Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the TFI International Second 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. Again, that's one question and a follow-up, so that we can get to as many callers as possible. For the instruction for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. Also, I would like to remind everyone that this conference call is being recorded on Friday, July 29, 2022. I will now turn the call over to Mr. Alain Bedard, Chairman and President and Chief Executive Officer of TFI International. Please go ahead, sir.

[Technical Difficulty] our remarkable performance so far this year reflects our long-standing adherence to our principal operating philosophies, as well as the many internal or self-help opportunities that we see regardless of economic condition, not the least of which is the continuing successful integration of TForce Freight acquired just a year ago. In addition, our favorable quarterly results reflect strong execution across our diversified business, driven by the many dedicated individuals at TFI International. We look forward to having you met some of our many talented leaders at our upcoming Investor Day on November 10 with more details to follow. For the second quarter of 2022, we reported 76% increase in our adjusted net income over the prior year and an 81% increase in our adjusted diluted EPS, along with more than $300 million in quarterly free cash flow for the first time in our company's history. All four of our business segments contributed to this strong outcome by producing very strong returns on invested capital. And today, we are again raising our outlook the full year. The economic headwinds, as I'm sure you're all aware include the rising interest rates, along with inflationary pressure at multi-digit, continued elevated energy prices, unprecedented labor shortage, resurfacing regional pandemic outbreaks. And of course, the ongoing global supply chain challenges. Especially during uncertain time, this is when we re-sharpen our focus our long-held operating principle, which bear repeating as they are so instrumental to our strong performance. We have a relentless detailed focus on getting the fundamentals of our business right in our quest to maximize efficiencies, everything is with an eye towards optimizing our free cash flow, generating strong returns on invested capital and growing our earnings per share. Why do we do this? Well, because it's self-help [ph] achievement of our…

Thank you, sir. [Operator Instructions] Our first question comes from the line of Ravi Shanker from Morgan Stanley. Please go ahead.

Thanks. Morning, Alain. As you mentioned in your comments, there's been much press dedicated to what the U.S. macro environment is like, may or may not be a recession. But maybe investors here not quite as clear with what's happening in Canada. So can you give us a little bit of a snapshot into what the macro environment and outlook is like in Canada? And also what the kind of ELD situation there is like and potential tailwinds from there? Thank you.

Well, very good question, Ravi. So yeah, the - I mean, finally, our friends at the federal government said that this is going on in 2023, Jan 1 of '23. In interest of the general economy in Canada, we feel pretty good with that. I mean, yes, we had two years of COVID like the rest of the world, but oil being at over $100 a barrel really helps some of our provinces in Canada because don't forget like the Canadian dollar is mostly like compared to dollar. Ontario and Quebec, I mean, economy are doing well as well. So we have a lot of people who are talking about freight recession or maybe a recession. But so far, even when I look our month of July, I mean we're still running on all cylinders. But maybe a storm could come, maybe, I don't know, maybe at the end of '22 or into '23. But as I said many times, us at TFI, we know that storm will come one day, and we're ready for that. And we try- we do very well in the storm and it creates opportunity for us. We have a very strong balance sheet. We generate today a lot of cash. I mean our forecast for '22, like I said on my script is about US$900 million. So and we feel good about the economy as it stands. For sure, we have those challenges like inflation and all that. But we went through a COVID for 2 years. And prior to that, there was another story. So in our world, there's always something that we have to live up to a challenge. And if there's a recession coming, we're ready.

Great. And then maybe as a follow-up, what kind of message do you want to send to investors on the Street by raising your buyback at this point? I mean clearly, like with your new guide, I mean I think it reflects kind of fee, but the valuation and the stock. But maybe if you can talk in terms of like trough EPS or for the stock price, what kind of signal are you sending with that upside?

Yes. You know, Ravi, we believe that even at the stock price today, it's still cheap maybe not within the next six months, maybe because there's a recession coming. But long term, if you look at the next five years, we believe that at today's prices, it's the best use of our cash because don't forget, we do large M&A every three years on average. And right now, we're not doing in '22 anything big upside that may come in '23 if market condition are fine. But in the meantime, we just buy back something that we know that what we're buying for sure is TFI. So we'll keep, we'll stay very aggressive on our buyback because we believe that long-term valuation of TFI is still undervalued. We believe that TForce Freight could be an ADOR [ph] down the road, like I said, over the next two to three years. We are investing in technology to help our team there. We are also investing in our equipment, which was very underinvested for a few years. So we believe that TForce Freight to be an ADOR within the next few years, like I said. So this is why for us, buying back the stock long term it's a great deal for our shareholders.

Great, thanks a lot.

Pleasure, Ravi.

Thank you. Our next question comes from the line of Ken Hoexter from Bank of America. Please go ahead.

Great. Good morning, Alain. Maybe clarify that last point. You mentioned earlier in your opening comments that you thought the LTL, the U.S. LTL could be similar to Canada. You just said in the ADOR and obviously, Canada is now pushing below 70. Is your target? Or are you throwing it out there longer term?

No, no, no. We're still - we're still staying with a target of ADOR, okay, which is quite a challenge because don't forget a year ago when we bought the company, and the company was not very successful at the time. So now we're – from 90, now we're down to 88. We're making all these investments in technology and equipment and people, okay? And our forecast is really to be an ADOR within the next two years now. Can we be as good as Canada? I mean that's a different country. That's a different story. We are a dominant player in Canada. We are not a dominant player in the U.S. today. So what we're saying is that the same recipe, okay, that makes the key cake of success in Canada. Were working with our U.S. team, okay, to bring the similar approach, similar philosophy. You guys have to do more with less. We cannot haul freight that does not fit. And if you go back to a year ago, when we bought the company, I would say that about a third of the freight that we were hauling at the time did not fit, okay? So it's not a situation that has been corrected in 12 months. It will take more than 12 months to correct. We made a lot of stride doing that. But no, I mean the – that TForce Freight reasonable target for the next two years is an ADOR. It's not a 7 ADOR. I mean 70 ADOR, it's best-in-class in the U.S. I mean there's only one company, one of our peers that’s there and us, we're there okay, in Canada, but Canada is not U.S.

Yeah. I just wanted to clarify if you were setting a different signal. Just to continue on that. You sold a terminal. Is that just the start of you're digging through the process in terms of what LTO opportunities within the U.S.? Or was that a special case out in California?

Well, that was a special situation because so far, I mean, we got rid of one lease in Chicago. We're going to be selling two small terminals to one of our peers, but that was a major one, okay? So the usage of that terminal was very, very small. So that was a kind of a one timer. But for sure, like I said earlier, when we bought the company a year ago, these guys were - they were managing about, I would say, like 11,000 to 12,000 doors. And we believe that there's at least 3,000 doors, too many. So we just sold 74 to this purchase from a third party, but there's more to come. So are we going to be selling the terminal are we going to be renting space like we do in Canada on our dock to third party? Are we going to be starting to rent space in RR [ph] because we have lots of space available in yard, for sure, okay. But year one was really just to try to understand what's going on, okay? And now our real estate team is working aggressively with our operating team to identify the opportunity for renting space in our yard and on our dock. In terms of selling excess real estate assets, that was more of a one timer, although we're selling some smelter here and there. But as a matter of fact, we're also buying one terminal from one of our peers in Sacramento, okay. So a lease will be turned over to one of our own terminal at Sacramento. We're also looking at buying another one in Louisiana. So it's just a real estate complete analysis that's been going on, and we didn’t talk in the script about the environment, okay? But it's very important to say that we've pulled out the fueling tanks and all of this equipment in about 40 of our sites so far. We shut down the 100 fueling operation within the network, and we've cleaning up all this environmental as we speak.

Alain, great to watch and appreciate your thoughts and insights. Thank you.

Pleasure, Ken.

Thank you. Our next question comes from the line of Jordan Alliger from Goldman Sachs. Please go ahead.

Yeah, hi. Morning. I was wondering if you could drill down a little bit deeper on the truckload profitability for the quarter, specialized Canadian. I mean, just had a really big step-up in margin and maybe give a little more details around that? Thank you.

Yes. Very good question, Jordan. So our Canadian LTL, Canadian Truckload, I mean, a van division - they've done a fantastic job in the quarter, Q2. They took advantage of market conditions, and they produced in the 75 neighborhood and the same of our specialty truckload. Because now specialty truckload is being, okay, we're the largest player by far in Canada, mostly on the eastern part of Canada on Torque Québec [ph] and we're building also a quite solid specialty truckload in the U.S. under the leadership of Steve Brookshire and we reported a very improved OR there because don't forget, we made a lot of acquisition in that sector over the last 12 to 18 months, small tuck-ins here and there. And when we buy this company, normally, the run a 95 on average when we buy those guys. And Steve and his team are slowly bringing those guys closer to, let's say, a 9 OR and then an 88 OR and then 5 OR. So we had a fantastic quarter in our specialty. On the regular U.S. operation, with the acquisition of UPS a year ago, we got about 750 trucks in our UPS truckload dedicated division, that was losing a ton of money. We were losing about $5 million a quarter when we acquired this division. And at the same time, we've also moved all the over-the-road operation of Transport America to CFI. So CFI kept all the over the road operation of the old TA and TA kept only dedicated business that was intertwined okay, with the over the road operation. So now the old TA operation, which is about 500 trucks and the combination of the old UPS truckload division, which is about 700 trucks, the total of that dedicated operation is 1,200 trucks. A year ago, these guys were losing money, big time because of UPS mostly. Now Greg's team working with Eric, they've turned the tide, they've turned the page, they've turned the corner. And now we are in a profitable environment, okay, running an operation that is around a 94% OR. And the reason we did the split is that we want Greg's steam to be really focused on over the road, which is a different world, okay, than dedicated. Dedicated is not the same kind of business in our mind, okay, because we run also some dedicated business in Canada. And for us, it's always been part of our specialty truckload. So this is why we've announced on the call this morning that we're making these changes. So Greg keeps over the road. Eric is now our leader in the dedicated networking with Steve's team in the U.S.

Thanks. And then just in the context of the earnings outlook, then I mean, is this kind of within a few points, the margin level you think with truckload going forward for the time being at least?

That's the intention, Jordan. That's the intention is that by having this team more focused on just over the road with the CFI Logistica division in Mexico that guys, let's focus on being better at over the road and meantime, Eric is running his operation and working closely with Brookshire.’

Thank you.

Thank you. Our next question comes from the line of Brian Ossenbeck from JPMorgan. Please go ahead.

Hey, good morning. Thanks for taking the question, Alain. Ask you a couple of questions about labor to start. We've seen AB5 enough be heard by the Supreme Court. Just given the nature of TFI's model and I think you just purchased the courier service in California, maybe you can give us an update on that as well as what you're expecting with the Teamsters on TForce Freight coming up in the next year?

Yes. Well, AB 5, I mean, we've been preparing for that for the last, I mean, two years. We - at the time when this came out, we believe that this would stay the course. So that Unity courier that we bought a few months ago is an employee model, okay? And we're just getting ready to grow with the employee model in California. What we've done with our last mile operation is we don't an owner operator today that works for us and has only one truck, okay, that creates an issue with AB5. So I mean we've cleaned all this in the last, I would say, two to three years, just to make sure that we would be clear of any issues with AB5 as it is now. Now in terms of our discussion with the Teamsters, I mean, we feel really good about that. I mean our intention to us is always, like I said many times, our asset is our people. And our approach with our people is that we want salaries to be market. And we are - we're there. I mean the base salary of our employees is market. For sure, market to be different in California, okay, that it could be let's say in Louisiana, okay, different market conditions in New York or Texas. And our approach to us - to our discussion is guys, let's see what we can do together. I mean, we're not about trying to squeeze salary reduction or whenever you want to call. Our approach us to do more with less. So how do we do that? Okay? It's very easy to say. How do we do that? So our approach us is, guys, can we reduce the - because right now, our driver spend about 55%, our…

Thank you for all those details, Alain. Just to follow up on the building shipment density. It looks like in TForce Freight shipments in tons are still down a bit quarter-to-quarter. Is that still part of the one third of the business that doesn't fit. And maybe you can give us some thoughts on where you are in that journey and when that might start to reflect positive? Thank you.

Yes. That's - you're absolutely right. I mean if you look at TFI's history, every time we buy a company, it always shrinks, step one. And TForce Freight is not an exception, is what we do, right? Now for sure, we have some kind of a pause right now, okay, in terms of - because a third of the shipment, you can't churn a third of your shipment within, let's say, a year, it's impossible. So what we did is we got rid of everything that was really, really bad, okay? But we still have some bad stuff in there. But you know what, between here and there, we still have some bad stuff in Canada, right? So nobody is perfect. But in the U.S., it's going to take us to ensure everything that doesn't fit, probably another two years, right, to - because we have to do it in a timely manner, right? We can't run from, let's say, 30,000 shipment down to 20, it's not going to work, right. So this is why we're slowly and aggressively, okay, replacing the things that are the worst - worst freight that we've got, like hauling mattresses that doesn't fit TForce Freight. Hauling carpet, I mean we're not in that business. That should not be us, right? So to answer your question, we're probably at a flat, okay, organic growth or a little bit negative maybe in the next few quarters. But after that, okay, we are investing in our sales team, our approach is different. And one thing that is also important to note, guys, is that our GFP, which is our diamond within TForce Freight, there our revenue are growing by about 20% a year. That's our asset light operation in our LTL.

Thanks, Alain, very helpful. Appreciate it.

Pleasure.

Thank you. Our next question comes from the line of Tom Wadewitz from UBS. Please go ahead.

Yeah, good morning.

Good morning, Tom.

Alain, I think there's been maybe greater caution on the truckload business that we've heard from you over, I don't know if it's over the past year or whatever, I think maybe some frustration with some of the challenges. This quarter was - I think you performed well across the board, but truckload was really notable how strong the performance was on the margin side. And I think you said on an earlier question that you thought it was sustainable at this level. So with that as a backdrop, does it make you more optimistic on that business as an attractive segment and maybe something you'd want to grow more in the future? And maybe that's more conventional TL question because I know you like specialized TL?

Yes, yes. You're absolutely right. We prefer, okay, for sure, specialized. But within our over-the-road operation, okay, we have one part of our business, which is temperature control, okay that's doing really, really well. And we're growing that. As a matter of in fact, we did a small acquisition of D&D, a small Joplin [ph] 100 truck company. So we are investing in temperature control. On the dry van side, I mean, right now, our focus is really to do better with the assets that we have now, right? And that's why we did that split so that the Greg's team could be more focused on over-the-road and temperature control. And then Eric has got - because dedicated is really not the same business in our mind than it is with the over road stuff, over-the road stuff. I mean it's not the same story. The employee turnover is not the same. So the over-the-road stuff 900 miles average length of haul, you end up with something like an 85 or 90 turnover dedicated normally, you should be closer to 50 in the U.S., I'm talking about 50, maybe 60 turnover. So it's a different story. It's not the same. So that's why we made the slit working with our dedicated team in Canada under Steve Brookshire, that made a lot of sense of Eric. So these are changes that we're making to make sure that we could do a better job.

[Technical Difficulty] where would you see risk and potential, I don't know, pressure on revenue and performance looking out a quarter or two?

Yes. I would say that to me, it's mostly our truckload operation that you may be more concerned that our U.S. LTL, our U.S. Logistics, our Last Mile in our logistics, when [Technical Difficulty]

control, et cetera. So was there anything nonrecurring in nature, like not necessarily your sales or something, but just anything that benefited you in Q2 for those two or three segments for 30% margin? Or was that purely kind of operational performance and you continue to expect those segments to deliver those kind of margins going forward?

Yes. Yes. Well, on the truckload, the Canadian truckload is really the market condition that we really took advantage of. The market has been tight. The activity has been good, okay? So really, it's just a market condition, right, that we took advantage. Because if you go back to, let's say, two, three quarters ago, I mean we were not able, okay, to provide these kinds of results because the market was not helping us on that. So really for Canadian truckload, Canadian LTL, it's a little bit of a different story because we keep on building more freight, more dense to reduce our costs. So I could say that because of fuel being so high, and when your density is also above average, okay, compared to your peers, which is not the case for us in the U.S. Like I said earlier, our density in the U.S. compared to our peers, is probably not as good. But I would say that our density in Canada is way better, okay, than I would say, compared to our peers normal. And when fuel is high and you've got efficient equipment, which is not the case. I mean in the U.S., we have old trucks. So we get the double whammy of not being efficient. So we have old trucks and not good density. So fuels high in the U.S. LTL it kills us. On the Canadian side, we have a young fleet, okay? And we have high density. So, to answer your question, maybe on the package and the LTL in Canada because fuel is high. It's a little bit of a tailwind for us that let's say if fuel goes back to normal, okay, so it could be a little bit of a detriment to our profitability because we make a little bit of this because we are so efficient. But that also help us on the U.S. side. If fuel goes down, it should be a good benefit for us because it will take us two years to bring our fleet to a normal age. So we reduced the average age of one by one year, okay, from 8.3 when we bought the company, average age of trucks in U.S. LTL, now we're down to about 7.25, right, 7.25 is way too old, right. So we're going to bring that down. So that is the only thing I would say that is something that is unusual, okay, that if fuel goes back to normal, yes.

Right. That makes sense. And then to the pricing environment. I think some of your U.S. peers have recently alluded to the fact that the rates have started to kind of soft. And I'm not talking about spot, I'm talking about the contract. I know have minimal exposure to spot. But on the contract side we are anticipating some sort of softness in the second half sequentially, they will still be up versus last year and maybe low. But what are you seeing from your perspective or kind of rate discussions with your customers? I know your book kind of turns around pretty quickly every year, so any part…

Yes. Because of all the efforts that we have to do on our dedicated because when we got this business from UPS, it was really, really losing money mid time. Okay, and Greg's teams focus has been on correcting that. So a lot of energy from the sales department and everybody was there to correct the situation. But I believe that our average revenue per mile in our over the road today is under market because the guys were too focused on dedicated maybe not enough on over the road. So our contracted rate today, we're still not seeing that pressure that some of our peers may have because probably their quality of revenue is better than ours because us, our team was - had to focus more on the dedicated to direct a situation that was completely not acceptable. We were losing money. It didn't make any sense. We had deals with customers that had no sense. But you know what, when you have to adjust rate, it's hard to - you have to chase the customer. So it takes time and a lot of discussion, et cetera, et cetera. So a little bit of a lot of focus because of that dedicated. I would say maybe our rates at over the road compared to our peers are not where they should have been, okay? So we're still overbooked every morning, as of today, we still are overbooked by 5% to 8% to 10%. And we used to be over by 15% were over going by 5%, okay, to 10%. But still, I don't see in the next, let's say, two quarters to - for the rest of the year, I don't see any pressure on the truckload U.S. truckload rates for us.

That's great color. Thanks, Alain. Appreciate your time.

Pleasure.

Thank you. [Operator Instructions] Our next question comes from the line of Kevin Chiang with CIBC. Please go ahead.

Hi, good morning, Alain. Congrats on set of good results here.

Thank you, Kevin.

Maybe just - I'll keep it to one question. If I could just look at your LTL division. If I look at your revenue per shipment, excluding the fuel for both the U.S. and Canada. Sequentially, there were up a couple of percentage. And one of your peers north of the border was pointing to a stronger pricing environment in the Canadian LTL market? And I think part of that might be if it - so maybe a little bit of a catch-up on pricing. [indiscernible] what you think the trends in LTL yields or pricing or revenue per shipment or whatever metric you want to call out looks like through the balance of the year and maybe even into 2020, 2023?

Kevin, if you compare us in the U.S. LTL with our peers, the big, big issue is our average weight, right. So our average weight is not even 1,100 pounds per shipment. And most of our peers are at least above 1,300. So the cost of all the pellet that's 1,100 pound versus delivering a pallet or picking up a palate 1,600 ounce, I mean the costs are basically the same. But the problem is the revenue is not the same. Why? Because most of the pricing is based on per hundred weight. So this is part of our strategy of improving the quality of revenue is to hold - like we do in Canada, our LTL operation in Canada, we're heavy in industrial LTL. There's not much industrial LTL in Canada, but that's where we're focusing. And that's why if you look at the average weight for shipping in Canada is day nine versus what it is in the U.S. Canada is exceptional. Our average weight is while our OR is - we've never done a 69 OR, right? But on the U.S. side, we've got a lot of things to fix. Like I said, when we bought the company at least a third of the shipment and didn't make any sense. So we've corrected some of that, but we still have to correct way more, okay? And this is also part of the issues of the weight per shipment. So we've improved over a year a little bit on the wafer shipment, just a little bit, not much, not enough, right? So that's also the part of focus on our kind of three, four leg shares. So like I said earlier, one leg is to pick up more freight per stop, another leg is to pick up more…

That's helpful. And then just a clarification question. When you think about ADOR target in the next couple of years in the U.S. I guess that assumes that the fleet gets replaced, so you get the two to three points, plus that the average rate gets the 1,300. Are those kind of the two KPIs that kind of are the major drivers of the ADOR or is there anything else you'd call out?

Yes. So what we're seeing, Kevin, in general, is if you look at today is operations, so where are we going to take the, let's say, the 90 OR those 8 to 10 points. Okay, fleet is two to three points. That is the big thing, getting more freight for stuff and the productivity of our operation is another to two to three points. The line haul, okay, that we're bringing some new tools to help our guys. We believe that this is between one to two points, okay. Line haul is our biggest expense at about 38. It's a huge change, okay. So the guys are working, it's a complex network that we have in the U.S. contrary to Canada. Canada is a very easy complex because your line haul runs Toronto, Montreal, a little bit to the west, not being deal. But I think U.S., it's complicated because we got 20 hubs. So the tools that they have right now are not tools of the 21st century. So that's what we're doing, okay, we should be up and running 100% by the end of this year. And there on the line haul, we believe between one to two points of OR will reduce, right? So all in all, we have a path, okay, to that OR, but that takes time, right.

Perfect. I'll leave it there. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.

Thanks so much. Good morning, Alain.

Good morning, Walter.

So I want to come back to the question on segmenting. You mentioned some leadership changes. You've curved out USL hosting an Investor Day. Just curious as to whether all of this suggest that you're looking at businesses either more on a stand-alone basis? Would you consider some to be non-core but not strategic for you that you could spin out -- or just curious whether all of these changes are leading to something that you might be -- maybe you won't say it here, but am I pulling together things accurately here? Or is that just something you're doing in the normal course of how you're managing your business and nothing to read into.

No, it's normal course, Walter. I'll give you an example, which I did talk about on the script. So what we've done is our Western Canadian operation that was the responsibility of Steve Brookshire, we said, Steve, you know what this got to go. It's going to go to Chris Traikos, which has its own operational west. So we did that change about two months ago. And that change was done. Why? So we removed about $100 million revenue from Steve's management, okay, and we gave it to Chris because we saw an opportunity in dedicated. I mean Greg and his team have done a fantastic job to turn this thing around okay? But doing that - like I said earlier, we lost focus on the over the road thing. More importantly, on the quality revenue, the revenue per mile. I'm convinced that we've missed, okay, because were too focused on trying to correct a situation at dedicated. So this is why our approach is said, okay, Greg, let's have you and your team focused on over the road only so that we could catch okay, everything that we didn't do because we were too focused something that we have to correct. And Steve, okay, is growing more and more into our specialty truckload. And there, we also made a split between the flatbed operation that we have in the U.S. and the tank operation in the U.S. So Cameron that used to run Hoke [ph] okay, until about two months ago, Cameron also now runs only the tank operation and someone else I forgot his name, runs our U.S. flatbed operation, which is upside. I mean, we're doing about $100 million of flatbed in the U.S. today. And now bringing dedicated, Eric, with about 1,200 trucks into the same fold or the same team. The other thing also is the TMS, okay, we run mostly TMW, okay. And TMW is the software in our dedicated that we got from UPS. It's also the same kind of system that we have at the OTA. So it's to different roles and our specialty in the U.S., they all run TMW. So it's a standardization thing that we were doing there Walter.

That makes sense, some more of an optimization, standardization rather than in probably got it. Okay. Acquisitions you mentioned, perhaps in '23, I know recently, when we were chatting, you mentioned you're always working on larger transactions that take time - and there were a few that you kind of working on - my question is, do you think those are advancing - or are the market conditions right now that process down or pausing it? Or are they continuing to proceed such that in 2023, we could very well see another larger deal from TFI?

Walter, I think it's possible I think it's possible, but you can't see anything on diligent in, right? But for sure, like I said many, many times, you cannot buy something of size and do that overnight. That's style. We always believe that you make your money on the buying never on the selling. So you got to be smart buyer and take opportunity where they lay. So '22, it's impossible for us. So what we're doing, as we said, okay, buying TFI -- we marked 2.6 million shares in Q2. We've increased from 70 to 80 something, okay, according to our Board approval. So we'll be probably very active with our NCIB in '22. Now going into '23. And you know what our forecast is that if we exercise share buy by debt we could do until the end of October because that is the NCIB, that's the expiry date of our actual NCIB buying back -- we believe that our leverage is going to be at about, right? So it's going to be incredible. So that's our focus. Now '23, for sure, if it fits, if it makes sense, if market condition and maybe like everybody is saying, maybe there's a recession coming, if a recession is coming I like that on the M&D side because adjusting the value, okay, through a recession, right? Everybody evaluation comes down. If you look at since April, most trucking companies valuations have come down 10%, 15%, 20% because is that we're going into a recession, right? So that's why I think 23 is the right timing for us. I think that our target that we have still very interesting. And let's see what '22 end and I think we'll be ready for something of size in '23.

Yes. I guess when you got good free cash flow, it gives you lots of options, buy back stock and still be able to do acquisitions with a clean balance sheet. That's great, Alain. Congrats on the great quarter. Appreciate the time.

Thank you, Walter.

Thank you. Our next question comes from the line of Jason Seidl from Cowen. Please go ahead.

Good morning. Wanted to ask a couple of questions here on some operational issues. So if you look at your P&C business. I mean, obviously, there's been a switch away from the more to B2B, how should we think about the margins in that business trending forward with the shift going on.

I think that most of the shift Jason, what you're seeing in Q2, I think that it's probably going to be similar in the next 3 to 4 -- Q3 to Q4 in '22. I think that okay. So if I take one of our division, for instance, ICS, okay, we're really badly affected by B2B, all the closing, et cetera, et cetera, they're back to normal now, right? So those to FIS, okay, were badly affected by B2B. Those guys are back to normal. Now our Canpar, Loomis operation, mostly Loomis There, we've been down on volume because they were a big B2C player when this coveting hit us. They were the choice the tool that we use. And this is why our Loomis operation has shed some volume and B2C will probably continue to shed a little bit of volume into the peak season of '22. Why? Because the consumers, okay, we see that all around A lot of these guys are going back to the mall, right? So it helps our TFIS, - it helps our ICS guys to the nutrient and mostly of our Loomis guys.

Okay. That's great color. I wanted to also follow up with Canadian LTL. I mean, absolutely an amazing OR. And I've been on one of your docs years ago when it was under another brand name with the running through it, and I think they were operating in the 90s. So to be operating in the 60s is an amazing accomplishment. -- do we think about that going forward? Is this sort of plateauing and then we should think about potential growth on this? Or do you think there's even more to go there on the OR?

No. I think that when you run on the Canadian market, Jason, the 70 OR, I mean, it's like -- you cannot say impossible, but it's like very, very difficult to do better than that. I mean our guys are working every day like very professional to do better. But when you are a in Canada because if you compare the quality of revenue, okay, of a Canadian shipment same weight, same like the ball -- you compare that with the U.S. even better, to one of our peers in the U.S. that is running a 69 OR compared to the quality of revenue of a USD 69 OR with the quality of use you will say, wow, this is incredible because the Canadian market is such a market in terms of quality of revenue. So our team are doing a fantastic job. If we would be able to replicate what we do in the U.S., okay, I mean in Canada, in the U.S. with the same quality of revenue that we have in the U.S., even with shipments that don't fit, we would probably be running a 55 OR, okay. So if you do the math, because in our MD&A, okay, we are showing all these different numbers and you will say that wow. So to answer you and make a long story short, it's difficult to do better than that, right? But we're going to try

Well, it was extremely impressive, nonetheless. And I look forward to you guys posted gains in the U.S. division, impressive quarter. Thank you for the time.

Thank you, Jason.

Thank you. Our next question comes from the line of Benoit Porier with Desjardins Capital Markets. Please go ahead.

Good morning, Alain and congrats for the very impressive quarter.

Thank you, Benoit.

Obviously, a very strong performance from Canadian LTL and Canadian TL with very impressive OR. But we are aware about the supply chain issues in Montreal and Toronto, the lack of in dry capacity and obviously a as many tools in their toolbox to help out customers. So could you provide some color about how the supply chain issues benefit TFI and whether the strong performance for both segments is sustainable going forward as the supply chain is going back to more normal level at one point?

You know what You're right, Benoit, maybe - but our guys really took advantage of the market, for sure because we have a good pause. We know what the market can sustain and we of it. Now if supply chains issue within a year or 18 months or maybe because of a recession, supply chain gets better or worse, I don't really know. Well, one thing is for sure is that we always take advantage of market condition. The only areas where we missed about a little bit, like I said earlier, is our U.S. TL over the road because the guy we're really focused on correcting a situation that are dedicated that need a lot of attention. But the rest of our operations really are on calls, with condition. Now if market conditions change, for sure, that could affect us down the road. But you know what, that also help us on the M&A side. So if you look at 20 years of TFI's history, good times, bad times. We adjust ourselves and we perform well.

Yes. Okay. That's great color. And for my follow-up, Alan, with respect to the $8 EPS target for the year. Would you talk a little bit the expectation for gain on the rolling stock in the second half and looking at the CapEx also is a bit weaker in quarter. So if you could mention some color about the CapEx forecast and your ability to get trucks these days. That would be all?

Yes. Well, for sure, Q2 on the CapEx side has been slow, okay, for our LTL -- U.S. LTL, I mean, we need suppliers keep pushing back -- we believe that 3 and 4 will be important CapEx for our U.S. LTL. We're trying to catch up. I mean so far, we've replaced about 650 trucks in the U.S., which is way too low. We believe that by the end of '22, we'll be in a position to have been able to replace about 1,400 of those trucks. So CapEx on Q3 and Q4 will be more important. Now in terms of gain, okay, on we don't believe that the use gain that we had in Q2, because we also took advantage of the market. So we were selling trailers in the U.S. for $24,000 or 2008, 2009, okay, in Q2. As of today, the same trailer being sold for 1,500 15,000. So it's still a lot of dollars for old trailers, but it's not 25,000 like it was like two months ago. So we don't believe that in three and four, the gain on selling pre-owned used equipment is going to be in the same nature. Q2 was exceptional on that in that regard. But we believe very, very confident about our $8 per share in our free cash of 900.

Okay. Thanks for the color.

Thank you. Our next question comes from the line of Bascome Majors with Susquehanna. Please go ahead.

Can you talk about how you compare quantitatively the return you expect on buying your stock versus the return you think you can earn from M&A? And what that comparison looks like today where your stock price is trading this morning. And just to clarify, does the EPS guidance assume that you get through that full expanded $8.8 million share buyback? Or does it not matter in

No. No. When we talk about the $8 per share, it assumes the share count as we have it today after the 2.6 million shares that we bought back in Q2. So if we buy back another, let's say, 2 million to 3 million shares, okay, that could be a different story on the EPS.

Okay. And the return comparison, how does your…

The return comparison is always difficult to do, okay? But what we believe is, if you look at it today, -- maybe it's close to breakeven, always depending on what is the cost of purchasing the stock back. But we know long term, it's going to be a huge advantage for our shareholder. When I'm talking long term is I'm talking 3 to 5 years.

Thank you for the time.

Pleasure

Thank you. Our next question comes from the line of Ari Rosa [ph] with Credit Suisse. Please go ahead.

Great. Thank you. Good morning, Alain. Impressive results here. So you laid out the path to get to an ADOR on the U.S. LTL side. obviously, what you guys have done since acquiring that business has been extremely impressive. Maybe I could just get you to speculate or discuss what would be the obstacles to getting to that ADOR. 2 to 3 years down the road, if you guys aren't there what would be kind of the reasons that, that might not happen? And specifically on the kind of competitive landscape in U.S. LTL, we've seen a number of the big players looking to expand. And obviously, a lot of people are going over -- after that heavier weighted shipment -- heavier-weighted shipments and that sort of thing. Does that present any kind of competitive risks to achieving that ADOR and if not that, is there something else that might be an obstacle to getting there?

You know what I don't think so. I think that we have a lot of opportunity to correct the situation that has been there for too long. Like when you run an old fleet, like we do now. That's got nothing to do with the market. That's got something to do with the decision of the owner of the company to invest or not to invest. And when you don't invest, okay, well, that's the result that you're getting. -- your maintenance cost per mile instead of being $0.05 a mile on the equipment on your truck is going to run to $0.40 a mile because you're running in 2008 or 2009 trial. So on the 2 to 3 points of OR, okay, that relates to the fleet, this is us. I mean, this is us investing in the future of the company, right? -- on trying to do more with less on the P&D side than on the line haul side, again, this is us. I mean, we have to provide our team there, the tools to be able to be efficient like our peers. The tools that we're implementing in our line, most of our peers are using that tool - so for sure, they're more efficient than us because it's not about market condition. It's about just providing our team the tools to be successful either. And that's what we're doing. We're implementing those tools on the P&D side and on the freight that fits, again, that's a decision that was made to go after everything that moves, right? Our approach us is more none. We're not jack-up all trade as -- we're not hauling mattresses. We're not only served board to California. That's not us. So guys, let's focus on what makes sense. Okay. Let's try to pick up more freight flows to our terminal. Let's try to pick up more freight per customer. And that's what we do in Canada. So it's got nothing to do with the market. This is all us doing a better job with better tools, right? Now if market conditions change, let's say that if I look at one of my peers, my best peer ex fuel is revenue per shipment was up 9% year-over-year. That's great. That's fantastic. But that's not us. I mean, we are up big time because we got rid of a lot of freight that did not fit how we're able to get a better revenue per shipment. We did not raise our rate on average by 9% year-over-year with existing customers in a way. We're not in that position today, right? So a lot of improvement from a 90 OR to ADOR, it's just us -- it's us doing a better job, providing our team with better equipment, providing them with AI tools because we run a complex network. That's just us.

Got it. Got it. Looking forward to seeing that play out. I'll keep my questions to one. Thanks for the time.

Thank you. Our next question comes from the line of Cameron Doerksen with National Bank Financial. Please go ahead.

Thanks very much. Good morning. So I just wanted to actually follow up on the comment you just made about some of the peers and maybe their ability to price a little higher. And I guess one of the things that some of them have pointed out is having very good service metrics is one of the levers for having pricing -- can you talk about, I guess, the TForce Freight service metrics, how that has evolved since you've owned the company and you at more maybe needs to be done that maybe down the road, you will have maybe a little more pricing power?

That's a very good question, Cameron. And for sure, if you compare me with the best peers in the U.S., our service is not up so that level. And you're right, you're absolutely right. You got to correct your service to be able to adjust to, let's say what the peers are. Now one of the reason, okay, that our service is not up to par compared to our guys, which we have to improve, and we keep improving it is the equipment and the tools we have, right? So that's something that will be corrected over time. And so claims is also [indiscernible] for customers. So we used to have one or 1.25% of our revenue to pay for claims. So when you have claims, customers are not happy because you have plans because either you break the guy stuff or you lose it. So now our claims per dollar revenue is down to about 0.5. So we are solving this issue billing, okay billing with TForce at from day one. And it's been an ongoing thing for years, okay. I mean building failures, we have way too many - so this is - what we've done is we've brought in all the billing, okay, fast, as fast as we could from the TSA is the deal we have with UPS into our own family, the customer must have file the same thing. So if you compare me with my peers on mistakes on billing, for sure, I'm worse than most of my peers. So this is something that we are correcting. And you're absolutely right, Cameron. We have to fix all these things, okay? And in order to be able to get the same kind of quality of review as my peers, right? So these are all things, like I said earlier, that it's us. But we are investing, okay? And we're bringing all this into our own house so that we are in control. same approach, same philosophy as we have in Canada.

That's great. That's extremely helpful. I'll keep it to one question.

Please, Cameron.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the conference over to Mr. Alain Bedard closing remarks.

Well, thank you, operator, and thank you, everyone, for being with us this morning. Again, we look forward to seeing many of you at our upcoming Investor Day on November 10. As always, we appreciate your interest in TFI International, and we'll keep you posted on our ongoing quest to create and unlock shareholder value. Please feel free to contact us with any remaining questions, and I hope everyone has a terrific weekend. Thank you again.

Thank you, sir. The conference of TFI International has come to an end. Thank you for your participation. You may now disconnect your lines.