TFI International (US:TFII)2020-07-28 19:59Financial Performance - Total revenue for Q2 2020 was $1.1 billion, down 17% year-over-year. Operating income decreased by 12% to $131 million, and adjusted EPS on a diluted basis was $1.04 compared to $1.18 in the prior year [12][13]. - Net cash from continuing operating activities was $228 million, up 61% from the previous year [13]. Business Segment Performance - The P&C segment, representing 14% of total segment revenue, saw revenue decline by 12% year-over-year, with operating income of $23 million compared to $30 million in the prior year [15]. - The LTL segment, accounting for 16% of total segment revenue, experienced a 28% decline in revenue year-over-year, but operating income increased by 10% to $33 million, aided by a Canadian wage subsidy [18]. - The truckload segment, the largest at 46% of total revenue, saw a 17% decline in revenue, but operating income rose by 3% to $70 million, supported by a Canadian wage subsidy [20]. - The logistics segment, representing 24% of total segment revenue, grew by 8% year-over-year, with operating income up 27% [23]. Market Trends - The company noted a significant shift from B2B to B2C business during the pandemic, with B2C activity increasing as traditional retail outlets closed [16][66]. - E-commerce demand remained strong throughout the quarter, benefiting logistics operations [24]. Company Strategy and Industry Competition - The company continues to pursue an asset-light business model and focuses on disciplined acquisitions to enhance operational efficiency [9][30]. - Management expressed confidence in the M&A environment, indicating potential for larger acquisitions in the future [46][50]. Management Commentary on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but highlighted a strong recovery in June and positive signs for future performance [14][29]. - The company expects adjusted diluted EPS for the full year to be in the range of $3.40 to $3.75, with free cash flow projected between $425 million and $460 million [27]. Other Important Information - The company has reinstated full work weeks for many employees and resumed some capital expenditures [26]. - Financial leverage is at a multi-year low, with $1.1 billion in liquidity [24]. Q&A Session Summary Question: Can you walk us through the cost impacts related to COVID-19 in Q2? - Management discussed various costs incurred due to COVID-19, including sanitation and employee bonuses, and noted significant revenue drops in April [36][37]. Question: Has the M&A environment normalized for larger acquisitions? - Management indicated that while small acquisitions have been active, they are cautiously optimistic about larger deals in the near future [46][50]. Question: What are the trends in the U.S. truckload market? - Management noted a sharp recovery in activity and expressed confidence in the ability to re-price lower-yielding freight [55][58]. Question: How is the B2B business recovering? - B2B revenue was down about 15% in July compared to the previous year, with expectations of a permanent impairment due to shifts towards e-commerce [76][78]. Question: What is the outlook for free cash flow in the second half of the year? - Management indicated a decline in free cash flow due to tax payments and resumed capital expenditures [80][81].