Second Quarter Ended June 30, 2018

Transcription

1 Second Quarter Ended June 30, 2018

2 Forward-Looking Statements In the interest of providing shareholders and potential investors with information regarding TFI International, including management s assessment of future plans and operations, certain statements in this presentation are forward-looking statements subject to risks, uncertainties and other important factors that could cause the Company s actual performance to differ materially from those expressed in or implied by such statements. Such factors are further discussed under Risks and Uncertainties in the Company s Annual Information Form and MD&A, but readers are cautioned that the list of factors that may affect future growth, results and performance is not exhaustive, and undue reliance should not be placed on forwardlooking statements. The expectations conveyed by the forward-looking statements are based on information available to it on the date such statements were made, and there can be no assurance that such expectations will prove to be correct. All subsequent forward-looking statements, whether written or orally attributable to the Company or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. Unless otherwise required by applicable securities laws, the Company expressly disclaims any intention, and assumes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 TFI International: Who We Are Full service: Transport and logistics Diversified: Truckload, Logistics & Last Mile, Less-Than-Truckload, Package & Courier North American Leader: Operations across U.S., Canada and Mexico Extensive Network: 376 facilities, 15,581 tractors 1, 25,197 trailers 17,285 employees, of which 8,335 are drivers Decentralized, entrepreneurial management approach 1 7,303 owned or leased; 8,278 are independent contractors 3

4 Our Customer Value Proposition We create transportation and supply chain advantages to mitigate risk for customers improve their efficiency and delivery timing reduce their delivery costs drive satisfaction for the end consumer 4

5 Why Invest in TFI International? Superior record of growth and shareholder value creation Market leader in key transportation and logistics segments Track record of M&A execution with well-defined acquisition pipeline Diversification by industry sectors and geography Robust return metrics (e.g. Return on Equity) 5

6 Investment Highlights Best-in-class operating margins, FCF yield and FCF conversion Proven track record of growth through disciplined acquisition strategy 7.2% Operating Margin % FCF Yield % FCF Conversion 3 Avg. Adjusted ROE of 14.4% since Completed 65 acquisitions since 2008 Industry remains fragmented Balanced capital allocation approach to drive shareholder value 4,252% 20-year total shareholder return 5 $2.8 bn FCF over same period, $780 million returned to shareholders since 2014 Robust balance sheet position 1 TTM as of Q2 2018, calculated using revenue before fuel surcharge. 2 TTM FCF divided by the June 30, 2018 market cap. 3 Calculated as TTM (adjusted EBITDA Net Capex ex-property) / Adjusted EBITDA. 4 Before impairment. 5 Total return performance includes dividends, assuming dividends not reinvested and calculated from 1-Jul-98 to 29-Jun-18. Access to $1.2 bn revolving facility ($427 million undrawn) Debt-to-Capitalization Ratio of 51% Annual dividend yield of 2.1% 6

7 Low Capex Facilitates Asset-Light Model TTM Q Net Capex (% of Total Revenue) 9.4% 8.7% 7.1% 3.0% 1.3% TFII Truckload Peer Average Package & Courier Peer Average 1 Less-Than-Truckload Peer Average 2 3 Logistics & Last Mile Peer Average4 Note: TFI net capex excludes purchases and sales of property. 1 Truckload: Covenant, Heartland, Knight-Swift, Marten, Werner and Schneider. 2 Package & Courier: FedEx and UPS. 3 Less-Than-Truckload: ArcBest, Old Dominion Freight Line, Saia and YRC Worldwide. 4 Logistics & Last Mile: CH Robinson, Expeditors and Forward Air. 7

8 Our Strategy of Growth Through Acquisitions Proven track record of executing on M&A strategy across highly fragmented markets Completed 65 acquisitions since 2008 Strong focus on integration, operations and realization of synergies Our disciplined acquisition criteria: Immediately accretive to EPS and free cash flow Fit with one of our four segments (TL, Logistics & Last Mile, LTL, Package & Courier) High free cash flow generation USA or Canada footprint Strong management team Synergy and growth potential 8

9 Overview of the TFI International Platform Truckload (46% of YTD Revenue) Logistics & Last Mile (20% of YTD Revenue) Less-Than-Truckload (20% of YTD Revenue) Package & Courier (14% of YTD Revenue) Conventional (27% of YTD Revenue) Specialized (19% of YTD Revenue) Logistics (7% of YTD Revenue) Last Mile (13% of YTD Revenue) Over-the-road (13% of YTD Revenue) Intermodal (7% of YTD Revenue) 9

10 Services by Geography TFI has built a robust and well-diversified revenue base No client accounts for > 5% of consolidated revenue Truckload Logistics & Last Mile Less-Than- Truckload Package & Courier By Geography (YTD Q2-2018) 0.4% Canada United States Mexico 43.4% 56.2% Canada United States By Top Customers' Industry (YTD Q2-2018) 3% 3% 3% 2% 4% 5% 29% 6% 7% 7% 8% 9% 14% Mexico 1 1 Truckload and LTL in Mexico provided by CFI Logistica. Retail Building Materials Automotive Energy Services Waste Management Maritime Containers Manufactured Goods Metals & Mining Food & Beverage Forest Products Chemicals & Explosives Others 10

11 Truckload Segment Geographic Footprint 1 Segment Overview Dry van full truckload Flatbed, tanks, dumps, oversized and other specialized services Modern fleet We own our assets and have long established partner carrier relationships 46% of YTD revenue Truckload Operating Companies CONVENTIONAL (27% of Total Revs.) A&M Intl. Highland Besner Laidlaw Carriers Van CFI Papineau Intl. Clarke Road Transport Roadfast Couture TF Dedicated Ganeca Transport America Grégoire Transport J.C. Germain 1 Truckload in Mexico provided by CFI Logistica. SPECIALIZED (19% of Total Revs.) Bergeron Brasseur Charbonneau Contrans Flatbed Group Contrans Tank Group E.L. Farmer GHL Transport Golden Intl. Highland Intermodal JAF Mirabel Logistics Nordique P&W Intermodal & MTMX Rebel Transport TF Truckload & Logistics Les entreprises Dupont 1972 Kingsway Bulk Tibbs Transport Durocher Intl. ECL Carriers Laidlaw Carriers Bulk McArthur Express TimeLine Logisitcs Tri-Line Carriers TST Expedited Villeneuve Tank Lines Westfreight Systems Winalta 11

12 Logistics & Last Mile Segment Geographic Footprint Segment Overview Full service logistics and transportation management Last mile in the US and Canada Provides a complete one-stop experience for TFI customers, completing TFI s portfolio of assets 20% of YTD revenue Logistics & Last Mile Operating Companies Logistics (7% of Total Revs.) Last Mile (13% of Total Revs.) Cavalier Logistics CFI Logistica CFI Logistics CK Logistics Clarke North America Cornerstone Logistics E&L Logistics Hyphen Transportation Management Kobelt Transportation Landry Logikit Patriot Freight Services Premier Product Management Quik X Logistics St-Lambert Stream Logistics AC Final Mile TForce Critical TForce Final Mile Canada TForce Final Mile U.S. TForce Logistics 12

13 Less-Than-Truckload Segment Geographic Footprint 1 Segment Overview Over-the-road and intermodal LTL services Solid track record for safety and on-time delivery Focus on customer facing technology Asset light intermodal 20% of YTD revenue Less-Than-Truckload Operating Companies OVER-THE-ROAD (13% of Total Revs.) INTERMODAL (7% of Total Revs.) Canadian Freightways Normandin Cavalier Quik X Transportation Concord Total Transfer La Crete Transport Tripar Transportation McMurray Serv-U Expediting TST Overland Express Clarke Transport National Fast Freight Quiktrax Intermodal Vitran 1 LTL in US provided by partners and in Mexico provided by CFI Logistica. 13

14 Package & Courier Segment Geographic Footprint Segment Overview Next-day in Canada and globally through partnership with DHL Cutting edge technology Specialized supply chain services 14% of YTD revenue Package & Courier Operating Companies Canpar Courier ICS Courier Loomis Express Muskoka Delivery Services TForce Integrated Solutions 14

15 Our Decentralized Structure: Uniquely Delivering Value for Shareholders Our four segments are constituted of wholly-owned subsidiaries operating under their own brands Our differentiated approach to operating our businesses enables us to create shareholder value by reaping the benefits of both economies of scale and specialization more efficiently allocating resources capitalizing on market opportunities and exploiting market dislocations in real time 15

16 Superior Track Record of Growth Revenue Before Fuel Surcharge (C$ in millions) Adjusted EBITDA 1,2 (C$ in millions) $5,000 $4,379 $4,000 $3,000 $2,000 $1,000 $ Diluted Adjusted EPS 1,2,5 $600 $514 $500 $400 $300 $200 $100 $ Free Cash Flow 1,2 (C$ in millions) $3 $2 $1 $2.08 $400 $300 $200 $100 $376 $0 $0 -$ $ These are non-ifrs measures. Please refer to the tables at the end of the presentation for a reconciliation of non-ifrs measures. 2 Please refer to pages 36, 37 and 38 for the most directly comparable measure determined under IFRS, being net income, diluted EPS and net cash from operating activities. 3 CAGR calculated from 1998, the first year of positive EPS. 4 CAGR calculated from 2000, the first year of positive free cash flow. 5 Tax adjusted for when TFI was an income trust. 16

17 Indexed Total Return and Shareholder Return Over Time 4,900% 20-year Total Return 1, TFI International vs. TSX and S&P 500 4,400% 3,900% 4,252% 3,400% 2,900% 2,400% 1,900% 1,400% 900% 400% -100% 1-Jul Mar Dec Sep Jun-17 TFI TSX S&P 500 Note: Total return calculated from 1-Jul-98 to 29-Jun Total return performance includes dividends, assuming dividends not reinvested. S&P % TSX 122% 17

18 Our Approach To Creating Shareholder Value Growth & ROIC Market Leadership We deliver earnings growth and strong ROIC, both organically and through our proven acquisition strategy Our People We continually solidify our position as a leader in the North American transportation and logistics industry Prudent Balance Sheet We maintain a strong balance sheet and access to capital We leverage our team of dedicated professionals to provide value-added services and solutions across each of our business segments 18

19 Market Leadership in Key Transportation and Logistics Segments: TTM Q FCF Conversion Truckload Less-Than-Truckload 95.4% 56.8% 47.8% 49.8% TFI Peer Average 1 TFI Peer Average 3 Logistics & Last Mile Package & Courier 98.3% 88.7% 93.3% 37.1% TFI Peer Average 2 TFI Peer Average 4 Note: FCF Conversion (%) calculated as (Adjusted EBITDA Net Capex) / Adjusted EBITDA. TFI net capex excludes purchases and sales of property. 1 Truckload: Covenant, Heartland, Knight-Swift, Marten, Werner and Schneider. 2 Logistics & Last Mile: CH Robinson, Expeditors and Forward Air. 3 Less-Than-Truckload: ArcBest, Old Dominion Freight Line, Saia and YRC Worldwide. 4 Package & Courier: FedEx and UPS. 19

20 E-Commerce Provides Additional Growth E-Commerce is a powerful secular force, driving new shipping demands including greater emphasis on last-mile logistics E-Commerce Revenue (C$ in millions) Evolution of B2B/B2C Split 15.8% CAGR $ % 31% 32% 34% 41% 42% 40% $ % 69% 68% 66% 59% 58% 60% 2012 TTM Q TTM Q B2B B2C 20

21 Evolution of E-Commerce Fulfillment The evolution of E-Commerce fulfillment has created numerous opportunities for TFI companies both next-day (Canada) and same-day (Canada & US) Shipper - Warehouse Next-Day Services Same-Day Services Shipper - Warehouse Pickup Region A Sorting Facility Linehaul Delivery Region B Sorting Facility Delivery Business Customer Business Customer 21

22 TFI International Serves a Vast E-Commerce Network TTM E-Commerce Revenue by Segment (C$ in millions) $39.6 United States Canada $189.3 $11.0 TFI services e-commerce from approximately 80 North American cities Further opportunities for the Logistics & Last Mile segment, both through acquisitions and organic growth Increasing facility utilization with addition of same-day service Logistics & Last Mile $86.5 $43.9 $0.9 TL P&C LTL Total Canadian e-commerce revenue: $95.3 million Total US e-commerce revenue: $275.9 million Note: TTM as of Q

23 Financial Discipline and Return of Capital Free Cash Flow (FCF) 1,2,3 (C$ in millions) Cumulative Cash Returned to Shareholders through dividends and share buybacks (C$ in millions) $500 $450 $400 $350 $300 $250 $200 $150 $ TTM 89% 76% 86% 68% 74% FCF Conversion 4 $900 $450 $800 $780 $700 $600 $500 $400 $300 $200 $100 1 From continuing operations. 2 This is a non-ifrs measure. Please refer to the tables at the end of the presentation for a reconciliation of non-ifrs measures. 3 Please refer to page 38 for the most directly comparable measure determined under IFRS, being net cash from operating activities. 4 Calculated as TTM (Adjusted EBITDA Net Capex ex-property) / Adjusted EBITDA. $ YTD Q $56.6 $68.6 $64.1 $69.0 $37.2 Annual Dividends Paid $57.4 $121.8 $151.2 $81.6 $72.2 Annual Share Repurchases 23

24 Robust Balance Sheet With Strategic Flexibility Disciplined acquisition strategy with focus on preserving balance sheet strength and attractive cost of capital Current leverage of 2.7x 1 (as of June 30, 2018) Target leverage in the 2-3x range, with flexibility to go above for strategic purposes Debt as of June 30, 2018: $1,546 million, with $427 million undrawn under the revolving facility 1 Based on Debt as of June 30, 2018 and TTM Q Adjusted EBITDA (not including full-year acquisition results). 24

25 Track Record of M&A Execution and Integration Acquired 65 companies across our highly fragmented markets since 2008 Number of Acquisitions per Year Winalta La Crete 14 TForce Integrated Solutions 5 Lafleche 3 TForce Final Mile Loomis 6 Total Transfer Quik X Transportation E.L. Farmer 4 4 Contrans Clarke & Vitran Transport America 6 AC Final Mile 4 CFI Cavalier National Fast Freight TForce Critical 10 Premier Product Management 7 Brasseur Normandin YTD Q

26 Outlook & Strategy (Slide 1 of 3) Accelerating economic activity throughout North America, with strong consumer spending driving a recovery in freight volume Tightening capacity is putting upward pressure on shipping rates Truckload fundamentals are strong in Canada and the US In this environment, TFI remains focused on operating efficiencies, asset rationalization, tight cost controls, maximizing asset utilization, and aligning rates with the changing market 26

27 Outlook & Strategy (Slide 2 of 3) Truckload segment: Focus on the quality of U.S. freight revenue and network efficiency Remain disciplined in regards to supply management in the U.S. and optimize the utilization of existing assets Deploy leading-edge analytical tools to aid business decisions and maximize returns Focus on cost initiatives to improve margins Logistics & Last Mile segment: A strategic division for TFI that leverages our last-mile assets Further grow our presence as non-asset-based activities are a strategic complement to conventional transportation services Logistics requires less capital, thereby generating even better free cash flow Leverage our strong network to capitalize on e-commerce growth opportunities 27

28 Outlook & Strategy (Slide 3 of 3) Less-Than-Truckload segment: Consolidation of operations, administration and IT platforms for efficiency gains Remain disciplined in adapting supply to demand as overcapacity affects the industry Focus on major cities, cross-border and high-density regions to enhance value Leverage capabilities in asset-light intermodal activities that generate higher returns Package & Courier segment: Our focus on higher-quality revenues, business mix and cost reduction enables us to generate higher margins and strong operating income Consolidation of operations, administration and IT platforms for efficiency gains Remain proactive in implementing measures to further optimize asset utilization 28

29 Appendix 29

30 Balance Sheet Details Debt structure $1.2 billion unsecured revolving facility Matures in June 2022 and can be extended annually Provides favourable terms and conditions and capital management flexibility $125 million unsecured debentures Interest rate between 3% and 3.45% and matures in December 2020 Can be repaid, without penalty, after December 18, 2019 $75 million unsecured term loan 3.95% interest rate and matures in August 2019 Can be repaid, without penalty, after August 18, 2018 $500 million acquisition credit Two tranches, $200 million maturing in June 2020 and $300 million maturing in June 2021 Same pricing, covenants and conditions as the banking revolving facility 30

31 2017 and Q Selected Segment Financials 2017 has been recast for changes in composition of reportable segments and changes in presentation Package & Courier (in thousands of dollars) 2017-Q Q Q Q Q Q2 Total revenue 162, , , , , , ,249 Fuel surcharge (17,032) (17,062) (15,984) (19,969) (70,047) (20,680) (23,484) Revenue 145, , , , , , ,765 Materials and services expenses (net of fuel surcharge) 63,026 63,635 65,450 70, ,720 59,306 65,849 Personnel expenses 48,534 46,152 44,916 46, ,349 44,770 46,116 Other operating expenses 14,649 13,614 12,715 13,541 54,519 14,376 13,263 Depreciation of property and equipment 3,525 3,531 3,418 3,337 13,811 2,983 2,982 Amortization of intangible assets , Gain on sale of rolling stock and equipment (106) (32) (23) (50) (211) (33) (16) Operating income 15,674 25,730 23,577 27,462 92,443 20,623 30,217 Adjusted EBITDA 19,511 29,575 27,702 31, ,982 23,968 33,553 Gain on sale of land and buildings and assets held for sale - - 9, , Logistics and Last Mile (in thousands of dollars) 2017-Q Q Q Q Q Q2 Total revenue 252, , , , , , ,449 Fuel surcharge (6,928) (8,185) (7,275) (8,719) (31,107) (9,927) (12,577) Revenue 245, , , , , , ,872 Materials and services expenses (net of fuel surcharge) 175, , , , , , ,436 Personnel expenses 34,941 37,347 34,526 34, ,548 35,662 34,680 Other operating expenses 17,366 16,392 14,784 17,856 66,398 16,783 17,037 Depreciation of property and equipment 1,037 1, , Amortization of intangible assets 4,842 5,171 4,655 5,555 20,223 5,326 5,310 Gain on sale of rolling stock and equipment (63) (14) (88) (71) (236) - (110) Operating income 12,277 15,258 13,269 14,101 54,905 15,020 19,806 Adjusted EBITDA 18,156 21,449 18,887 20,509 79,001 21,099 25,829 Loss on sale of land and buildings and assets held for sale (49) (37) (26) (3) (115) - - Impairment of intangible assets (13,211) (13,211) - - Note: Please see note 3 of the unaudited 2018 quarterly financial statements. 31

32 Additional Operating Data (Slide 1 of 3) Operating Data TL 2017-Q Q Q Q Q Q2 US based Conventional TL Revenue before fuel surcharge (in thousands of U.S. dollars) 173, , , , , ,009 Operating ratio 102.6% 103.0% 106.0% 100.0% 98.3% 94.5% Total mileage (in thousands) 109, , ,795 99,340 98,426 98,337 Tractor count, average 3,713 3,690 3,329 3,115 3,100 3,088 Trailer count, average 11,328 11,275 11,362 11,360 11,201 11,143 Tractor age Trailer age Number of owner operators, average Canadian based Conventional TL Revenue before fuel surcharge (in thousands of dollars) 75,270 78,152 74,073 74,125 73,604 82,531 Operating ratio 94.6% 90.7% 92.2% 91.8% 90.6% 86.6% Total mileage (in thousands) 30,809 32,556 28,060 27,427 26,142 27,867 Tractor count, average Trailer count, average 3,150 3,130 3,146 3,072 3,021 3,086 Tractor age Trailer age Number of owner operators, average Revised as of July 26,

33 Additional Operating Data (Slide 2 of 3) Operating Data TL 2017-Q Q Q Q Q Q2 Specialized TL Revenue before fuel surcharge (in thousands of dollars) 183, , , , , ,434 Operating ratio 90.9% 88.3% 88.7% 91.5% 91.1% 86.0% Tractor count, average 1,251 1,344 1,343 1,346 1,365 1,407 Trailer count, average 4,309 4,726 4,696 4,663 4,625 4,525 Tractor age Trailer age Number of owner operators, average 1,126 1,224 1,176 1,242 1,108 1,075 1 Revised as of July 26,

34 Additional Operating Data (Slide 3 of 3) Operating Data - LTL 2017-Q Q Q Q Q Q2 Revenue before fuel surcharge (in thousands of dollars) 224, , , , , ,245 Operating ratio 96.0% 92.9% 93.5% 92.9% 95.3% 89.8% Revenue per hundredweight (including fuel) $13.77 $13.39 $12.83 $13.11 $14.05 $13.99 Revenue per hundredweight (excluding fuel) $12.17 $11.86 $11.40 $11.40 $12.13 $11.89 Revenue per shipment (including fuel) $ $ $ $ $ $ Tonnage (in thousands of tons) ,005 Shipments (in thousands) 976 1, Average weight per shipment (in lbs) 1,891 1,899 1,951 1,941 1,983 2,168 Average length of haul (in miles) Vehicle count, average ,080 Revenue per week per vehicle (incl. fuel, in thousands of dollars) $20.38 $22.10 $21.31 $21.54 $23.68 $

35 Reconciliations 35

36 Five-Year Reconciliation of Adjusted EBITDA 1 (C$ in millions) (from Continuing Operations) TTM Q Net Income $347.6 $158.0 $157.1 $145.7 $116.2 Net Finance Costs $61.4 $61.1 $54.9 $75.7 $64.2 Income Tax Expense (Recovery) $(13.3) $(40.6) $46.3 $55.1 $47.2 Depreciation of Property and Equipment $196.9 $209.6 $139.4 $129.1 $86.0 Amortization of Intangible Assets $62.9 $61.2 $53.7 $47.1 $35.7 Gain on Sale of Land and Buildings $(0.3) $(0.2) $(8.9) $(12.0) $(14.7) Gain on Sale of Assets Held for Sale $(80.3) $(77.4) $(3.9) Impairment of Intangible Assets $143.0 Adjusted EBITDA $574.9 $514.5 $442.4 $436.8 $ This is a non-ifrs measure. 36

37 Five-Year Reconciliation of Adjusted Net Income 1 and Adjusted EPS Diluted 1 (C$ in millions, except per share data) TTM Q Net Income $347.6 $158.0 $639.6 $163.4 $127.9 Amortization of Intangible Assets Related to Business Acquisitions, Net of Tax $42.1 $38.3 $32.7 $28.8 $21.7 Net Change In Fair Value of Derivatives, Net of Tax $(0.4) $(1.2) $3.5 $9.5 $3.7 Net Foreign Exchange Loss (Gain), Net of Tax $(0.2) $1.8 $1.6 $(1.0) $2.9 Gain on Sale of Land and Buildings and Assets Held for Sale, Net of Tax $(69.0) $(66.7) $(7.5) $(13.5) $(12.5) Impairment of Intangible Assets, Net of Tax $138.4 US Tax Reform $(76.1) $(76.1) Net Income from Discontinued Operations $(482.5) $(17.7) $(11.7) Adjusted Net Income from Continuing Operations $244.0 $192.6 $187.4 $169.5 $132.0 Adjusted EPS from Continuing Operations Basic $2.74 $2.13 $2.00 $1.69 $1.33 Adjusted EPS from Continuing Operations Diluted $2.68 $2.08 $1.96 $1.66 $1.30 EPS from Continuing Operations Diluted $3.79 $1.70 $1.64 $1.43 $ This is a non-ifrs measure. 37

38 Five-Year Reconciliation of Free Cash Flow 1 (C$ in millions) (from Continuing Operations) TTM Q Net Cash from Operating Activities $448.2 $372.6 $337.9 $358.8 $228.5 Additions to Property and Equipment ($238.9) ($259.7) ($110.6) ($157.8) ($69.3) Proceeds from Sale of Property and Equipment and AHFS $240.7 $263.6 $61.0 $90.5 $84.2 Free Cash Flow $449.9 $376.5 $288.3 $291.5 $ This is a non-ifrs measure. 38

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