TFI International, Inc. (TFII) CEO Alain Bedard on Q1 2022 Results – Earnings Call Transcript

TFI International, Inc. (NYSE:TFII) Q1 2022 Earnings Conference Call April 29, 2022 8:30 AM ET

Company Participants

Alain Bedard – President, CEO & Chairman

Conference Call Participants

Ravi Shanker – Morgan Stanley

Jordan Alliger – Goldman Sachs Group

Konark Gupta – Scotiabank

Brian Ossenbeck – JPMorgan Chase & Co.

Benoit Poirier – Desjardins Securities

Kevin Chiang – CIBC

Thomas Wadewitz – UBS

Cameron Doerksen – National Bank Financial

Scott Group – Wolfe Research

Kenneth Hoexter – Bank of America Merrill Lynch

Walter Spracklin – RBC Capital Markets

Tim James – TD Securities

Bascome Majors – Susquehanna Financial Group

Jason Seidl – Cowen and Company

Operator

Speakers, you are now in the main room and you can proceed with your conference.

Alain Bedard

Thank you, operator. And I would like to welcome everyone to today’s call that’s been delayed for about 15 minutes. I’m really sorry about that. But yesterday, after the market closed, we released our first quarter results, we entered 2022 in the strongest position in our company’s history, and the year is off to a very strong start. The results we are now reporting reflects the broad diversification of our business, the ongoing successful integration of TForce Freight and strong execution across our entire company. In fact, all of our 4 business segments grew operating income again this quarter. This led to a strong overall performance, including first quarter adjusted diluted earnings per share of $1.68 and which is more than double compared to a year earlier. And today, we’re raising our outlook for the full year.

First of all, we have multiple internal opportunities ahead to further enhance results. These ongoing opportunities help explain our current strong performance despite macro-related headwinds that I’m sure you have heard, included higher inflation, elevated energy prices, rising interest rates, labor shortage and a global supply chain challenges.

While we continue to drive both revenue and cost synergies following last year’s major acquisition, we’re also maintaining a relentless focus on what we at TFI International have always done best. As you’ve heard me say many times, we get the fundamentals of the business right by focusing on the details and always looking to maximize efficiencies. We run our business to produce free cash flow, generate strong returns on invested capital and grow our earnings per share. This helps us achieve our ultimate goal which is to create long-term shareholder value, including through the identification of strategic acquisition opportunities while returning excess capital to shareholders whenever possible. It is this consistent operating philosophy that we are there to along before the pandemic that provides us with confidence that we can continue to successfully navigate the constantly changing macro landscape.

Let’s now review our strong first quarter results, which serves as a testament to our guiding principle and our many ongoing internal opportunities to unlock value.

Our total quarterly revenue climbed by more than 90% year-over-year to $2.2 billion. Freight volumes were generally solid across B2B, and we capitalized with appropriated pricing. More important to us given our focus on profitability, our operating income reached $220 million during the quarter, that’s an increase of 116% over the prior year. And as I mentioned, our adjusted fully diluted EPS of $1.60 was well above the prior year’s $0.77 and that’s up 118%.

Our net cash from operating activity was a solid $138 million, although down 11% versus the year ago quarter due to elevated working capital needs associated with higher fuel surcharges. As I’ve said before, our value — we value our ability to consistently generate cash flow throughout the cycle. This permits us to strategically and profitably grow the business over time through internal investment and through our disciplined approach to acquisition.

Turning to our 4 segments. We’re very pleased with the results, especially given our emphasis on profitability and operating income, as I mentioned. All 4 segments generated operating income growth well into double digits, and all 4 produced stronger results on invested capital than the prior year, as I’ll now discuss.

Our P&C segment represents 7% of total revenue. Despite a 5% decline in revenue before fuel surcharge related to reduced Canadian B2C activity, we saw a very strong 42% increase in operating income to $26.1 million, with the operating margin up a robust 700 basis points to 20.9%. This strong profitability reflects our focus on driving yields across both B2C and B2B. Return on invested capital for our P&C business was also up considerably coming in at a strong 26.4% during the first quarter, which was 600 basis points above the prior year period.

Moving along to our LTL segment. It’s 45% of total revenue, generating $835 million of revenue before fuel surcharge during the quarter. This was relative to $132 million in the prior year as the newly acquired TForce Freight continued to perform. Our operating income of $95 million, was up from just $22 million a year earlier. This reflects an operating margin of 11.3%, and therein lies one of the many internal opportunities we have to optimize operation and grow profits as we approach the 1-year anniversary of this important acquisition.

Taking a closer look within our LTL business, our Canadian operation benefited from strength in industrial markets, grew revenue before fuel surcharge by 8% and produced an impressive operating ratio of 79.1%. OR was 410 basis points better than the prior year. Return on invested capital was also strong at 18.4%, up 300 basis points over the prior year.

In the U.S., our LTL business was created with the acquisition of UPS Freight last year remains right on track in terms of integration. We generated revenue before fuel surcharge of $696 million and a 90.7% OR in what has historically been a seasonally weakest quarter for the business. Our return on invested capital for U.S. LTL is just — in just the first 11 months of our ownership was a remarkable 22%. Next up is Truckload, which is 20% of our total segment revenue.

Our Truckload revenue before fuel surcharge came at $516 million, up 22% year-over-year. Operating income climbed 42% to $71 million, and our operating margin expanded further to 13.8%, up 200 basis points over the 11.8% a year ago. We believe that our TForce Freight Truckload division acquired last year has now favorably turned the corner.

Within our Truckload segment, starting with our U.S.-based conventional operations, we saw strong topline growth with revenue up 23% to $192 million. The OR improved considerably to 89.1% relative to 93.4% a year earlier, and this is a great example of the self-help nature of our opportunities. Similarly, our return on invested capital was 6.5%, an improvement over the prior year’s period, 5.5%.

Looking next at Canadian-based conventional Truckload, we saw revenue before fuel surcharge climbed a very strong 37% to $76 million. This business produced an adjusted OR of $85.6 million, which improved by 250 basis points and our return on invested capital of 11.9% was up slightly.

Rounding out our Truckload segment, Specialized operations also saw considerable growth with revenue before fuel surcharge up 17% to $250 million, benefiting from strength in industrial end market. Profitability improved as well with the adjusted OR of 84.4%, representing a 200 basis point improvement with return on invested capital expanding from 10.9% to 11.7%.

Our fourth business segment to discuss is Logistics, which is now 20% of total segment revenue. Logistics also saw solid growth over the past year, with revenue before fuel surcharge up 15% to $435 million.

Operating income grew to $35 million, representing an 8% margin, up 30 basis points. Return on invested capital for Logistics remained very strong, climbing further to 20% relative to 18.6% in last year’s first quarter.

Well, let’s now turn to our balance sheet. We grew stronger during the quarter even as we return capital to shareholders and invested in our fleet and continues to be a pillar of strength for TFI International. We generated free cash flow of $92 million after higher equipment purchases relative to last year given our success in deploying capital to update our fleet and ended March with a debt to adjusted EBITDA ratio of 1.72, an improvement versus 1.89 at the beginning of the year.

During the quarter, we further strengthened our financial profile with a private placement of $300 million of notes with maturities of 10, 12 and 15 years and corresponding fixed interest rates of 3.5%, 3.55% and 3.8%. The proceeds were used to refinance a maturing term loan and therefore, it was a leverage-neutral transaction.

Following this move, at the end of March, 78% of TFI International debt is fixed rate, excluding equipment financing and with the weighted average interest rates of 3.45%, and a weighted average maturity that has grown to 8 years.

Lastly, I’m going to provide an update on our full year outlook, which assumes reasonably stable macro condition and benefits from our own ability to execute on what I’ve mentioned, which is what we control internally. We have numerous opportunities to enhance efficiencies by simply adhering to our operating principle that emphasizes strong execution and our prioritization of profitability and cash flow over simple growth. More specifically, in addition to continuing to optimize TForce Freight following last year’s acquisition, we plan to especially focus on improving density, increasing our service level, optimizing our pricing, increasing driver retention and a concept that we call freight that fits. In other words, we strive to take on only the right trade for our valuable network.

For a full year 2022, we’re raising our outlook for earnings per share to a new range of $6.50 to $6.75, up from $6.25 to $6.50 previously. We continue to see net capital expenditure in the range of $325 million to $350 million, and we continue to forecast free cash flow in excess of $700 million.

I’ll wrap it up with a summary of our first quarter performance. We entered 2022 in the best position in our company’s history, and the year is off to a very strong start. What I find most encouraging is that despite the many macro disruption over the past 2 years, our team has stayed focus, we’ve executed in accordance to our guiding principle, and we have significant opportunities ahead to create shareholder value. Best of all, so many of these opportunities are within reach regardless of economic condition because they involve internal execution and doing what we do best in our quest to create and unlock shareholder value and return excess capital to shareholders whenever possible.

So with that, operator, if you could please open the lines, we can now begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question is from Ravi Shanker of Morgan Stanley.

Ravi Shanker

As you know, kind of there’s a bunch of concern about end of cycle and kind of where things are going and such. Your stock was one of the best performing in the last couple of years. So congrats there. But it has pulled off with peers in recent days and your stock is now at a very attractive multiple, especially on your new valuation. And some of your peers have kind of helped us understand what trough EPS might be to kind of put a floor on the multiple and where they think the stock would be. So a long way of asking you kind of how cyclical do you think the business is and based with what you see right now, and where do you see the cycle, where do you think trough EPS might be for TFI in the light of your new 2022 guidance?

Alain Bedard

Well, you see, Ravi, thanks for your question. If you look at TFI, if you look at 45% of our revenue is LTL, about 7% is P&C and I would say about 20% is our logistics. I mean this is not very cyclical as compared, let’s say, to a truckload operation. So to say that TFI — I would say that TFI is more in a noncyclical event that, let’s say, a normal truckload operation.

But that being said, Ravi, one thing that it’s more important when you look at TFI is that with this UPS Freight acquisition last year. We’re just starting to scratch the surface. We’ve got so much to do over there. I mean we said, okay, we’re going to bring this company to a 90 OR within a year or 2. And finally, I could say that the team there has been really doing a fantastic job. And we brought this company to about a 90 OR within a year. But there’s still a lot for us to do because I believe that this could be an ADOR company within the, let’s say, 2 to 3 years, we have to drive less miles. We have to pick up more freight. We have to pick up more heavy freight.

So globally, to answer your question, I mean, us at TFI, we’ve got so much to do in improving our U.S. LTL network in the next year or 2 that even if there’s — because a lot of people are talking about this freight recession, but let me tell you that when I look at our results in April, we don’t see a freight recession at all. What we see is shortage of drivers, shortage of power. Customers are asking us, can you please help me in servicing my customer? That’s what we’re seeing now. Well, maybe in 6 months, a year, 1.5 years, that could be different. But what we’re seeing now is that. And us with our TForce Freight, we’ve got so much to do. And don’t forget that with this kind of an environment, it helps us with our M&A, right?

So we’ve not been too busy M&A-wise in Q1, but you should see us a little bit more active in Q2 and in Q3. And the most important thing of M&A is buying back our own stock. So like you raised the question about our stock price. Our stock price is the shit. It’s terrible, right? So — but that is the beauty is that helps, it creates an opportunity for us to do M&A in our own stock, which is the NCIB.

So all in all, we feel really good about what happened in Q1. When we look at Q2, what we can see so far is that we’re going to be really, really busy. And we have lots of faith in our team. And when I look at my peers in the U.S., I mean, everybody in our industry has done really, really well so far what I’ve seen.

Ravi Shanker

Great. Maybe as a follow-up, I know it’s your smallest segment, but P&C was a little bit of an outlier versus the other segments in terms of the year-over-year revenue change. I know there’s been some large customer shifts there in recent quarters, but can you just help us understand what the near-term trajectory of that business is like.

Alain Bedard

Yes. So what’s happening, Ravi, there is that our B2C is slowed down, okay, because the largest e-commerce player in North America is not one of our customer. And our customers have been slowed down. But our B2B has improved, right? Since Canada is reopening more and more of the brick-and-mortar guys, stores, the malls and all that. And this is why when you look at our profitability, it just went through the roof, okay? Because of that, I mean, for sure, if you look at our density, B2B has always been way better, okay, than B2C. Now what do we see in the next 9 months for ’22 in terms of volume, again, we see us losing a little bit of volume on B2C and trying to replace that with more profitable B2B business.

Now who can run a 90 — a 20-point or OE division like that in Canada, well, nobody. I mean, we’re the only one. I mean it’s — our team there, the Canadian team on our P&C are doing a fantastic job. Yes, our Loomis operation, which is one of our most significant operation, has lost tremendous volume because of the B2C thing there. We anticipate that Loomis will lose more volume during the course of the year, but that will be our ICS and our TFIS, which is mostly B2B, are going to fill up that. So we anticipate ’22 for our P&C to see some drop in volume again for the rest of the year, but profitability is going to go up again year-over-year, Q2, Q3 and Q4.

Operator

Your next question is from Jordan Alliger of Goldman Sachs.

Jordan Alliger

You touched, I think, briefly in the prior question about where you’d like to take the LTL margin over time. But can you give an update perhaps on the timing and trajectory as you’ve done in the past on U.S. LTL and the improvement timing?

Alain Bedard

Yes. Thank you, Jordan, for the question. Let me tell you. I mean, when we talk to our team there, the goal is to get to an ADOR within the next 2 years. I mean now if you ask me where are you going to be at the end of ’22? It’s difficult because now we’re having to touch the operation, okay? We’re having to replace our equipment, our trucks, which we did about 500 so far, but we have to do another 800 to 1,000 in ’22. And this is based on supply coming from the truck manufacturers, which is always a question mark. So I would say that we know what to do. We have to execute it. And the team, like we would say they’re drinking the Kool-Aid, they know what needs to be done. And slowly, our focus is drive less miles, pick up more freight and reduce the claims, reduce all these different things that in the past, we were not really focused on to try to create this lean and mean operation in our U.S. LTL operation.

When you look at our Canadian operation, which is unionized as well, not 100%, but we were able to come up with less than an AUR in Q1. On the Canadian environment, which is, if you look at our MD&A, you look at the quality of revenue of Canada versus U.S. is like day and night. So to me, this is why I feel pretty good that we’ll obtain this goal over the next 24 months because we know what to do. It’s just a matter of executing it, and the team gets it. They know what to do. And we have a very, very great team there. I’m convinced that we’ll make it happen.

Jordan Alliger

And then just on Canada LTL, I mean, what’s the volume outlook there? Like it’s been a few negative quarters.

Alain Bedard

Yes. Volume is above flat, Jordan. I mean if you look at our volume in Q1, we were down about 1%. What we anticipate for the rest of the year is about flat, maybe plus 1%. So we got some of our divisions that are up. Some of our divisions are down a bit. So this is why, to me, you got to think about our Canadian operation with about flat volume for ’22. But that being said, I mean, we’re going to run this Canadian LTL with a fantastic OE. I’m telling you, I was just looking at our month of April. I mean we’re just running on all cylinders and reducing costs and being more efficient.

Operator

Your next question is from Konark Gupta of Scotiabank.

Konark Gupta

So maybe I wanted to kind of dig in to your guidance raised here. So congrats on a great quarter and upgrading guidance here. How much of your new guidance is dependent on continued pricing power, consumer demand, buybacks and the M&A.

Alain Bedard

There’s no M&A in there, Konark. No M&A, except what we’ve done in Q1, okay? So for sure, that may change based on all M&A that we could do in Q2 and in Q3 or in Q4. So there’s no M&A in this guidance. In terms of pricing power, nothing more than what we’re doing now. right? So it’s just a cost. We believe that we could shed some costs again, okay, in Q2 and in Q3 to get to $650 million to $675 million. And you know what, maybe we’ll get to $7 by the end of the year, who knows, right? So us, as I’ve always said, we’re very, very conservative, and we want to stick to our mission that’s always been under promise, but over deliver.

Konark Gupta

Makes sense. And as a follow-up, I think, to the earlier question with respect to how and where can be an extra, et cetera. I wanted to ask you, what changes are you seeing in your key lanes, especially in the U.S., especially Van spot rates, drive and spot rate are coming down, obviously, and that’s creating a lot of panic.

Alain Bedard

Yes. But I understand what you’re saying, but the contract rates is where our business is, right? So we’re not a spot rate company. So we are more like a — so if you look at our business, I mean, we run about 1,300 trucks in our U.S. Van division. 1,300 trucks that are dedicated, which is medium to long-term contract, which we’ve been working on, okay, because some of these contracts didn’t make any sense, and that’s why we were losing so much money with TForce freight which is the UPS Truckload division that we bought a year ago. So this is starting to do well. And if you look at our temperature control there again or over the road, we’re not being fan of spot. So this is not affecting us.

I think that what we have to look at is contracted rate, okay? And those rates are great right now. And when I talk to Greg, he says, I’m always, always even now 115%, 110% overbooked. I mean I’ve got 10%, 15% of my load that I cannot service right now, right? The big issue is that there’s a lot of issues, finding drivers, okay, and finding trucks. And that’s what create a little bit of this. Okay. So yes, spot went down, okay, big deal. But it’s still way ahead of what it was. And let’s see what happens in Q2 and in Q3. Because if you look at based on what I’m reading, the level of inventory of most of our — the shippers and the users in the U.S., the inventory are really, really low. So I mean, we feel good about the rest of ’22. Absolutely. Really, really good.

Operator

Your next question is from Brian Ossenbeck of JPMorgan.

Brian Ossenbeck

So I just wanted to dig into the — some of the self-help here you’re talking about there, especially on the — improving the density, improving the pickup. Can you still feel like you can do that even if we do get a bit of a slower environment on the volume perspective, I guess, how comfortable or how confident rather are you that you can still improve those things when we might be facing a bit of a deceleration. Or when it comes to the demand side, are you still able to accomplish that in maybe a softer market?

Alain Bedard

Yes, I think so, Brian, because when we look at the number of miles that we have to travel in the U.S. between each and every pickup. It doesn’t make any sense. It’s way too much, right? So this is us. This is us, okay, organizing the work and servicing the right customer. So let’s say that you take one of your hub, okay? And you have to deliver about 70 miles away from your hub. So why are you doing that, right? So let’s focus on from your terminal, let’s try to service within the next 5 miles, within the next 10 miles, within the next 15 miles. But why would you go 75 miles away. I mean us in Canada with such a lower density than in the U.S. because if you exclude Toronto, Montreal and Vancouver, I mean the density is terrible, right? U.S. is very different. But if I compare the number of miles that I’m doing in the U.S. between each and every stop versus just the example of Canada. It’s just crazy. We drive more than 6 million miles a month to deliver freight, excluding the linehaul. And to me, we shouldn’t do no more than 3, maybe 3.5.

So this is us. This is us, the management team and the sales team and working and trying to understand that, guys, we want drivers to pick up freight not to drive a truck. Now they have to drive the truck between each and every sub, I get that, but we have to pick up more freight per stop, and we have to drive less miles and guys, this is what we need to do. But that takes time because it’s a change. It’s a change in culture and mentality that we don’t want to be Jack of all trade master of none. We don’t want to travel 75 miles to deliver 2 skids of freight et cetera, et cetera.

So this is how we’re going to do that, Brian. It’s slowly terminal by terminal, okay, looking at the footprint, looking at the ZIP code that you’re servicing and trying to get more freight closer to your terminal versus running 75 miles away to deliver 2 skids of freight. So this is us. This got nothing to do with recession or no recession, it’s guys, we have to be way more efficient, create better density.

If you look at our P&C, why are we so good? Because we get more money from the customer? No. As a matter of fact, our revenue is down and our revenue per shipment is also down. But we made more money. Why? Because we improve our density. So it’s the same story, Brian, that we have to work with our team there. As a matter of fact, we’re having another meeting early in May with Paul and the rest of the team, and this is what we need to address, is pick up more freight, heavier freight, okay, more freight per stop and drive less miles. I mean, this is not like trying to go to Mars. This is just normal LTL business.

Brian Ossenbeck

Understood. Just a quick follow-up there. Would you think any loss of volume that might not fit the network in terms of pickup and delivery catchments is there? Would that be more than offset by profitability in terms of reduced miles and better operations?

Alain Bedard

For sure, Brian. Absolutely. I’m convinced of that. And also, Brian, don’t forget at the same time, we have to improve our service. Our service is not like the best peers in the U.S. Why is that? Well, when you run an old truck like we do, I mean, not so much now than a year ago, but the truck breaks down, the service is not there, et cetera, et cetera. So we have a lot of other things also that we have to fix at the same time. So right now, we got 500 trucks. Well, that’s only 10% of the fleet. So this year, we’ll get probably between 800 and 1,000 new trucks, okay? We are investing, okay? And we’re going to do well. But to me, if you look at just our P&C in Canada, lost a little bit of volume, a little bit on the revenue per shipment, and we still did way better than last year, right? If you look at my LTL in Canada, my shipment count is about flat, down a bit. But we have pricing power there, okay, versus last year. We’re seeing the same thing in the U.S., although you don’t see it because we can’t compare because we didn’t own the company last year, right, in Q1.

So that’s what I’m saying is that we have a good 24 months working with the team there to get this operation lean and mean so that we have drivers picking up more freight, driving less miles. But to me, that seems simple, right? It’s a lot of work when you have 200 terminals.

Brian Ossenbeck

Right. One quick follow-up on just the OR and the 80% in the next couple of years. We have a Teamsters negotiation coming up before too long. So this will be the first one, I believe, with TForce Freight involved with that. Maybe you can just give us some high-level comments in terms of how you see that playing out? And if there’s any sort of initial discussions as you go inside of that in the back half of next year?

Alain Bedard

For sure, Brian. We’re getting ready for that. I mean already if you compare the base salary that we have versus the other 2 unionized carrier. I mean, TForce Freight has got the base salary the most expensive base salary that we do have. But what I see, though, is that in some markets, our base salary is too low, in other markets, our base salary is too high. So — and this is because it’s a kind of a national grid that we have that was done because the last discussion or negotiation with the union was mostly done by the UPS people. So this is going to be a major change for us because now we’re getting our operational people involved in the next discussion with them. There’s no lawyers. We don’t want lawyers in there. We want operational guys. We want our labor guys, our HR guys. And for sure, we’re going to have a very good discussion with those guys, like we do in Canada.

Our goal is to pay our people fairly, okay? But most importantly, what we ask of our managers is we have to manage our people in the right way. So if this driver drives 300 miles a day to deliver freight, this doesn’t make any sense. It’s got nothing to do with the driver. It’s got something to do with me, the management team. We have to manage people better so they don’t have to drive 300 miles in a day to deliver 15 shipments, right? So I mean, as we feel really good. We’re working now, okay, how to get ready for the next discussion. And we want to start, if possible, that very early so that we have a good discussion with our guys.

Operator

Your next question is from Walter Spracklin of RBC Capital Markets.

Walter Spracklin

So just focusing on now the current buyer seller market, you mentioned M&A, and I want to come — that will be my second question. My first question though is that it seems to be right now a seller’s market. And if you if you’re contemplating selling right now is pruning or improving the overall quality of your asset base by getting rid of some of the — getting rid of lower return businesses. Would you contemplate that as you get ready for reentering the market on the buying side? Could you envision a larger event with Truckload? And is that something you’re contemplating in this environment right now?

Alain Bedard

You see, Walter, we have always been guided by this principle. You buy on bad news and you sell in good news, right.

And right now, the problem, Walter, is that it’s all bad news about trucking, right? In the month of April, our stock went down like 20%. And my mistake was before we got to the blackout, okay, I said to our VP Finance, Martin, said Martin, okay, we got another 165,000 shares to buy, just buy that, and we’ll just wait. That was a major mistake. I should have told him by 1 million shares. Okay. So you buy in bad news, you sell in good news. Right now, it’s all bad news, right, about trucking. So to me, it’s more time to sell — to buy than to sell. But that doesn’t mean that if someone, a very strategic, smart transportation company approaches us and say, “Hey, I mean, maybe this asset doesn’t fit you guys, right? Maybe it would fit me better, right?” So for sure, we’re not going to say no to that, right? So there’s always walk through discussion within TFI because that’s my job really is M&A, right? That’s what I do all the time. Besides making sure that my EVP are really on the clock, right? So let’s see what happens in ’22, right?

Walter Spracklin

Yes, that’s exactly where I was going — I mean selling in the sense that people are desperate right now for, like you said, power and people selling that right now might fetch a nice bit if you got enough.

Alain Bedard

May be.

Walter Spracklin

Yes. Okay. On the M&A side, you mentioned ramping up Q2, Q3. Is this kind of tuck-in ramp up? Or are you contemplating something a little larger, maybe perhaps talk a bit of, is it LTL tuck-in? Or…

Alain Bedard

No, no, Walter. I mean, what we’re working on right now, and that will be announced in Q2 and in Q3 is mostly in our logistics sector in the U.S. or our specialty truckload in the U.S. or maybe 1 or 2 transactions in our nice VAN division in Canada. Because if you look at what we’re doing with our VAN division in Canada, I mean this is unbelievable what the guys have done in Q1 in the winter. Don’t forget, this is winter. This is MPG down 15% to 20%. I mean the guys are doing fantastic. So maybe a little bit of specialty truckload in the U.S., but these are all tuck-ins, Walter. There’s nothing big, nothing big.

Operator

[Operator Instructions]. Your next question is from Scott Group of Wolfe Research.

Scott Group

I wanted to just get a couple more things on the LTL side. Just maybe how much of the freight, how much of the tonnage do you think that you might need to call. Are there any term — any update on terminals to close or sell? And I think in one of the earlier questions, you were talking about a 2022 OR expectation. I don’t think you actually gave a number. So I don’t know if you have any thoughts there.

Alain Bedard

Yes. In terms of terminal, okay, Scott, what we’ve done so far is we closed down a leased terminal in Chicago that was taken over by another trucking company as of — I think it was April 1. We also have 2 small terminals in West Virginia that will be sold to another trucking company. We are in the midst of buying a terminal in California that’s owned by another trucking terminal because we are right now — we own one, but we’re also leasing one in that city in California. So we’re buying another one.

So there’s nothing major so far in the real estate side of the business, okay? But I mean, we’re working on it. I mean these things take time. I mean we’re looking at buying another terminal right now that we’re leasing because we hate to lease terminals if we can own it, right? So — yes. Real estate, nothing so far major except this lease in Chicago that we got away from, which was $1 million a year that we didn’t really needed.

Scott Group

The OR question?

Alain Bedard

The OR question, Scott. I mean like I said earlier, we strongly believe, okay, that this company, the U.S. LTL could be an ADOR company within the next 2 years. Now can we be running a quarter in Q4 at 87%, I hope so, right? But what I would say today, because it’s a huge job to change all of this, okay, within a quarter or 2 quarters, right? So you need the sales team to be focused on the right thing. You need the ops guys to change the approach. And we’re not Jack of all trade and master of none. So we’ve got to be focused on driving less miles and all that. So this is — you start with a CEO and then you go to the VP and then you got to go down to the terminal managers. And that’s where we’re at now, okay? We’re at the terminal manager. So there’s 150 to 200 of these guys.

So that’s why it takes time. So I cannot commit, okay. But one thing, Scott, that you got to keep in mind is that we said that within a year or 2, this should be a 90% OR company. And we’ve done that. The team has done. They’ve delivered. We were always worried about Q1 because Q1 in the old days was a disaster of a quarter that the guys did pretty well compared to what was done prior years. So we feel good, but I mean it takes time to readjust and correct. We’ve built our Canadian LTL over years. So — but this is not the U.S. U.S. is much bigger. It takes more time.

Scott Group

Okay. And then just one more on the M&A side. When you — and it sounds like tuck-in deals in the near term, as you think about larger deals over time, any thoughts on where you want that to be? What types of businesses?

Alain Bedard

Well, I can’t say too much about what type, Scott. But what I could say is that everything that’s going to be big is got to be from the U.S. I mean, we can’t do anything big in Canada, right? So something of size has to come from the U.S. And it may happen in ’22, maybe, but probably more like in ’23, and we’re getting ready for that. I mean, for sure, we know what we’re going to do. We have a plan. But like everything else, there’s never only one target. There’s always more than 1.

Operator

Your next question is from Kevin Chiang of CIBC.

Kevin Chiang

I was wondering if you could maybe break down within your P&C, you pointed to packages being down roughly 6% year-on-year. What amount you would say was from purposeful demarketing as you kind of improve the revenue versus maybe just a slowdown in B2C. And then you did mention your B2B is helping offset that from a weight perspective. So the overall tonnage is flat. Is that kind of the trend you expect that from a from a tonnage perspective, your B2B will offset the B2C even as we progress through the rest of this year?

Alain Bedard

Yes. So Kevin, our plans really started in the summer of ’21, okay? So in the summer of ’21, the team — our team said, you know what, we’re coming into Q4 last year, which is ’20, we were overwhelmed with volume. I mean, we didn’t know what to do. We had to get the freight with agents and all that. We don’t want to repeat that because these guys, we can’t control the service and sometimes, okay, because we were stuck, you had to pay more than what the customer is giving you. Okay, because you were just anointed with volume. So we said, guys, let’s get ready, okay, for Q4, which the guys did a fantastic job by saying to some shippers, “No, we don’t want this region, this ZIP code, okay? Because we have to deal with an agent. And that guys a crook, who wants to charge us more than what you guys are paying us,” right? So we said, “Guys, no, we don’t want that.”

So this was Q4, and it’s also boiled over into Q1. So if you look at our profitability improving, okay, some of that lost volume is because we didn’t want it, okay? Some also is because of the largest e-tailer is gaining market share in Canada, and our customers are losing. So we are losing also a little bit of e-commerce freight that we didn’t plan on losing. But at the same time, okay, because Canada is reopening in Q4 and in Q1 and probably it’s all complete in Q2 now, okay, is that we’re getting more of our B2B because consumer, they like e-commerce, but now that they can go to the malls, some of our mall customers are getting busier. So we get more B2B and our B2C B2B has shifted, right? So if you look at Loomis, Canpar, for instance, these guys went from 56% or 58% B2B, okay, a year ago, to 70% B2B in Q1 of this year, right?

So that’s the change. So we are losing a little bit of e-commerce, okay, to competition, I would say. And some of it also is because we didn’t want that volume because we’re focused on profitability. Now when we talk to our guys in Canada, our P&C guys about Q2 and in Q3, it will probably look the same as our Q1, okay? So a little bit less volume, but way more profitable, okay? And the B2C, B2B improvement, growing B2B and less of B2C will continue probably in Q2 and in Q3. That’s where we’re standing today, I would say. When I look at our month of April, our volume again is down, but the profitability is similar to what you see in Q1, improvement.

Kevin Chiang

Right. That makes sense. Maybe my second question, and I know you do like to be conservative on your outlook. But if I just take your Q1 EPS and annualize that, you’re already at the top end of your revised EPS guidance and Q1 is historically a seasonally weaker quarter for you. I know your business is different than what it looks like pre-pandemic. But I guess where do you think some of the conservatism might be when you think of maybe getting an EPS above $6.75 just based on what you printed in the first quarter here.

Alain Bedard

Well, see, Kevin, it’s a guiding principle of TFI. I mean we’re in business to deliver freight, but we also have to deliver results to our shareholders. But I believe that we should always under promise and over deliver because everything that I’m reading, okay, is that, oh, it’s a big freight recession, everything is going to be bad, blah-blah-blah. So this is why we are very conservative on our guidance, right? We don’t want people to invest in TFI thinking that we’re going to do $7.50, okay, even if we believe that we could do $7.50 a share. So let’s be conservative. Let’s be very conservative because of all these different clouds. Because I don’t want to say something like a $7.50 as an example. And we come in at $6.75 and then the guys say, hey, Alain you — what were you talking about, right? So we are conservative. And let’s see when Q2 comes out, okay, maybe then we, again, will revise our guidance, depending on what happen in Q2.

Kevin Chiang

Your next question is from Ken Hoexter, Bank of America.

Kenneth Hoexter

Just want to follow up on exactly what you’re talking about there about the signals of the market, right? So you mentioned early on that right now, contract is still strong, and it seems like contracts really kind of started ramping up maybe at the end of peak season last year when spot ran up kind of after peak season. So I guess how do we not read into the fact that spot question earlier about spot rolling is a precursor of contracts coming over. I guess I just want to understand when you think about the Truckload business and what that could mean on the contract side. I know right now, it’s good. But is that a signal? Or is there something different here that you see that the spot market is not telling you a signal about the future of the market?

Alain Bedard

You see, Ken. It’s — if you look at history, you are absolutely right that when spots start to come down, contract rates will follow, et cetera, et cetera. And that history is based on one thing that does not exist today, which is availability of power and availability of people, right? So for us, Truckload in the U.S. is a very small portion of our business. And when we look at that, we say, Greg, listen, I mean we’re not going to keep running this operation with a 6% return on invested capital. So we’re going to do more logistics. We’re going to do this. We’re going to do that. We’re going to sell the equipment, make a fortune selling the equipment to the other guys. So to us, we believe, okay? And when I listen to our peers, I think they’re the same as we believe that something is different than the last 40 years is that because of all the supply chain issue, you can’t get the power, you can’t get the people.

So yes, the spot rates are down a bit, okay. But when we talk to customers, it’s — we don’t really talk too much about price right now. We talk more about can you provide the service? Now that may change. Okay. That may change maybe in Q4 although that’s a busy season or maybe in Q1 next year, who knows. But for us, I mean, our focus is really the day-to-day thing there into shaving our costs. Because if you look at our U.S. TL operation, I mean we’re doing better, but we’re not doing great, right? So we still have a lot of work to do there, okay, in terms of shedding costs and being more efficient, right? And this is mostly because of the TForce Freight Truckload acquisition that we did that these guys were just losing a fortune on and it took us a year to get rid of all these stupidity there.

Now the future of our Truckload U.S. base, maybe contracted rate will follow spot, who knows. But I think that there’s something different today versus historically is that you can’t get power, you can’t get people. So — and the small trucker’s also is in a very difficult position. When I listen to my peers on that, I agree with them. So it’s not probably the same story. Well, we’ll have to see. Time will tell that, Ken.

Kenneth Hoexter

Okay. And your thoughts on logistics from my follow-up, the logistics. Logistics and last mile, I guess that’s where you would see presumably on some of the managed services and logistics side, the peaking out. Are you still seeing acceleration? It seems like that maybe sequentially. Obviously, normally fourth quarter to first quarter, you get the deceleration. But is that something where you’re still seeing the acceleration in demand.

Alain Bedard

Oh yes, absolutely. I mean, our logistics guys. But don’t forget, we don’t do much logistics or brokerage in Truckload. We do some, but very little.

Kenneth Hoexter

No. No. Yes, it’s over in logistics and last mile.

Alain Bedard

Yes. Yes. Yes. So it’s mostly our last mile operation. So we are doing really, really well. I mean in the U.S. We just acquired a small company in California, Unity Courier. And that’s going to do really well. Our Medical division is also doing really well in the U.S. So no, we feel really good about our logistics sector. It’s 20% of our revenue. And early on, someone asked me the question about M&A. And I said it. I mean logistics in the U.S. or in Canada, okay? And what we do in our last mile, absolutely is something that we’re looking at right now to grow.

Operator

Your next question is from Tom Wadewitz of UBS.

Thomas Wadewitz

Let’s see, Alain, you’ve had a lot of questions on LTL and OR, and I think you’re pretty clear in your framework. I think one thing you haven’t touched on really is the pricing lever. And I’m wondering, do you think is there — the progression from 90% to 80% on the OR, how important is the pricing lever, or is it really predominantly the operating side and new equipment and fewer miles and all the things you focused on? And I guess I asked that because if freight cools down, then maybe you get less priced than what we’ve been getting.

Alain Bedard

Yes. Well, you see — we still have some issues to solve on the pricing side. I mean, we still have customers that we’re servicing today with an OR that’s superior to 100%, right? We have less of that, but we still do, right? So during the course of the next 2 years, our goal is going to be way more focused on what I’ve described on the cost and the freight and this and that. But for sure, we’ll try also to correct mistakes of the past in terms of pricing with customers, right? So to run from 90% or like we are today to an ADOR during the course of the next 2 years, I would say that 90% of that in my mind has to be on cost, okay? We have to be way more efficient. We have to do more with less. We have to pick up more freight per stop, which is just normal. I mean, we’re not asking to get to Mars. We’re just saying, guys — I mean, if you look at our P&C every stop, we get a ton of freight. If you look at our LTL in Canada, every stop, we get a lot of freight. If I look at my LTL operation in the U.S., every stop, I get maybe 2 shipments on average, which is incredible because we’ve never focused on that.

So to me, it’s more like a cost over the next 2 years, efficiency, productivity like you said, the equipment, the MPG on the equipment, the cameras, the forward-facing cameras on the truck that’s going to help us, if ever our guys get involved into an accident, which right now, we have 500 trucks with those cameras, maybe a little bit more, maybe 800, okay? So — but we got 5,000 trucks. So all of this, okay, is going to help us during the course of the next 2 years. Maintenance of our equipment, maintenance also of our real estate portfolio. So we all know that we have to spend way more on maintenance, okay, in terms of improving the quality of our site, but also, we have to control the expense way better than it was done in the past. So we’re going to be spending about the same money, but we get way more results, right? So to answer — to be a long answer to your question, I believe that from 90% to 80%, mostly of that has to come from costs and not pricing with customers.

Thomas Wadewitz

Right. And just to — I guess, make sure I understand. If you had a — if you went to low single-digit LTL market pricing, it sounds like that wouldn’t really be an issue, you’d kind of still be on track.

Alain Bedard

Right. Yes.

Thomas Wadewitz

Okay. So one other question for you. I guess, the high-class problem you have when you may not be doing big deals in the near term and you’re generating a lot of cash is that the balance sheet leverage tends to come down, right? Is there a floor where you say at this lever, instead of buying back a little stock, I’ll buy back chunkier amounts of stock. Is that the right kind of logic we should think about? Or do you just say, hey, if we get to 1 turn or half a turn, that’s okay. Because then we can just do an even bigger deal when the time is right.

Alain Bedard

Yes. Yes. You know what the plan for us is really simple. I mean NCIB is the safest thing for us to do because every time you do M&A, there’s always risk. But when we’re buying back some of our TFI stock, I mean, we know what we’re doing, right? We know the company inside out. So this is why, to me, ’22, is the year of the NCIB for TFI. Why? Because the price is to the floor, USD 80, I mean, hey, let’s jump on it. And that’s what we’re going to do. So is there also — we’ve been offered by some banks, guys, we’ll give you a $500 million credit U.S. to buy back stock, say, no, no, we don’t need that. I mean we’re going to generate way more than $700 million of cash, okay, this year. And for sure, not an issue in Q2, we’ll probably buy back 1 million, 1.5 million shares to get ready for Q3. right?

Operator

Your next question is from Jason Seidl of Cowen.

Jason Seidl

Wanted to jump back a little bit about a comment you made on the Truckload side. I believe you said they’re running at about 10% to 15% overbooked right now. Can you compare that to maybe where it was last year? And then what’s the trend that you’re seeing? Has that come down or come up in the recent month or so?

Alain Bedard

It came down, Jason, it came down. If you look back, let’s say, instead of being 110%, 115%, you were maybe 120%, 125%. So for sure, it came down.

Jason Seidl

Okay. That’s good. And you mentioned a little bit about the inability to get equipment. Can you sort of tell us where you’re at in terms of your fleet replacement? And how much of that, whether it be on Truckload or LTL. And I know it’s more important in your LTL division. And sort of what you’re expecting for the remainder of the year and then will some of the stuff get even pushed into ’23?

Alain Bedard

Yes. So Truckload were fine. If you look at our MD&A, you’ll see that our Truckload is running about trucks about 2.1, 2.2, and we’ll get the product delivered in ’22. That’s not an issue. The problem we have is our LTL, for sure. Our average age is way too high. We got 500 trucks so far. We were supposed to get 1,100 trucks in ’21. We got 500, okay, at the end of March ’22. And we’re starting to get the ’22 orders, okay, in the summer. We started in June, okay, to get the ’22 order. And that’s going to bring us closer to a normal fleet in our U.S. LTL, but not there. So it needs another year, ’23 to bring our power in the U.S. LTL back to where it should be normal, right? So it’s a 2-year thing. I mean, ’22 and ’23. Truckload, not an issue at all.

Jason Seidl

And that’s a big deal, right, in terms of operational cost because it was older I mean, your maintenance cost per mile between the differential between a new tractor and an older tractor must be very notable.

Alain Bedard

Yes. Jason, the old tractors that we are taking off right now out of service is $0.45 a mile. The new one is $0.05 to $0.06 to $0.07 a mile. So it’s just crazy the amount of money that we’re spending and the customer service because the trucks break down. And it’s a domino effect, okay? The driver satisfaction, where the guy is driving in 2010, in 2022 versus my peers that parked next to him, the guy’s driving it 2020 or 2021, right? So it’s a domino effect on morale, on the service, on — so this is why it’s got to be a priority. The problem we have is that we were not lucky in terms of everything that’s going on. I mean the availability of the equipment, it’s not easy. But that’s why we went with 3 different suppliers in ’22, so that we don’t get involved in the same mess of ’21, where the guy says, “Well, I can’t provide you all the trucks that you want.” We had to cut the order in half. So in ’22, that’s why we went with 3 different suppliers.

Operator

Your next question is from Benoit Poirier of Desjardins Capital.

Benoit Poirier

Congrats for the good quarter. Yes. Just coming back on the U.S. TL. Obviously, you disclosed a 90.7% OR. But I look at the — there was a gain on rolling stock of about $15.8 million. So it seems that OR would be closer to 97%. So any thoughts about the potential for margin improvements, specifically for U.S. TL and the key initiatives that you’re putting in place this year to drive profitability upward?

Alain Bedard

Yes, yes. Yes, that’s a very good point, Benoit. And you’re absolutely right. I mean what helped us in Q1 to bring this OR down to more acceptable level is a huge gain on selling of equipment. And you’ll see the same thing in Q2. But what’s important is the trend. So you’ll see us improving in Q2. Why? Because of our dedicated business, that’s been a rocking our shoe because of the TForce Freight acquisition okay? We’re finally in April of this year, we finally lost — finally stopped losing money, right? So if you look at my Q1, my dedicated business at the old UPS truckload was losing money. That should be behind us, and this is why this 97% OR net of disposal okay, is going to come down, okay, slowly to a level that is way more acceptable. So are we going to hit 95% or 94%, that has got to be the goal.

Benoit Poirier

Okay. And 95%, 94% would be the growth by the end of the year?

Alain Bedard

I would say that based on what I’m seeing now, our dedicated UPS business that we bought is finally showing up a small profit, but this is early. This is just April, right? So we believe that by the end of the year, like you said, we should be running a 94%, 95% Truckload operation, which is not good. It’s not good because if I look at my peers, they do way better than that. Us, we were bogged down, okay, with all this business that we bought that was really terrible. We didn’t have the people, we had commitment with customers. We had all kinds of issues. Now we’re starting to get out of that mess, okay? But it’s going to take us some time.

Benoit Poirier

Okay. That’s great. And for my follow-up question, it’s more on the P&C. If you could discuss about the market dynamics with the new service at Amazon and also U.S. Postal Service reducing its level of service. I’m just wondering about how does it play out or impact your U.S. Last Mile the opportunity to eventually close the gap versus Canada Last Mile, Alain?

Alain Bedard

Last Mile in Canada has been affected this year in terms of volume lost. We’ve lost some volume about a year — 9 months a year ago to our friends there, the largest e-tailer because we don’t services them at all now in Canada or in the U.S. So — but we keep growing, okay, our Last Mile operation, both in Canada and the U.S. Our medical division also is growing in the U.S., big time. Our bank services in Canada, you should see some growth there. We just took on — we’re taking on the new market very soon from competition. So e-commerce for our Last Mile, I mean, it’s — there’s no question that we’re growing that and very favorably. In our P&C, e-commerce will continue in the course of Q2 and in Q3 to come down a bit, okay, because of our choice. Some of it is because of my competition, but at the same time, my B2B is growing. And if you look at my P&C OE in Q1, I mean, we’ve never been able to get a 20% OE in the winter month, don’t wait. With 5% less volume and 5% less revenue per shipment.

Benoit Poirier

Okay. And very quick one. When I look at the number of owner operators, you reached about 6,900 people in Q1. So it’s down almost 3,000 people versus a year ago. Is it because now they are back working for larger companies? Or is it a function of the large e-tailer that you lost?

Alain Bedard

Yes. No, no, no. It’s a combination, Benoit. So if you look at California, I mean, we got rid of all the single owner. A guy that’s got 1 car, 1 truck, I mean — so this guy is out. So now this guy works probably for a guy that we deal with, that’s got 10 trucks. Do you understand what I’m saying?

Benoit Poirier

Okay. Okay. So there’s been some consolidation already, okay?

Alain Bedard

Right, right, because of the California situation, the same thing is true with Massachusetts. So we don’t want to deal like a few years ago. So it’s a huge consolidation that happened in California, okay, that we don’t want to deal with a single owner-operator now in California. So we deal with the guy that has 10 trucks, a guy that’s got 20 trucks. So that’s why if you look at the number of owner ops, I mean, you say, hey, they went from 9 to 6, and what happened there. Also, we’ve lost some owner operator in our U.S. TL division, okay, when we did these changes at CFI dedicated from over the road to just fully dedicated. So this also will have an effect long term, okay? So the mix of over the road versus dedicated is starting to change. So we are going to be running like 35% dedicated now and 65% over the road, including our Temperature Control division. So it’s a major change versus what it was like 2 years ago. And dedicated is more like long-term, 3-year deal with customers versus over the road, it’s more like contract rate for 6 months a year.

Operator

Your next question is from Tim James of TD Securities.

Tim James

Just wondering, I was intrigued by your reference to TForce Freight turning the corner. I was just wondering if you could expand on that a little. It seems like it’s been improving really since you acquired it. But just what causes you maybe what sort of thresholds have you met that causes you to say today that it’s now turning the corner?

Alain Bedard

Now when I’m saying TForce Freight Truckload, Tim, it’s Truckload. When I talk about turning the corner, it’s TForce Freight Truckload because when we took over that division, we were losing between $5 million and $6 million a quarter, Q2 of last year, Q3, Q4, okay? We kept on reducing these loss. And finally, in Q1, we still lost money, okay? But when I look at the month of March, finally, we’re turning the corner. We stopped losing money. And when I look at my month of April, it should be a confirmation that we stopped losing money. That’s why we see T4’s Truckload dedicated business is finally turning the corner. Stop losing money.

Tim James

Okay. That’s helpful. Then my second question, if I could just return to P&C for a minute. Could you talk about if you think or seeing any signs that the strong P&C market that we’ve seen really since the start of the pandemic, if that’s resulted in any excess capacity or businesses in the market. And then does that capacity potentially create opportunities as the market softens? Or does it create more desperate competitors and maybe aggressive pricing? Is it a challenge? Or is it a risk? Or maybe it’s both?

Alain Bedard

Yes. Yes. That’s a very good question. You’re absolutely right. Okay, e-commerce created transportation company in Canada, right? Why? Because Amazon and the consumer wanted more freight delivered to the home. So now what you see is that, for sure, consumers because more are reopening, and there’s just saying, you know what, Oh, I’m going to get to the — to the mall. So this is why when you look at us and you look at even the big players like UPS, okay, e-commerce for us is slowing down. There’s no question about that. The B2C is slowing down. But at the same time, as the chance we have contrary to my peers, my small peers in Canada is that we have the next day service with Canpar, Loomis, TFIS and ICS. So we’re losing on the e-commerce side in my P&C. Yes, we do what we’re gaining on B2B. Now my logistics and last mile operation in Canada, where, at the same time, we’re gaining on e-commerce because our solution through our Last Mile is very, how would I say that, it’s very interesting for customers, right? If they have a DC in Toronto or if they have a DC in Montreal, a last mile solution to service these markets from the DC. Last Mile is a great solution.

So we are expanding our networks. In our Last Mile, for instance, we just opened up south of Toronto, a new service station in Hamilton, right, to cover more e-commerce through our last mile division. And we’re also looking at opening up in other sectors to provide a better coverage of the e-commerce through our Last Mile. But through our P&C, okay, we’re more focused on B2B. We’re trying to get more action because our density is so huge, okay, with the malls. And with the B2B that this is — the goal of our P&C is to create more of this B2B within our service and keep the e-commerce that makes sense for us. And our last mile guys in U.S. and in Canada is that, guys, we have the network. Can we improve the network? Yes, we can. Okay? So as an example, we opened up in Hamilton. Can we do better? Absolutely. That’s why we bought Unity in California to improve our coverage of this huge state that’s doing really well. So at the end of the day, when you look at this Canadian market, we may have some competition that we’ll say, you know what, I want out. That may happen.

Operator

Your next question is from Cameron Doerksen of National Bank Financial.

Cameron Doerksen

So just go back to the U.S. Truckload segment, I mean you’ve had, I guess, an issue with unseated trackers for a while now. It doesn’t seem to really have improved much year-over-year. I guess my question is, if we do have some sort of market slowdown, is that potentially even a positive from an operational point of view for you because that there’s more availability of drivers and you can reduce that unseated tractor count and then improve the utilization?

Alain Bedard

Maybe, Cameron, maybe, maybe. We’ll have to see because right now, what we’re doing is that we have a leased truck within our Temperature Control division. So right now, we’re buying back these trucks and selling them to the market, and transferring those unseated trucks into my Temperature Control division, right? But you’re absolutely right. If this market start to soften, we’ll have to see, but we don’t believe that, Cameron, for at least the future, the next 6 to 9 months. And then we’re going to get to the busy Q4 season. Maybe could be something of a risk in ’23 in our U.S. TL operation. We’ll have to see. It’s a far, 8, 9 months, it’s really far to predict, right? What’s the focus of our U.S. TL is really to continue to improve our dedicated business, okay, that these guys have done really well over the last 6 months. And over the road, like you just said, we have way too many unseated trucks, way too many unseated trucks. So we got to take the bull by the horn. So we have too many trailers as well. So we’ve got probably 1,000 — too many trailers that were selling at a huge profit right now. And this is why Mr. Poirier from Desjardins was saying, I mean, you guys made a lot of money selling trucks, absolutely, selling trucks and trailers, and you’ll see the same thing in Q2. Now if we could get more drivers, our guys are really active at that and dealing with customers. But let’s see what Q2 is in and then we’ll have a better understanding of what we could do with that.

Cameron Doerksen

Okay. Makes sense. And just a quick follow-up question, just on working capital. I mean you had a big increase in, I guess, in receivables, that’s related to fuel surcharge. Can you just explain what’s going on there? And should we expect that to reverse in Q2?

Alain Bedard

Yes. Fuel surcharge is always the same thing as customer pays you in 40 days and the fuel supplier needs a 7-day payment. So that delta between 40 days and 7, okay, is killing you. Because when fuel surcharge is going up, I mean you have to pay more to the energy company, and you have to wait that delta of 30 days, 30, 33 days, okay, to get your money back from the customer. So if the price of oil stays steady, you won’t see that in Q2, right? Because we’re already there. If price of oil starts to come down, okay, in Q2 or in Q3 or by the end of the year, we will recapture this huge requirement on our working cap. But even with that, Cameron, we’re going to generate over USD 700 million of free cash this year.

Operator

Your last question is from Bascome Majors of Susquehanna.

Bascome Majors

Mr. Bedard, you’ve been the voice of — and the manager of this business for decades here and you’ve certainly compounded a tremendous amount of growth over that period. When you look forward, I mean, the business certainly seems set up to continue that on the cash you’re generating and opportunities ahead. Is there an opportunity to sit down with investors and talk about longer-term targets and also introduce some of the SVPs and help investors get comfortable with the bid Street. Just curious how you think of an Investor Day type format in the next 6, 12, 18 months?

Alain Bedard

Very good question. And I have to tell you this is that we were planning an Investor Day in New York just before COVID hit us, right? So it’s a very good point, and it’s a point well taken, is that absolutely, you’re right, we need to show up our — the group of our EVP okay, to — through an Investor Day, and it’s something that we got in mind. We want to go through after Q2. But for sure in the fall, we’re going to set up that. It’s a very good point. We were doing that in New York about 2.5 years ago, just before COVID, and then COVID hit and we said, “Oh, we can’t do it,” right? A good point. And you’re absolutely right. As the CEO of TFI has been 25 years with the company, and I had a chance to build a fantastic team both on the Canadian side and on the U.S. side. And you’re absolutely right, we have to show that to the investor community. And for sure, it’s not a one-man show. It’s a group of very highly dedicated people that supports the success of TFI.

Bascome Majors

All right. So potentially sometime in the second half [indiscernible] in line?

Alain Bedard

Oh, yes. Absolutely. Second half or — absolutely, it’s something that’s on our radar.

Operator

It appears we have no further questions. I’ll now turn the call back to Alain Bedard for closing remarks.

Alain Bedard

Very good. So well, thank you, operator, for facilitating this morning’s call, and thank you, everyone, for joining us today. We very much appreciate your interest in TFI International, and we will keep you posted on our progress as we move through the year. As always, please feel free to contact us with any remaining questions, and I hope everyone has a terrific weekend and thank you again, and stay safe. Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now disconnect.

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