So, missed pickup is improving. We put more freight on the road, okay, versus, let’s say, a year ago, on the linehaul, we use less rail, okay? So, rail used to be a big portion of our linehaul. Now the portion of rail is reducing, and our own linehaul is picking up speed. So, I think that pretty soon we’re going to be doing probably like 60% of the linehaul miles will be our own guys, let’s say within a year or two, so — in order to, again, improve service. So, to me, Brian, I mean, we still have a lot of work to do over there, but we know what to do. That’s — the beauty is we have to execute and we’re just starting to see a little bit of improvement of our execution.
Brian Ossenbeck: All right, Alain. Thanks very much. Appreciate it.
Alain Bédard: Thank you, Brian.
Operator: Thank you. Our next questions come from the line of Jordan Alliger with Goldman Sachs. Please proceed with your questions.
Jordan Alliger: Yeah, hi. Good morning. Just to sort of follow up a little bit…
Alain Bédard: Good morning, Jordan.
Jordan Alliger: Good morning. I know you mentioned sort of early innings in service improvements, so it’s good to get a little bit more color on what you feel you’ve accomplished and what’s next to come to get service. And then, even though it’s early innings, are you at the point in service, again, assuming the freight market cooperates, where you could have sustainability in that growth and tonnage after a first quarter that saw an inflection?
Alain Bédard: Yeah. Well, we believe so. And, if you look back that an example of stupidity is missed pickup. So, if you don’t monitor that, you can’t improve. So, this is something that we put in place to make sure that we monitor that. Now, we still have about — around 2% of our pickup that we miss today, okay? Now, depending on the terminal that, we have better ones, we have ones that are not so good. But, the business of freight starts with the pickup. So, if you miss the pickup, you miss the revenue. This is the kind of culture that we are changing, for example, in California, where we can’t afford to miss pickup. So, we’re changing that, and that improves the service to the customer, because then the customer can trust — can have trust in you that you’re going to show up and do the pickup, right?
That’s number one. Number two is our billing system. And I’ve been saying that for two years, okay? It’s also a major issue of having, like, sand in the gearbox with our relation with customers. So, we are fixing that during the course of ’24, finally, okay? And in terms of the linehaul, if you rail your linehaul freight, your freight on the linehaul with rail, I mean, don’t expect to be — don’t expect it’s going to be on time. I mean, those guys — their on-time services is maybe not as good as the road. And if you look at my peers in the U.S., I mean, the percentage of freight that’s run on the rail is way less than what we do as today. So, this is also something that we are working on to improve, and we can’t change everything at the same time, but this is an ongoing process in ’24 and into ’25.
So, to your question of growing this company, I mean, for sure, right now, what we’ve been able to do is at least grow the weight per shipment, which is, a key to success. I mean, again, if you compare my average weight per shipment to my peers in the U.S., I’m still way too low versus those guys. If you look at my weight per shipping in Canada, there we understand the business, and our weight per shipment is way more than what it is in the U.S. So that is also a trend that we’re going to keep running and improving over the course of the next year or two. So, this is why we’re probably in the second inning of a ninth inning game on that TForce Freight LTL business. I mean, we still have to work on the cost, like I said, our P&D, we still run too many miles, our density is not as good as should be, we don’t pick up enough freight per stop, et cetera, et cetera.
So, these are all the different levers that we have to put in place, do what we do in Canada. I mean, we run an OR in Canada that is second to none. If you look at my OR in Canada, sure, it went from 75, okay, last year to 81. But, an 81 OR in Canada in a very depressed market is not bad. Why? Because we have a density that is second to none. And this is what we’re trying also to build in the U.S.; do more with less.
Jordan Alliger: Got it. And just as a quick follow-up, taking all that together, is it still a thought you could do around an 88 OR this year?
Alain Bédard: Well, when I talk to my guys, okay, they are convinced that they could do it. I had a little bit of concern when I look at the environment and the market right now. I would never, Jordan, anticipated that ’24 was going to be so rough in terms of the freight environment. I mean, I’m telling you, if you would have asked me six months ago, what you think about early ’24, I would never have said that it would be that bad. I mean, look at the truckload guys. Some guys are losing money. I mean, this is probably one of the worst market we’ve seen in the last 30 years.
Jordan Alliger: Thank you.
Alain Bédard: You’re welcome.
Operator: Thank you. Our next questions come from the line of Ravi Shanker with Morgan Stanley. Please proceed with your questions.
Ravi Shanker: Thanks. Good morning, Alain. Just on that point, on the LTL side, how much of that path to 88 OR is macro, so, depending on the cycle coming back versus idiosyncratic actions, I mean, best practices from the Canadian operation that are putting into the U.S. operation. And so, how quickly can you implement that idiosyncratic action?
Alain Bédard: Yeah. When we talk about the business, Ravi, we never talk about the market because we don’t control the market. So when we say that we believe that we’ll get to an 88 OR, this is based on market condition that we see right now. I mean, nothing is based on the market that may improve down the road. We don’t budget for that because we don’t control the market. What we do control is our cost and our efficiency and our productivity. And this is what we’re trying to do. Now, in terms of the market is — let’s focus on the freight that fits. Okay, that we can control. Let’s focus on heavier freight versus lighter freight, which is something that slowly we’re starting to improve. Let’s focus on trying to get more freight per stop.
That’s something that we can control when you’re having the right discussion with the customer. But this 88, okay, that has to be our target for us in ’24, is based on, guys, we have to do a better job in terms of managing our cost, better productivity, getting more weight per shipment. So if you look at — our revenue is about stable, but our shipment count is down. So it helps us on the cost side because we get the same dollars. Well, we have to do a little bit less work because we pick up less shipments, right? So, this is the trend is based on, guys, we can’t control the market, but what we can control is our cost and the freight that we pick up and deliver.
Ravi Shanker: Got it. Helpful. And maybe as a follow-up, you said earlier that you’re not expecting an inflection in the cycle until 2025. So just to understand, is your full year guidance for ’24 just based on normal seasonality off of a 1Q number, or are you accounting for any improvement at all this year?
Alain Bédard: No. The way we see it, Ravi, is that this is going to be not a great year in terms of the freight environment.
Ravi Shanker: Okay. Understood. Thanks, Alain.
Alain Bédard: You’re welcome.
Operator: Thank you. Our next questions come from the line of Tom Wadewitz with UBS. Please proceed with your question.
Tom Wadewitz: Yeah, good morning, Alain.
Alain Bédard: Good morning, Tom.
Tom Wadewitz: Yeah, let’s see, there’s a lot going on in transports these days. Wanted to get your sense on acquisitions. You’ve had very, very good skill at identifying value and taking out costs, and doing acquisitions. Historically, I think with TForce, obviously, the market backdrop is tough, but it seems like it’s been maybe harder to fix than you might have anticipated or maybe just takes longer.
Alain Bédard: Yeah.
Tom Wadewitz: And then you’ve got a pretty tough truckload backdrop and you’ve got a big truckload carrier you just bought. So, I guess a question is, do you consider slowing the pace of acquisitions maybe the next year or two, and say, hey, we’ve got a lot to digest and maybe even takes longer to kind of separate the truckload businesses, or just thinking about how that might affect the pacing of what you do on the, I don’t know, strategic front?
Alain Bédard: Very good question, Tom. I mean, the UPS Freight acquisition was very difficult to do. Number one, because it’s a carve-out. A carve-out is always difficult because you don’t know exactly, okay, the cost that you’re going to inherit, et cetera, et cetera. And I have to tell you that, one thing that we were not aware is that 35% of the freight was bad when we bought the company. So this is a little bit of some of unknown, okay? And you’re right, it’s taken us a little bit more time. So, it took us two years to unhook from UPS financial system. So, it’s — a carve-out is always difficult to do, okay? But we are — right now, we’re completely out of the UPS environment, right? So, we are standalone and we’re making progress over there.
Now, the Daseke one, that’s a different story. Because Daseke, it’s not a carve-out, it’s a standalone business. Number one. Number two is, their head office cost was through the roof, okay? To run the Daseke head office is the cost was about the same as to run TFI head office. Now that cost at Daseke has been reduced by 75%, okay, over the course of the next year or two. So, we’re going to be down to very little cost. And the operating companies at Daseke, you could say there’s about nine business unit that operates, okay, so these operators, I’m looking at the results for ’23 excluding the head office, okay, those guys did a pretty good job in the market environment of ’23. I’m looking at ’24. And if I look only at the operating businesses, these guys are on plan.
They’re down versus last year. They’re down versus ’23. But not that much. So it’s a little bit — I mean, they’re very — it’s not like UPS Freight versus us in Canada in the Canadian LTL, which was day and night in terms of results. I mean, those guys are not as good as TFI, okay? But the delta between the operating units and our operating units, it’s not 300,000 points of OR. I mean, those guys, it’s not going to be the same thing. Now the question is, are we going to do something major in ’24? Yeah, you’re right, Tom. I mean, we have to keep digesting TForce Freight and we have to do the same with Daseke. I mean — so this is why M&A side for us, ’24, tuck-ins, yes, in Canada, easy to do, but nothing major except the Daseke transaction.
Because as I said on the script there in the call, we’re planning on reducing our debt by between $500 million to $600 million in ’24 to bring our leverage down to something like 1.6, 1.7. Right now, we’re about 1.6, okay, and we believe that by year end, we’re going to be back to 1.6. So, by saying that, I mean, there’s nothing major of M&A that’s going to happen in ’24.
Tom Wadewitz: Okay, that’s really helpful. I just had one follow-up on the LTL — U.S. LTL. How do we think about the improvement in OR and the sensitivity to freight market versus what’s in your control? I mean, there are a bunch of things that are in your control, but it also feels like if you’re going to get paid a higher price, then it would help to have a tighter freight market. And it feels like there’s some sensitivity to pricing and freight market within that improvement too. So I don’t know, how do you think about this year, next year, how much is in your control on or improvement in LTL versus how much is kind of freight market sensitive?
