TFI International Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's fourth 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. Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on February 20, 2024. I will now turn the conference over to Alain Bedard, Chairman, President, and Chief Executive Officer of TFI International. Please go ahead, sir.

Well, thank you for the introduction, operator, and thank you, everyone, for joining our call. So yesterday, after market close, we reported quarterly results reflecting the industry-wide slump in freight volumes, as well as the ongoing effort by our team to make the most of the challenging conditions. We again produced strong free cash flow of more than $200 million during the quarter. This brought our full year total to more than $750 million, the third year in a row that we've achieved this mark despite the prolonged weak stretch for the industry. This directly reflects our long-withstanding focus on optimizing free cash flow so that we can strategically invest in the business, consider attractive M&A, and return excess capital to shareholders. We did all three during the fourth quarter, while also reducing our debt to further strengthen our balance sheet. With that, let's have a look at our consolidated results. For the fourth quarter, our total revenue before fuel surcharge grew 9% over the corresponding prior year period to $1.8 billion, which benefited from our acquisition of Dasky last April. However, operating income of $160 million was down from $198 million, reflecting an operating margin of 8.8 versus 11.8 previous year. We did have unusually high accidents-related expense that were about $9 million higher than prior year period. Our adjusted net income of $102 million was down from $148 million the prior year, An adjusted EPS of $1.19 compares to $1.71. I would also note that the impact of foreign exchange fluctuation, which during the quarter reduced reported EPS by $0.03, as every one penny fluctuation of Canadian dollar per U.S. dollar tends to impact either positively or negatively our annual EPS by about $0.02. So again, we produced solid cash flow, as I mentioned, specifically $262 million of cash from operating activity and free cash flow of $208 million. However, both were down from the prior year figures of $303 million and $244 million, respectively. I want to again call out that our ability to produce very respectable cash flow during a prolonged slump for the industry is a direct reflection of our team's effort to focus on the details of the business regardless of market condition. This includes concentrating on quality of freight and other efficiencies. Let's now turn to a review of our three business segments, beginning with LTL, which was 40% of segmented revenue before fuel surcharge during the fourth quarter. LTL revenue before fuel surcharge of 737 was off 10% and operating income of 70 million which had an $8 million impact from higher accident-related costs versus the prior year period, was up 34%. Our adjusted LTL operating ratio was 90.3 as compared to 86.1 a year earlier, and return invested capital was 16.3. So next up is our truckload. 38% have segmented the revenue before fuel surcharge at $693 million, which was up from 3%. $399 million in the prior year period, benefiting from the Dasky acquisition. Truckload operating income came in at $60 million, which was up from $51 million. We produced an OR of 91.5 relative to 87.3 a year earlier, and our return invested capital was 8.4%. Our third business segment to review is logistics, which was 22% of segmented revenue before fuel surcharge, or $410 million for the fourth quarter, down from $472 million the prior year. Operating income of $43 million was down from $55 million. This equates to a logistics operating margin of 10.5 relative to 11.6 last year, and return on invested capital was 17.1. Turning to our balance sheet during the quarter, we again benefited from our solid free cash flow of more than $200 million. We reduced debt by $156 million, and as a result, ended the year with a funded debt-to-bid ratio of 2.11. In addition to allocating capital to debt reduction, we completed one bolt-on acquisition during the quarter. Also during the quarter, our board declared a 13% increase in our quarterly dividend to $0.45 per share. That was paid on January 15. We also repurchased $42.4 million worth of shares during the quarter. And you'll recall that in October, the renewal of TFI International Nomar Coast issuers bid or NCIB was approved for an additional year. So before I wrap up, as you may have seen in our press release, we plan to re-domicile TFI from Canada to the U.S. to better align with our shareholder base and commercial presence. With that, operator, if you could please begin the Q&A portion of the call, and I'll be happy to take questions.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. And to withdraw your question, please press the star followed by the number two. And again, in order to ensure that everyone has a chance to participate, we would like to request that you please limit yourself to asking one question and one follow-up. Your first question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Great. Thanks. Morning, Alana. So when you think of where we're on the cycle now and where we ultimately go to, let's say $8 of normalized EPS, how much of the path from where we are today to that level do you think is idiosyncratic actions that you guys can take versus waiting for the cycle recovery?

Very good question, Ravi. And you know what? I think that we still have a lot of work to do on costs. If you look at our T-force freight, you know, our costs are still too high. We're getting also killed because our volume keeps dropping. You know, our shipment count is down 6% year over year. Although our weight per shipment is about the same, it's still a very difficult environment. So we still have a lot of work to do at T-force freight on the fleet side. to reduce our costs. We're on the right track there. Our average age of a fleet of trucks at T-force rate is 4.2 years, which is getting close to normal versus the average age that we have in Canada, which is a little bit higher. But then if I look at my maintenance cost per mile in U.S. versus Canada, I mean, there's still a big discrepancy between the two. So we still have a lot of work to do on costs at the T-force rate. The same is true also of our Dasky acquisition. You know, if you look at, you know, the trend since we bought Dasky in April, I mean, Q2 was okay. And then, you know, we had issues with revenue per miles that keep dropping because, you know, the freight recession is still with us. And even in Q1 of 25, we're still seeing a very pressure on rates, although it's quite stabilized. But the number of miles are down significantly. And our costs also are too high. You know, Deski, we were trying to have a lot of equipment, and these equipment are specialized equipment. They're used, you know, not very often. And let's say wind equipment, wind is out of wind, right? So it's not very popular right now. So we have to reduce our asset base at Deski to reduce our costs, to reduce our depreciation expenses, to reduce our interest costs as well. So We still have a lot of work to do to get to, to me, on the cost side, with no market improvement, we have to be closer to a 7 to a 7.25 EPS in a normalized cost environment. If you look at our logistics, I mean, we're down $12 million year over year in Q4. This is just volume. I mean, you know, the truck manufacturers' volumes are down about 20%. This will continue probably Q1, Q2, Q3 of 25. When we talk to our customer, they see a pickup by the end of 25. So that is also not helping us in the early days of 25. But this is just volume, and it will come back. So to make a long story short of a big question is that we still have a lot of work to do on the U.S. operation to become lean and mean. If I compare that with our Canadian operation, I mean, we still have a lot of work to do in the U.S.

Got it. That's really helpful. And apologies if I missed this, but did you give us formal 2025 guidance?

No. I mean, we're like our peers. I mean, it's really a very difficult start of the year. It's very foggy, you know, so it's difficult for us. What I could say is that what we've seen so far in Q1, we're still in a very deep rate recession. The volumes are not there. So it's going to be a difficult 25, I think. Again, we thought when we made our plan in October of 24 for 25, we never anticipated this kind of situation, which is still difficult. in terms of volumes, both truckload and LTL.

Great. Thanks, Alain. Pleasure, Ravi.

And your next question comes from the line of Jordan Allager with Goldman Sachs. Please go ahead.

Yeah, just to come back to U.S. LTL margins and deterioration in the quarter, would you say that's – I know you talked about cost as well, but is it primarily revenue? And then can you maybe go into a little bit more color on some of the specific steps TFI is going to take to work on U.S. LTL margins in 2025, regardless of the volume environment?

Yeah, yeah, yeah, yeah. You see, the problem that we have, Jordan, is this, is that right now, okay, we're losing the small and medium-sized, okay, customers, which have the best margin, right? And some of that has been replaced, okay, by let's say 3PL and corporate account, which doesn't bring the same margin. And this was really accelerated in Q4. So that's part of the issues that we have is sales, okay? We have to be way more aggressive on the small and medium-sized account. So this is problem number one for us. If you look at T-force rate today, okay, is revenue. Problem number two is cost. So we've been working steadily on costs since we bought this company, and we've invested a ton of capital to improve our asset, to improve our training, et cetera, et cetera. But at the same time, okay, our volume, okay, keeps coming down, right? So it's like you're chasing your tail, like a dog chasing its tail, okay? So this has got to stop. So we are at a floor of around 20,000 shipments. The mission that we give to our sales force is to try to grow organically, but also to try to improve the density. So what I mean by density, and I'm like a guy that's always repeating the same thing, if you look at our Canadian operation, density is second to none. I mean, it's just fantastic. That's why we're doing so well. In the U.S., our density is the ship. I mean, it's really bad. We have to improve the density, so there's two ways to improve density, right? Approach number one is to try to do it organically, and that's what we've been trying to do for three years since we bought the company, three, four years. Option number two, okay, is down the road, okay, you got to do what we've done in Canada. You got to do some M&A, okay? So if you can't get the density right, from organically your sales team, then you have to focus down the road, okay, in trying to find, you know, a target, something that fits you, okay, that could help you improve your density at one point, right? So this is why we've been saying that, you know, one solution down the road, okay, for T-force rate on sales and revenue, it will have to go through M&A at one point. But in the meantime, let's say during the course of 25 and 26, our focus has to be trying to grow it organically with the people we have and the sales, the revenue, and try to squeeze the cost of our, let's say, fleet operation. What we've done so far that's good at T-Force Freight is our line haul. So now we're using a software that's really good, which is called Optum, which is used by some of my peers. And now we are implementing Optum in Canada for P&D. Okay. And we're also starting to look at implementing that P&D tools. It could be Optum or another one in the U.S., again, to improve the management of our costs on P&D side. So it's like a two avenue for us. We got to keep working on the costs and do more with less. Okay. But at the same time, the mission to our sales team is to grow organically and to improve our density. And over time, down the road, let's say within 12 months, 24 months, whatever, when we're ready, when we can find the right fit, is to add M&A like we do in Canada all the time.

Just as a quick follow-up, I know things are still a little challenging to start the year, but in that sort of, let's say, no help from the macro or zero volume growth environment, any sense for where your LTL-OR could get to in the U.S. in 2025 or directionally where you think it could get to coming off the 97 or so in the fourth?

Well, what we know, Jordan, is that Q1 is going to be a very difficult quarter, right? A very difficult quarter. But I still believe that, you know, We've been running this company since we bought it in the neighborhood of 91, 92, 93, 94 OR. Q4 was a disaster for us. I mean, we didn't do a good job in managing our labor costs. We had too many issues with accidents and claim. If you look at my claim ratio, I went all the way to 0.9% of revenue, which is just unacceptable, right? So... This company, even in this kind of freight environment, we have to be able to run that between a 93 and a 95 OR. I've been saying since we bought the company that we'll get to a sub 90 OR, but right now, okay, at the level of shipments that we have at 20,000, if our sales team does not help us in trying to grow this density, improve this density and grow the shipment count and working just on the cost, within 25 with this kind of freight environment, I think that overall we should think that, you know, it's difficult to say because, again, it's very foggy, Q1, Q2, with everything that's going on. But, I mean, to me, we've got to be able to live in a 93 to a 95 or even in 25 with this kind of difficult environment. But Q1, extremely difficult because of all kinds of reasons, okay? But for the year 25, even with what we know today, we should be able to play in that 93 to 95, which is way, way above the target of being a sub-90 OR. But density is the name of the game. And we've been trying with the sales team to have those guys understand that we need to drive less miles. We need to pick up more freight per stop. It's been quite difficult. OK, it seems like, you know, difficult to do in this kind of an environment. But it's the only way that we're going to bring this company to a sub-90 OR because at 20,000 shipments a day, when you run a national network in the U.S., you are small. You are small. You know, in my mind, to run – just look at the shipments count that we do in Canada. In Canada, we do close to 10,000 shipments a day. And we do only 20,000 in the U.S. So – I mean, in Canada, with 10,000 shipments a day, we have huge density. That's why our costs are so good. In the U.S., our costs are not good because our density is way too low.

Right. Thanks so much. Thank you, Jordan.

And your next question comes from the line of Ken Hoekster with Bank of America. Please go ahead.

Hey, great. Good morning, Elaine. So a lot happened, it seemed like, in the numbers in the LTL. Length of haul dropped a couple hundred miles. You added trucks. You mentioned an $8 million charge in there. Maybe talk about what's going on at the LTL so we can understand the dynamic and the speed that things are changing. And it looked like GP revenue is really shifting down very quick. So a lot of dynamics going on here. Maybe walk through what changed so quickly.

Yeah, well, GFP has been – Not doing well since, I would say, a year and a half ago when our partner on GFP, UPS, said, I mean, those customers, we can't service those guys because, you know, they are not honest and they play games, et cetera, et cetera. So we had to drop, okay, all those resellers that UPS didn't want us to service. And now we're down to basically not much in terms of revenue versus where we were two years ago. And we've changed the commission structure to our sales team to try to make this thing grow again. But so far, we don't have any results. So that's GFP. But on the asset side, what we have done, if you look at my personal costs year over year, I went from 40% to 44%. And this is because of all these changes in terms of our service, in terms of... not managing the labor costs the right way, and also the mix of the revenue, which has deteriorated a little bit. Okay, our weight per shipment is about the same, but the revenue per hundred weight is down. Why? Because we're replacing small and medium-sized account shipments with great margin versus a 3PL and a corporate account with less good margin, right? So this is what's happening there. And this is where I say that our sales team has to pull its own weight and start helping us to try to grow this better business. But at the same time also, we also have to manage better the claim costs. And this is big for us because we're at 0.9% of revenue, which is completely unacceptable. If you look at our Canadian operation, Okay, we used to be at 0.2, we're at 0.3 in Q4. You look at the best in class in the U.S., the guys are at 0.2 or 0.3 or something like that. So us, we're at 0.9. Also, our accidents, okay, reserve had to be adjusted with the actuarial, which we took another hit. So globally, it's a lot of bad news for us in Q4. Okay, but the guys, you know, they're rolling up their sleeve and we're attacking and we understand that the market is not going to help us again in 2025. I mean, we still think that we're going to be in a freight recession. We don't see anything changing over the course of 2025. And this is why, when I look at the plan that we have for 2025, running in a 93 to a 95 OR for all of 2025 would be you know, probably the best that we could do with the low density that we have, okay, and without any M&A in 25. I don't think that we'll have any M&A in 25 to help us improve the density, okay? So with that in mind, this is where we stand again.

Thanks, but just to clarify, you added 500 trucks, so you grew the fleet significantly, but why did the length of haul drop 400 miles? Did you just change business? No.

No, no, no, because you have to look at the active trucks again, okay? The active trucks at LTL is about 3,200 trucks. The total trucks is about 4,000 trucks because we're bringing new trucks in and we're not selling the old trucks, okay? We have about, I don't remember exactly the count, okay? But we have a lot of old trucks that, you know, we're selling now, okay? Because the active fleet of UPS or the T-Force Freight LTL is about 3,200. So there's no movement. You have to look at the active fleet.

Okay. And then just to read domicile, any tax implications on that? Is that just moving headquarters? Where are you going to be moving? Is there any follow-on implications for that?

You know what, Ken? I think this is an evolution of TFI. So if you look at five years ago, we listed TFI into the New York Stock Exchange, and we were able to do that through what they call an MGDS exception. But this exception will disappear the minute that our shares that are owned by U.S. shareholders disappear. The minute that we go above 50%, then this is not going to work. So we have to go to the SEC, and then we have also to be US GAAP. So it's part of an evolution, okay? But at the end of the day, if you look at TFI today, okay, for head office, we have people working in Canada. We have also people working in the US. We have people in Montreal, in Toronto, Calgary. We have people in Chicago. We have people in... Minneapolis so we are all over the place in North America with our head office crew so to me it's just like an evolution okay because you know our business is now today about 70% u.s. domestic 25% Canadian domestic and about three or four or five percent trans-border so it's just and with the next M&A okay we just announced a small transaction in our MDNA and With that and with the possibility of us doing some more M&A in the U.S., like we said at one point, we will invest $3 to $4 billion. It's going to be in the U.S. It's not going to be in Canada. So our revenue will creep up to about $80 to $85. So it's just an evolution, but we're not moving at office. We're not moving people from, let's say, Toronto to, I don't know, Chicago. No, no, no. Every... a member of the TFI head office is staying where they're at. So that's why we call TFI, TFI International, is because we're Canadian and U.S.

Got it. Appreciate the time. Thanks, Alain. Pleasure, Ken.

And your next question comes from the line of Walters Fracklin with RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Good morning, Alain. Morning, Alain. So maybe, just to clarify, you will not be delisting in Canada, is that right?

No.

No, okay. And will it be a full reincorporation into the U.S.?

That, you know, Walter, because we're only in the early days, right? So we still have a lot of work to do on that. We must get a shareholder approval of that. So to me, in a simple way, I mean, it's just like TFI International today is a Canadian corp. Tomorrow, once the shareholder approves it, it's going to be a U.S. corp. So that's the way I understand it. So there's no big story except the fact that now by being a U.S. corp, you know, on the Daski acquisition, for example, one of our business unit deals a lot with DOD, the Department of Defense, the U.S. Department of Defense. And because we are a foreign company, owner, okay, that creates a little bit of issues for us. Okay, well, that's no big deal. We can live with that. But the fact that now you are a U.S. corp, that will help us, okay? So there's a few things like that. You could be part of some index in the U.S. because now you are a U.S. domicile. But at the end of the day, and like I said to our board member yesterday, it's an evolution of TFI, you know? If you look back five years ago, we had no U.S. shareholder. I mean, we were just Canadian, right? Today, just under 50%, 49.9% of our shareholder summer of 24 were U.S., okay? And 4% or 5% were, I think, European or Japanese or something like that. And 45% were Canadian. So it's an evolution.

Got it. Okay. And then my second question really is just on M&A. You mentioned densification is a big objective, and M&A can certainly help with that. This is a tough environment, so arguably sellers are in a tough spot. Could you look at bolt-on or accelerating your bolt-on tuck-in acquisitions to a more significant pace to take advantage of potentially lower the normal acquisition multiples to achieve that density so that when things turn, you're building off a larger base.

Yeah, you're right, Walter. I mean, for sure. But there's always the question, you know, you've been with me for a long time, Walter, right? You know us really well. And me, my saying has always been, you buy in bad news and you sell in good news. But, you know, it's been bad news for TFI for the last two years, right? Since... Since 22, when our EPS hit $8, I mean, it's just been bad. I mean, we went to 6-something, 6.15, and now this year we're at 5.75. So with that in mind and all this, everything that's going on in 25 with the fog that nobody knows where we're going, really. So a lot of people could be scared and say, hey, don't do anything crazy. Don't spend a billion dollars or whatever. I think that you have to be bold, okay? You know, we have a very strong team in Canada, and we're also building a much stronger team in the U.S. in our specialty truckload with Steve Brookshaw and with Bob McGonigal at T-Force Freight U.S., and also with Rick Asche in our logistics, right? So you may be right, Walter. Maybe it's not going to be in 26. It could be maybe in 25, okay? But it's always to try to balance between being bold and trying to do something sooner than later because you may end up being ahead of the curve in terms of the market improving. Me, I really believe that the U.S. is the best place to be in the world in terms of business. And I feel really good about this U.S. economy. And I feel really that those guys, Okay, we'll do a great job, the new administration. So, I mean, to me, it's time to invest in the U.S. But then on the other side, I've got guys saying, oh, Alain, you've got to be careful. You know, your debt is at 2.1. Your leverage is at 2.1. So this is why we're trying to reduce our debt by about $500 million, at least $500 million during the course of 2025. So it's a balance, eh, Walter? It's a balance, and we want to get the Q1 behind us because, to me, Q1 is going to be very difficult when I look at my specialty truckload in the U.S. When I look at our U.S. LTL, it's going to be a very difficult Q1, and maybe also Q2 because, you know, with what's going on, we still don't know what are going to be the rules, right? As of March, the new administration will talk about tariff. As of April 1st, there will be a report by the Treasury that's going to say whatever, I don't know. So I think that the rules will be clearer starting the summer of 2025 into the fall of 2025. But with all this insecurity, if you are bold, maybe it's the right time to do a deal. So we'll see.

Okay. That's great. I appreciate the call, Alec. Thank you.

Thank you, Walter.

And your next question comes from the line of Brian Ostenbach with JP Morgan. Please go ahead.

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

Morning. Just wanted to ask if you could give a little more detail as to why you think you're seeing some of this mix shift in T-force freight and maybe how much you can quantify just how much more 3PL you're doing versus SMB. Is this Is this competition the challenge? Is it service level? Is it kind of all the above?

I think it's all of the above. I think it's just a difficult environment. Everybody is looking for freight. The perception is that through the master report is that T-Force freight is cheap, but the service is average or maybe not as good as the average of my peers. So I mean, we have to fight, and it's the focus of us. I mean, there's no other issues. Now, this is what these sales guys have to do. I mean, we've been working at it for three years, and we've not been very successful. The only success we had on the quality of freight is the average weight, which was really low. Now it's a little bit better at 1,200. That's the only success that we have so far. We're trying to work with these guys and say, hey, you know, your responsibility is to bring some freight. And, you know, so far it's been difficult. So, you know, like I was saying to the team two days ago, the T-Force freight team, is that, guys, I mean, I understand that we have this freight environment, but we have to have probably better people, better leaders, I don't know, The ball is in their court, but it's tough.

So looking at Dasky, it looked like, at least in our math, it may be barely profitable during the quarter. You made some comments that specialized TL was pretty tough. You have extra equipment laying around. So I just wanted to see if there was a path to better profitability, or is that something you have to wait? more for the cycle to turn around. So I guess a similar question there. How much of that is really in your control versus what the broader economy gives you?

Yeah. So the revenue per mile, okay, if you look at our revenue per mile, Q2, 3, and 4, it keeps coming down, okay? So it's really not good. Our revenue per truck, because we have increased the number of miles, stayed about steady so more miles that we did per truck q3 q4 versus q2 but less revenue per mile okay because the freight is scarce right so this is up to the end of 24 going into 25 okay rate per mile has got some stability but because of everything that went on with the storm and this and that so number of miles went down in january And the killer that we have over there is that we have way too much capital invested, trucks and trailers invested in that company. And why is that? Because when we acquired Dasky, they had committed to buy a large number of trucks, which we could not walk away. So that's what we did in Q2 and Q3 and Q4 is we had to take on these trucks that were in order, okay? So now we have way too many trucks in a very difficult environment. So during the course of early 25, we have to start unloading those excess trucks that we have. And then we'll have probably a better result in terms of our depreciation expense, which is just crazy with the revenue we have. In terms of customer, in terms of activity, Okay, we're still in a freight recession in the specialty truck load. We are still not active like we should be in a normal environment. But it's been going on for two, three years, right? So if you look at my peers in the U.S., in the van world, okay, it's really difficult. I mean, us, if you look at my OR in Q4, I'm above 90 for the first time ever. Okay, first time ever that our specialty truckloaded OR is above 90. I think we're 91-something because Daski is, like you said, probably running like a 98 OR, right? And the rest of our operation is running sub-90 OR, right? Because Daski and the existing business that we had before we bought Daski, it's about 50-50, right? So legacy TFI specialty truckload is about the same size as Dasky in terms of revenue, but in terms of profitability, it's day and night, right? So you're right, Dasky in Q4 didn't help us because if you look at my year-over-year improvement, top line is through the roof, but bottom line is a meager, what, just a few million dollars. So that tells you that we didn't do too well okay, in Q4 with our U.S. operation, okay? But this is a different environment. T-Force is a big rock in my shoe, no question about it. Dasky and our U.S. specialty truck load, this is something that we will be able to fix on the cost side, on the equipment side during the course of 25. And if market condition improves, That should help us. But if market does not improve, I mean, at least on the cost side with our specialty truck load, we have a path forward by shedding equipment, by, you know, improving our costs, improving our overhead as well. Okay, so our overhead will come down during the course of 25. So I feel, you know, I feel that, you know, Q1 is going to be difficult for specialty truck load as well. Okay, but I think that we will bring the OR down sub-90 within the next Q2, Q3, and Q4.

Okay, thanks very much, Alain. Appreciate it. Pleasure, Ryan.

And your next question comes from the line of Scott Group with Wolf Research. Please go ahead.

Hey, thanks. My connection's not great. Hopefully you can hear me, Alain.

Yes, no problem, Scott.

Okay, great. I know Ken asked, but any more color on the LTL length apology? It's such a dramatic change. And then you've mentioned a few times, tough Q1, like do you think T-Force is profitable? And then one more guidance kind of question. I know you're not giving specific guidance yet, but as you look at it today, do you think you'll grow consolidated earnings this year?

Tough, tough, tough question, Scott. So far, what we know with everything that's going on, okay, we did about 575 of BPS in 24. With everything that we know so far, same environment, everything the same. I think that, you know, 575 to $6, which is what we've done this year, it's still a very, very difficult environment. And I would say probably first six months of 25 will be more difficult than the first six months of 24. And I think that the last six months should get better once we understand the new rules of the North American market. Now, in terms of are we going to be profitable at T-force rate, it's very difficult right now. So the month of January was not good for us. February, still tough. We believe that the sum of Q1, that's why we've asked our guys to give us a re-forecast for Q1. It's tough for me to answer, but one thing is for sure is that we're not going to be better than the 97 OR in our Q1, right? So, going back to your question about the average length of all for T-force freight, to me... Maybe I'm wrong, but in my mind, the average length of haul, okay, at T-Force Freight is basically about the same. So I know Ken was saying that the length of haul has changed big time, but I don't know if it's a mistake. But in my mind, it's about the same. So what I'll do, Scott, on that, I'll ask David to get back to you just to make sure that we all talk the same thing on that. Okay.

Yeah, I mean, it almost looked like a typo in the press release because it was down so much. So maybe that's right.

It could be because to me, it's like I said to Ken, number of trucks, you got to look at the active trucks in IMDNA, okay, because it's about the same. But in terms of length of all, I mean, in my mind, it's basically the same. I mean, we have not changed the company. It's about the same. We're about the same as, let's say, uh, ABF, ABF is about 1100 miles. We are about the same.

Okay. Okay. And then on the strategic side, when you were talking about LTL M&A, I think in your answer, you said like down the road, like five times, like, it seems like it could be helpful now. Is this you not ready or you not will, or you're not able to find a partner and then just separately on the re-domicile, does that, what does that mean if anything for, the idea of a spin at some point.

Yeah. Okay. So like I said, Scott, I mean, you know, my philosophy has always been you buy on bad news, you sell on good news. So it's been bad for TFR the last two years, right? It's been bad for the industry in general, and it's been bad for us as well. But we also did some M&A. So we bought Dasky in those bad times. We bought GHT, which is going to, you know, be a great asset. And we're also buying another one that's going to be under the GHC umbrella, you know, in April. So we're still active in the good, you know, tuck-ins, reasonable price, et cetera, et cetera. But in terms of the US LTL M&A, in order to do something, you got to do something of size because the problem we have is that we're way too small, way too small. 20,000 shipments is the ship. It's bad. I mean, you cannot have – it's difficult. If you want to be a national player in the U.S. with 20,000 shipments, it's too small. Just think about we do 10,000 in Canada. I mean, Canada is one-tenth of the U.S. So it doesn't make any sense. But I think the timing is right, but you have to be bold, right? And it also depends on – you know, are investors, okay? It also depends on the board. So me, I'm the CEO, okay? And for sure, I'm making some proposal, okay? But, you know, sometimes you got board members or people that could say, Alain, are you crazy? I mean, your leverage is 2.1. It's very foggy. Nobody knows where we're going, okay? Your earnings in Q4 are down like 30%. Okay, are you crazy? I mean, why would you do a deal of size, right? So me, I'm saying, well, guys, yeah, you got this. This is one side of the coin. The other side of the coin is you got to be bold. You got to do it now when everything is bad because when everything is bad, one day things will get better. So if you wait for things to get better, you're going to have to pay more. So it's a balance, like I said earlier. okay and and you know that's why i'm saying i'm saying down the road okay but maybe the road is not going to be too long like uh like uh you know i was talking with walter we'll see and the spin idea oh the spin the spin You know, like I said earlier, Scott, we need size. So if you look at our market cap today, when we talk to our investors, large investors of TMI, you know, they like the idea of the spin, but they say you're too small. You're too small. So, you know, if you're a $12 billion market cap guy and you split the company in two, and one is, let's say, six, and the other one is six, 2.6, 2.6 is small. So we think that your idea is really good. It makes a lot of sense. But try to get a little bit bigger. So let's say if you do a deal and your market cap is 15, okay, because you're buying, you know, something good at a reasonable price, then it makes it easier to do, number one. Number two, it takes time. So in the meantime, what we're doing, Scott, we're not sitting on our hands, okay? We're getting ready. Okay, so we have to work on systems, right? So because when you do the split, you don't want to be stuck with a TSA, a transition agreement for three years like we had with UPS, right? So we're making some moves on the real estate side too. We're making some move on the asset side. Okay, so let's say we have trucks that are, let's say in business A, but they should be in business B. Because what we used to do in Canada is to have a global portfolio of all assets mixed up between truckload and LTL. So now we're all going to the split. So we're not sitting on our hands. We're getting ready to do that. But it's still in the cards, absolutely, because it makes a lot of sense. The return invested capital of our truckload operation is single digit in Q4. Single digit. Eight point something, if I remember. I mean... And then the rest of our business in very difficult environment, terrible environment for us. Logistics, okay, LTL. I mean, we're running 15, 17, 18% return investor capital. So it's not the same. So it's got to be separate at one point.

Thank you, guys.

Appreciate it. Pleasure, Scott.

And your next question comes from the line of Bruce Chan with Steeple. Please go ahead.

Yeah, thanks, Operator, and good morning, Elaine. Morning, Bruce.

Yeah, great to speak with you. You made some comments about the sales team earlier in the call and the opportunity in SMB, which I think makes a lot of sense. But you've also been trying for three years at this. You've had a lot of competitors in the space that are targeting this type of business. So my question is, how do I win in these RFPs? Are you just going to Keep slogging it out. Do you need to hire more? Do you need to change incentives, especially without improving your service first?

Yeah, I think we did all of that. We changed incentives. We've changed people. The focus is still the same. And we've not been able to have the results. So we are working on our service. We have improved service at T-Force Rate, absolutely. You know, right now, if you look at my missed pickup, I still have way too many. I've got about a little shy of 400 a day that we miss pickup. But we used to be double that, right? So we are improving. Now, for sure, the master report is not helping us in the perception of T-force rate. Why is that? Because we came to know that, sadly, Maschio was trying to get in touch with us, and they couldn't get in touch with us for four years. So they were using information that is stale from 2020. So maybe this report is not accurate because we never provided them the right information for them to really, you know, get a true picture of T-force rate services, right? So hopefully down the road now that we have a communication, they will talk to customers that we service and maybe hopefully that perception that T-force rate service is not good will improve. And I think the service reality-wise has improved, right? Now, Our sales team are fighting that, okay, and are fighting our peers that, you know, have better service. And in a difficult environment, okay, where freight is not easy to find, the service is key, right? So if the customer has the perception that your service is not as good as the other guy and the price is about the same, well, the customer is not stupid. He's going to go with the other guy, right? So we have to change this perception of service, and we also have to work on improving our service at the same time. And we also have to educate our sales team that, guys, I mean, our service is improving, guys, and you got to fight. You got to fight, right? And so far, you know, if I look at my corporate and 3PL, we're about flat, okay, in 24, year over year. So far in 25, we're down a little bit on corporate, but about flat on 3PL. But we're down on, again, on small, medium-sized account, which is the most profitable business that you can have. So, I mean, so we're trying organically, okay, to improve that because that would help us with our density. And like I said earlier in the call, down the road, okay, and that's what we've done in Canada. That's what we've done in Canada for years and years and years is that we beef up our density through M&A, okay? Through M&A. So we continue to do that. And in Canada, we run either union or non-union, right? So we've got a union network and we also have a non-union network. And we beef up density in all these two networks all the time. And this is now, after trying for three years okay, to grow organically and it's not working, okay, so we keep pushing our sales team to grow this thing, but if we now understand that we have to do something, okay, down the road on M&A, either to build a non-union network on the side or to try to grow with some regional unionized LTL to beef up the force rate, I mean, But don't forget, our approach on M&A is always the same. If we do some M&A, we keep business separate. We don't like merger. We're not a big fan of merger. We don't do that. We work together. Let's say we own another company. The two companies will work together, but there's no combination. There's no merger. We hate that because Yeah, the accountant will tell you that you can save a lot of money, but at the end of the day, it's false. So we keep the – like we do in Canada, right?

Okay. That's a really helpful caller.

And then just a really quick follow-up on that M&A point. Is the thought still that an asset light operation makes the most sense, or are you kind of broadening up the search a little bit?

Well, asset light is always the best. So if you look at our Canadian LTL, it's really, really light. Why is that? Because we are heavy intermodal. We are also heavy with third-party P&D. So for sure, I mean, if we have an option to buy an asset light at a reasonable price, okay, we'll jump on that one first. Now, We also understand that there's not that many asset light operations in the U.S. on the LTL side. So then we look at an asset operation. So about a year ago, we bought a $100 million revenue asset company, non-union, in the U.S. So this is our first of maybe more to come on that side. Now, this company, the beauty of this company is that they're all so big in the trans-border between U.S. and Canada, right, which has got better yield, better yield than U.S. domestic or better yield than Canadian domestic.

So this is a first for us a year ago.

And down the road, okay, this is an area that we'll be trying to grow. And maybe, you know, if we can find a good brother to T-Force Freight, okay, I mean, that's also something that we're going to be looking at. If we can find a good brother, a good fit, but without merging. I mean, guys never say that TFI wants to buy a company and merge it with A or B or C. We don't do that.

Okay, great. Appreciate the time. Pleasure.

And your next question comes from the line of Tom Wadowitz with UBS. Please go ahead.

Yeah, good morning, Elaine. Morning, Tom. I wanted to get a sense. I know we've had quite a bit of discussion on USLTL. I think we've had for the last couple of years the real framework of idiosyncratic drivers for improvement in USLTL and that you had a fair bit of control. It feels like we're kind of waiting for the market to improve. and you really need a better freight backdrop to see things get better in US LTL. Do you think that's fair, that that's really the most important lever for US LTL to get better, or there's still levers that are kind of meaningful enough that you can push in your control in US LTL?

No, I think so, Tom. I think that we still have a lot of work to do on the cost side. I think fleet okay, is a big problem for us since day one because we had old trucks, blah, blah, blah. Now we have a normal fleet, but our cost is too high. So we're starting to see some improvement because we have a new leader, okay, that oversees our fleet management now. And this is something that should help us during the course of 25 and beyond. That's number one. Number two is, like I said earlier on the call, The P&D software that we're using dates back about 20 years, right? So it was good 20 years ago, okay? So now in 25, we're going to be updating that through either which is the software that we're using now for our Lionel, which helped us big time, okay? So our Lionel cost today, even if we put more freight on the road versus rail, our Lionel cost per pound or per shipment is less today than it was three years ago with better service because the rail is the rail, right? So we put less stuff on the rail, more on the road, cars about the same, and service is better. But on the P&D side, we have a big job to do there because, you know, we could save a lot of money. So to me, it's really the next big focus. So fleet, we have the tools, we have the software, We have a better leader now. That should help us in 2025. P&D, it's going to take probably all year to get this new software tested, implemented, maybe 2025 into 2026. The other thing also that we are implementing now is also it's been a cancer for us, billing, master file of customers and all that. So we are implementing as we speak, and it's going to take all the way until the summer of 25, a software that's been used by one of our peers. So it's been tested by those guys, and that's what we are implementing now. So that's going to help us build customer properly, have a better control about what's going on, better visibility about what's going on, etc., etc. So that's also another lever during the course of 2025 that should help us on the cost side. Now, if markets start to turn, if this economy starts to get better, if this rate recession disappears, let's say late 2025, it's even better. But for us in 2025, we have to stop the degradation of volume and slowly improve it as much as we can. And we have a big job to do on cars, on fleet still, on P&D, and on building customer property so they can pay us properly.

Right. Okay. There hasn't been much discussion on competitive environment, but if you take a step back, a number of the bigger players have added terminals and recycled yellow terminals, if you will. expanded and are, you know, are focused on growth. So do you think that's potentially contributing to some of the pressure on shipments that, you know, other players who have added terminals are, you know, taking business and that's, you know, contributing to the pretty significant cycle pressures and lower shipment counts? That might be hard to see, but do you think that's a factor too?

You know, Economy 101, Tom, tells you that if you offer more, okay, you'll get less, right? So if you offer more freight capacity, you'll get less money. To me, it's basically the rule of economy. So by adding capacity to the LTL environment, for sure down the road you're going to be, you know, putting pressure – Unless the market starts to grow, okay? And if there's growth, maybe not so much. But if still a very weak market, for sure, by adding capacity, you're putting pressure down the road on rates. The shippers see that. They know that. And they will RFP the business. And then you're stuck with fixed costs. And, you know, there's a fight for freight. So this is basic economy. So this is why us, our approach has always been, guys, don't add capacity. Don't do that. So this is why us, down the road, what we're trying to do is through some M&A, through some education. Guys, if you add capacity, you'll make less money. It's very simple. You have to understand. Just look at the price of oil. Add capacity, add more oil, price of oil goes down. It's just... It's just basic rules. So us in Canada, why we're so good is, you know, we're not adding capacity. We're shrinking, shrinking, shrinking, and making more, or at least protecting. If you look at my LTLOR, okay, I used to be 79, I think, in last year, and I'm an 80-something now, 80-point-something, right? So we are protecting our margins. So you're right. I mean, there could be some pressure down the road. Hopefully, hopefully our peers understand that and don't offer too much capacity because LTL, the U.S. LTL is the best place to be in North America today. Best place to be because it's more, it's not like the truckload where, you know, every Tom, Dick and Harry could be a truckload guy tomorrow.

So just to make sure I understand your comment, so you did not, it wasn't clear that there was like a worsening of competitive pressures in 4Q. You don't really think that was the issue, it was more broader market, but you might be concerned about pressures in the future. Is that, I guess, is that the way you're seeing it?

Yeah, yeah, yeah. Q4, it's hard to say, okay. Maybe, okay, I don't know. But one thing is for sure, long-term, when you add capacity, and the market is not growing, you're going to end up with price pressure.

Yeah. Makes sense. Thank you for the time, Alain. Pleasure, Tom.

Thank you. And your next question comes from the line of Benoit Poirier. Please go ahead.

Yeah. Good morning, Alain. Just in terms of first question. Yeah. With respect to free cash flow, obviously, you were able to pull close to $800 million in 2024. I would be curious, given all the comments that you provided, how should we be thinking in terms of free cash flow generation for 2025 and maybe a little bit more color around CapEx, given the investment needed for DESA key that you've committed for?

Yeah. So I think based on what we know so far, okay, Benoit, is TFI will pay his dividend. TFI will reimburse, okay, about $400 million to $500 million of debt during 2025. TFI will also invest about $200 million U.S. in M&A. So if you do the sum of all that, I mean, it's basically about the same because our capex will be reduced Why is that? Because when you drive less miles in your truckload operation, okay, well, you can extend the life of the truck, right? So our capex will be less in 25 than they were in 24 because of that depressed truckload environment. The same is true of our LTL. So LTL for this year, we're buying 400 trucks, US LTL, I'm talking here. instead of buying 500 or 600 trucks in 24 and in 23, right? Because our average age, okay, is at 4.2 now at the USLTL. So globally, our capex, TFI net capex will probably be less 50 to 100 million year over year.

Okay, that's great. And in terms of M&A, just for the follow-up, you gave a very good color on the timing. It seems to be most unlikely in 2025. I'm just wondering how much it's pushed to the right, given maybe the financial situation. And do you feel you need to further integrate UPS, Freight, and Dasaki before pulling the trigger on the larger one? Obviously, when we look at the past, you've been quite good monetizing some assets. Think about Hartman Express, waste management. Is it something that might be in the cards down the road?

Monetizing assets, no, except on the real estate side, Benoit. In terms of T-Force Freight, we have a plan and M&A will just help T-Force Freight down the road, I think. So we will not stop an M&A transaction because we're not happy with what's going on at T-force rate. I'm not happy at all with what's going on over there. The guys are working hard, but we need results, right? So M&A could be part of that solution, helping them on the density side at one point, maybe. And on the Dasky side, I mean, we are really busy in reducing overhead costs over there. We have way too much assets, so this is killing us on depreciation expenses because we have probably in the neighborhood of 400 trucks too many, okay, because we were stuck buying the commitment that Dasky's prior owners made. And we got all these trucks in 24. And now, okay, we have to start unloading, okay, the older trucks, okay, in a depressed environment. So what the guys have been doing is what they're saying is that, Alain, the market is so bad, I don't want to sell it now. I just want to wait until this market gets better. So this is today, right? So me, I'm saying now, hey, guys, I mean, do we see the U.S. market going? pre-owned trucks getting better? Okay, not really. Well, okay, so let's start unloading the trucks. And that's what we're doing now. And the beauty of Dasky is that we're not losing money when we're selling trucks, even in a very depressed pre-owned market, compared to when we are selling old UPS or T-Force freight trucks, okay, because they've been sold So, the fleet has been so poorly managed that, you know, if you look at my disposal of equipment in Q4, I've lost money, right? Not much, but I still lost money, right? But on Daski, when I sell equipment at Daski, overall, I don't lose money. So, I say, guys, now is the time. I don't know when this market is going to get better. We know, because all the new trucks for Packard and Freight, that the production is down 20%. Okay, in Q4, it's going to be down 20% in Q1, Q2, and Q3 probably, and picking up again in Q4. Q4-25, according to our forecast on the truck, I mean, for the first time, they will do a better job in Q4-25 than in Q4-24 for the first time. So, I mean, it's a global situation, but M&A, You know, like I said many, many times, you buy in bad news, you sell in good news. It's all bad. It's been bad for years and years. It's just like we have to be bold. We have to find the right target. We have to do the right deal at the right price. And, you know, that's been the success of TFI over the last 25 to 30 years is buy the right price at the right time. You know, we bought Dasky a year ago in April. Q2 was okay. Three and four, not so good. But I feel really good with Mr. Brookshaw and his team. We have a lot of work to do on reducing our overhead costs, reducing our asset base so that we could bring our expense depreciation expense down. We're going to turn this ship around. I mean, running a 90 OR in specialized truck load, it's not acceptable. Okay. Everybody knows that. I mean, we're not a van guy. We are a specialty. So we got to bring this OR down and we're going to get sub 90 for sure during the course of 25, even in a difficult, still difficult market.

Thank you very much for the time, Alain. Pleasure, Benoit.

And your next question comes from the line with Stevens. Please go ahead.

Hey, good morning, Benoit. Thanks for taking the questions.

Good morning.

I want to start maybe back on the USLPL service side. You mentioned a few times the claims ratio is unacceptably high at 0.9. Yeah, yeah. You know, to previous answers, you said some other things are getting better, but this has been softening for a couple quarters. We'd love to hear some of the investments you're making to actually improve this claims ratio going forward, and could you provide any other update on, like, on-time deliveries, any other service metrics that have been a headwind on the U.S. LTO side and maybe what you're doing to improve those?

Yeah. So, you know, on the claims side, here's the story, okay? So the reason we're at 0.9 is that we used to break so much stuff that we have a store in Richmond that was selling the stuff that we were breaking. But now we break less stuff, so we don't have this revenue. that goes against the expense. I mean, that is the story right now, which to me is, okay, fine. But at the end of the day, okay, our claim will come down back, will come back down again, okay, in the next quarters. And what we're doing about that is, again, is working with the customer, working with the operators, and we know what to do. It's just like the story is that Well, the benefit that we had by selling all the stuff that we were, you know, breaking, I mean, that is gone. The store is closed. We don't have that anymore. And now we're just expensing, okay, the stuff that we're breaking now, okay, or losing now. So, okay, fine. That being said, what is the plan to bring the 0.9 down to a more acceptable level? So we're going back to the source. And we should do a better job on that, right? So the guys are all sensibilized that, hey, this is not acceptable, okay? This affects our service, affects our customer relationship. Nobody likes to have stuff broken. Nobody likes to have stuff lost, right? Even if you pay for it. So that is where we're going on that. And what was your next second question? I forgot.

Any other update on the on-time deliveries or other service metrics that have been kind of elusive?

Yes, yes, yes, yes. Well, the on-time delivery, we are improving, absolutely. You know, well, we'll never be a 99.9 guy, so the goal is to be something around a 98. When we bought the company, we were more like a 90, 91, 92, and we had all the excuse in the world to be at 90, 91, 92. Right now, we're more like a 95, 96 in range if you exclude everything that's going on with weather issues. So we have improved. We're still probably not to the level our peers are, okay, but we are improving. And I just gave the specific on missed pickup. I mean, our missed pickup is down 50% versus what it was like a year, two years ago. So our service is improving. Absolutely.

Got it. And then as a follow-up, I want to ask a longer-term, maybe strategic one on the U.S. LTL side. It's been a few years now. You mentioned it's been a challenging three years of owning the T-Force asset. Whether we think about the ability to cut costs or add density, I guess how much of those differences of the U.S. versus Canada are maybe more structural than you appreciated when you bought this business, as you've learned? And when we think about where OR can get to, maybe 93, 95 is this year. But has anything changed? Where can this business go over time as you better appreciate the headwinds and just the challenges of the U.S. market?

You know what? The market in Canada is not different than the one in the U.S. and vice versa. What's different is the level of issues when we bought UPS Freight. Okay? So we could never, you know, even with all the due deal that we've done, we knew that the fleet was... not up to par. We knew that the real estate was not up to par. But the system, the financial system, we were not aware because these were UPS's system, okay? So they were connected to the UPS environment. So we didn't know anything about that. And the tools for LTL, because the tools for package at UPS are probably fantastic because these guys do a fantastic job over there. But the tools for LTL were poor. Okay, so this is something that is taking us way more time than we thought. So I've talked about the Lionel. Okay, so Lionel, now we have Optum, which is helping us big time. The fleet, now we have Sataris that has been implemented a year ago. We had to change leadership. Now we have a new leadership. So Sataris and the tool and the new leadership will help us reduce maintenance costs. Billing and master file management, it's been a nightmare for us. okay from day one now we are implementing a software that's been used by one of our peers by the end of summer this should be done with so it's it's much worse okay than we thought when we bought the company okay but we're going to get over it i mean we know what to do okay the u.s market is not that different than the than the canadian market the basic rule okay, why are we so good and successful in Canada is because our density is second to none. You know, we drive in the U.S. right now for our P&D 10 miles between each and every stop. This is not acceptable. I mean, we drive less than five miles in Canada. Why is that? Because we've educated our sales team, everybody in our Canadian operation that we want the driver to drive less miles and pick up more freight. That's the culture we have in Canada. In the U.S., That culture did not exist, okay? And we've been trying, working with the sales team to understand, guys, we need more freight close to our terminal. We need more freight per pickup. So it's what we call density that helps us reduce costs, right? By doing that, okay, you're way more efficient. So what we're trying to do for the first three, four years, four, five years that we bought the company is, is trying to do it organically. And we've not been successful so far. The only success we have is we moved the rate, not the rate, but the weight per stop, the weight per stop, the weight per shipment, okay, from, let's say, less than 1,100 pounds to about 1,200 pounds. That has been a success. But besides that, we have not done anything on density. So this is why I'm saying that down the road, okay, you try organically to improve your density, but At one point, and that's been the success of Canada, M&A has been the success that we encounter in Canada, both union and non-union, is to grow a network that through M&A, you build your density.

Great. I appreciate all the color. Best of luck, Alain. Pleasure.

And your next question comes from the line of Ariel Rosa with TD Group. Please go ahead.

Ben Moore on for RE. Morning, Alon. Thanks for taking our question. Back to the small, medium business. Is it losing accounts and lanes or is it keeping accounts and lanes but just losing volumes? Just to try to understand the ease of winning back that business when you improve service. And are there other higher margin customer segments you could focus on to offset in case small and medium business is still low in 2Q and you're at risk of OR being close to that 97 for 2Q?

Yeah, yeah. No, I think that it's just like the focus of our sales team has not been good, okay? So the reason that we lose, okay, is because, you know, our churn is too high, right? So, you know, we look at the churn, normal churn in an LTL environment could be 5%, 10%. But when your churn is way more than that, which is the case at T4 straight, then, you know, it takes, you lose more than what you gain. So the net is minus, right? So you got to stop the churn. You got to stop what you're losing, okay, so that you could have a positive when you had the loss because you will always have loss, okay, because you always have churn, but you have to have less loss than what you can bring in. And so far, okay, on 3PL and corporate, Okay, we're fine. The problem is that with small, medium-sized accounts, we lose more than what we gain, right, in terms of customer and also in terms of lane. So it's just like, guys, roll up your sleeve and you got to be more aggressive so that we stop losing more than what we're gaining.

Okay, great. Appreciate that. Maybe just as a follow-on from your investor day a few years ago, you were great in providing... Estimates and OR improvement, for example, 50 or 100 basis points. Just to understand the magnitude of the, I think, five or so actions you're implementing now, the sales culture to maximize shipments per stock, the P&D software would be number two, billing system number three, or you've talked terminal level visibility and compensation tied to that, which needs time to gain transparency. and then five would be the line haul insourcing. Can you provide sort of rough estimates on OR improvement, basis points, ranges for these?

Yeah, so on P&D, it's too early. I don't know, okay? So this is difficult to say. On fleet, in my mind, okay, if I look at the plan, what we're trying to do, I think fleet, Year over year, same miles, same everything. Our cost has to come down between $20 to $35 million year over year. That's fleet. In terms of billing, bad debt, claims, and this and that, to me, this is another $10 to $15 million that we just throw money out the door. We pick up freight, we deliver freight, and We don't know who we have to bill because it's not clear. We accept an order, and our people are just saying, well, I think it's A. No, it's B. So we bill A, and then after six months, A is not paying because he says, it's not me. So then you go back to B, and B says, no, it's not me because it was not clear the day that you took the order. So we have that because... of all the software, all tools that we have that did not control that process, which will happen during the course of 25 from now until the summer, July. So on the Lionel side, I think we're probably doing a great job. We're probably at 95% of what the optimum, the best that we could do on that. Our objective has been to move more freight on the road versus rail to improve service. And we've done that. So we run a lot of teams now, okay, running our line-alls. So we're doing a better job on that. So on line-all, I don't see that so much. So it's basically the P&D, although P&D, I cannot put a number on it. It's too early. And fleet and also bad debt and billing customer property. So these are the kind of levers. Density. it's a push. We've been pushing with no results, with no results so far. So again, 25, we keep pushing on that. And that's why I'm saying down the road, you know, we're going to have to do something on M&A to help us improve, okay, that density. Because again, we buy a company, there's no merger, but we work together, right? So, you know, like we do in Canada, if I take the example of Ken Parlumis, So what we're saying is that these zip codes are CanPAR, let's say in Toronto, and these zip codes are Loomis. So we're not merging the company, but in these zip codes, okay, CanPAR is delivering both CanPAR and Loomis stuff. But the companies are not combined, but we work together. So we improve the density by doing that in those zip codes because now CanPAR delivers freight for CanPAR and freight for Loomis. Okay, Loomis. And then in a different region of Toronto, for example, it's going to be, let's say, a Loomis territory where Loomis is going to deliver both Kanpar and Loomis freight, right? But we don't merge the company.

No, no, no, no, no. We don't do that. Great. Thanks so much, Alon. My pleasure.

Thank you. And your next question comes from the line of Kanar Gupta with Scotiabank. Please go ahead.

Morning, LA. Thanks for the question. It's been a long call, so I'll keep it pretty short, hopefully. I know you're not guiding here for 2025, but I think you're alluding to some pressures and headwinds in the specialty truck load, the T-Force and maybe GHT, right, for the better part of 2025. In terms of the remaining operating segments, right, you know, the Canadian LTL, Canadian truckload, package and courier, et cetera, do you see those segments, you know, like maybe offsetting the headwinds in the remaining segments perhaps? So, I mean, like perhaps this is like a flattish year from earnings perspective?

Yeah. I feel pretty good about our logistics, okay? So our logistics are going to do well, except for GHT, the first probably nine months, okay, we're going to be behind. last year because of, but logistics, I feel really good. PNC, I mean, the team there, Mike and Chris, they've done a fantastic job. If you look at my Q4, well, you could say, well, because of the Canada post-strike, yes, a bit, but don't forget that we're mostly B2B us, right? So I feel good about Canadian LTL. I mean, the Kindersley acquisition will turn into something you know, a good OR environment because right now it's a drag on our Canadian OR. So the Canadian truckload, the driver ink is killing us, okay? So it continues. But I think that the federal government now is taking action, reducing the permit, the work permit and all that. So maybe this is going to help us. So the big rock in my shoe, okay, and it's been like that for a few years, is T-force freight, and we're working hard on it. Specialty truckload in Canada, we're doing well, doing really well. Specialty truckload in the US, we will do better in 2025. We have a rough start of 2025. We got too much trucks, too much assets that we're stuck with because of commitment of the previous management team there that we had to take on. And then also the revenue per mile has been difficult for us in Q3 and in Q4. So far in Q1, revenue per truck is okay. The revenue per mile is okay. The revenue per truck is down because the miles are down because of weather issues. That will disappear during the course of the year. The freight is still not the greatest environment, okay? Hopefully, with the new administration in the U.S., things will start to accelerate this freight demand. So, yes, Conor, I feel really good about a certain part of my business. My biggest problem is really T-Force Freight U.S. I mean, it's been that for four years. That's the only reason I keep up at night, okay, is really T-Force Freight U.S.,

It's helpful, Kulit. Thanks, Alain. And then maybe just a quick follow-up on re-domiciling. Any timelines you want to suggest here in terms of the application process, the shareholder approval, and when this thing can be wrapped up?

I think the timeline is between 9 and 12 months. And again, if I may add to that, Kunar, I mean, we have today, within the TFI head office, we have employees in Canada and in the U.S. We have employees in Montreal, Toronto, Calgary, Chicago, Miami, et cetera, et cetera. And it's not because the domicile of TFI International will move from Canada to the U.S. We're not moving people. We're not moving people from Canada to the U.S. I mean, we're not doing that. We're not stupid. I mean, so... I mean, it's business as usual, okay? And us at TFI, we hire the best talent where the talent is. So if the talent is in Chicago, we hire in Chicago. If the talent is in Toronto, we hire in Toronto, right? So that has always been the nature. It's just like by doing that, now we become a U.S. domicile. But every responsibility of TFI and office remains where the responsibility is today.

Right. Makes sense. Thanks so much for the time, Alain. Thank you. It's a pleasure, Conard.

And your next question comes from the line of Kevin Chang with CIBC. Please go ahead.

Hey, Alain. I'll leave it to Juan. And I appreciate all the call you've provided on this call. I think in answer to an earlier question, you said absent any, I guess, revenue recovery, you saw a path to at least getting to just 7 or 7.25 EPS with your self-help levers. I know you're refraining from providing guidance, but when we think of that level of earnings growth without a macro recovery, do you have a sense of how long it can get there? It sounds like you have a lot of irons in the fire for 25. So is that... Something we can think of as at least a North Star for 2026 as you kind of work through some of these initiatives? Or is it longer than that, shorter than that?

No, for sure, Kevin. It's going to take us some time. I mean, you know, the cost issue that we have at T-Force rate is still a drag because our volumes are too low. Our volumes are too low. So, you know, at 20,000 shipments a day, it's just very difficult. But, you know, we have levers that we're going to be working on. Now, in terms of our logistics, I mean, it's a little bit of a market condition. As soon as, okay, this GST situation corrects itself by the end of the year, okay, we're going to be doing about $200 million of OE with our logistics division. Now, this year, we'll probably be down to $150 million, $160 million because of what's going on with the truck manufacturing. I think our Canadian operation will do as good as we did in 25, in 24. Okay. It's really, we need major improvement. Because if you look at my T-force rate Q4 year over year, I'm down like $30 million. Right. I mean, this is like a nightmare for me. Right. So, I mean, we have to take the bull by the horn now. Okay, Q1, because of everything that I've said, because of all the fog and all this, we don't know where we're going to end up with Q1. So far, very difficult for our T-force rate and our U.S. specialty truckload operation. I think that truckload operation will improve during the course of the year. And we have a big job to do at T-Force Freight USLTL.

That's helpful, Carlo. I'll leave it there. And best of luck as you get through 25 here.

Oh, yes. We're going to need a lot of work. But you know what they all say, the harder you work, the luckier you can get.

I hear you. Thank you.

Okay, Kevin.

Thank you. And your next question comes from the line of Cameron Dirksen with National Financial Week. Go ahead.

Yeah, thanks. Good morning. I'll stick to one question as well. And you kind of mentioned earlier in the call just around uncertainty around tariffs and what that might mean for volumes. Just wondering if you can just talk a little bit about your cross-border exposure. I know you've got a decent amount of automotive work. I'm not sure how much of that is cross-border. Just any, I guess, additional color you can provide on where you see the risks might be if we have some sort of big blanket tariffs applied to Canadian imports into the U.S.?

Yeah. Good question, Cameron. I mean, we owe a lot of aluminum to us, okay? So for sure, aluminum is going to be part of the tariff. I mean, Mr. Trump has already said that the aluminum tariff is going to be 25%. So we know that, okay? But we lived through that also in 18, right? So I don't think that this is going to affect the volume for aluminum, but we don't know. When we talk to customers, I mean, you know, They feel good, but we don't know, right? This is why I'm saying we are going through some fog right now because I think that by the summer we'll know, but right now we don't know. Steel, we believe that Canada produces a lot of steel for the U.S. market. Some of it is specialized, so I don't see issues too much with that. We haul some of that. Some of it is more like commodity steel, which is like a Stelco, for example. So that could be a problem, okay, with tariff. So this is mostly, you know, affects Ontario. It will affect us a little bit, but the problem is always the domino effect of all these truckers that are hauling this product that we don't, us today, that now are out of work. Could they start to rock the ship and attack some of our customers that we service today? So it's still difficult to say, right? But because we're mostly a specialty truckload guy, it's not as easy as a van kind of world, right? So what we know so far, Cameron, We shouldn't be doing too bad. Now, the trans-border revenue is about 4% of global TFI revenue, 4%. So it's big, but it's not that big, right? So we'll have to see. That's why we cannot provide guidance. I mean, even my U.S. peers, okay, are having a tough time giving guidance because of all this unknown. Is inflation coming back in the U.S. or in Canada? Okay, who knows? The interest rates, are they going to stay high like they are in the U.S.? You know, the 10-year U.S. bond is 4.5 or about that. So that's high, right? So is this going to stay? Mr. Trump wants interest rates to come down, but so far it's not happening, right? So all this is creating a lot of issues and not knowing where we're going. But to me, it's foggy. But it's going to clear up. It's going to clear up. I think it's going to clear up in the summer, and then we know the rules, and then we'll just adjust.

Okay. No, that makes sense. Appreciate the time. Thanks very much.

Pleasure, Cameron.

Thank you. And that is the end of our question and answer session. I would like to turn it back to Alain Bidard for closing remarks.

Okay. It's all right. Well, thank you very much, operator, and we appreciate everyone's joining today's call, and I want to thank you for your interest in tfi international so i look forward to providing additional updates as we move through the new year and please if you have any additional questions be sure to reach out enjoy the day everyone and thank you again bye thank you elaine and ladies and gentlemen this concludes today's conference call thank you all for participating you may now discuss