TFI International Inc (TFII) 2023 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Second Quarter 2023 Results Conference Call. (Operator Instructions)

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 Tuesday, August 1, 2023.

I will now turn the call over to Alain Bedard, Chairman, President and Chief Executive Officer of TFI International. Please go ahead, sir.

Well, thank you very much, operator, and thank you, everyone, for joining us this morning. Yesterday, after market close, we released our second quarter 2023 results. During these tough times for the freight market with lower volumes industry-wide, it was critical that we abide by our long-term operating principles, and we did just that. We again demonstrated the quality of our operation and our team's ability to quickly react to changing market conditions by focusing intensely on the fundamentals of the business at all times.

Speaking of our team, I'm pleased to announce that just yesterday, our TForce Freight unionized employees ratified a new agreement with an 81% vote in favor, which we view as favorable outcome for everyone involved.

Throughout our organization, we recognize the importance of profitability and cash flow. This is what allowed us to produce solid results during a difficult quarter with solid operating ratio across all 4 of our business segments. In turn, this focus on profitability and cash flow, as I've mentioned many times, allows us to steadily invest in the business; take a disciplined and strategic approach to M&A; and as always, return excess capital to shareholders whenever possible.

We produced just over $200 million in net cash from operating activities during the second quarter with free cash flow of $138 million, despite the industry-wide weaker freight environment and other factors I'll outline in a moment.

Our operating income during the second quarter was $192 million, reflecting an operating margin of 12.4%. This compares to the prior year's quarter of $391 million with a margin of 19.7%.

Our adjusted net income of $139 million compares to $241 million, and our adjusted EPS is $1.59 compared to $2.61. We view these as solid results under the circumstances, supported by our team's ability to protect margin by quickly reacting to changing market conditions -- changing market dynamics. Our success in this regard is best reflected by the strong returns on invested capital across our organization.

When comparing to prior year, I'll point out that our results reflect not only our sales of CFI last August, but last year's sizable gain on the sales of real estate in both LTL and Truckload segments. In addition, similar to last quarter, foreign exchange fluctuation hamper the year-over-year comparison. And similar to last quarter, we incurred costs associated with the transitioning of our IT system from UPS to help enhance efficiency going forward, while providing better controls and insight and allowing us to exit our TSA with UPS.

TFI reported results are fully burdened as we are not adjusting this year, nor did we in the second quarter of 2022, for any of these items that worked against our year-over-year comparison.

Let's turn to the performance of each of our business segments. Starting with our P&C, which represents 7% of our segment revenue before fuel surcharge, we saw an 8% decline in both the numbers of package and revenue before fuel surcharge. Our operating income came in at $27 million relative to $37 million the prior year with a margin of 23% relative to 29%. However, our return on invested capital actually improved to 28.8% from 27.6% a year earlier.

Next up is our LTL, which is 43% of segmented revenue before fuel surcharge. Shipments were down 18%, and our revenue before fuel surcharge was down 23%, also reflecting the unfavorable FX impact. Operating income of $81 million compares to $187 million in the year-ago period. And again, we do not adjust for the IT system transition, nor our sales of real estate had a gain in a year-to-go period.

Digging deeper within the LTL, Canadian revenue before fuel surcharge was down 14%, but our operating ratio remained strong at 73.7% compared to 69.1% the prior year. At the same time, our return on invested capital for Canadian LTL actually improved to 21.1%, up 70 basis points versus a year earlier.

Turning to U.S. LTL. Revenue before fuel surcharge of $550 million compares to $725 million the prior year due to volume pressure. However, reflecting our continued progress with our turnaround plan to streamline the operation of TForce rate, our adjusted operating ratio of 91.5% reflects relative stability versus 88% reported a year earlier. And importantly, our work is not done enhancing the efficiency of acquired operation. Return on invested capital for U.S. LTL was 16% compared to the prior year's quarter at 24.5%.

All right. Let's move on to Truckload, which represent 26% of our segment revenue before fuel surcharge. Revenue before fuel surcharge was down 26%, reflecting not only weaker volumes, but our sales of CFI last year and unfavorable foreign exchange translation. Operating income was $66 million relative to $127 million last year, reflecting the same factor, plus our sales of real estate in the prior year period and our margin of 16.1% was down from 22.9%.

Within Truckload, revenue before fuel surcharge for our specialized operations, which benefit from our diversity and exposure to niche market, performed relatively well at $335 million versus $353 million the year prior, despite FX. Our operating ratio also held under the condition at 83.9% versus 77.1% the year prior, and our return on invested capital actually improved to 12.7%, up 150 basis points over the past year. This is yet another business where TFI, as what we refer to as self-help opportunity, regardless of the macro environment.

Next is the Canadian-based conventional Truckload, which produced revenue before fuel surcharge of $77 million, down from $88 million, a comparison that would have been stronger on a constant currency basis. Our 84.3% adjusted operating ratio, which compares to 73.4% a year earlier, is impressive under the circumstances, benefiting from our continued focus on network density and cost control. Our return on invested capital once again showed improvement despite industry headwinds, coming in at 17%, up 30 basis points.

Finally, let's discuss our Logistics segment, which represents 23% of segment revenue before fuel surcharge. We've produced $362 million of revenue before fuel surcharge, reflecting both volume declines and foreign exchange when compared to the year-ago $454 million. Logistics' operating income of $33 million compares to $42 million a year earlier, and our operating margin actually held nearly flat at just above 9%, reflecting our team's success in reacting to market conditions as well as the relative strength of our same-day package delivery operation.

Rounding up our Logistics discussion, our return on invested capital was 17.9% versus 21.1% a year ago. Shifting gears. Strong free cash flow across our business totaling $138 million, I mentioned, continues to benefit TFI International balance sheet. We ended June with a funded debt-to-EBITDA ratio 11.11 -- 1.11. And as a reminder, our debt is almost entirely at fixed rate at a weighted average cost of just under 3.5. This financial strength is an important pillar of our strategy, allowing for smart investment in the business regardless of the cycle, while continuing to return capital to our shareholders whenever possible.

During 2023, we have now completed 7 small tuck-ins acquisitions, including 1 completed subsequent to the second quarter. Our ability to take a disciplined approach to M&A stems directly from our strong balance sheet and the [patience it allows]. We also announced on June 15 that our Board of Directors approved $0.35 quarterly dividend, which is 30% higher than the year-ago quarter.

Turning to our updated full year outlook. We are updating our guidance provided in April to a range of $6 to $6.50 for 2023 EPS. We maintained our free cash flow at $700 million to $800 million, which is based on net CapEx of between $200 million to $225 million.

In terms of capital allocation, given the strength of our current M&A pipeline, we expect that for the full year, we will now allocate a total of approximately $500 million through a combination of acquisition and share repurchases.

With that, operator, we're now ready to move into Q&A. If you could please open the lines.

(Operator Instructions) Our first question comes from Ravi Shanker with Morgan Stanley.

Thanks for the update on the numbers. I would love to get your thoughts on some of the strategic changes taking place in the U.S. LTL industry. Obviously, one of your large peers has kind of temporarily stopped taking on new business. What do you think the near-term implications are for TFI? Kind of are you seeing that -- seeing some of the benefits of that already? How do you think this industry evolves in the coming days and also the coming years?

Well, thank you, Ravi, for the question. I mean I think this is a very good question. And the first thing that was important to us is to get a long-term agreement with our employees, okay, which we did very successfully, the just-ended voting on the weekend. And we got the result, and it was very well accepted, okay, this plan for the next 5 years.

Now in terms of what's going on in the industry, we're looking at -- it's a very special situation. A few months ago, we were looking at it, and they're saying, don't know. Don't know what's going to happen there. And over the weekend, we were updated.

Now what I could say is that, for sure, if I look at the average volume of TFI, TForce Freight division, okay, in the U.S. LTL prior to all these things going on right now, we were doing about 23,000 shipments a day, very steady since January of '23. And then whoops now, we're running more like a 26,000 shipments a day lately, right?

And also, more importantly is the quality of revenue. If we look at the improvement of quality of revenue, we're doing better. So if you look at my Q2 year-over-year, my quality of revenue is down a little bit, like 2.5% down. And now if I'm looking at, let's say, the last shipments of July versus the earlier shipments in July, my average revenue per shipment is up about 3.5%. So I think that this is going to be really, really good for the industry in general. But for sure, like our team is really looking in too deep into this. We need the freight that fits our system.

Now the good thing at TForce Freight is that I've got 4,000 doors too many, right? So we could run a 40,000, 45,000 shipments a day operation within TForce Freight. Real estate is not an issue. The other thing also that's not an issue is our drivers and our dock workers. Because a year ago, okay, we were running about 28,000 to 30,000 shipments a day. Now before all these changes in the industry, we were down to 23,000. So we had a lot of people on layoff. And now we're calling back these people slowly, okay? So we have the capital, we have the equipment, we have the employees, we have the real estate to benefit whenever we can get from these major changes in the market.

Now if you also look at our Q2 numbers in terms of OR year-over-year, last year was our best quarter ever at 88% OR. Now in a very difficult environment, with 18% less volume, with price pressure a little bit, like minus 2.5, we were able with our team, okay, that are doing a fantastic job slowly to get to 91.5% OR, which is not great, okay? But under the circumstances, I think that the guys did a fantastic job.

The other very important point to notice on that is that slowly, for the first time, we're going to be moving with P&L by terminal before year-end. So our terminal managers now will be able to manage dollars, which they've never done in their life, right? And this is the key, if you compare that with our Canadian LTL and in a very difficult market.

If you look at our Canadian LTL OR, last year, we were at sub-70. We're at 69%. Now this year, we're at 73.7%. Not great, but I mean it's a very difficult market in Canada. And the reason -- the main reason why we're doing so well in Canada is because our guys have the financial information. They can't sit on their ends. They have the tools, they have the info and they take action.

In the U.S., slowly now that we've moved away from the UPS financial system, now it's on a TFI financial system, now slowly, we're going to be moving financial information to those managers, those are deals, those regional directors of operations so that they can take action and reduce costs and do more with less. So to me, it's fantastic, what's going on right now.

Our next question comes from Walter Spracklin with RBC.

Congratulations on the union deal. Certainly, that's an important milestone given everything going on. I was wondering if you might be able to give us any terms of the deal so we can look at how that figures into our OR forecast for your LTL division going forward.

Yes. So in general, Walter, this is about a 3% increase to our costs on every year, okay, so on this global deal. So if you look at year 1 of our contract, which starts August 6, right? So August 6, our employees, in general, will get $1.70 an hour more. And that was difficult to explain to our employees because if you remember, one of our peers just signed a contract with them, with the Teamsters and their employees a month ago. And day 1, the employees got $3.50.

Now what we have to explain to our employees is that, yes, yes, guys, okay, $3.50 is not the same as $1.70. But don't forget that at the peers, these guys are getting, on average, about $4 less an hour versus us. So our peers is catching up to us. At the end of our contract, the delta salary, base salary between us and the peers will still be about $1.75 to $2 an hour difference. We are paying more base salary than our peers 5 years from now. But on average, okay, Walter, to put it in your model, I mean, the inflation of salary is going to be about 3% on average for 5 years, every year for 5 years.

That's great. That's great color, and I appreciate that. next question is on just on M&A in general. I know you said $500 million combined M&A buyback. I don't know if you have any -- is that something that you just are holding on to see how M&A develops and you'll adjust as you go through the year? And perhaps any commentary on the ArcBest divestiture of that stock and what it means for any large deal time line into next year?

Yes, Yes, yes. Very good question. Walter, you know what, let's start with the divestiture of ArcBest. I mean we've looked at the situation, okay? We have to go through our contract. And then we saw what was going on with some of our -- one of our peers that was going into a very difficult period. So we said, if this happens, I mean, we're going to be too busy. We're going to be way too busy, us and them, okay, to go through all these changes in the industry. So the timing is wrong. So that's why we sold our position, right? And then we'll see in '24.

Now in terms of M&A, for sure, Walter. I mean I think that pretty soon, we'll be announcing a fantastic transaction. And that's the reason why we sold our position so that we don't leverage our balance sheet more than -- because right now, we're at 1.11. We think that by the end of next quarter, Q3, with a transaction that we think that's going to happen very soon, our leverage is going to go all the way up to 1.25, right? So nothing major. Well, thanks to the sale of our investment in ArcBest, I mean, we are able to get this leverage keep really, really low. Now this is not going to be a major year for M&A, okay, in '23, but we're getting ready for '24.

Got it. Okay. Last question here on -- coming back to the Yellow. Do you think that the opportunities might present themselves for you to go into new markets through the purchase of terminals or assets? Or is densification in repricing your main objective? And a little bit more of a longer-term question, investors are starting to change their view on LTL and to the positive, and many compare even to the railroad pricing. Is that something that you think is going to develop? And would you look at LTL longer term as something that we can price or as we haven't in the past in our models, but we can with good comfort, put in some notional pricing increases because of the added quality and fundamentals of that sector.

I think you're right there, Walter. I mean us, our goal #1 with everything that's going on right now is to increase our density, not to grow our network. I mean like I said, we got 4,000 too many doors today, right? So we could all allot more freight. But really, what we're going to be really strategic in what we take on as customers that has to fit our network and increase our density because that's the name of the game.

If you want to reduce your hours, okay, per ship, I mean you can't drive 10 miles between each and every stop. I mean in Canada, we drive about 5 miles between each and every stop. And in the U.S., we drive 10. It doesn't make any sense, right? So that's our focus, and we're lucky. I mean sometimes, you need to be lucky. And with the demise of one of our peers, I mean, this is really a lucky event for us. It helps us build density, and that's going to be great.

Now in terms of the industry, I think that the U.S. LTL is day and night versus the Canadian ones. I mean in Canada, we have lots of competition in -- we have one smart competitor, yes. But we just acquired an LTL company in Saskatchewan. And let me tell you, those guys are not running at a 75% OR or a 90% OR, right? Okay. So we'll change that.

But in the U.S., it's a very different story because one of the weakest player now is gone. So that's going to change. And already, you can see over the last 10 years, if you look at the superstar of LTL in the U.S., I was looking at the results. Their volumes were down more than 10%, but their pricing year-over-year was up 7%. So that tells you that these guys are really smart. And the industry in general also, if you look at another of our peers in the U.S., their volume was down like 3% or 4%, but they did well.

Just a few guys sometimes chasing volume, volumes up 4%, but OE is down 40%. Well, that's not us. So I think that the U.S. LTL industry is really getting closer and closer to what you could compare to the rail. Absolutely. I mean we have one player, the best LTL guy in the U.S., he's running a 70% OR in that neighborhood. So I think that the industry will benefit from all that. And so it's the place to be. This is why with everything that's going on right now, we think that from 23,000 shipments, we get to 25,000, 26,000, 27,000 hopefully, by the end of the year. This is going to be great. But more importantly, like I said to my guys, "Guys, we got to work on the cost." We have to be closer to the tiger in the jungle, not the big fat elephant, right?

(Operator Instructions) And our next question comes from Jordan Alliger with Goldman Sachs.

So with the fairly rapid, I guess, pickup in volumes here in the near term, with Yellow in the U.S. LTL business, is that enough to mitigate the cost of your new contract and perhaps do an OR better than, I think, the 92% you talked about in the last call?

Well, I think so, Jordan, I think that what's going to help, for sure. I mean running at 23,000 shipments a day when you have a network that could do 40,000 shipments a day, right? So I mean, 26,000 is better than 23,000. But at the end of the day, with the new contract where it provides us inflation to our cost, we have to be more strategic and work with our employees in a way that reduces our cost per shipment.

What I could tell you is that right now, our average cost per shipment year-over-year versus '22, a year ago, I mean, our average cost per shipment is down about 15%, okay? So we did really well in Q2 last year with an 88% OR. But with less volume, we have a less cost -- labor cost per shipment this year versus last year.

Now for sure, we have all these other costs. But really, the main cost in an LTL operation is your labor and your fuel. So yes, I think that even with this inflation on our labor costs, our OR will keep improving. And don't forget that slowly, we built a 23,000 shipment base that is quite solid, and now we're building on top of that. So at 26,000, we're not at 30,000 and we're not at 35,000. But slowly, we'll get there.

And in the meantime, like I said on the first and this question, is that by moving financial information to our terminal manager, this is going to be a fantastic tool for those guys to do more with less. And that is the key success for TFI in its Canadian LTL division. We have managers that manage people, manage costs, manage service, not just manage service.

Great. And then just as a follow-up, the new earnings guide, I think, $6 to $6.50 is less than the other one, the previous guide obviously. I'm just trying to understand, is it the non-LTL businesses? I'm just trying to get a sense for what sort of directionally is why the new range is where it's at.

Well, a year ago, our friends at FreightWaves said, "Oh, there's a freight recession in April of '22." I mean I think these guys were right, but not '22, it was really '23. And if you know of ours, our Canadian LTL, I mean, revenue big time, our specialty truckload down 5%, our Canadian Truckload down 12%, our Logistics down 20%, on the revenue side I'm talking about. So our P&C down about 6%, 7% on the revenue. So we never anticipated such a major, major disruption in the market in Q2. So this is why we're going ahead and reducing again because this is the second time we do that, right? So we're reducing that again, okay, but we feel pretty good that this is attainable. And this is a major disruption in this market in Q2.

If you look at all of our peers that came out in the U.S. or in Canada, I mean, everybody is going through sort of very tough soft patch in the freight environment. Now when we look at the summer of '23, it's still quite soft. But when we talk to our customers, they say, "You know what, inventory are starting to get low. We're starting to get some issues here and there, but then we got a stupid strike in the Port of Vancouver. That affects our Canadian operation big time." There's always something that happens. The flood, the this, the that. So I don't want to give any excuse, but '23 was really a year of a lot of things that were -- a lot of headwinds, Canadian dollars being -- to buy U.S. dollar now cost CAD 1.32. That affects our profitability as well.

So to me, I think $6 to $6.50 is now attainable, okay? Sad to say that we were doing $8, okay, in '22, down to $6 to $6.50. It's a huge drop, but this is reflecting the market condition. And don't forget that at TFI, the culture is we protect the margin, okay?

So you got 2 options when you have a soft market. You could chase volume. But to us, this is a chase to the bottom. And some of my peers are doing that. I've seen that. So revenue is up, but profit is down 40%, 50%. We're not bad. I mean us, we're more like, okay, guys, okay, we'll have less revenue, but we protect the margin because every dollar's revenue, there's a risk: a risk that you can get involved into an accident, a risk that your employee can get hurt, a risk that you're not being paid because this customer could be having some tough times too. So we don't like taking stupid risks like that. So this is why revenue is down. But when market condition changes, we'll be there. And our base rate is solid, and we're not going to have to be chasing customers all over the place. No. I mean we're ready.

Our next question comes from Cameron Doerksen, National Bank Financial.

So just a question on Canadian LTL. Like I know Yellow had some operations in Canada. I don't think they were that large. I'm just wondering if there's any impact you think positively on the Canadian LTL operations.

Yes. I mean the Yellow operation in Canada was mostly transporter freight from U.S. to Canada or Canada to the U.S. So for sure, all the shippers that were using Yellow from U.S. to Canada, now they have to find a different provider.

So if you look at our transborder business between TST and Saia. Saia is our U.S. partner for TST. I mean the volumes are up like 15% to 20%. So that freight that used to be serviced by Yellow Canada, now Yellow being out, has to go through some of my peers or some of my partners. And that's the way it's going to be fed into the Canadian market. Now they were also doing a little bit of domestic freight in Canada, so that will probably go to us or to some of our peers.

Okay. That's helpful. And second question, I guess, sort of related to the LTL segment, just on the ground with freight pricing, I mean a pretty significant drop year-over-year in that business. Can you just talk a bit about that? Why was it down so much? And what's the future of that product?

You know what, Cameron, that's a very good question. Yes, we're down big time on that. So there was an issue with some customers that we're cheating the system at UPS. So this is why UPS took action. I don't want to go into all the technical details, but this was a few customers, 4 or 5 customers that were a reseller, that were cheating the system. And the UPS reaction was, no, we can't deal with those guys. So that's why our revenue dropped like a rock in that sector, absolutely. Now okay, we are rebuilding that as we speak. But that is really one of our diamond that got cut in half.

Okay. So you still have a -- I believe that's going to be a good long-term business for you.

Oh, yes, absolutely.

Our next question comes from Tom Wadewitz with UBS.

Alain, I wanted to ask you a little bit about the guidance. I know you talked about it before. I'm wondering if you're factoring into that $6 to $6.50 improvement in U.S. LTL or if that guidance reflects more what the run rate was in 2Q for U.S. LTL. It does sound like the recent kind of end-of-July trend in both shipments and price is pretty favorable. So just want to get a sense of what your assumption is for that business in the guide.

No. No, no. All the changes in the last week of July are not reflecting in the guidance because it's so new, right? So that's why we went very conservative, so it's not included. So whatever benefit we get from the 23,000 shipment, if 26,000 or 27,000 sticks, 25,000, 26,000, 27,000 sticks with us over the long term, it's not in there.

Right. Okay. So that would be upside to what you've said for the...

Yes.

Great. I want to ask a little bit about 2024 view on U.S. LTL. So when the -- I guess, using your words, when the elephant becomes a tiger, it could run a lot faster. So I think that was referenced to the cost side, and you got a number of cost drivers. But obviously, it looks like the revenue side is really stepping up nicely, too. So how do you think about where the U.S. LTL operating ratio could potentially go in 2024? I mean I think the obvious macro assumption, but assume that you get some modest improvement in the freight backdrop, can we see a really big change, 300 or 400 basis points? Or would you keep it more moderate at 100 to 200?

Yes, yes. Well, you know what, Tom? I would be very disappointed if in '24, we're not running a sub-90 OR operation in our U.S. LTL. Now one thing that's also very important to mention is, I was talking to our Board yesterday about a little bit of a change in our structure in our executive team. So what are the changes that will be happening for '24 is that one of our EVP, Bob McGonigal that takes care today of our package business in Canada, which is only 7% of our revenue, my friend, Bob, now will take over the responsibility of the U.S. LTL, working with Keith. Keith is the President of TForce Freight. I'm still going to be involved, but to a lesser degree. And its package business will be taken over by another one of our EVP, Chris Traikos, and there's other changes also that's going on. So we're going to be putting even more effort from some of our Canadian team players supporting our U.S. team.

But at the end of the day, Tom, my philosophy has always been, if you can't measure it, you can't manage it. And by providing financial information to our terminal managers, I think that, that's been the success of our business in Canada. And those 4 guys right now, a TForce Freight terminal managers, they have no clue. They have no financial information. We're just providing them for the last few months their average labor cost per shipment, okay? And that's how we were able to improve that by about 15% year-over-year. And this is not over. I mean we've got a lot of work to do on fuel management, MPG on the trucks, idling time on the trucks. I mean there's so many leverage that we could tweak and reduce this cost.

So I'm very confident. And I would be very disappointed if at '24, we're not a sub-90 OR. Now I mean, if you look at some of my peers, nonunion, they're running an 85% OR in a tough environment like we are now, these guys will probably do better than that. And also, we should be doing better than 91% or 92% OR in -- like we have now in Q2.

So I think that with a little bit of a weak player gone, the market probably will start to recover. I think that the pricing also will improve with everything that's going on. I would be so -- I will fall off my chair if we're not running like something like an 85% to an 88% OR in '24.

Our next question comes from James Monigan with Wells Fargo.

Just a follow-up on some of the U.S. LTL questions. I guess what's the right amount of capacity did you actually release out into the market? I understand you have a lot available, but what's the right sort of amount that you can release without sort of disrupting the OR plans that you have? I guess I'll just stick with that.

We have the team, we have the equipment, we have the infrastructure to do easily 30,000 shipments a day. And like I said, over the last few days, we're running 25,000, 26,000 shipments. So when we bought the company, James, we -- the company at the time was doing 32,000 shipments a day. The network that we have can support easily 40,000 shipments a day, 40,000 to 45,000. But that's real estate.

In terms of people, we could easily do 30,000 shipments a day, 30,000 to 32,000. This is what the company was doing 3 years ago. But then we went from 32,000 down to 23,000, like I said. Now we're back up to 25,000, maybe 25,000, 26,000, 27,000. We'll see where we end up. But we still have lots of capacity within our system. And we have also the people to do the job because when we start to reduce the volume, we also lay off a lot of people, right?

So we -- also what we did in Q1, we retired also about 150 people that were good for retirement. So I think that we could do very well. We're going to be smart in terms of the volume that we're going to get from our customer, because our rule #1 is to increase our density, not to enlarge our network or add routes and this and that, no, no. Let's increase our density. Because I've said it many times, we can't run a P&D operation in the U.S. with 10 miles between each and every stop. I mean it doesn't make any sense. But that is what we're doing now.

And I use the Canadian comparison. In our business, we do 5 miles between each and every stop in Canada. And Canada is not U.S. I mean the density is not the same. Dense areas, we have Vancouver, Toronto, Montreal, that's it. The rest is there's no density in Canada.

Got it. And then, well, I understand that like the year-over-year -- on a year-over-year basis, everything is down quite substantially, and U.S. LTL does have a catalyst in front of it. Some of your peers did call out some sort of green shoots there across sort of freight generally. Just wanted to see if you were seeing any sort of similar trends in the business, like apart from U.S. LTL of positive trends sort of sequentially?

Well, absolutely. I think that what we're seeing now is with the fact that Yellow is not going to be there tomorrow, right? So I think that this is a huge benefit for the industry in terms of I think Yellow was doing 40,000 shipments a day, maybe not last week, but normally 2, 3 months ago. So this is really a huge benefit for the industry. And I think that everybody knows that Yellow was a very low cost -- not low cost but low revenue provider of service, right? So it was like very cheap pricing compared to the average, compared to the market. Those guys being gone, that's going to help the industry overall.

Our next question comes from Ken Hoexter, Bank of America.

Can you talk a bit about the path and process to remove some of the UPS costs, so the timing and scale of those duplicate costs? I just want to understand your goal of 85% to 88% OR next year, how much of that is the Yellow benefit of scaling up your network from 23,000 up to 26,000 or wherever it settles in? And then how much of it is self-help? And then are you done getting rid of the lower profit business, obviously, that gets paused now as you take on a lot of business in this interim? Was that process complete?

Yes. Okay. So in terms of the low -- the freight that don't fit the network, I mean, Ken, we've done everything except rural. We still deliver freight that is way too far from our terminal, okay, and that is still an issue. So we still have that, okay? We don't have the freight that doesn't fit in the high-density areas. But in rural freight, we still have that. So we're not going to address that right now in '23. We may address that in '24.

And in terms of what's going to be the leverage that we're going to use, our TSA with UPS, we're going to be done by the end of '23. So coming into '24, okay? So all the duplication that we're going through now, all the professional fees that we have to pay, et cetera, et cetera. So what's left is our fleet management today. That is really the big issue and our platform. We're still running edge on to the UPS platform. So we're going to migrate that before the end of the year. Fleet is done in the fall. We just finished the HR platform. We went from Workday, UPS to Oracle HR, TFI Oracle HR like just a few weeks ago. So all of this is going -- so into '24, all these duplicate costs, all these professional fees will disappear. For sure, that's going to help our OR. Absolutely.

But more importantly, Ken, is I think that the self-help that we're going to bring to that business is providing financial information to our terminal managers. I mean this is not -- the decision, the improvement, they are not going to happen overnight once we provide them the information. But over the period of 6 to 12 to 18 months, I mean, we anticipate that these guys will be able to do more with less because you can't fix something that you don't know, right? So that's always the excuse that we get from -- when we talk to those guys that, "Oh, I didn't know." Well, okay, you didn't know. Fine. Okay. So we'll provide you the information. Now that you know, you're not going to sit on your hands, right? No, no, no, I'm not going to sit on my hands. I'm going to take action. Okay, good.

So what we've done so far with those terminal managers, as an example, Ken, we said, you know what, day 1 when we acquired the company, we said grievances, it's your responsibility now. Now in the old days, you used to send that to lawyers. No, no, no. This is over. You fix it yourself. Labor relation at TForce Freight will help you fix the issue with the employee, with the grievance and all that. But it's your action, okay? You have to fix it.

Claims, okay. Again, oh, claims, not me. No, no. Claim is you, okay? So if you look at dollars -- claims per dollar revenue, I mean, we were at 1.5% of revenue. Then they say, "Well, we're well because we used to be 2%." No, no, no. You guys have to be 0.5% of revenue. So now we're getting very close to the 0.5%. And this is the terminal managers because now we're getting them involved, they have the information, et cetera, et cetera.

So all the financial system that we've put in place with TFI Oracle, slowly, we're moving all this information to them. And then we'll see because we'll have managers that will perform really well with all this information. Some maybe not able to perform well because they're used just to service rate. Because us, we want them to manage costs, manage people, manage the relationship with customer, et cetera, et cetera. Being a real manager, not just a guy that's making sure that the freight gets delivered.

And just to clarify, you mentioned the M&A before. Is that -- I presume now not LTL, just given you were talking about maybe come back, revisit ArcBest another point. Is that a different sector you're focused on?

Well, you know what, Ken, we said many times, in the U.S., our focus is going to be LTL and Logistics. But in Logistics, we have to be very careful because we don't want Logistics at 2%. If you look at our Logistics, our revenue is down big time, right, because of the market, like the TFWW, we're down. Like Q2 this year versus just last year, we're down like 20% revenue. But our margins is still 9%.

So if we buy a logistics business at 2%, that's not us. We're not in the business to buy a logistics company for big dollars and 2%. Because 2%, you know what, we'll buy shares of Canadian banks or U.S. bank, and we'll get 4% dividend. So there's 2 major sectors that we're focused in the U.S., LTL and Logistics, but logistics that makes money, not logistics that [add] 2%.

Our next question comes from Jason Seidl with TD Cowen.

I wanted to focus a little bit on TForce Freight some more here. Can you talk about the potential for a GRI in the back half of the year as capacity starts filling up in existing networks?

Yes, very good question. So I could tell you that Keith and Bob are already working on it right now. So the discussion that we're having is that this will probably take place in September, okay? And for sure, we're not leaders in the U.S. So probably we'll have to wait and see what the leaders are doing. Leaders, we know leaders in the U.S. is FedEx Freight and OD. But OD, those guys are very smart. So I think that those smart players will address the GRI not in January of '24, but I think it's going to get addressed right now.

Okay. That's good color. And the other thing, you talked a little bit about some of your customers seeing some low inventories. I wonder if you could add a little more meat on that bone, and then maybe thoughts on peak season this year.

Yes. Well, yes, you see, '22 was like, in my mind, a party because all the supply chain mess, I mean, then the supply chain mess was fixed, and then the guys got lots of stuff coming in. And sometimes, they order once, then they order twice. They don't get the stuff. Now everybody got the stuff late '22. And in '23, we're stuck with, oh, nobody is ordering anything because the inventory are too high. But when we're talking to our customers right now, inflation is coming down slowly. Okay, not bad. Interest rates are going up. Disposable income is okay. Labor situation is okay. The problem is that most of the consumers are saying, "You know what, we've been tied up because of COVID. Now we want to travel." So this is what we're seeing now is that a lot of people are traveling. They're not spending as much on the home or buying a TV or a patio furniture, whatever. So this is why we still believe that '23 is going to be a little bit difficult for us because of -- but it's slowly getting cleaned up, all this excess inventory.

So it's not going to probably help us in '23 in general, but coming into '24, I think we have a better feeling now. The Fed -- say, the U.S. Fed is now saying, "You know what, the risk of recession is becoming less and less in the U.S." So okay, fine. Consumer confidence is okay.

So to me, I feel pretty good, not so much in '23, but going into '24, that this market slowly for freight will start to come back to normal. Those guys at FreightWaves said there's a freight recession a year ago. We didn't feel it a year ago. We didn't feel it in Q2. We start to feel it a little bit in 3 and 4 of '22, one but big into Q2. I mean Q2 was terrible for us. Very tough.

Our next question comes from Jack Atkins with Stephens Inc.

If I can maybe kind of start with service. Obviously, that's critically important in the U.S. LTL market, as I'm sure it is in other parts of the business as well.

Yes.

How are you protecting the network? I know there's probably plenty of freight to be had, but how are you protecting the network so that you don't encounter any service issues as you're onboarding this incremental freight here that's kind of coming at you pretty quickly?

Yes. Well, you know what, Jack? Like I said earlier, I mean, we've got capacity, we've got people, we've got equipment, we've got everything. So it's just a matter of our sales team and our leadership in the operation to really say, "Well, this is the freight that we want. This is the freight that we have and we keep." Because don't forget that until just 2 months ago, we had customers saying, "You know what, you got to lower your rate because I've got a carrier here that says, I'm going to have to move with this guy. And now whoops, you know what? I'm going to stay with you now." So you got that going on, plus you got the new freight coming in.

And for sure, what we're trying to do actually is to protect our existing customers by adding new lanes, lanes that were with the competition. And now the competition is gone, and we're saying, instead of going with new customers all the time, what we're trying to do is increase our volume of business with existing customers that we already have, but we were doing only 10% of their business or 15% now. So that's our focus so that we provide a good level of service.

Now the other thing also, Jack, that's very important to mention is the atmosphere at TForce Freight. If you think about our labor force, accepting a new deal at 81%, the fact that we've invested in the equipment, the fact that we are investing millions of dollars in the real estate that was abandoned, okay, I mean, so our employees, how would you say that? I mean their morale, okay, is great. I mean they're seeing that, okay, so the owner of the company is investing. So now we have a better deal for them for the next 5 years. Everybody is happy about that.

So I would tell you that if you look at the morale of our team 2 years ago, a year ago today and a year from now, that morale, that pride of being part of the TForce Freight is like changing like there's no tomorrow. If you look at the pride of our guys in Canada is second to none. In the U.S., we were not there, okay? So if you look at some of my peers, the best of my peers, you see a lot of pride. Their terminal is spick-and-span. Ours were just abandoned terminals, right? Our trucks were terrible.

So the morale of our guys -- and we're saying, "Guys, we got to do more. We got to pick up more freight. We got to start driving all our way around and spend money driving a truck. We have to pick up more freight." So all this culture is taking place. So this is why, going back to your question, that's our focus. And our focus for sure is not to go up to 26,000, 27,000 right now and then back down to 24,000, because all the freight that we picked up didn't make any sense, didn't fit or we didn't provide the right service to the customer.

Okay. So that makes a lot of sense, and it's helpful. I guess for my follow-up question, I'd like to just go back to your comments on the improvement in revenue per shipment that you have observed in the U.S. LTL business from the beginning of July to the end of July. I think you said it's 3.5% better.

Yes.

Could you talk about it? Is that from that higher weight per shipment? Is that from improved sort of core pricing? What's driving that? I'd just love some more detail around that, if possible.

Yes. You're absolutely right. Weight per shipment is up, absolutely. Weight per shipment is up, and the quality of revenue has also improved a little bit. And I haven't seen my cost per shipment of -- because today is Tuesday, I get that on a Wednesday of last week. But I'm anticipating that my cost per shipment, okay, because my salary increases August 6, so I'm still with the old salary scale for last week of July. So I'm anticipating that my labor cost per shipment is going to be down.

I haven't seen it yet. So it's a combination of more weight, a little bit improvement in the quality of per hundredweight. So it's a combination of all of this. And the fact that I think that now moving from 23,000 to 26,000 -- 25,000, 26,000, I think my labor cost per shipment is going to come down, too. So it's going to be a double whammy, if you want to say.

Our next question comes from Kevin Chiang with CIBC.

If I go back to your last call, I think you talked about normalized earnings for your portfolio of businesses, around $8 to $9. And I'm just wondering, as you look at the M&A you've done, I know a lot of them are tuck-ins, but you've done quite a few, 7 already this year, more to do later this year, plus maybe the accelerated benefits within your U.S. LTL from the demise of Yellow. Just wondering how you think about that $8 to $9 moving forward. Should we think of that being a higher number just given some of these tailwinds and recent acquisition activity and buyback activity?

I think it's a little bit too early, Kevin, to talk about that now because when I said $8 to $9, I think that this is the capacity of TFI in a normal environment. Right now, we're not in a normal environment. All the small tuck-ins that we've done so far are really, really small, right? But we anticipate that between now and the end of the year, we'll do at least 2 of a normal size with revenue of more than $150 million each, right? So that really is going to help us into the end of '23 and into '24.

The other one that we've done so far is just some small tuck-ins that we've done, small truckload guys in Ontario or in Quebec. I mean this is not going to move the needle, okay? It's good when the market gets better, absolutely. But in a depressed environment like we're going through right now, it's not really a big help.

So I'm still convinced with -- by the end of '23, okay, we'll have a clearer picture of where we're at for '24. But I still believe that TFI has got the capacity to be between an $8 EPS minimum to $10 with what we're going -- what we're doing, right? Now for sure, the demise of one of my peers is going to help us. Absolutely, it's going to help us. If we could get this volume steady at 26,000 to 27,000 and by providing financial information to our guys, they'll be in a position to make better decisions, reduce costs, being more efficient, et cetera, et cetera, I think that this is really going to help us into '24.

Our next question comes from Konark Gupta with Scotia Capital.

So just wanted to understand, Alain, a pretty good margin progression at TForce, and given the situation in the U.S. LTL market, certainly seems like the volume and rate environment is getting better for you guys here in the second half. Can you talk about how you are ensuring the pricing discipline in onboarding this new LTL volume so that your efforts are not diluted to get to the 20% margin that you have sort of aimed for the next 2 years?

Yes. Yes, yes, very good question. I mean that's for sure. And this is why, like I said earlier in the call, I mean, we're moving one of our EVP, Mr. McGonigal, working day in, day out with Keith and the rest of the team there. We're not in the business of practicing delivery freight and not make any money. So no, absolutely, you're right. We're taking very important measures.

And every week, we also get the -- I get the reporting on the pricing and what's going on with the average revenue per shipment. So it's very important to us that we're not just taking freight just to match the other guys rate well, because the other guys rate, the guy would belly up. I mean why would we do it at the same rate now? Rate is 30% less than the market. So Mr. Customer, sorry to say, but we have to adjust the rate to the market, right? So that is what we're doing here, Konark.

Okay. That's great, Alain. Good to hear. And then if I can just follow up. Like I think the industry you are in the U.S., it's really concentrated, very few unionized players, unlike with the Yellow's exit, you'll be one of the few unionized companies there. Is there any main lessons learned for you guys from Yellow's repeated bankruptcy process considering their exit would leave you as one of the only few unionized players? And then hopefully, you will see more employees adding up there, right? So what do you learn from that process? Like how is the unionized business doing in the U.S.? Is it a good business to be in? Is it something that concerns you? Like any thoughts there.

Listen, I mean the benefit of a unionized environment is you have a contract that you have to abide by, okay? But it also could be an excuse for poor results by the management or the executive team. So if you look at what we're doing in Canada in a unionized environment, we're doing really, really well because we have managers that are managing everything, cars, service, et cetera, et cetera.

So I think that the perception in the U.S. has always been that, oh, it's a unionized operation. It must be bad, right? So I think that we're trying to work, us as TFI and TForce Freight, to change that perception, that if you manage the business, for sure. I mean the base salary of a union and nonunion environment are about the same. Maybe 15 years ago, it was different. But today, the base salary of a guy that works, let's say, on the West Coast of the U.S., union or nonunion, base salaries, both the same, where the big difference is on the fringe benefits.

So pension, for example, which is a huge cost for us. So if we're competing with a nonunion guy and he's got no pension, for sure, that is a disadvantage for a unionized environment.

Now the fact also that the turnover normally is less in a unionized environment, because those guys understand that they are very well cared for. Now if you look at TForce Freight, it was partly true because the trucks were bad, the environment was bad, the terminals were bad. So that was not the case, but we're changing that.

So at the end of the day, there could be a few points of OR that could explain, if you got the superstar in the U.S. at a 70% OR or 75% OR. Well, if you're a unionized guys, you could say, well, because of pension, because of this, because of that, bababiba, I cannot be as good as the superstar. Okay, maybe. But the delta cannot be 20 points. The delta cannot be 15 or 10 points. The delta could be 4, 5, 6, 7, 8 points, but no more than that. So if the superstar in the U.S. is a 75% or 70%, and for sure, the superstar is going to be much closer to 70% now that one of our peers is gone. So okay, fine.

So our goal is to get closer to the top guys in the U.S. And we'll get there. We'll never be as good as the nonunion superstar. But we could be really, really good. If you look at our unionized environment in Canada, which is a depressed market compared to the U.S., a depressed market, if you look at the quality revenue, I mean we're running, mostly unionized operation, we had 74% OR in Q2 in Canada.

So to me, union, it's sad to say that over the last 20 years, they went from 60% or 65% of the market. Now with Yellow being gone, probably the union will be 15% of the market. So it's -- I would say it's sad to see. It's a reality. It's our goal, us, to make sure that we can grow in a unionized environment by paying our employees well, but also by making sure that they are efficient at what they do and productive. And that's our job as management, to make sure that they don't drive the trucks 10 miles between each and every stop. So we have to change, and that is our job as management.

Our next question comes from Brian Ossenbeck with JPMorgan.

So just wanted to come back to your comments on cost per shipment trends within TForce Freight. I know there's probably some fuel impact in there, but you also mentioned unit costs were down pretty notably on the labor side is. So maybe you can expand on that and then also touch on the benefits of the new trucks you're getting. It looks like you actually shed a few trucks sequentially, but I'm assuming they're all getting newer, so maybe you can elaborate on how that's impacting the cost structure there.

Yes, yes. So on the truck side, I mean, for sure, I mean, we're getting -- by the end of October, our '23 order is going to be completely done. So the average age of our fleet will come down to about just shy of 4 years old, which is now going to improve our MPG. The only thing we haven't really worked on, on the trucks is the idling. The idling, this has never been managed. It's still not managed today. So that's something that we have to work on. And for sure, the fuel management, we could do a little bit better job. We're working on it right now.

In terms of the cost per shipment, this is labor cost per shipment that I'm talking about, Brian. So our labor cost per shipment is down year-over-year, with volume down like 17%, 18%, before what happened last week of July, right?

So what have we done? First of all, in the fall of '22, we provide them the information of, hey, listen, this is your labor cost per shipment for P&D and dock. I said that first. Is that real? We never saw that. Yes, it is real. Okay. And then we identify the stars and the docks. And right now, we're working on the docks. So this is why by improving the docks, labor cost per shipment, now we're able to look at what happened in '22.

And now I compare that and my labor cost per shipment for P&D and dock is down by about 15%. And I'm paying my employees a little bit better this year than last year. Now for sure, when August 6 hits, okay, now I'm going to be paying $1.70 more an hour. So we're working on what is this going to be the effect on my labor cost per shipment. So this is -- now this is where we have to be very aggressive and even more aggressive now with what's happening with Yellow, that guys, we need to drive less miles and pick up more freight because now our labor cost per hour is even more.

And it's just normal because inflation, as we all know, got all the way to 6% to 7% or 8%, now down to 3%, 4%, but still. So average contract, like I said earlier on the call, is about 3% a year average. So it's reasonable, it's fair. It was very well received by employees. As a matter of fact, like I said, 81% said yes to this new contract.

So I mean, this is an ongoing thing. But this is just labor cost per shipment, because now we're going to be working on everything else, maintenance cost per shipment, everything. And now we're -- because we're going to be providing all this financial information to our terminal manager, they're supposed not just to work on labor, they have to work on every, every cost that we have in our business to reduce that, because that's the only way, in my mind, yes, the market will help us. Yes, the volume will help us. Yes, the improved pricing in the industry will help us. But at the end of the day, us, we have to reduce our cost because we're like, I would say, the elephant right now on the U.S. LTL. We're big. We're fat, but we have to trim down. We've done some good stuff so far in 2 years that we own the company. But on the cost side, we haven't done enough, no way.

Just a follow up on that, it sounds like perhaps you get more benefits in later this year and into '24 from the fleet and from fuel efficiency and maintenance and service reliability. Is that how to think about the...

That's absolutely right.

Have you seen some of that already?

No. The fleet side, the MPG, we're getting it. That's not an issue. Idling, we're not. The other thing, too, is that we had to shut down about 80 shops. Don't forget that in the old days, these guys used to manage 120 shops with 300 mechanics. So think about, this is a nightmare. This is -- now by the end of August, we're going to be down to 16 shops and 200 mechanics, because the age of our fleet went from 7 years old on average, down to less than 4 right now.

Now our fleet -- the guy in charge of our fleet, Eric, he's been tied up for '22 and 2 because he was hired in the fall of '22, fall of '22, all the way to '23 now. The guy has been stuck with shutting down shops and letting go staff and people and all that. So we're still not doing a good job on our maintenance cost per shipment. We're still not doing the job there. But we have the excuse, hey, we have to do this, we have to do that. Okay, fine.

Now at the end of August, we're all done by cleaning up the mess of the past. We had a ton of spare parts that were obsolete related to the old trucks. Okay, we're cleaning that mess right now as we speak. It's costing me about $400,000 a month to clean up all this obsolete stuff that was there. Okay. Fine. But that's going to be done by, let's say, September. We're done. Okay.

So now fuel economy, okay, we're not doing bad because we have the new trucks. Idling. We have to improve that big time. We're doing about 35% to 40% idling. Nobody knows exactly how much, I mean, so because we don't track it, right? So now we're going to start tracking that. Maintenance cost per ship and it's too high, right? Because the warranty, we have new trucks, but you have to claim the warranty. If you do the work, you have to claim it.

So we hired a warranty managers just a month ago. Because in the past, warranty, what's that? I mean we buy trucks with no warranty, so we don't have to worry about warranty. No. No. We buy trucks with warranty, we have to claim. So I mean, you'll see us improving on all aspects of our costs slowly into '24.

Our next question comes from Benoit Poirier with Desjardins.

You provided great color about 2023, but I was wondering what kind of market conditions do you foresee so far in 2024? Is it kind of overall major rebound or slight improvement? And is the $8 still achievable given what you foresee the positive impact from Yellow and all the actions taken to improve the OR at TForce Freight?

You know what, Benoit, I think that if market in '24 comes back like normal, okay, not like great '22, because we believe that '23 was a terrible, very tough year for us for the industry in general. So '22 was the party. '23 was the after-party, okay? So we had some headaches and all that. And I think that '24 will probably be slowly going back to normal.

Now in a normal environment, can we do $8? Okay, with everything that's going on at TForce Freight, everything that's going on with our later M&A in '23, I think that going back to $8 in '24, I would say, it's very early to say. But I would tend to agree that I think $8 for '24 should be attainable with everything that we're doing. And if our guys at TForce Freight are able with the new volume coming in, the focus on reducing their costs with all this financial information and getting closer in '24 to an 85% to 88% OR as a first step sub-90 OR, I think $8, we should be back on track for $8 into '24.

Now that's very early because we're just in August right now. But my feeling, because our guys will start working on the budget in September, but my feeling is that would be really, really, really nice because don't forget, every part of our business has been affected in '23. We were able to protect our margin, yes, in general, but the revenue is down big time, right? So we need the revenue to come back.

And then our Logistics, think about that. Our Logistics were able to protect the margin at 9%, but the revenue is down like 20%, right? So this is tough. So if revenue is not down 20%, but let's say, down only 5% versus '22, I mean the bottom line will follow.

Our P&C, the same. Our Canadian LTL is the same story, but TForce Freight is really the key, and our specialty truckload as well, to get back to $8 and above into '24 and then going into '25. I still say that this company today, with the M&A that we're going to do between now and the end of the year, I mean, in a normal environment, it's between $8 and $10. $10 being a great environment like a '22 and $8 being a minimum in a normal environment.

Okay. That's really great color, Alain. Just in terms of follow-up, obviously, you mentioned good details about the M&A strategy. Obviously, a focus on U.S. LTL and Logistics. But when looking at valuation multiple, even on the Logistics side, we've seen an expansion in valuation multiples. So I was curious, given your discipline -- you're a disciplined acquirer, what kind of valuation multiples do you see these days? And whether transformative deal, there are still 2 or 3 opportunities out there as you discussed in the past.

Well, Benoit, I've been saying that all the time, is you always make your money on the buying, never on the selling. So you got to buy right. You buy that -- you have to buy at evaluation that makes sense for your shareholders, and you'll see. I mean hopefully, we can announce something in the next few days, next few weeks about a transaction that is going to be really, really very interesting for all parties involved. I really like this company. I like the management team. It's not a fixer-upper. I mean those guys are doing a very good job. And we'll just work with them, and it's going to be really fantastic. So no, I mean, we have to be cautious for sure. Valuation is always important when you do a deal. And we've always been very cautious with that. Because if you overpay, I mean, you're stuck with that rock in your shoe for a long time.

Okay. Okay. That's great color. And I assume given the robust M&A environment, buyback might be less a priority in the short to medium term, given the M&A environment?

Yes. Benoit, it always depends on the opportunity. If our stock goes back down to, I don't know, $140, $130, I mean we're going to be active, Canadian dollars I'm talking here. So for sure, we'll be back on the M&A of our stock. Our leverage is still very low. It's at 1.1. So I mean we could do 1 million, 2 million shares easily if we want. If we see the price being very, very low, we'll be opportunistic and we'll be, again, active on the buyback. I mean it's not because we're doing some nice M&A in the latter part of '23, that this will impede our possibility to do buyback. Because I think that by the end of this year, with all the M&A, everything that we're looking at doing, our leverage is going to be about 1.26 at the end of Q3 and 1.05 at the end of the year. So I mean, this is chicken (expletive) in a sense that we could buy back at least 1 million or 2 million shares if the price is right.

Our next question comes from Scott Group with Wolfe Research.

So you've said the word fantastic now twice with respect to near-term M&A.

Right.

I just want to understand, are we talking about a major transaction? Or is this something that's bigger than [sort of smaller tuck-ins]?

No. Something of good size. No, something of good size because what we've done so far this year, Scott, is very small transaction, small deals. And I think the latter part of '23 is going to be more like medium-sized deal. So when I say fantastic is the company that we're looking at acquiring, to me, it's a fantastic transaction for many reasons.

Reason number one is the market that these guys serve is really second to none. Their market share is what we like is really interesting. So I say fantastic because the valuation is also very accretive for our shareholders. I say fantastic because with these guys, we're going to learn something that will help us in all of our business segments. I say fantastic because I really like the management team over there. I can see that we could help them on a few aspects of their business, saving costs. So that's why I'm saying, in a difficult environment like that, I mean, this is one of a gem that we were able to pick up, hopefully. And that's why I'm saying fantastic, Scott.

Okay. And then someone asked you earlier about buying terminals from Yellow. I'm wondering if they were trying to sell one of the regional brands or the regional brands in total or maybe even the whole thing, is that something you'd ever have interest in?

Well, for sure, we're having discussion with the people in charge of the process. There are some areas that, as a matter of fact, if you look at Florida as an example, I mean, we are a tenant in one areas they have. They own one terminal, that could make sense for us. So for sure, we'll have some discussion with those guys. But to say that anything big will come out of -- on the real estate side or employees or equipment, I don't think so.

Our next question comes from Bascome Majors with Susquehanna.

Following up on that last question. I believe at the Investor Day, you talked about maybe 1 to 2 points of long-term opportunity from real estate in the U.S. LTL business.

Yes.

If we look to next year, it's pretty clear that there's going to be more real estate available than maybe had been anticipated at that point as well as more freight available near term. I'm just curious how your calculus may change where there's more freight and more supply of industrial real estate and how that -- how you play that to best drive value for your shareholders longer term.

Yes. Yes, that's a very good question. So what we've done in '23 so far is we've done deals with other carriers, where it made a lot of sense for them and a lot of sense for us. We still have some deals that are going on into '23. Now like I said, we've got lots of capacity within the TForce Freight network. So for sure, by moving from 23,000 to 25,000 or 26,000, that's going to take a little bit of capacity. But still, we have lots to do so in terms of shedding this capacity or finding tenants or doing some M&A that's going to help us fill those terminals that are costing us a fortune. And they are -- some of our terminals are running half empty, right?

Now the fact that YRC is going to be liquidating their assets or something like that, I guess, that's going to bring a lot of real estate to the market. Agreed, okay? But I don't know exactly. I mean some of the real estate that YRC was using -- utilizing was a lot of that was leased. So we'll see. I mean that may affect the market. But really for us is most of the transactions that need to happen within what we had to get rid of or sell, it's ongoing right now. So I don't think it's going to affect us in '23.

Could that change in '24? I think that the cleanup of the real estate for us at TForce Freight, I would say, is mostly done. And then what's left is our 3,000, 4,000 doors. Okay, we're going to have to fix that over time with volume through M&A or through organic growth, slow organic growth.

There are no further questions at this time. I would like to turn the floor back over to Alain Bedard for closing comments. Please go ahead.

All right. Thank you, operator. And I want to thank everyone for being with us. If you have any follow-up questions, please don't hesitate to reach out. I hope you enjoy the rest of your day, and we very much appreciate your interest in TFI International. So thank you again, and we'll speak soon. Thank you. Bye.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.