TFI International (TFII) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue grew 3% year-over-year to $1.2 billion, marking the highest revenue ever for the first quarter [9] - Operating income increased by 41% to $106 million, while adjusted EPS on a diluted basis rose by 40% to $0.77 [9] - Net cash from operating activities reached $161 million, up 178% year-over-year, and free cash flow was $143 million, up 172% [11] Business Line Data and Key Metrics Changes - P&C segment revenue before fuel surcharge grew slightly to $147 million, with operating income at $21 million [12][13] - LTL segment revenue before fuel surcharge increased slightly to $208 million, with operating income more than doubling to $28 million [14] - Truckload segment revenue before fuel surcharge rose 7% to $527 million, with operating income increasing to $51 million [15] - Logistics and Last Mile segment revenue before fuel surcharge was $224 million, down from $237 million in the prior year, but operating income grew 1% to $15 million [17] Market Data and Key Metrics Changes - The U.S. truckload market is experiencing pressure on volume due to weather conditions, but contract renewals are allowing for price adjustments of 3% to 6% [21] - The Canadian truckload segment is performing well, with expectations for continued improvements in operating ratios [50] Company Strategy and Development Direction - The company aims to generate profitable growth and return excess capital to shareholders, having completed three business acquisitions in a disciplined manner during the quarter [7] - The focus remains on optimizing business mix and asset utilization while leveraging technology to capitalize on e-commerce growth opportunities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a free cash flow target of $400 million to $450 million for 2019, citing improved accounts receivable collection [35] - The company is cautious about the impact of IFRS 16 on financial metrics but anticipates a downward trend in depreciation and finance charges over the next few years [123] Other Important Information - The company returned $117 million to shareholders through dividends and share buybacks during the quarter [17] - The outlook for capital expenditures has been revised down to $200 million to $225 million for the year [18] Q&A Session All Questions and Answers Question: Recent TL pricing trends for U.S.-based truckload - Management noted that contract renewals are allowing for price adjustments of 3% to 6%, despite a challenging market environment [21] Question: M&A market for Specialty TL - Management indicated a focus on digesting recent acquisitions and being disciplined in future M&A activities, with opportunities still available [24] Question: Changes to EPS expectations for the full year - Management maintained EPS guidance of $3.80 to $3.90 for 2019, with potential for upward revision based on Q2 performance [31] Question: Free cash flow expectations for the full year - Management expects free cash flow to be in the range of $400 million to $450 million for 2019, driven by improved operational efficiencies [35] Question: Update on BeavEx acquisition - Management highlighted the strategic fit of BeavEx, projecting a contribution of $10 million to $15 million to the bottom line due to minimal overhead [90] Question: LTL margins and subcontracting costs - Management explained that improved margins in the LTL segment were achieved through operational efficiencies and the elimination of low-margin business [128]