TFI International (TFII) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, total revenue before fuel surcharge increased by 9% year-over-year to $1.8 billion, aided by the acquisition of Daseke [7] - Operating income decreased to$160 million from $198 million, resulting in an operating margin of 8.8$102 million from $148 million, with adjusted EPS dropping to$1.19 from $1.71 [8] - Free cash flow was$208 million, down from $244 million in the prior year [9] - Funded debt-to-EBITDA ratio improved to 2.1$156 million [14] Business Segment Data and Key Metrics Changes - LTL segment, accounting for 40% of segmented revenue, reported revenue of $737 million, up 10$70 million despite higher accident-related costs [10] - Truckload segment revenue increased to $693 million from$399 million, with operating income at $60 million, up from$51 million [11] - Logistics segment revenue decreased to $410 million from$472 million, with operating income falling to $43 million from$55 million [12] Market Data and Key Metrics Changes - The company noted a 6% year-over-year drop in shipment count, indicating a challenging market environment [18] - Truck manufacturers' volumes are down about 20%, expected to continue in the first three quarters of 2025 [24] Company Strategy and Development Direction - The company plans to redomicile from Canada to the U.S. to better align with its shareholder base and commercial presence [15] - Focus on optimizing free cash flow to invest strategically, pursue M&A opportunities, and return capital to shareholders [6] - Management emphasized the need to improve operational efficiency and reduce costs, particularly in the U.S. operations [25][35] Management's Comments on Operating Environment and Future Outlook - Management indicated that the freight recession is expected to persist into 2025, making the first half of the year particularly challenging [27][58] - The company aims to achieve an operating ratio between 93% and 95% in 2025, despite the difficult environment [45] - Management acknowledged the need for better density in U.S. operations and plans to focus on organic growth and potential M&A to improve this metric [36][38] Other Important Information - The Board declared a 13% increase in the quarterly dividend to $0.45 per share [14] - The company repurchased$42.4 million worth of shares during the quarter [14] Q&A Session Summary Question: What is the path to normalized EPS of $8? - Management indicated that significant work on cost reduction is needed, especially in TForce Freight, where shipment count is down 6% year-over-year [17][18] Question: Is there formal guidance for 2025? - Management stated that it is difficult to provide guidance due to the challenging start to the year and ongoing freight recession [26][27] Question: What is the outlook for U.S. LTL margins? - Management noted that losing small and medium-sized customers has impacted margins, and there is a need to be more aggressive in targeting these accounts [32][33] Question: What is the reason for the drop in length of haul? - Management explained that the active fleet size and operational changes contributed to the drop in length of haul, emphasizing the need to focus on active trucks [60][61] Question: What are the implications of redomiciling? - Management clarified that redomiciling is part of the company's evolution and will not involve delisting in Canada [74][76] Question: Will M&A be accelerated in the current environment? - Management acknowledged the potential for M&A but emphasized the need to balance bold actions with caution due to current market conditions [81][84] Question: Is TForce Freight expected to be profitable? - Management indicated that profitability is uncertain for TForce Freight in Q1, with expectations of a difficult quarter [116]