Hello.
Speakers, you are now in the main room, and you can proceed with the conference. Thank you.
Thank you, operator. I would like to welcome everyone to today's call that's been delayed for about 15 minutes. I'm really sorry about that. Yesterday, after the market closed, we released our first quarter results. We entered 2022 in the strongest position in our company's history, and the year is off to a very strong start. The results we are now reporting reflects the broad diversification of our business, the ongoing successful integration of TForce Freight, and strong execution across our entire company. In fact, all of our four business segment grew operating income again this quarter. This led to a strong overall performance, including first quarter adjusted diluted earnings per share of $1.68, which is more than double compared to a year earlier. Today, we're raising our outlook for the full year.
Best of all, we have multiple internal opportunities ahead to further enhance results. These ongoing opportunities help explain our current strong performance despite macro-related headwinds that I'm sure you have heard about, included higher inflation, elevated energy prices, rising interest rates, labor shortage, and a global supply chain challenges. While we'll continue to drive both revenue and cost synergies following last year's major acquisition, we're also maintaining a relentless focus on what we at TFI International have always done best. As you've heard me say many times, we get the fundamentals of the business right by focusing on the details and always looking to maximize efficiencies. We run our business to produce free cash flow, generate strong returns on invested capital, and grow our earnings per share.
This helps us achieve our ultimate goal, which is to create long-term shareholder value, including through the identification of strategic acquisition opportunities while returning excess capital to shareholders whenever possible. It is this consistent operating philosophy that we adhere to and long before the pandemic that provides us with confidence that we can continue to successfully navigate the constantly changing macro landscape. Let's now review our strong first quarter results, which serves as a testament to our guiding principle and our many ongoing internal opportunities to unlock value. Our total quarterly revenue climbed by more than 90% year-over-year to $2.2 billion. Freight volumes were generally solid across B2B, and we capitalized with appropriate pricing. More important to us, given our focus on profitability, our operating income reached $220 million during the quarter.
That's an increase of 116% over the prior year. As I mentioned, our adjusted fully diluted EPS of $1.60 was well above the prior year's $0.77, and that's up 118%. Our net cash from operating activity was a solid $138 million, although down 11% versus the year ago quarter due to elevated working capital needs associated with higher fuel surcharges. As I've said before, excuse me, we value our ability to consistently generate cash flow throughout the cycle. This permits us to strategically and profitably grow the business over time through internal investment and through our disciplined approach to acquisition. Turning to our four segments, we're very pleased with the results, especially given our emphasis on profitability and operating income, as I mentioned.
All four segments generated operating income growth well into double digits, and all four produced stronger results on invested capital than the prior year, as I'll now discuss. Our P&C segment represents 7% of total revenue. Despite a 5% decline in revenue before fuel surcharge related to reduced Canadian B2C activity, we saw a very strong 42% increase in operating income to $26.1 million, with the operating margin up a robust 700 basis points to 20.9%. This strong profitability reflects our focus on driving yields across both B2C and B2B. Return on invested capital for our P&C business was also up considerably coming in at a strong 26.4% during the first quarter, which was 600 basis points above the prior year period.
Moving along to our LTL segment is 45% of total revenue, generating $835 million of revenue before fuel surcharge during the quarter. This was relative to $132 million the prior year as the newly acquired TForce Freight continued to perform. Our operating income of $95 million was up from just $22 million a year earlier. This reflects an operating margin of 11.3%, and therein lies one of the many internal opportunities we have to optimize operation and grow profits as we approach the one-year anniversary of this important acquisition. Taking a closer look within our LTL business, our Canadian operation benefited from strengthening in industrial markets, grew revenue before fuel surcharge by 8% and produced an impressive operating ratio of 79.1. That OR was 410 basis points better than the prior year.
Return on invested capital was also strong at 18.4, up 300 basis points over the prior year. In the US, our LTL business was created with the acquisition of UPS Freight last year, remains right on track in terms of integration. We generated revenue before fuel surcharge of $696 million and a 90.7 OR in what has historically been a seasonally weakest quarter for the business. Our return on invested capital for US LTL is in just the first eleven months of our ownership was a remarkable 22%. Next up is truckload, which is 20% of our total segment revenue. Our truckload revenue before fuel surcharge came at $516 million, up 22% year-over-year.
Operating income climbed 42% to $71 million, and our operating margin expanded further to 13.8%, up 200 basis points over the 11.8% a year ago. We believe that our TForce Freight truckload division acquired last year has now favorably turned the corner. Within our truckload segment, starting with our U.S.-based conventional operation, we saw strong top line growth with revenue up 23% to $192 million. The OR improved considerably to 89.1 relative to 93.4 a year earlier, and this is a great example of the self-help nature of our opportunities. Similarly, our return on invested capital was 6.5%, an improvement over the prior year's period 5.5%. Looking next at Canadian-based conventional truckload, we saw revenue before fuel surcharge climb a very strong 37% to $76 million.
This business produced an adjusted OR of 85.6, which improved by 250 basis points, and our return on invested capital of 11.9 was up slightly. Rounding out our truckload segment, specialized operation also saw considerable growth with revenue before fuel surcharge up 17% to $250 million, benefiting from strength in industrial end market. Profitability improved as well with the adjusted OR of 84.4, representing a 200 basis point improvement with return on invested capital expanding from 10.9% to 11.7%. Our fourth business segment to discuss is logistics, which is now 20% of total segment revenue. Logistics also saw solid growth over the past year, with revenue before fuel surcharge up 15% to $435 million.
Operating income grew to $35 million, representing an 8% margin, up 30 basis points. Return on invested capital for logistics remained very strong, climbing further to 20% relative to 18.6% in last year's first quarter. Well, let's now turn to our balance sheet, which grew stronger during the quarter, even as we returned capital to shareholders and invested in our fleet and continues to be a pillar of strength for TFI International. We generated free cash flow of $92 million after higher equipment purchases relative to last year, given our success in deploying capital to update our fleet, and ended March with a debt to adjusted EBITDA ratio of 1.72, an improvement versus 1.89 at the beginning of the year.
During the quarter, we further strengthened our financial profile with a private placement of $300 million of notes with maturities of 10, 12, and 15 years and corresponding fixed interest rates of 3.5%, 3.55%, and 3.8%. The proceeds were used to refinance a maturing term loan, and therefore it was a leverage-neutral transaction. Following this move, at the end of March, 78% of TFI International debt is fixed rate, excluding equipment financing and with a weighted average interest rates of 3.45% and a weighted average maturity that has grown to eight years. Lastly, I'm going to provide an update on our full year outlook, which assumes reasonably stable macro condition and benefits from our own ability to execute on what I've mentioned, which is what we control internally.
We have numerous opportunities to enhance efficiencies by simply adhering to our operating principle that emphasize strong execution and our prioritization of profitability and cash flow over simple growth. More specifically, in addition to continuing to optimize TForce Freight following last year's acquisition, we plan to especially focus on improving density, increasing our service level, optimizing our pricing, increasing driver retention, and a concept that we call freight that fits. In other words, we strive to take on only the right freight for our valuable network. For a full year 2022, we're raising our outlook up for earnings per share to a new range of $6.50-$6.75, up from $6.5-$6.50 previously.
We continue to see net capital expenditure in the range of $325 million-$350 million, and we continue to forecast free cash flow in excess of $700 million. I'll wrap it up with a summary of our first quarter performance. We entered 2022 in the best position in our company's history, and the year is off to a very strong start. What I find most encouraging is that despite the many macro disruptions over the past two years, our team has stayed focused. We've executed in accordance to our guiding principle, and we have significant opportunities ahead to create shareholder value.
Best of all, many of these opportunities are within reach regardless of economic condition, because they involve internal execution and doing what we do best in our quest to create and unlock shareholder value and return excess capital to shareholders whenever possible. With that, operator, if you could please open the lines, we can now begin the Q&A session.
Thank you. Ladies and gentlemen, if you would like to ask a question, you will need to press star one on your telephone. As a reminder, please limit yourself to one question and a follow-up. Your first question is from Ravi Shanker of Morgan Stanley. Your line is open.
Thanks. Morning, Alain. As you know, kind of there's a bunch of concern about end of cycle and kind of where things are going and such. Your stock was one of the best performing the last couple of years, so congrats there, but it has sold off with peers in recent days, and your stock is now at a very attractive multiple, especially on your new valuation. Some of your peers have kind of helped us understand what trough EPS might be, to kind of put a floor on the multiple and where you think the stock would be.
Long way of asking you kind of how cyclical do you think the business is, and based on what you see right now and what you see in the cycle, where do you think trough EPS might be for TFI, in the light of your new 2020 guidance?
Well, you see, Ravi, thanks for your question. You know, if you look at TFI, you know, if you look at 45% of our revenue is LTL, about 7% is P&C, and I would say about 20% is logistics. I mean, this is not very cyclical as compared, let's say, to a truckload operation. I would say that TFI is more in a non-cyclical environment than, you know, let's say a normal truckload operation, b ut that being said, Ravi, one thing that is so important when you look at TFI is that, you know, with this UPS Freight acquisition last year, we're just starting to scratch the surface. We got so much to do there.
I mean, we said, "Okay, we're gonna bring this company to a 90 OR within a year or 2." Finally, I could say that the team there has been really doing a fantastic job. We brought this company to about a 90 OR within a year. You know, there's still a lot for us to do because I believe that this could be an 80 OR company within, let's say 2-3 years. We have to drive less miles. We have to pick up more freight. We have to pick up more heavy freight. Globally, to answer your question, I mean, us at TFI, we've got so much to do in improving our US LTL network in the next year or 2, that even if there's. Because a lot of people are talking about this freight recession.
Let me tell you that when I look at our results in April, we don't see a freight recession at all. What we see is shortage of drivers, shortage of power. Customers are asking us, "Can you please help me in servicing my customer?" That's what we're seeing now. Well, maybe in six months, a year, a year and a half, that could be different, but what we're seeing now is that. Us, with our TForce Freight, we've got so much to do. Don't forget that, you know, with this kind of an environment, it helps us with our M&A, right? We've not been too busy M&A-wise in Q1, but you should see us a little bit more active in Q2 and in Q3. The most important thing of M&A is buying back our own stock.
Like you raised the question about our stock price. Our stock price is the shit. It's terrible, right? That is the beauty. You know, it creates an opportunity for us to do M&A on our own stock, which is the NCIB. All in all, we feel really good about what happened in Q1. When we look at Q2, what we can see so far is that we're gonna be really, really busy. We have lots of faith in our team. You know, when I look at my peers in the U.S., I mean, everybody in our industry has done really, really well so far what I've seen.
Great. Thanks for calling there. Maybe as a follow-up, I know it's your smallest segment, but P&C was a little bit of an outlier versus the other segments in terms of the year-over-year revenue change. I know there's been some kind of big, large customer shifts there in recent quarters, but can you just help us understand what the near-term trajectory of that business is like? Thank you.
Yeah. What's happening, Ravi, there is that our B2C has slowed down, okay, because you know, the largest e-commerce player in North America is not one of our customer, and our customers have been slowed down. Our B2B has improved, okay? Canada is reopening more and more of the brick-and-mortar guys, stores, the malls and all that. This is why when you look at our profitability, it just went through the roof, okay, because of that. I mean, for sure, if you look at our density, you know, B2B has always been way better, okay, than B2C. Now, what do we see in the next nine months for 2022 in terms of volume? Again, we see us losing a little bit of volume on B2C and trying to replace that with more profitable B2B business.
Now, who can run a 90, you know, a 20-point OR division like that in Canada? Well, nobody. I mean, we're the only one. I mean, it's a. Our team there, the Canadian team on our P&C, are doing a fantastic job. Yes, our Loomis operation, which is one of our most significant operation, has lost tremendous volume because of, you know, the B2C thing there. We anticipate that Loomis will lose more volume during the course of the year, but that will be. Our ICS and our TFIS, which is mostly B2B, are gonna fill up that. W e anticipate 2022 for our P&C to see some drop in volume again for the rest of the year, but profitability is gonna go up again year-over-year, Q2, Q3, and Q4.
Very helpful. Thank you, Alain.
Pleasure, Ravi.
Your next question is from Jordan Alliger of Goldman Sachs. Your line is open.
Hi. You touched, I think, briefly in the prior question about where you'd like to take the LTL margin over time, but can you give an update, you know, perhaps on the timing and trajectory as you've done in the past on US LTL and the improvement timing? Thanks.
Thank you, Jordan, for the question. Let me tell you, I mean, when we talk to our team there, the goal is to get to an OR within the next two years. I mean, now, if you ask me, where are you gonna be at the end of 2022? It's difficult because now we're having to touch the operation, okay? We're having to replace our equipment, our trucks, which we did about 500 so far, but we have to do another 800 to 1,000 in 2022, and this is based on supply coming from the truck manufacturers, which is always a question mark. I would say that, we know what to do, we have to execute it.T he team, like, we would say they're drinking the Kool-Aid.
They know what needs to be done. Slowly, our focus is drive less miles, pick up more freight, and reduce the claims, reduce all these different things that you know, in the past we were not really focused on to try to create this lean and mean operation in our US LTL operation. You know, when you look at our Canadian operation, which is you know, unionized as well, not 100%, but we were able to come up with less than an 80 OR in Q1. On the Canadian environment, which is, if you look at our MD&A, you look at the quality of revenue of Canada versus U.S., it's like day and night.
To me, this is why I feel pretty good that we'll attain this goal over the next 24 months, because we know what to do. It's just a matter of executing it, and the team gets it. They know what to do, and we have a very, very great team there. I'm convinced that we'll make it happen.
Thank you. Just on Canada LTL, I mean, what's the volume outlook there like in a few negative quarters? Thanks.
Yeah. Volume is about flat, Jordan. I mean, if you look at our volume in Q1, we were down, what, about 1%. What we anticipate for the rest of the year is about flat, maybe plus 1%. We got some of our divisions that are up, some of our divisions are down a bit. This is why, to me, you get to think about our Canadian operation with about flat volume for 2022. That being said, I mean, we're gonna run this Canadian LTL with a fantastic OR. I'm telling you, I was just looking at our month of April. I mean, we're just running on all cylinders in reducing costs and being more efficient.
Thank you.
You're welcome.
Your next question is from Konark Gupta of Scotiabank. Your line is open.
Thanks, operator. Good morning, Alain. How are you?
Good morning. I'm good. How about you?
Yeah, thanks, Alain. Thanks. Maybe, you know, I wanna kind of, you know, dig in to your guidance raised here. Congrats on a great quarter and upgraded guidance here. How much of your new guidance is dependent on continued pricing power, consumer demand, buyback and the M&A?
There's no M&A in there, Konark. No M&A except what we've done in Q1, okay? For sure that may change based on all M&A that we could do in Q2 and in Q3 or in Q4. There's no M&A in this guidance. In terms of pricing power, nothing more than what we're doing now, right? It's just cost. We believe that we could shed some costs again, okay, in Q2 and in Q3 to get to, you know, $6.50-$6.75. You know what, maybe we'll get to $7 by the end of the year. Who knows, right? Us, as I've always said, we're very, very conservative and we want to stick to our mission that's always been under promise but over deliver.
Makes sense. Thanks. As a follow-up, you know, I think to the earlier question with respect to, you know, how and where we can add extra, et cetera. I wanna ask you, what changes are you seeing in your key lanes, especially in the U.S., you know, especially when spot rate, dry van spot rate are coming down, obviously, and that's creating a lot of panic.
I understand what you're saying, but the contract rates is where our business is, right? We're not a spot rate company. We are more like a... If you look at our business, I mean, we run about 1,300 trucks in our US van division. 1,300 trucks that are dedicated, which is medium to long-term contract, which we've been working on, okay, because some of these contracts didn't make any sense, and that's why we were losing so much money with TForce Freight, which is a UPS subsidiary that we bought a year ago. This is starting to do well. If you look at our temperature control there again or our over-the-road. We're not a big fan of spot.
This is not affecting us. I think that what we have to look at is contracted rate, okay? Those rates are great right now. You know, when I talk to Greg, he says, "I'm always, even now, 110-115% overbooked. I mean, I've got 10-15% of my load that I cannot service right now," right? The big issue is that, you know, there's a lot of issues finding drivers, okay, and finding trucks. That's what's creating a little bit of this. Okay, yeah, spot went down. Okay, big deal. It's still way ahead of where it was.
Let's see what happened in Q2 and in Q3, because if you look at based on what I'm reading, the level of inventory of most of our shippers and the users in the U.S. are really, really low. I mean, we feel good about the rest of 2022. Absolutely. Really, really good.
Great. Well, okay. Thanks. I love it.
Thank you.
Your next question is from Brian Ossenbeck of JPMorgan. Your line is open.
Hey, good morning, Alain. Thanks for taking the question. I just wanted to dig into some of the self-help you're talking about there, especially, you know, on the semi improving the density, improving the pickup. You know, can you still feel like you can do that even if we do get, you know, a bit of a slower environment on the volume perspective? You know, how, I guess, how comfortable or how confident rather are you that you can still improve those things, when, you know, we might be facing a bit of a deceleration, when it comes to the demand side? Are you still able to accomplish that in maybe a softer market?
Yeah, I think so, Brian, because, you know, when we look at the number of miles that we have to travel in the U.S. between each and every pickup, it doesn't make any sense. It's way too much, right? This is us, okay, organizing the work and servicing the right customer. Let's say that you take one of your hub, okay? You have to deliver about 70 miles away from your hub. Why are you doing that, right? Let's focus on from your terminal, let's try to service within the next five miles, within the next 10 miles, within the next 15 miles. Why would you go 75 miles away?
I mean, us in Canada with such a lower density than in the US, because if you exclude Toronto, Montreal, and Vancouver, I mean, then the density is terrible, right? US is very different. If I compare the number of miles that I'm doing in the US between each and every stop versus just the example of Canada, it's just crazy. We drive more than 6 million miles a month to deliver freight, us, excluding the line haul. To me, we should do no more than 3, maybe 3.5. This is us. This is us, the management team and the sales team, and working and trying to understand that, guys, we want drivers to pick up freight, not to drive a truck. Now, they have to drive the truck between each and every stop. I get that.
We have to pick up more freight per stop, and we have to drive less miles. Guys, this is what we need to do. That takes time because it's a change. It's a change in culture and mentality that we don't wanna be, you know, jack of all trade, master of none. We don't want to travel 75 miles to deliver two skids of freight, et cetera, et cetera. This is how we're gonna do that, Brian. It's slowly terminal by terminal, okay, looking at the footprint, looking at the ZIP code that you're servicing, and trying to get more freight closer to your terminal versus running 75 miles away to deliver two skids of freight. This is us. This got nothing to do with recession or no recession. Guys, we have to be way more efficient, create better density.
If you look at our P&C, why are we so good? Because we get more money from the customer? No. As a matter of fact, our revenue is down, and our revenue per shipment is also down, but we make more money. Why? Because we improve our density. It's the same story, Brian, that we have to work with our team there. As a matter of fact, we're having another meeting early in May with Paul and the rest of the team, and this is what we need to address, is pick up more freight, heavier freight, okay, more freight per stop and drive less miles. I mean, this is not like trying to go to Mars. This is, you know, this is just normal LTL business.
Understood. Just a quick follow-up there. Would you think any loss of volume, you know, that might not fit in the network in terms of pickup and delivery, catchments is there? Would that be more than offset by profitability in terms of reduced miles and better operations?
For sure. For sure, Brian. Absolutely. I'm convinced of that. Also, Brian, don't forget, at the same time, we have to improve our service. Our service is not like the best peers in the US. Why is that? Well, when you run an old truck like we do, I mean, not so much now than a year ago, but the truck breaks down, the service is not there, et cetera, et cetera. We have a lot of other things also that we have to fix at the same time. Right now we got 500 trucks. Well, that's only 10% of the fleet. This year we'll get probably between 800 and 1,000 new trucks. Okay. We are investing. Okay. We're gonna do well.
To me, if you looked at just our P&C in Canada, lost a little bit of volume, a little bit on the revenue per shipment, and we still did way better than last year, right? If you look at my LTL in Canada, my shipment count is about flat, down a bit, but we have pricing power there, okay, versus last year. We're seeing the same thing in the U.S., although you don't see it because we can't compare because we didn't own the company last year, right? In Q1. That's what I'm saying is that we have a good 24 months working with the team there to get this operation lean and mean so that we have drivers picking up more freight, driving less miles. That to me seems simple, right? It's a lot of work when you have 200 terminals.
Right. One quick follow-up on just the OR and the 80% in the next couple of years. We have a Teamsters negotiation coming up for TForce. This will be the first one, I believe, you know, with TForce Freight involved with that. Maybe you could just give us some high-level comments in terms of how you see that playing out and if there's any sort of initial discussions as you go into that in the back half of next year.
For sure, Brian. We're getting ready for that. I mean, already, if you compare the base salary that we have versus the other two unionized carriers, I mean, TForce Freight has got the base salary, the most expensive base salary that we do have. You know, what I see, though, is that in some markets, our base salary is too low. In other markets, our base salary is too high. This is because it's a kind of a national grid that we have that was, you know, done because the last discussion or negotiation with the union was mostly done by the UPS people. This is gonna be a major change for us because now we're getting our operational people involved in the next discussion with them. There's no lawyers.
We don't want lawyers in there. We want operational guys. You know, we want our labor guys, our HR guys. For sure, we're gonna have a very good discussion with those guys, you know, like we do in Canada. Our goal is to pay our people fairly, okay? Most importantly, what we ask of our managers is we have to manage our people in the right way. If this driver drives 300 miles a day to deliver freight, this doesn't make any sense. It's got nothing to do with the driver. It's got something to do with me, the management team. We have to manage people better, so they don't have to drive 300 miles in a day to deliver 15 shipments. Right? I mean, us, we feel really good.
We're working now, okay, how to get ready for the next discussion. We want to start, if possible, that very early so that, you know, we have a good discussion with our guys.
Okay. Thank you very much for all the time, Alain. Appreciate it.
Pleasure, Brian.
Your next question is from Walter Spracklin of RBC Capital Markets. Your line is open.
Yeah. Thanks very much. Good morning, Alain.
Morning, Walter.
Just focusing on now, you know, the current buyer-seller market. You mentioned M&A. That'll be my second question. My first question, though, is that it seems to be right now a seller's market. If you're contemplating selling right now as a pruning or improving the overall quality of your asset base by getting rid of some of the lower return businesses, would you contemplate that as you get ready for reentering the market on the buying side? Could you envision a larger event with truckload? Is that something you're contemplating in this environment right now?
You see, Walter, me, I've always been guided by this principle. You buy on bad news, and you sell on good news, right? Right now, the problem, Walter, is that it's all bad news about trucking, right? In the month of April, our stock went down, like, 20%. My mistake was before we got to the blackout, okay, I said to our VP finance, Martin. I said, "Martin, okay, we got another 165,000 shares to buy. Just buy that, and we'll just wait." That was a major mistake. I should have told him, "Buy 1 million shares." Okay? You buy on bad news, you sell on good news. Right now it's all bad news, right, about trucking. To me, it's more time to buy than to sell.
That doesn't mean that, you know, if someone, you know, a very strategic, smart, you know, transportation company approaches us and say, "Hey, Alain, I mean, maybe this asset doesn't fit you guys, right? Maybe it would fit me better, right?" For sure, we're not gonna say no to that, right? There's always, Walter, discussion within TFI, because that's my job, really, is M&A, right? That's what I do all the time, besides, you know, making sure that my EVP are really on the clock, right? Let's see what happens in 2022, right?
Yeah. That's exactly where I was going. I meant selling in the sense that people are desperate right now for, like you said, power and people. You know, selling that right now might fetch a nice bid if you got enough.
Maybe.
Yeah. Okay. On the M&A side, you mentioned ramping up Q2, Q3. Is this kind of, you know, tuck in ramp up, or are you contemplating something a little larger? You know, maybe perhaps talk a bit. Is it LTL tuck in, or?
No, Walter. I mean, what we're working on right now, and that will be announced in Q2 and in Q3, is mostly in our logistics sector in the U.S. or in our specialty truckload in the U.S. or maybe one or two transaction in our niche van division in Canada, because if you look at what we're doing with our van division in Canada, I mean, this is unbelievable what the guys have done in Q1, in the winter. Don't forget, this is winter. This is MPG down 15%-20%. I mean, the guys are doing fantastic, so maybe, you know, a little bit of specialty truckload in the U.S., but these are all tuck-ins, Walter. There's nothing big. Nothing big, no.
Okay. Perfect. That's all my questions. Thanks very much, Alain.
Pleasure, Walter.
Once again, as a reminder, please limit yourself to one question and a follow-up. Your next question is from Scott Group of Wolfe Research. Your line is open.
Hey, thanks. Good morning.
Hey, Scott.
I wanna just get a couple more things on the LTL side. Just maybe how much of the freight, how much of the tonnage do you think that you might need to cull? Any update on terminals to close or sell? I think in one of the earlier questions, you were talking about a 2022 OR expectation, but I don't think you actually gave a number. I don't know if you have any thoughts there.
Yeah. In terms of a terminal, okay, Scott, what we've done so far is we closed down a leased terminal in Chicago that was taken over by another trucking company as of, I think it was April first. We also have two small terminals in West Virginia that will be sold, okay, to another trucking company. We are in the midst of buying a terminal in California that's owned by another trucking company's terminal because we are right now, we own one, but we're also leasing one in that city in California, so we're buying another one. There's nothing major so far in the real estate side of the business, okay? I mean, we're working on it. I mean, these things take time.
I mean, we're looking at buying another terminal right now that we're leasing because we hate to lease terminals if we can't to own it, right? Yeah. Real estate, nothing so far major except this lease in Chicago that we got away from, which was $1 million a year that we didn't really need it.
Okay. The OR question?
The OR question, Scott, I mean, you know, like I said earlier, we strongly believe, okay, that this company, the US LTL could be an 80 OR company within the next two years. Now, can we be running a quarter in Q4 at 87? I hope so, right? What I would say today, because it's a huge job to change all of this, okay, within a quarter or two quarters, right? You need the sales team to be focused on the right thing. You need the ops guys to change the approach, and we're not jack of all trades and master of none, so we gotta be focused on driving less miles and all that.
This is, you know, you start with a CEO, and then you go to the VP, and then you gotta go down to the terminal managers, and that's where we're at now, okay? We're at the terminal managers. There's 150 to 200 of these guys, so that's why it takes time. I cannot commit, okay, b ut one thing, Scott, that you gotta keep in mind is that we said that within a year or two, this should be a 90 OR company, and we've done that. The team has done. They delivered. We were always worried about Q1 because Q1, in the old days, was a disaster of a quarter. The guys did pretty well compared to, you know, what was done prior years.
We feel good, but, I mean, it takes time to readjust and correct. You know, we've built our Canadian LTL over years, so yeah. This is not the U.S. U.S. is much bigger. It takes more time.
Okay. Just one more on the M&A side. When you know, it sounds like tuck-in deals in the near term. As you think about larger deals over time, any thoughts on where you want that to be? What types of businesses?
Well, I can't say too much about what type, Scott, but what I could say is that everything that's gonna be big has gotta be from the US. I mean, we can't do anything big in Canada, right? Something of size has to come from the US. It may happen in 2022, maybe, but probably more like in 2023. We're getting ready for that. I mean, for sure, we know what we're gonna do. We have a plan, but like everything else, there's never only one target. There's always more than one.
Okay. Thank you, guys.
Scott, it's a pleasure.
Your next question is from Kevin Chiang of CIBC. Your line is open.
Hi, thanks for taking my question. Good morning, Alain.
Morning, Kevin.
I was wondering if you could maybe break down, you know, within your P&C, you know, you pointed to, you know, packages being down roughly 6% year-on-year, you know, what amount you would say was from, you know, purposeful demarketing as you kind of improved the revenue versus maybe just a slowdown in B2C? And then, you know, you did mention your B2B is helping offset that from a weight perspective. Y our overall tonnage is flat. Is that kind of the trend you expect, that from a tonnage perspective, your B2B will offset the B2C even as we progress through the rest of this year?
Yeah. Kevin, our plans really started in the summer of 2021, okay? In the summer of 2021, the team, our team said, "You know what? We're coming into Q4. Last year, which is 2020, we were overwhelmed with volume. I mean, we didn't know what to do. You know, we had to get the freight with agents and all of that. We don't want to repeat that because these guys, we can't control the service." Sometimes, okay, because we were stuck, you had to pay more than what the customer is giving you, okay, because you were just inundated with volume. We said, "Guys, let's get ready, okay, for Q4," which the guy did a fantastic job by saying to some shippers, "No, we don't want this freight.
We don't want this freight into this ZIP code, okay, because we have to deal with an agent. That guy's a crook. He wants to charge us more than what you guys are paying us," right? We said, "no, we don't want that." This was Q4, and it has also boiled over into Q1. If you look at our profitability improving, okay, some of that lost volume is because we didn't want it, okay? Some also is because the largest e-tailer is gaining market share in Canada, and our customers are losing. We are losing also a little bit of e-commerce freight that, you know, we didn't plan on losing.
At the same time, okay, because Canada is reopening in Q4 and in Q1, and probably it's all complete in Q2 now, okay, is that we're getting more of our B2B business. Consumer, they like e-commerce, but now that they can go to the malls, you know, some of our mall customers are getting busier. We get more B2B. Our B2C, B2B has shifted, right? If you look at Loomis and Canpar, for instance, you know, these guys went from 56% or 58% B2B, okay, a year ago to 70% B2B in Q1 of this year, right?
Mm-hmm. Mm-hmm.
That's the change. We are losing a little bit of e-commerce, okay, to competition, I would say. Some of it also is because we didn't want that volume because we're focused on profitability. Now, when we talk to our guys in Canada, our P&C guys about Q2 and Q3, it will probably look the same as our Q1, okay? A little bit less volume, but way more profitable, okay? The B2C, B2B improvement, growing B2B and less of B2C will continue probably in Q2 and Q3. That's where we're standing today, I would say. When I look at our month of April, our volume again is down, but the profitability is, you know, similar to what you see in Q1, improvement.
Right. That makes sense. Maybe my second question, and I know you do like to be conservative on your outlook, but if I just take your Q1 EPS and annualize that, you know, you're already at the top end of your revised EPS guidance. You know, Q1 is historically a seasonally weaker quarter for you.
Yes.
I know this year is different than what it looked like pre-pandemic, but I guess, where do you think some of the conservatism might be, you know, when you think of, you know, maybe getting an EPS above 675 just based on what you printed in the first quarter here?
Well, see, Kevin, it's you know, it's the guiding principle of TFI. I mean, we're in business to deliver freight, but we also have to deliver results to our shareholder. I believe that we should always underpromise and overdeliver because you know, everything I'm reading, okay, is that it's a big freight recession. Everything's gonna be bad, blah, blah, blah. This is why we are very conservative on our guidance, right? We don't want people to invest in TFI thinking that we're gonna do $7.50, okay? Even if we believe that we could do $7.50 a share. Let's be conservative.
Let's be, you know, very conservative because of all these different clouds, because I don't wanna say something like a $7.50 as an example, and we come in at $6.75, and then the guy say, "Hey, Alain, what were you talking about," right?
Mm-hmm.
We are conservative, and let's see, you know, when Q2 comes out, okay, maybe then we again will revise our guidance depending on what happened in Q2.
Right. It makes sense given all the uncertainty out there today.
Yeah.
Thanks for coming. Thank you very much, Alain.
Thank you, Kevin.
Have a good rest of the day as well.
Likewise.
Your next question is from Ken Hoexter of Bank of America. Your line is open.
Good morning, Alain.
Good morning, Ken.
Just wanna follow up on exactly what you were talking about there about the signals of the market, right? You mentioned early on that you know, right now contract is still strong, and it seemed like contracts really kinda started ramping up maybe at the end of peak season last year when spot ran up kinda after peak season. I guess how do we not read into the fact that spot, you know, question earlier about spot rolling is a precursor of contracts coming over. I guess I just wanna understand when you think about the truckload business and what that could mean on the contract side. I know right now it's good.
Is that a signal, or is there something different here that you see that the spot market's not telling you a signal about the future of the market?
You see, Ken, it's if you look at history, you are absolutely right that, you know, when spots start to come down, contract rates will follow, et cetera, et cetera. That history is based on one thing that does not exist today, which is availability of power and availability of people, right? For us, truckload in the U.S. is a very small portion of our business. When we look at that, we say, "Greg, listen, I mean, we're not going to, you know, keep running this operation with a 6% return on invested capital." We're gonna do more logistics. We're gonna do this. We're gonna do that. We're gonna sell the equipment, make a fortune selling equipment to the other guys.
To us, we believe, okay, and when I listen to our peers, I think they're the same. We believe that something is different than the last forty years. That is because of all the supply chain issue. You can't get the power. You can't get the people. Yes, the spot rates are down a bit, okay. When we talk to customers, we don't really talk too much about price right now. We talk more about can you provide the service. Now, that may change, okay. That may change maybe in Q4, although that's the busy season, or maybe in Q1 next year. Who knows? For us, I mean, our focus is really the day-to-day thing there into shaving our costs. Because if you look at our USTL operation, I mean, we're doing better, but we're not doing great, right?
We still have a lot of work to do there, okay, in terms of shedding costs and being more efficient, right? This is mostly because of the TForce Freight truckload acquisition that we did, that these guys were just losing a fortune on, and it took us a year to get rid of all the stupidity there. Now, the future of our truckload US base, you know, maybe contracted rate will follow spot. Who knows? I think that there's something different today versus historically is that you can't get power, you can't get people.
Yeah.
The small trucker is also in a very difficult position. You know, when I listen to my peers on that, I agree with them. It's not probably the same story. Well, we'll have to see. Time will tell, Ken.
Okay. Your thoughts on logistics, if I might follow up the logistics question. Logistics on last mile, you know, I guess that's where you would see, presumably on some of the managed services and logistics side, the peaking out. Are you still seeing acceleration? It seemed like that may be sequentially, obviously normally fourth quarter, first quarter, you get the deceleration. Is that something where you're still seeing the acceleration in demand?
Oh, yeah. Oh, yeah, absolutely. I mean, our logistics guys. Don't forget, we don't do much logistics or brokerage in truckload. We do some, but very little.
No, no. Yeah, I meant over in logistics and last mile. Yeah.
It's mostly our last mile operation. We are doing really well, I mean, in the US. We just acquired a small company in California, Unity Courier, and that's gonna do really well. Our medical division is also doing really well in the US. No, we feel really good about our logistics sector. It's 20% of our revenue. You know, early on, someone asked me the question about M&A, and I said it, I mean, logistics in the US or in Canada, okay, and what we do in our last mile, absolutely something that we're looking at right now to grow.
Wonderful. Alain, thank you very much for your time. Appreciate it.
Pleasure. Pleasure, Ken.
Your next question is from Tom Wadewitz of UBS. Your line is open.
Yes, good morning.
Morning, Tom.
Let's see. Alain, you had a lot of questions on LTL and OR, and I think you're pretty clear in your framework. I think one thing you haven't touched on really is the pricing lever. I'm wondering, do you think is there, you know, the progression from 90 to 80 on the OR, how important is the pricing lever? Or is it really predominantly the operating side and new equipment and fewer miles and all the things you focused on? And I guess I ask that because, you know, if freight cools down, then maybe you get less price than-
Yeah.
You know, what we've been getting.
Yeah. Well, you see, we still have some issues to solve on the pricing side. I mean, we still have customers that we're servicing today with an OR that's superior to 100, right? We have less of that, but we still do, right? During the course of the next two years, our goal, us, is gonna be way more focused on what I've described on the cost and the freight and this and that. For sure, we'll try also to correct mistakes of the past in terms of pricing with customers, right? To run from a 90 OR like we are today to an 80 OR during the course of the next two years, I would say that 90% of that, in my mind, has to be on cost. Okay. We have to be way more efficient. We have to do more with less.
We have to pick up more freight per stop, which is just normal. I mean, we're not asking to get to Mars. We're just saying, guys, I mean, if we look at our P&C, every stop, we get a ton of freight. If we look at our LTL in Canada, every stop, we get, you know, a lot of freight. If I look at my LTL operation in the US, every stop I get maybe two shipments on average, which is incredible because we've never focused on that. T o me, it's more like a cost over the next two years. Efficiency, productivity, like you said, the equipment and the MPG on the equipment, the cameras, the forward-facing cameras on the truck, that's gonna help us if ever our guys get involved into an accident, which right now we have 500 trucks with those cameras.
Well, maybe a little bit more, maybe 800. Okay, b ut we got 5,000 trucks. All this, okay, is gonna help us during the course of the next two year. Maintenance, you know, maintenance of our equipment, maintenance also of our real estate portfolio. We all know that we have to spend way more on maintenance, okay, in terms of improving the quality of our site, but also we have to control the expense way better than it was done in the past. We're gonna be spending about the same money, but we get way more results, right? Tom, to be a long answer to your question, I believe that from 90%-80%, mostly of that has to come from cost and not pricing with customers.
Right. Just to make sure I understand. If you had to de-sell it, you know, if you went to low single digits LTL market pricing, it sounds like that wouldn't really be an issue. You'd kinda still be on track.
Right.
Yeah. Okay. One other question for you. I guess the high-class problem you have when you may not be doing big deals in the near term and you're generating a lot of cash is that the you know the balance sheet leverage tends to come down, right? Is there a floor where you say you know at this leverage instead of buying back a little stock I'll buy back you know chunkier amounts of stock? Is that the right kind of logic we should think about? Do you just say, "Hey, you know, if we get to 1 turn or half a turn, that's okay, because then we can just do an even bigger deal when the time is right.
Yeah. Yeah. You know what? The plan is, for us, really simple. I mean, NCIB is the safest thing for us to do because every time you do M&A, there's always risk. When we're buying back some of our TFI stock, I mean, we know what we're doing, right? We know the company inside out. This is why to me, 2022 is the year of the NCIB for TFI. Why? Because the price is to the floor, $80. I mean, hey, let's jump on it, and that's what we're gonna do. Is there also. We've been offered by some banks, "Guys, we'll give you a $500 million credit to buy back stocks." I said, "No, no, we don't need that." I mean, we're gonna generate way more than $700 million cash, okay, this year.
For sure, I mean, not an issue in Q2, we'll probably buy back 1 million-1.5 million shares to get ready for Q3. Right?
Okay. Yeah, great. That seems to make a ton of sense. Thanks for the time, Alain.
Pleasure.
Your next question is from Jason Seidl of Cowen. Your line is open.
Thank you, operator. Good morning, Alain. Wanted to,
Hi, Jason.
Wanted to jump back a little bit about a comment you made on the truckload side. I believe you said they're running at about 10%-15% overbooked right now. Can you like compare that to you know maybe where it was last year, and then what's the trend that you're seeing? Has that come down or come up in the recent month or so?
It came down, Jason. It came down. If you look back, let's say Q4, instead of being 110-115, you were maybe 120-125. For sure, it came down.
Okay, that's good. You mentioned a little bit about the inability to get equipment. Can you sort of tell us where you're at in terms of your fleet replacement and how much of that, whether it be on truckload or LTL, I know it's more important in your LTL division, and sort of what you're expecting for the remainder of the year, and then will some of the stuff get even pushed into 2023?
Yeah. Truckload, we're fine. If you look at our MD&A, you'll see that our truckload is running about 2.1, 2.2. We'll get the product delivered in 2022. That's not an issue. The problem we have is our LTL, for sure. Our average age is way too high. We got 500 trucks so far. We were supposed to get 1,100 trucks in 2021. We got 500, okay, at the end of March 2022. We're starting to get the 2022 orders, okay, in the summer. We start in June, okay, to get the 2022 order. That's gonna bring us closer to a normal fleet in our US LTL, but not there.
It needs another year, 2023, to bring our power in the US LTL back to where it should be normal, right? It's a two-year thing. I mean, 2022 and 2023. Truckload, not an issue at all.
That's a big deal, right? In terms of operational cost, because, you know,
Yeah.
The fleet was older. I mean, your maintenance cost per mile, the differential between a new tractor and an older tractor must be very notable.
Jason, the old tractors that we are taking off right now, out of service is $0.45 a mile. The new one is $0.05 to $0.06 to $0.07 a mile. It's just crazy the amount of money that we're spending and the customer service because the trucks break down and it's a domino effect, okay? The driver satisfaction where the guy is driving a 2010, okay, in 2022, versus my peers that parked next to him, the guy is driving a 2020 or 2021. Right? It's a domino effect on morale, on the service. This is why it's got to be a priority. The problem we have is that, you know, we were not lucky in terms of everything that's going on. I mean, the availability of equipment, you know, it's not easy.
That's why we went with three different suppliers in 2022 so that we don't get involved in the same mess of 2021 where the guy says, "Well, I can't provide you all the trucks that you want. We have to cut the order in half." In 2022, that's why we went with three different suppliers.
That makes sense. Alain, I appreciate the time, as always.
It's a pleasure, Jason.
Your next question is from Benoit Poirier of Desjardins Capital. Your line is open.
Hey. Good morning, Alain, and congrats for the good quarter.
Thank you, Benoit.
Just coming back on the US LTL, obviously you disclosed a 90.7% OR, but I look at the. There was a gain on rolling stock of about $15.8 million.
Yes.
It seems that your OR would be closer to 97%. Any thoughts about the potential for margin improvement, specifically for US LTL and the key initiatives that you're putting in place this year to drive profitability upward?
Yeah, that's a very good point, Benoit, and you're absolutely right. I mean, what helped us in Q1 to bring this OR down to more acceptable level is a huge gain on selling of equipment. You'll see the same thing in Q2. What's important is the trend. You'll see us improving in Q2. Why? Because of our dedicated business that's been a rock in our shoe because of the TForce Freight acquisition, okay? We're finally in April of this year, we finally stopped losing money, right? If you look at my Q1, my dedicated business at the old UPS truckload was losing money.
That should be behind us, and this is why this 97 OR net of disposal, okay, is gonna come down, okay, slowly to level that is way more acceptable. Are we gonna hit 95 or 94? That has got to be the goal.
Okay. 95%-94% would be the goal by the end of the year?
I would say that, you know, based on what I'm seeing now, our dedicated, okay, UPS business that we bought is finally showing up a small profit, but this is early. This is just April, right? We believe that, you know, by the end of the year, like you said, we should be running a 94%-95% truckload operation, which is not good. You know? It's not good because if I look at my peers, they do way better than that. Us, we were bogged down, okay, with all this business that we bought that was really terrible. We didn't have the people. We had commitment with customers. We had all kinds of issues. Now, we're starting to get out of that mess, okay? It's gonna take us some time.
Okay, that's great. For my follow-up question, it's more on the P&C. If you could discuss about the market dynamics with the new service at Amazon and also US Postal Service reducing its level of service. I'm just wondering about how does it play out or impact your US last mile, the opportunity to eventually close the gap to versus Canada last mile, Alain.
You know, our last mile in Canada has been affected this year in terms of volume lost. We've lost some volume, about 9% a year, 9 months a year ago to our friends there, the largest e-tailer, because we don't service them at all now in Canada or in the US. We keep growing, okay, our last mile operation both in Canada and the US. Our medical division also is growing in the US big time. Our bank services in Canada, you should see some growth there. We're taking on a new market very soon from competition. E-commerce for our last mile, I mean, it's. There's no question that we're growing that and very favorably.
In our P&C, e-commerce will continue in the course of Q2 and in Q3 to come down a bit, okay, because of our choice. Some of it is because of my competition, but at the same time my B2B is growing. If you look at my P&C OR in Q1, I mean, we've never been able to get a 20% OR in the winter month. No way. With 5% less volume and 5% less revenue per shipment.
Okay. Very quick one. When I look at the number of owner-operators, you reach about 6,900 people in Q1, so it's down almost 3,000 people versus a year ago. Is it because now, they are back working for larger companies, or is this function-
Yeah.
-of the, uh, the large-
Yeah.
Retailer that you lost?
Yeah. No, no. It's a combination, Benoit. If you look at California, I mean, we got rid of all the single owner-op, a guy that's got one car, one truck. I mean, this guy's out, so now this guy works probably for a guy that we deal with that's got 10 trucks. Do you understand what I'm saying?
Okay, okay. There are just some consolidation already, okay.
Right. Because of the California situation, the same thing is true for with Massachusetts, so we don't want to deal like you know a few years ago. It's a huge consolidation that happened in California, okay? That we don't wanna deal with a single owner-operator now in California. We deal with a guy that has 10 trucks, a guy that's got 20 trucks. That's why if you look at the number of owner ops, I mean, you say, "Hey, it went from 9 to 6. What happened there?" Also, we've lost some owner operator in our USTL division, okay, when we did these changes at CFI dedicated from over the road to just fully dedicated. This also will have an effect long term, okay?
The mix of, you know, over the road versus dedicated is starting to change. We are gonna be running like 35% dedicated now and 65% over the road, including our temperature control division. It's a major change versus what it was like two years ago. Dedicated is more like long-term, three-year deal with customers versus over the road is more like, you know, contract rate for six months, a year.
That's great. That's great, Alain. Thank you very much. I'd like for the time.
Pleasure, Benoit.
Your next question is from Tim James of TD Securities. Your line is open.
Thank you. Good morning, everyone.
Morning.
Just wondering, I was intrigued by your reference to TForce Freight turning the corner. I was just wondering if you could expand on that a little. Is it? You know, it seems like it's been improving really since you acquired it, but just what causes you, maybe what sort of threshold have you met that causes you to say today that it's now turning the corner?
No, what I'm saying, TForce Freight truckload, eh? Tim, it's truckload.
Yeah.
When I talk about turning the corner, it's TForce Freight truckload. Because when we took over that division, we were losing between $5-$6 million a quarter. Q2 of last year, Q3, Q4, we kept on reducing these losses. Finally, in Q1, we still lost money. When I look at the month of March, finally, we're turning the corner. We stopped losing money. When I look at my month of April, it's, it should be a confirmation that we stopped losing money. That's why we say TForce truckload dedicated business is finally turning the corner. Stopped losing money.
Okay. That's helpful. My second question, if I could just return to P&C for a minute. Could you talk about if you think or seeing any signs that the, you know, the strong P&C market that we've seen really since the start of the pandemic, if that's resulted in any excess capacity or businesses?
Yes.
in the market.
Yes.
Does that capacity potentially create opportunities as the market softens, or does it create more desperate competitors and maybe aggressive pricing? Is it a challenge or is it a risk or maybe it's both?
Yeah. That's a very good question. You're absolutely right, okay? E-commerce created transportation company in Canada, right? Why? Because, you know, Amazon and, you know, the consumer want more, you know, freight delivered to the home. W ow what you're seeing is that for sure, consumer, because malls are reopening and they're just saying, "You know what? Oh, I'm gonna get to the mall, to the mall." So this is why when you look at us and you look at even the big player like UPS, okay, e-commerce for us is slowing down. There's no question about that. You know, the B2C is slowing down, b ut at the same time, us, the chance we have, contrary to my peers, my small peers in Canada, is that we have the next day service with Canpar, Loomis, TFIS and ICS.
We're losing on the e-commerce side in my P&C, yes, we do. What we're gaining on B2B. Now, my logistics and last mile operation in Canada, we're at the same time we're gaining on e-commerce because, you know, our solution through our last mile is very... How would I say that? Is very interesting for customers, right? If they have a DC in Toronto or if they have a DC in Montreal, last mile solution to service these markets from the DC, last mile is a great solution. We are expanding our network. In our last mile, for instance, we just opened up south of Toronto, a new service station in Hamilton, right? To cover more e-commerce through our last mile division.
We're also looking at opening up in other sectors to provide a better coverage of the e-commerce through our last mile. Through our P&C, okay, we're more focused on B2B. We're trying to get more action because our density is so huge, okay, with the malls and with the B2B, that this is. The goal of our P&C is to create more of this B2B within our service and keep the e-commerce that makes sense for us. In our last mile guys in US and in Canada, we have the network. Can we improve the network? Yes, we can. Okay, as an example, we opened up in Hamilton. Can we do better? Absolutely. That's why we bought Unity in California to improve our coverage of this huge state that's doing really well.
You know, at the end of the day, when you look at this Canadian market, we may have some competition that will say, "You know what, I want out." That may happen.
Okay. I mean, that's very helpful. Thank you.
Pleasure.
Your next question is from Cameron Doerksen of National Bank Financial. Your line is open.
Yeah, thanks. Good morning.
Good morning, Cameron.
Just go back to the U.S. truckload segment. I mean, you've had, I guess, an issue with unseated tractors.
Yeah.
For a while now, it doesn't seem to really have improved much year over year. I guess my question is, you know, if we do have some sort of market slowdown, is that potentially even a positive from an operational point of view for you because there's more availability of drivers, and you can reduce that unseated tractor count and then, you know, improve the utilization?
Maybe, Cameron. We'll have to see because right now what we're doing is that we have a leased truck within our temperature control division. R ight now we're buying back these trucks and selling them to the market and transferring those unleased trucks into our temperature control division, right? You're absolutely right. If this market starts to soften, we'll have to see. We don't believe that, Cameron, for at least the future, the next 6-9 months, and then we're gonna get to the busy Q4 season. Maybe could be something of a risk in 2023 in our USTL operation. We'll have to see. It's a far. 8-9 months, it's really far to predict, right?
What's the focus of our USTL is really to continue to improve our dedicated business, okay? That these guys have done really well over the last six months. Over the road, like you just said, we have way too many unseated trucks. We gotta take the bull by the horn. We have too many trailers as well. We got probably 1,000 too many trailers that we're selling at a huge profit right now. This is why, you know, Benoit Poirier from Desjardins was saying, "I mean, you guys made a lot of money selling trucks." Absolutely. Selling trucks and trailers. You'll see the same thing in Q2. Now, if we could get more drivers, our guys are really active at that in dealing with customers.
Now, let's see what Q2 is in and then we'll have a better understanding of what we could do with that.
Okay. Makes sense. Just a quick follow-up question just on working capital. I mean, you had a big increase in, I guess, in receivables that gets related to-
Yes.
the fuel surcharge.
Yes.
Can you just explain what's going on there? Should we expect that to reverse in Q2?
Yeah. Fuel surcharge is always the same thing, is customer pays you in 40 days and, the fuel supplier needs a seven-day payment. That delta between 40 days and seven, okay, is killing you because when fuel surcharge is going up, I mean, you have to pay more to the, to the energy company, and you have to wait that delta of 30 days, 33 days, okay, to get your money back from the customer. If the price of oil stays steady, you won't see that in Q2, right? Because we're already there. If price of oil starts to come down, okay, in Q2 or in Q3 or by the end of the year, we will recapture this huge, you know, requirement on our working cap.
Even with that, Cameron, we're gonna generate over $700 million of free cash US this year.
Right. Yeah. Makes sense. Perfect. That, that's all I have. Thanks very much.
Pleasure.
Your last question is from Bascome Majors of Susquehanna. Your line is open.
Yeah, thanks for taking my questions. Mr. Bedard, you've been the voice and the manager of this business for decades here, and you've certainly compounded a tremendous amount of growth over that period. You know, when you look forward, I mean, the business certainly seems set up to continue that on the cash you're generating and opportunities ahead. Is there an opportunity to sit down with investors and talk about longer term targets and also introduce, you know, some of the EVPs and help investors?
Yeah.
Get comfortable with the bid streak?
Yeah.
Just curious how you think of an investor day type format?
Yeah.
in the next, you know, 6, 12, 18 months. Thank you.
Very good question, and I have to tell you this, is that we were planning an investor day in New York just before COVID hit us, right? It's a very good point, and it's a point well taken, is that, absolutely, you're right. We need to show up our, the group of our EVPs. Okay. To through an investor day. It's something that we got in mind. We wanna go to after Q2, but for sure in the fall, we're gonna set up that. It's a very good point. We were doing that in New York about 2.5 years ago, just before COVID. COVID hit, and we said, "Oh, we can't do it." Right? Good point. You're absolutely right.
You know, the CEO of TFI has been 25 years with the company. I had a chance to build a fantastic team, both on the Canadian side and on the US side. You're absolutely right, we have to show that to the investor community. For sure, it's not a one-man show. It's a group of very highly dedicated people that supports the success of TFI.
All right. Potentially sometime in the second half.
Oh, yeah.
If the stars align.
Absolutely.
Okay.
Second half. Oh, absolutely. It's something that's on our radar.
All right. Thank you for the time.
It's a pleasure.
It appears we have no further questions. I'll now turn the call back to Alain Bedard for closing remarks.
Very good. Well, thank you, operator, for facilitating this morning's call, and thank you everyone for joining us today. We very much appreciate your interest in TFI International, and we will keep you posted on our progress as we move through the year. As always, please feel free to contact us with any remaining questions, and I hope everyone has a terrific weekend, and thank you again, and stay safe. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.