TFI International (US:TFII)2022-07-29 22:33Financial Data and Key Metrics Changes - For Q2 2022, TFI International reported a 76% increase in adjusted net income year-over-year and an 81% increase in adjusted diluted EPS, with quarterly free cash flow exceeding $300 million for the first time in company history [6][11][28] - Total quarterly revenue reached $2.4 billion, reflecting a 32% increase compared to the same quarter last year [11] - Adjusted operating income was impacted by a prior year bargain purchase price gain of $284 million, leading to a 17% decrease in reported operating income [12] Business Segment Data and Key Metrics Changes - The P&C segment, representing 7% of total revenue, experienced a 14% decline in revenue due to slower e-commerce activity, but operating income increased by 25% to $37 million, with a return on invested capital of 27.6% [14][15] - The LTL segment, accounting for 45% of segment revenue, generated $870 million in revenue, a 39% increase year-over-year, but operating income decreased to $187 million due to a prior year gain [16][17] - Truckload segment revenue before fuel surcharge was $557 million, up 16% year-over-year, with operating income more than doubling to $127 million [21] - Logistics segment revenue grew 12% to $454 million, while operating income decreased to $42 million due to a prior year bargain purchase gain [27] Market Data and Key Metrics Changes - Canadian LTL operations showed solid growth, with an operating ratio of 69.1%, an improvement of 880 basis points year-over-year [18] - U.S. LTL revenue reached $725 million with an operating ratio of 88, improving over 200 basis points from the previous year [20] - The truckload segment's Canadian operations benefited from favorable market conditions, achieving a significant margin improvement [90] Company Strategy and Development Direction - The company plans to continue optimizing TForce Freight while focusing on improving density, service quality, pricing, and driver retention [32] - TFI International aims to create long-term shareholder value through strategic acquisitions and returning excess capital to shareholders [9][30] - The company is investing in technology and equipment to enhance operational efficiency and profitability [41][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic headwinds such as rising interest rates, inflation, and supply chain challenges but expressed confidence in the company's ability to navigate these issues [7][31] - The outlook for 2022 has been raised, with expected earnings per share now forecasted at $8 and free cash flow at $900 million [33] Other Important Information - The company repurchased approximately 2.6 million shares during the quarter and increased its NCIB program to a maximum of approximately 8.8 million shares [29] - TFI International's balance sheet remains strong, with a debt to adjusted EBITDA ratio of only 1.32 [30] Q&A Session Summary Question: What is the macro environment and outlook in Canada? - Management indicated a positive outlook for the Canadian economy, supported by high oil prices and strong performance in key provinces, despite potential recession concerns [36][39] Question: What message does the buyback signal to investors? - Management believes the stock is undervalued and sees buybacks as a strong use of cash, indicating confidence in long-term growth [41][42] Question: What are the targets for U.S. LTL operations? - Management aims for an ADOR target within the next two years, focusing on improving operational efficiency and reducing excess capacity [48][50] Question: How is the company addressing labor challenges? - Management has prepared for regulatory changes and is focused on improving employee productivity while maintaining competitive salaries [70][72] Question: What is the outlook for truckload profitability? - Management expressed optimism about truckload margins, citing strong performance and market conditions, while also focusing on specialized operations [90][94]