Revenue’s down, but TFI has cash for acquisitions

Despite considerably more income in the first quarter compared the last year’s first quarter, Montreal-based TFI International says it still has an appetite for buying companies.

First quarter operating income of $166.4 million in U.S. dollars compares to $219.8 million for the same quarter last year, according to a company statement. Total revenue dropped from $2.19 billion in the first quarter of 2022 to $1.85 billion in the first quarter this year.

The company attributed the drop primarily to the sale of CFI’s truckload, temp control and Mexican nonasset logistics business in August 2022 to North Liberty, Iowa-based Heartland Express. CFI produced sales of $145.5 million in first quarter 2022 for TFI. The company also noted reduced volumes driven by weaker end-market demand.

The company has cut costs through “streamlining” its workforce and has converted accounting and finance systems at TForce Freight.

TForce Freight is the name that TFI gave the main part of United Parcel Service Inc.’s freight business, which TFI bought in 2021 for $800 million. It rebranded the main part of the business as TForce Freight. The acquisition significantly boosted its ranking in the U.S. less-than-truckload sector.

Total revenue declined for all segments relative to the prior year period, the company reported. Operating revenue from package and courier business increased 10% but dipped 1% for truckload business.

Operating revenue for less-than-truckload took a big hit. It dropped 39% in the first quarter. Blame for the decrease was put on lower freight volumes and costs related to exiting the transition service agreement with UPS and to severance and early retirement payouts.

An eye toward acquisitions

The company continues to allocate capital in the interest of enhancing long-term shareholder value, according to the company earnings statement.

TFI has a strong free cash flow of nearly $200 million, Alain Bédard, chairman, president and CEO, said during an earnings call.

“This strong capital position is what allows us to strategically invest in the business even during times of uncertainty, while also returning capital to our shareholders whenever possible,” Bédard said in an earnings call transcript. “Year-to-date, we have completed five tuck-in acquisitions including one subsequent to the first quarter.”

Some of TFI’s peers have noted this is a challenging time in transportation, but bad news can also be good news, he said during the earnings call.

“We love this environment for (merger and acquisitions),” Bédard said. “So you’ll see us do some more tuck-ins. And I said in my discussion, we’re going to be spending at least $300 million on M&A and on buyback, but these are small transactions.”

He added that his company expects to “do something of size” every three years or so.

“So, for sure, we’ve been working on a few opportunities. Now could that materialize in 2023, maybe at the end of 2023 into 2024 for sure, we have the capacity, we have the know-how. So something may happen on something of size before the end of the year or into next year,” Bédard said.

TFI announced in February it was acquiring Montreal-based Axsun Group, an intermodal and freight brokerage company.

The Wall Street Journal recently reported on speculation that TFI was interested in buying Fort Smith, Ark.-based ArcBest Corp. because TFI had bought a 4% stake in it.

TFI International Inc. operates across the United States and Canada through its subsidiaries. TFI International Inc. is publicly traded on the New York Stock Exchange and the Toronto Stock Exchange under symbol TFII. LL