Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the TFI International Q3 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and a follow-up. Again, that is one question and a follow-up, so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on Friday, 30 October 2026. Joining us on today's call are Alain Bédard, Chairman, President, and Chief Executive Officer, and David Saperstein, Chief Financial Officer.
Operator: I would now like to turn the call over to Alain Bédard. Please go ahead, sir.
Alain Bédard: Thank you very much, operator, and welcome everyone to this morning's call. Yesterday, after market close, TFI International reported another quarter of solid results with standout performance from our Truckload segment. Overall, adjusted diluted EPS was $1.67, up nearly 40% over the prior year's of $1.20. Our overall operating income grew 17% to $180 million, despite an office-related real estate impairment charge, and this was driven by Truckload operating income that nearly doubled and Logistics operating income that was up almost 60%. Another important highlight is that this was the second consecutive quarter that TFI International achieved a sub-90 operating ratio on a consolidated basis. Of significant importance to our business strategy, we generated another $116 million of free cash flow, bringing our year-to-date total to more than $440 million, even while investing for growth.
Alain Bédard: As a result, our leverage ratio further improved this quarter, as I will discuss in a moment. This very solid financial foundation allows us to thoughtfully invest for the future during up and down cycles alike, and also allows us to return excess capital to shareholders whenever possible, which we did both during and subsequent to the Q3, as I will also discuss. Taking a step back, our current strong performance is the direct result of the investment we made during the down cycle. We invested in our operation, we made strategic acquisitions, and as a result, we now have an enhanced focus on specialized freight, which improves diversification towards industrial end markets and across multiple modes of transportation. All the while, the talented men and women of TFI International have maintained their focus on efficiency and the related operating principle that drives our profitability.
Alain Bédard: With that, let me quickly review our consolidated Q3 results before taking a closer look by business segment. Our top line total revenue before fuel surcharge of $1.9 billion was up 8% over the past year, while operating income reached $180 million, up 17%. Our operating margin of 9.7% was up 80 basis points over the prior year's quarter of 8.9%. Turning to our segment, we will begin with Truckload, which simply had a phenomenal quarter and now represents 40% of segmented revenue before fuel surcharge at $753 million. That was up 10% the past year, and our revenue per truck per week, excluding fuel surcharge, climbed 13%. Operating income nearly doubled to $100 million, up from $53 million in a year ago period, and our industry-leading adjusted OR of 86.7% marks a 560 basis point improvement over the past year.
Alain Bédard: Lastly, our return on invested capital for Truckload was 8%, up from 6% last year. In addition to the tightening capacity industry-wide, these results directly reflects our favorable exposure to the right-end markets, our emphasis on the specialized side of the business, and our limited capital intensity, with an optimal asset mix and improved fleet productivity. Next up is our LTL. LTL was 36% of segmented revenue before fuel surcharge at $678 million, which was roughly flat year over year. Our adjusted OR was 91.3%, and operating income was $44 million. Again, that's including a non-cash impairment and equates to a return on invested capital of 11.1%. Finish up the segment, Logistics also had a strong quarter, with revenue before fuel surcharge of $437 million, up a robust 19% year over year, and Logistics now accounts for 23% of our segmented total.
Alain Bédard: Perhaps more impressive, our operating income jumped 59% to $49 million, and that equates to 11.3% margin, up nearly 3 full percentage points from the prior years of 8.4%. Our Logistics return on invested capital was 14.9%. Turning to our balance sheet, as I mentioned, $440 million of year-to-date free cash flow has further added to our overall strength, and we ended September with an adjusted funded debt-to-EBITDA ratio of 2.1. Please note that this is an updated measure which excludes the letter of credit and contingent consideration which affected the previously communicated banking covenant ratio. I'll wrap up my prepared remarks this morning with our updated outlook, which include full-quarter adjusted EPS of $1.30 to $1.40, which at the high end would represent a 28% year-over-year increase.
Alain Bédard: In addition, we continue to expect year-over-year adjusted operating ratio improvement of 400 to 500 basis points in the Truckload segment, 100 to 200 basis points for our Logistics, and a slight decline, maybe of 100 basis points, up to 100 basis points for our LTL. Lastly, in terms of our outlook, we continue to expect net CapEx, excluding real estate, to be in the range of $225 to $250 million, demonstrating improved capital efficiency. As always, our outlook ranges assume no significant change in the operating environment. With that, operator, David and I are ready to take questions. If you could please open up the lines.
Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2. As a reminder, please limit yourself to 1 question and a follow-up. 1 moment, please, for your first question. Your first question comes from Ken Hoexter from Bank of America. Please go ahead.
Ken Hoexter: Hey, great. Good morning. You know, you kind of ran through Alain, thank you. You ran through Truckload and Logistics in, I guess, more detail than LTL. Maybe just take the opportunity to dig into LTL, talk about your thoughts on the US performance, maybe talk about fuel, the benefit, and then throw that into your Q4 outlook. How should we think about the improvement potential and going into Q4 and next year?
Alain Bédard: Yeah. A very good question, Ken. If you talk about Canadian LTL, I mean, fuel is some kind of a tailwind because of our density, right? So, our density in Canada is second to none. But in the US, it is the opposite kind of thing, is our density is so bad that when you have inflation like we went through in Q2 and in Q3 with fuel, I mean, that turns to be some kind of more of a negative because our density is not that good. Okay, we do about 20,000 shipments a day. We cover all the US, and our density is not good. Now, as you know, we have been going through a very rough patch in our US LTL for the year 2025, 2026. We are not very happy at all with the result that we have in 2026.
Alain Bédard: And we are in for a major improvement, I think, going into 2027 with improvement in the team and all that. That being said, we have tried something, Ken. Trying to grow organically at TForce Freight, and the results, our timing was probably bad because we tried that in Q1 of 2026 when the weather was not helping us at all, okay? If you remember January, February, it was difficult. Even Dallas was tough to deal with. Then, you go into Q2, we end up with something like 22,000 shipments a day, and our guys are not able to manage that.
Alain Bédard: We are really sad about that we have to say that, but those guys were not able to do that. Then we end up with inflation on the linehaul because at the same time that our guys cannot, our driver in our linehaul department cannot take this excess volume, we have to go on the spot market. The spot market in Q2 and in Q3 for linehaul is just killing us, right? We have that negative affecting us, and at the same time, also, we have tried to grow in terms of volume, but we had to discount a little bit on the price. It is like a double whammy where you get less revenue per shipment, at the same time, you got more cost per shipment. This does not work, okay?
Alain Bédard: This is why when you look at our Q3 numbers, we did fantastic everywhere except our US LTL, which is like a broken story. It is like we all keep repeating the same story time over time, and hopefully, with the improved teams that we have on board now, okay, under Kal's leadership, we could finally get this ball up and running. I am sure you saw in our MD&A, okay, another little thorn in our shoe for our US LTL is our six years partnership with our friend at UPS is coming to an end, okay, in early 2027, right? This is, again, another reason why, if you look at our forecast EPS for Q4, okay, because this partnership is ending early in 2027, we anticipate that some customers will have to find a solution somewhere, okay?
Alain Bédard: We are working on a solution of our own, but this is difficult to do, to try to replace UPS with someone else, right? This is why we are very careful about the guidance that we are giving for Q4. We feel really good about our Truckload, like I said on the script, okay? We feel really good with our Logistics, but another rock in our shoe on our US LTL is what I just said about GFP, okay, the partnership that we have for six years with UPS that will come to an end at the end of January 2027. When you look at that, you say, "Hey, you have been at it for years and years and years," and I agree, and we were never able to turn the corner with this. 2021, 2022 were way better.
Alain Bédard: 2023 was not so bad, but then 2024, 2025 with freight recession, increasing inflation on the cost, et cetera, et cetera. We believe that we are going to turn the corner in 2027. That is an opportunity because if you look at our revenue, okay, and the small margin that we get out of that, once we fix that, TFI is going to be like, "Wow." That is the big rock that we have in our shoe, Ken, okay? But that is also the big opportunity down the road if we can fix that, and we have to fix it because this is huge revenue for us, and the contribution is minimal, right? The good thing is we have acquired Daseke two years ago, and that Daseke ship has been turned around very, very fast.
Alain Bédard: If you look at when we bought Daseke, these guys were running a 97%, 98% OR in Q2. We did a good job in Q3. Now, we are coming with a sub-87% OR in our Truckload compared to my best peers in the US. We are doing great. The Canadian operation is doing even better. But our US operation slowly is catching up, right?
[Analyst] (Bank of America): Yeah. Just to follow up, do you need to acquire to get the density there, or is that something you can do on your own?
Alain Bédard: It can. It is a union shop, right? The only other union shop, those guys, they do a great job. They are better than us, right? For sure, we have tried to do something, and it never worked. The plan, again, has been simple, is that we are building, in parallel to our 20,000 shipments, slowly we are going to start building in a non-union operation. Today, we do about 1,000 shipments a day, non-union through Hercules, our US operation. Hercules has got partnership with some of our Canadian business as well. But this is small, right? Unless there is something outside that come to us, the plan is going to be really to slowly build that non-union, like we do in Canada, because in Canada, we run both. We run union and non-union. To me, it is okay.
Alain Bédard: We will run a second network if we can, and the idea is to bring more stability to our TForce Freight because, again, if you look at history, the way we used to do things in the US is, volume goes down because of December, January, we let go people, then we call them back in March. Those guys are not available. You have to rehire. This is instability, and this is one thing that we are working on with Ken and his team to try to have a volume that is steady month over month in that 20,000 shipments a day range, which we are now.
[Analyst] (Bank of America): Great. Thanks for the thought, Alain. Appreciate it.
Alain Bédard: Very good, Jeff.
Operator: Your next question comes from Scott Group from Wolfe Research. Please go ahead.
Scott Group: Hey, thanks. Good morning. Just a couple follow-ups on that LTL. Maybe can you share where's the US LTL margin right now? The UPS relationship that's sort of ending, does this impact just the GFP business? Is that going away, or is there a broader impact than GFP?
Alain Bédard: No, Scott. The GFP thing is just that partnership that we have with UPS, okay? That is going to come to an end at the end of January 2027. After six years of partnership with UPS, as a reseller of UPS services, this is going to go away, okay? So, that is a GFP thing. About the profitability of our US LTL operation, okay, for sure, when we report a 91 OR, okay, you can think that our US operation is more closer to a 97 OR, and our Canadian operation is more like a sub-75 OR operation. But the size is not the same, right? We do about 10,000 shipments a day in Canada. We do 20,000 in the US.
Scott Group: Right. How big is this GFP business today?
David Saperstein: Well, the operating income in Q3 was a little over $4 million.
Scott Group: Okay. Thank you, David. Alain, bigger picture, in that first question, you said, "It feels broken. We have no density." But you also said, "We think we can improve it in 2027." So, help us square those two comments. When you think about allocating capital to the business, it felt like a few years ago, we wanted to allocate more capital to LTL. We were thinking about
Alain Bédard: Yes
Scott Group: de-emphasizing Truckload.
Alain Bédard: Yes.
Scott Group: Is the message different that we want to allocate more capital to Truckload, or how should we think about where you want to invest incremental capital?
Alain Bédard: Okay. You know what, Scott? That's a very good question. If you look at opportunities right now, in our US Truckload operation, or even our Canadian operation, we still have a good year to go to fine-tune everything that we do in our US Truckload operation. But let's say something nice comes around, in mid-2027, for sure, we're in a position to look at it. On the LTL side, on the Canadian side, there's not much that we can do. But on the US side, union side of our operation, there's nothing we can do except build some kind of a non-union network in parallel to the network that we have. In the meantime, for sure, we're adapting the network to a 20,000 shipment company.
Alain Bédard: As an example, we're going to have a transaction with one of our friend in Chicago, where they will take over one of our terminal. We're in discussion also with one of our terminal in the New York area to reduce our footprint to that 20,000, 22,000 shipments a day. Also, at the same time, our focus is going to be try to bring more density to that 20,000 shipments. The average mile that we drive today between each and every stop in our P&D is about twice as much as our Canadian operation. Why is that? Because in Canada, we focus trying to do business with customers that are close by and not run 100 miles to do a delivery, right? This culture, we've been working at it with our friends there at the US LTL, but it seems to be difficult to do.
Alain Bédard: We're getting some support. We just hired an executive that hopefully is going to be able to help us drive change. There's more team members that we need to add to drive more change and to bring that density down, because fuel is high, okay? In Canada, like I said, with Ken, it's a tailwind for us, okay? But in the US, Truckload or in our US LTL, it's not a tailwind. It's more of a headwind, right? Truckload has been We did fantastic in Q3, even with that headwind in our Truckload, but we did very poorly, okay, in our US LTL in Q3 with that headwind, that cost inflation on our linehaul, because the market has been very hot, okay, on the spot. All that really turned out to be not a great quarter for us at all.
Alain Bédard: Now, in terms of investment, if you look at our CapEx, okay, this year, in our US LTL, we did a lot of CapEx to support this company. We bought 1,500 trailers, okay, this year. We bought a little over 600 trucks. We continue to do the investment, okay, but the return has been not great at all, okay? This is why it's like, guys- We have to turn this thing around. There's no other solution. I'm very happy, like I said earlier, with the capital intensity of our Truckload in US, that it has improved tremendously. Our revenue per truck is up big time, not just because of the revenue per mile is up. The usage, the number of miles per truck is also up. We've also been able, with Steve and his team, to transform our US Truckload operation with more niche carriers.
Alain Bédard: If you just look at one of our carriers, SPD, on the West Coast, these guys, they were like jack of all trade, master of none. They were servicing the aerospace industry, like Boeing and Bombardier and others. That was with 75 trucks. But they had also another 125 trucks losing money. So we said, "No, forget about that." Those 125 trucks have been moved to Wylie, and now SPD is making money with the truck, making money with the brokerage. We've also attacked our friend in Texas, Lone Star. Again, very great carrier, with the wind, with the data center and all that. But they also had an over-the-road operation that was just killing them. So we said, "No, this is over, my friend." This has just happened in Q3. Over the road is going to Wylie. Okay, fine.
Alain Bédard: This is the fine-tuning that Steve and his team still have to do. We're working on COTC right now, and then it's South Shore. That's why I'm saying 2027, Q4, 2026, 2027 for our Truckload. We see great improvement there. Truckload is great. Logistics is great. US LTL is not. That's, again, I feel like I'm a broken record on that. We got to correct the situation. We know what to do. It's just, we need the soldier, we need the management to jump in and do the right thing.
Scott Group: Thank you, Alain.
Alain Bédard: Okay.
Scott Group: Thank you very much. Appreciate it.
Alain Bédard: Pleasure.
Operator: Your next question comes from Jason Seidl from TD Cowen. Please go ahead.
[Analyst] (TD Cowen): Hi, morning. This is Jose on for Jason Seidl. Maybe just to go back to the US LTL, Alain, revenue per shipment, I think.
Alain Bédard: Yep
[Analyst] (TD Cowen): decelerated a bit here in Q3.
Alain Bédard: Yep.
[Analyst] (TD Cowen): Last quarter, you spoke about 3PL mix being a factor.
Alain Bédard: Yeah.
[Analyst] (TD Cowen): I'm just wondering, is that still a factor in Q3? If that was the case, then thoughts on how you plan to rationalize that?
Alain Bédard: Yeah, it is still a factor in Q3, but over the course of Q3, it's been improving. Q3 is 3 months, right? It was not good in July at all. It got a little bit better in August and better in September, and we keep improving that for our Q4 situation there. Yeah, it's been an ongoing thing where our commercial team has been really hard working at it. Yeah.
[Analyst] (TD Cowen): All right, thanks. That is helpful. Maybe just sticking on the, you mentioned the line haul pressures here. Can you maybe give us some detail, maybe remind us how much rail you utilize presently? On the trucking side, is there an opportunity to enter more contract-type exposure and reduce spot?
Alain Bédard: Yeah. If you look at our situation today, about 55% of our miles is done through our own people, our own drivers. About 20-some percent is rail. Then we have about 125 owner-op that is also exclusive to us. Over and above that, we have also contract. But when the volume went from, let us say, 19,000 shipments to 22 at the peak, we had to go on the spot market, because we did not have enough power with our own team. We move a little bit more volume on the rail, but there again, then you end up with service issue. It is not the solution. So we went on the spot. The spot was about, what, $2.75, $2.90, whereas, let us say, 8 months ago, it was like $2.20, right? So that killed us in Q2 and in Q3.
Alain Bédard: Now, at the end of 3, we are back to normal because now we do not have to go on the spot market to get power for our line haul.
[Analyst] (TD Cowen): All right, very helpful. Thank you very much, Alain.
Alain Bédard: My pleasure.
Operator: Your next question comes from Ravi Shanker from Morgan Stanley. Please go ahead.
Ravi Shanker: Great. Thanks, Alain, David. Thanks so much for the details so far. Alain, you have been very clear on the idiosyncratic changes you guys need to make in the LTL business. I would love to hear your characterization of the LTL market overall as well. Where do you see demand right now relative to where ISM is in the mid-50s? Where do you see the pricing environment? How do you see competition and capacity shaping up, et cetera?
Alain Bédard: Well, the chance we have in our US LTL is our peers are smart. We are not competing with stupid peers. Our peers are really, really smart, doing a great job. This is why, to me, volume is soft a bit. Yes, it has been soft for the last few years, but at least the pricing is holding. There is no, from what I can see, pricing war because we have smart leadership in the US LTL. With the leader running a 70 OR, with the second next one running an 80 OR. I mean, you got smart guys doing a great job on the market. So, to me, the market is soft a bit, but price-wise, I mean, we are the problem, us. I mean, it is not the market that is the problem, it is us.
Alain Bédard: So, we have to do a better job, commercially, to identify what fits, and the average weight per shipment. You see another of our peers, weight per shipment is up. I mean, this is the way to go because you are paid by the pound. So, I mean, our weight per shipment is down a bit, so that is the wrong direction, guys. So, we have to move this into more heavier industrial. I mean, we love us industrial freight. Why is that? Because this is us with our Truckload operation. That is what we move. Everything is industrial. We do not move retail. We do not have, let us say, dollar store as a customer in retail. I mean, we do not move that, us. We move industrial. So, again, those industrial customer have LTL. But us, with the old UPS approach, they were focused on retail freight.
Alain Bédard: So, now we are opening more doors with the size that we have now in Truckload industrial freight. We are saying to our US LTL guys, "Guys, wake up," and let us piggyback our US LTL commercial team working with our Truckload commercial team to get more of that industrial freight in our LTL environment. At first, with the old team there, we got pushback, "Oh, there is lots of claim," blah, blah. I mean, all kinds of story. But now, this is something that is ongoing to try to improve, the weight per shipment at the same time as the revenue per shipment. But Ravi, in my mind, this US LTL market is way better than the Canadian one. It is way better. The leadership is great. The market is soft, but at least the pricing is holding, and the leaders are getting more dollars, right, per 100 weight.
Alain Bédard: I mean, it is not the market, it is us.
Ravi Shanker: Understood. And maybe quickly as a follow-up on the TL side as well, shifting gears a little bit, can you talk about the potential upside you see for 2027, especially around rates and bid season, especially as 2027 kicks off?
Alain Bédard: Well, I think that on the Truckload side, the market is still soft. I mean, the demand is not there. It's not really wow, but it's the supply, because of the administration, what these guys have been doing with CDL illegals, the guy can't speak the language, and all that story. So, this has helped us to a certain degree so far in 2026. But, going into 2027, I think that this is some kind of a permanent change, and if the demand starts to grow, I mean, like in the building material, for example. I mean, this is like dead for us. I mean, who's buying a house now, right? Who's building? No one. Interest rates at 7%, fine. But this is going to come to an end at one point. So, building material is key to us, steel, aluminum, and all that.
Alain Bédard: We feel very good about 2027 because at one point, the demand will start, the supply will stay constrained. And us, like I said, during the course of 2027, we still have some tweaks to do. Mr. Brookshaw and his team, they still have some improvement of our own to do, and it's going to take us another 6 months in 2027, maybe all year of 2027, to have a state-of-the-art US operation like we have in Canada.
David Saperstein: Yeah, the thing I'd add to that is the nature of our business, the structure of the business has changed, and you see that in the reduction in the capital intensity, right?
Alain Bédard: Oh, yeah.
David Saperstein: We have a principle, which is to do more with less, and you really see that here, right? You see more revenue with less trucks. As a result, the OR goes from 92 to 86.5 because depreciation expense is far lower, the productivity on the trucks is far higher. Our brokerage revenue in the quarter was up 49% year over year, right? We are basically taking our assets, we are putting them to the most productive use
Alain Bédard: Right
David Saperstein: meaning the end markets that are the most productive, the customers that provide the highest return for us, right, where we have real competitive advantage, niche businesses. The rest, we are brokering, and we are using independent contractors. That is where our return on invested capital in Truckload, it jumped from 6% to 8%. It is enormous. It is a 33% increase in ROIC year over year, and I would encourage you to benchmark other Truckload players for true after-tax ROIC. Nobody is at 8%. Nobody is even close to 8%. The reason for that is that it is like a hybrid business. It is not a pure asset-based business. It is a hybrid business that we have built in this way to get these returns, and you are seeing that transformation take place.
David Saperstein: When Mr. Bédard talks about these further adjustments that are still to come, because in addition to the market, this is what we are talking about. We are talking about more right-sizing of the capital intensity and more increases in the returns as a result.
Alain Bédard: Yeah. Guys, on the brokerage, if I may add, we are not like some of our peers in the brokerage world, okay?
David Saperstein: No.
Alain Bédard: We, we have specific carriers that we use, all the time. We are not using Joe today and Peter tomorrow, and then someone else the next day. No, no, no. We, we have a portfolio of carriers that deal with us, on a daily basis that we deal. The same is true of JHT as an example. When we are moving trucks for our OEMs, we have one of our agent that is going to do probably, out of the 250,000 trucks that we move, this guy will probably move for us 40,000 trucks. So it is brokerage for us, but we do not deal with 45 different companies. We deal with one guy, that we know that he has got coverage, that he has got insurance.
Alain Bédard: That he is a professional, not an illegal guy that today decided to lease a truck and he becomes a truck driver.
Ravi Shanker: Understood. Thanks for both of the color.
Operator: Your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead.
Walter Spracklin: Yeah, thanks so much. Good morning, Alain. Good morning, David.
Alain Bédard: Morning.
Walter Spracklin: Coming back to your costs, I've had a number of questions with regards to your cost structure perhaps being able, in theory, to be more insulated against some of the wage inflation aspects that other carriers might have that may be more reliant on owner-operators or may not be unionized, and therefore could see more competitive moves. We are not really seeing that in these results. Can you speak a little bit to, is that just kind of great in theory, but not in practice? Love to hear your thoughts on your cost structure there.
Alain Bédard: Yeah. Walter, are you talking about LTL or Truckload or both?
Walter Spracklin: Mainly on the-
Alain Bédard: In general?
Walter Spracklin: where you're seeing the most inflation. Yeah, in the areas where you're seeing the most labor inflation, wage inflation.
Alain Bédard: Well, on the Truckload side, for sure, Walter, US and on the Canadian side, as of Q2, we're starting to see some inflation on the salary. That's a given. Why is that? Because there's the eternal shortage of drivers, right? If you would talk to Steve Brookshaw, he would tell you, "My main thing is I need drivers," right? So, what happens when you need drivers is the price or the cost of a driver goes up, right? So we are going through some inflation for sure with the driver wage. But at the same time, we have to be more efficient with our asset, our drivers and our trucks. So this is what David was saying, more revenue per trucks. Also, the other thing that Steve and his team has focused is the empty miles, right?
Alain Bédard: Between the unloading of your customer and the reloading of your next customer, between the two, nobody pays fuel surcharge. So when you're buying fuel at $6 a gallon versus $3 a gallon a year ago, this is inflation to your cost, right? So the smarter you are by reducing or improving your density in your Truckload, that's going to be a huge benefit for you. So that's the Truckload. On the LTL side, labor is not an issue so far because, like you said, in the US, most of our labor is unionized, so we have a contract, it's 3%, so we deal. It's the third party that we're using for linehaul or for the last mile. That is where we got a lot of cost increase.
Alain Bédard: And this is why we had to go back to do it ourselves, okay, instead of using a third party that is going to cost $2.90 a mile to haul a trailer from point A to point B, okay? Whereas we used to pay on the spot or contract rate, $2.20. So this is where we had inflation in Q3, and it will continue when you have inflation at 3% to 4%, for sure, we are going to have cost pressure. So this is why, like I said to Steve, we got to do more with less. So forget about those guys that bring revenue of $3,000 a week on a truck. This guy, don't give him a truck. He is always sick, he is always on vacation, he this, that. No, no, forget about this guy. Okay, get this guy out. Okay, we need $5,000, $6,000 per truck per week, okay?
Alain Bédard: Because under that, it is difficult to be profitable.
David Saperstein: Well, no. And as it relates to the LTL and the cost pressures we saw in the quarter, part of that was also related to the transition around the rate of volume growth. So if you remember, last quarter, we had too much volume growth. The rate of growth was too high, so we raised price aggressively on the blanket 3PL rates to slow the rate of growth. And you see that, right? The year-over-year shipments in LTL is 4% this quarter as opposed to 7.5% last quarter. But those costs came out of the network over the course of the quarter, and not necessarily in lockstep with the volumes coming out. So, as we look though now towards the end of the quarter, the balance is there. Into October, the balance is there.
David Saperstein: Some of those excess cost lags were impacting Q3 and are no longer there today.
Alain Bédard: Yeah. Yeah. You know what, Walter, when you think about the theory is, if a guy delivers 15 shipments a day, you give him 2 more, okay? This is going to be very profitable. If the guy comes back with those 2 shipments and you have to give that to a third party, it's a losing proposition, right? This also was part of our I was not very happy with what happened there, right? This is why I said, "Cal, we need stability. We need better management. We need to better manage our costs and manage our people." So, we have great terminals within the TForce Freight network, highly profitable terminal. But we also have dogs, so we're attacking those dogs where you give a guy more shipment and you just come back with those shipment.
Alain Bédard: He says, "Well, we'll do it tomorrow." No, no, because then we miss service, my friend. You have to do it today. So, again, this is part of all this situation that we are aggressively working on. That's also part of that inflation that we had to because we had to hire a third party to do the delivery, okay, of that additional freight, if you want to call it that.
Walter Spracklin: That's great color. Alain, I'm going to ask you a question. I don't know to what extent you're going to be able to answer it, but it is about kind of leadership succession plan. We just had a bunch of retirements in the railroad sector last night. Our friend Gilles Lehoux announced he's putting up the gloves as well. When I look out to your plan and your strategy over the next year or 2, you'd always articulated the idea of acquiring to build scale in LTL
Alain Bédard: Yeah
Walter Spracklin: and then spinning Truckload and kind of going that path. If that gets delayed and we're not able to get the right acquisition and you're not able to bring in the right scale that you talked about and density that you're looking for, are you looking at any other avenues? Are divestitures in the works? Are there any other things that you're considering as we go toward a change in leadership? Eventually, we don't want you to retire, but when you do, I know it's inevitable, but how are you thinking about that over the next couple years if things don't pan out from an M&A perspective as you hoped in 2027 or 2028?
Alain Bédard: But you know what, Walter? We got a lot of opportunity on $150 to $200 million EBITDA with low D&A. We don't like D&A at all. There's some that happened in Canada that we passed on and my friend made the deal. Great. But, we had to digest the Daseke acquisition. If you go back, 2025 was not great for our Truckload business. Because we had all kinds of problems. Because of this acquisition that we were doing the integration. But if you look at 2026, forget about Q1, because Q1 was like the tail of 2025. But from Q2, we start to see the results of what Steve and his team have done in the US, and it's a confirmation in Q3.
Alain Bédard: We still have some work to do, but if the right thing, the right investment comes along, sometimes in 2027, we're ready. We're ready. Now, it could be upsize. It could be a $100 million EBITDA company. It could be a $200 to $300. We've got capital to justify through debt, a billion, a billion and a half, acquisition, cost of an acquisition. What we look at is always the same thing, is the US LTL, we'd like to do something there. And the Logistics. Us, we're a big fan of Logistics, and I think that our team is doing it really, really well. Just look at the results of Q3. Those guys came in with an 11% bottom line.
Alain Bédard: This is great news, and we're not stuck with all this issue of, you're brokering to a jack-of-all-trade and you got the risk, like some of our peers. Us, our Logistics is not just brokerage. We do brokerage, yes, but we move trucks, we do all kinds of work for Ford in contract Logistics, et cetera, et cetera. So, it's not just one thing that we do, and we are really in control. So, if the right opportunity comes along with a great Logistics company, that would be a fantastic fit. But we're not looking at a guy with a 2% bottom line. This is not for us. We leave that to the other guys.
Walter Spracklin: Appreciate the color as always, Alain. Thank you.
Alain Bédard: You are welcome.
Operator: Your next question comes from Brian Ossenbeck from JPMorgan. Please go ahead.
Brian Ossenbeck: Hey, good morning. Thanks for taking the question, guys. Just two quick follow-ups first on US LTL. Is there any operational impact to the network when GFP doesn't get renewed? Does that affect density even further or, I guess, complexity of the network? Then just
Alain Bédard: No.
David Saperstein: No
Brian Ossenbeck: speaking of complexity, how would a non-union, I guess, bolt-on or expansion work functionally with the current footprint? Is that something you need to acquire more, need to expand, or maybe bifurcate how you use some of the terminals? Maybe just a little bit more detail on that, because it does sound like that is more part of the future plan here.
Alain Bédard: Okay. So on that, Brian, GFP is like a brokerage operation for us, okay? So everything was done by UPS, our partner, okay? So it does not affect our operation at all, okay? That is number one. Number two, what we are building as a non-union, okay, with just 1,000 shipments, it is more of an asset-light carrier, right? So if you look at our capital intensity in Canada, I mean, it is really, really low. Why is that? Because we use a lot of third party, okay? The only thing really that we manage in Canada, except for TST where we have assets, okay, is the dock. This is the direction that we are going in the US in the non-union LTL operation, is that we are going to manage the dock, yes, us, but all the P&D, all the linehaul will be third party, right? Why are we doing that?
Alain Bédard: It is because we hate capital intensity. We are going to start building that because we believe that one day, okay, in the US, there will be an LTL company that is going to be an asset-light operation, like in the parcel world, right? So you got this big blue machine that is running on third party everywhere, basically, okay? So if those guys decide one day to be in the LTL world, they will probably go asset-light. This is why us, we cannot be asset-light in our union environment, okay? We could do it to a certain degree, but not like 80%. So, like we did in Canada, okay, we are slowly going to build a non-union asset-light, okay, operation in the US. That is the goal. Unless we find a solid operator at a reasonable price, then we will see.
Alain Bédard: But in the meantime, if we got to go baby step trying to build this network, that is the intention. That is where we are going.
Brian Ossenbeck: Okay. Understood. Thank you. Just for a quick follow-up, I guess it relates to that comment about going more asset-light. Looks like some of the reserves for accidents were up, and that includes a reversal, I guess, from the prior years. Maybe you could just talk more broadly about the complications of going more asset-light in this sort of backdrop, and I guess how you are experiencing that right now, just from not only from a brokerage liability perspective, but also just from an auto liability claims and how that is also inflationary. Thanks.
David Saperstein: Well, our accident accrual this quarter was very much in line with normal. Most of that, a lot of it is in corporate costs, especially for the larger accruals, and you can see our corporate costs were around $14 million, $15 million. Very normal for the quarter. What you saw last year this quarter was that we settled the claim for $5 million less than our accrual. And so that is a testament to the machine that we built to handle our accident liability. We have a fantastic team that is out there settling claims early, sometimes on the spot. We are very, very close to this in the finance team, in terms of really following each of these cases, getting them done fast, and making sure the accruals are right. And so, really, the year-over-year change in the quarter should be viewed as a very positive thing.
David Saperstein: It is not an increase in accident expense. Yes, arithmetically, it is an increase. But really what it is it is highlighting the fact that we got something done less than the cost of our accrual in the year prior. And more broadly, as it relates to managing this, the approach, of course, is to have adequate risk management as it relates to the insurance program. But the most important thing to reduce accident claims is to reduce accidents. And so this is why we invest in technology. This is why we invest in driver safety. This is why we are very careful about all of these things. And when there are incidents, we deal with them aggressively and quickly and proactively, because time is against you in these things.
Alain Bédard: And if I may add, in our Truckload guys, we are starting to implement inward-facing camera. That is number 1. We are also implementing to teach our driver simulator, like those airline pilots. So we are introducing simulator to our JHT team, to our TForce Freight team, so that you can test a driver in all kinds of different environment. So that is ongoing. And then on top of that, if I go back to brokers, pure brokers that we do, because our loss ratio is so minimal, David, so what did we do with the insurance on that?
David Saperstein: Well, on the brokerage, we did go out and buy much higher limits, much higher coverage on the brokerage, and it cost us very little because our loss ratio in brokerage is zero.
Alain Bédard: Yeah.
Brian Ossenbeck: Okay, very helpful. Thanks, guys.
Alain Bédard: You are welcome.
Operator: Your next question comes from Jordan Alliger from Goldman Sachs. Please go ahead.
Jordan Alliger: Yeah. Hi, morning. Just a couple things. One, on the Logistics front, which is doing quite well, is it primarily being driven by brokerage? I know you have other services in there as well. Can maybe talk a little bit about that? And then secondly, just on the LTL, appreciate all the comments on it in terms of things to think about and how to fix. But Alain, do you have a timeframe for the fix where we could start to see better profitability? Is this 6 months, 12 months? And is there a point in time where you say, "Okay, we have to start the script over and come up with a new 3-year plan"? Thanks.
Alain Bédard: Yeah. Okay. In terms of the time, we bought this company, think about that, 5 years ago, in May of this year. It took us 2 years to get financial information that we can manage. So, 2021, 2022, all the way up to the summer of 2023. So, we've been at it for 3 years, and it's not doing well, right? We made some changes. We've invested in talent coming from outside the world, the Canadian team, because what we've done since day one is we brought some Canadian guys to help the US team. Now, what we've been able to accomplish is to bring an executive from one of our peers that had retired, and we said, "Hey, maybe you're up to another challenge." This guy joined us 1 October.
Alain Bédard: I think that now the recipe is to try to improve. I remember one of our major shareholder always told me, "Alain, you got to hire a super guy like one of your peers did." We're saying, "Well, yeah, but we're unionized." Maybe this guy was right, one of our investor at the time. Now, that's what we're doing, is we're beefing up with people from outside this UPS world, UPS Freight world, that we got, because we've tried. We've tried, but it's like, you're trying to change a guy that's been in an environment for some 20-some years, and he's been used to not care too much about service, not care too much about costs, because it's just the way it is. You're trying to change this guy, but, nah, it doesn't work, right? New broom sweeps clean.
Alain Bédard: After 3 years of trying and trying and trying, we said, "We got to change the recipe." That's what we're doing now. We're changing the recipe. We're going to bring more executives from some of our peers that's got experience in our world to turn this ship around and to change this mentality of, "We don't really care," right? It's simple. Why do we have executives that don't care or employees that don't care in that world? It's because the previous owner did not care about UPS Freight. They did not invest in the fleet. They did not invest in real estate. They did not invest in the technology, because for them, it was like, "Forget about it. We don't need that. Our focus is the other company, and we're doing great there." Fine.
Alain Bédard: All this, we tried to change this whole executive team there and improve them by giving them financial tools, better technology, better assets, et cetera, et cetera. But it's not working. If you look at the result, it's not working, right? We said, "Now, guys, this doesn't work. We need now to change course," and that's what we're doing. Your first question was-
David Saperstein: Yeah, on Logistics. What was that, Jordan? Could you repeat it?
Jordan Alliger: Yeah, just what is driving the Logistics opposite broker?
Alain Bédard: Yes.
Jordan Alliger: Last mile, you have other things in there.
Alain Bédard: Yeah.
David Saperstein: Yeah.
Alain Bédard: Yeah. On the Logistics side, for sure, we are piggybacking on the OEM, right? The OEM, like PACCAR and DTNA, those guys are doing good. Well, for sure, we are going to do better, right? This is something that is helping us. The other thing also that has helped us is the acquisition we did, December of 2025, late last year, of two entrepreneurs that built a fabulous company. Now with these guys, we are now involved into data center. We are involved also with one of our customers on the storage, the battery storage that these guys are building. So, those guys are really building a fantastic business. That is helping our Logistics. Our US last mile also is doing quite well. On the Canadian side, we have lost a little bit of business. We had a business with the banks in Canada, through Symcor, that was doing great.
Alain Bédard: Fifteen years ago, that business was supposed to disappear. Now it is disappearing, right? So we rode the horse until it died, but that horse is dying on us right now. That is on the Canadian last mile operation. So, we have all kinds of puts and takes, but at the same time, we are growing the business organically in our Logistics sector, piggybacking on, yes, we are big with two major OEMs, but we are also growing with the smaller guys, like the Hino and the Isuzu, and all these guys. For sure, on the EV side of the truck, that is something new for us. For sure, these guys will not use only one carrier. They will probably use three carriers. We will be one of them. So again, this is all nice opportunity that we have in terms of growing this business.
David Saperstein: Yeah. The Logistics, as you can tell, the margins are really top of the peer group and growing fast, right? We did $49 million of operating income in the quarter. That is up from $31 million last year. So it is really a collection of asset-light businesses. This is not just commoditized brokerage at all. It is a collection of asset-light businesses where we have got really good market share, good barriers to entry, good connectivity with our customers.
Alain Bédard: Yeah.
David Saperstein: It is just a collection of great businesses that continues to grow.
Jordan Alliger: Thank you.
Operator: Your next question comes from Cameron Doerksen from National Bank. Please go ahead.
Cameron Doerksen: Yeah, thanks. Good morning. You touched a little bit on this already, but I will maybe ask it again or in a little different way. Just on the, I guess, the US LTL business. Obviously, this is a source of frustration for you and for investors as well.
Alain Bédard: Yeah.
Cameron Doerksen: But, if the desire, I guess, for the company as a whole is to become more asset-light, and obviously you indicated that you are looking at potentially asset-light LTL acquisitions in the US. Is there an option or does it make sense at all to maybe divest the TForce Freight business in the US? It just seems like this may be something that takes a lot longer to get to the type of returns that you really want than maybe you are willing to be patient about.
Alain Bédard: You know what, Cameron? We sold a few business in my 30 years life with TFI. We sold the waste to GFL, and we sold What did we sell? Oh, okay, the waste and CFI. The reason we sold the waste is because we couldn't grow it, right? Because we were trading at 6 and the market for waste was 10, so we sold it. CFI was, we don't want to be in the Truckload sector. If you look at TForce Freight, the van world, okay? If you look at TForce Freight, we want to be in the LTL. To me, it's been a disappointment. I'm not happy at all with what's going on, but it's a fight, and we've been fighting, but losing. We're going to keep fighting, and I think that Cal's approach is, we're going to change the recipe.
Alain Bédard: We're going to change We've invested tons of dollars with the asset, the fleet, and the real estate, the tools, et cetera, et cetera. It's not working. What's left? It's the human asset that we're going to have to invest and change and improve. This is the kind of war that we're going to go through in the next year and 2. This question that was asked, "How long is this going to take for you to fix it?" It's going to take time, but we fell. We're on the floor, okay? But we're going to stand up again, and we're going to keep fighting on that, Cameron. We have no intention of selling our US LTL at all. But we want those guys to be efficient, to be productive.
Alain Bédard: After improving everything except the human side of the business, and it's not working, then say, "Hey, guys, the problem is the human." There's no more excuse on the fleet. There's no more excuse on the financial tools or whatever. It's just that we have the wrong guys.
Cameron Doerksen: Okay. No, that's helpful. I'll leave it at one question. Thanks very much.
Alain Bédard: Okay.
Operator: Your next question comes from Kevin Chiang from CIBC. Please go ahead.
Kevin Chiang: Hey, thanks for taking my question here. Maybe if I just take a step back, I think back to the last cycle, I know different factors were at play, but you achieved over $8 of EPS, clearly during a more robust volume environment. I think expectations were that you could reach a higher high as US LTL hit the KPIs you wanted. But let's say excluding a recovery in US LTL, is that level of EPS growth, like $8, $9, still achievable for the rest of the business, just given clearly TForce Freight wouldn't have been much of a contributor back 4 or 5 years ago?
Alain Bédard: Well, Kevin, I think that today, based on what I know about this market, we're still in a freight recession, right? Let's say that we accomplished the $1.40 in Q4. We end up the year at what, $5.50 or something like that. Okay. Which is still far from $8. I mean, this is a long way from $8. Now, with all the tweaks that we have to do with the rest of our business, Logistics and Truckload and all that, can we add a buck, okay, in this freight environment? Maybe. Okay. I've not seen 2027 plan yet. Okay. I'm going to be in Toronto in 2 weeks to review all of that with the team there. But, it's difficult until we have freight coming back to normal, okay? We need the contribution of TForce Freight to be an $8 guy.
Alain Bédard: If those guys continue to be minimal contribution to us, it's going to be tough for us to be back to $8. We need those guys to get the job done, right, to get to that $8. Now, don't forget, when we got $8.22, we didn't have GST. We didn't have Daseke. Okay? But don't forget also that we pay in terms of interest, because our debt is still around $2.2 billion. Okay. We don't do anything of size, okay, in 2027. Our debt from $2.2 billion is going to go down to maybe, I don't know, down, let's say $500 million, okay, at 5%, okay, of interest cost. It's $25 million. After tax, let's say it's $20 million on 80 million shares. Okay. Well, what is that? $0.25? Okay. So, we're heading in the right direction if this happens, but we're not at $8 at all, right?
Alain Bédard: So, we need the freight market to come back to be an $8 guy, in my mind, and the contribution also of TForce Freight.
Kevin Chiang: That is helpful. You need the contribution. Maybe just a quick follow-up, just given where the stock is now, just changes in maybe near-term capital allocation. Do you lean more on the buyback here? You were active in October. Does that accelerate here, just given the move in your share price?
Alain Bédard: Well, for sure, Kevin, like you said, we bought back about 400,000 shares in October. We are at a crossroads right now, based on what do you do? Do you do M&A, or do you just buy back your stock and wait, let us say, 6 months, 12 months to have more confirmation that this freight environment is changing? Or you just do some small tuck-ins like we always do. So, this is, for us, it is going to be a major decision into 2027, is that based on the stock price, based on what is going on with our industry, if you just go back to, let us say, 6 months ago, and today, our stock is down, what, 30%, David, or about?
David Saperstein: Yeah.
Alain Bédard: Right? So, were we overvalued then, and now we are undervalued? But it is not just us. The industry in general is down big time. So, it is going to be a balance that we are going to have to look at. So, for sure, we will look at the reaction on the stock. We will look at the reaction of our investors, and what they are saying. And, for us, if we do not do anything of size to buy back 1 million shares at $100 US, I do not know if the stock is $100, but we will see, it is just $100 million US. And we are going to generate probably, without any large M&A transaction, another $700, $800 million of cash in 2027, even if this soft environment continues. So, why take the risk of huge M&A when you got a stock that is in the doldrum?
David Saperstein: That has always been the beauty, right? That is why we have a 30-year track record of compounding so tremendously, is just that we generate so much free cash, and we reinvest it.
Alain Bédard: Right.
David Saperstein: We give back a solid amount to the shareholders in the form of a dividend, which has a very long track record of increasing each year. But the rest is reinvested, and it compounds over time. That has always been the key to the long-term success.
Alain Bédard: Yeah. Absolutely.
Kevin Chiang: I appreciate you taking my question, and best of luck as you close out 2026 here.
Alain Bédard: Thank you.
Operator: Your next question comes from Bruce Chan from Stifel. Please go ahead.
Bruce Chan: Hey, good morning, gents. Just a couple of cleanups here. On the Truckload side, you have made some nice progress on pricing, and I know you said, Alain, that you see some upside in bid season for next year. Just want to get a sense maybe for what you are seeing in terms of contract renewals. Then, David, is there anything that we should be thinking about as far as headwinds for driver cost inflation, given the tightness in the market?
Alain Bédard: Yeah. We know that contract rates, the guys are working on that. We have a customer, contract is due 1 November, and we have honored the contract, us. We are saying, "Mr. Customer, you are going to have to pay 20% more." The guy says, "Ooh, this is a lot. Can we extend the contract for another year?" We said, "No. No, because this is reality." For sure, and also what we have done, what Steve has done is that now we have a commercial team under one leader, which is Scott Hoppe, right. Scott sees everything that is going on, right. This customer, our friend Scott, is involved, and for sure, this is what we need. Now, it is not easy when the market has to be adjusted 20% to reflect market condition. But, we have honored the contract. Now, this is reality, Mr. Customer.
Alain Bédard: So, what we see in contract renewal is that prices are going up. Prices are going up. Now, to the second leg of the question, like we said, we have pressure on labor costs. Why is that? Because everybody's looking for drivers. Right? Everybody's looking for drivers right now, so that rings inflation to the salary, which, between you and me, I think is needed when you have a 3%, 4% inflation. So, you need to adjust the salary of those guys. At the same time, we have to push customers around that this is the new reality, my friend, and this is the new price. We are not in the business of practicing delivery just to have fun. No.
David Saperstein: Yeah. I think in terms of quantifying it, the revenue per truck per week, which we publish, is a really good indication of where pricing is, right? We are up 13%. That is where the facts really hit, right? Because it is one thing to get contract rate increases, but the question is how many miles do you get at those contract rates?
Alain Bédard: Yeah.
David Saperstein: It does not help you if a customer gives you a big rate increase and then he does not give you any freight. So, where the rubber meets the road is really, what is the revenue per truck? Is that going up or is it going down? In our case, it is going up 13%. So, that gives you a sense for realized pricing. Of course, there is a little bit of productivity, more miles in there. The beauty of our model is that in the face of driver shortage, difficulty recruiting, et cetera, we have been able to grow our revenue while decreasing our truck count. Why? Because we are brokering more. This enables us to sort of work through this driver inflation kind of situation more effectively, because we are actually reducing our driver pool while increasing our revenue.
Bruce Chan: Okay, great. That is a helpful caller. Just a last one here. Alain, you talked about LTL service levels. Any sense for directionally where those are right now and where they are going?
Alain Bédard: Hey, you know what? We were heading in the right direction in 2025. From start of 2025, everything, our service was improving big time. Then we messed it up. We messed it up in 2026, right? Why is that? Well, first, we start the year with this issue with the weather. Everybody's got issues with the weather, but it seems for us was more prevalent. And then we add volume, and whoop, the shit hit the fan, right? So, our service tanked. So, this is the wrong direction. Now, we've addressed that. So, from that disastrous 9 months of 2026, now we're heading in the right direction in terms of, because we have stability now. We're at 19.5, 20,000 shipments. Now we have stability, and now the focus is, guys, we have to deliver on time. We cannot lose customers' freight, et cetera, et cetera.
Alain Bédard: So, to improve the service, because that's the key. This is like the chicken and the egg. What comes first? Well, what comes first is the service. Once you have the service, then you could be in a top-class carrier, and you can ask for more money. But until such time that you're a dog in terms of service, it's difficult to get the premium revenue per shipment, right? So, this is why the trend has to be, "Hey, guys, forget about the first 9 months of 2026. We shit the bed. But now, let's roll up our sleeve and do the job." And this is what the team and the executive team that we're building gets.
Bruce Chan: Okay, great. Appreciate it.
Alain Bédard: Good.
Operator: Your next question comes from Konark Gupta from Scotia Capital. Please go ahead.
Konark Gupta: Thanks, operator. Good morning, Alain and David. Thanks for squeezing me in. Alain, we probably haven't talked a lot about 2027 yet. I'm sure you'll probably talk about that with Q4. Just to build a framework for where things are heading, 2026 was like a hybrid year, right? You had parts of recession and parts of some rebounds and capacity exits and rate improvements, et cetera. When you look at 2027, do you expect broadly volumes in your Truckload and LTL segments to be up, margins to further improve, and maybe further growth in Logistics?
Alain Bédard: Kornar, we believe that 2027, on the Truckload sector, the freight environment's going to be still soft, but the supply is going to be constrained, okay? That's going to help us in 2027, like it helped us in Q2, Q3, and Q4 of 2026. Like I said earlier, we still have some tweaks to do of our own to improve our profitability on that. On the LTL side, US LTL side, I think that the market will still be soft too. Us, there, we have a big job to do. I mean, in terms of doing a better job in terms of service, reducing the cost, et cetera, et cetera, improving the mix, improving the revenue per shipment, and all that. Like I said, the chance we have in US LTL is our peers are smart.
Alain Bédard: I mean, we're dealing with guys, professionals that are really good, okay? At least the market is stable in terms of pricing. There's no war on rates and all that. Volumes is down a bit. Everybody is doing a great job except us, okay? This is why we are addressing that. We've done everything we could on the fleet, the financial tools, all that. We did everything that is possible to do, and we don't have the results. Then, like I said earlier, now we're attacking the human side of it, okay? Because if you're sitting on your hands, I mean, we don't need you, right? This is where we're at now. I mean, we got too many of those service managers or that day-to-day team that accept things that are completely unacceptable, right?
Alain Bédard: That to me, we should see some improvement during the course of 2027 in our US LTL. Canadian TL, we're doing great. Logistics, I mean, we've got some great opportunity in 2027, okay? This is why we feel really good about what these guys have done, okay, and the potential for 2027. I mean, we have a great team. The only cloud that is the bank business in Canada that we're losing, okay, because of technology. That's a little bit of an issue in Canada, but the team will replace that business. It's going to take us some time, maybe 1 year to 2 years, because this was great business for us. But really, in our Logistics world, we have a fantastic team with a lot of organic growth, okay, potential. A little bit like Steve Brookshaw in the US, okay?
Alain Bédard: Our revenue is up, so it is organic growth. The way we are set up now with Scott Updyke in charge of our commercial team in the US, we are going to see huge benefit, in my mind, of that during the course of 2027.
Konark Gupta: Okay. That is great, Alain. Appreciate that. If I can squeeze one more in here on the LTL. You laid out some expectations for operating ratio to be up as much as 100 basis points in Q4. Can you frame expectations for tonnage and yield into Q4?
Alain Bédard: I think it is going to be year-over-year. I do not know that, Konark, but I would say that versus Q3, it is probably, in terms of pounds, in terms of volume, going to be probably about flat.
Konark Gupta: Yeah
Alain Bédard: versus Q3.
David Saperstein: Yeah. Konark, if you look at the press release, I want to make sure that you see what is in the press release. We say that there is zero to 100 basis points decline in LTL year-over-year.
Alain Bédard: That is in the model.
David Saperstein: That is what is in the press release.
Alain Bédard: Yeah.
David Saperstein: I think you can
Konark Gupta: Right. I mean, the decline is an improvement?
Alain Bédard: No.
David Saperstein: No, no. It is improvement in the quarter. So, if you look at how it is written, when you talk about Truckload, it is an improvement of 400 to 500 basis points for Truckload, 100 to 200 basis points for Logistics, and zero to 100 basis points decline.
Alain Bédard: Yeah
David Saperstein: in the LTL.
Alain Bédard: Yeah.
David Saperstein: So, improvement is Truckload and Logistics. Deterioration is in the Truckload, or in the LTL. Yeah.
Konark Gupta: In the LTL. Absolutely. Okay, I got it. Perfect. Thanks.
Konark Gupta: Tonnage is flattish on-
David Saperstein: Yeah
Konark Gupta: increase in the OR.
David Saperstein: Or about, yeah, deterioration.
Konark Gupta: Perfect. Thanks.
Konark Gupta: Thank you.
Operator: Your next question comes from Benoit Poirier from Desjardins Capital Markets. Please go ahead.
Benoit Poirier: Yes. Thank you very much. Good morning, Alain. Good morning, David. On the Truckload, if I look at the implied guidance for Q4, it implies that you will be finishing the year with a 400 bps improvement versus last year, so probably around 89%. I was just wondering what kind of OR improvement we might be thinking of for next year. I understand that there is some investment to be done with Mr. Brookshaw, so I am just wondering what could be some reasonable expectation. It does not look like that you have the ability to hit 83% or 80% as it was previously discussed before on this call, given the current macro backdrop. If you could provide more details around Truckload, that would be great. Thank you.
Alain Bédard: I think, Benoit, if you look at 2027, we still have some tweaks. Q1 2026 was not good for us, right? I think that Q1 2027 is going to show major improvement versus Q1 2026, okay? That is number 1. Globally, like you said, if you look at the year 2027, can we be a sub-85 OR? We have done that before, but the market, the demand is still soft. What is helping us is the supply, but the market is still soft. With the same kind of market condition, I think that to be an 85 OR for 2027, I think that this is probably the best that we can do with this kind of an environment. Do not forget that our Canadian operation has been affected by tariff, right? Steel, for example.
Alain Bédard: We do not know what is going to happen with steel, but we know one thing, is that us, okay, we are the largest carrier of steel in Canada, right? Or Canada to the US. We do not move a pound right now of steel between the two countries. That is something that we do not know. Probably steel will still be 50% tariff. If this is the case, this is not going to help us. There is a lot of small things that could help us, but we do not anticipate anything major to help us in 2027, except, okay, the supply constraint is going to continue. Fuel, we believe, is going to stay high, which is not helping us at all in our Truckload, okay? Because right now, fuel surcharge is 100% of the freight bill. This is tough to swallow for customers, right?
Benoit Poirier: Yeah
Alain Bédard: If you add all of that, Benoit, I think that if we get 85 and grow, organic growth too, right, on the revenue side, Mr. Brookshaw and his team will have done a fantastic job in 2027.
Benoit Poirier: Okay. That is great. You have been talking about some external help to join the team at TForce Freight, so I was just wondering where the new guy comes from and what will be his role versus Carl and Chris, that would be good.
Alain Bédard: Yeah. Benoit, this will come public, probably within the next few weeks. It is still not public. This is why we will say that publicly in the next, probably before, because I am having a meeting with those guys in Toronto, I think it is the week of 15 November. This is why after that, it is going to be public.
Benoit Poirier: Okay, perfect. Maybe just a quick one. Obviously, on the LTL, I would expect more details. There are still some investment to be done in 2027.
Benoit Poirier: If I look at the guidance, it implies you will be about 91.5% OR for the year. What kind of reasonable expectation we might see for LTL? Could we see even some deterioration given all those investment to be made, or you would expect some improvement in terms of OR
Alain Bédard: No
Benoit Poirier: from LTL next year?
Alain Bédard: No. I do not think so, Benoit. I think that we have done everything that we could, okay, in terms of investment. Now, we are investing in people, okay? I think that I would be very disappointed for 2027 if we do not break the 90 OR globally.
Benoit Poirier: Okay. Okay. Good. That is great. Thank you very much for the time, Alain.
Alain Bédard: Very good, Benoit. Thank you.
Operator: Your last question for today comes from Ari Rosa from Citigroup. Please go ahead.
Ari Rosa: Hey. Good morning, Alain, David.
Alain Bédard: Morning.
Ari Rosa: I want to stay on kind of the subject that everyone else has been talking about, but I want to ask it from a slightly different angle, if I could. Alain, in the past, you've spoken about viewing the US LTL business as not necessarily structurally broken given the union, and now I hear you talking about wanting to expand in kind of non-union areas within LTL.
Alain Bédard: Mm-hmm. Yeah.
Ari Rosa: I'm just curious to hear, like, has your thinking evolved in that regard? I mean, I hear you saying kind of the people are the problem, the mindset, the culture is the problem. I mean,
Alain Bédard: Yeah
Ari Rosa: wondering, like, what do you say to skeptics who, the business seems to be structurally broken? If we are looking at a management change and we look forward kind of 12 months, 18 months, and we are still seeing that business under pressure, like, what is the answer?
Alain Bédard: Yeah.
Ari Rosa: What then?
Alain Bédard: Yeah. Yeah. You know, you cannot blame the drivers. I mean, if those guys are not efficient, it has got nothing to do with the driver. The driver will do what he is supposed to do if he is managed properly. If he does not do what he is supposed to do, then the management has to sit down with this employee and make sure that he is going to do what he is supposed to do, or he is going to have to look for another job. So, when I talk about the issue of people, I am talking about the management. I am not talking about the dock guy or the driver. I mean, those guys will do what they are supposed to do if you manage them properly. So, it is a management thing. This is why I have said, "Do not blame the union.
Alain Bédard: Do not blame the fact that the guy is a unionized guy to say that the results are poor." No. Because we have the same issue in Canada. We have unionized guys, and the results are great. So, it is not the union or the driver. Yeah, maybe we have some guys that are cheating, et cetera, et cetera, but the start is really the day-to-day management of those guys. That is for TForce Freight. In terms of building a non-union in parallel, the objective is really to build an asset-light network. An asset-light can be done in a non-union environment. So it is not like we are trying to build a non-union environment just to be in a non-union world. Our objective is to build something that is asset-light, and in order to do that, you cannot have a union, right?
Alain Bédard: That's really the direction that we're going, unless we could find, down the road, maybe an LTL operation that makes sense of size. We'll see. I mean, we're having some discussion with some carriers that, "Hey, you want to join the team?" We'll see how this goes. But in the meantime, our TForce Freight business is not performing well at all, but it's not the issue of the driver or the dock guys or the union. It's the issue of the local management that are not managing properly or effectively, those guys.
Ari Rosa: Yeah, understood. Then just quickly as a follow-up, David Saperstein mentioned the idea that TFI has been a really strong compounder over time, and I think that's what certainly we like about the business, and a lot of people have identified TFI as a compounder over time. Yet, we've stalled out, and obviously, I understand, we've had a freight recession and difficult macro conditions, but how do we get back to that trajectory? I mean, again, unless we're hanging our hat on macro turnaround, does it require that turnaround in TFI, or can you get back to that kind of trajectory of compounding without that?
Alain Bédard: No.
Ari Rosa: Thanks.
Alain Bédard: No, because we have a huge revenue with basically little contribution. So this is the issue we have, guys. I mean, if you look at the latest investment of Daseke, this thing has been turned around, we're doing well. Our Logistics is doing well. The big rock that I got in my shoe for the last few years is TForce Freight. So we've tried everything with those guys. The fleet, the financial tools, the real estate. We've tried everything. And the results is not good. So now we're saying, "Guys, the problem is the people," right? Not the drivers, not the dock workers. I'm not saying that. I'm saying the way we manage those guys, that is problem number one that we got to fix.
Alain Bédard: We got to bring pride to this company that, if you look at all of our business unit, even the Daseke companies that we, 2 years ago, we have people that are pride of their company. I'm not too sure how many people are pride of TForce Freight today with every investment that we've made. Still like, "Well, you know what? We don't really care about what's going on." I mean, we don't provide good service. We bring back the delivery of this shipment back to the dock. We were too busy. We were too busy at the coffee shop probably, and, well, we'll just bring it back. I mean, service suffers, right? So, this is all these things that you say, "Well, did you see that before?
Alain Bédard: After three years of looking at it, well, there was always, "Well, we need this, we need that, we need this, we need that." Now you got everything. You got everything that you need, and you're still not performing well. So the problem is the guy that's sitting on that chair.
Ari Rosa: All right. Fair enough. Thanks for the time, Alain.
Alain Bédard: My pleasure.
Operator: There are no further questions at this time. I will turn the call back over to Alain Bédard for closing remarks.
Alain Bédard: All right. Thank you, operator, and I would like to thank everyone for joining our call and for your interest in TFI International. We look forward to finishing the year strong and seeing many of you at the six investor conference that we will be attending before year-end. As always, please do not hesitate to reach out with further question, and please enjoy the weekend. Thanks again.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
