Q2 2025 TFI International Inc Earnings Call

Operator: Welcome to TFI International's 2nd Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's second quarter 2025 earnings call. At this time, all participants are in listen-only mode.

Operator: Callers will be limited to one question and a follow-up, again, that's one question and a follow-up, so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time.

Following the presentation, we will conduct a question-and-answer session.

Colors will be limited to 1 question and a follow-up.

Again that's 1 question and a follow-up so that we can get to as many colors as possible.

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

Further instructions for entering will be provided at that time.

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

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

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

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

Joining us on today's call are Alain Bdard, Chairman, President, and Chief Executive Officer.

Alain Bdard: I'll now turn the call over to Alain Bdard, please go ahead. 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 Intl. And I'm pleased to report that we had yet another strong quarter in that regard, producing 182 million dollars of free cash.

And David Saperstein, Chief Financial Officer. I'll now turn the call over to Elaine Bard. 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 artwork of the talented team members across our organization. Even as economic uncertainty continues to weigh,

On industrywide 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.

Alain Bdard: As you know, we use excess cash flow to return capitals to shareholders whenever possible. Thus, we repurchase 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.

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 a long binh, a pillar of our strength,

Alain Bdard: 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 of 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.

In fact, we further strengthened our balance sheet during the quarter through a private placement bond offering, and I’ll discuss that 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.

Compares to a171.

Alain Bdard: 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% during part of favorable working capital dynamics. dynamics, as well as moderately lower capex relative to last year.

In terms of net cash from operating activities, 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 of 20% during part of favorable working capital dynamic.

Alain Bdard: We owe these solid results to the dedication of men and women of TFI International who really focus on the executions during the quarter, taking the opportunity to strive for quality of revenue and improve efficiencies, including at acquired operation, while maintaining a keen focus on cost control.

Dynamics, as well as moderately lower capex relative to last year.

Alain Bdard: Let's turn to the NEC second quarter results for each of our three business segments, starting with LTL. This quarter was 39 percent of segmented revenue before fuel surcharge, and down 11 percent 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 investment 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.

We owe these solid results to the dedication of the men and women of TFI International, who really focus on the executions during the quarter. They seize the opportunity to strive for quality of revenue and improve efficiencies, including at acquired operations, while maintaining a keen focus on cost control.

Let's turn to the next quarter results for each of our three business segments, starting with LTL. This quarter was 39% of segmented revenue before fuel surcharge and was down 11% year-over-year to $74 million, with operating income of $74 million compared to $110 million in the year-earlier period.

The LTO operating ratio of 89.5% compared 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, investor capital was 12.9%.

Alain Bdard: 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 weight on 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 to vested capital was 6.4%.

Next up is Truckload, which was also 39% of segmented revenue before. The fuel surcharge came in at $712 million compared to $738 million a year earlier.

Operating income was $71 million compared to $81 million for the prior year period, and our truckload of 90.1 is relative to $89 in the second quarter of 2024.

Tariff-related uncertainty continues to weigh on industrial and market.

Demand; however, this quarter is also delivered 250 basis points. Sequential improvement relative to the first quarter of 2025.

Alain Bdard: 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 the prior year. Logistics operating income was $38 million compared to $51 million representing a 9.6% operating margin as compared to an 11.4% in the prior year, second quarter, and our return investor 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 2.4 times. 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 longstanding important commitments.

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 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. In the second quarter, our return on invested capital was 15.7%.

In terms of the balance sheet, we benefited from $192 million of second quarter free cash flow and ended June with a funded debt-to-equity ratio of 2.4 times.

Alain Bdard: Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares.

As I mentioned, we also eagerly repurchased shares during the quarter, worth $85 million, 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 475,000 shares.

Alain Bdard: 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.

I'll wrap up with our outlook for the third quarter of 2025.

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

We currently look at for an EPS in the range of $0.10 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 lines, both David. I would be happy to take questions.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2.

Thank you.

Ladies and gentlemen we will now begin the question and answer session. Should you have a question? Please press star 1 on your touchtone phone, you will hear a prompt that your hand has been raised.

Operator: A reminder, please limit yourselves to one question and one follow-up.

Should you wish to decline from the polling process? Please press star followed by the number 2?

Ravi Shanker: Your first question comes from the line of Ravi Shanker from Morgan Stanley. Your line is now open. Great, thanks for your time. Thanks, Alain. Great to see the turnaround in margins here. I assume that this was all idiosyncratic actions you have taken and not really helped in the cycle.

A reminder, please limit yourselves to one question and one follow-up.

Your first question comes from the line of Rabbi Chancre from Morgan Stanley. Your line is now open.

Ravi Shanker: 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? Yeah, absolutely. I mean, the A.R.A.E. Please go ahead, Ravi. Sorry. So thanks for that.

Uh, great, thanks. Thanks for the time. Thanks, Alain. Uh, great to see the turnout and margins here. I assume that this was all, uh, idiosyncratic to the actions you have taken and not really help from 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?

Sensitive us and, uh, what these guys were able to accomplish in Q2, okay? In a very difficult, still difficult Market condition, okay? Now, if you look at, uh, all the tools that we've implemented so far, 1 it 1, technology tools is Optum, we've we've implemented optin for our LOL. Now, we're in the midst in 25 to up to implement often Optum. Okay, that software. Okay, to help us on the pnd side. So our line all we're very proud with what happened there. If you go back 4 years ago, we used to to run Lowell Mi 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 Optimum is helping us do a better job on the line. All we believe that the, you know, the next thing that's going to help us reduce our cost is going to be on the pnd side. Okay, where we going to do?

More with less. So that's 1 area that we 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 of those hundred. And some terminals that we're going to be moving towards with Optum and 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 we yeah we're better. Okay, we're at 7.

% of revenue. We used to be at 0.9. I think T Force rate best result has been 0.4. If you look at our Canadian operation, we run 0.2, and I think the best period in the US 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, Mark Fox, that's going to help us, you know, improve our safety. You know, he was the president of M. Okay, when we used them some 10-15 years ago, and Mark has done a fantastic job in terms of changing the culture and improving the culture of safety. So claims and accidents, okay, I think that we need to improve that by like 100%. That's going to help us big time. Also, new technology in terms of AI, you know. David, maybe we could talk a little bit about that, what we're looking at doing on a high to help us reduce the labor intensity of our operation, you know?

Maybe on the collection side, maybe on the appointment, uh, freight side. I mean, we're looking at all kinds of stuff to reduce, reduce, reduce, reduce our costs and be the tiger, lean and mean.

That is really, I mean, the agent.

Alain Bdard: Maybe as a follow up question, if you can give us a little more color on just how customers are talking to you about a tariff environment, 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 us? Well, that's for sure. If you look at our Canadian LTL, we're down, okay? 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.

Please go ahead, Robin. Sorry. Uh, uh, uh, um, so, and actually that, uh, maybe as a follow-up question, uh, if you can give us a little more color on, uh, 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, uh, tell at this point.

Alain Bdard: 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 two north, one south. Right now, okay, the two north are down to about one, 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, well, August 1st, maybe it's going to be fixed or later on, but for sure in 2025.

Well, that's for sure. If you look at our Canadian performance, we're down. Okay, we're down. 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 the U.S. and Canada on the LTL side is down, and this is the most profitable business that we have. The LTL trade between the U.S. and Canada has decreased significantly. So, for sure, normally the flow is two northbound shipments out, but right now, okay, the northbound shipments are down to about one.

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.

Alain Bdard: 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? So, 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.

Alain Bdard: Hopefully with this big, beautiful bill that should help investment. And that's what the investment we made on Dasky a year ago, that was because we thought that the industrial, okay, business in the U.S. will start to grow again, okay? Well, we missed the call. Maybe we were maybe one year too early.

Here too early.

Alain Bdard: Very good. Thank you.

Very good. Thank you.

Scott Group: Your next question comes from the line of Scott Group from Wolf Research. Your line is now open. Hey, thanks, afternoon.

Thank you, Robbie.

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

Scott Group: 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, you know, it's Thank you. You know, Scott, this is really based on just the historical seasonality of the business. If you look last year, Q2 to Q3, we dropped 11 cents 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, you know, will, of course, come to offset some of that.

Hey, thanks. Uh, good afternoon. Uh, maybe if you can just give us a little bit more color on the Q3 guidance, $120 to $125. Maybe some of the um,

Margin assumptions there. You know, it's probably a little bit of a steeper decline from Q2 to Q3 than we typically see. So, just any thoughts there?

You know, Scott this is really based on just the historical seasonality of the business. If you look last last last year, due to the Q3 we dropped 11 cents, uh, of eps. And, uh, and, and, and, and margins contracted, uh, pretty much the board, uh, across the, the, the divisions, and the segments. And, and so, that's, that's all that that we're, we're forecasting. There is just normal seasonal, uh, sequential declines, uh, and uh, the extent to which we're able to continue to drive these idiosyncratic, uh, opportunities that we have over the course of this quarter. Uh, you know, we'll, of course, come to offset some of that.

Alain Bdard: And then maybe just maybe a little bit more specifics on how you think about the progression of U.S. LTL margin Q3 if you have any early thoughts on, you know, where you You know what, Scott, I think that our guys at T-Force Freight will do a great job again in Q3. I would say that, you know, again, I mean, our volume is still too soft. So the guys, you know, 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, the thing that, you know, what we're focused 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?

Okay, and then maybe, um, just maybe a little bit more specifics on how you think about the progression of.

U.S. LTL margin. Q3, if you have any early thoughts on where you think this should be going in Q4.

You know, what's going? I think that our guys at T Force rate, uh, will do a great job again in Q3, I would say that, you know, uh, again. I mean our volume is, is still too soft. So the guys, you know, they what they've done so far is they've improved the mixed, uh, of our freight, okay? Year over year. Uh, and when you talk to our team here at the, the thing that, uh, you know what, we're a focus is a 940 like we've, we've done in in Q2 94, 950 R. I think that, that is the goal that is attainable today with the kind of volume we have, right?

Scott Group: So you're saying 94, 95 in the back half of the year is sort of what you would expect. Yeah. Okay, that's helpful. Thank you, guys. Thanks, Scott.

So you're saying, 94 to 95 in the back, half of the year is sort of what you would expect. Yep. Yep.

Okay, okay, that's helpful. Thank you, guys.

Walter Spracklin: Your next question comes from the line of Walter Spracklin from RBC Capital Markets. Your line is now open. Thanks very much. Good afternoon. Just on the guide in the back half, I know you're not, or I guess 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, or back half of 26? Just curious your view on the overall macro here from the signals you're getting.

Thanks Scott.

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

Yeah, thanks very much. Uh good good afternoon uh just on on the the guide in the back half I know you're not or I guess you know implied died for the fourth query. Are you giving any indication as to what we're going to see for the full year and and I are you seeing uh I know you you've you've been um you've been right in terms of what you've seen in the in the general macro environment saying that it's you know we're not seeing much relief or

Is there anything that would suggest to you? That is, are you seeing any signs that this could start to improve in the front half of '26? Or are you thinking now, or back to the back half of '26? Just curious your view on the overall macro here from the signals you're getting.

Alain Bdard: 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, you know, 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's been stuck in the mud for close to three years. 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.

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

Alain Bdard: I had a meeting with our specialty truck load fleet a week ago, and for the first time, I heard those US guys saying that, you know, we feel better, we feel good when we talk to our customers. Hopefully, you know, 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 three years.

Uh, 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.

David Saperstein: 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 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 yeah and I think what underpins that is is really being able to see that the effects of the cash tax savings right and and thinking about how that flows through the economy I mean just just us our cash tax savings in the U.S.

And and for the first time, I I heard those us guys saying that, you know, we feel better, we feel good when we talk to our customers hopefully you know the things will start to roll, right? So it 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 this terrible recession that we went through the last 3 years.

David Saperstein: this year going to be 20 million and next year it's going to be another 20 million and think about that throughout the economy and this is really going to go towards uh companies that are doing cap ex right and these are the companies that are our customers I mean now that we own 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, you know, 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.

So we'll see but at least the confidence. Okay. When I talked to the guys in the US is coming back on the Canadian side. I mean it's there's a lot of instability once we we know what's going to be the deal with the US. I mean then the Canadian will be able to say okay this is what we need to do now, right? Yeah. And I think what underpins that is is really being able to see the the effects of the cash tax savings, right? And and thinking about how that flows through the economy. I mean, just just us our cash tax savings in the US is you're going to be 20 million. And next year it's going to be another 20 million and think about that throughout the economy. And this is really going to go towards uh companies that are doing capex, right? And these are the companies that our our customers, I mean, now that we own dassey, right? 72% of our specialized operation in the US is flatbed. We have 1.3 billion dollars of us.

Flatbed exposure revenue, that's this year based on today's, you know, depressed dollars. So, when you think about rates coming down and you think about all of this cash tax savings coursing through the economy.

Walter Spracklin: There's a sound more confident than I've heard heard you in a while. So that's great.

That's what gives us a little bit of confidence. Uh, they're really being a catalyst for a turn, in particular for our business units, which are our specialized truckload and our LTO.

Walter Spracklin: My follow up question is on M&A and I 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 is that still is that still in the cards? Yeah.

As a selling more confident that I've seen, he heard you in a while, so that's great. Uh, my follow-up question is on m&a and I can you talk to us a little bit about how you're looking at tuck-ins, what your budget would be, uh, uh, over the balance of the year. And into next for just tucking, uh m&a and then what your thoughts are toward, uh, a larger deal. I know you pointed to 2026. Is that is that still uh, is that still in the cards?

Alain Bdard: 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.

Alain Bdard: Now, in terms of larger transactions... You know, I think that Probably, you could see us getting involved into something of size. in 26.

Yeah. Yeah, yeah. So, so 4205 Walter is 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 2025 because we cannot find another opportunity that cheap. It's impossible. You know, 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 transactions.

you know, I think that

Alain Bdard: Don't forget the last deal we did was late 23 into 24, so that was like two years ago. Mr. Brookshaw and his team, slowly we're digesting Dasky. It's more and more every day under our control. We're transforming the good Dasky truckers. 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 serve as the customer and hopefully makes money.

Probably you could see us getting involved in something of size.

Alain Bdard: That's the difference between Thank you very much, gentlemen.

In 26 know, don't forget the last deal we did was late 23 into 24. So that was like 2 years ago. Uh, Mr. Brookshaw and his team, you know, slowly we're digesting, uh, Dashi. Okay. It's more and more every day under, you know, our control. We're we're transforming the good that he truckers. Okay. The role that Steve has is to 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 he makes money. That's the difference between the 2.

Thank you very much gentlemen.

Jordan Alliger: Your next question comes from the line of Jordan Alliger from Goldman Sachs. Your line is now open. Yeah, hi, everyone.

Pleasure Walter.

Jordan Alliger: Yeah, I was wondering if you give a little more color on the USLTL side and some of the other things you've been working on, such as the Salesforce, you know, rejiggering, penetration efforts on the small to midsize businesses, you know, some of that other initiative stuff that may be lifted margin better than expected in the second quarter. Thanks. A very good question, Jordan. And I, you know, I have to tell you that sales has been, since we bought UPS Freight, T-Force Freight now, it's been a rock in our shoes. I mean, we've never done well.

Your next question comes from the line of Jordan alligator from Goldman Sachs your line is now open. Yeah. Hi everyone. Um, yeah, I was wondering if you give a little more color on the US LTL side and some of the other things you've been working on such as uh the sales force, uh, you know, rejigger, um, penetration efforts on the small to mid-size businesses, you know, some of that other initiative stuff, that may be lifted margin better than expected in the second quarter. Thanks.

Alain Bdard: 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, medium sized account that is highly motivated and getting results. Okay, so the number of shipments, okay, that went down like crazy, about six months to nine 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's leadership, I mean, 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, you know, billing customer, okay, it's like, you know, we always had problems with that.

A very good question. Jordan and I you know I have to tell you that uh sales has been since we bought UPS Freight T Force 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 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 it's coming back and and the guys are very motivated. So we feel really, really good that finally, uh, through Chris's 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 customers is that...

David Saperstein: Hey, David, could you talk a little bit about that with Prism? Okay, this new software? Yeah, I mean, for sure. Especially now that we've corrected the problems, we can explain exactly what they were. The 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 T-Force or in the USLTL, which is primarily T-Force, DSO went down from 43 days a year ago to 35 days.

David Saperstein: 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 So that also helps the motivation of the sales guy, because now they don't get calls from customer and your billing department, they don't know what they're doing or this or that.

It's like, you know, we always had problems with that. Hey, David, could you talk a little bit about that with Chris? Okay, this new software? Yeah, I mean for, for sure, especially now that we've, we've corrected the problems, we can explain exactly what they were. The, the prism is a new billing software, uh, which uh, which is, which is helping us with our, our billing and our billing accuracy. Uh, 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 call is DSO to go down at T force or in the US LTL, which is primarily T Force. If you have someone 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 the software and it's because of a better process, which is a basic 1, 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. It's also helps.

Uh, the customer experience because, uh, there’s no running around afterwards trying to figure out the billing.

Alain Bdard: I mean, it's smoother. It's getting easier to do business with T-Force Freight today than in the prior times, and we'll keep improving that. And you see it, 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. The big problem that we had over the last several quarters was a three-point reduction in the SMB mix as a percentage of our total revenue, and we've now reclaimed two of those three lost points. Okay, so we're two-thirds of the way back to where we were, let's say, about a year ago.

So that also helps the motivation of the sales team because now they don't get calls from customers, 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 TFI today than in the private times, and we'll keep improving that, and you see it.

Exactly. And you see it in. Also the quality of the revenue. So you you'll notice that the our 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 um a 3 point reduction in the SMB, mix as a percentage of our total revenue and we've now reclaimed 2 of those 3 loss points. Okay, so we're 2/3 of the way back to where we were.

Alain Bdard: And that's important. That's contributing to the results.

Jordan Alliger: 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 three quarters now is something that we have not seen in a while, and those two go hand-in-hand, the local, the SMB, and the GFP sales. Great, thank you.

Let's say about a year ago and, uh, and that's that's important that's contributing to uh, to, to the results. And then the last thing is the gfp. We've now put up our third sequential uh a 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 and those 2 go hand in hand, the the the local, the SMB, and the and and the gfp cells.

Great. Thank you.

Tom Wadewitz: Your next question comes from the line of Tom Wadewitz from UBS. Your line is now open. Yeah, good afternoon. I wanted to ask you a little bit more on USLTL. I know you guys have been kind of peeling back the onion for a number of years, you know, 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 line haul miles outsourced rail. I thought you were like up in the mid 30s. But I don't know, is it, you know, insourcing more line haul?

Your next question comes from the line of Tom Witts from UBS. Your line is not open.

Yeah. Good afternoon. Um, 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, you know, 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 line haul miles are outsourced rail. I thought you were like up in the mid-30s.

Alain Bdard: Is it, you know, other things, but just kind of where you're at in in your journey? Of, you know, getting to have the LTL operation and service that you want to have?

30s but I I don't know. Is it? You know, insourcing more line haul? Is it, you know, other things but just kind of where you're at in in your journey of you know getting to have the LTL operation and service that you want to have.

Alain Bdard: Well, you know what, I mean, for sure, from day one, we were not able to move away from rail because, you know, 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, you know, we didn't add that many road drivers within T-Force Freight. I mean, it's just like those drivers are doing more. Okay, so we've been also introduced sleeper trucks. Okay, so now I would say we're just a little over above 100 sleeper trucks in our, okay, Lionel fleet at T-Force Freight.

Alain Bdard: And this is also helping us on the long, long haul, okay, because now running sleeper, we beat the service of rail, okay, and the customer satisfaction is like, meh, much, much, much improved, right? So it's, 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, you know, the three or four days service, right? Because now we move more and more freight on the truck instead of rail.

Well you know what? Um I mean for sure from day 1, we were not able to move away from rail because you know, 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 you know, we didn't add that many Road drivers within a t Force rate. I mean, it's just like those drivers are doing more. Okay, so weaving also introduced sleeper trucks, okay? So now I would say we're just a little over above a 100 sleeper trucks in our, okay, line of Fleet at T Force rate and this is also helping us on the long, uh, Long Haul, okay? Because now running sleeper, we beat the service of rail, okay? And the customers satisfaction is like, May much much, much much approved, right? So it's, uh, it's a change and we'll continue to improve.

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

Alain Bdard: 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 year over year. So how do we think about the equation of getting to improvement in the price? Yeah, so our service on the next day, okay, is comparable to our peers.

So,

Seems like the pricing is still showing some pressure. I think you had some improvement in shipment sequentially, but you're still kind of, you know, down in terms of Revenue per 100 weight sequentially year-over-year. So, how do we think about that, you know, equation of of getting to, uh, Improvement in the in the price?

Alain Bdard: We know that. Where we are not up to par is the when it's a two-day or three-day or four-day service. Four 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 two to three days, this is what 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, okay, cannot be as good as our peers, right?

Yeah, so our service on the next day. Okay? Is comparable to our peers. We know that where we are not up to par is the when it's a 2-day or 3-day or 4 day service for days. Now, we're getting closer to our peers because now we move more away from the rail, okay? And with our own trucks,

Alain Bdard: So, you know, 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, year and a half, 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% three years ago. Now we're hovering around 1%, okay, still too much, because in Canada we don't have missed pickup.

Now, in the 2 to 3 days, this is what 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, okay, cannot be as good as our peers, right? So, you know, 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.

Alain Bdard: I mean, we're zero. Alright, so guys, one is better than three or four, but one is not good enough, so we have to keep improving this. service metric, right? Yeah, for sure. It's something that we're very focused on because as we talked about before, a 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, because sometimes, you know, ah, I didn't miss it but I rescheduled it, ah, you missed it.

So we're not there yet, Tom, but the guys are working on it, and we've made some major improvements over the last, uh, I would say, year and a half, and even more lately. Our missed pickup, okay? Which was a cancer for us. A cancer because, like, uh, nobody cared, okay? We were all the way up to 4% three years ago. Now, we're ringing around 1%. Okay? Still too much, because in Canada we don't have missed pickups.

I mean, we're zero.

Right. So, guys, 1 is better than 3 or 4, but 1 is not good enough, so we have to keep improving this.

Alain Bdard: Then you add those together, we're down like 42%, 43% year over year. So it's a major, major improvement.

Service metric, right? Yeah, for sure. It's, it's, it's, it's something that we're very focused on because, as we talked about before, I missed pickup, is the worst because it's bad service and you lose the revenue or Miss pickups are down the Miss pickups, pure, Miss pickups are down over 50%. Maybe 53%, something like that year-over-year in the quarter and then when you add Miss Pickups Plus reschedules, because sometimes, you know, ah, I didn't miss it but I rescheduled it at you missed it. Um, then you add those together, we're down, like 42% 43% year-over-year, so it's a major major Improvement.

Alain Bdard: Okay, yeah, great. It's good to see the improvement.

Okay, yeah, great. It's good to see the improvement. Thank you.

Brian Ossenbeck: Your next question comes from the line of Brian Ossenbeck from J.P. Morgan. Your line is now open. Hey guys, thanks for taking the question. So maybe just to follow up on that last train of thought, when does that start to translate the better service, the 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?

Thank you, Tom.

Your next question comes from the line of Brian Osbeck from J.P. Morgan. Your line is now open.

Hey guys, thanks for taking the question. So maybe just to...

Follow up on that last train of thought. When does that start to translate to better service? The consistency? Like...

Alain Bdard: 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, one 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, ah, okay, let's wait and see if this is not just a blimp of improvement, and then those guys fall back in the same kind of rut, right? So you're right, Brian. It's going to take more time.

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, our shippers are going to want to see that for a longer period of time before they start paying you a commensurate rate.

I think you're right, Brian. I mean, one quarter does not make a year, right? You know, 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 nah. Okay, let's wait and see if this is not just a blimp of improvement and then those guys fall back into the same kind of rut," right?

Alain Bdard: Now, is it another two or three 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, you know, T-Force freight service is up to par to the peers, it's going to take a few quarters.

You're right, Ryan. It's going to take more time now; is it another 2 or 3 quarters?

Uh, I think also, when the market starts to firm up, that's going to help us down the road, okay? Uh, but if things stay the same, I would say that, uh, I mean, to bring confidence to our customers that, you know, T Force Freight Service is up to par with the peers.

Alain Bdard: to build that confidence, but we'll continue to improve.

Uh, it, it, it's going to take a few quarters.

To build that confidence.

Well, we'll continue to improve.

Alain Bdard: Okay, and then Yeah, Dasky and then 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 trailing equipment. Maybe some other operational changes to get these to be, as I said, business truckers instead of what they were before. But, you know, some updates on this 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 Yeah, yeah, so very good question on Dasky.

Okay. Uh, and then

Yeah, Daski and the flatbed side of things. Um,

Maybe you can just go through more detail in terms of I think, at 1 point, you needed to get rid of some equipment entry at at, too much trailing equipment. Um, maybe some other, the operational changes to get these to be, uh what is it business truckers instead of what they were before? But um, you know, some updates on this on the asset side and then just the processes. Um, in terms of where you are now and what that could look like when the volumes do get better.

Alain Bdard: I mean, you know, I think as I said on the call of Q1, by the summer, okay, all of Dasky will be running our own financial 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 Dasky or specialized truck load, 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.

On the call of Q1 by the summer, okay? All of Dashi will be running our own financial system.

Uh, the same with Fleet Management. Okay? And now we have visibility about what's going on in terms of the asset base.

Alain Bdard: So, you'll see us improving, you know, if you look at my OR of Q1, okay, of my specialty truck load versus Q2, I wouldn't say that the market is better. I mean, I wouldn't say that we're more, we have more activity. We just did a better job on the cost side of it, right, so revenue per truck, you know, we're doing okay, but the rates is improved, but it's the velocity that's not there. So, overall, after buying Dasky 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 truck load with a 90 OR.

So if you look at my trailer, count a Dashi or specialized truckload, I’m down. Okay. If you look at my truck, I’m down, but not enough. So I’ve 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,

Now you'll see us improving. You know, if you look at my specialty truckload versus Q1, okay, 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.

Alain Bdard: 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, this is that tells you and these guys are good.

Uh, you know, we're doing okay, but the rates have improved. However, the velocity is not there. Overall, after going Desi 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 truck low with a 90 or...

Okay, it's not normal. So we got to bring those guys back down to an 85. Probably, hopefully, early 2026. We'll be running at an 87 or 88, and then continue the improvement in a normal environment. Okay, if the market starts to help us, well for sure, we'll be way faster going towards an 85 or an 82 over time.

Alain Bdard: That tells you how difficult it is in today's market. So I'm really proud of the guys improving what 200 basis point, quarter over quarter on the OR. I mean, 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, okay, 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.

Alain Bdard: Okay. But this is where the guys were slow.

Uh, now, the market is very difficult if you look at uh, there's not that lot that many peers that came out, okay. So far, uh, in Q2 but you could see that when you have 1 of my peers, losing money in truckload, okay. I mean, this is that tells you and these guys are good, that tells you how difficult it is in in today's market. So I'm really proud that the guys improving what 200 basis. Point quarter of a quarter on the oh I mean 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 share about 20 million dollars of capital, okay, 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, uh, we're not losing money by selling the equipment. Right now, we're making a little bit of money. Yeah. Okay.

Alain Bdard: I said, guys, we gotta, you know, be a little bit more active.

But this is where the guys were slow. I said, "Guys, we got to, you know, be a little bit more active."

Alain Bdard: Okay, thanks very much, appreciate it.

Okay, thanks very much. I appreciate it.

Goodbye.

Daniel Imbro: Our next question comes from the line of Daniel Imbro from Stephens. Their line is now open. Yeah, hey, good evening, guys. Thanks for taking our questions. Alain, I want to follow up on the US LTO pricing discussion. I think it makes a ton of sense. You're improving the missed pickups and service and that'll take time to show up in price.

Our next question comes from the line of Daniel Imbro from Stevens. Their line is not open.

Yeah. Hey, good evening, guys. Thanks for taking our questions.

Daniel Imbro: But I think the magnitude of the decline down almost 7% year over year, if 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? You know what, I would say that 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, OK, 5-6%. OK, not the one that came out last week, but, you know, so there's price pressure a little bit.

Online. I want to follow up on the US LTO pricing discussion. I think it makes a ton of sense. Your improving the missed pickups and service metrics 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?

You know what? I would say that number one is that the market is soft. I mean, what I've seen so far is that some of my best beer volumes are down. Okay, 5% to 6%, okay.

Alain Bdard: OK, not a disastrous, but there is some, OK.

Alain Bdard: And for sure, the mix is the minute that we start gaining more on the SMB where the profitability is better, OK, we should come up with, you know, better revenue, OK, per shipment, et cetera, et cetera. So it's a transition, OK, 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.

Not not the 1 that came out last week but you know, so there's price pressure a little bit, okay, not not a disastrous, but there is some okay. And 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, you know, better Revenue, okay for sure.

David Saperstein: Yeah, 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, you know, carrying heavier freight yields down a little bit. It's the way in the soft market that we're, you know, working to kind of preserve that revenue per shipment, right? And we've been able to do that, you know, while reducing the length of call a little bit, which takes a little bit of the cost off. So, but the real, the main driver of the yield decline is the growing weight per shipment.

Reducing the length of call a little bit, which takes a little bit of the cost off. So it's it. It but the the, the real, the real, the the main driver of the yield decline is the is the the the growing weight for shipment.

Daniel Imbro: Great. Helpful color.

Alain Bdard: And maybe one not on the US LTL, just on the PNC side, I guess, how much benefit, if at all, in the quarter was there from the partial Canadian postal strike or, you know, the other competitor strikes, any surcharges we saw up there? How much should we extrapolate the two key results into the back half? Thanks.

Great. Helpful color, and maybe one not on the U.S., LTL, just on the PNC side. I guess how much benefit, if at all, in the quarter, was there from the partial Canadian postal strike or, you know, the other competitor strikes, any third charges? We saw up there how much we extrapolate the two key results into the back half. Thanks.

Alain Bdard: There was nothing there. I mean, this potential strike didn't help us at all. Very minimal, okay? And it seems like this is not going to be another strike, so very, very minimal.

There was nothing there. I mean this potential strike didn't help us at all; very minimal. Okay, and uh...

Alain Bdard: What's killing us, okay, on the PNC 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 tailwind for us because of our density, so this is the effect of that carbon tax. But nothing specific to the potential strike, there was nothing there for us.

It, it seems like this is, there's not going to be another strike so very, very minimal. What, what's killing us? Okay, on the PNC side, Although our results are fantastic compared to our peers and on the Canadian side Kearney, the Prime Minister decided to go away from that carbon tax there 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 uh, of that carbon tax. But no, no, nothing specific to the potential strike that there was nothing there for us there.

Daniel Imbro: Great. Thanks for all the color and best of luck.

Great. Thanks for all the color. Best of luck.

Kevin Chiang: Your next question comes from the line of Kevin Chiang from CIBC. Your line is now open. Hi, good afternoon or good evening, and thanks for taking my question. Maybe just when I look at your OPEX within your U.S. lesson truckload, for the past couple of quarters, you're down, you know, $56-57 million year over year, both in Q1 and Q2. Just wondering, is that a trend where you can continue for the rest of the year? So if I look at OPEX, can that be down another, you know, $50-plus million in Q3 again, or are you starting to lap tougher comps?

Thank you.

Your next question comes from the line of Kevin Chang from CIBC. Your line is now open.

David Saperstein: But it does feel like you had some excess OPEX in 2024 in the back half of last year.

Hi, uh, good afternoon, or good evening, and thanks for taking my question. Um, maybe just uh, when I look at your Opex within your us less than truckload, um, for the past couple of quarters you're down. Um, you know, 50, 5657 million year-over-year, both in q1. And Q2 just just wondering, is that, is that a trend rate you can continue for the rest of the year? So if I look at Opex can that be down in another, you know, 50 plus million in in Q3 again or or are you starting to lap tough for comps but but it does felt. It does feel like you guys have some excess excess off effects, in 2024 in the back, half of back, half of last year.

David Saperstein: Yeah, 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 yeah, I mean, listen, we've been taking out costs. You can see that the truck count is also down in the US 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 two pieces of it, right?

David Saperstein: 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.

Oh, yeah, yeah for sure. Yeah, I don't know. We'd have to, we'd have to look uh, at some of the details to get back to you on those, those numbers Kevin, uh, uh separately. But uh uh but yeah, I mean, we've been, we've been taking out costs. You can see that the the the truck count is also down. Um, in the US LTL, uh and we're trying to adjust the cost to the demand while at the same time we're investing in in service part of the reason that we're missing less pickups is that we're, you know, we're we're Staffing, you know, a little bit more. We're working the overtime as well. We're making sure that that, that there's guys there. So, there's, there's the 2 pieces of it, right? It's not just about, uh, a a cutting

David Saperstein: Right, that makes sense. Maybe just a clarification, David, I think you mentioned the Q3 guide of 110 to 125 just assumes normal seasonality. I guess if I asked it this way, would that assume that 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. Okay. Correct. That normal seasonality would be we continue to operate the same way that we're operating now. Yeah. That just, we maintain that, right? Okay. And then we just kind of have the seasonality apply.

It's also about making, uh, some strategic investments, um, and, uh, certainly picking up the freight is a very high return on investment.

David Saperstein: Perfect.

David Saperstein: Thank you for the clarification. Thank you very much.

Right? That that makes sense. And maybe just a clarification, uh, David. I think you mentioned, the Q3 guide of 110 to 125, just just assumes, normal seasonality. I guess, I, I asked you this way any without without assume that any incremental, um, you know, success, you have on your self-help lovers outside of what you've you've, um, you've realized in the first half of this year, that, that would be additive to that to, that guidance. Correct. Correct, correct. Correct that normal seasonality would be, uh, we continue to operate the same way that we're operating. Now, that just we, we, we maintain that, right? Okay. And then we just kind of have the seasonality applied to it.

Perfect, thank you for the clarification. Thank you very much.

Ari Rosa: Your next question comes from the line of Ari Rosa from Citigroup. Your line is now open. Hey, good afternoon, Alain and David. Congratulations on the nice turnaround here.

Your next question comes from the line of Addie. Rosa from City Group, your line is now open.

Ari Rosa: 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, you know, can you can you sustain these levels? And where does it go to, if we see a little bit of improvement in the in the macro? Thanks. Yeah, you know, that's a very good question. But you know, I've always said the proof is in the pudding. So you got to look back, okay, five years. And and don't forget, the last two or three years has been very difficult in terms of the macro, right.

Hey, good afternoon, Lan and David. Uh, congratulations on the nice turnaround here. I I was hoping you could talk about the sustainability of the free cash flow, uh alen. You you opened your comments, just talking about free cash flow. I think that's such an important part of the story. Just talk about it. You know, can you can you sustain these levels and where does it go to if we feel a little bit of improvement in the, in the macro? Thanks.

Alain Bdard: And we still generate a lot of cash. You know, 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. You know, people say, well, you give all your cash away, you're not going to be in a position to grow the company.

We 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.

Alain Bdard: 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, bad timing there. But I mean, this has always been the focus. So as an example, we just give the example of Dasky, 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, if you would 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 Dasky guys, their thinking was, well, we got to run it ourselves with our own asset.

No people said well, you give all your cash away. You you're 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. But I mean there. But I mean this is always been the focus. So as an example, we just give the example of Dashi where these guys were good truckers. But we're we're changing those guys into good business structures 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 our specialty if you would look at the the revenue in Canada of our specialty truck load the balance between the revenue from our asset and the revenue from our brokerage is not the same as the us because in the US the Dashi guys, they're they're thinking was well we got to run it. Our

Alain Bdard: Yes, we do a little bit of brokerage here and there. So we're changing that in the U.S. So again, assets 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, what's your thought on that? It sounds like there's opportunity for it to step up from here or, you know, what is it? Oh yeah, for sure. You can be a little more explicit on that.

With our own assets, yes, we do a little bit of brokers here and there. So we're changing that in the U.S. Again, assets 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.

Alain Bdard: For sure. Thanks. Yeah, because if you look at what we do in Canada, I mean, my PNC and my Canadian LTL are really very running light in terms of assets. And this is what we're trying to do with Dasky 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, 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 a billion dollars U.S.

So I I I'm sorry. I so in terms of the sustainability of this level, like what's, what's your thought on that? It it sounds like there's opportunity for it to step up from here or you know, what is it? Oh, yeah, for sure. Is it going to be a little more explicit on that for sure? Thanks.

Yeah. Yeah, because if you look at what we do in Canada, I mean my PNC in my Canadian LTL are really very light in terms of assets, and this is what we're trying to do with Dashi and our specialty truck here 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.

David Saperstein: in free cash flow? And the market is helping us, absolutely. Yeah, because when you think about it, what's the first contributing element to the free cash flow? It's the net income. 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 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-right model in the recently acquired businesses that Mr. Bedard went through.

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 a billion dollars US? And the casual in the market is helping us? Absolutely. Yeah, because when you think about what's the first, what's the first...

Uh, a contributing element to the free cash flow is the net income. Okay, so as the business route, as the environment recovers, everything recovers, and then income goes up. Perfect. Okay. Then, what? Well, when we start making a lot of money,

David Saperstein: 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 with earnings. And you will not see a any any sort of large step up of adding capacity through assets. And also, we have a few one-timers on the real estate side, because we're also adjusting our real estate portfolio to the reality of the world today.

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. Right model in the recently, acquired business, this is Mr. Barr went went went through. And, um, and and so the incremental earnings dropped straight to the, 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, you know, as as Revenue goes up. But that's it. So the free should expect the free cash to go up. Uh,

Along with earnings, you will not see, uh, ah, ah, uh, uh, any sort of large step up in adding capacity through assets? Yeah.

David Saperstein: So this is also something that is going to help us in 2025, 2026, 2027, down the road.

And and also we have a few 1 timers on the real estate side. Hey we have a few 1 timers on the real estate side that you know, because we're also, you know, adjusting our real estate for a full year to the reality of uh, of the world today. So, you know, this is also something that is going to help us in.

25, 26, 27 down the road. Yep.

David Saperstein: Scott, 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 improved.

David Saperstein: Yeah, yeah. 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, you know, the more advanced Optum 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.

Started that. That's a 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 the actual steps are that you're taking there to improve the service and get it to look a bit more like some of your peers. Some of your peers have been pretty open about the steps that they take to step up service, whether that's putting, you know, airbags around the freight or dimensioning 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?

Talked about some of the success that, that we've had their, the the second is Cargo claims and there. Yes, we're using straps. We're experimenting with cardboard. Uh, and uh, and, and so, we are looking at at, at, at various, uh, consumables to be able to improve, uh, the, the the cargo claims the third is

David Saperstein: 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 line hole element to that. Got it. Okay, wonderful. Thanks for the time. Thank you.

Is missed pickups, which were addressing through, uh, first of all, better systems we're using, you know, the more advanced Optimum pnd, uh, 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 Miss pickups are not acceptable. Uh and and then and then of course the last is on time delivery and uh as it relates to that there's a there's a culture element to that and then there's also a line haul element to that

Got it. Okay, wonderful. Thanks for the time.

Ken Hoexter: Your next question comes from the line of Ken Hoexter from Bank of America. Your line is now open. Hey, good afternoon, Alain and David. 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 two 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 US should stay basically flat into 3Q, 4Q.

Thank you.

Your next question comes from the line of Ken Hawker from Bank of America. Your line is not open.

Hey, good afternoon Elaine and David Goodier. Are you on the call again?

David Saperstein: So is it truckload? Is it logistics? What falls off? Or is it just freight in the third quarter? Yeah, listen, I think so, you know, he said, you know, 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 a truck delivery business as just the industry pulls back on capex. And then I think there's a question mark that, you know, we have that we We don't have the answer to, and we won't until the Corps is over, which is how much of the freight dynamics that we're seeing right now are related to this stop, start, stop again, you know, dynamic related to the tariffs, right?

I just want to come back to the the second quarter Outlook, right? So it's a big pullback and I know you said it's a normal seasonal drop, but I 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 is what drops off, right? Because Elaine already mentioned LTL margins at us. Should stay basically flat into 3 Q4 Q. So is is it truckload? Is it Logistics? What what what falls off or is it just Freight in the third quarter?

Yeah, listen, I think so. You know, you said, you know, 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 a bit as well. Um, the logistics, uh, could also compress a bit with, uh, the uh, the, the lack of truck deliveries and our truck delivery business as just the industry. Uh,

pulls pulls back on on on capex and then I and I think there's a there's a

Question mark that, you know, we have that we.

David Saperstein: 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?

David Saperstein: But then at the same time, you've got peak season coming, so maybe – 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. And David, can you just remind us what percentage is related to West Coast ramp? No, boy. Well, it's probably, so on our LTL, around half of it is retail.

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 this. Stop start stop again, you know dynamic related to the tariffs, right? We saw that Imports into the west coast of the us. We're way up in June, right? So we're benefiting from those Freight flows. Now uh, what what's going to happen when those are done? But then at the same time, you've got peak season coming so maybe so we we we are just

Conscious of the fact that it difficult to extrapolate. What you're seeing right now, uh, out to the Future because of the the, the start and stop nature of the Imports that have been coming into the country as a result of of, uh, of the Tariff stuff which

It looks like, um, maybe the worst of that volatility is behind us.

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

Alain Bdard: 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. Yeah, because don't forget, we used to be part of UPS, and UPS is a retail machine. Yeah. So 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-based customer that we have at desk. right? Because again, UPS was a retail machine. UPS rate was the same.

No, boy. It's well, it's probably... So, on our LTL, around half of it is retail and, um, I couldn't tell you how much of those are related to West Coast imports. Um, but, uh, I think a lot of that retail stuff is coming from China. Yeah. Because don't forget, we used to be part of UPS, and UPS is a retail machine. Yeah.

Alain Bdard: We said, no, no, no, no, guys, let's move more into the industrial environment. Okay. And through the Dasky 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. 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, yeah, there could be some effect to that, but to say that we've seen something so far, I would not say that.

So it's a transition more and more into industrial freight. And, 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 a desk here, right? Because again, UPS was a retail machine; UPS rates were the same. We said, "No, no, no, no, no, guys, let's move more into the industrial environment." Okay? And through the dashboard sales team, we're opening doors to our LTL team.

To see. Hey, can we do something with you guys? Right, like a Carter, pillar like a John Deere, all these major industrial customers that we service on the industrial side but we don't on the other 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 sign being done. Do you think you're losing share or have you stabilized? Maybe thoughts on that backdrop?

Yeah.

Alain Bdard: But in terms of our volume, okay, I mean, we've been going down for the last two or three 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 understands that it's the chicken and the egg, right? So what comes first? Well, we know what comes first is the quality of service.

Alain Bdard: If you don't have that, I mean, and you're competing with good peers that provide a good service, well, 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've got to be stupid to miss 3% of your shipment, miss pickup, because that's 3% of shipment that you're not going to have because you just missed it because you're stupid. So now we're down to one, okay, we should be down to zero. So again, this is all things that, you know, the guys are focused and it's like a religion.

I mean so when I talked to our truckload guys, they believe that, yeah, there could be some effect to that, but uh, to say that we've seen some things so far, I would not say that. But um, 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. Uh, 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. Not nothing big. But again, this is also related to improving the service. This is where the guy now. Understands that is the chicken in the egg, right? So what comes first? Well, we know what comes first is the quality of service if you don't have that. I mean and you're competing with good peers that provide a good service. Well, good luck. I mean, it's going to be tough. So this is what

Alain Bdard: But again, like I was saying earlier to a different analyst, I mean, it's not one quarter that's going to convince the industry, the shippers that, oh, maybe it's a blip, maybe it's like, oh, it's... Flavor of the month now, right? No, no, no, no. We have to prove that this is gonna be consistent, sustainable, and this is why, you know, when we go back and talk about USLTL Q3 at 94, 95 OR is because we wanna be cautious. We wanna be prudent. I hope that we do better than that, but I mean, this is the minimum goal.

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 miss pick-up because that's 3% of shipping that you're not going to have because you just missed it because you're stupid. So now we're down to 1. Okay, we should be down to zero. So again, this is all things that, you know, the guys are focused on and it's like a religion. So, but again, like I was saying earlier,

To different analysts, I mean it's not one quarter that's going to convince our industry, the shipper, that, oh maybe it's a blip. Maybe it's like, oh it's...

This flavor of the month now, right? No, no, no, no, no. We have to prove that this is going to be consistent and sustainable. This is why, you know, when we go back and talk about our LTL, Q3 at 94-95% of our is 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.

Ken Hoexter: Appreciate your thoughts and insight as always. Thanks, Lane. Thanks, Dave. Thank you, Ken.

Appreciate your thoughts and insight as always. Thanks, Lane. Thank you.

Bascome Majors: Your next question comes from the line of Bascome Majors from Susquehanna. Your line is now open. Thanks for taking my questions. David, we go back to the cash flow discussion from earlier. You talked about, I think Mr. Radar talked about getting close to a billion free cash flow in a more normalized environment. Do you have a sense of where you might shake out this year?

Thank you, Ken.

Your next question comes from the line of Bascom Majors from Suski Hannah. Your line is now open.

Yep. Thanks for taking my questions. Uh, David, we go back to the cash flow discussion from earlier. Uh, you talked about, uh, I think Mr. Radar talked about getting, you know, close to.

David Saperstein: And just to clarify on the quarterly outlook, I know you're optimistic that US 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? Thank Yeah, so I think that free cash will be probably in the $700 range. for the you know, in motion, exactly, it takes shape.

A 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? Thank you.

Yeah, so I think that, um, free cash will be probably in the $700 range.

David Saperstein: So, you know, 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 Dasky in Q3 and in 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 US, what happened to us in Q4, that is not normal seasonality, that was related to us losing a lot of SMV, and so that will not apply.

For the year. Uh, and, you know, as it relates to the industrial uh, piece. I do think that it takes time. Stimulus, takes time to course through the economy. And when this, this this big tax break for capex is is going to take some time. So, I think that's really a 26 event when we start to see those projects, you know, really, uh, uh, you know, in in, in, in motion exactly. It takes takes shape. So, you know, as it relates to seasonality in the fourth quarter, the the the best way to to look at that would be if you're asking about the truckload, um, to look at what we did between Q3 and Q4 last year because it's we had dassey in Q3 and in Q4 last year. So, the the the whole kind of picture is Apples to Apples. And uh, give you a sense for the the sequential movements that we would expect to see. I think that on the LTL side, it was a bit of an aberration, um, in the

David Saperstein: 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. Thank you.

Us. 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. Um, in terms of uh the margin compression that we saw last year that that will will not be repeated. Uh it it is a uh uh more difficult.

Border. So it's normal to have some pullback in Q4 relative to Q3, but certainly not like what we saw last year.

Thank you.

Benoit Poirier: Your next question comes from the line of Benoit Poirier from the Jordan Capital Markets. Your line is now open. Yeah, good morning, Alain. Good morning, David. 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 Well, 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?

Your next question comes from the line of Benwa Portier from Jordan Capital Markets. Your line is now open.

Just looking at the financial leverage, you've been a disciplined capital allocator. You ended the quarter with a leverage of 2.35. You mentioned a clear desire to pursue buybacks given where the stock is. I'm 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?

David Saperstein: Let's say 2.1, we're at 2.35 now, 2.1, so this is the way we see it.

Alain Bdard: And now, in terms of a deal of size, you know... The approach that we have is that we could live all the way up to three because we generate so much cash, but we're not going to go above three, that's for sure. So up to three, and then very fast that year is we want to bring that leverage down to more like under the 2.5, 2.2, 2.25, 2.35, in that lead.

Well, I think our plan, if I correct me if I'm wrong David is that uh based on our plan we're going to end up the year around 2 2.1%, right. Let's say 2.1. We're at 235 now. 2.1. Yeah. So uh, this is the way we see it and now in terms of uh of a deal of of size, you know,

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...

and then,

Very fast that year, we want to bring that leverage down to more like under 2.5, to the 2.2, 2.25, 2.35 in that lead.

Benoit Poirier: Okay, that's a very good caller. And Alain, you mentioned great caller about the industrial, your exposure to industrial, the comments, positive comments about the potential recovery in 2026. Obviously, logistic 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 comments. How much upside could we see next year in terms of earning powers, whether we could see a $6 of EPS and maybe 90% OR for US LTO, whether it's doable. Yeah, it's still, Benoit, it's still too early for us to talk about 26 because we are in a tough time just to talk about Q3.

Okay, that that's very good caller and Ela you mentioned, great caller about the uh, industrial your exposure to Industrial the comments. Positive comments about the potential recovery in 2026 obviously. Logistic is also depressed this year but, uh, 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? Uh, next year, in terms of earning Powers, whether we could see a $6 a VPS and maybe 90% or for us LTL whether it's a doable.

Alain Bdard: But going back to logistics, I mean, logistics, okay, our GHT division is going through some tough times right now because nobody's buying trucks, right? You know, the OEMs are down 15, 20, 30%. So 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 the, you know, not so good first six months of the year. Okay. So we were running at about 95% of plan. Now, okay, we believe that the last six months of 25, we're going to be closer to a 98, 99% of plan.

Yeah, it's still. But anyway, it's still too early for us to talk about 2026 because we are having a tough time just to talk about Q3. But going back to logistics, I mean, logistics. Okay, our GHT division is going through some tough times right now because nobody's buying trucks, right? So, you know, the OEMs are down 15%, 20%, 30%. But that will correct itself probably in 2026, according to the forecasts we have from the OEM. Okay, that being said,

Uh, our U.S. Logistics, uh, the

Alain Bdard: 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 to 220, okay, with the business we have today. And I think we're going to end up the year probably like 160 or something like that. So GHT is a big, big thing there. But according to GHT 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 thing there with the new plan of Mr. Trump, okay, probably, okay, GHT will be back to being very busy in 26.

Alain Bdard: So that's going to help us.

You know, not so good. For the first six months of the year, okay, we were running at about 95% of plan now. We believe that the last six months of '25 will be closer to 98% or 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, I think we're going to end up the year probably like $160 million or something like that. So GHD is a big, big thing there. But according to GHD 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 thing there with the new plan of Mr. Trump, okay? Probably, okay. GHD will be back to being very busy in '26, so that's going to help us.

Alain Bdard: Thank you very much for the time. Thank you, bye-bye.

Thank you very much for that time.

Konark Gupta: Your next question comes from the line of Konark Gupta from Scotiabank. Your line is now open. Thanks, and good morning, Ali and David. Sorry, good afternoon. In fact, just, you know, wanted to get back to the SMB mix here.

Thank you. Bye. By the way.

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

Alain Bdard: Can you help us understand, you know, how, what made these SMB accounts, whichever you got back, what made them come back, you know, and like, what was the reason in the first place that left here? Because we're focused on them now, you know, we care about them, you know, we are really, as an example, David was talking about Ms. Pickup, I mean, we really focus on Ms. 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 account, instead of just not caring, okay, now it's a real focus of ours.

Thanks and good morning, Ellie and David. Uh, sorry, good afternoon in fact. Um, just, um, you know, wanted to get back to the SMB mix here. Uh, can you help us understand, you know, what made these SMB accounts, whichever you got back, what made them come back, you know? And like, what was the reason in the first place that left here?

Alain Bdard: 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 third and 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.

With good service.

Alain Bdard: But small, medium-sized account is mostly next day, so now my service is up to par to our peers. Makes sense, makes sense.

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 third and the third, 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, so now, my service is up to par to our peers.

On the next day.

Alain Bdard: So it's a service-based winning back, not a price-based winning back. Yeah. Thanks. No, no, no, not the price. I'm glad to hear.

Makes sense, makes sense. So it's a service-based getting back, not the price like that. Thanks and no, no, no, no, not the price. No, no, no.

Alain Bdard: And then just my follow-up would be on the capacity side. I think you laid out some capacity numbers for the truckload business, Podesti, etc. What about US LTL and Canadian LTL? How many does, how many trucks or trailers, maybe way too much in the US and Canada on the LTL side? I mean, do you need to rationalize some or you still need to add more for the future? Now, the Canadian side, we're done, because, you know, we've just acquired Kindersley about a year, year, year and a half ago, so we're done with Kindersley, we've acquired also Hercules in Canada and in the U.S.

I'm glad to hear and then just my follow-up would be on the capacity side. I think you laid out some, um, you know, capacity numbers for for the truckload business. Uh, pesky Etc. What about us LTL and Canadian LTL? You know how how many doors? How many trucks or trailers your your, you know? Uh you know, maybe way too much in in the US and Canada on the LTL side. I mean do you need to rationalize some or or or you still need to add more for the future?

No, the Canadian sides were done because, you know, we've just acquired Kinder's knee about a year, year and a half ago. So we're done with Kindersley. We've also acquired Hercules in Canada and in the U.S.

Alain Bdard: So Hercules, we're done in Canada. We're not done in the US yet. So the guys are working on the US side right now. But the rest of our business in Canada is okay. We have no issues. In terms of US LTL, real estate, we still have about 3,000 doors too many, three to 4,000 doors too many. So you should see us during the next six months do some trade, some swap with some of our peers that we do all the time. So that should help us reduce the carrying costs of those real estate that we have no use for it.

Alain Bdard: You know, 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.

So Hercules, we're done in Canada, we're not done in the US yet, so the guys are working on the US side right now. Um, but the rest of our business in Canada is is okay. We have no issues in terms of uh us LTL uh real estate, we still have about 3,000 doors to many 3 to 4 thousand doors to 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, uh, so that should help us really, you know, reduce the carrying cost of those real estate that, you know, we have no use for it. So,

Alain Bdard: Okay, that's very helpful. Thank you.

You know, 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.

Okay, that's very helpful. Thank you.

Elliot Alper: Your next question comes from the line of Elliot Alper from D.D. Coven. Your line is now open. Hey, great. Yeah, this is Elliot Alper, Jason Seidl. Maybe just follow up to the last question on T-Force. 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 little creative to maybe the total book? Is it seeing incremental challenges given some of these players are looking to grow share?

Your next question comes from the line of Elliot Alper from DD. Cowin, your line is now open.

Hey, great. Yeah, this is valid for Jason Sidle. Maybe just 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 that will be creative to maybe the total book seeing incremental challenges, given some of these players are looking to grow share?

Alain Bdard: David Saperstein, Ken Hoexter, Daniel Imbro, Walter Spracklin, Benoit Poirier, Kevin Chiang, 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, you know, 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. You know, so what is good for me is not necessarily as good or what is good for my peers is not necessarily good for me.

On the Tariff site. I, I don't see anything any issues with the, with the small and medium-sized account with, with the Tariff. Hey David, no, no, no, no. We haven't seen that, no.

In terms of your other, your other question about, uh, you know, pricing and other people going after SMB. It's it's a market, right? It's a market. We we, we all, um, you know, we all know. Uh, LTL has good characteristics. Um, good Market structure, uh, which makes it a very attractive, uh, segments within Transportation. Um, and it's a market, it's a market that operates within those parameters.

Alain Bdard: 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, you know, 1:1 shipping could be good for me and one of my peers, not as good for him, depending on where the customer is, why my terminal is, you know. 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 for me than for the other guys, or maybe the other guys were just like me, so it's just about playing it smart.

Alain Bdard: 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 that we I mean, it's like more of the same guys. Thank you.

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,

Like more of the same, guys.

God, thank you.

Cameron Doerksen: Your next question comes from the line of Cameron Doerksen from National Bank. Your line is now open. Yeah, thanks. Good afternoon.

You're welcome.

Your next question comes from the line of Cameron Doerksen from National Bank. Your line is not open.

David Saperstein: 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 US 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 five 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 two years.

Yeah, thanks. Uh, good afternoon maybe just a couple of quick, I guess maybe modeling questions for for David. You mentioned, I guess, the sum of the tax rate changes or cash tax changes uh, from the the new US legislation I I guess. What's your expectation for? I guess effective tax rate uh going forward with that.

No tax rate won't change, it's just a cash tax benefit. It's a cash tax benefit that uh we estimate based on our capex over 5 years uh is worth um, 75 million cumulatively relative to uh what what our tax would have been um, without this law and of that 75 million. Um, 40 is realized uh, in the in in the first 2 years.

David Saperstein: Okay, okay, that's helpful.

David Saperstein: And maybe just I guess on the new debt issuance in the quarter, 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? Yeah, 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 five. Yeah, oh yeah. Yeah, globally, for sure, we're under five. And we can follow up on the exact calculation.

Okay. Okay. That that that's helpful and maybe just I guess on the, you know you need to uh do a debt issuance in the quarter. Uh like looks like pretty attractive terms. Are you able to update? I guess what? The kind of average interest rate is now for for TFI across the the entire company.

Uh, yeah, I think I think we, I think we put it in the mdna, but I can tell you that, the, the weighted average interest rate on this particular, uh, issuance was 4.8% fixed, right?

Uh, and we reimbursed debt that was, uh, costing 6.1.

Yeah.

But I think globally David.

David Saperstein: 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. Great job. That makes a lot of sense. Thanks very much. Thank you, Cameron.

We're in the 5. Yeah. Oh yeah. Yeah, globally globally. For sure. We're we're under 5. Um, and uh, and, and we can we can follow up on the exact calculation, uh, but this was a great, this was a great private placement for us. Um, we we, uh, we we managed to access, uh, the the markets at a great window. Uh, we reduced our interest expense as we discussed. Um, we increased the availability, uh, on

Revolver. We actually pushed the maturity out by a year as well, uh, in a separate transaction on the revolver. Uh, and um, and we also a better aligned our, our our currency mix, uh, with our cash flow, the currency of of our debt, uh, with the, uh, the currency mix of our cash flows. So, uh, we're very happy with the, with the transaction.

Great hope. That makes a lot of sense. Thanks very much.

Bruce Chan: Your last question comes from the line of Bruce Chan from Stifos. Your line is now open. Hey, good evening, guys. Thanks for squeezing me in here at the end.

Thank you, Cameron.

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

Alain Bdard: 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. 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 know, you'll be going at organic from this point forward? You know what? We need to prove to the investor that, you know, we are in control at USLTL. You know, we had a lot of, not a lot, but we had a few shareholders that were very disappointed.

Hey, good evening, guys. Uh, thanks for squeezing me in here at the end. Um, Lyn, I just wanted to ask a maybe 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 know, you'll be going at organic from this point forward?

You know what? We need to prove to the investor that, you know, we are in control at U.S. LTL.

Alain Bdard: They made a lot of money with TFI, but they were disappointed that they thought that we've lost control of T-Force rate. 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 one year of showing, hey guys, it's not a blimp, it's not a mistake, it's not something, no, no, it's true.

You know, 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, you know, we've lost control of TF Force rate.

So now we're starting to show that no, 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, you know, our investors, we have to convince them that we are in control. So let's say that we come out to Q3 and then Q4, and let's say Q1 of 2026, and now we have one year of showing, "Hey guys, it's not a blimp, it's not a mistake, it's not..."

Alain Bdard: 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 T-Force rate, our US LTL. So this is what we have to prove. If we would do a deal of size in the trundle world, 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, you know, those guys are really in control, okay, in a very difficult environment.

Alain Bdard: So they're buying something of size, 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, you know, in 26.

Meant so they're buying something of size. Okay, they have a great team; they'll fix it. Uh, 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, you know, in 2026.

David Saperstein: We'll re-look 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.

We'll, uh, 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 is, the yield is like double digits there. There's nothing we can buy today that's cheaper than that with the best, uh, potential.

David Saperstein: And there just may be a lot of cleanup, you know, perhaps for you, David. I don't think I heard it, but any color on LTL contract renewals? Yeah, listen, the contract renewals continue to be in the sort of, you know, low to mid-single digits. The question is the mix, right? It's of little use if, you know, 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 to specifically answer your question, that's where the renewals are.

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

Uh, yeah, go listen. The contract renewals continued to be in the, the, the, the sort of, you know, low to mid single digits. Uh, the, the question is the mix, right? It it's a little use if, you know, 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. Um, but specifically to answer your question, that’s where the renewals are.

David Saperstein: Good. Okay. Perfect. Yeah. Thank you.

Good. Okay, perfect. Yeah. Thank you.

Thank you.

Operator: There are no further questions at this time.

Alain Bdard: I will now turn the call over to Alain Bdard. 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.

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

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

All right, so thank you. 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 for 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.