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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Fourth Quarter 2021 Results Conference Call. [Operator Instructions]Before we turn the call over to management, please be advised that this conference call will contain several statements that are forward-looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, as a reminder, TFI changed presentation currency at year-end 2020, and all dollar amounts are now in U.S. dollars. Lastly, I would like to remind everyone that this conference call is being recorded, Tuesday, February 8, 2022.I would now like to 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 welcome, everyone, to this morning's call. Yesterday, after the market closed, we released our fourth quarter 2021 results. TFI International completed a very strong year, and that will be remembered as a pivotal in our history with the successful acquisition of UPS Freight.Our strong fourth quarter results demonstrate the sound rationale behind this transformational event, which drove much of our outperformance, along with continued strong execution across all of our business segments. All 4 segments generated growth in operating income, contributing to full year adjusted diluted earnings per share of $5.23, which easily exceeded the high end of our guidance that we provided in October.What we find most compelling is that while UPS Freight rebranded TForce Freight is already playing a large role in our outperformance, we still see much upside ahead as we continue to integrate driving both revenue and cost synergies. It is this ongoing upside combined with our consistent focus on the fundamentals of the business that provides us with confidence that we will continue to successfully navigate the road ahead with TFI International now in the strongest position in its history.This focus of the fundamental for TFI International means that getting it right on the details of our business. It means striving for operational efficiencies, and selectively capitalizing on strategic acquisition opportunities. Over time, this approach allows us to generate strong returns on invested capital, optimize our free cash flow, and grow our earnings per share.And with the overreaching goal of creating long-term shareholder value, we also aim to return excess capital to shareholders, whenever possible. Importantly, you will notice that before, during and after the global pandemic, this has been our focus. Regardless of lockdowns, ongoing supply chain disruptions, and labor shortage, and any other changes in operating condition that 2022 may have in store, we are confident that our operating principles will continue to help us succeed.Looking into the new year, in addition to integrating TForce Freight, we plan to especially focus on improving density, increasing our service level, optimizing our pricing, increasing driver retention, and the concept I mentioned last quarter, freight that fits. This means taking on the right freight for our valuable network.Turning to our fourth quarter results. Our total revenue climbed by more than 90% year-over-year to $2.1 billion. During the quarter, we continued to strategically price in order to capitalize on rebounding freight volume across B2B and e-commerce. Given our focus on profitability rather than growth for growth's sakes, I'm pleased to report our operating income climbed to $215 million, which was up 84% and our adjusted fully diluted EPS of $1.57 was up a very healthy 60%.Similarly, we had a long-standing focus on net cash from continuing operating activities, and I'm pleased to report an increase in this measure as well to $190 million. This cash flow strength is strategically important, allowing us to appropriately invest in our business, seek attractive acquisition opportunities in a disciplined manner, and return excess cash to shareholders when possible. Each of our 4 segments performed well during the quarter, with all 4 producing an increase in return on invested capital versus the prior year, which is a metric that we track closely.Let's now take a look at each. Beginning with P&C. This segment represents 8% of our total segment revenue and saw a 3% decline in revenue before fuel surcharge versus the year ago quarter, but a 25% increase in operating income to $36.7 million, with the operating margin up a very strong 540 basis points to 24.5%. This improved profitability was the result of strengthening yields for both B2C and B2B. Our return on invested capital for P&C on was very strong as well at 25.3%, which was up from 18.2% a year earlier.Turning to our LTL segment, which is 44% of total segment revenue before -- revenue before fuel surcharge was $823 million as compared to $141 million a year earlier, with the increase largely due to the acquisition of TForce Freight. Operating income of $103 million was up from $24 million, and our operating margin of 12.6%, as I referred to earlier, has significant upside potential as we continue the important work of optimizing our newly acquired operation.Digging in deeper on LTL. Our Canadian business grew revenue before fuel surcharge at 3%, and delivered a remarkably strong adjusted operating ratio of 78.3%, representing a 440 basis point improvement versus the prior year. Our return on invested capital for the Canadian LTL was a strong 17.8%, up 420 basis points. Our U.S. LTL business newly formed with last year's acquisition of UPS Freight produced revenue before fuel surcharge of $680 million with an OR that improved another 130 basis points sequentially to 89.4%. Our return on invested capital for U.S. LTL was once again exceptional, but we will continue to wait until we have a full year's worth of TForce Freight performance before reporting this measure.Turning to our Truckload segment, which represents 27% of total revenue. Our revenue before fuel surcharge of $506 million was up 16% over the prior year fourth quarter, and our operating income of $62 million was up 15%. Our Truckload operating margin was unchanged at 12.2%. In addition, the newly acquired TForce Freight Truckload division continues to operate at a modest loss of $2.4 million, a sequential improvement from a loss of $4.6 million last quarter, and we expect continued near-term improvement. So taking a closer look at Truckload revenue before fuel surcharge for U.S.-based conventional operation grew 16% with an adjusted OR of $95.5 million, and a return on invested capital of 5.3%, flat year-over-year.Our Canadian conventional Truckload operation grew revenue before fuel surcharge, a very strong 26%. The adjusted OR was 88.4% versus 85.2% the prior year, and the return on invested capital was 10.9%, down 50 basis points. Lastly, within Truckload, our Specialized operation grew revenue before fuel surcharge 13% with an adjusted OR of 84.6 and a return on invested capital of 11.2%, up from 9.9% a year earlier.Rounding out our discussion by segment, our Logistics business represents 20% of total segment revenue. Our revenue before fuel surcharge jumped 33% to $428 million, with operating income up 24% to $33 million. Logistics operating margin was 7.7% relative to 8.2% the prior year. And return on invested capital was a very strong 19.9%, up 460 basis points. This overall strong performance was led by our same-day package delivery business in the U.S. and in Canada and by the addition of U.S. LTL Brokers TFWW, which remains a strong performer. Shifting gears. TFI International balance sheet remains a source of strength. During the fourth quarter, we produced free cash flow of $121 million, allowing us to end the year 2021 with a debt to adjusted EBITDA ratio as calculated in accordance with our debt covenant of 1.51. This low leverage and continued strong cash flow is what allows us to strategically grow the business through prudent internal investment and our long-standing disciplined acquisition strategy.Turning to the outlook for 2022. Today, we are issuing our initial full year guidance. These initial range assume that operating condition remains relatively stable, and most importantly, reflect our own confidence in our ability to capitalize on the favorable opportunities ahead based on what we at TFI International can control. This includes the compelling opportunities to optimize recently acquired TForce Freight operation. And as always, our emphasis on strong execution, getting the fundamentals of the business right, including our focus on freight deficits, and our preference for cash flow and stability or growth for the sake of growth.With this in mind, our initial 2022 outlook calls for full year earnings per share to be in the range of $6.25 to $6.50, reflecting a potential growth of over 20% at the midpoint. We expect net CapEx to be in the range of $325 million to $350 million for the full year, and we also expect our free cash flow to exceed $700 million. Throughout the year, we expect our leverage again, defined as funded debt-to-EBITDA ratio as calculated in accordance with our debt covenants to remain at around 1.5x.In conclusion, before we open the call for your questions, TFI International finished the year on a very strong note. And we're now in the best position in our history to navigate what's ahead, and capitalize on the many opportunities that are within reach, especially the compelling opportunities to optimize TForce Freight. We, therefore, see continued operating opportunity to create and unlock shareholder value, returning excess capital to shareholders whenever possible.And now, operator, we can begin the Q&A session. If you could please open the lines? Thank you.
[Operator Instructions] Your first question comes from Scott Group from Wolfe Research.
Can you talk about your expectations for the U.S. LTL margins this year? And then if anything is changing in terms of your longer-term expectations for where the business can operate?
Yes. Yes. Well, you know what, the way we look at Q4 is that we were very prudent and conservative. And we're looking at Q1 '22 the same way. We've never seen Q1 so far with TForce Freight. But what I could tell you, though, is that what we've been able to accomplish so far with the team there, okay, which I think we have a great team in our U.S. LTL is that all the low-hanging fruits, the easy stuff, okay, it's mostly done now. So the year 2022 for us is really a pivotal year in the sense that we're going to be focused on, first of all, getting the operation with what we call: first, we said the freight that fits, but now we need the network also that fits the operation.So we're going to be really focused on improving the density, on improving the number of shipments per stop, on improving also our footprint in the sense that to travel 70 miles to deliver 2 shipments, it doesn't make any sense, right? So that's going to be a major, major focus of having the operation that fits and the freight that fits the operation as well.So to answer your question, I think that in long term, this company has to be an 80 OR. Now long term is 2 to 3 years from now, I believe that probably by the end of '22, we should be closer to something like an 86 or an 88 than a 90 or 92, okay, it's hard to say. The chance we have is that the market -- the LTL market in the U.S. is really a great market to be in right now so that helps us. But we have so much to do on the operational side.Now for sure, equipment has been delayed, okay? That's a little bit of an issue because our MPG on all the equipment is just a shift. Our maintenance cost on the old truck is $0.45 a mile, which is about $0.40 more than the normal. So these are all things that are being some kind of an handicap for us. But in the meantime, I see we're going to be focusing on improving the density. Density in my mind is the name of the game in this business. And if you look at what we do in Canada in a not so good market. I mean the reason why we can produce those good results is because we focus on density. We focus on doing more with less, not less with more.In our U.S. operation, I mean, the focus was never really 100% there in that regard, okay? And we're working with Paul and all the team there. to really change, and we're going to be focused on trying to get more shipment out of customers instead of trying to get more customers, right? So it's going to be, again, a long threat, okay, to get to an 80 OR. But I think that this company, this team will do it. I mean, if we're able to be sub-80% in Canada, there's no reason okay, not to be an [ 80 OR ] company within the next, I don't know, 24 to 36 months in the U.S., right?
Okay. And then just so I understand, when you talk -- you said 86 to 88, is that a -- was that a full year '22 comment or more like a run rate exiting the year? And then maybe just other run rate...
Exiting the year -- Scott, exiting the year, I think that will be, let's say, fourth quarter, I see us maybe between 85% to 88% in somewhere like that.
Okay. And then maybe just your margin expectations for some of the other segments within the guidance would be helpful?
Yes. Well, you see, if you look at our P&C, I mean, we're second to none in that regard. So I think that P&C, the focus in '22, we've done a fantastic job of building a very, very strong foundation. Now the focus is going to be more growth in '22 in our P&C. The margin is really solid, second to none. Same story with our Canadian LTL. Our U.S. LTL, I mean, I've said it, I mean we're going to start working and improving our operation and improving our density. U.S. Truckload, we've been a little bit disappointed, okay, with the dedicated Truckload division, but I know Greg and the team, they're working really hard. And we see that finally, Okay. We should end up the year in an OR that's going to be closer to 90% than closer to 98% like we have right now.In Logistics, I mean, we see a lot of growth there in the U.S. and in Canada with our last mile and even our TFWW, Scott, is really doing really, really well and growing. So all in all, that's why we are able to say, guys, we think that we could do $6.25 to $6.50 in EPS in '22. We're very confident. Don't forget, we're also very conservative.
Your next question comes from Tom Wadewitz with UBS.
Wanted to see if you could provide, I think the framework on LTL, OR is really helpful. So thank you for that. Wanted to see if you could provide a little more thought on how you're doing on repricing the book, kind of how much you've gotten your hands on in terms of raising price in LTL? And also how you think about I guess, the taking out lower quality freight? It seemed like you had some sequential decline in tons or shipments that was maybe a bit more than seasonality. So maybe if you could comment on those 2 levers for where you're at for LTL?
Yes. Yes. Well, absolutely. In terms of the freight that does not fit, I mean, we're not done. I mean, we're not done. I mean we did Phase 1. The problem that we have is that we need to replace those shipments. But like you said, okay, quarter-over-quarter, our volumes are down a bit, okay? So this is why our sales team has to be on their toes, to be in a position to replace everything that does not fit us. So in terms of repricing the business, I mean, we've done a lot, but we still need a lot to do in terms of catching up to the market. So the market is improving every month, every quarter.And as our base was so low because the quality of our freight was so bad in a sense that we had a lot of small shipments. The average weight per shipment is still too low. I mean, we're around 1,070 pounds per shipment. Most of our peers are closer to 1,300 to 1,400. I mean on the Canadian side, we're above 1,500 pounds per shipment. So there's still a lot to do in terms of the freight that fits the mix.I would say that we're probably done half of what we should accomplish on that. And then the big story for us in '22 is, yes, certain degree with market and freight and then all that, but it's all going to be a story in '22 of improving the cost of operation or reducing our cost of operation. This is the big thing that's going to help us bring this company closer to an 80 OR than a 90 OR.
Okay. And then for the second question, just wondered if you could offer some thoughts on kind of portfolio, and how you think it might change in terms of both divestitures and acquisitions? It seems like there are a lot of transports out there that have cash that are interested in doing deals, dedicated to an area where I think their company is interested. So is that something you consider in terms of pruning the portfolio, if it doesn't necessarily seem to be something that's going well? Or is that something you just fix? And then I don't know what thoughts on deals this year is -- are you likely or you still need some more time to do bigger deals again?
Yes, for sure. I mean, we need more time. I mean we have to deliver on our TForce Freight promise of being closer to an 80 OR. There's been a lot of discussion about why do you guys run a U.S. Truckload operation when you have a return on invested capital that's single digit. I mean -- for sure, I mean, I'm getting a lot of questions from investors or Board members. And I'm saying, guys, I mean, we have to demonstrate, okay, what we could do. And I'm very confident in Greg's team to be able to get this 5.5% return on invested capital closer to 10%.Now 1 thing is for sure, I mean, if sometimes if you look at the track record of TFI, if we cannot grow this business in a sector like we were in the Waste business. And we sold it to GFL about 5, 6 years ago. Why? Because we couldn't grow it. Now it's the same story with all of our sector. If we -- if you look at our P&C in Canada, I mean, it's hard for us to grow in through M&A. But we're going to be focusing on growing organically. And with the return on invested capital that we have there, I mean, it's second to none. So that makes sense.In terms of M&A, for sure, we're always open. We cannot do anything of size before the end of '22, maybe from Q3. As soon as we feel really, really good about TForce Freight, then we could go to the next step. For sure, we have a plan for the next step because the next big acquisition for TFI is already in the plan right now. I mean we know what we'll be doing, hopefully, in the next, I don't know, 12 to 18 months. But in terms of divestiture, I have to give a chance to our Truckload guys to really prove that we -- it can be part of the TFI family.Now in terms of strategy, for sure, when we look at that, if you -- our cost of capital is more than your return on invested capital, it doesn't fit, right? So I mean, right now, our focus is really TForce Freight and all the migration away from our TSA with UPS. That's really the focus of '22. And in the meantime, our Truckload guys are working diligently to improve what we have now because for sure, showing the results that we have today in our Q4 compared to our peers in U.S. TL, we're a little bit concerned.
The next question comes from Ravi Shanker with Morgan Stanley.
Maybe I'll start with a follow-up, which is just to confirm that your 2022 EPS guidance does not include any M&A in it, correct?
No, no, no. Everything stays the same, right? No, M&A.
Got it. That makes sense. And maybe if I can follow up on your comments on the U.S. TL business. I mean we certainly saw the results kind of improve there sequentially. And I think in the last quarter, you had flagged some issues with the residual TL business within the UPS LTL business that you acquired seemed like you made a bunch of progress there. Can you elaborate on that a little bit more? And maybe kind of -- I did want to ask you about the potential long-term future of that TL business?
Yes. So Ravi, are you talking LTL or Truckload?
Truckload. I'm talking about the Truckload business within the...
Yes, yes, yes. Well, let me tell you that we believe that in Q1, we're going to stop losing money with the UPS Truckload business that we've acquired. I mean we still have 2 major accounts there that are not doing a good job for us. We're losing money on 2 major accounts. I know that Greg and his team are working hard to fix this issue. I mean we've been working at it for 8 months. This was a business that we got, that was terrible, really, really bad because we had commitments with customers, and we didn't have the trucks, we didn't have the power. So we have to go with third party, and we lost a fortune doing that.Now in terms of our approach to the market is that, guys, I mean, let's fixed rates, and that's what we've been doing since day 1. So we've lost $5 million or $6 million in Q2, we lost $4 million to $5 million in Q4 -- Q3, and then we lost about $2.5 million in Q4. And we anticipate that we won't lose any in Q1 of 2022. It doesn't make any sense, okay, to keep hauling freight and lose money in this kind of environment. It's so stupid. But we had to go through that.But at the same time, also what we did, Ravi, is we moved the over-the-road from our TA operation to CFI. So now TA is also just a dedicated Truckload guy. And we were also disappointed. When we did that, we found that out, okay. And when you do 2 or 3 times, you're a dedicated, you're over-the-road, your intermodal, you do this, you do that, and you've got all kinds of allocation. Sometimes you don't see the global picture of dedicated at TA. Now that we pull the over-the-road, we see that we have issues with us there as well. with some customers that don't cover the cost, and we don't make any money.So dedicated, okay, right now is our biggest problem, okay, that we have to fix within our U.S. TL. But now our guys were so focused trying to fix that, that even our over-the-road, okay, we lost a little bit of focus on market environment. So if I compare with my peers, even on over-the-road, my average revenue per mile is way lower than theirs. So this is now after looking at what happened in Q4 with the results of my peers now our teams are saying, "Oh, here we have another issue that we have to fix with our customer" because if we run on average, let's say, I don't know, $2 20 miles, and our peers are running at 2 60 or 2 80 miles, I mean, we are not at market rate. So that's also part of our program early in '22 to fix.So as an example of talking with Greg as of the month of January, over-the-road, okay, we got about $9 million more on a yearly basis from existing customers. Okay. So Greg, that's fine. Okay, but we need more than that, right? So this is why we're doing the same thing in February, adjusting rates to the market with our customers.
Your next question comes from Konark Gupta with Scotia Bank -- Scotia Capital.
So I wanted to kind of focus on the Package and Courier business as well. I think the 75% OR, or 25% operating margin, it's probably your best ever, if not, may be closer to the best ever you have seen in that segment. I'm just kind of wondering what kind of drove that performance? Was it more of a pricing story in Q4? Or was it more of a cost improvement story? And then what do you think about sustainability in that?
Yes. So Konark, what we did, okay, this was Brian's plan, okay? The summer of '21 is that we're not going to go through the same story in '21 peak as in '20 peak, right? So we got rid of -- and this is why our year-over-year revenue is a little bit lower. Why? Because we got rid of e-commerce freight that we didn't -- we made very low margin on it, right? So that was the plan. And I said, Brian, I think it's a great plan, and this is what we're showing a 24% OE in that division, okay? And if you compare that with last year, okay, we're up about $6 million, $7 million, okay, versus last year. So fine.Now the new plan for '22 when we're talking to Jimmy and Bob over there and said, "Guys, okay, now we are very strong. We don't have freight that doesn't fit in that network. So let's start growing again". Because if you look at the last 4, 5 quarters, we used to grow 15% to 20%. Really, if you look at Q3 and Q4 of '21, we slowed that down a bit, okay, to consolidate our base to add more trucks, to add more drivers, okay, to beef up our terminal network. So we are opening a new terminal in Winnipeg as an example, okay, during Q2 of '22. And so some kind of wait a little bit, and now we're focused on growing again in our P&C.So to answer your question, it's a combination mostly is getting rid of freight that did not fit okay, with low margin that we got stuck in '20, okay, at peak. And now our base is really, really solid, and we're going to start growing again there.
Makes sense. That's great color. And then if I can follow up, perhaps lots going on these states with respect to vaccine mandates. And I'm sure there's no resolution as of now officially. And then there's some protests going on in Canada as well for that matter.I'm just kind of curious as to your kind of high-level thoughts on what do you think what's your kind of driver pool like these days? Are you all vaccinated there, and you have kind of good enough number of drivers that you need for the business? Or are you seeing any kind of issues around vaccine mandate at TFI?
So vaccination at TFI has not an issue at all. I mean on the Canadian side, most of our drivers are vaccinated. So crossing the border into the U.S. has never been an issue. We anticipated that. So we worked with our people to have them okay, convinced that vaccination, it's -- you're free. You do whatever you want. Okay, we get that. But guys, I mean, to cross the border, we know that at one point, it's going to be an issue if you're not vaccinated. So we have a few people, a few drivers that still say no. Well, what we do with them is we just keep them in Canada, so they don't cross the border anymore.But I would say, guys, that the way I look at January, I think January is going to be the best January ever for the company. I mean, the guys are doing a fantastic job. And for sure, there's some small carriers maybe in Canada that are having issues, but at TFI, not an issue at all.Our biggest issue for us really in January is sick people in the U.S. with COVID. That has been the big thing for us, our TForce Freight, a lot of people got sick in January in the U.S. because of this new variant there. So that was a little bit of an issue, creates an issue with servicing customers and all that. But that being said, vaccination, not a problem at all.
Your next question comes from Jordan Alliger with Goldman Sachs.
Just a quick follow-up on the Package and Courier, you've mentioned growth again. So I assume -- are you referring to -- you have some tough comps ahead still on shipments and pricing, but do you expect both those categories to see growth again as we move through 2022, maybe as we move later in the year?
Yes. Well, absolutely, Jordan. I mean, what we're saying is that we took a step back in a sense, okay, with Q3 and Q4 in terms of growth, okay, in '21. And so what we're saying is that now we're set up in '22 to really turn the screw of growing organically again, right?Now if you look at bottom line, 24% in Q4, this is unbelievable. This is highly remarkable. Can we stick to 25% and grow organically OE? The guys are working hard on that. But don't forget, we have competition from [ Puro ]. We have competition from the U.S. guys like UPS and FedEx. And those guys are not running a 20-point bottom line operation, right?So we may have to sacrifice a little bit the OEs as a percentage, okay, to grow like a 5% to 10% that's -- we'll see. Let's have a look at Q1, and then the rest of the year. But let me tell you that when I look at the numbers that we see so far, I mean, so far so good. Even with everything that's been going on in January with the storm, with the weather, with the Omicron and all that, we feel really good.
Can you just give a quick update on what you're seeing on the Logistics segment, I guess, most curious about the same-day parcel delivery aspect?
Same-day, we're doing really well. I mean the only rock in our shoe is that our Canadian operation lost all of their volume with the largest e-tailer, right? So those guys, we were dealing with them in the U.S., they walked away from us in the U.S. because we're all about making money us. And then slowly, they walked away from us in Canada. So that is a little bit of a step back, but we're replacing that as we speak.On the U.S. side, I mean, we feel really, really good about what's going on. The issues we have right now has been, like I said, weather, and this Omicron thing there created a little bit of an issue in January. But long term, okay, you'll see us doing really, really well. And over again, we run these operations with double-digit EBIT. I mean, we don't run these guys at 2% bottom line. I mean nothing at TFI is single-digit, OE except, okay, our TFWW, which we bought from Donnelley. And at the time, those guys were 2% to 3% bottom line. So WW is still not a double-digit EBIT guy, okay? But slowly, we're getting closer to 5%, 5.5%. But the rest of our business is all double-digit OE.
Your next question comes from Jack Atkins with Stephens.
I would love to get an update on your ground at freight pricing business that you acquired from UPS. How has that been trending over the course of the last couple of quarters? And what are your expectations for that in 2022?
Well, if you look, Jack, a -- you'll see in our MD&A that the average revenue ex fuel per shipment is up big time. So we've been correcting adjusting rates with our customer. But like I said earlier, we're not done, we're not completed with that. I mean, it's an ongoing process, and it will last at least another year because we got a lot of small ship and still in our network that has to go away, but we can't kick them out because we need to replace those small shipments with better shipments. And this is the focus of our sales team, okay, guys, wake up and smell the coffee, we have to replace shipments by better shipment, right?It's the same story as if you think back when we bought CFI, okay, in 2016, '17, it took us a year, okay, in our Truckload division to clean freight that did not fit. In an LTL environment, it takes way more than a year. It takes probably more like 2 to 3 years to really clean-up okay, and get rid of all the shippers or the shipments that don't fit. So we're not there yet at all, okay?So our sales team is highly focused on improving the number of shipments that we get from customers as an example, okay? So let's say this shipper gives us 2 shipments a day, well, try to get 3 from this guy, try to get 4 from this guy, because we're already there, right, to do the first pickup, right? So it's a little bit of a change, okay?So we're working on the mix, but also, we're working on the productivity and the efficiency in the operations. So this is why during the course of '22, what we believe is that slowly we'll get closer to an 85%, 86% by year-end, okay? And then into '23, we'll keep on improving those processes and to get us closer to maybe in '23, like an 83% or 84% down to the target that we have of being at least an 80 OR carrier in the U.S. LTL market.
Okay. Got it. Got it. No, that helps. And then I guess kind of thinking about the structural changes that you're trying to implement within your U.S. LTL business. Are you contemplating maybe any incentive changes for your sales force or your operations team? We've seen that with some other LTLs in the U.S. in the past and it had significant positive impact.
Yes. Yes, absolutely. You're absolutely right, Jack. I mean we're having a meeting with Paul and his team, I think, next week or the week after next. And for sure, we're talking about that. Absolutely. I mean we have to change, okay, the way our salespeople are their salary and their commission and all that. So I know that Paul is coming up with a proposal on that. It's -- the sales team that we have today, the sales leadership, everything has to be questioned about what we want is -- the way we judge the sales team is not by the effort, is by the results. So I don't know if you understand what I'm saying, Jack, but me, I don't look at -- the guy tells me he works [ 24 ] hours a day, and he gets no freight, well that's not good for me, right? So maybe work less, but get more.
Yes. No, totally. It's all about the bottom line.
It's all about the bottom line. Absolutely.
Your next question comes from Ken Hoexter with Bank of America.
You mentioned we're -- you mentioned we're very confident but yet very conservative within the model. So maybe just taking a look at that, where do you see the most upside? Is it the LTL margin you talked about? Is it Truckload fixing, the pricing in this best-ever truckload market? Maybe talk about where the potential is?
Yes. Well, you're right. You're absolutely right, Ken. I mean in the plan that we have for our U.S. TL guys, I think that we will do better than that. I think that our guys -- if you don't see that you have a problem, you can't fix it, right? So now I think that our U.S. TL team, when they look at our peers' results for Q4, that were fantastic. And our result, I wouldn't say that they're fantastic, right? So we know what to do. And it's not about cost, okay? The big issues we have is more like our costs are in line, okay? The problem we have is getting the right market rate for the service we provide to the customer.So our team was completely focused on dedicated, fixing dedicated, which was a disaster that we got from the acquisition of UPS Freight, okay? Fine. But we also overlooked what was going on the over-the-road thing. So now we know, okay? When we look at our peers, the average revenue from -- we know that we're too far from these -- where these guys are. So that's one.Number 2 is, like you said, TForce Freight, we know what to do. It's just the execution could be slow or fast or between slow and fast, right? So right now, we don't know what's the speed of these operational changes. Are we going to be slow? Are we going to be fast? No. What we've done so far with the low-hanging fruit, I would say that we went really fast on that. Now on the operation, this affects way more people. It affects terminals. It affects the terminal managers. It affects everything that we do every day. So this is why I'm not sure. So this is why we're going conservative with TForce Freight. Pace of change.
Yes. So Alain, for my follow-up, let's just dig into that for the service centers and the growth, right? You always talk about density, you talked about there were some opportunities where you could blend some of your operations in terms of better utilizing the service centers. Where are you in that process? How many service centers do you have now? And what are you thinking of that process going forward?
We were just starting, Ken. We're just starting. I mean, as an example, I mean, we have shut down 1 terminal in Chicago, and we're going to be subleasing that terminal to another carrier. We shut down 2 small terminals in West Virginia that those 2 small terminals will be sold to another carrier. We just closed a small center in Kansas, Salina. We had 40 shipments a day there. It doesn't make any sense to run an operation of 30-some thousand bills for a small operating terminal of 40 shipments a day. So we're just starting. I'll give you another example. We have a terminal in Rialto in California, a fantastic terminal, a diamond terminal. I don't know how many doors. I don't remember how many doors, but it's probably like 80 to 100 doors. I've got 60 shipments a day. Think about that, 60 shipments a day in a huge terminal. So we're just signing a deal with another carrier that's going to take over about 40 spots for parking equipment. And these guys will also take another, it will take about 40 doors in the terminal. So that's going to bring about $2 million to $2.5 million to the bottom line of the company because right now, this site is like empty, right? So we're just starting.In Sacramento, as an example, I got 3 sites, doesn't make any sense, right? So we're working on Sacramento. So our team -- we are really focusing on the West Coast right now. So -- but it will take time, okay? But we're just, Ken, we're just scratching the surface. I mean I said it many times, we got 12,000 doors over there. We don't need 12,000. We need maybe, I don't know, 6,000, 7,000 or 8,000 okay? We have way too many doors. So that is an opportunity for us for growth, either organically or through M&A, yes. But in the meantime, everything that doesn't make any sense, we're fixing it. okay?So Rialto, we want to keep the terminal. But we don't want to keep it empty. So okay, so you'll find another tenant for now. And then we'll see if we need that terminal 5 years down the road for our own need. But in the meantime, let's get the $2 million, $2.5 million a year to help us cover the carrying costs and eliminate the loss that we have on that terminal right now.
Your next question comes from Walter Spracklin with RBC Capital Markets.
So you're going to have a pretty good year in terms of free cash flow, your leverage is low, and not likely, if I hear you correctly, going to be looking at acquisitions until perhaps later in the year or early into next year. So does that mean you now deploy that cash into buyback? Or is this something you want to kind of raised cash to keep on hand for something perhaps a little larger, so you can do a larger deal in the fourth quarter or early '23? Just curious where your head is at in terms of buyback versus retaining cash for acquisitions?
Well, buyback is -- well, there's always an opportunity. So if you look at what we've done in Q4, we bought back 1 million shares, right? And the price that TFI stock trades today, okay -- well, today, I can't talk about today, but let's say, over the last few weeks, for sure, we're going to be buying back at least 1 million shares, okay? If we are traded right now in sub USD 100, I mean first sure, we're going to be buying at least 1 million shares.Now going to your point, okay, we also feel that our guidance is conservative. So based on what we've seen so far, I think that we'll probably do a little bit better than the guidance, but we're conservative, right? But if we look at the opportunity for us to do a deal of size, okay, let's say, late '22 or into '23, the fact that we do some small M&A. So we'll do probably like CAD 150 million to CAD 300 million of small M&A, buying back, let's say, USD 100 million of stock or maybe a little bit more. It does not preclude us for doing something of size late in '22.
Okay. That's perfect. And I appreciate the buying back stock when your stock is at a certain level as opposed to when times are good.Moving on to constraints. I mean, driver shortage is still an issue, supply chain is still an issue. And we heard a lot in other companies saying that demand was above their volume, right? Because you just couldn't get the volume. So how much of that was a factor in the fourth quarter? And how much are you assuming supply chain will be -- and driver shortage will be a continued constraint when you put out your guidance for next year or for this year?
Yes. Well, you see the fact that we are already overbooked every day. It's true in the U.S., okay? It's true in the U.S. It was not true in Canada until, I would say, mid-November. This is because I was talking to my Canadian guys says, "How come this is not in Canada. And it was not in Canada". But I could tell you that what we're seeing in the U.S. for, I would say, at least the last 6 months, we're seeing now the same story in Canada since probably early November. So for sure, the demand is more than the supply. And that's why I'm saying that probably TFI will have its best every month of January because of that.See, our Canadian team is taking advantage of market condition. And our U.S. team, like I said earlier, on the Truckload side, we missed a little bit of an opportunity in, let's say, Q3 and Q4. But now we smell the coffee and we're going to take advantage of the market in '22, okay? The supply chain, I don't think it's going to be fixed within the next 6 months to 12 months. I mean it's a lot of politics in there. There's lots of changes around the world. So it's going to be a very, very tight market from what we could see in '22 and probably into '23. So let's see what happens. Our guidance is conservative like always, right? So our team is really focusing on doing better than that. But so far, what we could see is that '22 will be a great year for TFI.
Your next question comes from Kevin Chiang from CIBC.
Sorry, just taking myself off of mute here. Actually, I just have one question. If I could just follow up on the P&C margins, it was 24.5% for Q4. When I look back historically, typically, your Q4 margin is a good benchmark to what the following year looks like? You usually lose about 100 basis points as you kind of work through seasonality. So if I kind of just use that rule of thumb, it seems like maybe a low 20s margins. It seems like maybe the baseline you're starting with? And then you kind of talked about maybe growing the absolute earnings and willing to sacrifice a little bit on margin.Just one, is that the right way to think about it that maybe on a full year basis, P&C is a low 20s margin and then you'll kind of flex that potentially lower, and if there's a level that we could think of in terms of how low that could go, that would be appreciated?
Yes. You see, Kevin, there's 2 things that will affect us, okay, in '22, B2B. So we're still not back to where we were. So B2B for us is even more profitable than B2C, right? Because the coincidence of delivery versus pickup is better on B2B than B2C. So that's why we're saying in '22, if B2B comes back. Because don't forget, we still have lockdowns in Ontario, same thing in Quebec. So we're still not out of the world B2B, okay, versus where we used to be pre-COVID. So that could help us a little bit in '22.The other thing also in '22 is that we're going to be focused on highly profitable growth. The potential is there. And we made these investments in drivers and in trucks. If you look at our truck fleet in our P&C, I think that we added about 100 trucks year-over-year. So now we're in a position to really take advantage of the potential of this market, e-commerce, B2C growth, but it's going to be at a profitable rate.So going back to your our forecast is that, yes, we should think that TFI's, P&C is going to run about the 20%. But that based on B2B versus B2C, it's still difficult to predict. So let's wait and see what Q1 is going to come about. What I could tell you so far, when I look at our month of January is the guys are really doing a fantastic job.
That's helpful. If I could just ask one clarification question. Just in your guidance, does that assume your EPS guidance that is, does that assume the 1 million share buyback you mentioned in Walter's question or is there any buyback in there at all?
No. No. No. There's no buyback in there. There's no M&A, there's no buyback. It's just that it's -- everything stays the same. But don't forget that everything stays the same, okay, our leverage in the guidance, we're saying it's going to stay around 1.5%. But if we don't do any buyback, if we don't do any M&A, my leverage is going down around 1.
Your next question comes from Brian Ossenbeck from JPMorgan.
I wanted to come back to the U.S. LTL, you talked about density and going back from more shipments. But specifically on the operation -- lowering the operating cost for LTL, is it primarily through the top line and through density, you talked about not getting the trucks on time, which sounds like it's pretty decent-sized headwind, so maybe you can just elaborate on what are the main drivers of lowering that operating cost? Is it something specific with those terminals you're pairing off? Or is it driven through density or maybe a combination of both?
Brian, it's really a combination. And when I'm saying to those guys, that guys drivers they like to drive. And why are they drivers is because they like to drive. Me, I like to pick up freight, right? So we have a disconnect in terms of -- so what we want to do is have our P&D guys drive less miles and pick up more freight. So how do you do that, right? So first of all, first step is every stop that you have, okay, with your drivers, you try to pick up more freight per stop, right? So it's something that's never been really monitored at UPS Freight, so get more out of every stop. That's number 1.Number 2 is we have guys driving 150 miles okay? That doesn't make any sense. Well because if this guy drives at 40 miles an hour, that means that he is driving about 3 to 4 hours a day. So when he's driving, he's not picking up freight, and when he's driving he is spending money. He's burning fuel, he's burning tires. And as I said earlier, my old trucks cost me $0.45 a mile in maintenance. So our intention, Brian, is to improve the efficiency of our network by picking up more freight and driving less miles. And this is what we do as in Canada, right? Our LTL, why are we so efficient? It's just because of that, not because we're a bunch of magician. No. I mean, we do more with less. So the intention is to drive less miles and pick up more freight. That takes time, though, Brian. I mean you don't do that within a month in a huge network like the TForce Freight network. So it's going to be a combination of that. And for sure, if you're running an old truck at $0.45 a mile maintenance, and 5 miles or 4.5 miles MPG versus the newer drug, which cost you $0.05 and have an MPG of 8, I mean that also is detrimental to your profitability. So yes, we had some headwinds to that. We were supposed to get 1,000 trucks in '21 and we got 300. By the end of '21, we got only 300. We will get 500 probably new trucks by the end of Q1 '22. But we also have another 1,000 trucks coming for '22, and it seems like the truck manufacturers are in a better position, okay, to complete the order because we went with 3 -- 4 different suppliers, well, 3 major ones and other smaller 1, right?So new equipment is going to help us reduce the operating cost of the equipment, but more importantly, Brian, our focus is do more with less travel, less miles and pick up more freight. So get more shipments out of the existing customer. They don't drive 150 miles to service a shipment. And this is a change, right? This is a change. So it fits with our approach of freight that fits. Why would you travel for 2 shipments, a 150 miles, no. So reduce the ZIP code use a little bit more agent where it makes sense. It's what we do all the time in Canada.
Okay. Great. That's really helpful. Just one quick follow-up. You mentioned synergies a few times with TForce Freight. Is that in reference to trying to change some of the footprint you mentioned earlier with leasing out some of these facilities? Can you start to run maybe more final mile from these now that you've got a better handle on the real estate portfolio?
Yes. Yes, absolutely. I'll give you an example in California, for instance. I mean, our TForce Freight team there used to use a third party. And now they're using our TForce Logistics division at about 65% of the cost that they used to pay, okay? So there are some synergies, okay, slowly between the family, right? But real estate is a big opportunity for us. It's an opportunity for growth okay? It's an opportunity for M&A down the road. But it's also an opportunity to get rid of the real estate that does not fit like those 2 small terminals that I was talking about in West Virginia or the small terminals that we were renting in Salina, Kansas, that doesn't fit, there's no future there. So we're trying to make a deal with a carrier there that's got a larger footprint than us for those 40 shipments, okay, that was part of the Salina.So it's a global change in what we do. And the chance we have, Brian, is that the team there, TForce Freight, they're really drinking the [indiscernible]. They're part of the solution. We don't have these kinds of pushback that sometimes you may have okay, with an acquisition. So those guys are part of the solution. The team there, they're part of the solution. So this is why it makes it much more easier for us to work with them, and apply, I would say like the TFI Canadian LTL recipe for success.
Your next question comes from Cameron Doerksen with National Bank.
So just one question from me. I guess my view is probably this is a nonissue. But in your press release, you do have, I guess, a disclaimer in there around the internal controls and possible deficiencies as it relates to, I guess, becoming a U.S. reporter. So can you just maybe go over what all of that is about? And like I said, I think it's probably a nonissue, but just maybe a bit of an explanation is would be good?
Yes. So Cameron, I'm not a SOC specialist, okay, but what I could say is this, is that the work is not done. The work is not complete. But what we see so far okay, based on -- because we've hired PricewaterhouseCoopers to help us on that. We've hired also another firm M&P to help us on that to do the testing and test all these controls and all that, and also under the supervision of KPMG, and our internal audit department is that because TFI is so decentralized, I mean, what the guys are telling me is that they have to test about, I would say, like around 900 different controls, okay, which is huge. So this is why it's -- we're still in testing and remediation phases right now. So this is why we said, let's be transparent, okay?So let's put a note in there, a paragraph that says we don't know. I mean we'll know, okay, when we came out with our annual filing okay, if we have an issue or not. But one thing I could tell you though, Cameron, is if there is a small issue, okay, we'll fix it. I mean we spent a lot of time and energy, okay, to solve this SOCs compliance thing there. And a lot has to do with documentation, which is different than what we used to do at TFI, right? So it's an education. It's making sure that everything, okay, is what it should be for SOCs compliance.But we said, guys, because we're not filing our MD&A now, we're not filing our annual stuff now. So let's put this paragraph in there. Just think -- and then if it's an issue when we file, then we'll just say, "Hey, guys, we're committed. We're going to work on that". Now we know and if you maybe talk to David, which he's way more aware than me on that, we know that initial, okay, IPO filers in the U.S. about U.S. based, new IPO, there's about 50% of them that have some weaknesses, okay, the first year. We also know that foreign filers, okay, on average, okay, have 75% of them have weaknesses the first year. So it's no big deal because TFI's team, okay, is committed to fixing everything that needs to be fixed on that, and it's our first year, right?
Okay. Now, that's a great explanation. And just as far as SOCs compliance costs, I mean, obviously, you probably incurred costs throughout in 2021. Is this anything material going forward, the additional G&A costs that you're going to need to spend to be compliant?
Well, in our cost of '21, you've got a few things that are exceptional for sure. And this would probably amount with all the legal, and adviser, and all of that for '21, you could say those are probably between $10 million and $15 million that will not rehappen in '22. In '22, the SOC thing there will probably cost us a few million dollars, Cameron, to get compliant or to do whatever testing needs to be done and change whatever needs to be changed. So I mean the guys are working. It's really taken very seriously by our team.
Your next question comes from [ Pascal Major from Ciscona ].
Looking at the TForce Freight deal, it's a large deal. It's a complex deal and call it, 9, 10 months in, it certainly looks like it's a very successful deal. As you go forward and think about doing bigger deals on a larger base, how do you keep the quality of those acquisitions as good as they have been historically for your company, especially as they need to get bigger to move the needle?
Yes, it's a very good question. And the proof is in the [ pudding ] at TFI. So if you go back 20-some years ago, most of our deals were small. And every 2 to 3 years, we made a significant bigger deal. And we've built a culture at TFI of doing that, right? So it's not something new for us. What's new to us, like you just said, is that this deal is really huge, okay? We've never done a deal at this size. And for sure, it takes a lot of our energy to work with the local team.Now this is why I've also said that before we do anything of size, we need to be sure that we are 100% under control okay, with our TForce Freight. And this is why we don't see anything of size probably before the end of '22, and into '23. Because we're -- some of the guys I remember about 15 years ago, they said, well, it's like a deal junky. No, we're not a bunch of deal junkies. I mean we do deals where it makes sense for our shareholders, where we can create value, okay, for our shareholders long term.So I understand your point. The next 1 is going to have size as well to move the needle. And it's all part of our plan. We've already have some targets that we're working on to make it happen when the time is right. So time could be right at the end of '22 or maybe if we're not convinced we'll wait in 2023.
And if I could just squeeze one kind of housekeeping one in there. I know you don't guide quarterly, but you've made some comments on one hand, the TForce Freight business having a really difficult 1Q seasonally historically working to improve on that. But on the other hand, you've talked about having the best January ever for the business. You certainly come off a great quarter for the company. Can you just help us directionally about what 1Q might look like, so there are any surprises when you report in April?
Well, we like surprises us, the good surprises though, right? So you have to understand that TFI's approach has always been under promise and over deliver. I mean that's the story of 20-some years of success at TFI. So what we're seeing so far, okay, when I talk about our month of January, is that is going to be a spectacular January for us, yes.But we're also very conservative. So I think last year, we did about $0.79 EPS in Q1. So for sure, we're going to be above $1. Are we going to be at $1.25? It's still too early to say. But TForce Freight is a big part of our success, right? So they've never made money in January, those guys. They never made money in December. Well, this year, they made a little bit of money in December, okay? So fantastic. Great. So it's still too early. That's why we're cautious about our guidance.We're conservative because we still have not gone through a Q1 with TForce Freight. We know that April normally is a great month for those guys. March should be good. But January is a big issue. And don't forget, like I said earlier, we had a lot of sick people in the U.S. with COVID, right? A lot of sick people. January was bad for that. January was also bad with the weather, right? So I mean, we have to be conservative.
Your next question comes from Benoit Poirier with Desjardins.
Yes. Based on our discussion with investors, a lot of people, as you know, are worried about the potential trucking cycle rollover. And I'm sure you're hearing the same concern, what are you answering to this concern? And any signs of slowdown on the horizon? And what -- how is the dynamic different from the past cycles in your view, Alain?
I think this is a perception and it's a mistake. It's a huge mistake, okay? And I understand that you could think about that because the guys are doing so well that you could say, well, that's probably the peak. And from there, it's going to start going down. Well, there's a huge change. Well, first of all, the supply chain is a big problem, as we all know. The fact that it's hard for you to add truckers, I mean everybody knows that in the U.S. and even in Canada to a certain degree, you cannot add drivers. It's a fight. It's a big fight.So when -- if you look back at all these cycles, okay, over the last 30 years, we shot ourselves in the foot because the customer was busy, so we were adding capacity, and then there's a slowdown, and there's too much capacity, and then the risk went to the ship. That issue right now, it's difficult. I mean, so it's difficult for a trucker to add capacity. You can't find the drivers and you can't find a truck. So it's a huge change in these stupid cycles, okay, that we've seen.If you look at the LTL market, both in Canada and in the U.S., if you look at the P&C market, both in U.S. and in Canada, I mean you've got disciplined players in there. U.S. LTL, you've got disciplined players, the stupid LTL guys, they are less and less, the Canadian LTL market is still not there yet, but it's getting better, right? It's just that the Logistics, the last mile is the same story. It's hard to find people.So to me, I think it's a big mistake to think that, "oh, they're at peak, and this is the only way these guys are going to go is down, okay, over the next, I don't know, maybe a year or 2". But also Benoit, it creates opportunity for us. Like I said earlier on the call, I mean, our stock -- the price that it was yesterday or week before, it creates also an opportunity for us to buy back, right?
Yes. Now, that's great color, Alain. And just looking at your CapEx, you've been guiding for $325 million, $350 million, I would be curious where are you going to be at the end of 2022, in terms of fleet replenishment? And what could be spent in 2023 and beyond? What could be the sustainable level longer term? It seems that there is some money that is put towards replenishing U.S. TL. But down the road. I would expect given your asset-light model, there's an opportunity to reduce the CapEx beyond 2023, so if you could try to give some color, that would be awesome?
Yes. You see the big CapEx, the big abnormal CapEx that we're doing is for our U.S. LTL operation, okay? So normally, in the U.S. LTL, we should be buying, let's say, between 600 and 650 trucks a year, normally. Right now, we're trying to buy 1,000 okay? Why? Is even with our plan, if we get the 500 that we were supposed to get in '21, and we get the 1,000 that we're hopefully going to get in '22, and this is in our plan, okay. At TForce Freight LTL, at the end of the year, we're going to still be driving 2012, 2013 trucks. So that tells you that the same effort that we're doing in '22, we'll have to do the same thing in '23 to bring the average age of this division to normality, it will take us '22 and '23. After that '23, okay, there may be some small reduction. But to your model, I think that you should work with right now for '22 and '23, the same number.
Your next question comes from Bruce Chan from Stifel.
This is Casey Deak in for Bruce this morning. I just wanted to just quickly thank you for all the guidance on the numbers and the cost drivers, but can you talk a little bit, Alain, about what you think on tonnage for the LTL operations? And especially in the U.S., what do you think cadence there looks like? And I know it's back and forth a bit on getting rid of the bad freight and trying to plan better freight.
Yes. Yes. Well, what we've seen so far is the fact that for sure. If you look at our bill count, we're down a bit. If you look at our tonnage, okay, we're also down a bit, okay, year-over-year. So once we get through Q1, I think that also with our approach with our sales team, our sales leadership of not looking at just what the effort, but the results I think that we're going to start growing because our peers are all growing. I mean good peers, the market, the demand is there, but then us, our problem is we got so much cleanup to do in terms of getting it on that shipment, get it in that customer getting rid of that lane, okay, that at the same time, okay, you don't see really the results of our sales team because we have to replenish okay, the 30-some thousand bills a day that we do, right?And I think that all during '22, the cleanup of all of that will continue. So you won't see us growing organically big time in '22 in terms of volume. You'll see us improving the quality of the revenue. You'll see us improving, okay, with the cost base. But in terms of growing organically as our peers are doing, not sure about that in '22. In '23, it's going to be a must. But in '22, the first 6 to 9 months, I think it still replace this and look at that and this doesn't make any sense and get more out of this guy, and it's going to be more of a kind of churn still okay? And at the same time, though, we are focusing on making sure that we deliver only something that fits our network, okay, and something that fits us in terms of weight. So as an example, our average weight per shipment is still way too low compared to our peers. So our sales team understands that now.So they are focused on getting the heavier shipments that makes sense. And getting or reducing the number of low weight shipments that we're getting. And we have a solution because we have GFP us, okay, the partnership we have with UPS. So if it doesn't fit us our LTL maybe it fits our friends at UPS package, and that GFP, we're growing that, okay, with our partner, UPS, makes sense for them, makes sense for us.
Sure. Now, that's helpful. And then the last thing I have for you guys is kind of on the maintenance, are you seeing anything like your customers when you're looking at picking up good freight or picking up a good customer contract. Is there a pushback on the equipment? Are there breakdowns on that old equipment that's kind of hampering your ability to win?
For sure. The fact that we run an old fleet is not helping us. It's not helping us with our drivers. It's not helping us with our customers. This is why day one, when we go in there, we say we have to improve that asap. Now because of this supply chain mess and it's tough to get the trucks in okay? But you're right. I mean it's not easy, okay, because it affects the service, right? So you got an old 2008 trucks, and it breaks down, well, the service is going to suffer, right?So this is why a good carriers and our peers, they don't run old trucks like we do, us today, right? Because when the truck breaks down, the service breaks down as well. And also the driver is mad. It's normal. So we're addressing that as we are replenishing okay, our truck fleet with newer trucks, right? So by the end of '22, we're still driving 2012, 2013, think about that, we're in 2022. So we're still driving 10-year-old trucks. But today, we drive 2006-2007, think about that.I mean, we're in 2022. So we are improving, okay, but '22 is not going to be enough. So we have to keep improving in '23 so that we don't have service issue because the truck is a problem.
And your last question for today comes from Tim James with TD Securities.
Congratulations on a great quarter. Just going back to a question recently. You were commenting on some of your peers being in a position of growth, while TFI is doing some cleanup. Now would you agree that this has and really is a great time, in fact, to be doing that cleanup as opposed to just trying to push growth, I would think it's actually very opportune to be in that position?
Yes, it is. It is because we're lucky in a sense that the market condition are great, okay, that our peers are busy growing their business, whereas us, we're doing the cleanup. It would be nicer if we would be in a position to keep, in order grow organically as we speak. But if you have to be in a clean-up position I agree with you. This is the best timing to be in a position of having to do some cleanup, right? Because some customers deals don't make any sense.So yes, for sure, we got guys that just walked away, but where are they going to go? Well, there's always maybe a solution, fine. Some of them cannot find a solution. So it's -- I agree with you, it's the best timing. It's just sad that us because we're stuck in doing all this cleanup okay? Well, we can't grow organically too much because if we add 1,000. [Technical Difficulty].
I apologize, Alain Bedard's line was disconnected. Just one moment, please. Ladies and gentlemen, you can continue to hold if you would like, in case Mr. Bedard rejoin the call. Thank you.You're now back online, Mr. Bedard.
Sorry about that. I don't know what happened here. So...
Alain, it's Tim James here. Can you hear me?
Yes. Yes. Yes.
Yes. Now, you covered off my question just regarding the kind of timing and the industry backdrop and that it's actually not a bad time to be in this cleanup mode.
No, not at all.
Maybe I'll move on to my follow-up question, if I could. And I just want to return to the idea around potential businesses or when you consider divesting certain operations. And you indicated that when you feel you can't grow a business, then it would be considered for sale.When you say grow, do you mean in terms of revenue or earnings? I mean, could a lower declining revenue business but that has improving efficiencies and opportunities for margin expansion, and therefore, in turn, earnings growth, could that still be a fit for TFI?
Yes. So on that, when I say when we can't grow it, let's say, we cannot do M&A, okay? So given you our Waste division that we sold 5, 6 years ago, is I was unable to grow it, okay? Organically, yes, to a certain degree, but really through M&A, it was impossible. And we were just sitting on the fence in terms of size. So I mean, it's always a global look that we think. So some of the investors are asking about our U.S. TL, for sure, we could grow that. Okay. For sure, we could do some M&A, okay? But right now, the problem we have is that our return on invested capital is below our cost of capital.So the story when we talk to our U.S. TL guys is that, guys, we have to move that up. And we have the opportunity right now because the market for U.S. TL, when we look at our peers, is just on fire. And us, I mean we now understand the opportunity for us to improve those results, and then we'll be in a much better position, okay, down the road.For sure, there's always can we grow it organically or can we grow it through M&A. If you look at TFI's history of growth, it's always been done mostly through M&A because it's way faster, and we have the talent to do it. I mean it's not all companies that could grow through M&A successfully, right?
And there are no further questions at this time.
All right. So thank you very much, operator, and my thanks to everyone for listening us in this morning. As always, we appreciate your interest in TFI International, and look forward to keeping you posted on our progress throughout the year. Please feel free to reach out with any remaining questions. Stay safe. And have a great day. Thank you again. Bye.