TFI International Inc Aktie

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that this conference call will contain statements that are forward-looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on April 27, 2026.

Joining us on the call today are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Mr. Alain Bedard. Please go ahead, sir.

Well, thank you for the introduction, operator, and welcome, everyone, to today's call. Within the past hour, we reported our quarterly results, including adjusted diluted EPS of $0.69. This performance was driven by the tremendous effort of our talented team members and their relentless focus on efficiency and related operating principles. Taking a step back, a long-standing part of our strategy is to maintain a rock-solid balance sheet that allows us to thoughtfully manage through the cycle.

And after generating more than $800 million of free cash flow last year, which was over $10 per share we produced another $124 million during the first quarter, which further benefited our financial position. Most importantly, this allows us to continue to -- our track record of strategic capital allocation investing for the long term regardless of market conditions, while also returning excess capital to shareholders whenever possible. To that point, during the quarter, we paid out $38 million in quarterly dividends.

Let's take a closer look at our first quarter financial results. The total revenue before fuel surcharge of $1.7 billion was consistent with the prior year quarter. Our consolidated operating earnings of $97 million represented a 5.7% margin, and our net cash from operating activity came in at $122 million. Turning to our business segment performance. I'll first mention that we have streamlined our reporting approach in our quarterly report in an effort to reduce complexity for our investors and better align with our peer practices. Therefore, I'll be primarily speaking to the overall results of each of our 3 segments, beginning with LTL. Which represents 38% of our segmented revenue before fuel surcharge.

We saw notable improvement during the quarter as weather improved with shipments per day in March, considerably stronger than January and February and this trend continued into April. For the first full quarter, the $656 million of revenue before fuel surcharge was down just 3% year-over-year, an improvement from the fourth quarter 10% decline. Our LTL adjusted operating ratio came in at 95.3% and total operating income of $31 million compares to $47 million one year earlier. Lastly, our return on invested capital for LTL was 11.6%, again with notable improvement through the quarter and into April.

Turning to our Truckload segment, the $673 million of revenue before fuel surcharge was 39% of segmented revenue and grew from $663 million in the prior year first quarter. We were able to grow by 9%, our revenue per truck per week, excluding fuel surcharge, while reducing our truck count to 7% as we increase fleet productivity and shed excess equipment. In addition, we continue to see rapid sequential growth from data center construction, although this today is a small part of overall revenue.

Truckload is also a segment for which our past acquisition, including Daseke have increased our exposure to industrial truckload end markets, helping us to overcome industry fundamentals recently characterized by tariff and economic uncertainty as well as our industry overcapacity. Our quarterly truckload operating income of $56 million was up from $49 million in the prior year and OR was 92.7%, improved by 100 basis points. Lastly, our Truckload return invested capital came in at 6%.

To round out our segments, Logistics accounted for 23% of segmented revenue of $388 million, which was up slightly from the prior year figure of $385 million and also up 8% sequentially. Our logistics operating income of $34 million was also up year-over-year from $31 million and was up from the December quarter as well. This equates to a margin of 8.9%, which was also up both year-over-year and sequentially. Our logistics return on invested capital was $12.4 million.

Moving on to our balance sheet. Our strong financial foundation continues to benefit from our free cash flow, another $124 million during the quarter, as I mentioned, and we end up month of March with our funded debt-to-EBITDA ratio at 2.6. Wrapping up my remarks in terms of our updated outlook for the second quarter of 2026, we expect adjusted diluted EPS to be in the range of $1.50 to $1.60, and net CapEx, excluding real estate for the full year, we're expecting a range of $225 million to $250 million, unchanged from previous expectations.

As always, our outlook range assumes no significant change, either positive or negative in the operating environment. And with that, operator, David and I -- we'd be happy to take questions, if you could please open the lines.

[Operator Instructions] And your first question comes from the line of Ravi Shanker with Morgan Stanley.

An, obviously, a lot has changed since your previous call with the cycle and the current environment. I would just love to get a sense of what you're seeing out there in terms of the TL market tightening up, direct impacts on you, secondary in LTL, et cetera?

That's a very good question, Ravi. So what we're seeing really in the truckload sector is that it's the offer that's been reduced, right? With everything that's going on in the U.S. with this new administration, the tightening of CDL, okay, the closing of all those driving schools, right, that make any sense. I mean the offer has been reduced month after month. And now slowly, okay, we're getting closer to a balance in the industry where for a long time, this industry was very on balance where the offer was way more than the demand.

Now if you look at our Truckload operation in Canada and in the U.S., I mean, we're focused on industrial freight, right? We're not a carrier of retail freight in our truck world. we are really industrial, and we feel really, really good about where the U.S. is going and even Canada, where the future is for our flatbed operation our specialty truckload, okay, et cetera, et cetera. We're starting to see a change, okay? Customers now are asking for, hey, can you help me customers are saying, can we be partners because it's always the same story. When the markets start to tighten up, shippers want to be partners with truckers, right?

So I mean, we're seeing that we're very happy with what's going on. The investment we've made in Daseke 2 years ago has been average so far. We were really busy in investing in technology, in financial system and all that, consolidation. But we're starting to see a little bit of light at the end of the tunnel in terms of the demand, in terms of the future of North America, U.S. and Canada. So I feel really, really good about where we're at.

Now if you talk about our LTL in North America, I would say that it's been a long time since we have some organic growth in that sector. And I would say that what we're seeing now is slowly we're probably going to show up at least no negative, okay, growth in Q2 in our LTL. We believe that organically, our LTL could grow maybe a few points, right, which is going to be a first. I'm really happy with the commercial team that we have in the U.S. right now led by our guy, Chris rakes and Kal as well. So I mean, we have way more stability in our commercial team.

Our service is slowly, again, improving customers are starting to see us maybe in a different way that, okay, finally, these guys are getting their act together, we're not perfect. We're far from that yet but we are improving. I mean, if you remember the Mast report, for the first time, okay, we've shown an improvement, okay? So I mean, I feel in a long time, I mean, the last 2, 3 years have been very difficult for us at TFI. But I think that finally, we're going to turn the corner turn the page on very difficult '23, '24 and '25, even 25% being the worst of the 3. And I think that '26 is the transition year to a much better future for us in the quarters to come.

That's incredibly helpful, and I hope you're right about that. But maybe as a quick follow-up. You said light at the end of the tunnel. Do you have confidence in what the full year is shaping up to be and when do you think you might address our full year guidance in the year?

Ravi, until we have a deal signed between Canada, U.S. and Mexico, we can't come up with a full year guidance. I mean it's too unstable right now. So until we have that. And hopefully, we'll have that by the end of the summer, okay? And also with more experience where this market is going, I mean, we have the fuel situation with what's going on in Iran. I mean, this free trade agreement between North America. So this is why David and myself, we feel good about giving a guidance for Q2, but not the rest of the year.

There's too many things that we're not sure. We feel good about where we are, and we feel good about where we should be heading. But it's still too early in the game to come up with a year number. right? So this is why I think that $1.50, $1.60, I think it would be a great accomplishment because it would be better than last year because if you look at my Q1, I'm worse than last year on EPS, right? So this got to change. So I think that Q2 is, for the first time in a long time, okay, that will show better numbers than the prior year, at least.

And the next question comes from Scott Group with Wolfe Research.

So Elaine, you mentioned inflecting to hopefully some growth in LTL. Are you still providing break out U.S. versus Canadian LTL? And are you seeing growth both U.S. and Canada within that comment? And I don't know maybe just along those lines, any thoughts on like on the margin outlook for the LTL segment for Q2...

Yes. So here's the deal, Scott. I mean, no, we don't separate U.S. and Canada anymore because -- more and more, what we're saying the same is our truckload and our logistics. We are a North American player. But what I can tell you, though, -- in terms of organic growth, we're seeing as we speak, okay, organic growth in the U.S. year-over-year in April. And what we've seen so far -- on the Canadian side, we're starting to see also some improvement there. So that's why we feel pretty good that organically, in our sectors, truckload the same, okay. Logistics the same. We feel that we're going to show some organic growth in Q2 '26 versus $25 million year over year.

And then maybe just -- I asked it for LTL, but maybe you could sort of walk through the P&L and how you're thinking about some of the margin assumptions in order to get to the guide for Q2, maybe that would be helpful.

Okay. Well, that's a very good question. So that's why I'll leave it to David, our CFO. He's the numbers guy. .

Scott. Yes. So for TFI as a whole, we expect OR improvement of 400 to 500 basis points. And so taking it through the segments, so I'm talking about sequentially from Q1 to Q2. So LTL, we expect 600 to 700 basis points of sequential improvement Q1 to Q2, Truckload 200 to 300 basis points and logistics 75 million to 125 basis points of improvement. .

Just to -- that's -- I mean that's a really big LTL number. Just any additional color there? Is fuel a big help? Or is pricing getting a lot better that it's a pretty big...

So a couple of points. First of all, Q1 was probably unusually bad because of the weather in the beginning of the quarter. And we're exiting the quarter way better than we entered the quarter. So just to give you a little bit of sense across -- around that. In January, LTL shipments were down year-over-year, 10%, okay? In March, they were up 8% year-over-year. in April is looking similar to March. So we had a very different situation now than in the beginning of the quarter, and that's what's driving a lot of this improvement and as well as the other things that the team has been working on.

Fuel is part of it only where we have real strong density. But it's really more around the volumes and some of the pricing actions that we'll be putting through.

And also, David, if I may add, don't forget that our GRI, okay, was not in place in late '25 we've delayed that it was put in place mid-March, right? So we have that -- a little bit of tailwind on that, Scott.

Yes. Although this is only for about 25% of our shipment. Scott, this is only for about 25% of the shipment. But we're in a penny business, Scott. So every penny counts. .

And the next question comes from Ari Rosa with Citi Group. .

So Alan, you mentioned that you were feeling good about the sales effort on the LTL side. I was hoping you could talk just more broadly about how the LTL turnaround is progressing and kind of how you think about the structural barriers to improving margins there. It sounds like a lot of improvement is underway, but just kind of curious how much of that is related to things that you guys are undertaking versus the broader macro environment may be turning more favorable?

Yes. So you see, if you look at -- the worst thing that you can have is you try to sell the service and the service is not there, right? Because that's what we do us. We sell a service. We are supposed to pick up the freight, and we don't show up. I mean that's not too good, right? So this is what the operating guys have been working at, okay? Missed pickup. And if you look at our claims, okay, consolidated, we're at 0.6. But if you remember, when we were showing that separate, I mean, the U.S. was not that good.

So that's another areas that we are improving. Stability in your sales team also helps you, okay, with the customer relationship and all that. So this is like a good willing -- so hopefully, macro will start to help us down the road at 1 point when the market is stronger. But in the meantime, okay, we still have lots to do for us to improve our service. And I said in last conference call that -- if you look at our U.S., okay, we still have issues with not the next day service, we're good at that. But the second and the third day service, we have some issues. The guys are working on that. And the culture is -- the culture of the old days of less a fair and I don't really care. I mean, we're changing that culture. You're going to say, Alan, you bought the company 5 years ago. I mean, 5 years ago, think about that.

And we're still okay, working on changing this culture. We're not a monopoly anymore, okay? We are an LTL company in North America and we compete with good peers. I mean we're competing with good companies in North America. So we have to be good. Our service has to be up there, right, in order to get more money because -- if you ask me today, price-wise, we are a discounted carrier compared to some of our peers, right? And the reason we are some kind of a discounted carrier is because our service is not where it should be. And this is the chicken and the egg, right?

So where this starts? Well, it starts with providing the acceptable service comparable to our peers. So this is an ongoing thing that our ops guys are doing. And at the same time, also, we're saying to our commercial team guys, let's focus on freight that fits us. I mean, don't give me a customer where I have to run 70 miles to pick up the shipment because this is not what I want, I want something that is closer to my terminal to improve my density, okay, I want more shipment per stop, okay, to improve my cost per shipment, et cetera, et cetera. So it's a team effort -- but again, I mean we're still in a position of working hard to get closer to the service level of our peers.

Okay. Understood. And then just as a follow-on, I wanted to ask about the strength in flatbed rates. It's been pretty remarkable to see some of the public load board data. I'm just Curious to hear your thoughts on, like, what has TFI's been ability been to capitalize on that, particularly in Daseke. And then just broadening it out, to the broader business, how do you think about what up-cycle earnings could look like, both for Daseke and for the broader business? Assume -- let's assume for a moment, kind of a benign resolution to USMCA?

Yes, yes. So listen, guys, I mean, our revenue per mile is up in our TFI specialty truckload, absolutely, our revenue per mile is moving up. okay? And we drive more miles per truck per week, okay? So this is a productivity effort that Steve, the leader of our of our Truckload division has been able to do is do more with less, okay? Now for sure, also, if you look at our market, our focus is more and more into markets where we are more specialists. So I'll give you the example of Lone Star, which is Texas space, .

Today, we run 100 trucks, highly specialized $7, $8 a mile, okay, which is great. But next to that in Lone Star, we also run over the road at 225 to 40-year a mile. So what we're seeing is, as you know, being Jacka trade master of none, -- what we're trying to do with the team there is that, guys, from 100 trucks will move the super specialty truckload to 150. But the over-the-road thing there, we're going to move that to someone else.

Okay. What we did with SPD on the West Coast, okay, those guys are very strong with Boeing, and Boeing is just on fire, right? The demand is just through the roof over there at Boeing. So we said, guys, how many trucks do we need to service this high-end customer, that niche customer. We need 75 trucks. That's it. That's all okay, you find goodbye. So you used to have 200 trucks. Now you're down to $275 million okay? But we're moving those trucks to Wiley in North Dakota because Wiley is our big over-the-road truckload guy, and we want Wade to be 1,000 trucks, right? Not 500, 600, but 1,000.

So we're doing all these changes at the same time that we are working on reducing our costs, reducing our asset base. And if you look at our brokerage operation in our truckload sector, Last month, revenue-wise, we were up 7%, 8%. So the goal is to drive more revenue with less steel in the road. So all of that, this is when David was talking about our Q2 forecast versus our Q1, okay, we see some improvement in all of our sector, including truckload.

But like on a like-for-like basis because I understand there's a mix impact there, but on a like-for-like basis, can you tell us kind of how contract rates were comping year-over-year?

Yes. I can jump on that.

we're winning contracts in the U.S. flatbed in the high single digits to low double digits. We also have about 20%, 25% spot exposure in the U.S. flatbed and those rates are coming in higher, but that's not where we're focused, right? We're really focused on the contract area, but we do have some spot exposure. Canada is not yet seeing that -- those kinds of numbers. The renewals there are more like in the low single digits. .

And the next question comes from the line of Ken Hoexter with Bank of America. .

Great, Elaine. -- and David, and thanks for the details on the outlook. So the historical sequential change in LTL logistics can -- Dave, I know you gave what you target now in this. Can you get maybe historical just given your given combined numbers so we can kind of understand how that is normal or as it stands out? And then maybe talk about the highest lows in the target, $1.50 [indiscernible] ?

Yes. So on the historicals, Ken, we've got all of the -- in the appendix of the presentation on the website. we've had 8 quarters of historicals with the new presentation. So I'll just ask folks to look at that. In terms of the range, the high end what could drive the high, the low -- I mean it's a pretty tight range. It's $0.10, right? There's a lot of moving parts. I don't know Mr. Badar, if you'd like to comment on what could drive where we land within the range.

It's what we feel, Ken, that is reasonable and attainable okay, right now based on -- because don't forget, there's lots of instability right now, right? So this is based on what we've seen so far in April. This is based on when we talk to our 3 top guys, 3 senior EVPs about how do they see the quarter we ask those guys to reforecast okay, that we can give you guys that kind of guidance, okay?

So these are fresh off the press revised number from our guys. So I mean, we could be wrong, okay? But we feel pretty confident based on what we've seen so far. And the...

If I could just follow up on that. So I mean, just given great now, right up 8%, both March and April and LTL tonnage I presume you're talking about or shipments -- and then number -- and then that's not just catching up from the weather, that's actual economic turn. I just want to understand the feeling behind that, same on truckload, your ability to kind of capture that share back real time. .

Well, it's always -- it's an interesting question, right? Is it catch-up from freight that didn't move in January that's driving that? Possibly. But I'm not sure that, that would continue all the way into April. I mean when I look at the LTL shipment count down 10% in Jan, it was flat year-over-year in Fab and like I said, we're on 8% in March and looking similar in April. And so now the important piece is to press on the revenue per shipment and make sure that -- because we were a little bit late on the GRI relative to peers, we're also a little bit low relative to peers on the GRI at only 3.9%. So maybe some work to be done there.

In terms of truckload, like Oster bar was saying, there's been a lot of good work that was done last year, taking excess trucks out of the system. And so when you look at the KPIs of our truckload today, you can see that revenue per truck per week ex fuel was up 8.6% and truck count was down 7.1%. We did the same amount of revenue with 7% less trucks -- and you see that in the DNA, right?

The D&A is down, I think, $3.5 million year-over-year. But actually on a like-for-like, if you exclude M&A, it's down $5 million and then on top of that, we've got brokerage up another 7%. And that trend is continuing into April. So -- so this is the direction that the segment is going, and we haven't really seen the impact of this pricing yet, right? Because these renewals are taking place now.

And the next question comes from the line of Walter Spracklin with RBC Capital Markets.

Good afternoon, David. I want to perhaps just ask a couple kind of modeling questions. Your tax rate has been pretty low here in the last couple of quarters. What tax rate should we kind of assume for the rest of this year? And does that hold for next year? And just as a second question here, I know you're not giving guidance for full year, but historically, been putting the last year aside, obviously, but historically, summer trucking is better than second quarter trucking and you tend to have a better OR and better EPS in the third quarter, all else equal. Is there anything -- if there's no change in underlying conditions, no change in tariffs, just looking on a straight line, is it fair to say that, that summer sort of Q3 EPS seasonally does tend to be better than Q2? And should we at least pencil that in for this year? .

Yes. So Walter, David, I'll let you answer the tax thing there and then I'll take the rest. .

Okay. Sounds good. Yes. On the tax, we have a permanent tax benefit, which was related to our financing structure. And that increased a little bit as we increased the size of that financing structure through additional M&A. And so that's a permanent benefit. But when profit before tax came down in Q1 quite a bit.

So the rate looks very low, right, because we have a fixed benefit and less profit before tax. What I would model going forward is something more in the maybe 24% range and that should be directionally where we land over the course of the rest of the year.

Yes. And then, Walter, on your question, I mean, although we don't give guidance, okay, on 3 and 4 for 26. But what I could say is this. I mean, our logistics sector is going to do probably a lot better, okay? I mean 1 of our major contributor to our logistics is we move trucks, right, for PACCAR and DTA, and we just signed a deal also with Volvo, okay? So we started Volvo late in this year. So we all about 70% of all the trucks manufactured in North America right now. .

So if you read what the OEMs are saying and I could tell you that we're very busy so far in Q2. And so logistics and also the acquisition we did late last year we didn't have that. So those guys are doing great. We are involved in the data center construction. So we are partnered with the construction company in Michigan with 4 data centers. So this is something new for us. So I feel really good about 26 in our logistic truckload like David was saying, the renewal rates are really helping us. And thanks to the U.S. administration, with these guys, they took the bull by the horn with all these illegal and unsafe drivers. So this is really helping the industry in general.

And hopefully, the industry will stop chasing drivers and chase rates instead of always keeping chasing drivers. Hopefully, we learned from that after 3 years of being like famine on rates. And in our LTL, I mean, Karl and the team there are working finally, on the commercial side, we have stability. So -- to answer your question, Q3 normally, okay, because it's summer, costs are less. We probably should see better. And I feel pretty good, but -- we can't really give guidance because there's so much instability water in the world right now, okay? So that we say we stay cautious -- what we know that we have a lot of good stuff on the go with our team, right?

Our team is all pumped up. And after 3 years of a very, very difficult environment for us.

And the next question comes from the line of Jason Seidl with TD Cowen. .

Rawanted to talk a little bit, Elaine, about a comment you made that you guys are still discounted in terms of the LTL pricing versus your peers. Where do you think the service level needs to go. It sounds like you're finding your next day, but as the second and third day that you're looking at. So where do you think it needs to go? And are you going to still give investors sort of updates so we can sort of keep track of that progress?

Yes.That's a good point, Jason, because we know where we stand, okay? Although it's not published. But this is something, David, that we'll have to look at -- but what I could tell you, though, Jason, is that on the next day service, okay, we're on par with our peers and the 4-day service. And this is where the guys are working on second and third day -- and I said the same story on the previous call. And this is where we lack, okay, the care, okay? We still have issues with shipment that's supposed to go to A and they're going to be because they've not been scanned.

I mean it's a global -- when you look at TFI, our Canadian LTL over time has built 1 step at a time, right? So -- if you look at one of my best peer OD, they were built 1 step at a time over a long period of time. as we jump into UPS Freight and the real estate was abandoned. The fleet was abandoned. IT was abandoned a lot of things were abandoned because UPS for them, it was not really important. Their parcel business was the key. Their LTL was just an afterthought, right? So it takes us way more time than I thought, way more time. But we're going to get there and the service is the key because if you don't provide a service that is equal to your peers, you get penlie,okay?

You get switched over now for sure, in a difficult environment, okay, in a soft market, you suffer way more then versus a, let's say, a strong market. So they will -- the shippers will close an eye more if your service is not up to par in a very strong market. But we've not been in the Swan market for 3 years. So now we're getting ready to have a better market, but no, no. We're still working on improving our service so that we can move closer to our peers in terms of the revenue per shipment, right?

No, Alain, I totally get that, and let's keep our fingers crossed for a better market. I wanted to follow up on something you mentioned. You talked a little bit about Obviously, the steps the administration here in the States is taking to combat some of the very questional capacity that has flooded the market over the last couple of years. what's going on up in Canada? And what do you think needs to be done going forward to help out with capacity up there?

Well, the Canadian -- with the new Prime Minister, that's not asleep at the wheel, like the previous one, they took action, okay? In 2011, okay, they've decided not to issue any employment record for an owner operator. So these drivering guys took advantage of that. And that's -- Loop has been closed as of December '25. So now if you're a driver ink, your employer has to issue you an employment, what they call that certificate that tells you your earnings, et cetera, et cetera.

So now you cannot cheat the tax, right? So we see an effect, okay, not as strong as what we see in the U.S. because U.S., they took really the bull by the horn. It's not the same approach, right? Canadian approach is more slow and okay, fine after 10 years of complaining the start to do something. But we're starting to see a little bit of that effect because those drivers don't pay any taxes, right? So they can offer a customer that doesn't gear a much better deal than us. But now as of December '25, the employer had to issue kind of what we call us, it's like a W-2 in the U.S. or W-9 okay? This is the statement of your earnings, okay?

And now you're stuck with paying taxes because this is -- this information has been sent to CRE, the Canadian tax government, right? So -- but it's much lower than what we've seen in the U.S. I mean the U.S. is really very active, very active. And there's a safety reason there, okay? Those drivers are not safe. Their equipment is not safe. So it's got to be resolved. And us, as an industry, we have to stop chasing drivers and talking about we have a shortage of drivers Well, if you ask Exxon or Chevron, there's a shortage of oil, what do they do? Well, they just raised the price. They don't try to chase for oil stupidly.

And the next question comes from the line of Jordan Alliger with Goldman Sachs. .

So sort of question, now that you've sort of streamlined or re-streamline the segments into the 3 broader categories. I was wondering, Alan, if you could maybe give some sense on this revamped basis and how you're looking at it, perhaps the medium- to long-term margin targets as to where you think these segments in a normalized world should be at ?

Well, in a normal environment, okay, I don't see us running an LTL with an OR that is 90 OR, okay? Right now, we were okay? Based on what David just talked about how do we see Q2, probably a sub-90 okay? But in a normal environment, you have to run an LTL division between 80 to 85 OR, okay? So that is our goal in North America LTL. So for sure, okay? The edge that we have is our Canadian operation. Everybody knows that has always been a gold standard, right? And our U.S. operation has never been a gold standard.

So this is why it's a unified operation under Cal now and we believe that our U.S. operation over time will get closer to our gold standard that we run in Canada, right? So to say that an 80 to 85 OR in a normal environment in our LTL, that's where we have to be. The truckload sector, I mean, we don't run van for retail guys, right? We don't run van for Amazon or Walmart. We don't do that. So our customers are industrial. We are a specialty. So our drivers are not just driving a truck. They also operate something, right?

So if it's a tanker, they operate the unloading of the tanker, if it's a flat bed, they operate with the TARP and things like that, they're strapping and all that. So it's not just a driver. It's also an operator. So this is why you cannot run, okay, with a 90 OR. That doesn't make any sense. So if you look at our Q1, okay? We're running [indiscernible] something which is terrible, okay? So our goal is to be under 90 very soon. okay? But in a normal environment, where should we be? Well, we have to be between, let's say, an 82 to 86 OR in our specialty truckload.

But more importantly, Jordan, is the return on invested capital, okay, which is the problem that we have. Right now, we're at 6%, which is terrible. Now in a normal year, we should be between $10 million and $15 million. Now this is where we're heading to. In our LTL, we should -- we have to be above 20%, the same with our logistics sector, above 20 retail invested capital, right?

Our logistics, we've always run at about a 90 OR. That's where we're at now. We're very close to that. Where should we be in a normal environment with the quality of our logistics okay, where we're heading. It's going to be between 86% and 88% normal environment, maybe 85% is a good year, okay? But this is where we have to be in a normal environment. So if you do the sum of all that, TFI is not a 90 OR company. I mean that's what we'll probably be in Q2 around 90 OR. But in a normal environment, TFI is not a 90 OR. -- we're ready with the quality of our people and our market end market. In a normal environment, it's more like a 5 or, right? Globally. 85 to 87, right?

And the next question comes from the line of Brian Ossenbeck with JPMorgan. .

Just to come back to the GRI. I know you said it was late and low, at least in the U.S., how did that work out sounded like perhaps there's another action coming just based on what you were talking about earlier? And are you starting to see some weight per shipment improve there as well. Maybe you can talk about the price and mix trend in U.S. LTO?

Yes. Well, like -- well, you know what, go ahead, David, I'll let you go with that.

Yes, listen, so the pricing actions that are taking place next are specific, specific accounts, specific freight that is below where it needs to be because the volumes the volumes have improved and so now we have to be more selective. And so that's the work that's being done right now. And will sort of develop over time. In terms of weight per shipment, It didn't move too much. When you look at the -- this quarter, right, we're kind of year-over-year kind of flat, and that's true in the U.S. as well.

All right. Thanks, David. Maybe just follow up on that real quick. Anything into April for weight per shipment as you've given us some information on that already? And then -- we'd love to hear a little bit more about the acquisition you guys just did. I think it's a fairly good size of 2% of consolidated revenue. So -- maybe give us a sense in terms of what you're expecting from that here into the next quarter to integrate it and for the rest of the year? .

Yes. I don't have the weight per shipment in front of me, but I do have LTL revenue per shipment in April, and that's flat. -- which has much improved over March because in March, it was down low single digits. So we're flat revenue per shipment in April with 6% more shipments.

And the next question of our friend, David, was about the acquisition addition that we yes. .

The 1 in logistics, Brian, is that?

Yes, that was the one. .

Yes, listen, it's a great value-added kind of logistics niche business. It's similar to -- in concept, it's similar to the JHT acquisition, meaning niche good barriers to entry and these guys are basically providing value-added warehousing kitting, subassembly in the auto sector, entrepreneurial and we're able to grow this into different adjacent areas like even into some data centers, some battery plants -- we're looking at expanding this into the trucking OEMs.

So it's just -- just another example is really the kind of business that we like in our logistics. I mean, we don't do a ton of brokerage in our logistics. It's -- we do have some. But what we really like is are these niche really value-added providers that provide great service and great returns, which, by the way, are completely uncorrelated with the rest of the business and provide a nice portfolio elements to the earnings profile as well.

So, if I may add, guys, I mean these guys are a solution provider to our customer, right? So they come in and they say they have a great engineering department that comes in and provide a solution that could be good for a year, good for 2 years on the project, -- so this is really a good thing. And now like David is saying, we're talking to our truck OEM, which we moved their trucks, right?

So we're talking to an example a company that wants to open up a battery plant for storage, right? Not for the cars, but for storage. So we are involved with those guys on that. in the U.S. So that vision is, I would say, David, what, 85% U.S. and 10%, 15% Canadian revenue-wise? Yes. So the split? So it's really U.S.-based.

And the next question comes from the line of Tom Wadewitz with UBS. .

Yes. Let's say, you've, I think, had a lot of helpful responses to the questions. Elaine , and it's great to see the improvement in demand and traction you have. How do you think about where you're at on I guess, quality of shipments. If I look back to what happened with -- then this is focused on U.S. LTL, you kind of had a lot of shipments in the system, and that came down maybe more than you thought, right?

There were some probably purposeful move out of shipments and now you got the service improvement. How do you think about the like shipments per day you're at in U.S. network and kind of quality of the shipments you have? Is that kind of on the right track and what you're getting is good quality. I think it relates to some of the other questions you've had. And then maybe additional to that is like how long is the lag between service and really getting more on price, right? Because your -- the industry leaders get, call it, 4% to 5% revenue per hundredweight, that's so that's something you can do I think it was really high service, but I guess a couple of components on just kind of where you're at in U.S. LTL.

Yes. What the commercial team has done, as an example, -- with our 3PL, what we gave those guys, let's say, a year ago was mostly blanket rates, which is the worst that you could do, right? Because then you give the guy black or rate. I mean, Neil will use you when you're the cheapest and lowest guy in the world, right? So we said, this doesn't make any sense. So we have to move closer to CSP customer-specific pricing, okay? So this is stickier because it's customer specific to a 3PL customer, okay? .

And what we see now, okay, is that our 3PL business is way more acceptable in terms of volume and in terms of pricing and in terms of stickiness than the system we had before. On the other side, the corporate account, okay, we made a lot of changes there with 2 big retailers that want to squeeze you 45 times a day on the rates. So we just said, I'm sorry. Okay. We can't afford to service you because we can't make money with you guys. We can run business with [indiscernible]. At the same time that we're moving our SMB to where they should have been at the time. And our corporate shipments is about flat. Why is that? Because we got rid of 2 retail guys, okay, that were very important to us about 1.5 years ago and now they are kind of still with us, but very negligible in terms of the size.

If you look at the mix between SMB, corporate, government and okay? We feel good about the mix that we have today. Now that doesn't mean that we're not pushing on SMB, okay? Absolutely. We're still pushing on that. because there is some niche areas that trade that fits us better than anyone else, right? And this is -- the goal is to get that freight that fits us better than anyone else. -- in our industry, right? So this is the focus that we have with our guys. Not a game -- a price game is just get the right price, but something that fits us. right?

So sometimes a shipment that is worth $300 for my peers, okay, fits me way better than them. So this is the kind of shipments that I want, right? So this is all these tools that we've been using and slowly because we have some stability in our sales force, then we can build with the strategy with those guys. So the leader that we have in our commercial now is a strategic player that comes out with all these kinds of promotion is not the right word, but strategic approach to the market. So as an example, One area that we're pushing more and more is transborder freight between U.S. and Canada and vice versa, right?

So we are a large player in Canada and we know that the profitability of a transborder shipment is way better than domestic U.S. or domestic Canadian shipment. But until a year ago, the focus -- we kept talking about it, but they didn't walk the talk. So now, okay, we see also on the transborder side, okay, way more focused on growing that highly profitable business.

Right. Okay. That makes a lot of sense. What about the lag between service improvement and price? Like I don't know if you want to say kind of what your revenue per underweight was in the quarter year-over-year or how you think that progresses. But is price really starting to come through? Or is that something where you say, hey, that's another lever to come in the future that we're seeing nice traction on shipments. Price comes next year or price comes a couple of quarters out? Or just how to think about that element of the equation. .

Hard to say, Tom. I mean, we're not there. We're not there to say that, guys, we're going to get more dollars, okay, from our customer because our service is up to par. -- to our peers. We're not there yet. So right now, where we are there, though, is that through the stability of our commercial team, to the focus that these guys were able to bring volume organically growing, okay, compared to where we were, let's see, a year ago. That we can say. And we know, okay, because we have experience that the more that your service is closer to your peers than your revenue per ship and unless you're stupid, okay, we'll be closer to your peers okay? But we're not there yet, Tom.

I mean we're slowly at least creating some kind of organic growth, which we've never done, right, on the U.S. LTL, like David was explaining, okay, on the shipment count. But on the pricing, we're not there. That's an opportunity in the future that I could say.

The next question comes from the line of Konark Gupta with Scotia Capital.

David, I, maybe I wanted to ask you first on the demand side. I think a lot of people are talking about, obviously, the trucking rates are going up a lot. Fuel prices have surged as well. And clearly, the truck rates combined with the fuel prices, what the shippers see at the end. In this environment, I mean, what are you seeing from a demand perspective? I mean I'm curious to know, because I know you said you are a discounted carrier in some respects. -- and U.S. LTL. So maybe it's not such a big issue for you. But at some point, I mean, there's some price elasticity perhaps. I'm just trying to see what are you seeing from that perspective? Where do you see shippers becoming more sensitive or less sensitive now?

Well, for sure. I mean right now, it's a double whammy for the shippers, right? So they get the pressure of the fuel surcharge, right, which is huge. And at the same time, on the U.S. side, mostly on the U.S. side, -- they get the offer that's been reduced tremendously by this new administration that is doing their job in terms of getting rid of all these unsafe okay, and unqualified drivers in the U.S. So I mean, for sure, it's difficult. But don't forget that all of this that's going on right now -- the volumes are not growing, right?

It's the offer that is less and less and less, right? So what we've seen so far is that, hey, listen, I mean the market is adjusting, okay, to higher rates to the fuel surcharge and everybody is thinking that this thing there in Iran, hopefully, will get settled at 1 point. It's an economic war right now, right, because they're not really shooting at each other. But I mean it's a financial thing there, and it's going to get resolved at 1 point, right? Is it in the month? Is it in 2 months?

And this fuel surcharge will start to disappear slowly over time. But at the same time, okay, we -- hopefully, we believe us that because of our business focus on industrial, okay, not retail on the truckload side, I'm talking here. is this is going to start -- the demand is going to start to grow at the same time that maybe fuel will start to drop, fuel surcharge will start to drop. -- rates will keep flat or going up. And our costs will come down because of fuel surcharge because -- at the end of the day, when fuel surcharge is 80% of the base rate, I mean it's not a good discussion that you have with the customer, right? Nobody likes that, but it is what it is, right?

That makes sense, Land as a follow-up, I think we haven't had a lot of discussion today on your M&A opportunities. Can you talk about what's your focus here now given the market seems to be turning I think you have waited for some time, I think, to pull the trigger, I guess. But your free cash is still good, more earnings power probably means more cash flows. How do you see capital allocation maybe heading into...

Yes, yes. Well, for sure, the problem we have right now on M&A on is very simple, is that everybody is waiting because everybody believes that things will get better, so the seller says, why would I sell now? Okay, I'm going to wait. I'm going to wait because my number is my profitability will improve over the next 6 to 12 months or 18 months. So because we are having a serious discussion on some nice tuck-ins. But everything is on hold right now because everybody says, things will get better. So we wait.

Now, for us, in the meantime, okay, what myself and David, we're going to be doing is very simple. If the price is acceptable to us, we'll do the buyback. If not, we'll just reduce the debt, reduce the leverage. So I mean, with -- like you said, Ganarwith the huge free cash flow that we're going to generate, I mean, Q1 was an exception because we pay fuel short term and our customers pays us on average about 40 days. So this is why our free cash flow took a beating in Q1. But when fuel situation gets normal, I mean this cash flow is going to get back to the usual numbers that we see $700 million, $800 million of cash.

So we're going to work on reducing the debt. The dividend, I mean, we grow that dividend every year. We've grown that about $0.02 a quarter last year. So yes, maybe a little bit of dividend growth, but really it's going to be focus on reducing our leverage because we believe that interest rates are not coming down anytime soon in the U.S. unless maybe the new President of Fed changes mine. And in Canada, we're worried that because of inflation, maybe the interest rate will start to go up. So we said, you know what, let's reduce our debt level and -- if I remember, David, correct me if I'm wrong, but I think our leverage goes down under 2 if we don't do anything major in '26 in terms of M&A besides what you've done so far.

Yes. Yes. And on that, Konark, we're -- we love -- well, we make the best of whatever situation the market gives us. And the market gave us over the last 3 years, a very, very difficult cycle. And during those last 3 years, we deployed more capital than we ever have in any 3-year period. So when we look at '23, '24, '25 in first quarter, we've deployed $2.5 billion in investments, $1.8 million of that was M&A and $620 million of that was buybacks. And so we feel very good about that timing. We're optimistic that -- now in this environment, we're going to start to see the returns on those investments. And we use the cash flows to delever a little bit and get ready for the future.

SP1 And the next question comes from the line of Ben WellCare with Deere. .

Alain. Thanks for the update on capital allocation and the update on M&A talking -- what about -- I'm just curious, what about the potential for maybe a more transformative deal and anything required on U.S. LTL to add density in order to get to a normalized OR of 80%, 85%, as you mentioned before?

Ben, that's it takes 2 to dance, right? So so far, in the discussion that we had with 1 of our target so far, it didn't work, right? It didn't work. But if you go back in time, it took us 5 years. I've been working 5 years to convince UPS to sell UPS Freight. It took me 2 years to convince DHL to sell DHL Canada. So I mean, we're very -- how would you say that? I mean -- we're used to people saying no to us, okay? But we don't let go when we believe that for the shareholder, the target and our shareholder a deal would be beneficial, right? .

So right now, it's still it's still no, no, no, no. You do something else, call someone else, don't bother me. But it's still the best deal that we could do in a lot of deals that we're looking at. But right now, it's difficult, right? So like David was saying, we're going to be busy this year in '26. We still have a lot of good stuff to go. I mean Desk was bought 2 years ago. We still have a lot of work to do there on working with those guys to turn good truckers into good businessman. And the difference being good truckers like to service customer and hope that they'll make money, good businessman our focus on making money servicing customers well. It's not the same, right?

So this is the kind of TFI education on truckers that we try to do. So M&A is the blood of TFI. So 26% is probably going to be very quiet. But hey, let's say, we're getting ready. We're getting ready. But like David was saying, I mean, we made a ton of $1.8 billion of investment. And the last few years, I mean, we were not able to show how good these were because the market was so bad. Now '26, '27, hopefully, things are starting to turn, then we'll be in a position to not come up with a stupid $4 a share of EPS, right? We'll get closer to where we should be. And hopefully, we can come up with reduced leverage and to strike a good deal once we have a seller that says yes, instead of no.

That's great color. And maybe just in terms of follow-up, Alain, you've seen a lot of trucking cycles over the years. You mentioned potential OR for each segment under a normalized environment. How fast do you think we could get into a normalized environment given this cycle and improve fundamental, Could we see a normalized environment in 2027 or maybe 2028?

Ben, it's hard to predict. But I think that if you look at industrial freight environment in the U.S. or in Canada, I mean, schools, hospitals, road, bridge, et cetera, et cetera, housing, housing is an issue, right? I mean, -- so we feel pretty good that interest rate is an issue, right? So -- but interest rate being high is related to inflation being high. So now we have the problem of the fuel, but the problem of the fuel will probably be settled soon. So as soon as we have lowered interest rates, this economy will start to boom again and industrial freight to me is the key.

I'm always worried with retail freight because of the nature of the beast, the e-commerce my customers -- some of my customers in the brick-and-mortar world, it's -- they're being squeezed. So when your customer squeezed, it tries to squeeze you, So this is why I don't want to be stuck with those guys. Industrial freight is really the future because this is related to a growing economy. I think the intention of this U.S. administration is to bring back some industrial base into the U.S. They understand that there's a problem. I mean globalization was good. But if you can't build a ship, you may -- and you're in the U.S., well, you have a problem, right? Because the ships are mostly built in Asia right now. So the guys are saying, hey, we got to do something about that.

So to me -- these are all positive to our flatbed division that relates to the industrial. As an example, I was talking about Boeing I mean, Boeing went through a lot of issues, okay, with their products. But now, I mean, those guys are flying high -- and us, we're piggyback on Boeing with our SPD or SFI Global Logistics division over there in Washington state. So I mean, these are all things that will -- when you are piggyback on the U.S. industrial economy and the direction that this administration was to go, I feel pretty good.

And the next question comes from the line of Cameron Doerksen with National Bank. .

Just a question on the Logistics segment. I mean, obviously, you guys are feeling pretty optimistic about the truck moving portion of that business as the year progresses. Can you just talk a little bit about the other couple of major businesses within logistics, what you're seeing there and what the outlook looks like for the next few quarters?

Yes. You know what, Cameron, within our logistics sector, okay, we have the truck movers, Okay, guys. We have the specialty guys that David was talking about that we just acquired late last year. And very importantly is our logistics sector that is the old Dynamics operation that we run both U.S. and Canada, highly profitable last mile operation. And also, we have a small brokerage $500 million brokerage operation, that's called the TWW worldwide okay, that is an LTL play. So all these business units, Cameron, are showing good results today. .

And when we talk to them, they say, hey, we'll do better. I mean the truck movers will do better. The other logistics that David was talking about, we'll do better. Our last mile guys are saying, -- you know what? We're working on a solution that will help us reduce our costs. It's an IT solution.

And hopefully, we'll have that ready for the new year, in -- so we feel pretty good about where we're heading. So logistics, I mean if you look at what the guys are doing with close to $400 million of revenue, it's not chicken shed, right? And most importantly is what's the bottom line? Well, the bottom line is about 10 points or close to 10%, right? So this is a big area of focus of ours, and it's a beautiful business.

Okay. That's helpful. And just maybe, I guess, a quick, I guess, question on the fuel impact. I mean you mentioned the impact on the free cash flow in the quarter, just the timing of collections. But -- was there any positive or negative impact from the big spike in fuel prices during March to like the P&L? I mean, obviously, there's a lag between when you collect revenue, but there's also maybe in some of your operations, denser operations, maybe the fuel dispute surcharge helps. Just wondering what the net impact was in the first quarter.

Yes. On that, David, I'll let you go with this one.

Yes. Yes. The net impact was pretty neutral on across TFI in March. It was slightly positive in the LTL because of the density that we have in certain areas of the LTL. What I mean by that is we're not driving large distances between stops, so we're not burning a lot of fuel. But that was offset by a negative like a loss in the truckload related to those climbing fuel prices.

And the next question comes from the line of Bruce Chan with Steeple. .

I just wanted to clarify a couple of things. First, I understand the rationale for the reporting consolidation between the different LTL divisions. Just Curious if there are any changes planned for maybe more operational integration between them now. .

No, -- there's no different sorry, please go ahead, Mr. Ma, please.

No, no. We're just going to say the same as you, David. So I'll let you go. No. .

No, there's no change in terms of the way that the business is managed.

Okay. Great. Yes, that's very clear and very helpful. And then just kind of a final quick 1 here. You talked about the data center exposure, which is obviously very exciting. You said that it's a small piece of the business. Can you -- maybe just remind us of what that exposure looks like today versus maybe where it was last year. .

Yes. This quarter, it was $21 million of revenue, which was up from $15 million in Q4 and 8% in Q1 of last year. .

And our last question comes from the line of Harrison Bauer with Susquehanna. .

Mr. Bernard and David, thanks for sun here for a question. You highlighted doing more with less in TL? And any sense of how much productivity improvements you can continue to get or what you need to see in the market before you want to start growing that truck out again? Or are you at that point with how elevated rates are?

Okay. So I think, David, that you've touched on that, right, the revenue per truck and all that right? .

Yes.

So over and above that, okay, when I'm talking to the Senior EVP there, Steve, what I'm saying to Steve is what we need is a better mix, okay, of asset and non-asset revenue, okay? So our goal has always been to generate about 65% -- I'm talking truckloader okay? About 65% of revenue from our asset-based operation. and about 30 to 35 on a non asset-based operation. So when we bought Daseke, that was difficult to do, number one, because these guys, they really love trucks, right?

So they've they were committed to a ton of CapEx in '24. Okay. So we're stuck with all these CapEx in '24. Then we get into '25 and we still don't have a clear vision of what's going on. So -- our CapEx for '25 was, again, still too elevated for the market, but we've corrected that now. So this is why, like David was saying, we deliver way more revenue, okay, per truck per week, okay?

And also, we're starting to get better revenue per mile. So we drive more miles with better revenue per mile. And also, we are growing our asset-light operation in Q1. We've grown that, David, I think it was 7% right?

Yes.

So that is really the goal because with peaks and valleys -- when you have too many trucks, okay, because you are loaded with trucks for the peak, when the value comes, you just turn into a slave because you're stuck with the truck. And that is the problem, okay? So our goal has always been to have the number of trucks based on the value of the trough, not the peak, right? And then -- when the market is great, okay? And the guy says, I need more trucks. We just wait because don't forget, if you buy a truck, you're stuck for 5 years, okay, with that truck. So if the peak is good for another 3 months, not too sure if this is going to be good for us, right? So that is a different approach that we brought to Daseke, okay?

And this is going to continue, okay, over the next few quarters. So the guys come to us with, oh, I need more trucks because I got more freight, you got more free for 6 months or 2 years, let's be careful. So this is why we need some kind of a mix between asset-light and asset in the revenue stream.

Thank you -- and that concludes our question-and-answer session. I would like to hand it back to Mr. Bedard for closing remarks.

All right. So in closing, I'd like to thank everyone for being on this afternoon's call and for your interest in TFI International. So we look forward to keeping you updated on our progress throughout the year. and hope to see many of you at upcoming conference events. Please don't hesitate to reach out if you have any further questions. And I hope you enjoy the evening. So thank you very much. .

Thank you, presenters. Ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to TFI International's 2026 Annual Meeting of Shareholders. [Operator Instructions] I'd like to remind everyone that this call is being recorded on Monday, April 27, 2026. I would now like to turn over the call to Mr. Alain Bedard, Chairman of the Board, the President and Chief Executive Officer of TFI International. Please go ahead, sir.

Well, thank you, and good afternoon, ladies and gentlemen. Welcome to the 2026 Annual Meeting of the shareholders of TFI International. Participation at this meeting by myself, the scrutineers and certain proxyholders is being done remotely. So we are making this meeting available by phone. We have, therefore, asked all shareholders to vote by proxy prior to the meeting, which many of you have done and we thank you for doing so. At the conclusion of the official business shareholders will be able to ask questions by following the instruction from the operator.

So I will act as Chairman of the meeting. And with the consent of the meeting, I'll ask Josiane Langlois, who is President of TFI's Head Office in Montreal to act as Secretary. Also, with the consent of the meeting, I'll now ask Steve Gilbert and [ Vlad Tilibassa ], our Computershare Trust Company of Canada to act as scrutineers for the meeting, tabulate the number of shareholders and the number of shares represented at this meeting in person or by proxy and report to me as Chairman of the meeting. There are several routine matters to be dealt with at this meeting to expedite matters of arranged for certain people to make and second the various motions. The matters to be considered at this meeting are the presentation of the 2025 annual financial statements of TFI International, the election of the directors for the upcoming year, the appointment of the auditors and a nonbinding advisory vote approving the compensation of the named executive officer of TFI, commonly known as say-on-pay.

The election of the directors will be out by ballot. All other votes at this meeting will be conducted by voice vote as permitted by the Canadian Business Corporations Act, unless a ballot is requested by a registered shareholder or proxyholder. I will now begin the official portion of this meeting starting with the scrutineers' report. I call upon the scrutineers to present the report on the attendance, and I direct that such report be annexed to the minutes of this meeting as scheduled.

Mr. Chairman, we the scrutineers of Computershare Trust Company of Canada hereby report that there are at least 2 shareholders or proxyholders present, representing 65,853,128 shares or 80.13% of the 82,186,031 outstanding shares of TFI International Inc. as of March 18, 2026. And we will hand in a report signed by both scrutineers after this meeting.

Thank you. The scrutineers' report shows a quorum to be present, so I declare the meeting to be regularly constituted. The notice calling this meeting and accompanying documents have either been mailed or made available electronically to all the shareholders of TFI and to its auditor. With the consent of the meeting, we will dispense with the reading of the notice. Also, with the consent of the meeting, we will dispense with the reading of the minutes of the last meeting of shareholders held on April 23, 2025. And I direct that such minutes be taken as read and approved and that they be signed as being correct.

Now the first item on the agenda is the presentation of TFI International 2025 audited annual financial statements, the annual report containing the consolidated financial statement of TFI International for the fiscal year ended December 31, 2025, and the auditor's report thereon have been mailed to the shareholders who requested them. They are also available electronically on SEDAR+ and EDGAR as well as on the TFI International website. The next item of business is the election of the Director of TFI International. So I would now like to introduce the 9 candidates for election this year, and they are: Leslie Abi-Karam, William T. England, Diane Giard, Debra Kelly-Ennis, Sebastien Martel, John M. Pratt, Joey Saputo and Rosemary Turner and myself, Alain Bedard. So I declare the meeting open for nomination and ask Josiane Langlois to present her nominations.

Good afternoon. I'm Josiane Langlois, and I'm proxyholder of TFI International. I hereby nominate each of Leslie Abi-Karam, Alain Bedard, William T. England, Diane Giard, Debra Kelly-Ennis, Sebastien Martel, John Pratt, Joey Saputo and Rosemary Turner as directors of TFI International Inc. to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. Are there any further nominations? So as there are no further nomination, I declare the nomination closed. And in order to comply with the Canadian Business Corporations Act, the votes are being conducted by ballot so that they are accurately compiled. As all ballots were signed and submitted by proxyholder and tabulated by the scrutineer prior to this meeting, I now call on the scrutineers to present the results of the vote on the election of directors.

Mr. Chairman, we hereby report that the 9 nominees received votes in favor ranging from 88% to 99% of all shares voted at this meeting.

Well, thank you. So based on those results, I declare that the 9 nominees have been elected as Director of TFI International to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. TFI will issue a press release announcing the results and file a detailed report of voting results on SEDAR, on SEDAR+ and EDGAR shortly after this meeting. The next item of business is the appointment of the auditors of TFI International, and I ask David Saperstein to present a motion.

Thank you, Mr. Bedard. I'm David Saperstein, and I am a proxyholder of TFI International, be it resolved that Deloitte LLP be and they are hereby appointed auditor of TFI International Inc. to hold office until the next Annual Meeting of Shareholders at such remuneration may be fixed by the directors of TFI International and the directors be and they are hereby authorized to fix such remuneration.

Thank you. So I ask Josiane Langlois to second the motion.

I second the motion.

Okay. So all those in favor, please say, yes.

Yes.

Yes.

Yes.

And all those against, please say, no. Thank you. So I declare the motion carried. The next item of business is a nonbinding advisory vote on executive compensation or say-on-pay, as set out in our Management Information Circular dated March 13, 2026. We now ask Josiane Langlois to present the motion set out in our management information circular.

Be it resolved that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that shareholders approve the compensation of the corporation's named executive officers as disclosed in the Management Information Circular dated March 13, 2026, including the section compensation, discussion and analysis, the accompanying compensation tables and the related narrative disclosure.

Thank you. I would now ask David Saperstein to second the motion.

I second the motion.

So all those in favor, please say, yes.

Yes.

Yes.

And all those against, please say, no. I declare the motion carried, and we thank all shareholders who voted. As we have completed the official business of the meeting, I now ask for a motion to terminate the meeting.

I move that the meeting be terminated.

I second the motion.

Thank you. So all those in favor, please say, yes.

Yes.

Yes.

Thank you. And all those against, please say, no. Okay. Thank you. So I declare the motion carried and the official portion of the meeting is now terminated. So the meeting is now open for questions. So operator, please proceed with the question period.

[Operator Instructions] Our first question comes from the line of Rosa van den Beemt with Trottier Family Foundation.

I'm Rosa van den Beemt. I represent the Trottier Family Foundation, an investor in TFI through direct shareholdings and external fund managers. And my question today is around transition planning and related investor disclosures. Right now, we're seeing the war in Iran, it's expected to have a lasting impact on spiking oil prices. And at the same time, global EV adoption is advancing rapidly with the newest heavy-duty electric trucks now able to travel long distances on a single battery charge. The International Energy Agency reports that EV adoption will be faster than previously predicted. How is TFI planning for this inevitable transition across its portfolio? And as your proxy circular shows that the Board reviewed climate risk reporting in December, what is your time line for sharing with investors how the Board and management considers and is preparing for such material risks and opportunities?

Okay, well...

Yes, well, thank you. Excuse me, David, but I'll let you go, David, for the second, okay, question from the shareholder. And maybe on the first one, I may add something, please. Thank you.

Yes, sure. As it relates to the second question, which is around our communication, we are going to communicate in line with all of the regulations and the kind of rules around that. So the only one that has been in discussion has been the one in California, the SB 261, which has then been challenged in the U.S. Court of Appeals. So that passed and we -- there's no disclosure required. SB 253 is still in effect. And so we are preparing to disclose Scope 1 and Scope 2 emissions when it becomes due in Q3 this year.

Okay. Well, thank you, David. And if I may add, on the first part of your question, so where do we stand, okay, with EVs on the power of trucks versus the diesel, okay, that we're using. So what we have to understand is with EVs, there's a few issues. Issue #1 is the weight. So because the truck is so heavy versus a diesel and the number of towns that you're allowed to go on the road, depending on the state or the province, okay? So there's an handicap when you use an EV, okay? So it's a transition. So for sure, okay, everybody is going to go it seems to EV. But now when we talk to the OEM, the discussion is more like an hybrid model. So if you see what's going on with the cars, at first, they came with 100% EVs. That was the way to go with Tesla and others.

Now some of the manufacturers are proposing more of an EV solution -- I mean, a hybrid solution with EV and gas, gasoline, right? On the truck side, when we talk to the OEMs, and we know a lot -- we have a lots of discussion with the OEMs because we move about 70% of all the trucks that are being sold in North America. So we are like exclusive haulers for PACCAR and DTNA, Daimler trucks. So we know that these guys are looking at another hybrid solution, which is hydrogen, okay? But all this is dependent on how easy is it to get the energy, okay, to charge your trucks or to get the hydrogen. So problem #2 -- problem #1 is weight, Problem #2 is the distribution network. So the charging network. So we are in discussion with Tesla because Tesla will start producing a maximum of 50,000 trucks a year when they are at full capacity.

So when we talk to those guys, they say, we're -- they're going to be coming out with a very fast charging station, which is an issue because if you have to use your trucks 20 hours a day, to recharge your truck if it takes 18 hours, then you're in trouble, right? So it's all an evolution, okay, of 100% diesel to slowly moving towards a different solution. But that will take time. So problem #2 is the distribution network of the energy, which on diesel, it's easy. On EVs or maybe another mode is not that easy. So it will take some time. Now you have to also look at your P&D operation in a city versus your linehaul operation. So linehaul operation, you're tied up with the distribution network, like I said, which is item #2, but if you run a P&D operation, let's say, in Toronto, I mean, you're back home.

You leave early in the morning, you're back, let's say, at 7:00 or 8:00 dark at night, the truck has been parked. So it's easier to charge, okay, to a certain degree at night. So -- but again, it's an evolution, and it takes a lot of time. So that's where we're at, us. I mean, we're big at reducing the footprint of our energy usage. So this is why if I just take the example of UPS Freight, when we bought UPS Freight they didn't control or manage the speed on the truck. They didn't control or manage the idling on the truck. So they didn't manage, okay, the size of the engine, okay, versus what is necessary to really pull what is necessary to pull. So let's say, you build a truck to haul of 60,000 pounds, but on average, you haul only 40,000 pounds. So these are all things that we're doing now, okay, to reduce our footprint. But again, we're still at 99% diesel today. We use propane to a certain degree in some of our P&D operations in Canada, but this is small.

Our next question comes from the line of Ayo Olatunji with CMA Impact.

To ask a question, I'm Ayo Olatunji speaking on behalf of CMA Impact Inc. who are equityholders and debtholders of securities in TFI International. So air pollution is responsible for around 7 million premature deaths every year. And it's a certain global risk factor of death ahead of tobacco, poor diet, and other issues, including for children under 5 years. Transport contributes to about 1/5 of global particle matter 2.5 or PM 2.5, which is one of the worst pollutant impacting the health of workers and communities. Commercial vehicles, including last-mile delivery truck and vans emit NOx and particulate matter, both PM 2.5 and PM 10 from both exhaust and non-exhaust sources, such as tire and [ brakeware ] along freight corridors, including often in densely populated areas.

Transportation logistic companies and their shareholders face a rapidly shift in regulatory risk landscape where governments and court in other jurisdictions respond to the mounting cost of air pollution, including stricter disclosure framework, tightening vehicle emission standards and expanding clean air and low-emission zones. We did welcome certain disclosures in our 2026 corporate overview, including around fleet modernization and efficiency as well as was just mentioned, the use of propane in package and courier vehicles. So my question this afternoon is, will the Board seize the opportunity for leadership by explicitly recognizing the materiality of air pollution to TFI's business and disclosing transparently on air pollutants including PM 2.5, particle matter 2.5 that are harmful to worker and community health.

Okay. So I mean I think the quick answer to that, sorry, is that we respect all the different rules, and we will continue to do so. Now we live in a world today that was built around diesel or fossil fuel and we are living, okay, with that. And we know, okay, that there's something better that will come down the road. So it's an evolution thing, right? So we're part of a system as in North America, where we have peers, we are competing with those guys in the U.S. 75% of our revenue or about is derived from our activity in the U.S. So we have to live according to what is today, right? But we understand that we need an evolution. But I've been in this business for about 30 years. So I could tell you one thing. 30 years ago, the average NPG on the truck was about 4 miles to the gallon.

Today, we run on an average about 8 miles to the gallon. So the industry has changed and has improved over time. The most important thing is to deliver the freight that's required by the customer in a most efficient way by reducing the number of miles between each and every stop that you have to do to deliver the freight that you have to deliver. So if you're a smart operator, okay, like our Canadian operation, you don't drive a lot of miles between each and every stop because you have a huge density. In the U.S., we're not as good. Why is that? Because 5 years ago, we bought UPS Freight. And UPS Freight, the density is no good. We are working on improving that. At the same time, like I said earlier, that we've reduced the idling, we've reduced the speed on the truck, et cetera, et cetera.

But to reduce our footprint, we have to deliver more or pick up more and drive less right? And this has been a goal for us, right? But we have to understand that we live in an environment, okay, and we are going through this evolution. So we want to be perfect but we have to go towards that goal, but we take our role very seriously in terms of being more efficient, reducing our footprint. I'll give you another example, I mean when we bought UPS Freight, these guys had no control on energy on our dock, I mean, in terms of lighting, in terms of using LED lights versus the old stuff. Now we've changed all of that.

Why? Because we have a goal of reducing our energy footprint, right? We are -- on our trucks, the sleeper trucks now, we're testing because those guys, they sleep on the truck, so they need energy, right, at night for AC or at night for heating if they are in Canada in the winter. So now we're testing okay, batteries, lithium batteries that will replace the engine that runs on diesel when the driver needs energy for cooling or for heating. So this is ongoing now in the U.S. So I mean, we're not sitting on our hands. I mean we're moving ahead.

I don't see any further questions. I'd now like to turn the call back over to Alain Bedard for any closing remarks.

Well, thank you, operator, and thank you for -- to our shareholders for attending this meeting and for your support. So this concludes our meeting. Thank you, and have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call may contain statements that are forward-looking in nature and is subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on February 18, 2026. Joining us on the call today are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer.

I would now like to turn the call over to Mr. Alain Bedard. Thank you. Please go ahead, sir.

Well, thank you, operator, for the kind introduction, and thanks, everyone, for joining us on today's call. Last evening, we reported our quarterly results showing robust free cash flow driven by international initiatives and the hard work of our team. With overall freight dynamics showing modest signs of stabilization, the men and women of TFI are busy preparing for a potential industry rebound and controlling the controllables. .

And another focus of ours, which you've heard me in emphasis many times is producing strong free cash flow regardless of the cycle. I'm pleased to say that we generated more than $10 per share of free cash flow in 2025 or $832 million for the year and notably, our fourth quarter free cash flow was 25% higher than the year ago figure. At TFI, we view this free cash flow as very important given our strong track record of strategic capital allocation. We intelligently invest for the long term, even during down markets, and whenever possible, return our excess capital to shareholders.

As you may recall, during the fourth quarter, our Board again raised our dividend. And over the course of 2025, we continue our track record of opportunistic repurchase buying back over $225 million of common shares. Now let's turn to the other aspect of our fourth quarter results, total revenue before fuel surcharge of $1.7 billion compares to $1.8 billion a year earlier, and we generated $127 million of operating income, reflecting a margin of 7.6. Our net cash from operating activities improved meaningfully to $282 million, which was up 8% over the prior year quarter. And our free cash flow from the quarter was $259 million, reflecting a 25% year-over-year increase, as I mentioned.

Taking a more granular look at our business segment. Let's begin with LTL, which represent 39% of our segmented revenue before fuel surcharge. At $661 million, this was down 10% compared to a year earlier. However, we're able to improve our adjusted OR slightly more than expected to 89.9% relative to 90.3% in the year ago period. Our total LTL operating income was $62 million compared to $70 million a year earlier. We also generated for LTL a return on invested capital of 12.2%. Next up is Truckload, which was 40% of a segmented revenue before fuel surcharge at $674 million for the fourth quarter as compared to $693 million in the prior year.

While tariff and the general economic uncertainty still affect freight volumes and excess capacity has been an industry-wide concern. We continue to seek growth opportunity that our network and our infrastructure are particularly well suited for. This includes both data center and the broader economic grid -- electric grid to market in which we've demonstrated recent successes. Our Truckload operating income of $48 million compares to $60 million a year earlier and our OR of 93.2% compared to 91.5%. So wrapping up on Truckload, our return on invested capital came in at 5.8%. Lastly, in our segment discussion, Logistics was 21% of segmented revenue at $358 million relative to $410 million in the fourth quarter of 2025. Operating income was $31 million versus $43 million last year, and this represents a margin of 8.7% versus the 10.5%. I'll note that despite slightly lower logistics revenue sequentially we were able to expand our operating margin by 30 basis points over the third quarter. And finally, our Logistic return on invested capital was 11.8.

Shifting gears, our balance sheet is a pillar of our strength supported by the $830 million of free cash flow we produced during 2025, including more than $250 million during the fourth quarter alone. Both figures up year-over-year. We ended the year with a 2.5x debt-to-EBITDA ratio. And given this financial foundation, we continue to be an attractive dividend and repurchase more than $225 million worth of common shares during 2025, as I mentioned previously. We also continue to seek accretive bolt-on acquisition opportunities. And I'll conclude with our outlook as we entered the new year.

For the first quarter, we look for adjusted diluted EPS to be in the range of $0.50 to $0.60. And for the full year 2026, we initially expect net CapEx, excluding real estate, to be in the range of $225 million to $250 million. As I mentioned in the past, our outlook assumes no significant change, either positive or negative in the operating environment. So before we open up the Q&A, you may also have seen our press release yesterday about the latest change to our Board of Directors. So I want, again -- I want to again express my gratitude to my friend Andre Berard for his more than 2 decades of service as a Director of TFI International, most recently as our Lead Director. His impact on our Board since 2003 has been enormously beneficial to the firm, and we all wish him all the very best to his upcoming retirement. I would also like to congratulate Diane Giard on their nomination as our new Lead Director.

And now operator, if you could please open the lines for both David and myself, we'll be happy to take questions.

[Operator Instructions] And your first question comes from the line of Ravi Shanker from Morgan Stanley.

This is Nancy on for Ravi. I was wondering if you could help give some guidelines around the fiscal year guide and potential scenarios to get there and how you're thinking about 2026 as a whole would be great.

Yes. Well, that's a very good question. So this is why we came out with our Q1, okay, with $0.50 to $0.60. I mean this is down year-over-year versus 2025 because we're still in a transition environment. The freight recession that we've seen since 2023, 2024 and 2025 is still persistent as we look at Q1. We're starting to see some very early signs in our Truckload sector that maybe things will start to get better, okay, during '26. This is very early. The change in the U.S. with the CDL and not renewing some permits as drivers, et cetera, et cetera okay? That may help the Truckload industry in general.

On the Canadian side, the fact that now every owner operator or not an employee, but let's say, a Driver Inc. now has to -- will be issued a T4A, which is a kind of like a W-2 in the U.S. as an employee. So now he's got to report his income and pay taxes. So we're starting to see some people disappearing okay, in '26. But this is the very early days in the Truckload sector. On the LTL side, I mean, we're still in a very difficult environment, and we anticipate that it's still going to be the case for probably 2026 as a whole.

On the Logistics side, though, I mean we feel really good that, okay, yes, our Q4 2025 was not as good as the previous year. But in terms of one of our divisions that moves trucks for the most important manufacturer in the U.S. Packard and Freightliner. We think that this is going to start improving by probably Q3 and Q4 going back to normal. So on the logistics side, we have a more clear path of the major improvement that we could see during the course of '26. Truckload early signs that things will probably get better, although nothing is sure, it's very early in 2026. We're just in February.

On the LTL side, U.S., still very soft market. On the Canadian side, very soft market, too, but we do way better in Canada than we do in the U.S. because if you look at our revenue per shipment, number of shipments are down, okay, in Canada, the same as the U.S. But we're able to maintain an operating ratio very close to what we were doing, let's say, a year ago. So we have a better control on our costs still in Canada. If you look at our claim ratio, for example, which is like unbelievable. Were close to 0 in Q4 on the Canadian LTL side. And we're still at 0.9% of revenue on the U.S. side, which is an area that we definitely have to improve during the course of '26. I mean we had some better quarters on that in that regard on the claims side, and we need to focus more on that, and this is a big area of focus in terms of improving our service on the U.S. LTL side with our customers. So you don't want to break the customers' freight or lose it, right?

Got it. That's very helpful. I guess touching on that a bit more. Do you guys feel ready for the up cycle that comes within U.S. LTL with the idiosyncratic changes you have made? Or is there a lot more work within 2026.

No, we're ready -- I mean, we are really ready. I mean in terms of the management tools that we have today versus, let's say, just 2, 3 years ago, I mean we are very well equipped. We have financial information by terminal now. We've implemented Optym on our line all. We have Optym also implemented, which is a software on our delivery side, okay, now we're going to Phase 2, which is going to be also implemented for the pickup side. So I mean, we're ready. We have the tools. We are improving our team on the commercial side. I mean, we have way more stability in our sales force than ever, okay.

So our friend, Mr. Traikos has done a fantastic job of creating some stable environment in the sales team, understanding the focus of what these guys need to do. And I think that probably for the first time, it's still early in the game, but in Q1, we're probably for the first time in a long time, show that our shipment count is about equal to the one of the previous year. Very early still, okay? But if you look at Q4, we were down 10%. We're down 6%, 7% in Canada, but down close to 10% in the U.S. So it would be quite an accomplishment as a first step, okay, to be able to at least maintain the volume that we had in Q1 '25.

And your next question comes from the line of Jordan Alliger from Goldman Sachs.

Yes, I hear your thoughts around the demand environment. I'm just sort of curious as we roll into the -- or through the first quarter. Is there a way you could give some additional color as to perhaps the segment margin-related drivers behind the $0.50 to $0.60 EPS guide, again, realizing that you're not assuming much change in the operating environment, but maybe give some sense for shape of those margins as we move forward seasonally .

Well, that's a very good question, Jordan. And so this is why I'll pass it on to David, which is our CFO.

Jordan. So we're looking at probably around 250 basis points of sequential margin deterioration in the U.S. LTL. And I just want to qualify that by saying that Q1 is unique in the year and that it's very back-end weighted to March. And so it's very difficult to get a sense for the trends based on January and the first half of February. And this year, particularly so, because we lost at least 100 basis points related to weather, which caused us to have a lot of overtime expense, et cetera. So we anticipate around 250 basis point sequential deterioration, but it's heavily weighted towards March, which, of course, hasn't occurred yet, and we don't have perfect visibility into.

In terms of Canadian LTL about the same in terms of the sequential move, P&C is 1,000 basis point down and 15% revenue down sequentially, which is normal seasonality for us, Q4 being a peak season in the P&C. Specialty Truckload, like Mr. Bedard was saying, we are seeing some early signs of positive things in the Truckload. And so we expect to be flat sequentially from Q4 to Q1 in the Specialty Truckload. Canadian Truckload, a little bit of erosion, maybe 100 basis points margin deterioration sequentially and then Logistics are around 150 basis points.

All right. Great. And just out of curiosity, I know the weather has had an impact. Are you able to share a little bit more color around, I know March is so important, how's January, February volumes? And is it possible? I know you alluded to it a little bit, can you still make that up in March on the tonnage side for LTL?

Well, listen, the January was very, very difficult, both from a volume perspective and from a cost perspective, because of the costs associated with the weather and the disruptions and the inefficiencies that, that caused. February, we saw volumes tick up, and that's why Mr. Bedard is making a reference to potentially being flat year-over-year in volumes. We'll see how the pricing follows as it relates to that. But we can see that the volumes are -- did tick up in Feb.

And your next question comes from the line of Walter Spracklin from RBC Capital Markets.

Good morning, everyone. So you mentioned some of the improvement that you're seeing, and David just mentioned it as well in the fundamentals of trucking attributed to some of the CDL and [indiscernible] previously testing. Are you seeing that now build into your pricing, your contract pricing. We see pricing move on the spot side. But are you seeing at all any improvement in pricing on a contracted basis, particularly in U.S. LTL or if it is differentiated by segment or region, if you could touch on that.

Yes. That's a very good question also, Walter, because spot moves first. And when the shippers start to see a movement upward in the spot, they try to get into a long-term agreement with you with those low rates, right? So to answer your question, yes, spot are up. On the van side, I mean we're starting to -- it's also inflation for us on the line haul for our LTL, because some of our LTL is moved by third parties, okay? And we saw price moving up in Q1 so far. But on the contract rate, it takes more time. It takes more time Walter, so that shippers are going after you, commit to long-term pricing at these low rates. And as a trucker, what you normally say is let's wait, let's wait and see. So for now, no, on the long-term rates, it's still not as good as the spot rate, but we believe that the fact that the it's always an offer and demand balance.

So the offer is starting to reduce, okay? The demand is still not great, okay? This is the issue we have for the last few years is that the offer has always been growing because of the '21, '22 COVID area where we added so much capacity, okay, that now we're stuck with overcapacity. And now the offer is starting to reduce a little bit and the demand is still not very strong, but we anticipate that if the demand starts to go upward and the offer is also being reduced. So this is why as 3PL they're starting to see some pressure, because the trucker are asking for more money and they can't get that kind of money from the shipper yet. So a little bit of pressure on rates for our, let's say, our 3PL organization. But long term, medium term, for sure, the contract rates will start to go up. If this trend of reducing the offer and a little bit of increase in the demand continues in '26.

Okay. That's fantastic. I'd like to go back to your guide now and just reflecting some of the inbounds I'm getting in the sense that you delivered much better than your guide had -- your guide for Q4 had been set at 80 to 90, you came in it with [indiscernible]. Can you talk a bit about the different. What we could see what we had been forecasting relative to what you came in with, but really internally, where was the area of outperformance? And is that area of outperformance now built into your guide for Q1 as well?

Well, you know what, Walter, like David was saying, the problem that we face is that we are giving guidance on Q1 based on horrible month of January, right? And a very early, okay, signs of improvement in February. So this is why we're cautious. I mean, -- this is what we believe it could be delivered by our operation, okay? Hopefully, we do better than that like we did in Q4. But then again, the other problem we have Walter until we have a deal between U.S., Canada and Mexico, which is supposed to come, let's say, in the summer of '26 even if the market -- there is a reduction in the offer, the demand is still not very strong. So this is why we have to be very careful until such time that we have a new agreement between the 3 countries where our customers knows what's going to happen in the future, then we're going to feel way better, okay, in terms of being able to forecast what can the company deliver in terms of our profitability.

And your next question comes from the line of Brian Ossenbeck from JPMorgan.

I just wanted to hear a little bit more about the Specialty Truckload business, obviously, heavy industrial there. So assuming not seeing too much of an uptick yet, but we've seen a little bit of life in the PMI, but I also want to hear a little bit more about the data centers, the electrical grid, the things that probably have maybe a little bit more longer tail to them, but I'm not sure how big they are and how fast they're growing at this point. So maybe some more details on the industrial side with those 2 in focus.

Yes. Yes. You know what? This is something new for us, right? And this is coming right now, okay. It's our Lone Star operation out of Texas that is really the one being involved in wind, although wind is going to be quite active in '26 and moving some equipment for the data center. One of our latest acquisition is also bidding on some job up north in Michigan in those northern states in the U.S. So that could be a positive for us if these guys were able to win these adventures. So I mean, we are an industrial carriers in our Truckload. We're not a retail guy, okay? We are industrial. And for sure, let's say, on building we start moving in the right direction in that regard. Okay, that's going to help.

Whereas in the meantime, this is why we created this job of Chief Commercial Officer for all of our U.S. Truckload with [ Mr. Huppi ] that is now in charge of working, okay, all of our network participants in that sector. So we are deeply focused on what is moving now. And what is moving now is where the major investments are in the energy sector and wind, solar and the data center.

So that's our area of focus right now. But hopefully, the other sector, okay, of the industrial, which is construction material and all that starts to move in '26. Now like I said, with this latest acquisition that we've done late in '25, these guys are very good. Hopefully, they're successful in those bids, and we'll see, because this could be a very interesting win for us. So we'll see if these guys are able to get the ball moving on that.

So all in all, we started, okay, like we said, we're just seeing a little bit of the early sign of some industrial activity, which is our world. I mean we're not a van carrier that moves retail freight, right, for, let's say, a Walmart or Amazon. I mean us, we move steel, we move aluminum, we move building material, et cetera, et cetera. So that's our core, okay. Same in Canada, too, right? So hopefully, this starts to move. And like you said, there's some movement on PMI. Hopefully, those major investments starts to increase. Under the new administration, we're hopeful that this is -- this will happen.

All right. Maybe just a follow-up on the TFF, TForce side of things, for shipment looks like it's stabilizing a bit here. Talking about getting back to maybe flat tonnage growth here in the quarter and maybe improving from there. Is that service and network dependent? Or is that more of a -- all of the economy, I would assume it's more of the former, but just wanted to see how far along you are with that -- with those improvements to the point where you could maybe grow a little bit faster than what the market is giving you.

Yes. See, our focus to us is if you look at what we do in Canada in terms of our weight per shipment is way higher than what we do in the U.S. Why is that? Because you have to understand that TForce rate used to be UPS freight. And their focus was retail, like UPS per se. And as we're saying, forget about retail as much as you can move away from retail and let's move freight, that is based on the industrial base. So this is why our weight per shipment since we bought the company, it went from about 10.75 to 12 something now, 12.25, 12.50. Right? And the push is to continue to move into that sector of industrial LTL versus retail LTL. We understand that a lot of the retail stuff more and more, okay, will be controlled by the gig economy, by the Amazon and all that. So this is why we're saying to our guys in the U.S., let's focus on the industrial sector of the economy versus the retail sector of the economy.

Now the problem, like I just said earlier, is that the industrial economy is slow, it's very soft, right? But this is why it may be a little bit more difficult to do this transition. But that's the focus of ours is to move away as much as fast as we can, okay, from the retail economy, because we're seeing what's happening, okay, with the gig economy with the Amazon and all the others one.

So guys, that's changed, okay, the focus. We've been quite successful so far, okay, doing that, but we need to improve more. We have to be closer to 1,400, 1,500 pound shipments, because don't forget, you're paid -- normally, you're paid by the weight. And the cost is not based on the weight. The cost is based on the movement, right? So you move a pallet that's a 1,000 pounds or move a pallet that's 1,500 pound. The cost is about the same. May be different on the line haul. But line haul the issue is always [ queued ] before weight.

Yes. And the service point continues to be very important for us, Brian, and that's how we're looking to grow and move. I mean it's true that we took a step back on the claims ratio. But the other service metrics are moving in the right direction. I can tell you that in Q4, the miss pickups were 1.5%, down from 3.3% a year ago, reschedules at 8%, down from 12% a year ago. On time is flat, around 91%. And then we've continued to increase our small, medium-sized shippers as a percent of total, it's around 28% of total revenue, that's up from 25% a year ago.

And your next question comes from the line of Jason Seidl from TD Cowen.

I wanted to touch base a little bit on the data center comments and I think you called it out in the previous release, and you guys typically don't do that. Maybe you could dig a little bit deeper and let us know sort of how big you think this can get for TFI.

Well, you know what, Jason, like I said, I mean, right now, before this acquisition that we did late '25, I mean we were only servicing the data center world, okay, through our Texas operation at Lone Star. Okay? And this is something new for those guys. It's like it's something new for the industry in general. So -- because these guys used to be big with wind and energy in Texas. So now we're saying, okay, this is great, but how about data center. So let's -- so we are kind of very close to what's this builder Bechtel, okay? So we're trying to work very closely with those guys.

But now with this new acquisition that we just made late in the year, those guys that are operating more like in the Michigan area. Those guys are also very close to a builder there that's been awarded to data center. One for Meta, one for Google. And hopefully, we could continue to work for this builder okay, to support them in those two data centers. So this is -- could be a win for us. If ever, our team is successful out there. So this is what we're trying to do is build some kind of a recipe partnering with the builder of those centers, like the Lone Star guys are with Bechtel and our guys up north are with a different builder. So this is what we're trying to do.

And then once this is -- this data center has been completely built, they will need servicing, right? So that's also something that we're trying to get into and to grow that business. We have lots of experience in Texas with Lone Star and moving very expensive -- like we did a move for one of the energy company, ConocoPhillips that was valued at about just doing the move, if I remember correctly, it was like close to $1 million just to move this kind of equipment, right? So these guys are really good at what they're doing. And it's just like, okay, guys, so good for wind, good for energy, for the oil sector and all that. But data center is the new thing. So let's get up and running on that.

And the approach is to approach -- the approach is to approach this as a consolidated group, right? And we have one of the larger flatbed fleets in the U.S. over $1 billion of U.S. Flatbed revenue. And we are going to market for the large customers as one so that they're in the area able to get that nationwide service. And so it's around the energy, it's around the construction. It's also around the high-value A lot of the materials or high value need to be on time. And so we have that skill set with the DoD top secret work that we do high-value freight as well.

That makes sense, David. And my follow-up, Alain, you touched on continuing to do acquisitions. There's been a lot of articles out that 2026 could be a big M&A year for the logistics group in general. Maybe talk a little bit more about that? I mean, are you still targeting a larger acquisition this year? Or is that going to be something that's more of a '27, '28 event?

Jason, in order to do a deal of large-size you got to be patient. And like I've always said, you make your money in the buying, never in the selling. So the price has to make sense and all that. So for sure, I mean, we could do something of size, the end of '26 into '27. But there, again, I'm looking at what's going on with everything that's going on in the market right now with -- on the parcel side and even on the LTL side. So you'll probably see us do some in '26, do some kind of smaller deals, okay, like the one we just did late in Q4. We just did one small deals in Minnesota to add to our Transport America division, okay, that makes a lot of sense. We may be doing some smaller deals in the LTL world in the U.S. So large deals takes time, right? And we have to be very careful.

And like I said earlier, until we have a deal between the 3 countries, okay, in NAFTA kind of deal, right? Until we have that, it's very difficult to do a deal of size because you don't know what the rule is going to be. So this is why I'm saying it's impossible to do something now may be possible by the end of '26 but probably more like '27. And in the meantime, because of our free cash flow generation, we'll keep continuing to do smaller deals, okay, where the risk is different, okay? Now because of too much unknown on the deal between the 3 major partners in the world, which is U.S., Canada and Mexico.

Yes. Makes sense. Alain, you mentioned smaller deals on the LTL side. Will this be like buying cartage agents.

No, I would say it's probably -- I'll give you an example. You buy a small Texas regional guy as an example, okay? -- or you buy a regional guy in the Northeast, which is close to Ontario, Quebec, right? So that's what I'm saying by smaller deals. So it's not a national carrier. It could be a strong regional guy that covers one state like Texas or cover two or three states in the Northeast. This is more okay, what we are trying to do right now because a large deal in the U.S. LTL for us, it's not possible right now.

And your next question comes from the line of Tom Wadewitz from UBS.

I wanted to try to drill down a little bit on the non-domiciled CDL impact and how to look at that in your business, right? So Truckloads is an extremely large market. where we expect the supply side benefit, but the benefit might be different in dry van versus specialty in flatbed. So do you have a sense of kind of how much non-domiciled CDL has impacted specialty flatbed, you were mentioning some of the skill sets are a little more unique in specialty. And I'm just trying to get a sense of like, well, is this really going to cause capacity to come out in dry van and then there's maybe less pricing impact to you. I know they're somewhat fungible, but just trying to get a little more sense of kind of how you would see the driver impact and whether you think there is a lot of activity in supply and specialty that's actually non-domiciled?

That's -- you know what -- this is a really good question, because so far, okay, we see way more, okay, on the van side than on the specialty truckload side, because what you just said I mean in the specialty, let's say, on a flatbed or on a tanker operation, there's more than just driving the truck. Right? Whereas the van, you just pick up a trailer and you drive it, right? So it's much easier than to tarp a load on a flatbed, right? So I don't know that, Tom, so far. It's very hard to put a finger on what the effect of that is going to be. But one thing is for sure is that we'll probably not see as much benefit as the van because it's probably less of an issue for our world, but it's a little bit like a domino effect, right? So once the spot moves okay, on the van, it starts to move on the reefer, we see also some movement on the price on the flatbed side year-over-year. It's starting to move. So I don't know if exactly -- is it because the supply is constrained or is it the demand that's more?

My feeling would be more like not the demand because the demand in my mind, is still very soft and weak excluding the data center thing there or the energy sector. But I think it's an issue of the supply that's starting to constrain because our revenue per mile, although we still have some of our divisions that are not doing well on a revenue per mile basis because of market condition. But overall, okay, our revenue per mile is improving. I mean in Q1, okay, I think we're going to start to see those improvements, because we did not improve in Q4. That's for sure. I mean we -- I've never seen a Specialty Truckload OR at 93%, which is worse than my van 91 OR in Canada. This is not acceptable, absolutely not. But there's market condition to that. So that should -- we should see some improvement there. And is it because of the demand? Or is it because of the supply, I think it's a little bit the supply demand will probably improve over the course of '26 and '27 and CDL, is that helping us as much in the specialty world versus specialty Truckload world and than the van world, I think that probably it's a huge more benefit to the van world versus the specialty, but we're still getting I think improvement, because our revenue per mile is improving year-over-year as of now.

Okay. That's great. And then a quick one for David or one or two for David. Just I want to make sure I understand your comments on U.S. LTL in 1Q. So if you see flat year-over-year shipments, then that would imply, I want to say, like 3% to 4% growth in shipments per day 1Q versus 4Q. So that would be kind of a meaningful improvement. So I don't know if you were saying kind of flat shipments sequential or year-over-year and if you're saying flat year-over-year, what might be driving the kind of the improvement in activity.

Well, what's -- so it would be potentially flat year-over-year. Again, hard to say what's going to happen in March. But that was -- but it was -- the comment was with regard to year-over-year. What's driving the improvement is the sales team, the service and all of the things that we've been working on over the course of the past year. Now the revenue per shipment may not be positive, right? And that's the -- that's why we're looking at -- we'll see where the revenue per shipment is relative to year-over-year. But, but there is pricing pressure out there. And so that's going to be the offset to what could be strong volumes or stronger volumes as it relates to the profitability contribution.

And 100 basis point comment on weather impact, that's a full quarter impact in U.S. LTL?

Yes, we're estimating that we've lost like $5 million to $6 million already on the weather. Just through extra over time and just inefficiencies and cleaning up the dock and all that cost .

Yes, versus a normal environment, because some -- see the issue of the weather, we always have weather in Q1. So this is not something that we normally talk about. But this year, it's special, because it affected our big market, which is Northeast, Midwest and Texas, right? So if the weather is an issue in Idaho or in Utah, but not too big for us, right? But when it affects Chicago, when it affects Dallas, when it affects New York. I mean this is really, really difficult because Dallas, we were shut down for 3 days because of the ice. So what David is talking about $5 million, $6 million, this is over and above what we consider to be a normal environment of weather. I mean, this is -- we're not saying because we had -- no, no, this is exceptional for this year, because weather was really bad in our major sector, okay, for TForce Freight .

And your next question comes from the line of Konark Gupta from Scotiabank.

Maybe just a first one on the earnings side of things. I mean, as we kind of look into the back end of 2026, hopefully, conditions improve. But is Q4 going to face a tough comp from like the [ $1.19 ] EPS you reported for Q4 of 2025. I mean if I'm looking sequentially, you have like effectively a drop of 50% in EPS from Q4 to Q1 as guided, and that's a little bit wider than what you typically see, right? So I'm just trying to make sure, we're not missing anything when we are comping or lapping the Q4 2025 and Q4 '26.

Okay. So I think, Konark, that Q4, okay, 2025 versus '26 I think that we're going to be in a different position, okay, versus this year versus '25, reason being that I believe that our logistics will do way better in 4 '26 versus 4 '25 because our customers will be busier talking about the OEMs, the truck manufacturers, okay? And also the fact that we've had as an acquisition late in Q4 '25, a great company in our Logistics sector. So this is why on the logistics side, I think that we're going to do way better, okay, Q4 versus '25, '26.

On the Truckload side, it's still -- I'm convinced that we're going to do better because I've never seen 93 OR. And we're taking some action, okay? I'll give you an example. One of our division on the West Coast which we are doing really well, okay, with certain accounts like the aerospace. So we have Boeing as a customer over there. We have Bombardier as a customer too. So we're doing really, really well with those guys, but we're doing so poorly with some other customers.

So we took the bull by the horn, and we said, guys, no, no more of that, right? We have also another division that's from Daseke that is doing really well with one sector of their business, but they're doing really poorly with another sector. So there, again, we're going to take action there. So this is why, to me, I think that Steve and his team understand that we can run a Specialty Truckload with a 93 OR. This is completely unacceptable. And we're taking action over and above what we think that we're seeing some early signs of market improving.

On the LTL side, like David was saying, I mean a big focus of Kal and the team there is really to improve our service, okay? And we are. We are improving our service. So as an example, we move way more freight on the road versus the rail. So the rail miles within TForce rates are down to about 20%. When we bought UPS rate, these guys were 38% to 40% on the rail. So for sure, when you move freight on the rail. You don't know, you don't control the service, because this is the rail, whereas if you do it yourself on the road, well, it's under your control. So we are improving our service as an example, just moving rail to road.

Now like I said earlier, because we move that on a van and the van, okay, world's rate per mile is moving up, like we were talking about this environment is changing. It's also a little bit of pressure on our costs because where we used to pay, let's say, 220 miles. Now, okay, you could be start paying 250 to 270 or 280 a mile depending on the lane, right? So a little bit of pressure on that for us. But for sure, with better service, I believe that our commercial team with Chris and the rest of the boys there will help us grow for the first time organically in '26 year-over-year, right? So this is why you look at what we're saying about Q1, I think it's exceptional what we're seeing because it's still a very tough environment. Our customers don't know what's going to happen in the future because until we have a deal, like I said earlier, between U.S., Canada and Mexico, a lot of guys are sitting on the fence because don't forget, I mean, TFI is a U.S. carrier for about 75% of our revenue, but 25% to 30% of our revenue is Canadian, right?

So a lot of our Canadian customers, they don't know what the future is. And also some of our U.S. customers are facing a tough time selling to Canada right now. So all of that being said, when we come up with $0.50 in Q1, it looks really bad versus $1 in Q4, but it's a special environment, okay? And we're cautious.

That's great clearly. And if I can follow up maybe on logistics. I think you mentioned that sequentially speaking, at least logistics margin expanded from Q3, don't be surprised to see that. So any color you can share in terms of what's driving this improvement? I mean, is it early days? Or is it the mix? Or is there something else? Like how should we extrapolate this performance at logistics into '26.

Yes. I think, Konark, that you see us improving during the course of '26. Like I said, because of this acquisition, okay, that we did because of our -- one of our large customers, the OEMs are also going to be busier. Our Canadian logistics is doing pretty good. We have a great business there. Our U.S. logistics is under a little bit of pressure with what's going on in the truckload sector in the U.S. where the rates are starting to move up on the spot. So you try to get a truck. It's a little bit more money, and you're stuck with contracted rates with customers, and these guys want to extend those contracts and we're saying, no, because the market is changing.

So on the U.S. side, a little bit more pressure, okay, on our profitability there, maybe for the next few months. But all in all, I feel really good about where we're heading with our logistics. Logistics for us, with this new acquisition and a few things that we're working on should do better in '26 than in '25, Absolutely. The other thing also that's worth mentioning is that if you look at our Truckload brokerage operation in the U.S., I mean the revenue is up, okay, and it will continue to grow. So this is one area of focus of Steve and his team is to grow more of this asset-light operation versus asset-heavy operation and get a better mix like we have in Canada. In Canada, we won a hybrid model where we have our own assets, okay? But we also generate a lot of revenue without any assets. When we bought Daseke, they were doing some of that, but not a lot. So the goal doing in '25, '26 and '27 is to grow the share of the asset-light operation share of revenue, okay, versus the total revenue of the company.

So you're way better positioned to improve your return on invested capital, because when you don't buy steel, your capital cost goes down, if the profitability or the revenue remains the same, your return on invested capital improved. And this is when we talk to the Truckload team say, we can't run a single-digit retail investor capital, guys. I mean if you do that, the future is bleak. So we got to do something. The market will help us, yes, but we need to help ourselves too.

And your next question comes from the line of Bruce Chan from Stifel.

You made some helpful comments around the road to rail shift in LTL. I think that makes a lot of sense for service. Maybe you could also remind us of what percentage of linehaul miles are currently outsourced on the LTL side, whether that's the truck or rail. And then given your fleet investments, do you have any plans to bring that number down this year? .

Yes. So what we do is about 20% on the rail, 20%, 22% on the rail. And then we have owner up, okay, and we have third party. So the third party and owner up probably our own guys do, if I remember correctly, David, tell me -- correct me if I'm wrong.

Yes, our own guys are doing around 55%. Yes. So it's 45% outsourced.

And of the 45% outsourced, 20% of that is rail. So 25% is third party, owner up and third party.

Okay. Great. And then just maybe broad plans, if you're comfortable with that number as far as its use your model or whether you plan to bring that down over time?

Listen, I mean, for sure, okay, if you hold your average length of all is 1,000 and more, you have to have some rail, right? So I cannot answer is 20% the right number? I would say we're getting close to the right number if the average length of haul stays above 1,000 miles. Now one thing is for sure is the 55%, like David was mentioning with our own guys that could grow probably closer to 60%, okay? Over time, yes, because you have better control when it's your own people. But the rail at 20%, we're probably close. If we remain over 1,000 miles. We're probably close to the best that we could do.

Now again, this is going back to the average weight per shipment that we went from $10.75 to $12 something -- the average length of haul is down a bit, but the discussion I'm having with Kal and the rest of the team is over time, okay, we need to change our approach to the market and reduce over time the average length of haul so that we don't touch the product 3 or 4 times. We touched the product less. So in order to touch the product less, you have to do less miles, less on the average length of haul, right? it's an evolution, okay, that's going to take place over time. But there, again, what I'm saying, if you run over 1,000 miles, you need the rail.

And your next question comes from the line of Ken Hoexter from Bank of America.

So Alain, maybe just a bit of a contrasting message, so maybe some clarity. You noted a weak environment, but 1Q should be flat after a down 7% ton and down 11% shipment quarter. So maybe clarity on what's driving that near 50% EPS downtick in the first quarter. And then you throw in, "Hey, it's conservative, we could do better." So is it just the weather that's stepping you back? Are there gains in the fourth quarter or any impacts from the fourth quarter acquisitions in there? Maybe just some clarity on it. .

Yes. So David, do you want to give some clarity to Ken on that? .

Yes, sure. I mean, look, in terms of gains or anything special in the fourth quarter, the only thing special in the fourth quarter was tax for about $5 million. Other than that, it's -- there is nothing onetime in nature. The -- in terms of what's driving is the trend of volumes up. It's the work that the team is doing. What may still weigh on the profitability though is the revenue per shipment and -- and so that's why the growth in volume may not be as profitable as otherwise would be.

We'll just have to see how that plays out. And then more broadly, it's very, very difficult to, especially at TForce Freight to forecast the first quarter because all the money is made in March. That's just the nature of this business. And so when we're looking at a Jan and Feb that we're very difficult with or at least January, very difficult with the dynamics that we've talked about. There's a lot that's unknown. And so we've done the best that we can, and we are being conservative about what March might be when we put together that guidance.

That was flat on shipments or on tonnage. I think you said both...

The shipments year-over-year potentially on shipments. Yes.

And then you previously noted, I think, 200 to 300 basis points of margin improvement at LTL in a flattish environment. I think you mentioned, if we're starting out flattish in 1Q, does that mean you're looking flattish for the year? And -- does that -- or is too big a whole? And so that 200, 300 basis points for the full year is too big? Or is that still achievable Alain, in your outlook? And how about EPS, are you then looking for it to be at least up on a year-over-year basis? .

Yes. So in terms of the volume, like I said, Ken, I think for the first time '26 in our U.S. LTL we should see a little bit of organic growth, okay, on the shipment count, right? On the weight, we believe that it's going to be about flat or up a bit. On the revenue per shipment, like David was saying, okay, right now, what we're seeing is a little bit of pressure on the revenue per shipment when we look at Q1 so far. But the team is working to correct that, okay?

It's not like we accept that. No, no, no, no, no, no. We cannot live with $5 less of shipment and whatever it is. I mean don't forget, our GRI, which is small, okay? It's a small number of shipments, right? But we didn't do any, but we're doing one in mid-March, okay? Most of our peers have done, there's earlier than us. And us, we waited, okay? We waited because we want to continue to improve our service. So there's no this issue with customer when you talk to them about asking for more money. So this is why we're doing that mid-March. Okay. Fine.

So if we go back to the year in terms of globally TFI, my mind is, for sure, our plan is we will deliver better OE or EPS in '26 versus '25 without a doubt. That's our plan. Because our -- like I said our logistics will definitely improve that. We have visibility. We know okay, where the OEMs are going, because we talk to them, okay? We know that it's going to be weak for the first 6 months year-over-year in '26 versus '25. But the latter part of the year, we're going to do way better in Q3 and in Q4 versus '25. Okay. So we are suffering a little bit in that business in Q1 and in Q2 year-over-year.

In our Truckload, we've talked a lot about that. I mean I'm convinced that we're not going to deliver a 93 OR, okay, in Q1. We are improving our year-over-year basis in Q1 and during the course of the year. And on the LTL side, I mean, we're taking some actions there, okay, improving our service, organic growth small. I think that we'll do a better job in '26 as we've done. Now we've said it clearly, and this is why our guidance is only $0.50 to $0.60 is that we had a difficult start of the year, okay, not just in U.S. LTL, in truckload as well and logistics because some of our customers are not that busy. So this is why this is what we believe is achievable, okay? And hopefully, we do better than that.

Yes. And the other thing I would point out on the full year is that in Truckload, we've done a lot of work in 2025 to reduce the capital intensity of Truckload, because we had way too much equipment. And so depreciation expense will be lower in the Truckload in '26 than it was in '25. And you can actually already see that if you look at the DNA of Truckload just in Q4 is $3 million lower than it was the year prior and lower as a percentage of revenue as well, right? So there's real efficiency as it relates to the capital there. And that's going to continue into '26 and the impact would probably be higher in '26 than $3 million a quarter.

Yes. Because if I may add, guys, our revenue, if I remember correctly, our revenue per truck in Q4 is better even with rates per mile that are not that better. So velocity is more.

And your last question comes from the line of Cameron Doerksen from National Bank.

I just wanted to, I guess, follow up on M&A. You mentioned a few times the acquisition you closed in Q4, I guess, the Hearn industrial. I mean, obviously not huge, but you cited it a couple of times here as a really great fit. Can you just talk a little bit about that business? Because it looks like in your disclosures that not a huge from revenue point of view, but a pretty good margin profile for that business.

Well, you see -- I mean those guys are doing a great job. I mean they are entrepreneur. And I think that what these guys are doing today is great. And I think that the potential for being part of the TFI family is going to help us -- help them and us, okay, do even better in the future. So this is something new for them. I'll give you an example. They don't touch freight. I mean, they do a lot of work for the -- in the automotive business, but they don't touch freight, but they have a certain degree in the freight.

So that's something new for them, right? So for sure, they are in touch with our GHG division, okay? Because these guys have a lot of capacity that could be used to deliver freight for those guys. So there's going to be some great synergies, I think, between members of the family, with the Truckload sectors and all that. And for sure, these guys are lean and mean operators, very successful guys. And yes, I think it's going to be a great acquisition in our logistics sector, a little bit like the [ GHG ] and the other ones that we've done in the logistics sector.

Okay. No, that's helpful. Maybe just a bigger picture capital allocation question. I mean you mentioned that you continue to be active with the tuck-in acquisitions. Just wondering if you've got kind of a target for leverage at year-end? I mean, you still pretty comfortable here, great free cash flow still expected in 2026. But just any guess targets there as far as leverage and is the capital allocation priorities?

Yes. So capital is always the same thing. If we don't do anything of size we're going to do probably, I would say, '26 in 2026, $200 million to $300 million of M&A in terms of tuck-in, probably $200 million minimum, maybe up to $300 million, and then we get the dividend. And the rest, okay, we'll just use the cash to pay down debt or depending on the stock valuation do some buyback. I mean we have the possibility of buying back all the way up to 7 million shares that we are approved to do.

Now again, $2.5 million leverage, it's okay, but we would prefer to bring that down to $2 million over time. So let's say that we do about the same free cash as we did last year. We got the dividend, we've got the M&A -- so then for sure, we'll be reducing our leverage if we don't do any stock buyback. So leverage I don't remember the plan, David. So where do we end up, we're closer to $2 million than $2.5 million.

Yes, no doubt. And the other thing we'll point out and we actually added this into the MD&A were just under the table where we show the leverage ratio. That leverage ratio is calculated according to the way that our banking covenants are calculated and it includes two things that some investors may not consider leverage. One is letters of credit. And the second is the book value of earn-outs, right, which are subject, of course, to the future performance target companies.

So those numbers are a little bigger than they have been in the past. And so that's why we set them out in the table. And so you can see that and you can work out by backing those out, what, let's say, the real economic leverage of the company is, which is a little lower than as presented in the banking syndicate.

Yes. With these numbers, David, I think we're at $2.2 million, right? .

There are no further questions at this time. I will now hand the call back to Alain Bedard for any closing remarks. .

Thank you. So all right then. Thank you very much, operator, and thank you, everyone, for being on today's call. We appreciate your interest in TFI International. And we're both confident in our position and enthusiastic about what 2026 will bring. As always, please reach out if you have any additional questions. I look forward to seeing many of you on this year's conference circuit. Enjoy the day, and we'll be in touch. Thank you. .

This concludes today's call. Thank you for participating. You may all disconnect.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Third Quarter 202 Earnings Call. [Operator Instructions] Please be advised that this conference call may 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. I would also like to remind everyone that this conference call is being recorded on October 31, 2025.

Joining us on today's call are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I'll now turn the call over to Alain Bedard. Please go ahead, sir.

Well, thank you for the introduction, operator, and welcome, everyone, to this morning's call. Last evening, we reported our quarterly results that shows additional progress with operating margins, especially for our U.S. LTL. In fact, across our entire company, the men and women of TFI International doubled down on our core operating principle, which is setting us up nicely for the eventual rebound in freight volumes.

I'm also pleased with our free cash flow performance as this is always one of our top priorities. At more than $570 million year-to-date, this was slightly above the 9-month results from 2024. We use our strong free cash flow to strategically invest in the long term and whenever possible, return the excess to shareholders.

Speaking of which, as you may have seen in our press release, yesterday, our Board approved a 4% increase in our quarterly dividend to $0.47 per share, suggesting a yield of close to 2%. Equally important, during and subsequent to the quarter, we repurchased additional shares, which I'll speak to in a moment and while maintaining a very solid balance sheet.

With that, let's review our overall third quarter results. We generated total revenue before fuel surcharge of $1.7 billion, and that compares to $1.9 billion in the year ago quarter. In aggregate, we produced $153 million of operating income or a margin of 8.9%. We've recorded adjusted net income of $99 million as compared to $134 million in the third quarter of 2024 and an adjusted EPS of $1.20 is relative to $1.58 in the year ago quarter.

Rounding out our consolidated results, our net cash from operating activities came in at $255 million, up sequentially, but down from $351 million in the same quarter last year. And finally, our free cash flow from the third quarter was nearly $200 million, also up sequentially. In addition, as I mentioned, this brought our year-end-to-date free cash flow to just over $570 million.

So overall, when I look at our consolidated performance, first and foremost, I recognize the hard work of our team with everyone across our segments working to make the most out of a subdued freight environment and most importantly, setting us to capitalize on the next cycle.

How do they do this? Well, they focus on long-held core operating principle, ensuring that quality of revenue and aiming for constantly improving efficiencies. Additionally, as we make meaningful progress on service improvement in U.S. LTL, it's gratifying to see the team recognized in this regard by leading third-party customer research firms. So we very much appreciate their hard work.

Now, let's take a closer look at each of our 3 business segments, beginning with LTL. This quarter, our LTL operation represented 40% of segmented revenue before fuel surcharge, which was down 11% versus a year ago to $687 million. Notably, our U.S. LTL operation showed additional progress on margin for a second quarter in a row, producing a 92.2% OR, which matched the performance of a year earlier.

Total LTL operating income of $78 million was up sequentially from the second quarter, but compared to $96 million a year earlier. Our combined operating ratio for LTL was 88.8%, and that's also improved sequentially, in fact, for the second quarter in a row, but still compared to 87.3% in the prior year third quarter. Our return on invested capital for LTL was 11.9%.

Turning to Truckload. It was 39% of segmented revenue before fuel surcharge at $684 million, which compared to $723 million in the year ago quarter, with tariff impacts on steel and other commodities still waiting on freight volumes.

Operating income of $53 million compares to $70 million last year, and our Truckload OR came at 92.3% versus 90.6%. Lastly, our Truckload return on invested capital was 6% for the quarter. Our third and final segment to discuss is Logistics, which produced $368 million of revenue before fuel surcharge or 21% of segmented revenue, and this compared to $426 million in the third quarter of 2024.

Operating income came in at $31 million versus $49 million last year, and this represents a margin of 8.4% versus 11.4%. Our logistics return on invested capital was 14.6%. So next, I'll move on to our balance sheet, which remains very strong, benefiting from a free cash flow I mentioned of nearly $200 million during the quarter and more than $570 million year-to-date, which is stronger than last year. We end up September with a funded debt-to-EBITDA ratio of 2.4x.

From this position of strength, we are able to not only pay our dividend, which I mentioned, the Board agreed to raise today, but we also repurchased a total of $67 million worth of shares during the quarter. That brought our total return of capital to shareholders to more than $100 million during the third quarter alone.

As I mentioned at the outset, this is one of our key business principles to return excess cash to shareholders whenever possible. And I should add that subsequent to Q3, we also have repurchased an additional $17 million worth of share as we continue to effectively reduce our share count.

So before we turn to Q&A, I'll provide a fourth quarter outlook. We expect fourth quarter adjusted diluted EPS to be in the range of $0.80 to $0.90. And we now expect full year net CapEx, excluding real estate, to be $100 million to $175 million compared to $200 million earlier.

Similar to last quarter, I'll note that our outlook assumes no significant change either positive or negative in the actual operating environment. And with that, operator, David and I would be happy to take questions. If you could please open the lines.

[Operator Instructions] Your first question will be from Ravi Shanker at Morgan Stanley.

So Alain, I would love your overall thoughts on the state of the LTL market today. Obviously, macro still remains pretty depressed, but you guys are taking idiosyncratic actions as well. So if you just could address kind of where do you think volumes are going? What do you think the pricing environment is like, that would be great.

Yes. Well, very good question, Ravi. I think that like most of our peers so far, I mean, we're off to a very slow start in Q4 with all kinds of reasons. I mean, we have this special situation in the U.S. with the government shutdown and things like that. So I mean, we anticipate that probably in our guidance, what we have in there is Q4 versus Q3, okay, we'll probably see a deterioration of the OR between 200 to 300 basis points, okay, because of this slow environment, slow volume environment.

Now going into '26, we're starting to have a feeling that after 3 years of very, very hard difficult freight recession, we believe that finally, all the effect of that Big Beautiful Bills and the fact that the consumer will probably get some tax refund, et cetera, et cetera, the investment, okay, that will probably take place in the industrial sector in the U.S., we feel way, way, way better about '26 than what we went through about 2025. Now we -- what we were able to do with TForce Freight, I think it's a confirmation that the new team is really all hands on deck.

We've been working on our costs. We've also been working and improving our service. That's been confirmed by the famous Mastio report. We are improving. We still have a lot of work to do, but still we're heading in the right direction. And I'm very happy with the team, with what the guys are working on right now.

We're looking at '26. We need to do some major investment in AI, okay, to help us reduce our costs and be more efficient, provide a better service. So in that regard, we have some projects that should take place in '26. So I mean, Q4 '25, difficult all over for us, I believe. But I think that finally, the sun is going to start coming up in '26.

Understood. That's really helpful. And just you very quickly addressed that as well. But if you can just talk about the progress you made with kind of fixing some of the internal initiatives in the LTL business. How far along are you? And kind of what do you think are the next few steps you can expect in the next quarter or 2?

Yes. Well, one of the first things that we did, Ravi, with Kal and his team there is we fixed the small- and medium-sized business, where we were way -- we've lost too much of that in '24. And when Kal took it over with Chris and the rest of the team there, they said, well, we definitely need to change that, right? So what you see there, okay, in Q3 and also the improvement in Q2, some of that is the improved quality of revenue, quality of freight that we do. So that's basically step number one.

Step number two is we were a little bit too relaxed on some aspect of our business. So for instance, our approach us with temp account was you deliver the freight and hope to get paid, okay, when an account does not exist with you. Well, I don't think no one is doing that, right? So we were an exception in the U.S. We fixed that in Q2 and for the rest of the year.

So now if you order at TForce Freight and you have a ship and we don't know who's going to be paying the bill. So we hold on to the freight until we know who actually is going to be paying that bill. So that's also another improvement that because of past procedures, we were losing a lot of dollars because of that negligence of our process at the time.

Now also, we've hired a guy to run our fleet management team. And I'll give you just a small example. Last meeting we had the other day in Dallas, it used to be that a truck, a TForce Freight get into a shop and that truck is stuck there for 85 hours. Well, now we're down to about 45 hours. It's still too much, but that helps, okay, the cost because now the truck is available, so you don't have to rent a truck for 5 days or 6 days because now instead of being stuck there for like 2 weeks, now the truck is stuck there for now a week, right?

So these are all the small details that Kal and the team there are looking at. We have a new team also that's focusing on claims because our claim ratio at 0.7% of revenue is not good. I mean it's never been good. So we have to do something. If you look at our claim ratio in Canada, we're always in that 0.2% of revenue, which is normal, right? But we're at 0.7%. So now we have a team that focus on that day in, day out in trying to get that 0.7% down to a more normal level, right?

So these are all small things that the guys are doing, and we'll be announcing also, Ravi, very soon, probably next week that now within TForce Freight, we have one executive that's going to be a Chief Commercial Officer for all of our LTL operation in the U.S. So again, this is because our focus is on quality of revenue, growing the number of shipments. And this is what I think that we will start to see in '26.

Next question will be from Jordan Alliger from Goldman Sachs.

Just maybe just following up on that. It sounds like real progress is being made, which is great. So hopefully, next year will be better in terms of the underlying demand. So in the context of that, how do you think now that sort of maybe it's getting to that point?

How do you think either incremental margins or where LTL OR in the U.S. could ultimately get to? I mean, do you have any updated thoughts on that? Because clearly, what you've done has improved the company versus the last time we had strength in the LTL market?

Yes. Yes, absolutely, Jordan. And we -- if you look at our U.S. LTL versus our Canadian LTL, I mean, in Canada, we have a deep bench, and we've been at it for a long time. In the U.S., I mean, don't forget, we're in that business since we bought UPS Freight. And now we're beefing up our talent team. And that's going to help go through that period that hopefully is going to be some tailwinds for the LTL industry in general.

And we'll be, I think, well positioned to take advantage of that. But the focus at TFI with every business unit has always been do more with less, okay? And this is why, like I said earlier to Ravi is we are really focused in '26, what kind of implementation we could do with the new AI tools that are available to be in a position to do a better job, provide better service at a better cost for all of our customers.

And there, I'm not just talking about TForce Freight or LTL, I'm talking about our package in Canada, our P&C business in Canada. I'm talking also about our truckload operation in the U.S. This is really going to be a big focus of ours in '26 because now contrary to '24, this AI thing there is really something that's going to change a lot of stuff.

I mean we know that down the road, I don't know if it's 10 years from now, okay, you'll be probably able to drive a truck without a driver, right? So when you think about that, all the edge that a nonunion carrier has versus a union carrier, well, that edge down the road will probably disappear, right? It's like -- but this is 10, 15 years from now, I don't know.

But one thing is for sure is that us, we are embracing AI, big time. We'll be investing on that. That's a big focus of ours in '26. This market has been difficult for us for the last 3 years, okay? Hopefully, the market turns in '26. We don't control that. But what we can control is our cost and our focus, and this is something that I'm reviewing the plan for '26 as we speak, next 2 weeks. So it's a big focus of ours, Jordan.

Okay. Great. I mean, I guess, suffice it to say, I mean, without necessarily putting a number then and a time frame, I would suspect, given what you've done, when we do get to a positive volume environment, you'd expect fairly quick reaction to the operating ratio to the improvement.

Yes. Yes, for sure. Because don't forget, you know what, George, if you look at what we were able to do, with sadly 10% less top line, okay, in our U.S. LTL. And we maintained the same OR as the previous year at 92.2%. So that tells you the heavy lifting that our guys are doing today, okay, and becoming more process-oriented. I'll give you another example. shippers loading count, okay? So you get a trailer and the load and count is from the shipper. But if you don't check, maybe there's a mistake. But we were too relaxed on that.

So now Kal and the team says no more, no more. This is -- we get a full trailers from the shipper. We have to check, okay? And if there's a shortage, well, we have to tell the customer right away and not wait and get a claim 3 months down the road because there was a shortage. I mean this is just being professional in our business, right?

Next question will be from Scott Group at Wolfe Research.

So I wanted to see if we can dig into the fourth quarter guidance a little bit. So I think I heard you say, Alain, the U.S. LTL margins 200 to 300 basis points worse. It's sort of hard to get all the way to that -- to your guidance unless like, I guess, the rest of the business is doing particularly badly. Maybe, I don't know, you or David, maybe just walk us through some of like the segment expectations, that could be helpful.

You know what, Scott, that's a very good question. So I've got David next to me. He's the CFO. So I think I'm going to let that to David. He's the numbers guy.

Scott, so yes, embedded in that guidance is a U.S. LTL OR in Q4 of 96%. Specialized truckload between 93% and 94% and logistics also between 93% and 94%. And that logistics piece is down substantially when you run the numbers on what that suggests year-over-year, operating income contribution in logistics is down by about half.

Right. And logistics, Scott, I mean, as you know, we move all the trucks that are being manufactured in North America for PACCAR and Freightliner. So these guys are down like 40%. So that's a huge effect on us. And also globally, our logistics operation in the U.S. is also down. The Canadian ones are on plan, doing better. But in the U.S., we're also down. We're running about 92% of plan right now.

So this is what we are showing there. I mean, like this -- I'll give you another example because of government shutdown, DoD is dead, Department of Defense. I mean, one of our divisions, 30% of the revenue comes from the Department of Defense, right? So this is out of our control.

The same thing with the OEM, okay, selling less trucks. This is something that is out of our control, but we know it's short term. It could be 2 quarters, 3 quarters. I mean, those guys will be selling trucks soon. And that's why we're also keeping the staff. We're keeping the team because we'll be suffering for a few quarters because of that situation, okay?

But we know that this freight is going to come back. And it's the same thing with our truckload operation that service the Department of Defense. I mean we know that this shutdown will stop at one point.

Yes. And then in terms of rounding out the rest, P&C and Canadian LTL, we see those in the 82%, 83% range and Canadian Truckload around 90%.

Okay. Very helpful. And then, Alain, it feels like on the U.S. LTL side, one of the messages in the last year or so is we got to get service better before we can start focusing on price. Where are we in terms of the ability to start getting a little bit more focused on price? And then maybe just with that, it feels like we're seeing some stabilization in the GFP business? Is there any potential to start growing that business again?

Yes. Yes, you're absolutely right, Scott. GFP finally is we got some stability, and now we could start growing again because the business we get from GFP comes mostly from the small and medium-sized accounts. So once that you start going back the small and medium-sized account, normally, you should have a benefit to your GFP.

In terms of the service, what I would say is that right now, about 21% of our linehaul miles are on the rail versus 30% or 35% like it used to be. So for sure, our 4-day service has improved tremendously, right? Because we use less rail today than we were using about a year ago. So that's number one.

Next-day service, we're up to par. I mean if we compare our next-day service to our peers, I mean, we're there. Where we still have issues is second day and third-day service and the guys are working actively on that. We are improving. We're not where we should be, but that is really the goal is to get this up to our peers on the second and third day service.

And then slowly in '26, and I think we'll get there, we can start being seen as a professional carrier that respect, the commitment that they give to customers and get a price that is closer to the market versus right now, we're still a discounter, okay, versus the market.

Yes. And to follow up on what Mr. Bedard said on service, I think one of your peers pointed out that we were the most improved carrier in Mastio in this year's survey. And I can tell you that, that's underpinned by real data that we're seeing. So our small medium-sized revenue -- small, medium-sized percent of revenue is higher than it was last year.

We're at 27.4% relative to 26.7% last year, this quarter. Then on service, we've improved 340 basis points in terms of our on time. Our missed pickups year-over-year, they're down 60% and then our reschedules are down 34%.

So these are facts, Scott. So I mean, this is going to help us like you've asked the question to get better profitability from the top line.

And more freight.

And more freight.

Better retention.

Yes. Less turnover.

Less turnover.

Next question will be from Walter Spracklin of RBC Capital Markets.

Alain, on 2026, you said the sun is coming up, and you've been very pragmatic, very, very clear about when you see things that are poor and when you things that are turning. And so that's very interesting for you to say and to hear you say. And I'm just curious, is that a commentary on price? Is it a commentary on demand?

And specifically, are you seeing any real evidence either from the CDL restrictions and English language proficiency requirements that are now being mandated? Is that -- are you seeing that impact today on price? And are you seeing any light at the end of the tunnel in terms of overall demand as you go into 2026?

Okay. So Walter, let me a little bit more specific. When I see the sun coming out, it's mostly the U.S. I think Canada, okay, because we still don't have a deal with the U.S., it's going to be probably the same in '26 like we have been going through in '25, right?

But on the U.S. side, if you look at our truckload operation in the U.S., our velocity is down. Our miles are down, but our revenue per mile is up until now, right? So what we're starting to see is maybe a little bit of contraction in the offer.

And that could be, like you just said, Walter, this thing about the CDL, okay, those permits are not being renewed, okay? The same is true of the English proficiency thing. The early stage, okay, but I believe that, okay, this is going to help us correct the imbalance between the offer and the demand, okay? Also the fact that the truck sales are down like 40%. That's also something that tells you that some capacity is running out of the system, right?

Now for us, Canadian, I'm sure you saw what Champagne was saying about his new budget that he's going to be talking about soon, okay? Hopefully, in Canada, we'll have something similar with those Driver Inc., thing there, okay, where finally, we were able to convince the federal government to say, if you're a trucker, you have to issue either a T4 as an employee or a T4A as a subcontractor, right, Walter?

So the Canadian finally also could be a help for us in '26, maybe not on the volume, but the offer could reduce. As a matter of fact, we just saw one of the Driver Inc., up for sale, okay? I mean we're not going to buy a Driver Inc., company. But just to say that those guys are starting to feel things are changing in Canada.

So I think that globally, the Canadian situation is going to be difficult in '26 because we don't have a deal with the U.S. yet. .I think we'll have one, but we don't have one yet. Maybe it's going to go all the way to the summer '26. But I think that the U.S., okay, that's going to change. That's going to change with all the benefit of this OBB, the Big Beautiful Bill and everything that's going on, the reinvestment, okay, trying to bring those jobs back into the -- all of this to me is, guys, let's get ready, okay?

I think after 3 years of a freight recession has been really, really bad, we're starting to see some capacity out. As a matter of fact, even we have one of our peers in Alabama, 500 trucks. The guy is out.

They're in bankruptcy. Yes, exactly. We're seeing those come across our desk more and more now.

Exactly. We also have a freight guy, a freight broker, okay, closing shops.

So as you become a bit more optimistic on '26 then, does that change at all your strategy on M&A? Do you pull that forward at all? Is it contingent on the seller? Just curious your update on what -- and I'm talking not the tuck-ins, I mean a larger platform acquisition.

Yes. Yes. So you know what? This takes time, right? And we've been at it for quite a while. And because we don't have a deal, what we're doing is we're buying back TFI, right? So that's what we've been doing. I think that in '26, hopefully, we could have -- it's always difficult to do a deal when the target doesn't want to sell, right? This is not easy to do, right? So sometimes you're better off to say, you know what, let's wait, okay, and let's work on a different file where at least you got a seller that's motivated, right?

So to me, I'm still convinced that '26, probably mid-'26, later into '26, we could do something of size. We have the capacity, we have the potential, we have the target, okay, to do that. But there again, I mean, TFI stock is so cheap that when we talk to our Board, they say, "Hey, Alain, why would you invest $1 billion, $2 billion, $3 billion, okay? Why don't you just buy back TFI, okay?

And we've been doing that slowly. But now things could change with this macro environment and maybe it's best to put the buyback on hold for now, although we have our Board and the TSX approved the renewal of our NCIB, but maybe put that on hold for now, depending on the stock valuation and get ready for the next step, the next chapter of my life on M&A.

The next question will be from Jason Seidl at TD Cowen.

Getting back to your comments about a potential trade deal with the U.S., and I share your hopes that it's sooner versus later. But if it is later, have you given any thoughts to maybe some further cost reductions that you might have to take given that you saw CN out there the other day laying off about 400 people.

Yes. Well, you know what, Jason, I don't know that. What I could tell you, though, is that because we're so embracing AI, I think that with this tool, we'll be in a position to do more with less. I think that to do some layoff right now of quality people that are part of our team, the same story is true of our logistics, right?

So as I was saying, Jason, about our truck moving operation, we know that this is just a few quarters. So we are suffering because we're keeping our people, right? Because these are good people. They're doing a good job. So we'll be suffering on that. And we are still suffering on the Canadian side in our Truckload sector. As an example, steel, okay? Well, Steel is dead for us. But we are a big steel hauler. So what do you do? I mean now we have those trucks parked, and we have those drivers at home because that's the only thing we could do.

But then we have to protect our staff because the problem is when this business gets back on track, you don't want have to be rehire drivers and at the same time, also rehire the staff. So this is why by investing more in technology through this AI thing there, I mean, we'll be able to be better positioned to be fast, to react much faster to market condition.

Well, Alain, as a follow-up there, as we think about JHT, sort of can you give us some numbers in terms of how much of a drag it's placing on the margins at logistics? And in terms of the AI, how quickly do you think some of your investments are going to bear fruit that we can see as we move throughout '26?

Yes. I'll give you an example, Jason, about the AI. So when I'm talking to Kal and his team at TForce Freight, I'm saying, you know what, guys, we have to find a solution if Waymo can run taxi in Austin, Texas without a driver. I mean, how can we not run shunters in our yard without a driver, right?

Is there a way, guys, let's wake up and smell the coffee. Let's open our mind that we have to change. And if Waymo is able to run cab in Austin, in a city, okay, why can't we run shunters in a yard, okay, without the drivers. So these are all things that we're looking at, Jason, to be more efficient, right? So.

Sales augmentation as well, right? Increasing the productivity massively of salespeople in terms of effecting in terms of identifying targets that fit not just names, it's -- okay, what's their business look like? How does that fit with our network? The solutions can do a lot of that work and then increase the velocity of the contacts and the outreach and the back and forth, it's remarkable. So that's another important application that we're looking at right now, and we're rolling out right now.

That's some good color. And the margin hit from JHT?

Well, JHT, I mean, the margin at JHT is probably depending on what you talk about, if you're talking about trucks that move from Mexico, okay, to the U.S. or Canada, I mean, the margin is not the same because we use a Mexican partner to move that truck from Mexico into the U.S. or Canada. Also, don't forget that we have experienced drivers in there. We also have a logistics division.

So when the volumes are down, our logistics division, is very small, okay, because the logistics gets the overflow. So right now, there's no overflow. So this is why -- and as you know, Jason, in our logistics, the margins are really good, okay, on the overflow. So this is a little bit of a complex story.

But what I can tell you is that JHT is a diamond for us because it's very well run. I mean the guys -- and this is why we're suffering so much right now because the volumes are down, but we probably have 50% too much staff for the volumes we have. But we're keeping those guys, right? Because when the things go back to normal volume with Freightliner and PACCAR, we want to be there. We want to be there to be able to service them, right?

Next question will be from Konark Gupta at Scotia Capital.

Alain, you mentioned about AI quite a lot on this call and technology. And I'm pretty sure I think that's the next evolution for you guys and everybody in the industry. I think, though, you reduced the CapEx guidance for this year. I'm just curious, when you think about the year or years ahead to invest for technology and for eventual rebound in volumes. I mean, how do you see the capital planning for those things? I mean, should you see a significant increase in CapEx for that?

So on the AI, no. These are licenses, it might be $30 per person per month, $35. It depends on what exactly we're talking about what -- but these are light, very nimble tools that we add on, like in sales, you'll add it on to your CRM. So I wouldn't -- first of all, that's not going to be CapEx, would be expense, and it will not be noticeable. We're not building data centers and that kind of thing.

We're just customers and adopters of the technologies that are out there. As it relates to regular CapEx on trucks, there's no question that this is a very, very light year, right? At the outset of this year, we set out to do $200 million of net CapEx. Normal for this business would be more around $300 million. But the volumes are so low. We're driving so few miles that we -- and we had excess equipment from the Daseke acquisition that we're able to reduce the CapEx without really meaningfully aging the fleet. And so that's fine.

But you should think about a more normal net CapEx number for us to be around $300 million, but that's also will take place in a year where there's more normal earnings, right? So free cash flow would be higher than it is this year, even with that increased CapEx.

And the other thing, too, is that our CapEx has been delayed at TForce Freight because the supplier was not sure because the trucks, they are assembled in Mexico. right? And all this tariff thing situation, the trucks have been delayed by about 3 months. So right now, we're getting trucks in October, November that were supposed to come in Q3, right?

And some of trucks also will come in Q1 '26 that were supposed to be part of '25. So this is why this revised CapEx that you see is it's exceptional that we're so low in a year like '25. I mean we should -- if things come back like we think they will in the U.S., we should get back to a more normal environment, okay, of activity, miles and freight. So for sure, we'll be back to normal CapEx.

Makes sense. And just quickly to follow up. You mentioned Daseke in terms of access equipment you got there. Where is the integration process on Daseke now? I mean like it's been a while, I guess, right? You had Daseke in the system. And I'm sure obviously the volumes are soft and all that, but what you can control from a self-help perspective, like are you fully done there? Or there's more to do?

You know what? On the Daseke, on the financial side, okay? So we're done, okay? By the end of '25, we're done, okay? Fleet management, financial, so they run MIR now, okay, like Contrans. They also run on Infineon for financial like Contrans, okay, which is our Truckload division, right? So this is done. In terms of the day-to-day TMS, okay, there, we're still working on McLeod and TMW, okay, updating those systems and also making sure that we have visibility across all the divisions because Daseke was more of a siloed kind of company, okay?

So that is going to change during the course of '26. Sales is also something that we're working on at our U.S. truckload operation. And this is something I'm still discussing with my friend, Steve, okay, how we're going to go about the commercial operation in '26. This is still something that needs to be ironed out.

But for sure, we need to invest more on the commercial side of our U.S. specialty truckload because I believe that with everything that's going on in the U.S., we need a sales team that are aggressive because there's going to be more business.

Next question will be from Ken Hoexter of Bank of America.

Can you address the start in October on volumes relative to the down 7% tonnage in the fourth quarter, 11% shipments?

Yes. I mean the start to October, we're not in the habit of giving monthly data, as you know. But the start to October is soft, like the industry leader pointed out on -- when they reported recently.

So I just want to understand if it accelerate because I guess, David, just to clarify, right, when Alain said LTL 200 to 300 basis points deterioration, you said 96, which would be a 380 basis point sequential deterioration. I just want to -- was there anything in there that's getting worse? Or I didn't know if the volumes were accelerating the downside, just understanding what was in the numbers there.

No, listen, the 96% is what's embedded in the guidance. That's what our current forecast says, and that is driven by our observation of the first month of the quarter. So yes, October was weaker than it usually is, weaker than expected.

Yes. Ken, because me, I'm always being optimistic. This is why me -- that's the target when I talk to Kal. But David is the CFO. He's the numbers guy. So sometimes we have different perspective. But you got to trust probably better David because he's the numbers guy.

Okay. And then just following up on that. The logistics, I guess similarly, right, the OR deterioration, you mentioned the JHT -- or is that getting more expensive or deteriorating OR because of what's going on in terms of reduced capacity availability from ELP and the CLs you're talking about? Just want to understand kind of the negative mix. Was it really just on the top line like you're talking about with LTL and the volumes? Or is there -- is it the cost side kicking in as well?

No, it's not the cost side. It's not like it's harder for us to get capacity. It's a combination of -- we -- remember, our logistics broker -- the brokerage portion of our logistics, most of it is LTL -- so if LTL is off to a slow start in Q4, the same is going to be true for our LTL brokerage in terms of demand.

And then -- but the majority of the drag in that segment is coming from the truck moving business and the dynamic that we've talked about in terms of holding on to our people during that period.

And then Alain, I guess, just to wrap up.

Excuse me, I was just going to add, Ken, that this is -- the old red is killing us at JHT because like David is saying is we're keeping the staff. We're keeping the team because we know this is short term. So, excuse me. Please go ahead.

No, exact same issue, right, which is short term on that because you mentioned the government shutdown. It's surprising because it seemed like a lot of companies were avoiding that thing, we don't really move that stuff. But it sounds like, I guess, you're seeing not only direct business where particularly for the DoD customer, but I guess the derivative of that. Is that kind of having another flow-through on other or derivative customers increasing that demand or not necessarily at this point too early?

Yes. Yes. Well, one thing is for sure, Ken, is that everything is slow right now because think about the fact that some people are not being paid or delayed in the payment of their salaries. So for sure, the demand is slow right now. And it will correct itself as soon as there's a deal in the U.S. We don't know when. I think it's going to be soon.

And DoD, it's a big part of our specialty truckload, Ken. I mean, 30% of our business normally is moving freight for the Department of Defense. So it's just one example that this is why our guidance for Q4 is exceptionally low. This is not normal for us. But it's like a perfect storm where our logistics has been affected badly, okay?

Our truckload is the same. So -- and also the fact that in Canada, I mean, it's pretty difficult as we speak, right, because of the trade between the 2 countries. So it's like a perfect storm for us. But $0.80 to $0.90, I mean, EPS for us is not normal. It's exceptionally low, okay? But we have to give guidance that is proper.

Yes. One more on that real temporary question, but -- and I don't want to talk about the government shutdown on the post office, but the post office is threatening, I guess, to make drastic changes of changing how many days you get deliveries and things like that. Is that a huge potential for P&C? Or is that a cost issue? I just want to understand if that longer term, not just the takeaway of the strike minimal volumes. I'm thinking bigger picture long term, does that change the structure for your P&C business?

Well, for sure, Ken. If finally, these guys in Ottawa decide to -- because you're talking about Canada, right, Ken?

Yes, just Canada, yes. Yes.

Yes, yes. You're talking about Canada. So for sure, I mean, I think that the guys in Ottawa now wake up and they see that things have to change. Things have to change, and we are way more efficient than them, okay? So whatever change they do, okay, it should help us on the longer term, Ken, in Canada.

You know what, I'll give you an example of what's going on, credit cards, okay? So credit cards from financial institution used to be with Canada Post. Now it's mostly us, right? And a year ago, there was another strike. So we did that, then they went back to Canada Post. But now the discussion we're having with them, this is going to be a permanent change because I think the financial institutions are sick and tired of back and forth.

Next question will be from Cameron Doerksen at National Bank Capital Markets.

A question on the Canadian LTL shipments down quite a bit there, I think 12%, but revenue per shipment was nicely positive. Just wondering if you could describe, I guess, the -- what you're seeing in the Canadian LTL space? Are you just being more selective in the business that you're chasing there?

No, no, Cameron. It's just our customers -- the weight per shipment is down, right? So I mean, they're less busy. And us, I mean, we're not losing customers, major customers, one that I think we've lost one customer that I'm thinking of, yes, okay? But in general, we're not -- there's no churn in customers unusual. It's just like lower activity, Cameron.

Okay. And just on -- going back to your comments around, I guess, the Driver Inc., and hopefully, this change in the government will actually result in some change as we look ahead to next year. If that does happen, what does that impact on your business?

Is this something where you just expect that some of these driver in carriers will just not be able to be in the market at all, and so there's a volume positive for you? Or is it more just that they're are underpricing in the market and this will just lift the pricing across all carriers if they don't have that benefit anymore?

Yes. Yes. Well, we know these guys have been cheating all along. And we know that now if they have to issue T4A, the cheating is going to disappear. So I mean if you look at the evolution of our OR in Canada, the Canadian Truckload, I mean, it's just a disaster because we used to run 80 to 85 OR. And now we're running a 90 OR. Why is that? Well, because we have to be more competitive, et cetera, et cetera.

So this is -- this was always unfair competition to us. So we think that now with this new issues, okay, you're going to start to see some change. Another thing also that's important to notice is the safety record of those guys is not good. So people are starting to understand. So we've got customers now that are stating, we don't want to deal with those Driver Inc., anymore, right?

So we have won a paper guy big in Quebec that said, "Hey, you know what, you have to certify that you're not a Driver Inc., because more and more, there's also not just the cost, but the safety of these guys, okay, has been questioned now, right? So this is like to me, in '26, when I look at Canada, the market is going to be probably a little bit more difficult, but the supply is going to be also much less.

So we'll probably be in a better position in '26 than we were in '25 because slowly, okay, those drivers will have to adjust. They will have to adjust the rates. They cannot cheat because right now, a Driver Inc., guy is not paying any taxes. Now he gets a T4A, oops, Revenue Canada is aware of him. And if he doesn't pay his taxes, then he's going to end up with a little bit of an issue.

Next question will be from Brian Ossenbeck at JPMorgan.

Just going back to the Mastio survey and the big improvement you noted, when do you start to get credit for that? Is that something that you do at once? Obviously, it's continuous, but you get some credit the first time you make a couple of big steps and then they start to give you more volume and then maybe more price later. And then just related to that, I'm trying to understand how you can be pretty good on 4-day service and next day, but not necessarily 2 to 3 day. So what's the part I'm missing there?

Okay, Brian. I'll let David talk about the Mastio report. But what I can tell you is that the 4-day, okay, where we were able to make some changes is that we move freight from rail to road, right? So when you do that, you are in control, right? So this is why we're doing really well on 4-day versus what we used to do.

And next day, because we come from the UPS environment where everything was kind of next day, these guys have always been good on next day. So we're just -- it's just a continuation of what these guys have done all along. The second day and the third day, this has been the issue, okay, where we're not acting as being professional. We don't monitor. We just let the other guy do the job. So now it's a focus of ours because this is a big issue because you have a commitment that you give to a customer that is going to be there in 3 days, but it's not there in 3 days, it's there in 5 days. Well, that doesn't work, right?

So you've got to be having process in place that you manage that. So this is something where in the old days, there was no real focus. And now through this new focus of the team, it has been a major focus of ours. And we know that second day and third day, okay, we were not as good as our peers, right? But we're getting there because we're making a lot of changes and a lot of improvements. So that's the difference between 4 days, 2 days, 3 days, Brian.

And in terms of how you get credit, in our experience so far, we would expect to see the impact first on volumes, right? So your turnover and your churn comes down. You're able to retain more business that you get. Then you start to get more wallet share from the same customer. Because remember, our customers -- a lot of the big customers use all of us, right? They use lots of carriers. It's just a question of how much they're allocating to each one. And so you do a good job, start to get a little bit more. So the first place that we would expect to see it is on volume.

Pricing will come later. And pricing, frankly, is going to be a little bit of a function of the supply-demand imbalance correcting itself or at least normalizing and the market being a little bit more balanced, right? When there's -- the market is more balanced and our service is improving and we're getting more freight from people, then we could start to see pricing. The other thing I'll point out on this is that the beauty is that we've made big improvements, but there's still a long way to go, right? We're not best-in-class yet.

We've still got another hundreds of basis points to improve on time. We can drive our missed pickups way down further, reschedules way down further. Our claims can come down way further. So we're still in the early stages, and there's a lot more value for us to create for our customers in the form of better service and ultimately for our shareholders when that plays through to the numbers.

And then just the relative size of the 2 to 3 days, it sounds like that's probably the bigger chunk of the market or the opportunity relative to maybe the 4 in the next day.

Yes, absolutely, Brian. Because I would say that next day for us is about not even 20% of our volume today and 4 days is probably about the same. So I mean, the big chunk of our business is between 2 and 3 days. And this is where we are the weakest today, and this is where our focus is, is, guys, this is where we have to work on, right? So we made some major improvement in the 4 days there, we're good. We're good on the next-day service, fine. But let's do the job on the 2 and 3 days, and we are improving, absolutely.

The next question will be from Tom Wadewitz at UBS.

So Alain, I wanted to get your thoughts on just kind of the size of the terminal network for U.S. LTL and where you would want to be for shipments. I think that was something where you kind of -- you inherited some or you bought something that had over 30,000 shipments a day, I don't know, 33,000, whatever it was, a wind down on kind of your own initiatives and the cycle went down.

And I think that has been a component that you're like, well, we can't be a 90 or mid-80s OR company if we're just way underutilized. So how do you think about where the network is and how much volume is a piece of ultimately getting to the goals, like maybe how large that gap is? Because that seems like a factor that would ultimately matter as well.

You're absolutely right, Tom. And as a matter of fact, in Q4, we will probably swap 3 terminals with one of our peers to readjust the size of our terminal, versus those guys, right? So this is an ongoing thing, okay, that we continue to do. Cash-wise, probably in our Q4 between what we're buying and what we're selling, we should see a net positive between USD 40 million and USD 50 million in Q4. But still, even with that, going into '26, I would say that -- we probably have another 2,000 doors too many, okay?

Now the challenge that we gave our team is that the network was probably built to support 40,000 shipments a day, and we're doing half of that, right? So organically, it's going to take us some time. But can we go organically from 20,000 shipments a day to 40,000 shipments a day? That takes a long time. So this is for sure. There's more to go. There's more to come into adjusting our network, okay, to today's reality, and we'll keep doing that.

So we're talking to all of our peers all the time. And what's the number of doors that we would need today, probably more like 5,000 to 6,000 to 7,000 doors. But these doors have to be in the right location, right? So that's the other thing that we're working on in some areas.

I'll give you an example. Dallas, I don't have too many doors in Dallas because we're doing well in Dallas, and we are increasing our volume in Dallas. Chicago, the same, right? So we got areas that we are growing, okay? Now you say, well, your volume is down, yes, because in other areas, we are losing, right? But we were working on balancing the network absolutely like everything else, Tom.

Is that an issue on service that if you kind of rationalize or it's not -- it's size of terminal for you, it's not necessarily like reach of the network?

No, it's not an issue for service, Tom. I mean, no.

Next question will be from Benoit Poirier at Desjardins Capital Markets.

Thanks, Alain, for the great comments about the impact of regulation, both sides of the border. Obviously, you mentioned some color about 2026 being more of a sunny picture, especially on the U.S. LTL. I'm just curious what kind of OR could you produce in a flat volume environment in 2026? And maybe another scenario where you see a more bullish stance in terms of volume?

Well, I think if everything stays the same, I think that in this kind of an environment where the volumes are light, et cetera, et cetera, if you look at our Q2, if you look at our Q3, for sure, last year's Q1 was a disaster for us at 99. I mean, I don't think that we'll be in that position.

So can we say no volume growth, okay, for '26 versus the same kind of environment, '26 that we've been seeing in '25 with the investment that we're doing in our cost management and all that. So probably a 200 basis point globally improvement, 200 to 300 basis points versus what we are delivering in '25 into '26.

Okay. That's very great color. And just with respect to the Chief Commercial Officer role, is it fair to say that the candidate has already been identified and is coming from the outside? And I'm just curious to see how it will change the jobs performed by Kal and the team overall.

No, the guy comes from the family. The guy is within TFI.

Next question will be from Bruce Chan at Stifel.

This is actually Pernille Buhl on for Bruce. I appreciate all the color here. So a quick one. I wanted to ask about CapEx. In terms of CapEx budget from here, how would you expect it to trend going forward? What investments are sort of needed as far as maintenance and potentially growth?

Yes. So for this year, we're -- we've updated our guidance to $150 million to $175 million net CapEx for '25. And -- in normal years, it would be more like $300 million, okay? And that's all maintenance CapEx. The way that we think about CapEx is really about maintaining the fleet that we need. We're not seeking to grow the fleet organically when volumes turn, we just use that opportunity to get more productivity out of our assets, use that opportunity to take the highest paying freight and we get the operating leverage that way.

Next question will be from Ariel Rosa at Citigroup.

So I wanted to ask about tariff impacts and what you're seeing there? To what extent do you think tariffs are kind of holding back business, whether it's cross-border or in Canada versus how much of kind of the volume weakness is related to kind of cyclical factors or kind of underlying economic factors that would be independent of the tariffs? And then to the extent that we get a little bit more tariff clarity, do you see that as a positive or an incremental positive into 2026?

Well, one thing is for sure. If you don't know the rules, everybody sits on the sideline, right? And the problem we have right now is that we don't have a deal. I mean, Mexico or Canada, both countries, big traders in the U.S., we don't have a deal. right? So this is why it's so important that in '26, at one point, okay, there has to be a deal between the 3 countries, right?

So -- and in the meantime, okay, in terms of not knowing where we're going, right, for sure, it's a big effect, right? If you take the aluminum, okay, I was reading what the President of Rio Tinto is saying, I mean, aluminum is not affecting them, okay, the tariff, okay? So -- but what they're doing is they're shipping some of their aluminum from Canada to the Europe. Well, it's affecting me because I don't have any ships, right?

But down the road, okay, this is temporary. I mean, for sure, this will change as soon as we have clarity on tariffs finalized all that, I mean, that product will go back to the U.S., right? So it's just we need to have a deal between the 3 countries. And once we have that, whatever it is, okay, then we know what to do and what kind of adjustment will be needed. And then it's going to be clear sailing.

Yes. Well, let's hope we get some clarity on that in the months ahead. And then just as a follow-up, Alain, I wanted to ask about how you're thinking about the dynamics between LTL and Truckload right now. Do you think there's a lot of LTL volume that's slipped into the Truckload market? And obviously, if we get some tightening here because of some of these enforcement actions, how positive of an effect can that have for the LTL market?

Well, that's for sure. I mean when you think about that, you're a truckload guy, you're stuck, okay? So what do you do? I mean, you try to get the good heavy 5, 10 pallets of LTL and you give the shipper a good rate, right? So right now, what's happening in the LTL industry is that there's lots of freight that has been moved to the truckload guys, and this is good rates, good freight for LTL.

So we'll see what happens. When the truckload guys get busier, okay, are they going to walk away from that freight because now they don't need to do that? Probably experience tells us that this is what happens, okay? But we'll probably see that sometimes in '26, hopefully, okay? But who knows when, right?

And at this time, Mr. Bedard, we have no other questions registered. Please proceed.

Well, thank you, operator, and we appreciate everyone joining us today. Thank you for your interest in TFI International. We look forward to finishing the year strong and are confident we'll be entering '26 in a position of strength.

I look forward to seeing many of you at several investors conference and we'll be attending before year-end. And as always, please don't hesitate to reach out with any further questions. Have a terrific Halloween, and have a great weekend, guys. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Second Quarter 2025 Earnings Call. [Operator Instructions]

Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially.

I would also like to remind everyone that this conference call is being recorded on July 28, 2025.

Joining us on today's call are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer.

I'll now turn the call over to Alain Bedard. Please go ahead, sir.

Well, thank you very much, operator, for the introduction, and thank you, everyone, for joining today's call.

Within the past hour, we reported our quarterly results that demonstrate solid margin performance across all of our business segments. This reflects the hard work of the talented team members across our organization even as economic uncertainty continues to weigh on industry-wide freight volumes.

As you've heard me say, strong free cash flow is always a top priority at TFI International, and I'm pleased to report that we had yet another strong quarter in that regard, producing $182 million of free cash flow.

As you know, we use excess cash flow to return capital to shareholders whenever possible. Thus, we repurchased a significant number of our shares, both during the second quarter and into the third, this while maintaining a strong balance sheet, which has long been a pillar of our strength. In fact, we further strengthened our balance sheet during the quarter through a private placement bond offering that I'll discuss in a moment.

So let's begin with a quick review of our consolidated results. During the second quarter, we had a total revenue before fuel surcharge of $1.8 billion compared to $2 billion a year earlier. As I mentioned, we had strong margin performance across the board, and we generated $170 million of operating income, representing a 9.5% margin, up just a percentage point compared to 2.5% in the prior year period. We also produced adjusted net income of $112 million relative to $146 million last year, and our adjusted EPS of $1.34 compares to $1.71.

In terms of net cash from operating activity, we generated $247 million, which was virtually flat with the prior year period. And free cash flow, as you heard me say, was $182 million, and that was significantly above the second quarter of 2024 results of $151 million. That's up 20% due in part of favorable working capital dynamics as well as moderately lower CapEx relative to last year. We owe these solid results to the dedication of men and women of TFI International who really focused on execution during the quarter, taking the opportunity to strive for quality of revenue and improved efficiencies, including at acquired operation, while maintaining a keen focus on cost control.

Let's turn to the next second quarter results for each of our 3 business segments, starting with LTL. This quarter was 39% of segmented revenue before fuel surcharge and down 11% year-over-year to $704 million. Operating income of $74 million compares to $110 million in the year earlier period. The LTL operating ratio of 89.5% compares to 86.2% in the second quarter of 2024. However, this represents a 360 basis point sequential improvement relative to the first quarter of 2025. Our LTL return on invested capital was 12.9%.

Next up is Truckload, which was also 39% of segmented revenue before fuel surcharge, which came at $712 million compared to $738 million a year earlier. Operating income was $71 million versus $81 million in the prior year period, and our Truckload OR of 90.1% is relative to 89% in the second quarter of 2024. Tariff-related uncertainty continues to weigh on industrial end market demand. However, this quarter's OR also delivered 250 basis point sequential improvement relative to the first quarter of 2025. Wrapping up on Truckload, our return on invested capital was 6.4%.

Our last business segment to review is Logistics, which at $393 million was 22% of this quarter's segmented revenue before fuel surcharge and down from $442 million in the prior year. Logistics operating income was $38 million compared to $51 million, representing a 9.6% operating margin as compared to 11.4% in the prior year second quarter, and our return on invested capital was 15.7%.

In terms of the balance sheet, we benefited from the $192 million of second quarter free cash flow and ended June with a funded debt-to-EBITDA ratio of 2.4x. As I mentioned, we also eagerly repurchased shares during the quarter, $85 million worth, and also paid out another $39 million through dividends for a total of $124 million of excess capital returned to shareholders, fulfilling one of our long-standing important commitments. Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares.

I'll wrap up with our outlook for the third quarter of 2025. We currently look at -- for an EPS in the range of $1.10 to $1.25, and this assumes no significant change, either positive or negative, in the operating environment. In terms of net CapEx, we continue to expect approximately $200 million for the full year.

All right. So with that, operator, if you could please open the line. Both David and I would be happy to take questions.

[Operator Instructions] Your first question comes from the line of Ravi Shanker from Morgan Stanley.

Great to see the turnaround in margins here. I assume that this was all idiosyncratic to the actions you've taken and not really helping the cycle. Can you remind us what is the margin ceiling you can achieve with further internal actions before the cycle starts to help you out on the LTL side?

Yes. You know what, Ravi, it's always been a big discussion at TFI. I mean we are very cost sensitive, us, and what these guys were able to accomplish in Q2, okay, in a very difficult -- still difficult market condition, okay? Now if you look at all the tools that we've implemented so far, one IT, one technology tool is Optym. We've implemented Optym for our linehaul. Now we're in the midst in '25 to implement Optym, that software, okay, to help us on the P&D side. So our linehaul, we're very proud with what happened there. If you go back 4 years ago, we used to run linehaul miles on the rail for about more than 30% of our miles. Now we're down to closer to 20% of our miles, and we'll probably drop that. And this is all because Optym is helping us do a better job on the linehaul.

We believe that the next thing that's going to help us reduce our cost is going to be on the P&D side, okay, where we're going to do more with less. So that's one area that we feel good about, and we're implementing that. As a matter of fact, this week, I think, David, if I'm right, we're implementing 2 terminals, smaller terminals, okay? So that's the first of those 100-and-some terminals that we're going to be moving towards with Optym.

And over and above that, I mean, we still have lots of work to do on claims. If you look at our claims ratio, I mean, we're not good. I mean, yes, we're better, okay? We're at 0.7% of revenue. We used to be at 0.9%. I think TForce Freight best result has been 0.4%. If you look at our Canadian operation, we run 0.2%. And I think the best peer in the U.S. runs 0.2%. So this is, again, a huge cost for the company. And the same is true of accidents. So we just hired a guy, okay, Marc Fox, that's going to help us improve our safety. He was the President of Matrec, okay, when we used to own Matrec some 10, 15 years ago, and Marc has done a fantastic job in terms of changing the culture and improving the culture of safety. So claims and accident, okay, I think that we need to improve that like 100%. That's going to help us big time.

Also new technology in terms of AI, David, maybe we could talk a little bit about that, what we're looking at doing on AI to help us reduce the labor intensity of our operation, maybe on the collection side, maybe on the appointment freight side. I mean, we're looking at all kinds of stuff to reduce, reduce, reduce our costs and be the tiger, lean and mean.

Maybe as a follow-up question, if you can give us a little more color on just how customers are talking to you about the tariff environment, kind of especially Canada, U.S.? Are there any structural changes in supply chains and kind of any impact on you guys long term, if you can tell at this point?

Well, that's for sure. If you look at our Canadian LTL, we're down, okay? I mean we're still doing really well, but we're down, right? And one of the reasons we're down is because all the trade between U.S. and Canada on the LTL side is down. And this is the most profitable business that we have on the LTL is the trade between U.S. and Canada. So for sure -- normally, the flow is 2 North, 1 south. Right now, okay, the 2 North are down to about 1, okay? So we are losing. Now the minute the tariff is settled with Canada and Mexico, I mean, we should do fine. I mean things will come back. It's just like this kind of instability right now, okay? So this should be fixed probably before August 1. Maybe it's going to be fixed or later on, but for sure, in '25. So yes, we're a little bit affected.

We're mostly affected by the instability in our industrial truckload base in the U.S., where a lot of our customers are just waiting on the sideline to say, "Hey, where are we going? Where is this going to happen," okay, "Where is this going to end?" Because our miles in our specialty truckload are down like around 10%, which is not normal. I mean it's just like -- it's quiet. It's very quiet right now. Hopefully, with this Big Beautiful Bill, that should help investment. And that's what -- the investment we made on Daseke a year ago, that was because we thought that the industrial business in the U.S. will start to grow again, okay? Well, we missed the call, we were maybe 1 year too early.

Your next question comes from the line of Scott Group from Wolfe Research.

Maybe if you can just give us a little bit more color on the Q3 guidance, $1.10 to $1.25, maybe some of the margin assumptions there. It's probably a little bit of a steeper decline Q2 to Q3 than we typically see. So just any thoughts there.

Scott, this is really based on just the historical seasonality of the business. If you look last year, Q2 to Q3, we dropped $0.11 of EPS and margins contracted pretty much across the board, across the divisions and the segments. And so that's all that we're forecasting there is just normal seasonal sequential declines. And the extent to which we're able to continue to drive these idiosyncratic opportunities that we have over the course of this quarter, we will, of course, come to offset some of that.

Okay. And then maybe just maybe a little bit more specifics on how you think about the progression of U.S. LTL margin in Q3, if you have any early thoughts on where you think this should be going in Q4.

You know what, Scott, I think that our guys at TForce Freight will do a great job again in Q3. I would say that, again, I mean, our volume is still too soft. So the guys, what they've done so far is they've improved the mix of our freight, okay, year-over-year. And when you talk to our team here, they think that what we're focus is a 94% OR like we've done in Q2, 94%, 95% OR, I think that, that is the goal that is attainable today with the kind of volume we have, right?

So you're saying 94%, 95% in the back half of the year is sort of what you would expect?

Yes.

Your next question comes from the line of Walter Spracklin from RBC Capital Markets.

Just on the guide in the back half, I know you're not -- or I guess, implied guide for the fourth quarter. Are you giving any indication as to what we're going to see for the full year? And are you seeing -- I know you've been right in terms of what you've seen in the general macro environment, saying that we're not seeing much relief. Is there anything that would suggest to you that is this -- are you seeing any signs that this could start to improve front half of '26? Are you thinking now more back half of '26? Just curious to your view on the overall macro here from the signals you're getting.

Well, in terms of the industrial freight in the U.S., Walter, we believe that this new budget that the Trump administration came up with, I think it's going to revive the investment in the industrial sector, maybe the housing, maybe school, maybe all kinds of investment, okay? So this is why -- since we saw this new plan of the U.S. administration, we feel way better that we're finally going to get out of this freight recession that have been stuck in the mud for close to 3 years now.

Now we haven't seen anything yet, okay? But it's just like what we're reading, what the guys are talking about, when we talk to our customers. I had a meeting with our specialty truckload fleet a week ago. And for the first time, I heard those U.S. guys say that, "We feel better. We feel good when we talk to our customers. Hopefully, things will start to roll," right? So we haven't seen anything yet concrete, Walter, but all the signs are there to say that -- I don't know when, but we're going to get out of that mud of that real estate -- not real estate, but this terrible recession that we went through the last 3 years. Late '25, maybe, okay, early '26 because don't forget, these projects sometimes takes time. So we'll see.

But at least the confidence, okay, when I talk to the guys in the U.S., is coming back. On the Canadian side, I mean, there's a lot of instability. Once we know what's going to be the deal with the U.S., I mean, then the Canadian will be able to say, okay, this is what we need to do now, right?

Yes. And I think what underpins that is really being able to see the effects of the cash tax savings, right, and thinking about how that flows through the economy. I mean just us, our cash tax savings in the U.S. this year are going to be $20 million and next year is going to be another $20 million. And think about that throughout the economy, and this is really going to go towards companies that are doing CapEx, right? And these are the companies that are our customers.

And now that we own Daseke, right, 72% of our specialized operation in the U.S. is flatbed. We have $1.3 billion of U.S. flatbed exposure revenue. That's this year based on today's depressed dollars. So when you think about rates coming down and you think about all of this cash tax savings coursing through the economy, that's what gives us a little bit of confidence in there really being a catalyst for a turn, in particular, for our business units, which is our specialized Truckload and our LTL.

You're sounding more confident than I've heard you in a while. So that's great. My follow-up question is on M&A. Can you talk to us a little bit about how you're looking at tuck-ins, what your budget would be over the balance of the year and into next for just tuck-in M&A? And then what your thoughts are toward a larger deal, I know you pointed to 2026, is that still in the cards?

Yes. So for '25, Walter, it's pretty simple. The M&A activity is buying back TFI, right? That's what we're doing. That's what we'll continue to do in '25 because we cannot find another opportunity that cheap. It's impossible. with so much free cash flow, there's no company that we can buy today at a reasonable price that is better than buying back TFI. So that's what we're doing.

Now in terms of larger transaction, I think that probably you could see us getting involved into something of size in '26. Don't forget, the last deal we did was late '23 into '24. So that was like 2 years ago. Mr. Brookshaw and his team, slowly, we're digesting Daseke, okay? It's more and more every day under our control. We're transforming the good Daseke truckers, okay? The role that Steve has is to change these guys from good truckers to good business truckers, right? So a good business trucker is there to make money. A good trucker is there only to service the customer and hopefully makes money. That's the difference between the 2.

Your next question comes from the line of Jordan Alliger from Goldman Sachs.

Yes, I was wondering if you could give a little more color on the U.S. LTL side and some of the other things you've been working on such as the sales force rejiggering penetration efforts on the small to midsized businesses, some of that other initiative stuff that maybe lifted margin better than expected in the second quarter.

Very good question, Jordan. And I have to tell you that sales has been -- since we bought UPS Freight, TForce Freight now, it's been a rock in our shoes. I mean we've never done well, okay? We've tried everything. But I think that now for the first time in -- since we bought the company in Q2, we're starting to have a good sales team on the small and medium-sized account that is highly motivated and getting results, okay?

So the number of shipments, okay, that went down like crazy about 6 months to 9 months ago versus the total shipment, okay, now is coming back and the guys are very motivated. So we feel really, really good that finally, through Chris' leadership, I mean, now we are kind of regenerating this sales team. And also at the same time, one thing that has always been an issue with our customer is that billing customer, okay, it's like we always had problems with that.

David, could you talk a little bit about that with Prism, okay, this new software.

Yes. For sure, especially now that we've corrected the problems, we can explain exactly what they were. Prism is a new billing software, which is helping us with our billing and our billing accuracy. We've also changed our processes so that we no longer deliver until you have an account with us or we have your credit card. And this caused DSO to go down at TForce. Or in the U.S. LTL, which is primarily TForce, DSO went down from 43 days a year ago to 35 days. It's very rare to see such a dramatic reduction. And why is that? Well, it's because of the software and it's because of a better process, which is a basic one, which is don't deliver the freight until you have an account and then you get paid quickly. So this also helps the customer service. This also helps the customer experience because there's no running around afterwards trying to figure out the billing.

That also helps the motivation of the sales guy because now they don't get calls from customer, and your building department, they don't know what they're doing or this or that. I mean it's smoother. It's getting easier to do business with TForce Freight today than in the prior times, and we'll keep improving that.

Exactly. And you see it in also the quality of the revenue. So you'll notice that our length of haul is down a little bit. The SMB mix has improved, right? The big problem that we had over the last several quarters was a 3-point reduction in the SMB mix as a percentage of our total revenue. And we've now reclaimed 2 of those 3 lost points, okay? So we're 2/3 of the way back to where we were, let's say, about a year ago. And that's important. That's contributing to the results.

And then the last thing is the GFP. We've now put up our third sequential quarter of GFP stability. We're up a little bit. But stability for 3 quarters now is something that we have not seen in a while. And those 2 go hand-in-hand, the local, the SMB and the GFP sales.

Your next question comes from the line of Tom Wadewitz from UBS.

I wanted to ask you a little bit more on U.S. LTL. I know you guys have been kind of peeling back the onion for a number of years, getting the billing right, I'm sure it sounds like a big positive. What else do you think is left? I guess I was surprised when you said around 20% of linehaul miles outsourced rail. I thought you were like up in the mid-30s. But I don't know, is it in-sourcing more linehaul? Is it other things? Just kind of where you're at in your journey of getting to have the LTL operation and service that you want to have?

Well, you know what, I mean, for sure, from day 1, we were not able to move away from rail because our fleet, our trucks, were so bad that it was just a problem. So we've invested tremendously into the asset, the trucks and also the software. So right now, we are running about 20%. And we didn't add that many road drivers within TForce Freight. I mean it's just like those drivers are doing more, okay? So we've also introduced sleeper trucks, okay? So now I would say we're just a little over above 100 sleeper trucks in our linehaul fleet at TForce Freight. And this is also helping us on the long haul, okay, because now running sleeper, we beat the service of rail, okay, and the customer satisfaction is like much, much, much improved, right? So it's a change, and we'll continue to improve that.

Now can we go less than 20%? Well, it's something that we're looking at right now, okay? But it's way better in terms of our service on the 3 or 4 days service, right, because now we move more and more freight on the truck instead of rail.

So are you kind of where you want to be then in terms of your service? Or are there other kind of big things that you need to do? And then I guess just maybe related to that, it seems like the pricing is still showing some pressure. I think you had some improvement in shipments sequentially, but you're still kind of down in terms of revenue per hundredweight sequentially and year-over-year. So how do we think about that equation of getting to improvement in the price?

Yes. So our service on the next day, okay, is comparable to our peers. We know that. Where we are not up to par is when it's a 2-day or a 3-day or a 4-day service. 4 days, now we're getting closer to our peers because now we move more away from the rail, okay, and with our own trucks. Now on the 2 to 3 days, this is where the guys are working on. So our service is not where it should be. I'm not saying that our service has improved, okay? On the next day, we are comparable to our peers. And until such time that our service is comparable to our peers, our rate cannot be as good as our peers, right? So you have to provide the service first and then your sales team could say, "Hey, you know what, this is the market, and this is what we would like to have in terms of rate."

So we're not there yet, Tom. But the guys are working on, and we've made some major improvements over the last, I would say, 1.5 years and even more lately. Our missed pickup, okay, which was a cancer for us, a cancer because like nobody cared, okay? We were all the way up to 4% 3 years ago. Now we're hovering around 1%, okay? Still too much because in Canada, we don't have missed pickup. I mean we're 0, right? So guys, 1 is better than 3 or 4, but is not good enough. So we have to keep improving this service metric, right?

Yes, for sure. It's something that we're very focused on because, as we talked about before, missed pickup is the worst because it's bad service and you lose the revenue. Our missed pickups are down, the missed pickups, pure missed pickups, are down over 50%, maybe 53%, something like that year-over-year in the quarter. And then when you add missed pickups plus reschedules, I get sometimes, "I didn't miss it, but I rescheduled it." "You missed it." Then you add those together, we're down like 42%, 43% year-over-year. So it's a major, major improvement.

Your next question comes from the line of Brian Ossenbeck from JPMorgan.

So maybe just to follow up on that last train of thought. When does that start to translate to better service, to consistency? Like, how long does it take for those conversations to result in better yields, bringing it back to the market? Is this something you can see towards the end of this year? Is it really going to take a little bit longer, considering it has been such a big change in a short amount of time. Are shippers going to want to see that for a longer period of time before they start paying you in a commensurate rate?

I think you're right, Brian. I mean 1 quarter does not make a year, right? So for sure, the shippers, they're smart, okay? And for sure, they look at us and they say, "Well, okay, guys are doing better." But okay, let's wait and see. This is not just a blimp of improvement and then those guys fall back in the same kind of rock, right?

So you're right, Brian, it's going to take more time. Now is it another 2 or 3 quarters? I think also when the market starts to firm up, that's going to help us down the road, okay? But if things stays the same, I would say that -- I mean, to bring the confidence to our customer that TForce Freight service is up to par to the peers, it's going to take a few quarters to build that confidence, but we'll continue to improve.

Okay. And then Daseke and the flatbed side of things, maybe you can just go through more detail in terms of, I think at one point, you needed to get rid of some equipment, you had too much trailer equipment, maybe some other operational changes to get these to be business truckers instead of what they were before, but some updates on the asset side and then just the processes in terms of where you are now and what that could look like when the volumes do get better.

Yes. So very good question on Daseke. I mean, I think as I said on the call of Q1, by the summer, okay, all of Daseke will be running our own financial system. The same with fleet management, okay? And now we have visibility about what's going on in terms of the asset base. So if you look at my trailer count at Daseke or specialized truckload, I'm down, okay? If you look at my truck count, I'm down, but not enough. So I got way too many trucks sitting idling because my miles are down about 10% year-over-year, okay, because my industrial customers are not that busy. So you'll see us improving.

If you look at my OR of Q1, okay, of my specialty truckload versus Q2, I wouldn't say that the market is better. I mean I wouldn't say that we have more activity. We just did a better job on the cost side of it, right? So revenue per truck, we're doing okay. The rate is improved, but it's the velocity that's not there. So overall, after buying Daseke about a year ago, I'm very proud of what these guys have accomplished so far. But we have a long way to go because I think I've said it on the last call, it's not normal to run a specialty truckload with a 90% OR, okay? It's not normal. So we got to bring those guys back down to an 85%. Probably hopefully, early '26, we'll be running at an 87%, 88% OR and then continue the improvement in a normal environment, okay? If market starts to help us, well, for sure, we'll be way faster going towards an 85% or an 82% over time.

Now the market is very difficult. If you look at -- there's not that many peers that came out, okay, so far in Q2. But you could see that when you have one of my peers losing money in truckload, okay, I mean that tells you -- and these guys are good. That tells you how difficult it is in today's market. So I'm really proud of the guys improving, what, 200 basis points quarter-over-quarter on the OR. So the guys are working really, really hard.

Now in terms of capital, I would say that to run the business today, okay, we have to shed about $20 million of capital in excess equipment, trailers and truck. And this is what we're doing. Now for sure, the pre-owned market on equipment is not that great. But if you look at -- we're not losing money by selling the equipment right now. We're making a little bit of money, okay? But this is where the guys were slow. I said, "Guys, we got to be a little bit more active."

Your next question comes from the line of Daniel Imbro from Stephens.

Alain, I want to follow up on the U.S. LTL pricing discussion. I think it makes a ton of sense you're improving the missed pickups in service, and that will take time to show up in price. But I think the magnitude of the decline, down almost 7% year-over-year, can you just walk through or unpack what the headwinds to yield were this year? Considering service is better, I would have thought maybe we saw a little bit of improvement. But was there mix? Is it just competitive pricing? Kind of what's happening with core yields there?

At I would say, number one, is that the market is soft. I mean, what I've seen so far is that some of my best peers' volumes are down, 5%, 6%, okay, not the one that came out last week. So there's price pressure a little bit, not disastrous, but there is some, okay? And for sure, the mix is -- the minute that we start gaining more on the SMB where the profitability is better, okay, we should come up with better revenue per shipment, et cetera, et cetera. So it's a transition, okay, to move away from the corporate account and the 3PL as much as we can and to get to a goal where maybe 40% of your shipments are with the SMB.

Yes. And also, Daniel, our weight per shipment went up by almost as much as the yield went down, right? The weight per shipment was up over 5%. So carrying heavier freight, yields down a little bit, it's the way in this soft market that we're working to kind of preserve that revenue per shipment, right? And we've been able to do that while reducing the length of call a little bit, which takes a little bit of the cost off. But the real -- the main driver of the yield decline is the growing weight per shipment.

Great. Helpful color. And maybe one not on the U.S. LTL. Just on the P&C side, I guess, how much benefit, if at all, in the quarter was there from the partial Canadian postal strike or the other competitor strikes, any surcharges we saw there? How much should we extrapolate the 2Q results into the back half?

There was nothing there. I mean this potential strike didn't help us at all, very minimal, okay? And it seems like there's not going to be another strike. So very, very minimal. What's killing us, okay, on our P&C side, although our results are fantastic compared to our peers, is, on the Canadian side, Carney, the Prime Minister, decided to go away from that carbon tax there. So fuel price went down. And us, fuel has always been a headwind -- a tailwind for us because of our density. So this is the effect of that carbon tax. But no, nothing specific to the potential strike. There was nothing for us there.

Your next question comes from the line of Kevin Chiang from CIBC.

Maybe just when I look at your OpEx within your U.S. less than truckload, for the past couple of quarters, you're down $56 million, $57 million year-over-year, both in Q1 and Q2. Just wondering, is that a trend rate you can continue for the rest of the year? So if I look at OpEx, can that be down another $50-plus million in Q3 again? Or are you starting to lap tougher comps? But it does feel like you had some excess OpEx in 2024 in the back half of last year.

Yes, for sure. Yes, I don't know, we'd have to look at some of the details to get back to you on those numbers, Kevin, separately. But yes, I mean, we've been taking out costs. You can see that the truck count is also down in the U.S. LTL. We're trying to adjust the cost to the demand, while at the same time, we're investing in service. Part of the reason that we're missing less pickups is that we're staffing a little bit more. We're working the overtime as well. We're making sure that there's guys there. So there's the 2 pieces of it, right? It's not just about cutting, it's also about making some strategic investments. And certainly, picking up the freight is a very high return on investment.

Yes. Right. That makes sense. I mean just a clarification, David, I think you mentioned the Q3 guide of $110 million to $125 million just assumes normal seasonality. I guess if I ask it this way, would that assume then any incremental success you have on your self-help levers outside of what you've realized in the first half of this year, that would be additive to that guidance?

Correct. That normal seasonality would be we continue to operate the same way that we're operating now that just we maintain that, right? And then we just kind of have the seasonality applied to it.

Your next question comes from the line of Ari Rosa from Citigroup.

Congratulations on the nice turnaround here. I was hoping you could talk about the sustainability of the free cash flow. Alain, you opened your comments just talking about free cash flow. I think that's such an important part of the story. Just talk about -- can you sustain these levels? And where does it go to if we see a little bit of improvement in the macro?

Yes. That's a very good question. But I've always said the proof is in the pudding. So you got to look back, okay, 5 years. And don't forget the last 2 or 3 years, it's been very difficult in terms of the macro, right? And we still generate a lot of cash. TFI is a cash cow, and this is -- and I've said it many, many times, this is the golden goose of TFI is the cash because cash permits us -- excess free cash permits us to reduce debt or give more to the shareholders or do M&A.

And if you look back 30 years of TFI, that's how we've been able to grow, okay? I remember when we turned the company into an income trust in Canada in 2002, people said, "Well, if you give all your cash away, you're not going to be in a position to grow the company." But we've grown the company from 2002 to 2008, okay, when we reverted back into our corporation at the same time that we had the financial crisis, so bad timing there. But I mean, this has always been the focus. So as an example, we just gave the example of Daseke where these guys were good truckers, but we're changing those guys into good business truckers. So you'll see us brokering more freight to the market and driving less mile with our own asset to have the proper balance that we have in Canada. right?

So if you look at the revenue in Canada of our specialty truckload, the balance between the revenue from our asset and the revenue from our brokerage is not the same as the U.S. because in the U.S., the Daseke guys, their thinking was, "Well, we got to run it ourselves with our own asset. Yes, we do a little bit of brokerage here and there." So we're changing that in the U.S. So again, asset from the other guys, not your asset, improve your free cash flow, right? It's the same revenue, okay, maybe not the same margin, but you're not stuck with the CapEx or the accident, right?

So I'm sorry, so in terms of the sustainability of this level, like what's your thought on that? It sounds like there's opportunity for it to step up from here? Or what is it...

Yes, for sure.

If you can be a little more explicit on that.

Yes. Because if you look at what we do in Canada, I mean, my P&C and my Canadian LTL are really very running light in terms of assets. And this is what we're trying to do with Daseke and our specialty truckload in the U.S., the same kind. It's harder to do for us in the U.S. LTL because it's a unionized labor force, a little bit more difficult. So this is why, to me, okay, by switching revenue from asset to non-asset, it's going to help our free cash flow down the road. So to me, in a normal environment, can TFI -- with the business we have today, can we do close to USD 1 billion in free cash flow in the market is helping us? Absolutely.

Yes. Because when you think about what's the first contributing element to the free cash flow is the net income, okay? So as the business -- as the environment recovers, everything recovers, net income goes up. Perfect. Okay. Then what? Well, when we start making a lot of money, we're not going to go out and celebrate and buy trucks. That's not us. We're not going to buy trucks with excess free cash flow. We're going to buy the trucks that we need while continuing to migrate towards this more asset-light model in the recently acquired businesses that Mr. Bedard went through.

And so the incremental earnings drop straight to the bottom line of the free cash flow. And the only thing that you have to kind of look at to offset that would be working capital needs, which might increase as revenue goes up. But that's it. So you should expect the free cash to go up along with earnings. And you will not see any sort of large step-up of adding capacity through assets.

And also, we have a few one-timers on the real estate side, okay? Because we're also adjusting our real estate portfolio to the reality of the world today, so this is also something that is going to help us in '25, '26, '27, down the road.

Got it. That's wonderful color. And then I just wanted to stay on the point about the service in the LTL business. I was hoping you could go into a little bit more detail on what are the actual steps that you're taking there to improve the service and get it to look a bit more like peers. Some of your peers have been pretty open about the steps that they take to step up service, whether that's putting airbags around the freight or dimensioners and that sort of thing. Just talk about kind of a little bit more detail, a little more color around how you're actually -- what's the progression to get that service improvement?

Yes. Here are the things that we're looking at. The first is billing accuracy, okay? And as it relates to that, we've talked about the software and we've talked about some of the success that we've had there. The second is cargo claims. And there, yes, we're using straps. We're experimenting with cardboard. And so we are looking at various consumables to be able to improve the cargo claims.

The third is missed pickups, which we're addressing through, first of all, better systems. We're using the more advanced Optym P&D, but we're also really making sure that we're staffed appropriately and making sure that the culture at the terminal level, at the dispatcher level, is that missed pickups are not acceptable. And then, of course, the last is on-time delivery. And as it relates to that, there's a culture element to that, and then there's also a linehaul element to that.

Your next question comes from the line of Ken Hoexter from Bank of America.

David, good to hear you on the call again. I just want to come back to the second quarter outlook, right? So it's a big pullback. And I know you said it's a normal seasonal drop. But I guess if we go back 2 years ago, we didn't have that drop. So maybe, David, if you can just kind of walk us through what drops off, right? Because Alain already mentioned LTL margins at U.S. should stay basically flat into 3Q, 4Q. So is it truckload? Is it logistics? What falls off? Or is it just freight in the third quarter?

Yes. Listen, I think -- so we said 94%, maybe 95%. So if we end up in the 95%, that would be a point on the LTL. I think the truckload last year compressed a bit as well. The logistics could also compress a bit with the lack of truck deliveries in our truck delivery business as just the industry pulls back on CapEx.

And then I think there's a question mark that we have that we don't have the answer to, and we won't until the quarter is over, which is how much of the freight dynamics that we're seeing right now are related to the stop, start, stop again dynamic related to the tariffs, right? We saw that imports into the West Coast of the U.S. were way up in June, right? So we're benefiting from those freight flows now. What's going to happen when those are done, but then at the same time, you've got peak season coming.

So we are just conscious of the fact that it's difficult to extrapolate what you're seeing right now out to the future because of the start and stop nature of the imports that have been coming into the country as a result of the tariff stuff, which it looks like maybe the worst of that volatility is behind us.

And David, can you just remind us what percentage is related to West Coast transports?

Well, it's probably -- so on our LTL, around half of it is retail. And I couldn't tell you how much of those are related to West Coast imports, but I think a lot of that retail stuff is coming from China.

Yes. Because don't forget, we used to be part of UPS and UPS is a retail machine. It's a transition more and more into industrial freight. And this is maybe one thing that we forgot to say, David, is that now more and more, we are introducing our LTL salespeople to our industrial base customer that we have at Daseke, right? Because, again, UPS was a retail machine, UPS freight was the same. We said, no, no, no, no, guys, let's move more into the industrial environment, okay? And through the Daseke sales team, we're opening doors to our LTL team to see, "Hey, can we do something with you guys," right, like a Caterpillar, like a John Deere, all these major industrial customers that we service on the industrial side, but we don't on the LTL side.

Wonderful. And then my follow-up, I guess, Alain, if you think about shipments down 10%, tons down 6%, you talked about the competitor that's already reported, but what's your big picture on the capacity or the cycle here? I don't know if you want to throw in English language proficiency impact on the trucking side, just the cycle on the tonnage side being down much. Do you think you're losing share? Have you stabilized? Maybe thoughts on the backdrop.

Yes. I think that the English thing there is just maybe for the truckload guys. In the LTL world, I mean -- so when I talk to our truckload guys, they believe that, yes, there could be some effect to that. But to say that we've seen something so far, I would not say that. But in terms of our volume, okay, I mean, we've been going down for the last 2 or 3 years, okay, in terms of volume. And now a little bit like David was saying about the GFP where finally, we have some stability, I think that the next few quarters, we're going to start having some stability and maybe coming back into some kind of a growth mode, nothing big. But again, this is also related to improving the service. This is where the guy now understand that it's the chicken and the egg, right?

So what comes first? Well, we know what comes first is the quality of service. If you don't have that and you're competing with good peers that provide a good service, good luck. I mean, it's going to be tough. So this is why the team is really focused on like what David was saying about improving all the different factors. So you got to be stupid to miss 3% of your shipment, missed pickup, because that's 3% of shipment that you're not going to have because you just miss it because you're stupid.

So now we're down to 1%, okay, we should be down to 0. So again, this is all things that the guys are focused and it's like a religion. But again, like I was saying earlier to a different analyst, I mean, it's not quarter that's going to convince the industry, the shipper that, "Oh, maybe it's a blip. Maybe it's like, oh, it's flavor the month now," right? No, no, no, no. We have to prove that this is going to be consistent, sustainable. And this is why when we go back and talk about U.S. LTL Q3 at 94%, 95% OR, it's because we want to be cautious. We want to be prudent. I hope that we do better than that. But I mean, this is the minimum goal for us.

Your next question comes from the line of Bascome Majors from Susquehanna.

David, if we go back to the cash flow discussion from earlier, you talked about -- I think Mr. Bedard talked about getting close to $1 billion in free cash flow in a more normalized environment. Do you have a sense of where you might shake out this year? And just to clarify on the quarterly outlook, I know you're optimistic that U.S. industrial can improve later in the year. But if we're kind of bouncing along where we are and that doesn't happen before next year, can you just help us frame your view of seasonality in the fourth quarter as well?

Yes. So I think that free cash will be probably in the $700 million range for the year. And as it relates to the industrial piece, I do think that it takes -- stimulus takes time to course through the economy. And this big tax break for CapEx is going to take some time. So I think that's really a '26 event when we start to see those projects really in motion, exactly, take shape.

So as it relates to seasonality in the fourth quarter, the best way to look at that would be, if you're asking about the truckload, to look at what we did between Q3 and Q4 last year because we had Daseke in Q3 and Q4 last year. So the whole kind of picture is apples-to-apples and give you a sense for the sequential movements that we would expect to see.

I think that on the LTL side, it was a bit of an aberration in the U.S. What happened to us in Q4, that is not normal seasonality. That was related to us losing a lot of SMB. And so that will not apply. That trend between Q3 and Q4 in terms of the margin compression that we saw last year, that will not be repeated. It is a more difficult quarter. So it's normal to have some pullback in Q4 relative to Q3, but certainly not like what we saw last year.

Your next question comes from the line of Benoit Poirier Desjardins Capital Markets.

Just looking at the financial leverage, you've been a disciplined capital allocator. You ended the quarter with a leverage of 2.35, mentioned a clear desire to pursue buyback given where the stock is. Just wondering what could be the targeted leverage by year-end given the comments about free cash flow generation? And where would you like to be before sizing a more transformative deal?

I think our plan, correct me if I'm wrong, David, is that, based on our plan, we're going to end up the year around 2, 2.1 leverage, right? Let's say, 2.1. We're at 2.35 now, 2.1. So this is the way we see it. And now in terms of deal of size, the approach that we have is that we could live all the way up to 3, okay, because we generate so much cash. But we're not going to go above 3, that's for sure, okay? So up to 3, and then very fast that year is we want to bring that leverage down, okay, to more like under the 2.5: 2.2, 2.25, 2.35, in that league.

Okay. That's very good color. And Alain, you mentioned great color about the industrial, your exposure to industrial, the comments -- positive comments about the potential recovery in 2026. Obviously, logistics is also depressed this year, but there's a pickup expected in 2026. So I'm just trying to figure out what could be the normalized earning in 2026 with those positive comments. How much upside could we see next year in terms of earning power, whether we could see a $6 of EPS and maybe 90% OR for U.S. LTL, whether it's doable?

Yes. It's still -- Benoit, it's still too early for us to talk about '26 because we are having a tough time just to talk about Q3. But going back to logistics, I mean, logistics okay? Our JHT division is going through some tough times right now because nobody is buying trucks, right? So you know the OEMs are down 15%, 20%, 30%. But that will correct itself probably in '26 according to the forecast we have from the OEM, okay?

That being said, our U.S. logistics had a not so good first 6 months of the year, okay? So we were running at about 95% of plan. Now okay, we believe that the last 6 months of '25, we're going to be closer to 98%, 99% of plan. So that should help us because, in a normal environment, if everything runs normal, the OE of our logistics before tax should be between $200 million to $220 million, okay, with the business we have today. And I think we're going to end up the year probably like $160 million or something like that. So JHT is a big, big thing there.

But according to JHT and the truck OEM, I mean, because of this new engine thing there in '27, those guys will be pumping a lot of trucks in '26. And with this CapEx staying there with the new plan of Mr. Trump, okay, probably JHT will be back to being very busy in '26. So that's going to help us.

Your next question comes from the line of Konark Gupta from Scotiabank.

Just wanted to get back to the SMB mix here. Can you help us understand what made these SMB accounts, whichever you got back, what made them come back? And like what was the reason in the first place they left here?

Because we're focused on them now. We care about them. We are -- really, as an example, David was talking about missed pickup. I mean, we really focus on missed pickup for those guys even more than the general freight that we service. So we care about those guys because these are the best margin accounts. Instead of just not caring, okay, now it's a real focus of ours. They didn't come back because of rates, because we cut rates and this and that, no. They came back because we made them a proposal which is fair, reasonable. And we told them, "Listen, we'll provide you with good service."

This is why going back to an earlier comment, my next day, okay, service is comparable to our peers. Where we are not comparable to our peers is the second day, the third day and the fourth day. The fourth day, we're getting closer to our peers. So this is where the second and the third day, this is where we need to make major improvement, okay, to correct our service to be closer to our peers. But small, medium-sized account is mostly next day. So now my service is up to par to our peers on the next day.

Makes sense. So it's the service-based getting back, not the price-based getting back.

Yes. No, not the price.

Glad to hear. And then just my follow-up would be on the capacity side. I think you laid out some capacity numbers for the Truckload business for Daseke, et cetera. What about U.S. LTL and Canadian LTL? How many doors, how many trucks or trailers -- you're maybe way too much in the U.S. and Canada on the LTL side. I mean, do you need to rationalize some? Or do you still need to add more for the future?

No. The Canadian side, we're done because we've just acquired Kindersley about a year, 1.5 years ago. So we're done with Kindersley. We've acquired also Hercules in Canada and in the U.S. So Hercules, we're done in Canada. We're not done in the U.S. yet. So the guys are working on the U.S. side right now. But the rest of our business in Canada is okay. We have no issues.

In terms of U.S. LTL real estate, we still have about 3,000 doors too many, 3,000 to 4,000 doors too many. So you should see us during the next 6 months, do some trade, okay, some swaps with some of our peers that we do all the time. So that should help us reduce the carrying cost of those real estate that we have no use for it. On the truck side, we've talked about truckload. On the LTL side, what we're selling is the old UPS freight trucks, okay, with very little value. So there's not much capital to regain from the sale. But we still have way too many trailers over there and too many trucks, but not a lot of capital tied up there.

Your next question comes from the line of Elliot Alper from TD Cowen.

This is Elliot on for Jason Seidl. Maybe just a follow-up to the last question on TForce. Are you seeing some of these SMB customers feeling more of the tariff pressure? And then a number of carriers are also going after the SMBs. Is the pricing a bit accretive to maybe the total book? Is it seeing incremental challenges given some of these players are looking to grow share?

I think on the tariff side, I don't see anything, any issues with the small and medium-sized account with the tariff. David?

No, we haven't seen that. And in terms of your other question about pricing and other people going after SMB, it's a market, right? It's a market. We all know LTL has good characteristics, good market structure, which makes it a very attractive segment within transportation. And it's a market. It's a market that operates within those parameters.

And one shipment could be good for me and one of my peers, not as good for him, depending on where the customer is, where my terminal is. So what is good for me is not necessarily as good or what is good for my peers is not necessarily good for me. So just to say that everybody is going after this kind of business, I mean, sometimes it fits better me than the other guys or maybe the other guys versus me. So it's just to play it smart.

And then just bigger picture, I mean, any indication of how peak season may shape up when speaking with some of your customers, maybe any pockets of strength or weakness?

So far, I mean, it's like more of the same guys.

Your next question comes from the line of Cameron Doerksen from National Bank.

Maybe just a couple of quick, I guess, maybe modeling questions for David. You mentioned, I guess, some of the tax rate changes or cash tax changes from the new U.S. legislation. I guess what's your expectation for, I guess, effective tax rate going forward with that?

The tax rate won't change. It's just a cash tax benefit. It's a cash tax benefit that we estimate, based on our CapEx over 5 years, is worth $75 million cumulatively relative to what our tax would have been without this law. And of that $75 million, $40 million is realized in the first 2 years.

Okay. That's helpful. And maybe just, I guess, on the -- you did do a debt issuance in the quarter. It looks like pretty attractive terms. Are you able to update, I guess, what the kind of average interest rate is now for TFI across the entire company?

Yes. I think we put it in the MD&A, but I can tell you that the weighted average interest rate on this particular issuance was 4.8% fixed. And we reimbursed debt that was costing 6.1%.

But I think globally, David, we're under 5%.

Yes. Globally, for sure, we're under 5%, and we can follow up on the exact calculation. But this was a great private placement for us. We managed to access the markets at a great window. We reduced our interest expense, as we discussed. We increased the availability on our revolver. We actually pushed the maturity out by a year as well in a separate transaction on the revolver. And we also better aligned our currency mix with our cash flow, the currency of our debt with the currency mix of our cash flow. So we're very happy with the transaction.

Your last question comes from the line of Bruce Chan from Stifel.

Alain, just wanted to ask maybe a bigger picture strategic question. You talked in the past about maybe finding some density in LTL via M&A. And I know it's still early, but with some of the improvements that you've seen this quarter, is that still on the table? Or do you think that you'll be going at it organic from this point forward?

You know what, we need to prove to the investor that we are in control at U.S. LTL. We had a lot of -- not a lot, but we have a few shareholders that were very disappointed. They made a lot of money with TFI, but they were disappointed that they thought that we've lost control of TForce Freight. So now we're starting to show that, no, no, no, we're back in control. So for sure, to do a deal of size in the LTL right now, it would not be smart because our investors, we have to convince them that we are in control.

So let's say that we come out Q3 and then Q4 and let's say, Q1 of '26, and now we have 1 year of showing, "Hey, guys, it's not a blip. It's not a mistake." It's not something -- "No, no, it's true. These guys are going in the right direction." Then you could start looking at a transaction of size at that time. But now it would be too early. We have to prove to our investment community that we are in control. They know we are in control of all of our business, but they have a question mark on TForce Freight, our U.S. LTL. So this is what we have to prove.

If we would do a deal of size in the truckload world, okay, when we're running, let's say, a 90% OR and most of my peers are running 95% and worse than that, I would say that probably the investor would say, "Those guys are really in control in a very difficult environment. So they're buying something of size, it's okay, they have a great team, they'll fix it." But today, if we do something of size in the LTL, I think it would not be prudent. So we have to show that we are in control, and that's going to take a few quarters.

And then in '26, we'll relook at that. But for now, it's easier for us to just buy back TFI. We know the company really well. We know the free cash flow per share, the yield is like double digit. There's nothing we can buy today that's cheaper than that with the best potential.

Okay. That's great. That makes a lot of sense. And then just maybe a last cleanup, perhaps for you, David. I don't think I heard it, but any color on LTL contract renewals?

Yes. Listen, the contract renewals continue to be in the sort of low to mid-single digits. The question is the mix, right? It's of little use if you get renewals that are up, but then the customers that pay you more give you less freight and the ones that pay you less give you more freight, right? So that's really what we're looking at. But specifically to answer your question, that's where the renewals are.

There are no further questions at this time. I will now turn the call over to Alain Bedard. Please continue.

All right. So thanks very much, operator, and thank you, everyone, for being on the call with us today. We very much appreciate your interest in TFI International, and I look forward to updating you on how we perform through the balance of the year. As always, if you have any further questions, please don't hesitate to reach out. Enjoy the summer, and thank you again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.