Earnings Call: Q3 2020

Oct 23, 2020

Earnings release

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Third Quarter 2020 Results Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and a follow-up in order to get to as many callers as possible. Further instructions for answering the queue will be provided at that time. Before we turn the call over to management, please be advised that this conference call will contain several statements that are forward looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. All dollar amounts are in Canadian dollars. Lastly, I would like to remind everyone that this conference call is being recorded on Friday, October 23, 2020. I would now like to turn the call over to Alain D'Addario, Chairman, President and Chief Executive Officer of TFI International. Please go ahead. Well, thank you very much for the introduction, operator, and I appreciate everyone joining us for this morning's call. Yesterday, after market close, we released our 3rd quarter results. If you need a copy of the press release, please visit our website. TFI International had a very strong Q3. As I mentioned on our last call, we had seen several positive developments that bodes well for our performance going forward. These played out as expected during the quarter and our strong financial and operation results came despite of the ongoing pandemic and despite our continued focus on the health and well-being of our employees and customers. As you frequently hear me mention, a hallmark of PFI International's operating philosophy is our relentless focus on the fundamentals of the business, consistently getting the details right. We constantly seek opportunities to enhance efficiencies and increase returns on invested capital. We also look to optimize our free cash flow and our earnings per share, adding to our strong financial profile. This position of strength then allows us to strategically expand our business with a long term goal of creating shareholder value and this includes returning excess capital to shareholders whenever possible. During years such as this, when macro uncertainty is elevated, we believe that maintaining our culture and adhering to these principles is even more important. You see it in our quarterly results that I'll next walk you through and you also see it in our continued identification of strategic accretive acquisitions opportunities to expand and enhance our platform. During the Q3, we completed 4 acquisition and we agreed to acquire an additional business expected to close during the Q4. In addition, subsequent to September, we completed 2 additional acquisitions. In total, that's 7 well timed and highly strategic acquisitions since our last call. I won't walk you through the compelling rationale for each, but I do invite you to read more in our recent press releases as we extend our long and successful track record in this regard. Turning now to TFI International's 3rd quarter results. Let's start with our high level performance. And as a reminder, these results are despite the continued absorption of COVID-nineteen related costs and our continued focus on health and safety. Our total revenue of percent compared to the prior year's Q3. This was a significant improvement over the 2nd quarter's negative 17 percent year over year growth. More importantly, our operating income increased 18% to 156,000,000 dollars and our adjusted EPS on a diluted basis expanded 20 percent to $1.25 up from $1.04 a year earlier. Our net cash from continuing operation activities was a healthy $190,000,000 and that was up slightly over the prior year. We view cash flow as strategically important as it allows us to invest in our business and seek expansion opportunities. Overall, we were very pleased with our performance. More specifically, let's look at how each of our 4 business segments perform, beginning with our P and C packaging courier. Our packaging courier represents 14% of total segment revenue and saw a 5% increase in revenue before fuel surcharge versus the prior year. Operating income of CAD 28,500,000 was up 1% as the segment operating margin of CAD 17.5 percent compares to the 18.2 percent the prior year. These year over year P and C results were much improved over our 2nd quarter performance. Throughout the Q3, we saw a pickup in B2C activity and even B2B, which has slowed significantly due to the effect of COVID-nineteen, improved as the quarter progressed. Going forward, we believe that our P and C segment is emerging even stronger from the pandemic with a more balanced mix of B2C and B2B demand that we are well prepared to accommodate. Moving to LTL. This segment represents 16% of our total segment revenue and generated revenue before fuel surcharge of $177,000,000 down from $205,000,000 the prior year. That rate of year over year decline is much improved and in fact half of that was during the period quarter the prior quarter, reflecting a rebound in demand. Importantly, our operating income grew 36% to EUR 35,000,000 and our operating margin expanded more than 700 basis points to 19.7%. This 36% year over year growth in operating income was a result of not only the Canadian wage subsidy of $8,000,000 but our significant success driving operating leverage, for example, by merging our Canadian Freightways and TST Overland Express operating companies in May. These ongoing efficiencies significantly benefited our margin and more than offset the weaker demand environment. Next, turning to truckload. This is our largest segment representing 47% of our total revenue. Revenue before fuel surcharge declined 2% year over year, which was a sharp rebound from the 17% decline in the prior quarter. Truckload operating income declined just slightly to BRL75 1,000,000 from BRL76 1,000,000 in the year earlier quarter and our operating margin was up slightly. It should also be noted that we had $6,400,000 of higher gain on sales of real estate in the year ago quarter. Within this segment, our U. S. Truckload operation grew revenue 2.5% over the prior year period, while our Canadian specialized business each saw our Canadian and specialized businesses each saw a single digit percentage decrease in revenue, which led to a Canadian wage subsidy of $11,000,000 Rounding out our segment discussion, logistics is our 2nd largest segment at 22% of total revenue. We saw year over year growth of 9% in revenue before fuel surcharge. Our operating income more than doubled in the quarter versus a year earlier at CAD 30,000,000 compared to CAD 14,000,000 the prior year. Our operating margin came at CAD10.7 well above the year ago 5.4% as our margin improvement initiatives have produced solid improvement on the bottom line. E commerce and same day package delivery demand remains powerful organic growth driver for us. Turning to our balance sheet. It remains a meaningful source of strength for us, allowing us to execute on our business plan. We further strengthened our financial profile in August with a share offering that provided gross proceeds to TFI of approximately CAD290 1,000,000 Our strong liquidity further benefited from our strong cash from operations during the quarter. All in, we ended September with our long term debt down 27% since the start of the year and a total of 1 point $5,000,000,000 of liquidity. Given our continued strong operating performance and very solid financial position, I'm pleased to be announcing today that our Board of Directors has announced a sizable 12% increase in our next quarterly dividend payable in January. In addition, I'm pleased to report that as business conditions have improved and TFI International has continued to perform, during the quarter, we reinstated 4 or 5 days work week for 4.86 employees, and we rehired 298 employees full time who had been furloughed. Lastly, wrapping up my prepared comments today, I want to update you our full outlook for 2020. We now expect diluted earnings per share to be a minimum of $1 up from our previous range of $3.40 to 3.75 1,000,000. And we expect our free cash flow, which is a non IFRS measure, to be minimum of BRL600 1,000,000, up from R425 1,000,000 to R460 1,000,000 previously. In summary, as I mentioned at the start of the call, at TFI International, we focus on the fundamentals of the business and optimizing our capital allocation regardless of constantly changing macro conditions. Specifically, we invest in a highly disciplined manner where we see the best risk adjusted return while also paying our quarterly dividend. On a day to day basis, our entire team looks to drive efficiencies and produce not just growth, but profitable growth. Our ultimate aim is to create and unlock shareholder value, returning excess capital to shareholders whenever possible. I want to thank the entire team at TFI for generating the results I just outlined and for their continued dedication to this unprecedented year. And with that, operator, if you could open the lines so we can begin the Q and A session. From the line of Prabhup Shankar with Morgan Stanley. Please go ahead. Good morning, everyone. Good morning, Alan. Thanks for taking my question. So I want to start out with 2 kind of longer term questions. First on M and A, obviously, you guys have been super busy this year with everything going on. And you've just made what one would consider to be a fairly sizable acquisition. Can you remind us again kind of what your pipeline looks like? Are you guys taking a little bit of a break here? And also kind of with the market where the stock market where it is, you feel like valuations out there are compelling for you to go offer new targets? That's a very good question, Maria. I mean M and A has been the secret sauce of TMI for the last 20 years. So I mean, what we've done so far this year is just some small tuck ins that we do every year. We invest about $200,000,000 So far, we've invested only $100,000,000 $110,000,000 $115,000,000 dollars with some very nice small strategic acquisition. But for sure, I mean, we're going to be closing the DLS acquisition, which is a significant one for us. We're going to be closing that sometime early in November, okay? Everything is done. So that's going to be a great acquisition for us. Now in terms of the pipeline, our pipeline is always very full. In Canada, if someone wants to sell his company, the first call is always TFI. Why? Because we have a strong track record of closing transaction, number 1. And number 2, I mean, if we create an environment where someone sells his family owned company to us, I mean, we keep the value, this kind of environment that is propers to growing the business. We've done well. In the U. S, we're new players, okay, for sure. What we've done so far is some significant Dynamics in 2011. And our future for significant transactions, for sure, we've said it many times, it's got to be side of the border. It cannot be in Canada because we're such a dominant player in Canada. If we try to buy a company with revenue that is a little bit more than CAD90 1,000,000, then we have to sit down with a competition bureau in Ottawa. And it's a long, long process and takes an awful cost with lawyers and things like that. So, I mean, yes, we've been really busy, but this is normal for us. What is a little bit less than unusual is every 3 years or about we do some significant transactions. So this is why DLS is a significant transaction, not that big, but it's important to us. I mean, we're going to be investing $225,000,000 on this acquisition. And it's a strong team led by Tom, and we have a lot of faith in the future in that business. It's our first step into the U. S. LTL market through this asset like kind of acquisition. So we're going to use that to really understand the drivers of this LTL market in the U. S, which is a little bit different than probably the one in Canada. Now that doesn't say that we're going to be stopping. That's if you look at we've got $1,500,000,000 of liquidity available for us for M and A. We're going to be spending in Canadian dollars about $300,000,000 on DLS. So we still have a lot of dry powder. If we find the right acquisition, the right fit, absolutely, we're going to jump on it. We have a deep bench. In Canada, our team is second to none. And in the U. S, we're beefing up the team. I mean, again, this DLS acquisition is going to beef up our team. All these small acquisition that we've done in the U. S. Through our specialty TL, now we're running probably like a little bit more than 1,000 trucks in our specialty truckload, which 3 years ago we were, well, 0, okay? So we've got a lot of faith in this economy in North America, U. S. And Canada. I think that once this election is behind us, some concern will probably evaporate. And then 'twenty one, we see a lot of tailwind for transportation, lots of potential. Now in terms of valuation, I think that there's still ways to do a transaction that is accretive day 1. Doing a transaction that's accretive after 10 years, well, this is not my bag. We're not really in that business. Accretion has to be like day 1. And normally, without any synergies, because day 1, you don't have any synergy. You start the business and here we go. So if you look at DLS, if you look at everything that we've done over the last 1 years, that's how we were able to build this TFI, which we're really proud of today and very proud of our people, our team. And your next question comes from the line of Jason Seals with Cowen. Please go ahead. Thank you, operator. Good morning, Elaine and team. Wanted to focus a little bit on some of the trends you've been seeing across your different business lines as we sit here in 4Q. I'm curious to know sort of the rate of recovery you're seeing there and then talk about how that's going to impact the bottom line profitability, especially with the Canadian woody subsidy eventually going away? Yes. Well, absolutely. Very good question, Jason. So if you look at Q2, the subsidy in Canada was about $22,000,000 The forecast for us in Q4 is going to be about just a few $1,000,000 Our P and C, if you look at what we've been doing so far is our mix of B2B versus B2C has changed in Q3, but our profitability has not changed that much. So if you look at our P and C in Q3 and going into Q4, our B2B is still down year over year, okay? If I look at ICS, if I look at TFIS, which are our specialty P and C guys, mostly B2B, ICS is still down about 5%, 6%, 7%, okay? TFIS is still down about 20%. But globally, overall, our P and C is up a bit, okay? So that means that we've replaced a lot of our B2B with B2C without affecting our bottom line too much. If you look at our adjusted EBITDA, it stayed above the same. So that's our goal going into Q4 and into 2021, okay, we'll keep growing this B2C. Hopefully, all of our B2B comes back. Probably, there's going to be some leakage because as we know, e commerce is eating a lot of the lunch of the brick and mortar guys. So maybe there's a permanent, okay, impairment in some of our B2B business. We'll see. I mean, but we're back. So we're replacing B2B with B2C without affecting the bottom line because we're focused. We have a very solid plan, okay, to replace the B2B that is gone and also growing the global revenue of our P and C, which I think in 'twenty one, you'll see even some better organic growth. Now going into e commerce, then it brings me to the next sector, which is our logistics. Logistics is on fire for us. I mean, if you look at our last mile operation in Canada, I mean, we're doing so good, so good in terms of increased revenue and so good in terms of bottom line. But Canadian market is small. So if you look at our U. S. Market, okay, one of the main driver of our bottom line improvement in our logistics is our U. S. Last mile operation, okay, which, okay, the top line has not grown, okay, because we're still getting new business in of quality. And at the same time, we still have some business that are, let's say, 2%, 3%, 4% bottom line. And Cal and his team are saying, you know what, 2%, 3%. We don't sorry, guys, we can't service you for 2%, 3%. So you guys have to walk. So what you're going to see in 'twenty and into 'twenty one is that the bottom line of our U. S. Operation is going to keep on growing, getting closer to a double digit EBIT. That's the goal. Top line will grow, but not by much because we're still replacing 2%, 3%, 4% bottom line guys with better quality of bottom line. Now if you look at our LTL, here's the problem. In Canada, okay, most of the LTL is retail. So this is why you see us in Ontario and in Quebec, okay, not so much out west because the west is small, but there was never any industrial LTL out west. So there's nothing to lose there. But this industrial LTL in Ontario and Quebec keeps on coming down. So this is why revenue keeps on going down, okay, year over year organically. And at the same time, some of our brick and mortar guys, LTL guys, customers are also losing to the e commerce. So this is why we're still down big time in our LTL. But at the same time, okay, all the right moves that we're doing and focusing on the right lane, the right customer, the right weight break. So we're not in the business of hauling freight for $40 I mean, leave that to the other guys. But our LTL for sure needs to grow through M and A. So we're looking at all kinds of opportunities, what can we do on that. We were trying to buy apps. We announced this acquisition, but finally, there were certain closing conditions that were not met. So we had to say, well, okay, we'll look at something else. So but the LTL, it's going to be organic growth into 2021, yes. But I think that we're going to keep growing the dollar of the bottom line, okay, through our efficiencies. And hopefully, we're working on different scenarios to keep growing the top line on our Canadian LTM. Now if you think about our truckload, our U. S. Truckload operation, that's done okay in Q3. Yes, revenue is about stable. Our CFI operation did a little bit better than TCA. Our MCT acquisition is doing really, really well. Our specialty truckload is still effective in Canada. Some of the mines are coming back. Construction is okay, but the automotive business is still not where it should be. So steel, aluminum is affecting us a bit. But I see 'twenty one like our US TL will definitely improve, absolutely. I think our Canadian Specialty and Van division also will get to see some improvement there. So overall, I'm very confident. So this is why when we give guidance for 2020, we say EPS is going to be a minimum of $4 EBITDA is going to be probably a minimum of C900,000,000, okay? But I think that 'twenty one is really going to be a lot of these smaller acquisitions that we've done in 2020 plus the DLS one that's closing at the end of the year, okay, it's going to help us into the 'twenty one year. And I think that PFI will again produce even better results in 'twenty one versus 'twenty, even without the Canadian subsidy. That's fantastic color. Let me if I could sneak this last one in. CapEx, I mean, obviously, you had CapEx deferred. And then in 3Q, you had lead times go out on equipment, which everyone has been experiencing. How should we think about CapEx for 2021? Yes. So on Q4, our CapEx, for sure, you'll start to see CapEx net CapEx probably going to be like between CAD50 1,000,000 CAD60 1,000,000, okay, into Q4 because some of the lags, some of the CapEx that were put on hold will be taken care in Q4. But if you look at 2021, globally TFI net of disposal in Canadian dollars, we should be running around the $200,000,000 mark. Okay. That's great. Listen, I appreciate the time as always, Hollie. Nice job of quarter. Pleasure. Thank you, Jason. And your next question comes from the line of Allison Landry with Credit Suisse. Please go ahead. Thanks. Good morning. Good morning, Allison. I'm good. How are you? I was wondering if you guys could speak to the U. S. TL segment and specifically what your expectations for contract rate increases might be for 2021? And do you see an opportunity to maybe price a little bit higher than the market given your yield improvement initiatives? Yes. Very good question. So what we're seeing as of now, okay, is that contract pricing is up by about 5%, 6%, 7%, 8%, okay, depending on the customer. We all see the spot rate going through to some good levels right now. So we believe that the quality of revenue for our USTL operations for 2021 will definitely improve. But even more importantly for us, Allison, is always what can we do us to reduce our cost. So one significant thing that is one of our projects for us in 2021, which we put on hold in 2020 with the COVID, but it's back on track now, is it's our TMS. Our guys are doing a fantastic job today with tools of the 80s in terms of IT. Okay. So the discussion that we had with Greg and the rest of the team there is that, guys, we need tools of the 21st century, not the 20th century, okay? So this is why we picked McLeod as a new TMS. And we're doing right now the study phases, okay, of all that. And we should be in a position, according to what the guys are telling me, to start looking at implementation sometimes in 'twenty one. So that's one thing that has got nothing to do with the market, okay? But it's something that us we could do to have better tools to our management team to do a better job, okay? So bring better efficiency. And the motto at TFI has always been, guys, we have to do more with less. So yes, I agree with you. I mean, we have a tailwind in 'twenty one with the quality of the revenue. Rates should start to improve. But and the freight is there. We're always pre booked. Every morning now, we're pre booked. 6 months ago, guys or a year ago, guys were saying, well, we got drivers, we don't have the freight. No. Well, problem is the opposite. We have more freight than we have drivers. So it may be a nice problem to have, but at the same time, as we say to our team guys, we have to work on our cost basis. We have to be the tiger. The tiger is always the last one survive in the jungle. So low cost, okay, always help the company. So we have to bring and the same thing with our Canadian truckload. We're always working to bring our costs down and improve our efficiency. But 'twenty one, for sure, like you said, tailwind for us in terms of pricing improvement. Okay, great. Maybe in terms of capital allocation, prices, see the dividend hikes. Could you speak to how you're thinking about the buybacks going forward? Yes. Well, buyback is for us always been seen as M and A, right? So it's either you buy something outside of TFI or you buy your own stock. So right now, it's always a balance between, okay, what we but it's adjusted return, okay. So what can we buy versus, okay, buying TFI. Right now, our pipeline is, like I said earlier, is full. We got lots and lots and lots of opportunities. It's just which one can we do and which one's got the best returns. So what we've been doing, if you look at earlier in 'twenty, when our stock dip, when the COVID thing hit and our stock dip, we bought back about 1 500,000 shares at the time. Okay. I think it was Q1 or early into Q2. So we took that opportunity at the time. So okay, fine. Right now, our focus is more on M and A, okay, but it's always a balance. Depending on what the stock reaction is going to be, I mean, like I said, we've got $1,500,000,000 in liquidity, okay? So yes, through the DLS transaction, that's going to come down to probably a $1,200,000,000 But this is always the question, okay, what is the best adjusted return? Is it buying back TFI's shares or investing and growing the company through M and A, right? So it's a balance. It's always my number one job as a CEO at TFI is to control the cash. And you control the cash by what's our policy on dividend, 20% to 25% of our free cash flow goes back to our shareholder. That's our policy. That's why we're able to increase it by 12%. And then you've got reduction of debt, which we did this year, okay? And then, hey, M and A. So yes, we always invest about $200,000,000 a year on M and A with small deals. And once every 3, 4 years, we do something significant. DLS is important, significant. CFI was significant because there was $500,000,000 invested. DLS is important, but it's not $500,000,000 So for us, right now, TFI, if you want to talk a significant transaction, it's DLS 500,000,000. And also DLS is important, but it's not the size of the big whale that we always talk about every 3, 4 years. Okay. Excellent. That was a helpful framework. Thank you. It's a pleasure, Jose. And your next question comes from the line of Scott Group with Wolfe Research. Please go ahead. Hey, thanks. Good morning. So I just wanted to check something on the guidance. So $4 you've done, I guess, dollars 3.10 or $3.11 year to date. Should we be expecting a drop off in the Q4 as the subsidies go away? Or is there a conservatism here? Just help us think about what this means for Q4. Well, we are very conservative us at TFI. Our motto one of our motto is under promise and over deliver. So for sure, that's why we're seeing a minimum of $4 Now you could say, well, if you say a minimum $4 that means it's a minimum of about $0.90 for Q4. Is that because the subsidy is going away? Subsidy is going away, absolutely. Subsidy for us in Q4 is probably like a few $1,000,000 But our $0.90 okay, if you say minimum of 4 dollars versus $3.10 is $0.90 compared to $1.20 something today, that means that they believe that this is going to drop like $0.20 to $0.30 Probably not. But we want to be conservative. Remember, our last guidance was $3.40 to $3.60 right? And now we're saying $4,000,000 So I mean, we always like to under promise and over deliver. So this is why we see a minimum of. So that could be 4, it could be 4.10, it could be 4.15. Now we know October, okay, we have an idea of what's going on in October, but we don't know anything about November December. So this is why we're careful. And but we have confidence because if we don't have any confidence in 2021, why would we raise our dividend? I mean, we know our team is solid. We have a fantastic plan, okay, for now and into 'twenty one, but we want to be conservative. Okay. Makes sense. So with PLS, just because it's a larger one, maybe just help us a little bit more with just the strategic rationale here. I think it was a 5% running around the 5% margin business. Where do you think you could take it? And then maybe just the grander plans for LTL in the U. S. Would be helpful. Yes, yes, yes. That's a very good question. First of all, when we look at the U. S, 5% for sure, we believe that we could do better than that. Working with Tom and the team over time, it's not going to happen overnight, okay? But over time, if 1 in the same kind of business as DLS is, is a 7% bottom line guy. Well, why are we not 7%, okay? So over time, we'll work with Tom and his team to get from 5% to 6%, 6% to 7% and maybe 7% to 8% or whatever. I mean, we don't really like being a 5% bottom line guys, but hey, it is what it is today. Now, what we believe is good is that we know the LTL business in Canada inside out, okay? We know this business really, really well. We know the market. We know the players, etcetera, etcetera. Now this DLS acquisition help us understanding better, okay, the will help us understand better, okay, the players in the U. S, the market in the U. S, because when we look at the U. S. LTL market, for us, it's like a gold mine. And the Canadian LTL market is a sand mine. In Canada, you can't improve pricing because there's too much overcapacity. It's a that's why our revenue is down every quarter. Market is shrinking and our competition is not adjusting. So they're always chasing volume, okay, and trying to survive. The U. S. LTL market is different. I mean, you've got some fantastic company, okay, that one of them is running a sub-eighty OR, okay? And then you've got others that family owned that probably run-in the 80 to 90 ORs. You've got some public one nonunion that run 90 ORs and you've got guys, the unionized guys, okay, that's a different story. But not to say that union is bad because we if you look at the largest trucking company in the world, they're unionized with the teamsters and they do a fantastic job. But I'm just saying us, we're also some of our operation in Canada is unionized and we do very well. We work with the union, none of them at all. So it's one way, it's like we're going to school, okay. We're just trying to understand the different drivers, okay, in this U. S. LTL market because DLS is about 70% to 75% LTL, okay, and 20% truckload and the rest is freight forwarding. So it's like going school. We want to understand this market better because we believe that the LTL in the U. S. Between you and me is a much better business than the one in Canada. But hey, too bad, that's where we started us is with the Canadian LTL business. And we've been working day and night to improve this. But if you look at our results, yes, revenue is down, bottom line is up though. Even if you exclude the subsidy of $8,000,000 in Q3, I mean, our revenue went down big time, but exclude the subsidy, our bottom line is still up $2,000,000 And we're stuck with all kinds of fixed costs, the trucks, the terminal and all that. So that tells you how efficient we can be or we are. And And your next question comes from the line of Walter Stracklin with RBC Capital Markets. Please go ahead. Yes. Thanks very much. Good morning, Alain. Good morning, Walter. I'd like to focus a little bit on your margins here because you brought back a lot of costs and still got the operating leverage, right? I mean you brought back all your employees, a lot of other companies saw a lot of cost creep come in, but you were able to actually improve your margins as the volume came. So the operating leverage looks pretty attractive. I want to you, Alain, you gave us good color into the Q4 here. But when we go into next year, if we back out the CUES impact, looking into next year, do you think that your margins for next year can hold in at the level that you did in 2019? And therefore, with the acquisitions you've done, can you give us a little bit of indication as to kind of order of magnitude the improvement that we could see next year? I don't know if you're prepared to give us directionally some guidance in the next year or not, but that would be very helpful if you have it. Yes. Well, you see, Walter, we can't give guidance for 'twenty one. But what I could tell you is, like I said earlier on the call, is that our P and C in 'twenty one, which P and C, the subsidy, like it was chicken shit. I mean, it was like very insignificant in a sense. Yes, for ICS and PFIS, but KFR Lumis, there was no subsidy at all. We believe that in 'twenty one, excluding the subsidy, there's no subsidy for us, I think, in 'twenty one for our P and C. We're going to do better. We're going to do better because even with our B2B down a bit, okay, because we're still going to do some catch up of our B2B in '21. But our B2C is going to keep on growing, okay, at a reasonable rate, not going crazy, but at a reasonable rate, okay, that we could sustain at the same time our bottom line. Our truckload in the U. S, there was never any subsidy. But our Canadian truckload, most of our subsidy came to our special PTL, okay? And we're going to this will be probably eliminated in 'twenty one, but we believe that we can sustain the margin because some of the markets that we've been affected badly are coming back. And some of the small deals that we've done like the Keith Hall, okay, and others that we've done in Canada, okay, is going to help us beef up this margin. And we have some very, very nice project in Montreal, okay, with our Contrans division there. We have some nice project in the Port of Hamilton with TTL. We have some nice project also with Gorski and what's the name of that, GOSCO that we just bought about a few months ago. So I believe that even 'twenty one, Steve and his team there are going to yield a fantastic 'twenty one even if you exclude this COVID subsidy there. And then if you think about our logistics, there's no subsidy there. Our logistics will be up big time at the bottom line because of what I just explained. And then we're left with the LTL. So the LTL, that's why we were trying to buy this apps company, but finally we can do it. LTL is an issue because we think that organically the LTL, okay, is negative in 'twenty and into 'twenty one. The market is shrinking. So we have to do something in M and A to help us support. The subsidy will probably go away sometimes in 2021 and the guys are working hard. We are in discussion, okay, right now for something significant in terms of a contract with a carrier, okay, that maybe could help our LTL business in Canada. It's still early in the game. Maybe we'll be in position to announce something sometimes before the end of the year, maybe into next year. But we the LTL in Canada will have to grow through M and A. If perhaps we can new the deal, okay, we're working on plan B right now. That makes sense. And just a quick one on your M and A pipeline in the U. S. Any risk that, that gets affected by a U. S. Election that sees, for example, a higher capital gains tax come in? Is there any risk around an election that would affect your U. S. Pipeline at all? I don't think so, Walter. I mean, we don't know what's going to happen there in 2 weeks. But we believe that this U. S. Economy is going to stay strong whoever runs the country. I mean, but we're no magician. I mean, our goal is that we adapt. So we adapt and we adjust and we work for the future of our shareholders. Don't forget, TFI is in business, number 1, to create value for shareholder. That's our goal. And just one more housekeeping for me. Tax rate, you've been guiding us, I believe, at 25%. Is it still around that level we should Yes. Yes, yes, yes, yes, Walter. Yes. Thank you very much. Keep safe. Thank you. Okay. Thank you, Walter. The same to you. And your next question comes from the line of Tom Wafer with UBS. Please go ahead. Yes. Good morning. Good morning. I wanted to speak back a little bit to U. S. Truckload. I think you were asked a little bit earlier about pricing in 2021. It seems like the setup is pretty powerful. The biggest U. S. Truckload names that they expect double digit pricing in 2021. So it's an unusually strong framework. What do you think the OR in your conventional U. S. Truckload business can be? I think kind of best in class is 80, high-tech, low-80s in a strong cyclical environment. Do you potentially get to that in 'twenty one? Or is that kind of a multiyear potential for your U. S. Truckload? Yes, very good question. So what we keep on saying is that you cannot be in the truckload business if you don't run a 9 EOR and better on average, okay, over 10 years. So that means that if you have tailwind like we will probably have in 'twenty one, it's impossible to run a 90 OR. You get to run better than 90, okay? So if you look at what we've been doing in the last quarter, okay, we're running about a 90 OR right now, 90, 90 point something, okay, which is for sure the guy will say, well, we've been affected with the equipment, okay, the profit on equipment is gone because the market has not been so good. But now, okay, fine. But for us, in a tailwind situation like we anticipate in 'twenty one, I think there's no excuse to be running a 90 OR. You have to be focusing on something sub-ninety OR because on average, okay, you're going to have maybe some bad years at a 93 percent OR. So when the good years are coming in, you got to be a sub-ninety percent OR. Now I haven't seen our plan, our budget for 'twenty one yet, okay? So Greg and his team are working on it, and we can't really provide guidance for 'twenty one so far. But what I would be really disappointed to see an IDOR in our plan for 'twenty one. Right. Okay. And then the second question is in logistics. So your logistics margin improved pretty dramatically. Can you just give us a little perspective on what drove that and kind of the forward look do you sustain at that level or how do you think about the margin looking forward as well? Thank you. Yes. Yes. Well, most of the improvement, okay, so if you look at our improvement, there's about $4,000,000 of bottom line improvement that came from Canada. Canada is small, okay? But the majority of the improvement came from our U. S. Operation, okay, in the quarter, in Q3. And you'll see us improving in the U. S. Even more as time goes by. What we've done a year ago, if you remember what I said a year ago, I said, guys, we're making a change in leadership in the U. S. So what we're doing is Cal, which is our EVP that was responsible for Canada, now oversees our U. S. Operations since last summer 2019, okay? And we've been rebuilding the team. So the sales team now is under the leadership of Dean. Dean is overseeing our North American Last Mile operation, both U. S. And Canada. So we just signed and we just started, okay, servicing a $16,000,000 account in the U. S. With some interesting and fair margin. So our U. S. Q3 last mile operation had the majority of the improvement, absolutely. And you'll see that improving over Q4 and into 'twenty one. Like I said earlier, the top line of our U. S. Operation will probably not grow that much because we're still replacing 3%, 4% bottom line guys with better margin, right? That's our goal. We're not in business to practice delivery. We're in business to create shareholder value. So a guy that gives me a 2% bottom line, deal with someone else. Because for 2%, my shareholder will say, why would I buy TFI for 2% bottom line? I'm just going to buy shares of a North American bank and I'll get a 3%, 4%, 5% dividend. So stupid, right? So that's our goal. And you'll see us in Q4 again. Now the average with DLS, like we said earlier, DLS is adding a lot of revenue to our logistics at only 5 percent margin. So globally, it will reduce our percentage, but we'll work on that in the months and the quarters to come. And your next question comes from the line of Jordan Allager with Goldman Sachs. Please go ahead. Hi, good morning everyone. Good morning, Jordan. Good morning. Pat, a pleasure for you. On the LTL, I know you mentioned you'll need organic it will be organic growth and you might need some M and A to support. I'm assuming you're talking about the top line there. I'm just curious because your LTM margins even without the Wave Sensity in the Q3, were quite good. So putting the top line aside, do you think you could hold or improve upon the efficiencies for the LTL margin? Well, we still have plans, okay, to improve the margin, Jordan. But the top line, like I said, without M and A is going to shrink, yes. So dollar wise, I think that we could sustain the dollar wise even with some revenue leakage, okay, because of the market. But for sure, our approach is to do some M and A activities in Canada, okay, to beef up the top line and it will also have an effect. But I'm not saying that without the top line growth, okay, it's not sustainable, our margin. No, our margins are sustainable because we still have some stuff that we could do to keep on improving what we're doing today. Great. And then just a bigger picture question on M and A, as you guys have gotten larger as a company, I know historically the strategic deals were every 3, 4 years apart. Yes. If there's a need to make them what will you need or would you want to have them come more quicker as you've gotten larger? Is that something that might need to happen? You know what, that's a good question, Jordan. This is based on the deep bench that we have. So in Canada, we have a very deep bench, a team that's second to none. But the problem we have is it's a small market, okay, and we're already really, really big. So our plan has been to beef up our U. S. Team because the future is in the U. S. For us to grow our business significantly. So that's been the focus of ours. So DLS, okay, will add, will beef up our team in terms of market intelligence in the LTL. So if ever, if ever there's a transaction possible in the LTL in the U. S, I don't know, maybe a company that becomes for sale or whatever. So now with DLS, at least we before buying an asset based company, we have some market intelligence. We have a team. It's the same story with our specialty TL in the U. S. So what we've done so far is small acquisition. We bought a 200 truck operation here, another 200 truck there. And now we're up to a little over 1,000 trucks. So if a deal comes to us, let's say, for 1,000 trucks, now we could do that easily. And also, So our strategy has always been small step, but I agree with you that the bigger we get, the larger the small steps becomes, right? Yes. So our focus really has got to be for us small deals in Canada, okay, small nice tuck ins, which we're doing now. And hopefully, we could find the right transaction after DLS of size in the U. S, maybe in the specialty TL, maybe in the last mile, and we never know, maybe in the LTL. We'll see. Great. Thank you. You're welcome. And your next question comes from the line of Mona Nazir with Laurentian Bank. Please go ahead. Good morning, Ellen, and congrats on a fantastic quarter. Thank you, Mona. So I'm just going to keep it a long question. But when I'm thinking about your tenure at TFI, future performance and the legacy you want to leave, I'm just wondering what is your ultimate guiding principle or metric that is weaved into every decision you make or that mentally you keep reverting back to? And has it changed over time? I mean just even on the call yes, go ahead. Yes. Well, our religion is like I said for years years, we're in business to create shareholder value. This has been our number one rule at PFI, okay. And how do we get this done is by focusing on free cash flow. Some of the guys say they talk about EBITDA this, EBITDA that, blah, blah. We say, okay, EBITDA, fine, we understand that. But for us is what's the free cash? What's left? Okay, because you could have $100,000,000 of EBITDA, but if you have $98,000,000 of CapEx, okay, to sustain the business, well, there's not much to do. So if you look at our track record of 20 years, that's how we've been able to build TFI. It's based on the focus of creating shareholder value. That's never changed. Because don't forget, I'm an important shareholder of TFI from day 1. And also, how do we get there is through people, team, team, people and focus on free cash flow and the payback. So someone comes to me and say, Arne, we have to invest $1,000,000 for this customer and the return is going to be at one point. Well, find somebody else because we're not in the business of 1 point, 2 points, 3 points. That's not us. So that's always been the focus at TFI. It's everything is about creating value for our shareholders. Yes, through servicing customer and focusing on the team, team, people, the right guy. We've built a fantastic team of EVPs, are doing a great, great job. And we're beefing up the team. This acquisition of DLS is going to add another significant player to our team when we're really proud of that. Thank you. I'll leave it there. Thank you. And your next question comes from the line of Sanjay Ramaswamy with Bank of America. Please go ahead. Good morning and thanks for taking my question. I'll pass it over to Juan here. But maybe just talking about B2C and the shift that we did see in 2Q, maybe how do we look at the right mix between B2B and B2C maybe over the next couple of quarters? And is there a specific kind of business, whether it's in the U. S. Or Canada, that you prefer here? Any other details would be great there. Yes. Very good question. So for us, B2B is really what can we do and how much can we do. So our focus has always been to keep growing B2B. But it's tough to do being in the market environment because our customers are being, use the word, attacked by the e commerce, okay? So we're trying always to protect our B2B and to try to grow the B2B. But we live in a world in 2021 that e commerce is growing. So we got to be part of the solution, and that's what we're doing, okay? So we're growing. Now in terms of the mix, is the mix fifty-fifty? Is the mix sixty-forty? I don't know, okay, what's the best mix is. But one thing I could tell you is that we're trying to protect and grow our B2B because that is the coincidence of delivery is always more versus B2C, which is one stop, one partial normally. Now we know that e commerce is growing and B2B is not growing as much. So this is why we came with a solution that really focus on not just growing e commerce, everywhere and anywhere with any rates, our focus has been guys, let's grow where we can protect our margin and keep growing the revenue of the company. And that's if you look at Q3, okay, this is what we've been able to attain. Now if you ask me about future, probably in 2 to 3 to 5 years, we're going to see more, okay, of this growth in e commerce, B2C, than we're going to see in the growth of B2B. So but we are also controlling the growth, okay, of our P and C solution, okay, because we don't want to offer more capacity and come up with a 3% bottom line solution. So our most efficient solution, okay, to the e commerce is our last mile operation. And this is what we've been drawing, okay, in a very important way in Canada, not so much in the U. S. For now, okay? But that's going to be a real focus of ours in 'twenty one in the U. S. But in the U. S, like I said earlier, we still have some small margin accounts that needs to be adjusted or changed or replaced. And that's why we believe that in 'twenty one, our top line in the U. S. Is going to improve a bit. But most importantly, the bottom line will keep on improving a lot. And I don't know if this answers your question 100%, but our focus is bottom line. And how do we get that? Right now, we know that B2C is part of the solution. Perfect. No, that's great, I did mine. Maybe I'll ask for one more follow-up question. But just in terms of the freight cycle, obviously, we're seeing a very, very strong freight market right now in the U. S. U. S. Just potentially, could you comment on how you're kind of navigating these driver shortages right now and maybe talk about the wage inflation you're seeing? We're hearing a lot of truckers just really struggling to see drivers and the wage inflation is quite hefty. So could you just give some color on that? Yes. Well, you see, that's always the problem with the trucking industry is that a year ago, we had tons of drivers and not so much in terms of freight. Now we have tons of freight and it's tough to find the drivers, right? So for sure, we came out with a salary review for our drivers. And that I think it took effect just lately because it's a problem. So it's the same story all over again. Okay. So freight is plenty and shortage of drivers. So this is what we're going through right now. It's the same story for us and the rest of the industry. It's always a battle. What we're trying to do in a situation like that, our experience in Canada has always been when there's a shortage of driver, our approach in Canada, okay, over the last 15 to 20 years, what I said to my guys, guys, how about if we buy a trucking company, okay, with 200 drivers? So you buy the company, you keep the good accounts and you get rid of the bad ones. And also that gives you a little bit better capacity. So that is, in our mind, a solution that we may start to think about the U. S. Domestic market. So if I explain myself correctly, as you look at a 200 truck company, like we just bought MCT a few months ago, it's about 200 trucks. And I'm looking at the results of MCT, and it's very impressive what Greg and the team has done there. And maybe there's another MCT that we could buy in the next 3 to 6 months to beef up our human capital, our driver fleet. And in those small trucking company, they have some good accounts, but sometimes because they don't know what the market is, they have some not so good account. And our approach has always been what do is you just get rid of the ones that are not good, and then it leaves you capacity to service your good account in your existing business. I don't know if I'm explaining my right myself correctly. I don't know if you understand what I'm saying? Yes. No, that makes a lot of I don't have a smart strategy as well. So and I appreciate the color. Okay. And your next question comes from the line of Konark Gaspar with Scotia Capital. Please go ahead. Thanks and good morning, Helane. How are you? Good morning. I'm good. You? Perfect, perfect. Great. Thanks. Hope you're keeping safe and healthy. Just a few quick ones for me, Alain. On the wage subsidy, not sure if I heard you correctly. Are you expecting the government to expand the wage subsidy into 2021? Well, no. What I'm saying is that our wage subsidy for our Q4 is going to be minimal, okay, because our revenue is coming back and slowly, okay? So I was saying that in Q4, okay, our wage subsidy is going to be minimal, just a few $1,000,000 And for 'twenty one, it's probably going to be 0 for us. I see. Makes sense. And on free cash flow guidance, so the minimum you announced today is $600,000,000 Obviously, that implies relatively less cash generation in Q4. I'm curious as to if it's all pertaining to CapEx and tax payment perhaps? Yes. Well, CapEx is going to be more important for us in Q4. Like I said, net CapEx is probably going to be like in the €50,000,000 to €55,000,000, okay, because we have to do some catch up because of Q2 was light and even Q3 was light, okay? And then, yes, you're right, we got some tax payment. But like I said, this is a minimum of, okay? It's like on the EPS. It's a minimum of 4. So what is it exactly? We don't know. But we see it's a minimum of 4. So it could be maybe it's 4.5 not 4.5, but let's say 405, 4.15. We'll see. It's the same thing with the free cash. So it's a minimum of 6, €600,000 So it could be €650,000 or it could be €675,000,000 It all depends. But at least this is a minimum. Right, right. No, I understand that, Jolie. And then I think not a lot of discussion on packaging and courier, so just want to kind of dig in a few things there. There was, I think, a margin contraction in Q3 versus last year despite volumes being almost flattish and pricing being quite positive. What led to that margin deterioration? And then is there any room for margin improvement from where you are today? Yes. There's been if you look at our adjusted EBITDA as a percentage of revenue, I mean, there was no real margin issues. But what is affecting us, like I said, is our ICS, okay, and our TFIS, specialty P and C guys, which are mostly B2B, the revenue is still down year over year. So ICS is down 5%, 6% and TFIS is down like 15% to 20%. And this is high quality margin business, okay, that we're down. This, if you look globally, our P and C revenue is up a bit, okay, because we replaced those B2B revenue loss, okay, because the customers are still not completely reopened, except for whatever reason, okay, by B2C with our Canpar, our Loomis operation, okay? And if you look at most of the e commerce business, okay, and you listen to what's going on, guys always have pressure on the margin. We were able to do it at a kind of similar kind of margin like we used to do with our B2C. So that's what we're saying. We're saying also that e commerce in our package and courier business will keep on growing and we're in business to protect our margin. So we've got lots of demand. I mean, we could grow way more than what we're doing now, but we are controlling our growth through our capacity offering to our customers. Right. That makes sense. Thanks. And last one for me before I turn it over. All the acquisitions you have closed or announced this year, they add up to almost, call it, dollars 1,000,000,000 in revenue. Maybe you optimize some of those businesses, right? But what kind of margins do these businesses on a cumulative basis generate today? And where can they be in a year? Yes. Well, the biggest one is DLS that we're going to be closing in November. So yes, DLS is USD 550. So if you convert that into Canadian dollars, it's about, let's say, CAD700 million. And that is a 5% bottom line company today. We believe that 5% is okay, but it's only average. And we're not in the business of average kind of return. So we believe that over time, this 5 will become 6 and maybe 7 and 8. It's still very early to say. But we look at peers and we have peers at 7 right now. So one will be talking with Tom, our leader there, says, hey, Tom, if the peers are at 7, what can we do to get closer to 6 and then 7 and maybe get better than 7? But it will take time. It's not going to happen overnight. Now the other small ones like Heath Hall, like Gusto, okay, like the DSN, all those small, the CCC that we bought in the U. S, the MCT, those guys are running, some of them are 92 OR, some of them are 98 OR. And the proof is in the pudding. If you look at our track record, I mean, over time, these guys will get closer to on the specialty TL, an 85 were. But it takes time. It takes time, absolutely. So I mean, we don't give guidance for 'twenty one because our budget planning is not completely done for 'twenty one. But as soon as possible, we'll give guidance for the way we think 'twenty one is going to be. But I could say my first feel about 'twenty one is we're going to do better than 'twenty even without the subsidy. And your next question comes from the line of Jack Atkins with Stephens. Please go ahead. Hey, Elaine. Good morning. Thanks for taking my question. Good morning, Jack. So just kind of going back to the P and C business for a moment. We're certainly hearing about quite a bit of pricing power from the large U. S. Parcel carriers. I mean, when you think about that, especially as we go into 'twenty one with B2B hopefully recovering back to more normalized levels, There's obviously going to be sustained B2C demand. How are you guys thinking about the pricing power in your business there? And just sort of normalizing for the subsidies, is it right to maybe think about a real step function change in profitability from a margin perspective in P and C next year? Well, you're absolutely right, Jack. For sure, I mean, we're following in the steps of the big guys like the FedEx and the UPS. So for sure, the only difference between us and them is that those guys were ahead of the game and us were following them. So us, it will take effect only in November, okay, which is next week, absolutely. But I agree with you, B2B is slowly coming back. So that's going to help us in '21. Now are we going to be back to the same level as we were pre COVID on B2B? It's hard to say, probably not. Okay. But also our B2C is also improving in terms of demand. And the name of the game in transportation has always been density, okay? You have to build density and the more density you have. So on e commerce, because one stop is 1 parcel at 99.9% of the time, what you have to do in order to get the density is to pick the zip code, pick the right zip code. So I'll give you an example. If you want to do B2C in the small northern town of Ontario, 20 miles north of Sudbury, well, you won't have a lot of density there, right? So our option to us has been, well, let's pick the right zip code, like the GTA, the Greater Toronto Area, the same thing with Vancouver, same approach with Montreal, etcetera, etcetera. That is the way to create density in an environment where one stop is one parcel. So you say one stop is one parcel, that's true. But if you deliver into a downtown condo tower in Toronto, okay, where there's about 300 apartments, well, maybe one stop is not going to be 1 parcel there. Maybe 1 stop is going to be 15 parcels because there's 300 apartments. But a tower with 300 apartments in Sudbury, there's none, right? So this is why our approach has been Vancouver, Calgary, Montreal, Toronto, Ottawa, those cities where we could do more density, okay, per stop, okay, even in the e commerce world. Okay. That makes a lot of sense. Maybe just one quick last one for me. How are you thinking about your available capacity to be able to grow with the market there in 2021? Do you need to maybe add some capacity to margin within the P and C segment? Yes. Yes. What we're doing, Jack, is we're increasing our capacity at Loomis Canpar on a monthly basis. But we are not going to be like Canada Post or others in Canada that are just growing out of control. Us, we are growing in control because we don't want to come up to our shoulders, C 15%. But the bottom line is down 20%. No. No, no, no, no. We don't want to do that. That's why us, we go ahead and we grow top and bottom line accordingly. So that's the focus. So when I talk to Brian and his team, guys, absolutely, I mean, we got a full pipeline of customers that want to deal with us on e commerce, but we got to go step by step. We got to pick and choose the right customer, the right zip code and where it fits. And we don't want to blow out on the top line and a disaster on the bottom line. Okay. That makes a lot of sense in my book. Thanks again for the time. Thank you, Jack. And your next question comes from the line of David Ross with Stifel. Please go ahead. Yes. Good morning, Elaine. Happy Friday. Thank you, David. Good morning. So when you talk about the logistics and last mile division, specifically as you trade up in customer accounts to get more profitable business. Yes. Where are those you call them like 3, 3.4. Accounts going? Are they able to find somebody else to haul it at those low prices? Or are any of them coming back to you and paying the margin that it takes to run that business? It's a mix. It's a mix, Dave. You say in transportation, there's a sucker born every minute, right? So there's always someone stupid enough to say, oh, I'm going to do it for this kind of money. But our focus to us is that we've got so much capacity growth for our last mile in the U. S. With e commerce at good margin, why am I going to service this guy like Payless something? If this guy sells assets for Payless, sure he wants to pay less for freight too, right? So that's not my cup of tea. So we've got so much demand right now in the U. S. With the e commerce. So what I'm saying to Cal and his team is that, guys, I mean, let's bring this new e commerce business. As I said, we're just starting to do business with one customer that's going to be $16,000,000 for us on a yearly basis. And okay, take this guy on, but get rid of those 2%, 3% guys. Now some of them are saying, oh, no, no, we can't find another sucker, okay? So we'll stay with you guys, but can we do it for 8% bottom line? So we say, okay, we'll live with that. But the guy comes back to us with, can we do it for 3.5% and said, no, no, get out. And just quickly on the trucking side of things, given that it's tight, but also rates are up, are you do you expect that CFI and TCA to have any organic truck growth next year? Or is any of the growth in the truckload segment in the U. S. Likely to be M and A? That's a tough question. I mean, for sure, the freight is there. The freight is there. The issue that Greg and his team have is the same as everybody else has is people, is driver, right? So what do you do, okay, in a situation like that is, like I said to David and the team is, the guys, can we find a company, okay, that's got asset, which is people, and they don't know what to do with it. So this is why we bought from this guy that was under the protection of the court, Conkar. We bought MCT from him. We bought CT from him and we bought CCC from him. So we got assets, people, okay? And with that, we'll be in a position to create value to our shareholders. Because I was saying to Greg the other day, I said, Greg, yes, we're busy, okay? Yes, we're trying to hire driver. But is there a small company in your neighborhood? Is there something of size, size which for us is 200, 300, 400 trucks that we could buy. And those guys are not bankrupt, but those guys are okay, but we can improve them through cost and through quality of revenue. Because it's very hard because every transportation company is looking for driver. So and it takes time and it costs money. So what we're seeing is that, guys, how about if we buy a small, and that's what I've done for 15, 20 years in Canada, is when the shortage was there, let's buy a company. And a company, it's not that expensive. If we could strike the right deal, okay, perfect. So we beef up the team like that. So this is has been like a little bit under the radar, Dave, is when we bought those 3 companies from Comkar, okay, we didn't get a lot of good quality rates from customers, okay, because of the reason those guys were bankrupt or under the protection of the court. But we got the good asset, which is the people. And now we're working with customers and market, and we are improving. So this is why I was saying MCT, what the guys have done there is fantastic. I mean, Graemer, CCC, CT is still an ongoing process, but it's going to be the same story. So it's going to be hard to grow organically, okay, through trying to find the drivers. But if we could find the right company, okay, small, that's how we get the drivers. Makes sense. Thank you. You're welcome, Dee. And your next question comes from the line of Brian Oppenbach with JPMorgan. Please go ahead. Hey, good morning, Elaine. Thank you for taking the question. Good morning, Brian. So just a couple of quick ones here. I understand you're using DLS kind of the foothold similar group that you've done in the past to scale to new businesses in the U. S, give some market intelligence as well. Would you consider bolstering just overall brokerage platform more so to the TL side? Are you primarily focused on LPL? And we've typically seen a higher level of investment, especially from the technology side in brokerage, just overall. I understand LPL. I would have the same sort of drivers competition behind it. But how do you think of just the level of investment and what type of platform on the asset light side that you're looking to do with DLS? Well, DLS, if I listen to Tom and people that are talking to the guys, I mean, we could grow that fast. But our message to Tom and the team there is going to be guys, focus number 1, yes, we want to grow the top line, mostly on LTL, absolutely. But the most important thing to us, like I said on the call, is that we have to bring this 5% bottom line company closer to 6% and to 7% and maybe to 8%. To us, it's more important to grow the bottom line than to grow just the top line. But we believe that as an example, okay, when we talk to Tom, okay, at DLS, say, hey, Tom, do you guys focus on transborder LTL? I said, no. Oh, wow, that's a new thing for you guys. That's something that Tom and your team have to focus because the rates, the quality of the revenue on transborder freight between U. S. And Canada and U. S. And Mexico is even better than the U. S. Domestic rates. So guys, that's a new area of focus of theirs, okay? So that's one area that we think that Tom and his team could immediately start to focus on. So we believe that DLS will grow the top line over these, for example, okay. We believe that DLS can grow the top line with in concur with our truckload operation in the U. S, okay? We could do probably better with that. And absolutely, that's the way to go for us. I mean and it gets us market intelligence in the LTL market, which is something that right now, today, we know the Canadian market really, really well. But the U. S. One, we know it through our partners, okay, but only on the transborder freight. Well, when we look at the other LTL company, I mean, some guys are doing a fantastic job in the U. S, a fantastic job. And there's way more consolidation that's been done in the U. S. On the LTL side than in Canada. In Canada, there's still way too many small players, not about making money. Now that's a big difference if you compare that with our truckload market. The truckload market in Canada is way more consolidated than the one in the U. S, okay? But the LTL is different. The LTL is the guys, it's a much better market in the U. S. Than in Canada. So this is why for us, when we look at DLS, it's fantastic in the sense that, oh, this is going to give us the opportunity to really understand what's going on there, what are the drivers. And then, like I said earlier on the call, we've got CAD 1,000,000,000 to invest. Okay. So we could it could be a special TTL. It could be another last mile. It could be maybe one day it could be an LTL company in the U. S. We don't know. Okay. We're working on something important in all those sectors. Okay, but we'll see. But at least on the specialty TL, we've done many small deals that now give us what the market is all about in the U. S. Okay. On the van side, through CFI, TCA, we have a good understanding of the market. Now on the LTL with DLS, over time, we'll get a great understanding of the market. Fantastic. And then we can start growing. Because in Canada, we're such a huge player. That's something of size, tough to do for us. And just in terms of the technology investment, is there we typically hear that with brokerages, LPO, maybe not as much. You think you need to do just from a visibility perspective or anything on the tech investment side as you bring dealers on board? Yes, yes, yes, yes, yes. When we talked to Tom, for sure, okay, right now, if I remember correctly, they're using Mercury Gates and SAP. Us, we run Oracle. So first step for us is going to move because we have a TSC agreement for a year. So step 1 is to move those guys from SAP to Oracle. TFI, we use Oracle. And then the next discussion is going to be around Mercury Gates. I mean, is that the right tool for growing this division? Or do we have to do something else? I don't know. It's too early to say. But absolutely, that's one area that we want to invest is tools for our people to do a better job. Like I said, for our truckload guys, we're in the phase, we're looking at McLeod. Okay, we're doing the study right now, the first phase, and then probably the implementation will take effect in 'twenty one. So we need our people to have the right tools to be even more efficient. Same story with our LTL. Our LTLs, we're looking at TMW, okay? So if you look at LTL operation, out west mostly run on TMW. In the east, we have QuickEx now that's run TMW. We're going to be probably moving TST, CF on TMW in 2021. It's all about the tools. We have 18 that is second to none in Canada, but we can always improve the results by giving those guys better tools and that is the goal for us. Understood. One last quick follow-up on the driver market and the more inclination to buy assets to get drivers. With NCT, NCT sounds like it's going pretty well so far. What's your ability to hang on to the people when they come over and the market is tight and you need to perhaps call some of the freight to bring up the profitability? Are you seeing kind of historical levels of turnover and retention? And does that make you more or less confident to do more of these in the future? Yes. Not so much, Brian. Not so much. I mean, I know it's always been an issue in the U. S. That you buy a company and after a year, all the drivers are gone. I mean, our approach has been quite good. I mean, if you look if you would talk to Greg at MCT, he would tell you that, no, there was no real turnover. The same thing at CT with Steve and the team there, not an issue. But we don't come in there and say, well, you guys have to change. This is the recipe and this is the way to go for the future. No, we don't do that. I mean, the way our approach is, hey, guys, let's keep on doing what we're doing and now as we're working with the customer just to make sure that the rates are fair, that the rates are market. Also, if you look at the stuff that we bought from Comkar, I mean, the trucks were terrible in some of the divisions. So we're investing in CapEx. We're buying the equipment so that the guys could be proud of their equipment and their company. So I mean, we've been very, very successful in Canada. And if you look at what we've done so far in the U. S, it's working well. All right. Thanks for the time, Alain. Appreciate it. Pleasure, Brian. Take care. And your next question comes from the line of Kennen Dweltman with National Bank Financial. Please go ahead. Thanks. Good morning. Good morning, Cameron. Yes. So just a quick one for me. I just wanted to just get your thoughts around M and A in the specialty truckload area in the U. S. You've talked about that. But I'm just wondering if there's any sort of specific sub segments of specialty TL that are more attractive. I mean, I guess, flatbed versus dry bulk versus liquids. Is there anything there that is better from an operational point of view or from a competitive landscape point of view that you would like to focus on one of those 3? Yes. That's a very good question, Cameron. So flatbed, I mean, Citi is a flatbed company. So it's really the first transaction that we do in the flatbed world, okay? So it's probably not going to be something for us important in 'twenty one in M and A. But in terms of bulk, okay, with the stainless steel, okay, everything that relates to chemicals or food, okay, that's very important to us. So CCC is like that. When we bought Chile, when we bought Holic, absolutely, for us, really the tanker world is for us priority number 1. We are the largest player in Canada on the food grade stuff, hauling whatever wine, juice, sugar, etcetera, etcetera. So we believe that for us and the specialty TL, full grade chemicals on the bulk side, liquid and dry, okay, not so much the cement. Cement is okay in some areas of North America, But it's really the focus of ours. Flatbed, it's yes, we did CT. It was a good opportunity. And we'll keep on looking at that. But really, our focus on the specialty is more in the tanker world. Does that include petroleum products? No. No. Petroleum is no. Not for us. No. And you don't do much of that in Canada anyway, in specialty truckload? No. Very, very small. I mean, this came to us just small operation we have in Montreal, about 15 trucks on the petroleum. It's mostly for the ships. When they dock in Montreal, they need energy. So yes, it's for the ship. It's a specialty petroleum business that we have. That is very small, but absolutely not. I mean, if a company was up for sale, let's say, with, I don't know, dollars 300,000,000 revenue hauling petroleum product, no, not for us. We'll leave it to the other guys. Ours is more food, chemicals, yes, we're in. Okay. Makes sense. Thanks very much. Thank you, Cameron. And your next question comes from the line of Kevin Chen with CIBC. Please go ahead. Thanks for fitting in here. Elaine, I know it's been a long call. Maybe just a follow-up on the DLS acquisition. And you mentioned you have a lot of cross border partnerships. I think one of them with TFT, CS, etcetera. Just wondering, as you think of DLS longer term, would you look to eventually in house all your cross border LTL, I guess your cross border LTL network or and eventually partner shifts and or no? Okay. No. No, no. I mean, what we're saying to DLS is that the transborder business is huge. And you guys, you're doing a good job on the domestic side. Hey, how about if you start looking at the transborder business, which is something that those guys never really looked at. But no, we're really proud of our partnership with Saia right now. And for sure, we would never do something like that. I mean, this would be very unprofessional on our part. So no, no, the relationship we have with Saia is we want to protect that and we want to grow it, but it's got nothing to do with DLS. As a matter of fact, between you and me, Kevin, DLS deals with Saia in the U. S. On the domestic side. Yes. Perfect. Well, you, me and everybody else on this call. Thank you for the clarification and you're welcome a good quarter. Thank you, Kevin. And your next question comes from the line of Benoit Poppe with Desjardins. Please go ahead. Hey, good morning, Alain. Good morning, Benoit. And congrats for the results and glad to see that CAL's efforts are paying off on U. S. Last Mile. So Alain, looking at Last Mile, a great network in the U. S. There's been a lot of investment, if we think at Shopify, ShipBob. Just wondering whether you see some opportunity to partner with some warehousing fulfillment companies as you don't want to go through real estate. So I'm just wondering if you see some opportunities to partner up with some guys eventually. Well, that's a good question. But so far, I mean, no, okay? But we're having a lot of discussion. This is like the drone thing there. I mean, are you guys thinking about that? Yes, we are, okay? It's the same thing with this partnering with someone that's got the coverage, okay? Because like you said, I mean, we're not in the real estate business and we don't want to be in the real estate business, industrial real estate at all. So yes, but right now, we have so much demand without going through that, okay, that right now, Cal's team in the U. S. Are really focused on just answering the demand that we're getting. It's unbelievable, okay? But we got to do it step by step, one step at a time. And we're getting on board a $16,000,000 cap, like I said earlier, right now. Okay, it's fine. Okay, but $16,000,000 in the U. S. Is big, but it's not that big. So we're testing also with another customer in California right now or very soon. And this could be just for California, another $15,000,000 account. So huge potential for us in the U. S. But a year ago, CAL's mission in the U. S. Was, guys, we cannot build if the foundation are not solid, okay? So step 1, let's make sure that our foundation in the U. S. Is solid, which now, okay, we can say, yes. Get rid of all those 2% guys, okay, step number 2. Okay. Let's build a sales team that is North American. It's done with Dean. Okay. Fine. And then let's start growing organically with the e commerce solution that we have, which is fantastic lean and mean solution that today we're growing big time in Canada, but not so much in the U. S. Because we are replacing those 2% guys with better quality revenue, right? So we've got our hands full right now, Benoit. Okay. Okay. That's great color. And the other question I had was around the TL market. We are all aware about the positive market condition. Obviously, the biggest question is around the duration of the cycle. But when we look at the Class 8 orders, yes, they pick up over the last 3 months, but we are still well below the historical average. I'm looking also at the implementation of the driver's license drug and alcohol clearing out that remove almost 30,000 drivers. You also have the ELD implementation that will be mandatory in June 2021. Ultimately on the upcoming. So do you see some long term tailwind or structural changes that might make this positive cycle maybe longer than usual, Alain? I think so. And also the leadership in the throttled world in the U. S, like the good companies like Knight and Heartland and Werner and all those good companies in the U. S, they have a great influence now about, hey, guys, this is how we could sustain this growth, okay? And we're in business to serve customer, yes, but we're in business to make money as well. So I think that market the macro is changing to the advantage of the trucking company right now. Okay, fine. How long this is going to last? Maybe, like you said, longer than ever before because of the clearinghouse? Because also, it takes a lot of capital now to okay, interest rates are low, but still, I mean, it's not as easy to buy a truck like it was like 10 years ago maybe. And also customers are getting pressured to be more, I would say, professional in the sense that you can't give a load to a non professional driver anymore. It looks bad. So I think that you're right. Now we are things are changing, slowly changing. To be more professional, yes, it may cost a little bit more money, But we are in business for to create value for our shoulder, but we have to do it in a safe manner, okay? We have to be safe on the road, okay, with drivers that are safe, right, as an industry. So this is why I agree with you, probably a little bit more stronger tailwinds than we've ever seen before. That's great color, Alain. Thanks very much for the time. Pleasure, Benoit. And there are no further questions at this time. I will turn the call back over to Alain for closing remarks. Okay. Well, You can rest assured that everyone at TFI International will continue working hard for our shoulders, creating and unlocking value and returning excess capital whenever possible. I hope everyone stays safe and I look forward to providing you to providing another update on our next call. In the meantime, please don't hesitate to reach out if you have any questions. Have a great day and a wonderful weekend. And thank you again. This concludes today's conference call. You may now disconnect.