CA - TFI International Inc. (TFII) Q4 2023 Earnings Call Transcript

2024-02-09 17:22:02 ET

TFI International Inc. (TFII)

Q4 2023 Earnings Conference Call

February 9, 2024 09:00 AM ET

Company Participants

Alain Bedard - Chairman, President, and CEO

Conference Call Participants

Scott Group - Wolfe Research

James Monigan - Wells Fargo

Ravi Shanker - Morgan Stanley

Jordan Alliger - Goldman Sachs

Jason Seidl - TD Cowen

Ken Hoexter - Bank of America

Walter Spracklin - RBC Capital Markets

Tom Wadewitz - UBS

Brian Ossenbeck - JPMorgan

Konark Gupta - Scotia Capital

Ben Mohr - Deutsche Bank

Kevin Chiang - CIBC World Markets

Cameron Doerksen - National Bank Financial

Benoit Poirier - Desjardins

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Fourth Quarter 2023 Results Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]

Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. Also, I would like to remind everyone that this conference call is being recorded on Friday, February 9th, 2024.

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

Alain Bedard

Well, thank you, operator and thank you, everyone, for joining us today. Our results released yesterday after the close reflects strong performance by our talented team, beating our expectation and once again, we're entering a new year in the strongest position in our company's history.

This comes despite weaker market demand throughout much of the year and is a testament to our adherence to long-standing operating principle, regardless of cyclical freight demand.

In particular, I've referred many times to our overarching focus on profitability and cash flow, which is apparent in the fourth quarter results that I'll walk us through. It's this profitability and cash flow that permits us to execute on overarching principles of our growth strategy, which involve investing in the business, pursuing attractive M&A opportunities, and consistently returning capital to shareholders and doing all of this even when the market is weak.

This approach to the business is apparent in our fourth quarter results and indeed our performance throughout 2023. In fact, we were able to allocate roughly $2 billion of capital to announce acquisition and share repurchase during the year.

Let's turn to fourth quarter results, which include operating income of just under $200 million compared to $217 million in the year ago quarter. Our operating margin of 11.8% compared to 13.4% a year earlier and I should mention that these results include a $23 million reduction in the contribution from assets held for sale.

Our adjusted net income of $147 million was down only slightly from $152 million in the fourth quarter of 2022 and adjusted EPS came in at $1.71, down $0.01. Given our intense focus on generating healthy cash flow, we're most pleased with our net cash from operating activity, which was $303 million, up sharply from a year ago, $248 million and bringing our full year total to just over $1 billion, again, up over the prior year despite market conditions.

Equally important from a strategic standpoint, our free cash flow of $244 million was up significantly over $188 million in the prior year fourth quarter.

For the full year 2023, we produced more than $9 per share of free cash flow, which is remarkable given our company's size, which is again a reflection of the hard work of our team throughout the year.

Now, gig in deeper into our four business segments, starting with P&C, which represents 7% of our segment revenue before fuel surcharge. The number of package was down 4% with pricing a little softer as well, resulting in a 5% decline in revenue before fuel surcharge. Similarly, our operating income of $35 million was down just slightly from $38 million in the prior year, and our margin fell by 70 basis points to 28%....

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