TFI International Inc. (NYSE:TFII) Q3 2022 Earnings Conference Call October 28, 2022 8:30 AM ET
Company Participants
Alain Bedard – Chairman and President and Chief Executive Officer
Conference Call Participants
Jordan Alliger – Goldman Sachs
Ravi Shanker – Morgan Stanley
Brian Ossenbeck – JPMorgan
Konark Gupta – Scotiabank
Tom Wadewitz – UBS
Jack Atkins – Stephens
Scott Group – Wolfe Research
Walter Spracklin – RBC Capital Markets
Jason Seidl – Cowen
Ken Hoexter – Bank of America
Bascome Majors – Susquehanna
James Monaghan – Wells Fargo
Benoit Porier – Desjardins
Ari Rosa – Credit Suisse
Tim James – TD Securities
Operator
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TFI International’s Third Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and a follow-up. Again, that’s one question and a follow-up, so that we can get to as many callers as possible. For the instruction for entering the queue will be provided at that time.
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, October 28, 2022.
I will now turn the call over to Alain Bedard, Chairman and President and Chief Executive Officer of TFI International. Please go ahead, sir.
Alain Bedard
Well, thank you so much, operator, and welcome everyone to this morning’s call. We released our third quarter results yesterday after the market close and we’re pleased to again be reporting a strong quarter with relative stability right through September for most of our segment, despite ongoing macro volatility.
In two weeks, we’ll host our first ever Investor Day at the New York Stock Exchange on November 10. During that event, we’ll expand on the operating principle’s that drives TFI International and our plan to create additional shareholder value. Instructions on how to RSVP are in yesterday’s press release.
As a result, I’ll keep today’s remarks more brief than usual, but suffice it to say, our continued strong growth and profitability is a direct result of our principal operating philosophies that we stick to regardless of the economic cycles such as quickly adjusting capacity to our variable cost to match changing demand. In addition, our performance reflect the ongoing self help opportunities we are delivering on that are entirely within our control. Most importantly, our performance reflects the skill and tireless dedication of everyone at TFI International. And at our coming Investor Day, you’ll have the chance to hear from many of our talented leaders.
For the third quarter of 2022, we reported a 30% increase in adjusted net income over the prior year, despite a non-recurring charge and we’ve produced a 38% increase in adjusted diluted EPS. We also generated $292 million in quarterly free cash flow that was up 73% and giving the emphasis we place on intelligent capital allocation, we view our robust free cash flow as a strategically important, yes.
Also on a consolidated basis, our total quarterly revenue were $2.24 billion, up 7% over the prior year quarter. All four of our business segment produced strong returns on invested capital, and if we exclude the non-recurring charge in logistics, all four produce healthy gains in operating income. Our P&C segment represents 6% of our total revenue before fuel surcharge. We saw a 10% decline in revenue before fuel surcharge mainly related to slower volume associated with e-commerce activity. But this was partially offset by strength in our B2B business.
Importantly, due to our network density, our sharp focus on cost control and our strong execution, adjusting quickly to changing volumes. We produced a 42% year-over-year increase in operating income to $34 million with our operating margin up more than 1,000 basis points to 28.2%. Our return on invested capital came in a very strong 30.7%, up an impressive 760 basis point.
Turning to our LTL, which is 44% of segmented revenue before fuel surcharge, we produced $817 million of revenue before fuel surcharge that was down 5% versus the prior year quarter. However, our operating income of $101 million, was up 5%, reflecting a margin of 12.3%, up 120 basis point. Within our LTL business, our Canadian operation saw just a slight decline in revenue before fuel surcharge and produced a very strong operating ratio of 72.8%, marking a notable improvement at 750 basis points over the past year. Also important, our return on invested capital was 23.1% and that was 640 basis point improved.
Turning to our U.S. LTL business created just last year with the acquisition of UPS freight. Revenue before fuel surcharges was $687 million with an adjusted OR of 90.8% just above flat, while our return on invested capital was 25.2%, which we view as a solid just entering our second year with this business, but clearly experiencing top line pressure, due to lighter volumes. However, our pricing held up and TForce Freight has meaningful room to improve.
Moving right along to our Truckload segment is 27% of our segment revenue before fuel surcharge. Our third quarter revenue before fuel surcharge was $510 million, up just 4% over the past year as we sold CFI Truckload, temperature control and the Mexican logistics business about two months into the quarter. Our Truckload operating income still surged to $97 million, which was up 73% the past year. Similarly, our operating margin of 18.9% was up a robust 750 basis points.
So let’s take a closer look at what drove the strength by sub segment. First off mentioned that specialized truckload following the sale of CFI now includes our dedicated operation that remains with us and were previously included as part of our U.S. TL. With that in mind, specialized truckload performed well growing quarterly revenue before fuel surcharge by 9% to $355 million with our diversity and exposure to the industrial end market working in our favor.
And given our focus on profitability, we’re very pleased to have generated strong improvement in our adjusted OR, which at 79.9% marks an improvement of more than 10 points from 90% just a year earlier and our specialized truckload return on invested capital at 12.7% was much improved over the prior year period of 8.8%.
Next up, our Canadian based conventional truckload, we saw a jump of 34% in revenue before fuel surcharge was $79 million, this is an example of TFI’s diversity. In this case, our exposure to the relatively strong Canadian market working to our advantage. Similar to specialized truckload, we were able to leverage our network density and market share, while implementing cost control and benefiting from strong end markets. As a result, our adjusted OR at 75.5% improved by 13 percentage points from 88.4% and our return on invested capital at 20..6% was up sharply from 12.4% a year earlier.
So moving on to our logistics segment, it represents 23% of segment before fuel surcharge. We saw a 4% year-over-year growth in revenue before fuel surcharge to $424 million, while our operating income of $29 million, also reflecting the non-recurring charge of $11.4 million, compares to $33 million one year earlier. Our operating margin was 6.8%, as compared to 8.2% the prior year and our return on invested capital for logistics was 21.1%, compared to 24.3%.
With that summary of our segment, let’s move on to TFI’s international balance sheet and liquidity, which remain a pillar of our strength allowing us to probably invest for future growth while returning capital to shareholders both through our share repurchase and our quarterly dividend, which I’m pleased to announce today that our Board of Directors raised by a substantial 30%, reflecting the core strength of our business.
During the quarter, as I mentioned, we generated free cash flow of nearly $300 million, up 73%, we’ve repurchased approximately 2.1 million shares for just under $200 million. Also, in terms of strategic capital allocation, we’ve completed four tuck-in acquisitions during the quarter, plus a fifth subseacan to quarter-end. At the end of September, our funded debt to adjusted EBITDA ratio stood at less than 1 times and nearly all of our debt was fixed rate.
Finally, in terms of our full-year outlook, we’re maintaining our forecast of $8 per earnings per share with a free cash flow of $900 million. At our coming Investor Day, we’ll expand on our outlook including our long-term vision and our many strategic initiatives to enhance shareholder value that are within our own control regardless of the economic environment.
All right. Thank everyone for listening. And now operator, if you could please open the line for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Jordan Alliger with Goldman Sachs. Please proceed with your questions.
Jordan Alliger
Yes. Hi, good morning. Curious on the LTL tonnage front, you mentioned, culling freight is the primary factor also some softening demand. Maybe if you could give little more color around those two aspects of the tonnage? And on the culling side, can you maybe give a sense for how long that will be active and what sort of quarter of magnitude to think about? Thank you.
Alain Bedard
Very good, Jordan. So when we bought UPS Freight, the volume was above 30,000 — 32,000 shipments a day and then there was about 25% to 30% of that, that didn’t make any sense for us, right? So what we’ve done so far is we got rid of a lot of that, that didn’t make any sense, but it’s not done. We’re not complete, but we have to pause, okay? Because up to a certain level, okay, we were able to get rid of the — most of the freight that really did not fit, but we still have some freight that don’t fit, okay? But right now, we’re in a pause okay, because we reached a certain level that we said, listen. I mean, let’s do this pause, let’s work on our cost, because if you look at our cost per shipment today, I mean, we have not done a great job.
If you look at the trend over the last 12-months, since we’ve acquired. What we’ve done as a great job was to get rid of freight, a lot of that freight that didn’t fit, but in terms, and also adjusting rates to customers to the market. But where we haven’t done really a good job is controlling our costs. So one of our largest cost is labor, right? When we bought this company, the tools that these guys have to manage labor costs are very different than the tools that we have within all of the TFI companies. So these tools that we have in all of our LTL companies within TFI except TForce Freight as of ’23 we’ll be able to implement that.
Why is that? Because now at the end of ‘22, we’re moving away from, okay, the UPS Oracle system, financial Oracle system into the TFI Oracle system, and at that point, we’ll be able to provide our managers over their tools to be able to adjust costs to reality, cost to volume. If you look at what we do in other of the TFI division, our P&C, our Canadian LTL, our truckload. I mean, you see the difference between what we do normally and what our team has done at TForce Freight, so this volume, okay that we drop about 17%, 10% of it — 10% — 17%. So there is 10% that is really volume that didn’t make any sense.
Organically, we also lost some volume that now maybe made some sense. Okay? But the market has slowed down a bit. And to us, if you look at where we’re going, I think that we’ll see some kind of stability in terms of the volume for now, unless the market starts to shrink a little bit more, but more importantly to us is really to start addressing, okay, our labor cost per shipment that’s way too high.
Now I can’t ask the guys to do miracles, because they don’t have the right tool. So by ‘23, okay, these guys will get slowly, but surely the right tools to manage the business and manage the costs. That’s why we said from day one, okay to bring this company to a 90 OR, yes, we could do that between 12 to 24 months. But to bring this company to an 80 to 85 OR, it will take us two to three years, why? Because now it’s a cost game, and they don’t have the tools to manage the costs, we’ll be providing them those tools in ‘23 as soon as we hook up to the TFI financial system, and then we could start acting in a better way than what we’re doing today.
Now in terms of — that’s why to answer your question also Jordan is we see some kind of stability for now until, okay, we move into ’23. The other thing that we have to keep in mind is that ‘22 has been burdened, okay, very much so with the TSA that — the transition agreement we have with the seller, at the same time, that we’re paying these costs, we also have to spend money okay, to be able to move away from UPS into the TFI network — financial network. So it’s a long answer to your question. But it is what it is.
Jordan Alliger
Great. I appreciate the comments. Thank you.
Operator
Thank you. Our next question come from the line of Ravi Shanker with Morgan Stanley. Please proceed with your questions.
Ravi Shanker
Thanks. Good morning, Alain.
Alain Bedard
Good morning, Ravi.
Ravi Shanker
Very much looking forward to the Analyst Day in a couple of weeks. Not to steal your thunder from the event, but would love your thoughts kind of as you sit here looking out to ‘23, what do you think the downturn is going to be like? I mean, it sounds like you and all your peers have kind of maybe lowered expectations a little bit, since the last time we spoke. So, what does it look like out there right now as we sit here?
Alain Bedard
We feel pretty good about our Q4. What we’ve seen so far in October, I mean, we feel good about Q4. We anticipate that things will probably still slow down in ‘23 and then we will definitely have to adjust to that. I mean, if you exclude TForce Freight, which is special situation for us, the rest of our business, we have the tools and we have the management to really adjust and act and react according to the market condition. And I think that the proof is in the pudding. If you look at our last 20-years of TFI.
TForce Freight is a special situation whereby the guys over there are doing a fantastic job with the tools they have. But the problem is that their toolbox is very limited in terms of financial information, in terms of how fast these guys get the information. So, we will rectify that during the course of ‘23.
So, I mean, us, we’re ready. And don’t forget, Ravi, we — us, we like a storm. Okay? We’re going to go through a storm probably in ‘23. There is going to be a slowdown or whatever it is. And our balance sheet is very strong. And that opens always M&A for us. We’ve been doing small nice tuck-ins here and there. We did four of five in Q3. We’re going to do another two or three in Q4, will probably do four or five in Q1 and Q2 of ‘23, because we have so much free cash flow. So we could invest. Maybe also a larger one in ‘23, because, you know, the old saying in TFI is you buy a bad news and you sell a good news, right?
So we feel pretty good about our Q4 so far what we’ve seen. And we anticipate that there’s going to be some kind of a slowdown. If you exclude TForce Freight, TFI as fantastic adjust cost, volume and everything to market condition. TForce Freight, where the guys are working day and night, okay, to do this transition from UPS to Oracle as of January 1 of ‘23. From that point, now we’ll be in a position to support our team there, okay, provide them with the tools that our managers could move faster, adjust faster to volume change and adapt the cost per shipment, our labor cost per shipment.
The other thing also that didn’t help us in Q3 is our CapEx. We didn’t get any trucks, right? So everything that we wanted to do at TForce Freight in terms of catch up CapEx, okay, because the previous owner didn’t do okay a lot. We were not able to do so far. Now, we have a new Fleet VP that we just started about a month ago and for sure that’s his priority, okay, to move in the new equipment as fast as we can, because so far, our maintenance cost per shipment is the same and even a little bit more, because our age is about the same. And the only improvement that we see on our costs there is our MPG that improve a little bit, okay, because now we have about 800 new trucks in the fleet.
Ravi Shanker
Got it. That’s great color. Maybe as a quick follow-up. You mentioned the top the call that your cash balance is a strategic asset for you, just thinking, of whether you’re thinking about that as an offensive asset and that you can go out there and buy companies in the product capital or as a defensive asset going into the downturn?
Alain Bedard
Yes, yes. Right now, Ravi, the best M&A we could do is buy TFI, right? So that’s why we bought 2 million shares of TFI. Now depending on market condition, for sure, we’ll be very aggressive on the buyback. We just renewed okay, our NCIB to 6 million shares or about — just about 6 million shares. And depending on market, we will be very aggressive in Q4 and in Q1 and maybe in Q2 of ‘23 depending on market condition. But M&A has always been the source of creating value for our shareholders. So this is not going to stop, so we’ll do the small nice tuck-ins. Just look at our truckload, okay? Oh, fantastic because last year we did a lot of M&A in our truckload. And when we buy a 98 OR company, it doesn’t turn to an 85 OR company within a day, right?
So Brookshaw and his team have done a fantastic job. And this is what you see in Q3 now, okay. So we’ll keep with Steve and his team doing some M&A. Our Canadian team as well, our logistics team also in the U.S., we bought Unity in California about three, four months ago. So M&A is in TFI’s blood. We’ve done that for 25-years, we’re not going to stop that. Maybe in ’23, because market condition will help us doing a larger deal, a significant transaction at a fair price, but that could be interesting.
Ravi Shanker
Very good. Thanks, Alain see in a couple of weeks.
Alain Bedard
Yes. Thank you, Ravi.
Operator
Thank you. Our next question is coming from the line of Brian Ossenbeck with JPMorgan. Please proceed with your questions.
Brian Ossenbeck
Hey, good morning, Alain. Thanks for taking the question. So just going back to TForce Freight. Could you talk about the broader competitive dynamic? There’s one of your peers, who announced a large contract win at least for them. Did that have anything to do with the tonnage trends and the volume throughout the quarter and maybe you could also give us a little context of how that trended throughout the quarter, was it a steady decline or was there a significant drop?
Alain Bedard
No. I would say, Brian, that if you look at our Q3, June was great in Q2, okay? And then things starts to soften a little bit in July and August and we see the same thing in September, okay? But I had a chat — a meeting with our team there last week at TForce Freight and, you know, Eileen, the sales leader we have there has come up with some nice features that we’re doing. What we’re trying to do on the sales side at TForce Freight is to be smart. In the sense that, try to grow volume with existing customers that we already service to reduce their cost per pickup, right? Because instead of picking up one shipment, if you pick up two, while your cost of picking up is divided by two instead of being just on one shipment. So that’s the focus of Eileen and his team. Focus number one.
Focus number two, is guys, try to grow business around our service center. We don’t like to really do pickups at 80 miles away from our service center. This is very expensive. Or deliver freight 80 miles from our service center. So refocus guys on this. So this is a major change in the approach of TForce Freight, okay. That was not the same, kind of, focus as the TFI focus, because if you look at why is TFI so profitable on the Canadian LTL, on our P&C, because we are density maniacs, okay, that’s us. Okay? We’re not going to service a customer that’s a 150 miles away from our service center ourselves. We could do it with a third-party that’s got lots of volume in that area, maybe if the price is reasonable and we can make money on it.
So this is not something that was in the blood of TForce Freight. So this is on the sales side. Okay. This is really what they’re trying to do at the same time as okay we’re unloading. Okay, we did a lot of that. Okay, the first year. Freight that does not fit. So as an example, freight that we have to deliver 150 miles away from the terminal, that’s not for us. That’s for someone else. That’s not us, right? So what we’ve seen in Q3 is a little bit of softening. We anticipate four is going to be probably the same and into ‘23. So this is why it’s been urgent that we walk away from the financial system of the old company, and moving to the TFI financial system, so that we can provide them information not a month after, but the same day. So what’s going on, guys? So that they could act and adjust.
Brian Ossenbeck
And any comments on the competitive dynamic? Has that affected your tonnage trends at all?
Alain Bedard
Not so far. So far what we’re seeing is that — seeing like the industry in the U.S. is very aggressive in adjusting rates with 3PL, okay? So like the CH and guys like that. But so far with the competition our peers, I don’t see that, okay. We don’t see any pressure on quality of revenue, revenue per shipment. If you look at our revenue per shipment, it was up a little bit ex-fuel about 6% year-over-year. So, so far, so good. It’s really, Brian, we’re going to win this war at TForce Freight within the next two years by reducing our costs, by doing more with less.
And this is something that us we have to do it. It’s got nothing to do with the market, it’s us. I mean, but, when I say it’s us, is we got to give the guys the tools. Right now, they don’t have the right tools.
Brian Ossenbeck
And just one quick follow-up on the cost side. With the tools you mentioned, is there anything from a labor flexibility perspective that would be limiting or is the vast majority of what you’re looking to do here really based on information and tools? Just curious because obviously, you have a union workforce at TForce Freight and wanted to see, how it would play into this?
Alain Bedard
No. Brian, the contract we have today, if we are smart, okay, we could do wonder. It’s just that right now, we don’t have the tools to be acting smart. So you cannot blame okay a driver, if you don’t manage his work properly, right? You can’t blame the cost on the shipment if you service an account that’s 100 miles away from your service center. It’s us. We have to do the job. It’s got nothing to do with the contract we have with our employees. Contract we have with our employees is okay. We’re going to be working with them. And for sure, in terms of flexibility, it’s a little bit different than the non-union carrier, but look at UPS, I mean, they are the king and they are Teamsters, right? Union Teamsters.
Look at what we do us in Canada. Our P&C is 90% union. And look at the results we have. So the job is us. It’s not the union, it’s — no, no, it’s us. We have to do the job at TForce Freight and we will do the job. It’s not a question, can we or can we not. We will do the job, it’s just that the team there wants to do better. But they don’t have the right tools. They have tools of 1965, and we are in 2022. So we’ll change that.
Brian Ossenbeck
All right. Alain, thanks for the time.
Alain Bedard
Pleasure.
Operator
Thank you. Our next question comes from the line of Konark Gupta with Scotiabank. Please proceed with your questions.
Konark Gupta
Good morning, Alain. How are you?
Alain Bedard
I am good. How are you, Konark?
Konark Gupta
Good, thanks. Thanks and look forward to seeing you few days or weeks here. Just wanted to understand, Alain, you know, like Package and Courier had kind of still very sticky 28%, 29% operating margin, which I think, it’s your best ever, doesn’t change here, so good to see that trend continue in the third quarter? Your truckload margin as well improved quite a lot. I’m not sure if it’s just one month of no CFI makes that difference or not? But just wanting to have your thoughts on like how sticky are the margins in those two segments P&C and Truckload?
Alain Bedard
Yes. On the P&C side, I think that it’s not really a question. I think that it’s sticky. And I think, I’ve said it on Q2 call that to run at 28% OE in our P&C is exceptional. And I would say that, if you look at the margin that we believe at TFI that we can accomplish on average, okay, on average over 10-years is between with today’s technology, with today’s tool that we have, because when I talk about TForce Freight tools that they don’t have. I mean, the guys at the P&C they have tools, right? They have P&L by state, by terminals now. That you know, five — four years ago, we didn’t have. So that really help our management team to deliver these kinds of results.
So if you let’s say, Alain, could you do 28% for the — over the next five, 10 years, I cannot say that. But what I can say is, on average, I think that between 20% to 25%, okay, is should be the average. So we will have peak, like we have maybe now at 28%. We could have troughed at 22%, okay, depending on market condition. But on average, I think that 25% is what we could deliver with that P&C division. In terms of our truckload, that’s a little bit more tricky because right now, okay, we are getting a lot of action, okay, that our guys are doing in Canada, okay, with our truckload division.
Whereby, you know, with again, our tools, our management tool that we have there, the guys are able okay to really do a better job of matching the head haul with the backhaul. And also because now we have more unification of our Canadian operation under one management team, you’ll see that this is going to be even better for us in the future. Now if you say, well, Alain, could you do a — an OE of 20%, 25% in Canadian truckload over an average of 10 years, I would say 25%, I think it’s a little hard to accomplish on 10 years. But can we do 15% to 20%, I think this is doable and most importantly is our return on invested capital. I think it’s the key is we should be able to play in that 15% mark on that 10 year average.
Konark Gupta
That’s very great color, Alain. Thanks so much. And my quick follow-up is just on the M&A front, I’m sure like you’ll proabably cross that at the Investor Day. But in terms of competition from private equity, do you see that lessening at all given the interest rates are rising here? Or no change?
Alain Bedard
No, I think that with the interest rates, I mean, PE, those guys they love when interest rates are low, because their cost of funding is really cheap, so they could do all kinds of things. Right now with interest rates moving up and up and up, I mean, they’re getting a little bit more skittish and that’s really helping us because on larger deals, our competition is not really strategic as most of the time PE and those guys don’t view things the same way as we do. Our philosophy and I’ve said it many times at TFI you make your money on the buying never on the selling. So you got to do M&A very aggressive buy at the right price, not overpay, because this is going to burden you for years to come.
Konark Gupta
Makes sense. Perfect [Multiple Speakers] Thank you.
Operator
Thank you. Our next question is coming from the line of Tom Wadewitz with UBS. Please proceed with your questions.
Tom Wadewitz
Yes, good morning. Alain, I wanted to ask you a bit about how you envision the progression on LTL operating ratio? I think third quarter, you explained that the decline in shipments in other markets a bit weaker, but I guess the path is a little bit off from where we thought it was going to be. So how do you think about LTL margin in 2023? Is it reasonable to expect 200 basis points of improvement given the comments on Oracle and kind of managing costs better? Or is that too optimistic given that you’ve got a maybe weaker freight backdrop?
Alain Bedard
Yes, yes, that’s a very good question. I mean, it’s hard for me to answer, because we don’t know how fast these guys will be able to act based on the new tools that will be — financial tools that we’ll be providing them. This is why I’m driving some of our Canadian folks helping our U.S. management team, okay, to really start moving and addressing situations faster, et cetera, et cetera. It’s difficult to say what we could deliver in 2023. What we could say though is that within LTL we have a diamond that’s called GFP that’s really helping us, which is the asset light. We believe that our CapEx in ‘23 will be way better, okay? The new trucks coming in will be way better, okay, than what we’ve seen in ‘22. Because now with the leader, the new leader of our fleet at TForce Freight that should help us, okay, because don’t forget until we sold CFI, was our CFI team that was there to help us get the new equipment in even with all the supply chain issues.
And then don’t forget that in ’23 also our TSA costs, okay, that’s costing us a fortune, because it’s normal. UPS, I mean, they’re there to support us, but they want us out. So they charge us an arm and a leg, a fortune to support us. And as of Jan 1, we believe that once we have the financial system away from UPS, the saving in ’23 is going to be maybe a basis point, okay, of OR, just that, right? So we have a — some tailwind, okay, into ’23, we have also some headwinds. Like you just said, maybe volume is going to keep under pressure.
But on the other side, like I said earlier on the call, we have Eileen and our sales team focus on shipment and freight that makes more sense for us, okay? So we should also see some improvement into the average mile per stop. Why? Because we’re trying to pick up freight closer to our service center, not chase rate 100 miles away from our terminals, because that was not an area of focus in the past, right? So it’s very difficult to answer black and white on that, but I could tell you that our team is very motivated, they understand the challenge, okay? They look at their sister company in Canada and they say, hey, I mean, these guys are running a 72 OR in Canada. The Canadian market, the quality of the revenue is the ship, steerable, compared to the U.S. And those guys can run a 70, 72 OR, I think they’re 73. Wow, this is fantastic. So, but these guys have tools, us we have nothing, right? Oh, whoa, you guys will get the tools next year for sure. And then the proof is going to be in the pudding.
Tom Wadewitz
So if it’s hard to quantify or come up with the right, kind of, ballpark for what it is, are you confident in saying the OR will improve? Or is that may be hard to say too?
Alain Bedard
It’s hard to say right now, okay, because we don’t have the right tools to have these guys manage. But that doesn’t change the thing, okay? Like I said many, many times that we buy this company, it loses money. Within a year, we should be a year to two years we should be at a 90 OR, which we are basically there now, okay. Now within two years, we will bring this company to an 80 to 85 OR, okay, why? Because we know that with all the financial tools that we’ll provide them, okay, these guys will do their job.
Now what’s going to happen in ‘23? It’s hard to say, because you got the tools that these guys don’t have, number one. There’s market condition that is changing, okay, a little bit more softness in the market, but we also have some tailwind, right? So if you look at ‘22, we have lots of cost for that transition that will disappear in ‘23. You have also our sales team that’s more focused on freight that is logic, intelligent to us versus just chasing freight for the sake of freight. So you got plus and minuses, we’ll see how it turns out, right?
Tom Wadewitz
Yes. And then that’s great. Just a quick follow-up. What about the timing on the Teamsters contract? I think people focus for UPS on to ask some concern that there’s maybe pent up inflation when the contract expires. So you get a bit of a step up in your cost structure. Is that something that would be of concern for you as well? Or how do we think about kind of contract changes?
Alain Bedard
No. No, no, no. The contract that we’re going to have with our employees is going to be fair. So we want to be fair with them and salaries will be fair. Everything is going to be fair. And I think it is fair today and we’ll just make sure that the next contract hopefully is five years, okay, that it will reflect market condition, right?
Now if you just look at what we’ve done in Canada with Loomis, I mean Loomis okay, which is part of our P&C, we just renewed the contract for five years with these guys. And this is the Unifor union. Again, everybody was saying, oh, these guys are this. These guys are that. No, no, no. I mean, Unifor, you sit down, you make a deal, and now we have a five year deal with them. We have a five year deal with Canpar with the steelworkers, right? So we’ll sit down, okay, with the group of people that represent our employees and we’ll come up with something that is reasonable and fair, right?
And then the owners is on us, okay, the management team to organize the work, so that it’s efficient and profitable for our shareholders, delivering freight that fits, right? So we have a huge job to do a TForce Freight on that. And like I said, with financial tools, that we are using in all of our TFI division that will be supporting them next year, these guys will be in a position now to deliver and to deliver and reduce costs. Now how do you reduce costs is having the work better organized, okay, not by reducing the salary or the employee.
Tom Wadewitz
Right. Okay, makes a lot of sense. Thank you for the time.
Alain Bedard
Pleasure.
Operator
Thank you. Our next question is coming from the line of Jack Atkins with Stephens. Please proceed with your questions.
Jack Atkins
Okay, great. Good morning, Alain. And thanks for taking my questions.
Alain Bedard
Pleasure, Jack.
Jack Atkins
Let me kind of start. I think we’ve been getting some questions on this. And I’d love to get your take on it. This may be a difficult one to answer. Just given all the uncertainty out there, but you guys are obviously very, very good at managing your business. It sounds like there is a lack of visibility, maybe into ’23 at this point within the U.S. LTL segment based on some of the systems. But if we were to see a more challenging freight market in ’23 kind of materialize, given all the levers that you’ve got in the business across the different segments, do you think you’d be able to grow or at least hold earnings flat? How are you thinking about that? I am not asking for ’23 guidance at this point, but just trying to think directionally, how we should maybe think about that opportunity?
Alain Bedard
You know what, Jack, I mean, me — I feel pretty good. Like I said earlier in the call, I mean, we went through storms. I’ve been in this environment, Jack for 25 years. And if you look at TFI’s track record, good times, bad times. I mean, we always perform really, really well. And we take advantage. When there’s a storm, it’s time to do things that sometimes, you know, you can’t do when it’s nice and sunny. Right? So you could do things on the cost side, that, you know, when it’s nice and sunny, they guys say white [ph]. White is something that doesn’t seem to be broken. So there’s a lot of opportunity in an storm, okay, so a small storm, like we probably will get in ’23.
So me, I’m not worried at all. I mean, we have a very strong balance sheet, our debt is fixed at 3.45, our average tenure and our debt is eight years, leverage is less than one. We have a fantastic team and tools. The only rock in my shoe right now is TForce Freight whereby these four guys are trying to do a job that’s too bad. That they don’t have enough tools to have them, look at the situation and make some adjustment. But we will provide them the tools. So me — I feel really good.
So our guidance for ’22 is CAD8. I haven’t seen our plan, our budget for ’23, but you know, when we have the Board approve at 30%, Jack in our dividend. I think that this sends a message that guys, the CEO and his Board really are feeling good, even if there’s a storm coming into ‘23, because we have the tools. We have the team and we will take advantage if there’s a storm of all the M&A that we could do and look at our track record, I mean, it is what it is.
Jack Atkins
No, absolutely. Absolutely, and I appreciate that comment, Alain. I guess for my follow-up, just on TForce Freight, maybe looking at it a little bit differently, the Mastio survey results came out a couple of weeks ago. TForce Freight was sort of in the bottom quartile there of national carriers. I know, kind of, improving the freight mix is important to the strategy moving forward? How do you improve the service level there to be able to attract the freight that you want?
Alain Bedard
Yes, yes, yes. You’re absolutely right, Jack. I mean, our service is not — we’re not like the top tier of the LTL company in U.S. no way, it’s impossible. There’s many reason to that, okay. Reason number one, is that we have so much equipment, okay, that is not proper to do a good job. So if you look at the best-in-class in the U.S. do they run trucks on average that are eight to 10 years old, they don’t. Why? Because you got all kinds of issues, so the guy breaks down on the road, the service is not there et cetera, et cetera.
Our customer service, our pricing, okay, was not under our control righ? So now the Richmond team has customer service and pricing master file. Now finally, under our control, it will take time, okay? But if we don’t build the customer properly, because you’re so disorganized, that your master files, they are not upkeep by a bunch of guys that don’t know what they’re doing, okay, in the Philippines, as an example. Well, for sure the customer is not going to be happy, because you can build the guy properly. And then you got — he’s got another issue with you because then you’re trying to collect something that don’t make sense, right?
So we’re going through all of this as we speak in ’22 and into ’23. So this will improve — there’s lots of action that have been taken to improve the satisfaction of the customer dealing with us, not just delivering the freight, but also on the admin side, right? So it’s also a pride thing, right? So if you have drivers that’s for years and years are running into a terminal that is terrible, okay? Because, you know, that everything is falling apart and the guy who’s got a 2008 truck and he’s like a piece of shared expression. I mean that doesn’t help the pride of your employee and that reflects also to the customer to a certain degree. So we are also correcting that. That will take time, okay, the fleet and also the facility.
So we just started talking with Eileen, our sales leader to have customers in some of our terminal, the nicest one, bring customers into see what we do. Our claim ratio per dollar revenue okay, it’s a major improvement. We used to be at 1% of revenue, which is a disaster, okay. But the guys told me, well, we used to be at 2% now we’re at 1%. I said 1% is terrible, okay. You got to be at 1.2%, 1.25%. So now we’re under 5%. After a year we’re under 5%, so that also improve the customer experience with us, right? So we don’t break his stuff. We don’t lose it as much as we used to do. So all of that Jack is action that Paul and his team are taking to improve the customer satisfaction. It will take time, okay? But we’ll keep working at it and improving it. Because like you said, I mean, it’s hard for our sales team to get more freight, quality freight, quality customer, if the service is not there. We are at the par.
Jack Atkins
Okay. Thank you, Alain. Really appreciate the time.
Alain Bedard
Pleasure, Jack.
Operator
Thank you. Our next question is coming from the line of Scott Group with Wolfe Research. Please proceed with your questions.
Scott Group
Thanks. Good morning, Alain. I want to help you set a guinness record for saying tools. So I’m going to ask a follow-up there. The equipment’s been delayed what’s the risk that this new system gets delayed? And then maybe just bigger picture, right? You said at the call, at the beginning of the call like one of the pillars of the model is we’re an asset light model. We can be really flexible. Is this a lack of tools or is it just that, hey, this is an asset based business that has more operating leverage when things slow?
Alain Bedard
You know what, to answer your question on the financial tools that hook up to TFI Oracle. I think that we’re testing right now. And when I talk to David and all of our team, our IT team, I mean, we feel really good. I mean, that’s not going to be an issue. I mean, equipment is out of our control. We placed the order and those guys have so many issues with their supply chain that they can’t deliver. So that is out of our control. But IT is us, it’s our control and so far, what the guys are telling me is we’re going to be there. No question about that, right? So what was the second part of our question, Scott?
Scott Group
I just wanted if I — is this ultimately just a — this is a more asset based business the rest of your business is more asset light? Is that just a more difficult business to manage in the downturn?
Alain Bedard
No. I don’t think so, Scott. I think that once we provide the tools to the guys and just look at our Canadian LTL five years ago, seven years ago, and what we do now. I mean, it’s the same company, it’s the same asset intensity, but the results are day and night, right? Why is that? Well, because we over the time, over the years, we’ve built tools, we got P&L by terminals, we got all kinds tools that help those guys to do the job, right? So we believe that once we provide those guys with the right information, that’s not a question, the job will get done. We believe that two years it’s long, but it’s also short. I mean, we’ll get there, okay.
Scott Group
And then just quick follow-up, the revenue per 100 weight ex-fuel is up about 4%, which is good, but maybe others are going to be or trending a little bit better? Do you think there’s more pricing opportunity for you?
Alain Bedard
A little bit more, but don’t forget, we don’t have the same reputation as the peers, the best peers, right? So as the number one peer in the U.S., I mean, we’re not there at all, right? We — in Canada, it’s a different story in the U.S. Yes, so we did okay on that. To do great, it will take us some time to improve like I was discussing with Jack is, we have to improve service, we have to bring a lot of different cultural things over there.
I mean, at TForce Freight it’s not the TFI culture yet. We’re going to get there, but it’s not there. The culture of doing more with less is not there, right? It will get there. So all this and I don’t want to say tools again, Scott, because I said it too many times. But to me, this is — the guys are not going to sit on their hands. Once they have the info, when they have the proper information exact, fast, they’re not going to sit in their head. They’re going to start moving and acting.
Scott Group
Thanks, Alain. See you in a couple of weeks. Appreciate it.
Alain Bedard
Yes. Very good. Thank you, Scott.
Operator
Thank you. Our next question is coming from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your questions.
Walter Spracklin
Yes. Thanks very much, operator. Good morning, Alain.
Alain Bedard
Good morning, Walter.
Walter Spracklin
So I’d like to go back to the LTL division, particularly on the revenue per shipment. You’re up 6.5% on down 17% in shipments. And I know you were shedding a lot of underperforming business. So was the 6.5% increase mainly the average going up as opposed to price increase? And —
Alain Bedard
It’s a mix, Walter? Hey, Walter it’s a mix, right? Because if you shed low revenue shipments, I mean, it helps your average, right? So it’s also a mix, because we’ve been correcting rates or key adjusting rates. So as an example, the largest e-tailer a year ago that we were dealing with them about 1,400, 1,500 shipments a day losing 25%, right? That was a year ago with him. Today, we do about a 150 shipments with him, so we’ve lost 1,300 shipments volume wise with him per day. But instead of losing 25% now we make maybe 5% or 6%?
Walter Spracklin
Okay, so what I’m looking to get here is kind of unpacking the mix and really drill down on the price environment. If we do go into a weakening environment, do you still have room, because your price below — kind of below market to bring prices up, if we do go into weakening environment in the first half of the year? Or is it —
Alain Bedard
Yes, yes. For sure, Walter, we are not priced at the market at all, okay? So — but that it’s easier to fix when the market is solid like it was last year, okay? But we could not fix everything in the same day. So we still have a lot of adjustment to rates to get to market of our peers. But like we were talking earlier, okay, there’s also a service issue, right? So you want to sell your service as good as the best-in-class, but your service is not as good. So for sure, you always be a discount and got a guy, right?
So it’s a two-phase kind of approach, so Paul and his team are working hard to improve the quality of our service, et cetera, et cetera. But at the same time, we’re also moving slowly into getting closer to market, because if you compare, okay, what we do we still have some room to go. The other thing that we are not there at all is the weight per shipment, right? So that’s another aspect that we’re talking to our sales team is that us we like to carry very low weight shipment. That is not what we should be doing. Why? Because if you look at my peers, they all shipments that are 1,500 pounds on average 13, 14, 15, 16 and us were stuck at 10.75.
If you look at our Canadian division, we’re heavier. Why? Because we focus on heavy freight, because there’s more money, right? Over there, because of the past focus, they were not focusing on that. They were focusing more on retail, okay? LTL, which is lighter than industrial LTL, so we are the same thing as I was explaining about trying to get more freight per shippers okay, when you pick it up, try to get more shipment per sub, try to get more freight around a 30 mile radius of your service center. So it’s cheaper to operate and get more heavier shipment, because you get more dollars per shipment, right?
So it’s a combination of all of this, Walter, that’s going to help us move the average revenue per shipment, because you’re paid by the weight, by a per hundred weight, so why would you haul 10.75 versus, you know, my peers, my best peers are hauling 1,300 or 1,500 ? So they get more money per shipment.
Walter Spracklin
That’s great. Good color. My follow-up question here is on acquisitions. I hear you on a weakening environment and when they’re stormed out there, you can buy small tuck-ins, because of kind of desperate sellers, that kind of thing, I’m with you on that. My question is really on the larger transactions. Does a weakening environment pushback negotiations, because of the base on which the EBITDA is being negotiated or do you worry at all that some of the larger deals that you’re contemplating might not get done, because of a weakening environment? Or are you kind of settling in? Are you looking at more of a normalized EBITDA and kind of the weakness will be — will not be as bigger factor in negotiating with a larger potential acquisition?
Alain Bedard
Yes. So if you look at what we’ve done with CFI, Walter, discussion to have with the buyer is that let’s do a reasonable deal for both parties and we were able to come to an agreement in an environment that was not maybe the best for the seller, which is me, right? We apply the same kind of reasonability once we get to an environment that is to the buyer’s advantage, but it takes too to dense. So if you try to squeeze the seller, because market condition are in your favor, so much, like you just said, there’s not going to be a deal, right?
But it’s also a philosophy there that we want to have a fair deal, but my experience, Walter, is that we normally get a better deal, okay, when the market is difficult, because there’s less buyers showing up with stupid pricing. That doesn’t change the reasonable price. What it changes like, I’m just thinking about the housing market in Toronto, right? So now it’s way more reasonable. It was like six months ago, so the same story could be true of a company. When you have 15 buyers of a company, well then the price goes up, right? So when the market is stuffed, you have less buyer, so the reasonable price gets more in line with what I like to do.
Walter Spracklin
Makes a lot of sense. Thanks very much, Alain and see you in a few weeks.
Alain Bedard
Yes. Thank you, Walter.
Operator
Thank you. Our next question is coming from the line of Jason Seidl with Cowen. Please proceed with your questions.
Jason Seidl
Thank you, operator. Good morning, Alain.
Alain Bedard
Hey, good morning, Jason.
Jason Seidl
I want to focus on sort of through the storm here, if we will, because I think it’s pretty obvious to anyone that’s been following the markets that we’re heading into a little bit of a downturn here. How long it will take? I have no idea. But I want to look at your LTL business, because it sounds like right now you’re sort of running a six cylinder car without three cylinders firing, right? You have your fleet that you want a reef fleet, but you can’t because the OEMs, you have a facility footprint, which is probably not right sized to your liking and you’re a little bit behind in the technology.
So can you can you talk to me about the opportunities that exist or forget about ‘23, but ’24 and beyond and then where would that put you in terms of sort of the rankings in your head for some of the national carriers once you get rightsized?
Alain Bedard
Yes, once we get rightsized, Jason and this is what — why I say within two years, I think that will be in an 80 to 85 OR company, which is normal in the U.S. I mean, the exceptional guys are at 70 OR, okay, I’m not saying, I’m not talking about that. This is a company has been built and a great management team over years and years of success. I mean, I’m not saying that about our company. What — this is what we do in Canada, but this is not attainable for us within the next two, three years. What we’re just saying is that by providing okay, everything that these guys need in ‘24, in ‘25, I think that we should be in a normal environment of an 80 to 85 OR. I think that 80, 85 OR in U.S. LTL is just normal. It’s not exceptional. 70 OR is exceptional, but 80 to 85 OR is just normal.
Jason Seidl
No, now that makes sense. And can you get a little bit of an update on the fleet. Obviously, you mentioned, you’re not there yet where you wanted to be, that was one of the things you called out when you purchased TForce Freight. Where do you think you’re going to be — in other words, where do you think you’re going to be in terms of your original target by the end of ‘23?
Alain Bedard
Yes. So you know, that the story, you always put the oil on the wheel that squeaks and the wheel that squeaks did not happen at TForce Freight. Why? Because it was CFI, our Truckload division that was in charge of making sure that we get the CapEx in as fast as we can. But those guys have been gone for three, four months, because as they known that we were making a deal with another company. Well, they focus more on CFI than on TForce Freight. So this is why we just hired about a month ago, a leader. And now this guy is making calls, okay. He is now the wheel that squeaks and calling those supplier and making sure that we’re going to get the equipment ASAP.
So far, okay, one supplier is probably late by maybe a month and month and a half, but we’ve diversified in ‘22, okay, because of the failure of ’21. But the second supplier he just started giving us the equipment about a month ago, right? So this guy is three months behind his schedule. The third supplier that we have, he hasn’t delivered anything. So far, what we’re seeing is that the delivery is supposed to start end of October, which is now into November. So he is already about three, four months behind the schedule. And the fourth supplier, which was supposed to start in the fall, now is in Q1 of ‘23.
So I mean, we’re still behind, hopefully, okay with this new leader that we have, which is really important to him, that we get the equipment in, hopefully if supply chains issues with the OEMs start to improve, okay, we could get the stuff. Now the price of the equipment okay, is creeping up for the last, what, eight, nine months, big time. So maybe the demand, okay, will start to shrink, not ours, okay, like I said to the TForce team, said there’s no way we’re going to reduce our CapEx as at all at TForce Freight in ’22 or in ’23 or in ’24, because we need a lot of CapEx catch up, right? To bring this age of the fleet.
So if something happens in our CapEx in ‘23, ’24, it’s never going to be TForce Freight. So if the other carriers are buying less, maybe that’s going to help us expedite, okay, get our equipment faster. We’ll see.
Jason Seidl
I wish you guys good luck there. It sounds like you’re about three to six month —
Alain Bedard
Thank you. We need that. We need that. It’s going to improve the driver satisfaction. I mean, it’s such an important thing for a transportation company to have a fleet of normal age.
Jason Seidl
Yes, listen, it will improve your cost as well fingers crossed for you and I appreciate the time.
Alain Bedard
Thank you.
Operator
Thank you. Our next question is coming from the line of Ken Hoexter with Bank of America. Please proceed with your questions.
Ken Hoexter
Hey, great. Good morning, Alain.
Alain Bedard
Good morning.
Ken Hoexter
Maybe talk a bit about your review on truckload, obviously, now that post CFI, what else needs to be done on the truckload side, you’ve made continued acquisitions on the specialized side. What’s your thought for the business? How should we think about that with this low-80s, high-70s margins going forward? And any impact on what’s going on in the market now on pricing?
Alain Bedard
Yes, very good question, Ken, I mean, for sure, I mean we love specialized truckload. As we — we’re big fan of that. We are second to none in Canada where we’re so big. Our approach with the team there is that we’re trying to grow east of Mississippi in all sectors. So we did two acquisitions in the U.S. in Q3 on our specialized truckload.
Our team is heavily involved in the U.S. right now to keep growing that. And our truckload division now, including TA dedicated now is under one leadership, which is Mr. Brookshaw, right. So this is something that we will continue to grow, not the van, okay. But really the specialty like the flatbed, like the stainless steel, like the dump operation, all of that, absolutely east of Mississippi, we’re in.
Ken Hoexter
Okay. And then just to clarify on the truck — the LTL discussion a bit more on your shedding of the customer, maybe I’m just trying to parse what is the macro deceleration that you’ve already seen in the quarter? I don’t know if you were kind of breaking that up before when you were answering the question? Or is there a way to decipher how fast you’re seeing the impact of this decelerating economy versus what you talked about getting rid of a customer?
Alain Bedard
I would say that if you look at our 17% year-over-year drop in volume, at least 65% to — 60% — 70% of that is really freight that we had to get rid of. I mean, like I was talking this guy, that was giving us above 1,400 shipments, now he is giving us a 150. Well, that’s over 1,000 shipments a day that just disappear with this guy, because it didn’t make any sense. We were losing 25%. There’s another customer that we shed more than 60% of his business that was also an important shippers. We’ve also lost a lot of volume with three PLs right, because those guys, they will give you freight, but we haul freight to make money not just all freight, right. So, I would say at least 70% of that 17% that we lost is really related to just freight that did not fit the system at all.
Ken Hoexter
Okay. And so that’s flowing through on the pricing, on the — in terms of again, in your answer before?
Alain Bedard
Yes.
Ken Hoexter
Okay. Thanks, Alain.
Alain Bedard
Thank you, Ken.
Operator
Thank you. Our next question comes from the line of Bascome Majors with Susquehanna. Please proceed with your questions.
Bascome Majors
So we’re two weeks out from the first time that you’ve done a formal Investor Day with the investment community. As we sharpen our pencils and get ready for that a bit. Can you tell us little bit about what this is and what isn’t just — what are your objectives and what’s the kind of information that you do plan to share and maybe what will this not be as far as guidance or near-term expectations that sort of thing? Thank you.
Alain Bedard
Yes. What we are trying to accomplish with that is really to show the team at TFI, how deep of a bench we’ve got in our EVPs, right. So it’s a big company. And we have a lot of talent. And we just want to have and the investors and the analysts really not just be talking to the CEO or the CFO. That’s why we want these guys, our EVP being talking to investors and analysts. So that you guys get a better feel of how deep our bench is, right. The quality of our talent, so really that is goal number one.
And because of the timing, okay, for sure we will probably be in a position to say, hey guys, this is what we think so far, based on our budget that we’ve seen, okay, that this is what we think that may happen for TFI in ‘23 in terms of guidance, right? But the most important thing for us being the first is that we want to show our team, want to show the culture, I mean, how strong these guys are, right. That is really the key of this.
Bascome Majors
Thank you.
Alain Bedard
You’re welcome.
Operator
Thank you. Our next question comes from the line of James Monaghan with Wells Fargo. Please proceed with your questions.
James Monaghan
Hey, guys. Thank you. I wanted to ask about —
Alain Bedard
Good morning, James.
James Monaghan
Good morning. I wanted to follow-up on the commentary you had about specialized trucking, and just sort of understand, how you guys are thinking about the rate environment going into 2023 and sort of like, you see strength in the end market, like it would be less economically cyclical going through this like, is there still room for rate expansion? Just trying to understand your thoughts on how you’re thinking about sort of rates and specialized through into the next year?
Alain Bedard
Yes. So our vision on that is that infrastructure both Canada and U.S. have suffered investment for a long, long time. We believe that both on the Canadian and U.S. side, I mean, you will see some major investment all over the place on the infrastructure. And that helps our specialized division, right? There is still an issue housing in Canada and housing in the U.S. I mean, we lack a lot of housing now. Housing is very expensive, because of interest right now. I understand that, but we still need to build a lot of homes in Ontario and in Quebec, as an example and the same in the US, population is growing.
So to me, when we look at the specialty truckload that we do for the commodity market for the building material, for the chemical, for the food, okay. I mean, that is where we want to be positioned okay, in the U.S., not so much the van, this is why we made the deal okay of selling CFI, because there is way more players in that field, number one. And on the Specialty side, there is less and less players. So we see a lot of opportunity.
The other thing too is that we’re so big in Canada that a lot of our Canadian customers are coming from the U.S. So a lot of these guys are saying, hey, are you guys thinking about moving South? And we say yes, we’re coming, right? So this is really the plan for us on the specialty truckload side both on the East Coast in Canada and on the East Coast in the U.S. is we’re going to keep growing that through a lot of small nice tuck-ins here and there that we do.
James Monaghan
Got it. That’s helpful. And actually just a quick follow-up on LTL. Any — you’ve been calling for — just any sense of the sort of seasonality of the OR shipments heading into the fourth quarter from here?
Alain Bedard
On the U.S. side, yes, for sure December and January are not good months for us in terms of volume. But it is what it is. I mean, it’s always been the situation. And we’ve asked our team to be even more proactive than what they were used to do in terms of adjusting, okay? So yes, there’s cyclicality absolutely.
James Monaghan
Okay, thanks.
Alain Bedard
You’re welcome.
Operator
Thank you. Our next question is coming from the line of Benoit Porier with Desjardins. Please proceed with your questions.
Benoit Porier
Hey, good morning, Alain.
Alain Bedard
Good morning, Benoit.
Benoit Porier
Yes. You mentioned that some softness should be expected in 2023. And obviously, the company is quite different versus ’08, ’09, much less exposure to energy, TLs, stronger balance sheet. So just looking at 2023, what are the segment that should be the most resilient and the one we might see some volatility or softness? And how would you prepare for a potential software environment, Alain?
Alain Bedard
Well, it’s hard to predict, Benoit, okay, which one will be affected. But we know one thing is that the guys, the management team we have and everything that we have at TFI helps us adjust. So if you just take an example, without the recession, what happened in our P&C is that e-commerce start to come down, B2B start to come up, okay, but we’re still short in volume, right? Now if I look at October in my P&C, I’m down only 1% in volume, okay, year-over-year, okay? But I’m more than that into Q3. But the guys have done a fantastic job. So to say that the volume drops, okay, it means that you’re going to get killed. Well, it depends how good your teams are and it depends how fast they can turn around and adjust, right? So it’s hard to predict.
But one thing we always do in the downturn is because we are so active in M&A is that we could lose organically in our base business, but then we complement that with some M&A that we buy at reasonable price, okay, that case of revenue, okay, at something at the same level, if there was no storm. I don’t know if you understand what I’m saying or I’m explaining that correctly is that with a small downturn, we lose revenue, okay, fine. Well, with M&A because our balance sheet is so strong, because we have lots of experience doing M&A, we do that all the time. We could beef up our revenue through M&A to get back to where we were before this recession that may come.
Benoit Porier
Perfect. That’s great color. And just quickly on the follow-up question. In terms of CapEx, obviously, you’ll be facing catch up years 2022, 2023, but now that CFI has been sold? What could be kind of the normalized net CapEx we might see in 2024 and beyond once the — it gets more normalized?
Alain Bedard
Okay. I haven’t seen our plan Benoit yet for ‘23, but I would suggest that you take our ’22 numbers and you reduce that by about $75 million, which was the share of CFI, net CapEx of CFI.
Benoit Porier
Okay, perfect. And I suspect that those catch up years, the number could even go below that let’s say 2022 and beyond.
Alain Bedard
Yes.
Benoit Porier
Perfect. Okay.
Alain Bedard
Yes.
Benoit Porier
So thank you very much for the time, Alain. I’m looking forward to seeing you and the team.
Alain Bedard
Okay, very good. Thank you, Benoit.
Operator
Thank you. Our next question is coming from the line of Ari Rosa with Credit Suisse. Please proceed with your questions.
Ari Rosa
Hey, good morning, Alain. So I wanted to ask about the sale of the — the sale is part of the truckload business, I guess.
Alain Bedard
Yes.
Ari Rosa
It was one of the larger transactions that you’ve done in some time and certainly pretty rare to see you guys selling assets as opposed to buying assets. So I’m just curious what your thinking was there and kind of how you were thinking about that truckload business and why now was the right time to exit?
Alain Bedard
Yes. So key number one for us is that our return on invested capital, okay, has always been too low for us. If you look at the average return on invested capital today in Q3 of TFI is 20 points, right, 20%, which is great. Now our average return on invested capital in our regular van division was about 5% or 6% maybe 7% you know. So this is why discussing with the board, it was, you know, I mean, we have to do something else. And we’ll use this cash to invest into a business that will produce a better return on invested capital. And you’ll see that probably once we do the next major transaction, okay, you should see why we switch from, let’s say, a 5% to a 20%, right?
Now, I mean, for the buyer, okay, this is a great transaction, because he’s buying first of all, he has a lot of knowledge the buyer of CFI. He has a fantastic team and I’m convinced that the buyer will do a better job than me with CFI, right? So to me, I’m looking at that and it was a win-win for the buyer. It was also a win-win for us, because we got our capital back, okay, and then come ’23 maybe the end of ’23 or in 2024. We’ll use this huge capital influx $500 million, $550 million, okay, of the sale. And we’ll use that to invest in something that has got a better return. And you got to look at the track record of TFI. That’s what we’ve done for 25-years since I’ve joined this company 25-years ago, right? So it’s a swab.
So the idea was, okay, we sell this asset to a great buyer it’s going to be good for our CFI team. It’s good for the buyer. It’s good for us. It’s good for our shoulders, okay? And you guys have to wait till we do the next major deal, which may happen next year. It’s never going to happen in ‘22. But may happen next year, and then you’ll understand why we did that.
Ari Rosa
Yes. No, that makes a lot of sense. It will be exciting to see what you guys do with that capital. Just for my second question, I wanted to ask the parcel revenue per shipment was down sequentially. Just wanted to get a little bit of color on what drove that decrease? Was it FX related? And kind of how much of a headwind was FX also? But then specifically for parcel was there a mix effect or something else going on there?
Alain Bedard
Yes. The Canadian market is very different than UPS or what UPS or FedEx could do with the U.S. I mean those guys are lucky to be in the U.S. market. It’s really a fantastic market in terms of being able to get pricing power, okay, with the shippers. In Canada, our competition is government owned, it’s called [Puro] (ph), and it keeps a tab on what we could do in terms of improving the quality of our revenue. This is why the gain that we have in Canada has been like that for years and years has never been on trying to get more money from the customer is to be more efficient and to do more with less.
And that’s how we’re able to come up I mean to me, when I was looking at what Jim and Bob have done, I said, guys, this is wow, this is really fantastic. I mean, 28 OR with no volume growth, okay, no growth in revenue per piece, it’s all about cost. And this is the guy that’s run our P&C McGonagall is also involved with Paul, the guy that runs TForce Freight in the U.S. helping those guys to be more in line with our costs, right? Our cost reduction being more efficient, so this is why I feel good that Paul and the rest of our U.S. team with the support of our Canadian team, okay, we’ll be in a position to deliver some great result within 24 months, I think that we’ll get to that 80 to 85 OR.
Ari Rosa
Great. Thanks, Alain.
Alain Bedard
Pleasure.
Operator
Thank you. Our next questions come from the line of Tim James with TD Securities. Please proceed with your questions.
Tim James
Great. Thanks very much. Good morning, Alain.
Alain Bedard
Good morning.
Tim James
I’m just wondering if you could talk through the implications for profitability and returns on capital from the good growth that we’ve seen in ground with freight pricing in the U.S. LTL business?
Alain Bedard
Yes. Well, that is a diamond that we have. GFP has grown the revenue 25% year-over-year so far, right? So this is — the goal is to keep growing that by about 20%, 25% into ‘23. I haven’t seen Paul’s plan, but the last discussion we had was, is there a possibility that we could do that? And absolutely, we have a product there that is second to none. We have a partnership with UPS, this is one of the greatest assets that we have within our U.S. LTL business today. Absolutely.
Tim James
Thank you. Then my second question, you’ve done a great job of describing the transition that the TForce Freight business has gone through from the time you acquired it until today and kind of your strategy there? The transition from culling freight and focusing on freight that fits to now thinking about the cost side and getting the tools deployed in that business. I just want to confirm maybe that this transition was all part of the original plan. This is kind of denying with when you bought the business. This is playing out the way you expect it, I believe? Is that correct?
Alain Bedard
Absolutely. For sure, it’s always the same. What we do is always the same. So the easiest thing to fix okay, is freight that does not fit, because you just have to talk to the customer and say Mr. Customer, I’m sorry, but we can’t do it, right? Adjust rate is not that easy to do to market, because the customer doesn’t like that, okay, that you move rate up. So this is more difficult, so this is why year one, okay, to start from a company that was losing money to a company that’s got, let’s say, a 90 OR, that was the easiest thing to do. The most difficult thing is to do more with less, to organize the work of our drivers or dock workers or align all in a more efficient way, okay, that it reduces our cost.
So this is why we said, listen guys, I mean when we bought it, we say, hey, I think that within 12 to 24-months, we’ll fix that to bring it to a 10 — 9 OR, a 10 OE, okay. But it will take more time to fix the cost, because you got to change the culture. I don’t want to say it again, because Scott is going to kill me with the tools, but you got to provide the right information to those guys. So that they’re not going to sit in their hands, but they will fix the issue, right? They will get the job done in a better way.
But also at the same time, you need the support of sales not to commit to a customer that we’re going to deliver a shipment 100 miles away from a service center, it’s not for us, right? So it’s a complete plan, okay? Now for sure day one, if you ask me, Alain did you encounter some surprises? I would say yes. I thought that the technology that was there was better than what it is. The problem is that the previous owner for them it was like not very important, so they didn’t spend time or energy or money, okay? So the tools that we have the equipment, the technology we have there is very old, right? So this is why we’re moving the financial system to our own, which is brand new, okay? And then we’ll be in a position to provide the right information so that the guys could do their job, right?
Tim James
Great. That’s very helpful, Alain. Thank you. I look forward to seeing you in New York.
Alain Bedard
Very good.
Operator
Thank you. There are no further questions at this time. I’d now like to hand the call back over to Alain Bedard for any closing comments.
Alain Bedard
All right. Thank you very much, operator. So I appreciate everyone being on the call this morning. And again, I look forward to seeing many of you at our Investor Day on November 10. When you’ll have a chance to meet many senior leaders of TFI International. We appreciate your interest and hope you enjoy the weekend. Thank you again.
Operator
Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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