TFI International (TFII) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2021 reached $1.8 billion, more than doubling from approximately $800 million in the prior year, reflecting a strong organic growth of 27% [10] - Operating income was reported at just over $310 million, including a bargain purchase gain of $123 million from the UPS Freight acquisition [10] - Diluted EPS increased by 361% to $2.63, while adjusted diluted EPS rose by 89% to $1.44 [10] - Net cash from continuing operating activities increased by 78% to nearly $300 million, highlighting strong cash flow [11] Business Segment Performance - The P&C segment, representing 9% of total segment revenue, saw a 44% increase in revenue before fuel surcharge, with operating income up 80% to $29.5 million [13] - The LTL segment, now the largest at 39% of total segment revenue, produced revenue before fuel surcharge of $625 million, up from $114 million a year earlier, with operating income of $203 million [14] - The truckload segment represented 30% of total revenue, with revenue before fuel surcharge of $482 million, up 42% year-over-year, and operating income reaching $63 million [16] - The logistics segment accounted for 22% of total segment revenue, with revenue before fuel surcharge more than doubling to $407 million and operating income also more than doubling to $35.6 million [19] Market Data and Key Metrics Changes - The Canadian LTL business grew revenue before fuel surcharge by 26%, while the U.S. LTL business generated revenue before fuel surcharge of $482 million [15] - The overall strong performance was attributed to a combination of increased volumes and pricing, driven by both B2B and e-commerce demand [10] Company Strategy and Industry Competition - The acquisition of UPS Freight is viewed as a strategic move, positioning the company as a top five North American LTL carrier [9] - The company aims to optimize profitability and cash flow while focusing on strategic acquisitions to enhance shareholder value [7] - Management emphasized the importance of improving operational efficiencies and addressing cost structures within the newly acquired TForce Freight [40][84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to optimize the TForce Freight operation, despite acknowledging cyclicality in the business [22] - The company expects EPS to be in the range of $4.50 to $4.60 for the year, up from a prior range of $3.80 to $4.00 [23] - Management noted that while volume growth may be flat for the year, the focus will be on improving profitability [101] Other Important Information - The company reported a free cash flow of $268 million, up over 69%, and maintained a leverage ratio well below 2 times funded debt-to-EBITDA [20] - The company is addressing operational inefficiencies and has plans to upgrade facilities and fleet to enhance performance [96][97] Q&A Session Summary Question: Can you help us understand how much of the LTL performance was seasonal and how it aligns with targets? - Management indicated that Canadian LTL performance is stable, while TForce Freight shows cyclicality, with Q2 being the best quarter [30][32] Question: How are you addressing tonnage and pricing trade-offs at TForce Freight? - Management is focused on eliminating low-quality freight and adjusting pricing to improve profitability, with a long-term goal of enhancing operational efficiency [38][40] Question: What is the outlook for guidance and margin expectations? - Management stated that the guidance reflects a conservative approach, aiming to under-promise and over-deliver, with expectations for improved margins in the future [49][50] Question: Can you provide insights on the real estate footprint at TForce Freight? - Management acknowledged having excess terminal capacity and plans to optimize the network while exploring opportunities for additional tenants [93][95] Question: How do you see labor costs and availability impacting growth? - Management indicated that while they do not foresee volume growth this year, they are focused on improving the bottom line and managing labor costs effectively [99][101]