Q2 2025 TFI International Inc Earnings Call

Operator: Welcome to TFI International's second 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 second quarter 2025 earnings call at this time. All participants are now listening? Only mode

Operator: Colors 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 colors 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 that you will provide provided at that time.

Operator: I would also like to remind everyone that this conference call is being 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.

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

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

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

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

Alain Bedard: Well, thank you very much, Operator, for the introduction, and thank you, everyone, for joining today's call. Within the past hour, we reported our quarterly results that demonstrate solid margin performance across all of our business segments. This reflects the hard work of the talented team members across our organization, even as economic uncertainty continues to weigh on industry-wide freight volumes. As you've heard me say, strong free cash flow is always a top priority at TFI International, and I'm pleased to report that we had yet another strong quarter in that regard, producing $182 million of free cash flow.

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 of 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 dollars of free cash flow.

Alain Bedard: 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.

Votes during the second quarter and into the third.

Alain Bedard: 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, 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.

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

So, let's begin with a quick review of our consolidated results. During the second quarter, we had a total revenue before fuel surcharge of $1.8 billion compared to $2 billion a year earlier.

As I mentioned, we had strong margin performance across the board, and we generated $170 million of operating income, representing a 9.5% margin, which is an increase of just 1 percentage point compared to 2.5% in the prior year period.

We also produce adjusted net income of 112 million relative to 146 Million last year, and our adjusted DPS of a dollar to 34 compares to a dollar 71.

In terms of net cash from operating activities, we generated $247 million, which was virtually flat with the prior year period.

Alain Bedard: That's up 20% due in part to favorable working capital dynamics. dynamics, as well as moderately lower capex relative to last year.

And free cash flow. As you heard me say was 182 million and that was significantly about the second quarter of 2024 results of 151 million. That's of 20% due in part of the favorable working capital dynamic.

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

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

Alain Bedard: Let's turn to the next 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 solved 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.

Let's turn to the next second quarter results for each of our three business segments, starting with LTL. This quarter was 39% of segmented revenue before fuel surcharge and down 11% year-over-year to $704 million, with operating income of $74 million compared 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 investor capital was 12.9%.

Alain Bedard: 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 industrial and market. 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 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 $38M compared to $51M, representing a 9.6% operating margin as compared to an 11.4% in the prior year, second quarter, and our return to investor capital was $15.7M.

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

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

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

Demand, however, this quarter is also delivered. There is a 250 basis point sequential improvement relative to the first quarter of 2025.

Wrapping up on truck load, our return on investment 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 an 11.4% in the prior year. In the second quarter, our return on invested capital was 15.7.

Alain Bedard: 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 long-standing important commitments. Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares.

In terms of the balance sheet, we benefited from the $192 million of second-quarter free cash flow, and then the June funded debt to EBITDA ratio is 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 long-standing important commitments.

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

Alain Bedard: 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 Bedard: Alright, 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 an EPS in the range of $1.010 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.

Operator: 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: Should you wish to decline from the polling process, please press star followed by the number 2. A reminder, please limit yourselves to one question and one follow-up.

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?

Ravi Shanker: Your first question comes from the line of Ravi Shanker from Morgan Stanley. Your line is now open. Great. Thanks. Thanks for the 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 Robbie 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? That is really helpful. I mean, the A.R.A.E. Thanks for that.

Uh, great, thanks. Thanks for the time. Thanks, Alain. Uh, great to see the turnaround 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?

Yeah, you know, when Ravi, it's always been a, a big discussion at TFI. I mean, we, we are a very cost-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 Optimum we've, we've implemented options for our Leno. 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 were very proud with what happened there. If you go back 4 years ago, we used to to run Lino miles on the rail for about more.

Than 30% of our miles. Now we're down to closer to 20% of our miles and we'll probably drop that and this is all because Optum 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 0.7% of Revenue, we used to be at 0.9 I think T4 straight best result has been 0.4. If you look at our Canadian operation, we run 0.2 and I think the best beer in the US runs 0.

So this is again a huge cost for the company, and the same is true of accidents. So we just hire 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 on Metric some 10 to 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...

We need to improve that like a 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 or the labor intensity of our operation, you know, maybe on the collection side, maybe on appointment uh Freight side. I mean, we're looking at all kinds of stuff to reduce reduce reduce our costs and be the tiger lean and mean.

That is really absolutely. I mean, the agent.

Alain Bedard: Maybe as a follow-up question, if you can give us a little more color on just how customers are talking to you about the tariff environment, especially Canada, U.S., are there any structural changes in supply chains and any impact on you guys long-term, if you can tell us about that? Well, that's for sure. If you look at our Canadian LTL, we're down. We're down. I mean, we're still doing really well, but we're down. And one of the reasons we're down is because all the trade between US and Canada on the LTL side is down. And this is the most profitable business that we have on the LTL, is the trade between US and Canada.

Please go ahead, Robin. Sorry. Uh, um, so thanks for 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-US. Uh, 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 Bedard: So for sure, normally the flow is two north, one south. Right now, the two north are down to about one. 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 in kind of instability right now.

Well, that's for sure. If you look at our Canadian hotel, 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. On the LTL, it's the trade between the U.S. and Canada. So for sure, normally the flow is two northbound outs right now, okay.

To know, they're down to about 1.

Okay, so we are losing now the minute. The tariff is settled with Canada and Mexico. I mean, we should do fine. I mean, things will come back. It's just like this.

Alain Bedard: 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 25. So yes, we're a little bit affected. We're mostly affected by the instability in our industrial truckload base in the US, 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.

Alain Bedard: It's very quiet right now.

Alain Bedard: Hopefully with this big, beautiful bill that 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 US will start to grow again. Okay, well, we missed we missed the call. Maybe we were maybe one year too early. Very good.

So, yes, we're a little bit affected. We're mostly affected by the instability in our industrial truckload base. In the US where a lot of our customers are just waiting on the sidelines 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 to our clothes are down like, uh, around 10%, which is not normal. I mean, it's just like uh it's it's quiet. It's very quiet right now hopefully with this big beautiful build that that that should help investment and and that's what the investment we made on desk here a year ago that was because we thought that the industrial. Okay. Uh business in the US will will start to grow again. Okay, well we missed we missed the call. Maybe we were maybe 1 year too early.

Ravi Shanker: Thank you. Thank you, Ravi.

Very good. Thank you.

Thank you, Robbie.

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

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

David Saperstein: 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 It's probably a little bit of a steeper decline, Q2 to Q3, than we typically see, so just any thoughts. 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 $0.11 of EPS, and margins contracted pretty much across the board, across the divisions and the segments. And so that's all that we're forecasting there is just normal, seasonal, sequential declines.

Hey, thanks. Uh, afternoon. Uh, maybe if you can just give us a little bit more color on the Q3 guidance, $110 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?

David Saperstein: And the extent to which we're able to continue to drive these idiosyncratic opportunities that we have over the course of this quarter will, of course, come to offset some of that.

You know, Scott this is really based on just the historical seasonality of the business. If you look last last year, due to the Q3 we dropped 11 cents, uh, of eps and uh, and, and, and margins contracted pretty much across 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, will of course come to offset some of that.

Scott Group: 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 where you.

And then maybe.

On how you think about the progression of...

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

Alain Bedard: 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 focus is a 94 OR like we've done in Q2. 94, 95 OR, I think that that is the goal that is attainable today with the kind of volume we have, right?

You know, what's go? I think that our guys at T Force rate, uh, will do a great job again. In Q3, I would say that, you know, 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 of our freight, okay? Year over year. Uh, and when you talk to our team here, 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 95 or 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.

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

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

Scott Group: Thanks, Scott.

Walter Spracklin: Your next question comes from the line of Walter Spracklin from RBC Capital Markets. Your line is now open. Yeah, thanks very much. Good afternoon. Just on the guide in the back half, I know you're not, or I guess.

Thanks Scott.

Your next question comes from the line of Walter Spracklin from RBC Capital Markets. Your line is not 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 either implied that 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.

Alain Bedard: Is there anything that would suggest to you that is this, are you seeing any signs that this could start to improve front half of 26? Are you thinking now more back half of 26? Just curious your view on the overall macro here from the signals you're getting. Well, in terms of the industrial freight in the U.S., Walter, we believe that this new budget that the Trump administration came up with, I think it's going to revive the investment in the industrial sector, maybe the housing, maybe school, maybe all kinds of investment. Okay, so this is why, you know, since we saw this new plan of the U.S.

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, uh, start to improve in the front half of 2026? Or are you thinking now, or the back half of 2026? Just curious your view on the overall macro here from the signals you're getting.

Alain Bedard: administration, we feel way better that we're finally going to get out of this freight recession that we've 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, 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?

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 we better that we're finally going to get out of this Freight recession. There have been stuck in the mud for close to 3 years now.

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.

Alain Bedard: 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.

Alain Bedard: Late 25, maybe, okay, early 26, because don't forget, these projects sometimes take time, so we'll see, but at least the confidence, okay, when I talk to the guys in the U.S., is coming back.

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: On the Canadian side, I mean, there's a lot of instability. Once we know what's going to be the deal with the U.S., I mean, then the Canadian will be able to say, okay, this is what we need to do now, right? Yeah, and I think what underpins that is really being able to see the effects of the cash tax savings, right, and thinking about how that flows through the economy. I mean, just us, our cash tax savings in the U.S. this year are going to be $20 million, and next year it's going to be another $20 million, and think about that throughout the economy, and this is really going to go towards companies that are doing CapEx, right?

Late 25. Maybe. Okay. Early 26, because don't forget these projects, sometime takes time. 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. Yeah. 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 this year we'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

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

Uh, companies that are doing capex, right? And these are the companies that are our customers. I mean, now that we own Dassey, right? 72% of our specialized operation in the U.S. is flatbed. We have $1.3 billion of U.S. flatbed exposure revenue that's this year based on, you know, today's depressed dollars. So, when you think about rates coming down and you think about all of this cash tax savings coursing through the economy,

That's what gives us a little bit of confidence. 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: It sounded more confident than I've heard you in a while, so that's great.

Walter Spracklin: My follow-up question is on M&A.

Alain Bedard: Can you talk to us a little bit about how you're looking at tuck-ins, what your budget would be over the balance of the year and into next for just tuck-in M&A, and then what your thoughts are toward a larger deal? I know you pointed to 2026. Is that still in the cards? Yeah. So for 25, Walter, it's pretty simple.

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 Bedard: The M&A activity is buying back TFI. 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 Bedard: You know, I think that Probably, you could see us getting involved into something of size. Don't forget, the last deal we did was late 23 into 24, so that was like two years ago.

Yeah, yeah. So, 425 Walters is pretty simple. The M&A activity is buying back TFI, right? That's what we're doing and 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

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

Walter Spracklin: 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 their customer and hopefully makes money, that's the difference between Thank you very much, gentlemen. Pleasure, Walter.

In 26. You 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 know our control. We're we're transforming the good Dash key 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 need 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.

Alain Bedard: Yeah, I was wondering if you could give a little more color on the USLTL side and some of the other things you've been working on, such as the sales force, you know, rejiggering, penetration efforts on the small to mid-sized 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. I have to tell you that since we bought UPS Rate, T-Force Rate now, it's been a rock in our shoes. We've never done well. We've tried everything, but I think that now for the first time, since we bought the company, we're starting to have a good sales team on the medium-sized account that is highly motivated and getting results.

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 uslt Elsa 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.

Yeah, very good question, Jordan. And I, you know, I have to tell you that, uh,

Sales have been strong since we bought UPS Freight, T Force Freight. Now it's been.

Alain Bedard: The number of shipments that went down like crazy about six months to nine months ago versus the total shipment, now it's coming back, and the guys are very motivated. We feel really, really good that finally, through Chris's leadership, now we are regenerating this sales team.

David Saperstein: Also, at the same time, one thing that has always been an issue with our customer is that billing customer, it's like we always had problems with 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 is 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, 1 thing that has always been an issue with our customers, is that

David Saperstein: David, could you talk a little bit about that with PRISM, this new software? Yeah, for sure, especially now that we've corrected the problems, we can explain exactly what they were. PRISM is a new billing software, which is helping us with our billing and our billing accuracy. We've also changed our processes so that we no longer deliver until you have an account with us or we have your credit card. 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.

You know, billing customer. Okay. 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. That's yeah, I mean for, for sure, especially now that we've, we've, uh, 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. Yes, I went down from 43 days.

David Saperstein: It's very rare to see such a dramatic reduction. Why is that? 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. This also helps the customer service. This also helps the customer experience because there's no running around afterwards trying to figure out the billing. 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.

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. This also helps, uh, the customer experience because uh, there there's there's there's no running around, uh, afterwards trying to figure out the billing.

David Saperstein: I mean, it's smoother, it's getting easier to do business with T-Force rate 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.

David Saperstein: And that's important, that's contributing to the results. And then the last thing is the GFP. We've now put up our third sequential quarter of GFP stability, we're up a little bit. But stability for 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.

So that also helps the motivation of the sales guy because now they don't get calls from customers and you're building department. They don't know what they're doing or this or that. I mean, it's it's smoother. It's getting easier to do business with T4 straight 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'll you'll notice that the our our length of Haul is down a little bit. The SMB mix has improved. Okay. The big problem that we had over the last several quarters was um a 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 uh 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 sales.

Jordan Alliger: Great, thank you.

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 Wits from UBS. Your line is not open.

Tom Wadewitz: Is it, you know, other things?

Alain Bedard: But just kind of where you're at in your journey of, you know, getting to have the LTL operation and service that you want to have. 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.

Yeah. Good afternoon. Um, I wanted to ask you a little bit more on your 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, but 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 your journey of, you know, getting to have the LTL operation and service that you want to have.

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.

Alain Bedard: 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. 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 our service. Okay, so we've improved 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?

Tom Wadewitz: Because now we move more and more freight on the truck instead of the 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 the customers satisfaction is like, May much much, much improved, right? So it's, uh, it's a change and we'll continue to improve that now, can we go less than 20%? Well it's 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 rail.

so,

Alain Bedard: 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, we know that. Where we are not up to par is 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.

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 I maybe related to that, it 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 Bedard: Now on the two to three days, this is where the guys are working on. So our service is not where it should be. I'm not saying that our service has improved, okay, on the next day we are comparable to our peers, and until such time that our service is comparable to our peers, our rate, 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.

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 4 days. Now, we're getting closer to our peers because now we move more away from the rail, okay? And with our own trucks, now on the 2 to

3 days. This is 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 Bedard: 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, which was a cancer for us, a cancer, because nobody cared. We were all the way up to 4% three years ago. Now we're hovering around 1%, still too much, because in Canada, we don't have missed pickup. I mean, we're zero. Right, so guys, one is better than three or four, but one is not good enough, so we have to keep improving this.

So, we're not there yet, Tom, but the guys are working on it, 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 offering around 1%. Still too much because in Canada, we don't have missed pickup. I mean, you were at zero.

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

Tom Wadewitz: So we're down like 42%, 43% year over year, so it's a major, major improvement. Okay, yeah, great. It's good to see the 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 are missed, pickups are down the missed 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.

Brian Ossenbeck: Thank you. 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.

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

Thank you, Tom.

Your next question comes from the line of Brian Osen Beck from JP Morgan. Your line is now open.

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

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

Alain Bedard: 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. 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?

I think you're right. Brian I mean 1 quarter does not make a year, right, you know. So so for sure the 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 a blimp of improvement and then those guys fall back in the same kind of wrote, right? So

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

Alain Bedard: But if things stay 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. to build that confidence. Well, we'll continue to improve.

Frustrated, service is up to par with the peers.

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

To build that confidence. Alright, we'll continue to improve.

Alain Bedard: Okay, and then At Dasky and in 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, what is it, business truckers instead of what they were before, but, you know, some updates on the asset side and then just the processes in terms of where you are now and what that could look like when the volumes do get Yeah, yeah, so very good question on Dasky.

Okay. Uh, and then

Yeah, Dowski and the flatbed side of things, um,

Maybe you can go into more detail in terms of... I think one point is that you needed to get rid of some equipment entries due to too much trailing equipment. Um, maybe some other operational changes to get these aligned with the business truckers and what they were before. But, um, you know, some updates 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 Bedard: 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. 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.

Yeah, yeah, so very good question on that key. I mean, you know, I think as I said on the call of Q1, by the summer, okay, all of Dash key 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 Bedard: 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 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.

So, if you look at my trailer account, the Dashi or specialized truck load, I'm down. Okay, if you look at my truck account, I'm down but not enough. So, I got way too many trucks sitting idling because my miles are down about 10% year-over-year. Okay, because my industrial customers are not that busy.

So now you'll see us improving. You know, if you look at my Q1, okay, of my specialty truckload versus Q2.

Alain Bedard: It's not normal to run a specialty truck load with a 90 OR. 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. 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 so far in Q2, but you can 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, that tells you how difficult it is in today's market.

I would 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, you know, we're doing okay, but the rates have improved. It's the velocity that's not there. So overall, after buying 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 26 will be running at an 8788 or and then continue the Improvement in a normal environment. Okay, if Market starts to help us or for sure, it will be way faster going towards an 85 or an 82 over time. 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.

Alain Bedard: 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, okay, but this is where the guys were slow, but I say guys, we gotta, you know, be a little bit more active.

That tells you how difficult it is in today's market. So I'm really proud of the guys. Improving what, 200 basis points quarter over quarter on the...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 shed about $20 million of capital, okay, in excess equipment, trailers, and trucks, 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, okay? But this is where the guys were slow. I said, guys, we got to, you know, be a little bit more active.

Brian Ossenbeck: Okay, thanks very much, appreciate it.

Okay. Thanks very much. Appreciate it.

Goodbye.

Daniel Imbro: Our next question comes from the line of Daniel Imbro from Stephens.

Daniel Imbro: Your line is now open. Yeah, hey, good evening, guys. Thanks for taking our question. 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. 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 a mix?

Your next question comes from the line of Daniel Imbro from Stevens. Your line is now open.

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

Alain Bedard: Is it just competitive pricing? Kind of what's happening with core yields there?

Elena, I want to follow up on the U.S. LTO pricing discussion. I think it makes a ton of sense. You're improving the missed pickups and service metrics. It takes time to show up in price, but I think the magnitude of the decline, down almost 7% year-over-year, is significant. Can you just walk through or unpack what the headwinds to yield are this year? Considering service is better, I would have thought maybe we saw a little bit of improvement, but was there a mix? Is it just competitive pricing? What's happening with core yields there?

Alain Bedard: 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, okay, five, six percent, okay, not the one that came out last week, but, you know, so there's price pressure a little bit, okay, not a disastrous, but there is some, okay, and for sure the mix is, the minute that we start gaining more on the SMB where the profitability is better, okay, we should come up with, you know, better revenue, okay, per shipment, et cetera, et cetera.

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

Alain Bedard: So it's a transition, okay, to move away from the corporate account and the 3PL as much as we can and to get to a goal where maybe 40% of your shipments are with the SMB.

David Saperstein: Yeah, and also, Daniel, our wait for shipment went up by almost as much as the yield went down, right? The wait for 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 it's, but the real, the main driver of the yield decline is the growing wait for shipment.

Did that we started gaining more in the SMB where the profitability is better. Okay, we should come up with, you know, better Revenue, okay, for shipping, etc, etc. So it's a transition. Okay to move away from the corporate account and the 3pl as much as we can and to get to a goal where maybe 40% of your shipment are with the SMB. Yeah, and and also Daniel our our weight per shipment went up by almost as much as the yield went down, right? The way per shipment was up over 5% so you know, caring have your have your 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 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 growth.

Growing weigh per shipment.

Daniel Imbro: Great. Helpful color.

Alain Bedard: 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. 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.

Great, no, 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 as we saw up there? How much can we extrapolate the two key results into the back half? Thanks.

Alain Bedard: 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. Great.

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

Kevin Chiang: 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. less than truckload for the past couple of quarters, you're down, you know, 50, 56, 57 million year over year, both in Q1 and Q2. Just just wondering, is that 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 but it does it does feel like you got some excess excess OPEX in 2024 in the back half of back half of last. Yeah, for sure. 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, 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.

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 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 in Q3 again or or are you starting to lap tough for comps? But but it does felt. It does feel like

You got some excess Opex in 2024, in the back half of last year.

David Saperstein: So there's the two pieces of it, right? It's not just about cutting, it's also about making some strategic investments, and certainly picking up the freight is a very high return on investment. Right. That makes sense.

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 so 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 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 those guys there. So, there's, there's the 2 pieces of it, right? It's not just about, uh, ah, ah, cut cutting. It's it's, it's also about making, uh, some strategic Investments. Um, and, uh, and certainly picking up the freight is a, a very high return on investment.

David Saperstein: Maybe just a clarification, David. I think you mentioned the Q3 guide of 110 to 125 just assumes normal seasonality. I guess if I ask 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. That normal seasonality would be we continue to operate the same way that we're operating now. That just, we maintain that, right? Okay. And then we just kind of have the seasonality apply. Perfect. Thank you for the clarification.

Right? That that makes sense and maybe just a clarification, uh, David. I think you mentioned, the Q3 guide of 1/10 to 125, just just assumes, normal seasonality. I guess I, if I asked you this way, any without without that assume then 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 maintain that, right? Okay. And then we just kind of have the seasonality applied to it.

David Saperstein: Thank you very much.

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

Ariel 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.

Alain Bedard: 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 sustain these levels and where does it go to if we see a little bit of improvement 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?

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 Bedard: 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, 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.

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, 5 years. And and don't forget the last 2 or 3 years has been very difficult in terms of the macro, right? 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 of TFI is the cash because cash permits us excess, free cash, permits us to reduce that, or give more to the shoulders 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,

Alain Bedard: 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 ourself 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. So 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 our

Alain Bedard: Yes, we do a little bit of brokerage here and there, so we're changing that in the U.S., so again, asset from the other guys, not your asset, improve your free cash flow, right? It's the same revenue, okay, maybe not the same margin, but you're not stuck with the capex or the accident, right?

Raw grain morphe 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 ourselves, we don't own assets. Yes, we do a little bit of Brokers here and there, so we're changing that in the US. So again, I said, 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 Bedard: 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. For sure. Thanks. Yeah, because if you look at what we do in Canada, 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 US, the same kind. It's harder to do for us in the US LTL because it's a unionized labor force, a little bit more difficult.

So I I I'm sorry. I so in terms of the sustainability of this level, like what's what, 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 because you're going to be a little more explicit on that for sure. Thanks.

Yeah. Yeah, because if you look at what we're doing in Canada, I mean my PNC and my Canadian LTL are really running light in terms of assets. This is what we're trying to do with Dashi and our specialty truck here in the U.S. The same kind, we... it's harder to do for us in the U.S. LTL because it's a unionized labor force.

Alain Bedard: 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 US 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.

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, do close to a billion dollars U.S. in free cash flow if the market is helping us? Absolutely. Yeah, because when you think about what's the first, what's the first.

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

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

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 businesses and Mr. Barr went went, went went through. And, and, 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,

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

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

27 down the road.

Why?

Ariel Rosa: Got it. That's wonderful, Culler.

David Saperstein: 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?

Got it, that's a wonderful color. And then I just wanted to stay on the point about the service in the LTL business. Uh,

David Saperstein: Here are the things that we're looking at. The first is billing accuracy. And as it relates to that, we've talked about the software and we've talked about some of the success that we've had there. The second is cargo claims. And there, yes, we're using straps, we're experimenting with cardboard, and so we are looking at various consumables to be able to improve the cargo claims. The third is missed pickups, which we're addressing through, first of all, better systems. We're using the more advanced 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.

I was hoping you could go into a little bit more detail on what the actual steps are that you're taking to improve the service and get it to look a bit more like your peers. Some of your peers have been pretty open about the steps 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?

Yeah, yeah. Look, here's the here. Are the things that, that we're looking at the first, the first is billing accuracy, okay? And as it relates to that, we've talked about, uh, the the software and we've 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, 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.

Ariel Rosa: 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.

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 whole element to that

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

Thank you.

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.

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

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

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 our 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...

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. Q4q so is is a 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 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

David Saperstein: We don't have the answer to, and we won't until the quarter's 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 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?

Question mark that we have that we...

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? Oh 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 court 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 were 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's 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 the the major the, the worst of that volatility is behind us.

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

Alain Bedard: 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. So it's a transition more and more into industrial trade. 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.

Oh boy. It's well it 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 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.

Alain Bedard: 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. Wonderful.

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. What? We don't on the LTL side.

Alain Bedard: And then my follow up, I guess, Alain, if you think about shipments down 10%, tons down six, you talked about the competitor that's already reported, but what's your big picture on 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 much? Do you think you're losing share? Have you stabilized? Maybe thoughts on the backdrop? 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.

Wonderful. And then my follow-up, I guess, Elaine. 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 down. Much do you think you're losing share? Have you stabilized? Maybe thoughts on that backdrop?

Yeah, I think that the English thing. There is just maybe for the truck little guys in the LTL world. I mean, so when I talked to our truckload guys, they believe that, yeah, there could be some effect to that, but uh,

Alain Bedard: 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.

To say that we've seen something so far, I would not say that. But in terms of our volume, okay, I mean we've been going down for the last 2 or 3 years, okay? In terms of volume. Uh, and now, a little bit like David was saying about the GFE, 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.

Alain Bedard: 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 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 miss 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.

Ken Hoexter: 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 shipper that, oh, maybe it's a blip. Maybe it's like, oh, it's... play the game. Appreciate your thoughts and insight, as always. Thanks, Lane. Thanks, Dave. Thank you, Ken.

Service. This is where the guy Now. Understand, that is the chicken and the egg, right? So what comes first? Well, we know what comes first is the quality of service. If you don't have that, I mean, and you're competing with good peers that provide a good service, good luck. I mean, it's going to be tough. So this is why the team is really focused on, like what David was saying about improving all the different factors. So you got to be stupid to miss 3% of your shipment, 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 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 a different analyst, I mean, it's not 1 quarter that's going to convince the industry, the shippers 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, no. We have to prove that this is going to be consistent and sustainable. And this is why, you know, when we go back and talk about us, LTL, Q3 at 94-95, or 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.

Appreciate your thoughts and insight as always. Thanks a lot. 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. Bédard 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? 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 again.

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. You talked about.

Uh, I think Mr. Radar talked about getting, you know, close to...

David Saperstein: Thank you. Yeah, so I think that free cash will be probably in the 700 range. As it relates to the industrial piece, I do think that stimulus takes time to course through the economy. This big tax break for CapEx is going to take some time. So, I think that's really a 2016 event, when we start to see those projects finish.

A billion in free cash flow in a more normalized environment. Do you have a sense of where you might shake out this year? Um, 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.

For the year, and you know, as it relates to the industrial piece, I do think that it takes time with stimulus; it takes time to, of course, flow through the economy. And when this big tax break for CapEx is, it's going to take some time. So I think that's really a 2026 event when we start to see those projects, you know, really.

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 U.S. what happened to us in Q4. That is not normal seasonality.

Benoit Poirier: That was related to us losing a lot of SMV, and so that will not apply. That trend between Q3 and Q4, in terms of the margin compression that we saw last year, that will not be repeated. It is a more difficult quarter, so it's normal to have some pullback in Q4 relative to Q3, but certainly not like what we saw last year. Thank you.

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

Thank you.

Alain Bedard: 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 Benoa Party from the Jordan Capital Markets. Your line is now open.

Yeah, good morning La. Good morning, David. Uh, just looking at the uh financial leverage, you've been a disciplined Capital allocator. You ended the quarter with the Leverage is 2.35, uh, mentioned that clear desire to pursue buyback given where the stock is, um, just wondering what could be the, uh, targeted leveraged by year end given the uh, 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 Bedard: 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, okay, because we generate so much cash, but we're not going to go above three, that's for sure. Okay, so up to three, and then, very fast, that year is we want to bring that leverage down, okay, to more like under the 2.5, 2.2, 2.25, 2.35, in that league.

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 leverage right. Let's say 2.1 we're at 235 now. 2.1. 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 is we want to bring that leverage down. Okay, to more like under the 2.5 with the 2.2 2.25 2.35 in that 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 positive 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 LTL, whether it's doable.

Okay, that that's a 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 and 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 power?

Hours, whether we could see a $6 VPS, and maybe 90% for us LTL, whether it's doable.

Alain Bedard: 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. But going back to logistics, I mean, logistics, okay, our GHD 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%. 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 at the, you know, not so good first six months of the year. Okay, so we were running at about 95% of plan.

Yeah, it's still Beno. 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 freight division is going through some tough times right now because nobody is buying trucks, right? So, you know, the OEMs are down 15%, 20%, 30%. But that will correct itself probably in 2026, according to the forecasts we have from the OEM. Okay? That being said, our U.S. Logistics at the...

Alain Bedard: Now, okay, we believe that the last six months of 25, we're gonna be closer to a 98, 99% of plan. So that should help us, because in a normal environment, if everything runs normal, the OE of our logistics before tax should be between 200 to 220, okay, with the business we have today. And I think we're gonna end up the year probably like 160 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.

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 will be closer to 98.99% of plan, so that should help us. Because in a normal environment, if everything runs normal, the OE of our logistics before tax should be between $200 million to $220 million. Okay? With the business we have today, I think we're going to end up the year probably like $160 million 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.

Alain Bedard: 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 gonna help us.

Guys will be pumping a lot of trucks in 2026, 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 2026, so that's going to help us.

Alain Bedard: Thank you very much for the time. Thank you. Bye-bye.

Thank you very much for that time.

Thank you by the way.

Konark Gupta: Your next question comes from the line of Konark Gupta from Scotiabank. Your line is now open. Thanks, and good morning, Elliot and David. Sorry, good afternoon. In fact, just wanted to get back to the SMB mix here. 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 the first paper 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 miss pickup, I mean, we really focus on miss pickup for those guys even more than the general freight that we service.

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

Uh, can you help us understand, you know, how and 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 they left here?

Alain Bedard: 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, they didn't come back because of 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.

Because we're focused on that now, you know, we care about them. We are really, as an example, David was talking about Miss Pickup. I mean, we really focus on Miss Pickup for those guys even more than the general freight that we service. So we care about those guys because these are the best margin accounts instead of just not caring. Okay? Now it's a real focus of ours. They didn't come back because of rates, because we cut rates and this and that. No, they came back because we made them a proposal which is fair and reasonable, and we told them, listen, we'll provide you with good service.

Alain Bedard: 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. But small, medium-sized account is mostly next day, so now my service is up to par to our peers. Good day, thanks. 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 second and the third day, this is where we need to make major improvements, okay? To correct our service to be closer to our peers. But small and medium-sized accounts are mostly next day. So, now, my service is up to par to our peers.

On the next day.

Alain Bedard: So it's a service-based winning back, not the price-based winning back. Yeah. Thanks. No, no, no, not the price. No. Glad to hear.

Alain Bedard: 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 U.S. LTL and Canadian LTL? How many doors, how many trucks or trailers? You're maybe way too much in the U.S. and Canada on the LTL side. I mean, do you need to rationalize some or 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.

Makes sense makes sense. So it's a service based getting back. Not not the price. We are showing that thanks and no, no, no, not the price, the only 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? Um, 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 you still need to add more for the future?

No, the Canadian size we're done because, you know, we've just acquired Kinder Z about a year, year, year, year and a half ago. So we're done with Kindersley. We've also acquired Hercules in Canada and in the US.

Alain Bedard: So Hercules, we're done in Canada, we're not done in the U.S. yet, so the guys are working on the U.S. side right now. But the rest of our business in Canada is okay, we have no issues.

Alain Bedard: In terms of U.S. 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. 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.

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 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.

Elliot Alper: 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. 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. I'm for Jason Seidl.

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 is tied up there.

Okay, that's very helpful. Thank you.

Your next question comes from the line of Elliot Alper from PD Coven. Your line is now open.

Elliot Alper: 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? I think on the tariff side, I don't see anything, any issues with the small or medium size account with the tariff. No, no, we haven't seen that. And in terms of your other question about pricing and other people going after SMB, it's a market, right?

Okay, great. Yeah, this is Elliot on for Jason. Just maybe a 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 the number of carriers that are also going after the SMBs is affecting the pricing. Is it a little more creative, and maybe is the total book seeing incremental challenges given that some of these players are looking to grow share?

I think on the tariff side, I don't see any issues with the small and medium-sized accounts with the tariff. Hey David, no, no, no, we haven't seen that.

Alain Bedard: 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. So just to say that everybody is going after this kind of...

No. Um, you know, and 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, uh, 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 Bedard: 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.

That is good for him, depending on where the customer is, and where my terminal is. So what is good for me is not necessarily as good, or what is good for my peers is not necessarily good for me. So just to say that everybody is going after this kind of.

Business. I mean, sometimes it fits better for me than for the other guys, or maybe the other guys versus me. So, it's just to play it smart.

Alain Bedard: 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. You're welcome.

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, uh, it's 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 not open. Yeah, thanks. Good afternoon. Maybe just a couple of quick, I guess, 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.

You're welcome.

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

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 or cash tax changes uh, from the the new US legislation. I I guess. What's your expectation for? I guess effective tax rate going forward with that.

David Saperstein: And of that $75 million, $40 million is realized in the first two years. Okay, okay, that's helpful.

No tax rate won't change, it's just a cash tax benefit. The 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: 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.

You know, you need to, uh, do a debt issuance in the quarter. Uh, looks like pretty attractive terms. Are you able to update? I guess with the kind of average interest rate is now for TFI across the entire company.

Uh, yeah, I think I think we, I think we put it in the MDA, 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 reimburse debt that was, uh, costing 6.1.

Yeah.

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.

But I think globally. David, 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 our 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 though, that makes a lot of sense. Thanks very much.

Thank you, Cameron.

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.

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

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

You know what? We need to prove to the investor that, um, you know, we are in control at USL.

Alain Bedard: 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, these guys are going in the right direction, then you could start looking at a transaction of size at that time.

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 the TForce rate.

Alain Bedard: 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 trottal 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 in a very difficult environment, 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.

It's not a blimp, it's not a mistake, it's not something. No, no, it's true. These guys are going in the right direction. Then you could start looking at of a transaction of size at that time, but now it, 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 Team Force rate. Our us, LTL. So, this is what we have to prove, you know, if we would be, if we would do a deal of size in the Toronto World. Okay. When we're running, let's say a 90 or and most of my peers are running 95 and worse than that. I would say that probably the investor would say, you know, those guys are really in control, okay? In a very difficult environment. 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, uh, 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.

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, and we know the free cash flow per share is, the yield is like double-digit there. There's nothing we can buy today that's cheaper than that with the best potential.

David Saperstein: And then just maybe a last 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 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 renewal has 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 there, that's where the renewals are.

David Saperstein: Okay, perfect. Yeah, thank you. Thank you.

Good. Okay, perfect. Yeah. Thank you.

Thank you.

Alain Bedard: There are no further questions at this time. I will now turn the call over to Alain Bedard. Please continue. All right, so thanks very much, Operator, and thank you everyone for being on the call with us today. We very much appreciate your interest in TFI International, and I look forward to updating you on how we perform through the balance of the year. As always, if you have any further questions, please don't hesitate to reach out. Enjoy the summer, and thank you again.

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

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 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.

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

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