TFI International Q2 2025 Earnings Report

TFI International EPS Results

• Actual EPS: $1.34
• Consensus EPS: $1.24
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

TFI International Revenue Results

• Actual Revenue: $2.04 billion
• Expected Revenue: $1.49 billion
• Beat/Miss: Beat by +$544.41 million
• YoY Revenue Growth: N/A

TFI International Announcement Details

• Quarter: Q2 2025
• Date: 7/28/2025
• Time: After Market Closes
• Conference Call Date: Monday, July 28, 2025
• Conference Call Time: 5:00PM ET

TFI International (NYSE:TFII), together with its subsidiaries, provides transportation and logistics services in the United States and Canada. The company operates through Package and Courier, Less-Than-Truckload (LTL), Truckload (TL), and Logistics segments. The Package and Courier segment engages in the pickup, transport, and delivery of items in North America. The LTL segment is involved in the pickup, consolidation, transportation, and delivery of smaller loads. The TL segment offers expedited transportation, flatbed, tank, container, and dedicated services. This segment also carries full loads directly from the customer to the destination using a closed van or specialized equipment. The Logistics segment provides asset-light logistics services, including brokerage, freight forwarding, and transportation management, as well as small package parcel delivery. As of December 31, 2023, it operates 11,455 trucks, 34,599 trailers, and 7,504 independent contractors. The company was formerly known as TransForce Inc. and changed its name to TFI International Inc. in December 2016. TFI International Inc. was founded in 1957 and is headquartered in Saint-Laurent, Canada.

TFI International Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong free cash flow of $182 million in Q2 (up 20% year-over-year) was used for significant share repurchases and dividends, reinforcing the company’s cash-return strategy.
• Positive Sentiment: Consolidated revenue declined to $1.8 billion from $2.0 billion a year ago, but operating income rose to $170 million, driving a 9.5% margin compared to 2.5% in Q2 2024.
• Neutral Sentiment: LTL and Truckload segments showed sequential operating ratio improvements (LTL +360 bps, Truckload +250 bps) despite year-over-year margin pressure, while Logistics margin slipped to 9.6% from 11.4%.
• Positive Sentiment: Balance sheet remains strong with funded debt/EBITDA at 2.4×, $124 million returned to shareholders in Q2, and post-quarter repurchases exceeding 475,000 shares.
• Neutral Sentiment: Q3 EPS is guided to $1.10–$1.25 assuming stable conditions, and full-year net CapEx is expected to be around $200 million.

Presentation

[Operator]

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session.

[Operator]

Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. 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. I would also like to remind everyone that this conference call is being recorded on 07/28/2025.

[Operator]

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, President, CEO & Chairman at TFI International]

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 $182,000,000 of free cash flow. As you know, we use excess cash flow to return capital to shareholders whenever possible.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thus, we repurchased a significant number of our shares both during the second quarter and into the third. This while maintaining a strong balance sheet, which has a long been a pillar of our strength. In fact, we further strengthened our balance sheet during the quarter through a private placement bond offering that I'll discuss in a moment. So let's begin with a quick review of our consolidated results. During the second quarter, we had a total revenue before fuel surcharge of $1,800,000,000 compared to $2,000,000,000 a year earlier.

[Alain Bedard, President, CEO & Chairman at TFI International]

As I mentioned, we had strong margin performance across the board and we generated 170,000,000 of operating income, representing a 9.5% margin of just one percentage point compared to 2.5% in the prior year period. We also produced adjusted net income of $112,000,000 relative to $146,000,000 last year and our adjusted EPS of $1.34 compares to $1.71 In terms of net cash from operating activity, we generated $247,000,000 which was virtually flat with the prior year period And free cash flow, as you heard me say, was $182,000,000 and that was significantly above the second quarter of twenty twenty four, results of $151,000,000 That's up 20% due in part of favorable working capital dynamics as well as moderately lower CapEx relative to last year. We owe these solid results with 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 NEC 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 $7.00 4,000,000 Operating income of $74,000,000 compares to $110,000,000 in the year earlier period.

[Alain Bedard, President, CEO & Chairman at TFI International]

The LTL operating ratio of 89.5 compares to 86.2 in the second quarter of twenty twenty four. However, this represents a three sixty basis point sequential improvement relative to the first quarter of twenty twenty five. Our LTL return on invested capital was 12.9%. Next up is Truckload, which was also 39% of segmented revenue before fuel surcharge, which came at $712,000,000 compared to $738,000,000 a year earlier. Operating income was $71,000,000 versus $81,000,000 in the prior year period and our truckload OR of 90,100,000.0 is relative to 89,000,000 in the second quarter of twenty twenty four.

[Alain Bedard, President, CEO & Chairman at TFI International]

Tariff related uncertainty continues to weigh on industrial end market demand. However, this quarter's OR also delivered two fifty basis points sequential improvement relative to the first quarter of twenty twenty five. Wrapping up on truckload, our return on invested capital was 6.4%. Our last business segment to review is logistics, which at $393,000,000 was 22% of this quarter's segmented revenue before fuel surcharge and down from $442,000,000 the prior year.

[Alain Bedard, President, CEO & Chairman at TFI International]

Logistics operating income was $38,000,000 compared to $51,000,000 representing a 9.6% operating margin as compared to an 11.4% in the prior year second quarter and our return on invested capital was 15.7%. In terms of the balance sheet, we benefited from the $192,000,000 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, 85,000,000 worth and also paid out another $39,000,000 through dividends for a total of $124,000,000 of excess capital returned to shareholders, fulfilling one of our long standing important commitments. Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares. I'll wrap up with our outlook for the third quarter of twenty twenty five.

[Alain Bedard, President, CEO & Chairman at TFI International]

We currently look at for an EPS in the range of $1.1 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 $200,000,000 for the full year. All right. So with that, operator, if you could please open the line, both David and I would be happy to take questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. A reminder, please limit yourselves to one question and one follow-up. First question comes from the line of Ravi Shanker from Morgan Stanley.

[Ravi Shanker, Managing Director at Morgan Stanley]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes, you know what Ravi, it's always been a big discussion at TFI. I mean, are very cost sensitive us and what these guys were able to accomplish in Q2, in a very difficult, still difficult market condition. Now if you look at all the tools that we've implemented so far, one IT, one technology tools is Optum. We've implemented Optum for our line all, now we're in the midst in '25 to implement Optum, that software, to help us on the P and D side. So our line all, we're very proud with what happened there.

[Alain Bedard, President, CEO & Chairman at TFI International]

If you go back four years ago, we used to run line all 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 haul. We believe that the next thing that's going to help us reduce our costs is going to be on the P and D side, okay, where we're going to do more with less. So that's one area that we feel good about and we're implementing that.

[Alain Bedard, President, CEO & Chairman at TFI International]

As a matter of fact, this week, I think David, if I'm right, we're implementing two terminals, smaller terminals. So that's the first of those 100 and some terminals that we're going to be moving towards with Optum. 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 yes, we're better.

[Alain Bedard, President, CEO & Chairman at TFI International]

We're at 0.7% of revenue. We used to be at 0.9%. I think T4's 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 U. S.

[Alain Bedard, President, CEO & Chairman at TFI International]

Runs 0.2%. So this is again a huge cost for the company and the same is true of accidents. So we just hired a guy, Mark Fox, that's going to help us improve our safety. He was the President of Matric when we used to own Matric some ten, fifteen years ago and Mark has done a fantastic job in terms of changing the culture and improving the culture of safety. So claims and accident, I think that we need to improve that like 100%, that's going to help us big time.

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[Ravi Shanker, Managing Director at Morgan Stanley]

Is really helpful. Mean, ARA, James. Go ahead,

[David Saperstein, Chief Financial Officer at TFI International]

Please go ahead, Ravi.

[Ravi Shanker, Managing Director at Morgan Stanley]

Sorry.

[Ravi Shanker, Managing Director at Morgan Stanley]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Well, that's for sure. If you look at our Canadian LTL, we're down. We're down. 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 U.

[Alain Bedard, President, CEO & Chairman at TFI International]

S. And Canada on the LTL side is down. And this is the most profitable business that we have on the LTL is the trade between U. S. And Canada.

[Alain Bedard, President, CEO & Chairman at TFI International]

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, we should do fine. Things will come back. It's just like this in kind of instability right now.

[Alain Bedard, President, CEO & Chairman at TFI International]

So this should be fixed probably before August 1 maybe it's going to be fixed or later on but for sure in 2025. So yes, we're a little bit affected. We're mostly affected by the instability in our industrial truckload base in The U. S. Where a lot of our customers are just waiting on the sideline to say, hey, where are we going?

[Alain Bedard, President, CEO & Chairman at TFI International]

Where is this going to happen? Where is this going to end? So because our miles in our specialty truckload are down like around 10%, which is not normal. I mean, it's just like it's quiet. It's very quiet right now.

[Alain Bedard, President, CEO & Chairman at TFI International]

Hopefully, with this big beautiful bill that should help investment and that's what the investment we made on DESKY a year ago, that was because we thought that the industrial business in The U. S. Will start to grow again. Well, missed the call, maybe one year too early.

[Ravi Shanker, Managing Director at Morgan Stanley]

Very good. Thank you.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you, Ravi.

[Operator]

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

[Scott Group, Managing Director at Wolfe Research]

Hey, thanks. Afternoon. Maybe if you can just give us a little bit more color on the Q3 guidance, dollars 1.1 to 1.25 maybe some of the margin assumptions there. It's probably a little bit of a steeper decline Q2 to Q3 than we typically see. So just any thoughts there? Thank you.

[David Saperstein, Chief Financial Officer at TFI International]

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. So that's all that we're forecasting there is just normal seasonal sequential declines. And the extent to which we're able to continue to drive these idiosyncratic opportunities that we have over the course of this quarter will, of course, come to offset some of that.

[Scott Group, Managing Director at Wolfe Research]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Know what Scott, I think that our guys at T Force REIT will do a great job again in Q3. I would say that, again, I mean, our volume is still too soft. So the guys, what they've done so far is they've improved the mix of our freight, okay, year over year. And when you talk to our team here, the thing that what we're our 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.

[Scott Group, Managing Director at Wolfe Research]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Yep.

[Scott Group, Managing Director at Wolfe Research]

Okay. That's helpful. Thank you, guys.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thanks, Scott.

[Operator]

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

[Walter Spracklin, Canadian Research Management & Co-Head of Global Industrials Research at RBC Capital Markets]

Yeah. Thanks very much. Good afternoon. Just on the guide in the back half, I know you're not or I guess, implied guide for the fourth quarter. Are you giving any indication as to what we're going to see for the full year?

[Walter Spracklin, Canadian Research Management & Co-Head of Global Industrials Research at RBC Capital Markets]

Are you seeing I know you've been right in terms of what you've seen in the general macro environment saying that we're not seeing much relief. Is there anything that would suggest to you that is this are you seeing any signs that this could start to improve front half of twenty six? Are you thinking now more back half of '26? Just curious your view on the overall macro here from the signals you're getting.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. So this is why since we saw this new plan of the U. S. Administration, we feel way better that we're finally going to get out of this freight recession that have been stuck in the mud for close to three years now.

[Alain Bedard, President, CEO & Chairman at TFI International]

Now we haven't seen anything yet, but it's just like what we're reading, what the guys are talking about, when we talk to our customers. I had a meeting with our specialty truckload fleet a week ago and for the first time I heard those U. S. Guys saying that we feel better, we feel good when we talk to our customers. Hopefully things will start to roll.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. Late twenty five maybe, early twenty six because don't forget these projects sometimes takes time so we'll see. But at least the confidence, when I talk to the guys in The U. S. Is coming back.

[Alain Bedard, President, CEO & Chairman at TFI International]

On the Canadian side, there's a lot of instability. Once we know what's going to be the deal with The U. S, then the Canadian will be able to say, okay, this is what we need to do now.

[David Saperstein, Chief Financial Officer at TFI International]

Yeah. And I think what underpins that is really being able to see the effects of the cash tax savings And and thinking about how that flows through the economy. I mean, just just us, our cash tax savings in The US, this year are gonna be 20,000,000 and next year is gonna be another 20,000,000. And think about that throughout the economy. And this is really gonna go towards companies that are doing CapEx.

[David Saperstein, Chief Financial Officer at TFI International]

And these are the companies that are our customers. And now that we own Daseke, 72% of our specialized operation in The US We have $1,300,000,000 of US 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.

[Walter Spracklin, Canadian Research Management & Co-Head of Global Industrials Research at RBC Capital Markets]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

So for 2025, Walter, it's pretty simple. The M and A activity is buying back TFI. That's what we're doing. That's what we'll continue to do in 'twenty five because we cannot find another opportunity that cheap. It's impossible.

[Alain Bedard, President, CEO & Chairman at TFI International]

With so much free cash flow, there's no company that we can buy today at reasonable price that is better than buying back TFI. So that's what we're doing. Now in terms of larger transaction, I think that probably you could see us getting involved into something of size in 2026. Don't forget the last deal we did was late twenty twenty three into 2024. So that was like two years ago.

[Alain Bedard, President, CEO & Chairman at TFI International]

Mr. Brookshaw and his team slowly were digesting Daseke. It's more and more every day under our control. We're transforming the good Daseke truckers. The role that Steve has is to change these guys from good truckers to good business truckers.

[Alain Bedard, President, CEO & Chairman at TFI International]

So a good business trucker is there to make money, a good trucker is there only to service the customer and hopefully he makes money. That's the difference between the two.

[Walter Spracklin, Canadian Research Management & Co-Head of Global Industrials Research at RBC Capital Markets]

Thank you very much, gentlemen.

[Alain Bedard, President, CEO & Chairman at TFI International]

Pleasure, Walter.

[Operator]

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

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Very good question, Jordan. I have to tell you that sales has been, since we bought UPS Freight, T Force Freight now, it's been a rock in our shoes. We've never done well. We've tried everything, but I think that now for the first time since we bought the company, in Q2 we're starting to have a good sales team on the small and medium sized account that is highly motivated and getting results. So the number of shipments that went down like crazy about six months to nine months ago versus the total shipment, now is coming back and the guys are very motivated.

[Alain Bedard, President, CEO & Chairman at TFI International]

So we feel really, really good that finally through Chris' leadership, now we are kind of regenerating this sales team. And also at the same time, one thing that has always been an issue with our customer is that billing customer, it's like we always had problems with that. David, could you talk a little bit about that with Prism, this new software?

[David Saperstein, Chief Financial Officer at TFI International]

For sure, especially now that we've corrected the problems, can explain exactly what they were. The Prism is a new billing software which is helping us with our billing and our billing accuracy. We've also changed our processes so that we no longer deliver until you have an account with us or we have your credit card. And this caused DSO to go down at T Force or in The US LTL, which is primarily T Force. DSO went down from forty three days a year ago to thirty five days.

[David Saperstein, Chief Financial Officer at TFI International]

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 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. Also helps the customer experience because there's no running around afterwards trying to figure out the billing.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. I mean it's smoother. It's getting easier to do business with T Force Freight today than in the prior times and we'll keep improving that Exactly.

[David Saperstein, Chief Financial Officer at TFI International]

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 loss points.

[David Saperstein, Chief Financial Officer at TFI International]

So we're two thirds of the way back to where we were, let's say, about a year ago. And that's important. That's contributing to the results. And then the last thing is the GFP. We've now put up our third sequential quarter of GFP stability.

[David Saperstein, Chief Financial Officer at TFI International]

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.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Great. Thank you.

[Operator]

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

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Yes. Good afternoon. Wanted to ask you a little bit more on U. S. LTL.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

I know you guys have been kind of peeling back the onion for a number of years, getting the billing right. I'm sure it sounds like a big positive. What else do you think is left? I guess I was surprised when you said around 20% of line haul miles outsourced rail. I thought you were like up in the mid-30s.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Well, you know what, I mean, sure, from day one, we were not able to move away from rail because our fleet, our trucks were so bad that it was just a problem. So we've invested tremendously into the asset, the trucks and also the software. So right now we are running about 20% and we didn't add that many road drivers within T Force Freight. I mean it's just like those drivers are doing more. So we've also introduced sleeper trucks.

[Alain Bedard, President, CEO & Chairman at TFI International]

So now I would say we're just a little over above 100 sleeper trucks in our line all fleet at T Force rate. And this is also helping us on the long haul because now running sleeper, we beat the service of rail and the customer satisfaction is like much, much, much improved. So it's a change and we'll continue to improve that. Now can we go less than 20%? Well it's something that we're looking at right now, But it's way better in terms of our service on the three or four days service.

[Alain Bedard, President, CEO & Chairman at TFI International]

Because now we move more and more freight on the truck instead of rail.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes. So our service on the next day 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 and with our own trucks.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. On the next day, we are comparable to our peers and until such time that our service is comparable to our peers, our rate cannot be as good as our peers. So you have to provide the service first and then your sales team could say, hey, this is the market and this is what we would like to have in terms of rate.

[Alain Bedard, President, CEO & Chairman at TFI International]

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, was a cancer for us, a cancer because nobody cared. We were all the way up to four percent three years ago. Now we're hovering around one. Still too much because in Canada we don't have missed pickup.

[Alain Bedard, President, CEO & Chairman at TFI International]

I mean we're zero. So guys, one is better than three or four but one is not good enough. We have to keep improving this service metric. Right?

[David Saperstein, Chief Financial Officer at TFI International]

Yeah. For sure. It's something that we're very focused on because as we talked about before, a missed pickup is the worst because it's bad service and you lose the revenue.

[David Saperstein, Chief Financial Officer at TFI International]

Our missed pickups are down. The missed pickups, pure missed pickups are down over 50%, maybe 53%, something like that year over year in the quarter. And then when you add missed pickups plus reschedules Yeah. Because sometimes, know, I didn't miss it but I rescheduled it. You missed it.

[David Saperstein, Chief Financial Officer at TFI International]

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

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Okay. Yeah. Great. It's good to see the improvement. Thank you.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you, Tom.

[Operator]

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

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Hey, guys. Thanks for taking the question. So maybe just to follow-up on that last train of thought, when does that start to translate, the better service, the consistency? Like, how long does it take for those conversations to result in better yields, bringing it back to the market? Is this something you can see towards the end of this year?

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Is it really gonna 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 commensurate rate?

[Alain Bedard, President, CEO & Chairman at TFI International]

I think you're right, Brian. I mean, quarter does not make a year, right? So for sure, the shippers, they're smart, for sure, they look at us and they say, okay, guys are doing better. But 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 rot. So you're right, Brian.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. But if things stay the same, I would say that to bring the confidence to our customer that T Force Freight service is up to par to the peers, it's going to take a few quarters to build that confidence. But we'll continue to improve.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Okay. And then at Daseke and then the flatbed side of things, maybe you can just go through more detail in terms of I think at one point you needed to get rid of some equipment, 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 some updates on the asset side and then just the processes in terms of where you are now and what that could look like when the volumes do get better.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes, so very good question on that, I think as I said on the call of Q1, by the summer, all of Danske will be running our own financial system. 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 Daseke or specialized truckload, I'm down. If you look at my truck count, I'm down but not enough.

[Alain Bedard, President, CEO & Chairman at TFI International]

So I've got way too many trucks sitting idling because my miles are down about 10% year over year because my industrial customers are not that busy. So you'll see us improving. If you look at my OR of Q1 of my specialty truckload versus Q2, I wouldn't say that the market is better. I mean, I wouldn't say that we're more we have more activity. We just did a better job on the cost side of it.

[Alain Bedard, President, CEO & Chairman at TFI International]

So revenue per truck, we're doing okay but the rates is improved but it's the velocity that's not there. So overall after buying DESKY about a year ago, I'm very proud of what these guys have accomplished so far. But we have a long way to go because I think I've said it on the last call, it's not normal to run a specialty truck load with a 90 It's not normal. So we got to bring those guys back down to an 85. Probably, hopefully early twenty six we'll be running at an 87, 88 OR and then continue the improvement in a normal environment.

[Alain Bedard, President, CEO & Chairman at TFI International]

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 could see that when you have one of my peers losing money in truckload, I mean this is that tells you and these guys are good. That tells you how difficult it is in today's market. So I'm really proud that the guys improving what 200 basis points quarter over quarter on the OR.

[Alain Bedard, President, CEO & Chairman at TFI International]

I mean, so the guys are working really, really hard. Now in terms of capital, I would say that to run the business today, we have to shed about $20,000,000 of capital in excess equipment, trailers and truck. And this is what we're doing. Now for sure, the pre owned market on equipment is not that great. But if you look at, we're not losing money by selling the equipment right now.

[Alain Bedard, President, CEO & Chairman at TFI International]

We're making a little bit of money. But this is where the guys were slow. I say, we got to be a little bit more active.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Okay. Thanks very much. Appreciate it.

[Alain Bedard, President, CEO & Chairman at TFI International]

Good, Brian.

[Operator]

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

[Daniel Imbro, Managing Director at Stephens Inc]

Yes. Hey, good evening, guys. Thanks for taking our questions. Alain, I want to follow-up on The U. S.

[Daniel Imbro, Managing Director at Stephens Inc]

LTL pricing discussion. I think it makes a ton of sense. You're improving the missed pickups and service, and that will take time to show up in price. But I think the magnitude of the decline down almost 7% year over year. Can you just walk through or unpack what the headwinds to yield were this year?

[Daniel Imbro, Managing Director at Stephens Inc]

Considering service is better, I would have thought maybe we saw a little bit of improvement, but was there mix? Is it just competitive pricing? What's happening with core yields there?

[Alain Bedard, President, CEO & Chairman at TFI International]

I would say that number one is that the market is soft. Mean, what I've seen so far is that some of my best peers volumes are down, okay, 5%, 6%, not the one that came out last week. So there's price pressure a little bit, not disastrous, but there is some. And for sure the mix is the minute that we start gaining more on the SMB where the profitability is better, we should come up with better revenue per shipment, etcetera. So it's a transition 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.

[David Saperstein, Chief Financial Officer at TFI International]

Yeah. And also Daniel, our weight per shipment went up by almost as much as the yield went down. The weight per shipment was up over five percent. So 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.

[David Saperstein, Chief Financial Officer at TFI International]

Right? And we've been able to do that, you know, while reducing the length of coal a little bit, which takes a little bit of the cost off. It's but the real main driver of the yield decline is the growing weight per shipment.

[Daniel Imbro, Managing Director at Stephens Inc]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

There was nothing there. This potential strike didn't help us at all. Very minimal. It seems like there's not going to be another strike, very, very minimal. What what's killing us, okay, on the PNC side, although our results are fantastic compared to our peers, is on the Canadian side, Kearny, the prime minister, decided to go away from that carbon tax there.

[Alain Bedard, President, CEO & Chairman at TFI International]

Fuel price went down and us, fuel has always been a headwind a tailwind for us because of our density. So this is the effect of that carbon tax. But no, nothing specific to the potential strike. There was nothing there for us there.

[Daniel Imbro, Managing Director at Stephens Inc]

Great. Thanks for all the color and best of luck.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you.

[Operator]

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

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

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 $113,000,000 year over year, both in Q1 and Q2.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Just wondering, is that a trend where you could continue for the rest of the year? So if

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

I look at OpEx, can that be down another $50 plus million in Q3 again? Are you starting to lap tougher comps? But it does feel like you had some excess OpEx in 2024 in the back half of last year.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes, for sure.

[David Saperstein, Chief Financial Officer at TFI International]

Yes, I don't know. We'd have to look at some of the details to get back to you on those numbers, Kevin, separately. But yes, I mean, we've been taking out costs. You can see that the truck count is also down in The U. S.

[David Saperstein, Chief Financial Officer at TFI International]

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 those guys are there.

[David Saperstein, Chief Financial Officer at TFI International]

So there's the two pieces of it. 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.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yeah.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Right. That makes sense. Maybe just a clarification, David, I think you mentioned the Q3 guide of 01/2010 to 01/2025 just assumes normal seasonality. I guess if I ask it this way, without assuming any incremental success you have on your self help levers outside of what you've realized in the first half of this year, would be additive to that guidance?

[David Saperstein, Chief Financial Officer at TFI International]

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 applied to it.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

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

[Operator]

Your next question comes from the line of Adi Rasa from Citigroup. Your line is now open.

[Ari Rosa, Senior Analyst at Citigroup]

Hey, good afternoon, Alain and David. Congratulations on the nice turnaround here. I was hoping you could talk about the sustainability of the free cash flow. Alain, you opened your comments just talking about free cash flow. I think that's such an important part of the story.

[Ari Rosa, Senior Analyst at Citigroup]

Just talk about can you sustain these levels and where does it go to if we see a little bit of improvement in the macro? Thanks.

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

And if you look back thirty years of TFI, that's how we've been able to grow. Remember when we turned the company into an income trust in Canada in 02/2002, people said, 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 when we reverted back into our corporation at the same time that we had the financial crisis, bad timing there. But this has always been the focus. So as an example, we just gave the example of Daseke where these guys were good truckers, but we're changing those guys into good business truckers. So you'll see us brokering more freight to the market and driving less mile with our own asset to have the proper balance that we have in Canada.

[Alain Bedard, President, CEO & Chairman at TFI International]

So if you look at the revenue in Canada of our specialty truckload, the balance between the revenue from our asset and the revenue from our brokerage is not the same as The U. S. Because in The U. S, the Danske guys, their thinking was, well, we got to run it ourselves. We own asset.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes, we do a little bit of brokers here and there. So we're changing that in The U. S. So again, assets from the other guys, not your asset, improve your free cash flow, right? It's the same revenue, okay?

[Alain Bedard, President, CEO & Chairman at TFI International]

Maybe not the same margin, but you're not stuck with the CapEx or the accident, right?

[Ari Rosa, Senior Analyst at Citigroup]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Oh, yeah. For sure.

[Ari Rosa, Senior Analyst at Citigroup]

Because you can be a little more explicit on Thanks.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yeah. Because if you look at what we do in Canada, I mean my P and C and my Canadian LTL are really very running light in terms of assets and this is what we're trying to do with Daseke and our specialty trucker in The U. S. The same kind. It's harder to do for us in The U.

[Alain Bedard, President, CEO & Chairman at TFI International]

S. LTL because it's a unionized labor force, a little bit more difficult. So this is why to me, by switching revenue from asset to non asset, it's going to help our free cash flow down the road. So to me, in a normal environment, TFI with the business we have today, can we do close to $1,000,000,000 in free cash flow? And the market is helping us? Absolutely.

[David Saperstein, Chief Financial Officer at TFI International]

Yeah. Because when you think about what's the first what's the first contributing element to the free cash flow, it's the net income. Okay. So as the business as the environment recovers, everything recovers, net income goes up. Perfect.

[David Saperstein, Chief Financial Officer at TFI International]

Okay. Then then what? Well, when we start making a lot of money, we're not gonna go out and celebrate and buy trucks. That's not us. We're not gonna buy trucks with excess free cash flow.

[David Saperstein, Chief Financial Officer at TFI International]

We're gonna buy the trucks that we need while continuing to migrate towards this more asset right model in the recently acquired businesses that mister Bedar went went went through. And and and so the incremental earnings dropped straight to the to the bottom line of the free cash flow. 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 you should expect the free cash to go up along with earnings.

[David Saperstein, Chief Financial Officer at TFI International]

And you will not see any sort of large step up of adding capacity through assets.

[Alain Bedard, President, CEO & Chairman at TFI International]

And and also, we have a few one timers on the real estate side. K? We have a few one timers on the real estate side that you know, because we're also, you know, adjusting our real estate portfolio to the reality of of the world today. So this is also something that is going to help us in 2025, 2026, 2027 down the road.

[Ari Rosa, Senior Analyst at Citigroup]

Got it. That's wonderful color. And then I just wanted to stay on the point 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.

[Ari Rosa, Senior Analyst at Citigroup]

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?

[David Saperstein, Chief Financial Officer at TFI International]

Yeah. Yeah. Here things are that we're looking at. The first is billing accuracy. Okay?

[David Saperstein, Chief Financial Officer at TFI International]

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 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 and 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.

[David Saperstein, Chief Financial Officer at TFI International]

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 whole element to that.

[Ari Rosa, Senior Analyst at Citigroup]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you.

[Operator]

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

[Ken Hoexter, Managing Director at Bank of America]

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.

[Ken Hoexter, Managing Director at Bank of America]

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 is what drops off, right? Because Elaine already mentioned LTL margins at U. S. Should stay basically flat into 3Q, 4Q.

[Ken Hoexter, Managing Director at Bank of America]

So is it truckload? Is it logistics? What falls off? Or is it just freight in the third quarter?

[David Saperstein, Chief Financial Officer at TFI International]

Yeah, listen, I think so, we said '94, maybe '95. So if we end up in the 95, that would be a point on the LTL. I think the truckload last year compressed a bit as well. The logistics could also compress a bit with the lack of truck deliveries and our truck delivery business as just the industry pulls back on CapEx. And then I think there's a question mark that we have that we don't have the answer to and we won't until the quarter is over, which is how much of the freight dynamics that we're seeing right now are related to the stop start stop again dynamic related to the tariffs, right?

[David Saperstein, Chief Financial Officer at TFI International]

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. What's going to happen when those are done? But then at the same time, you've got peak season coming. Maybe so we we are just conscious of the fact that it's difficult to extrapolate what you're seeing right now out to the future because of the start and stop nature of the imports that have been coming into the country as a result of the tariff stuff, which it looks like maybe the worst of that volatility is behind us.

[Ken Hoexter, Managing Director at Bank of America]

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

[David Saperstein, Chief Financial Officer at TFI International]

No, boy. It's well, it's so on our LTL, around half of it is retail. And I couldn't tell you how much of those are related to West Coast imports. But I think a lot of that retail stuff is coming from China.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yes. 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 freight. 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 Daseke. Right?

[Alain Bedard, President, CEO & Chairman at TFI International]

Because, again, UPS was a retail machine. UPS rate was the same. We said, no. No. No.

[Alain Bedard, President, CEO & Chairman at TFI International]

No, guys. Let's move more into the industrial environment. Okay? And through the Daseke sales team, we're opening doors to our LTL team to see, hey, can we do something with you guys, like a Carter Peller, like a John Deere, all these major industrial customers that we service on the industrial side, but we don't on the LTL side.

[Ken Hoexter, Managing Director at Bank of America]

Wonderful. And then my follow-up, 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 the backdrop.

[Alain Bedard, President, CEO & Chairman at TFI International]

I think that the English thing there is just maybe for the truckload guys. In the LTL world, 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. But in terms of our volume, we've been going down for the last two or three years in terms of volume. 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, nothing big, but again, this is also related to improving the service.

[Alain Bedard, President, CEO & Chairman at TFI International]

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 and you're competing with good peers that provide a good service, good luck. It's going to be tough.

[Alain Bedard, President, CEO & Chairman at TFI International]

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 one, okay, we should be down to zero. So again, this is all things that the guys are focused and it's like a religion. Again, like I was saying earlier to a different analyst, I mean it's not one quarter that's going to convince the industry, the shippers that, maybe it's a blip.

[Alain Bedard, President, CEO & Chairman at TFI International]

Maybe it's like, oh, it's this flavor of the month now. No, no, no, no. We have to prove that this is going to be consistent, sustainable and this is why when we go back and talk about USLTL 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 this is the minimum goal for us.

[Ken Hoexter, Managing Director at Bank of America]

Appreciate your thoughts and insight as always. Thanks, Alain. Thanks, Tate.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you, Ken.

[Operator]

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

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

Thanks for taking my questions. David, if we go back to the cash flow discussion from earlier, you talked about I think Mr. Bedard talked about getting close to $1,000,000,000 in free cash flow in a more normalized environment. Do you have a sense of where you might shake out this year? And just to clarify on the quarterly outlook, I know you're optimistic that U.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

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 just help us frame your view of seasonality in the fourth quarter as well? Thank you.

[David Saperstein, Chief Financial Officer at TFI International]

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

[David Saperstein, Chief Financial Officer at TFI International]

It takes shape. So as it relates to seasonality in the fourth quarter, the best way to look at that would be, if you're asking about the truckload, to look at what we did between Q3 and Q4 last year because we had Daseke in Q3 and 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.

[David Saperstein, Chief Financial Officer at TFI International]

What happened to us in Q4. That is not normal seasonality. That was related to us losing a lot of SMB. And so that will not apply. That trend between Q3 and Q4 in terms of the margin compression that we saw last year, that will not be repeated.

[David Saperstein, Chief Financial Officer at TFI International]

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.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

Thank you.

[Operator]

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

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Yes. 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.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Just wondering what could be the targeted leverage by year end given the comments about free cash flow generation? And where would you like to be before sizing a more transformative deal?

[Alain Bedard, President, CEO & Chairman at TFI International]

Well, I think our plan, if I correct me if I'm wrong, David, is that based on our plan, we're going to end up the year around two, two point one leverage, right? Let's say 2.1, we're at 2.35 now, 2.1. So this is the way we see it. And now in terms of a deal of size, the approach that we have is that we could live all the way up to three because we generate so much cash. But we're not going to go above three, that's for sure.

[Alain Bedard, President, CEO & Chairman at TFI International]

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 lead.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Okay. That's very good color. And Alain, you mentioned great color about the industrial, your exposure to industrial, the comments, positive comments about the potential recovery in 2026. Obviously, 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.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

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 U. S. LTL, whether it's doable?

[Alain Bedard, President, CEO & Chairman at TFI International]

Benoit, it's still too early for us to talk about $26 because we are having a tough time just to talk about Q3. But going back to logistics, I mean logistics, our GHT division is going through some tough times right now because nobody is buying trucks. So the OEMs are down 15%, 20%, 30%. But that will correct itself probably in 2026 according to the forecast we have from the OEM. Okay.

[Alain Bedard, President, CEO & Chairman at TFI International]

That being said, our U. S. Logistics had a not so good first six months of the year. So we were running at about 95% of plan. Now we believe that the last six months of 2025 we're going to be closer to a 98%, 99% of plan.

[Alain Bedard, President, CEO & Chairman at TFI International]

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 $2.20 with the business we have today. And I think we're going to end up the year probably like 160 or something like that. So GHT is a big thing there. But according to GHT and the truck OEM, because of this new engine thing there in '27, those guys will be pumping a lot of trucks in '26. And with this CapEx thing there with the new plan of Mr. Trump, probably GHT will be back to being very busy in 'twenty six. So that's going to help us.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Thank you very much for the time.

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you, Benoit.

[Operator]

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

[Konark Gupta, Equity Research Analyst at Scotiabank]

Thanks and good morning, Ali and David. Sorry, good afternoon.

[Konark Gupta, Equity Research Analyst at Scotiabank]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Because we're focused on them now. We care about them. Are really, as an example, David was talking about missed pickup. We really focus on missed pickup for those guys even more than the general freight that we service. So we care about those guys because these are the best margin account instead of just not caring.

[Alain Bedard, President, CEO & Chairman at TFI International]

Now it's a real focus of ours. They didn't come back because of rates, because we cut rates and this and that. No. They came back because we made them a proposal which is fair, reasonable and we told them, listen, we'll provide you with good service. This is why going back to an earlier comment, my next day service is comparable to our peers.

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[Konark Gupta, Equity Research Analyst at Scotiabank]

Makes sense, makes sense. So it's a service based betting back, the price based betting back. Yes. Thanks.

[Alain Bedard, President, CEO & Chairman at TFI International]

No, no, no, not the price.

[Konark Gupta, Equity Research Analyst at Scotiabank]

Glad to hear.

[Konark Gupta, Equity Research Analyst at Scotiabank]

And then just my follow-up would be on the capacity side. Think you laid out some capacity numbers for the truckload business for DESKY, etcetera. What about U. S. LTL and Canadian LTL?

[Konark Gupta, Equity Research Analyst at Scotiabank]

How many doors, how many trucks or trailers you're you're, you know, you know, maybe way too much in in The US and Canada on the LTL side. I mean, do you need to rationalize some or or or you still need to add more for the future?

[Alain Bedard, President, CEO & Chairman at TFI International]

No, the Canadian size we're done because we've just acquired Kindersley about a year, and a half ago. So we're done with Kindersley. We've acquired also Hercules in Canada and in The US. So Hercules, we're done in Canada, we're not done in The U. S.

[Alain Bedard, President, CEO & Chairman at TFI International]

Yet. So the guys are working on The U. S. Side right now. But the rest of our business in Canada is okay.

[Alain Bedard, President, CEO & Chairman at TFI International]

We have no issues. In terms of U. S. LTL real estate, we still have about 3,000 doors to many, 3,000 to 4,000 doors to many. So you should see us during the next six months do some trade, some swaps with some of our peers that we do all the time.

[Alain Bedard, President, CEO & Chairman at TFI International]

That should help us reduce the carrying cost of those real estate that we have no use for it. So on the truck side, we've talked about truckload. On the LTL side, what we're selling is the old UPS freight trucks with very little value. So there's not much capital to regain from the sale. But we still have way too many trailers over there and too many trucks, but not a lot of capital tied up there.

[Scott Group, Managing Director at Wolfe Research]

Okay. That's very helpful. Thank you.

[Operator]

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

[Elliot Alper, Vice President at TD Cowen]

Hey, great. Yeah. This is Elliot on for Jason Seidl. Maybe just follow-up to the last question on T Force. Are you seeing some of these SMB customers feeling more of the tariff pressure?

[Elliot Alper, Vice President at TD Cowen]

And then a number of carriers are also going after the SMBs. Is the pricing little accretive to maybe the total book? Is it seeing incremental challenges given some of these players are looking to grow share?

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[David Saperstein, Chief Financial Officer at TFI International]

No.

[David Saperstein, Chief Financial Officer at TFI International]

We haven't seen that. No. And in terms of your other question about Pricing. Pricing and other people going after SMB, it's a market, right? It's a market.

[David Saperstein, Chief Financial Officer at TFI International]

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.

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[Elliot Alper, Vice President at TD Cowen]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

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

[Elliot Alper, Vice President at TD Cowen]

Got it, thank you.

[Alain Bedard, President, CEO & Chairman at TFI International]

You're welcome.

[Operator]

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

[Cameron Doerksen, Research Analyst at National Bank Financial]

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

[David Saperstein, Chief Financial Officer at TFI International]

No. 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 75,000,000 cumulatively relative to what our tax would have been without this law. And of that 75,000,000, 40,000,000 is realized in the first two years.

[Cameron Doerksen, Research Analyst at National Bank Financial]

Okay. Okay. That's helpful. And maybe just, I guess, 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?

[David Saperstein, Chief Financial Officer at TFI International]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

But I think globally, David, we're under five.

[David Saperstein, Chief Financial Officer at TFI International]

Yeah, oh yeah. Globally for sure we're under five and we can follow-up on the exact calculation. But this was a great private placement for us. We managed to access the markets at a great window. We reduced our interest expense as we discussed.

[David Saperstein, Chief Financial Officer at TFI International]

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. We're very happy with transaction.

[Cameron Doerksen, Research Analyst at National Bank Financial]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

Thank you, Cameron.

[Operator]

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

[J. Bruce Chan, Director at Stifel Financial Corp]

Hey, good evening, guys. Thanks for squeezing me in here at the end. Lane, just wanted to ask maybe a bigger picture strategic question. You talked in the past about maybe finding some density in LTL via M and A. I know it's still early, but with some of the improvements that you've seen this quarter, is that still on the table or do you think that you'll be going at organic from this point forward?

[Alain Bedard, President, CEO & Chairman at TFI International]

You know what, we need to prove to the investor that we are in control at US LTL. We had a lot of, not a lot, but we have a few shareholders that were very disappointed. They made a lot of money with TFI, but they were disappointed that they thought that we've lost control of 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.

[Alain Bedard, President, CEO & Chairman at TFI International]

So let's say that we come out Q3 and then Q4 and let's say '26 and now we have one year of showing, hey guys, it's not a blip, it's not a mistake, it's not something no, no, it's true. These guys are going in the right direction. Then you could start looking at of a transaction of size at that time. But now it would be too early. We have to prove to our investment community that we are in control.

[Alain Bedard, President, CEO & Chairman at TFI International]

They know we are in control of all of our business but they have a question mark on T Force Freight, our U. S. LTL. So this is what we have to prove. If we would do a deal of size in the throttle 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, those guys are really in control in a very difficult environment.

[Alain Bedard, President, CEO & Chairman at TFI International]

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. We have to show that we are in control and that's going to take a few quarters and then in 'twenty six we'll relook at that. But for now, it's easier for us to just buy back TFI.

[Alain Bedard, President, CEO & Chairman at TFI International]

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.

[J. Bruce Chan, Director at Stifel Financial Corp]

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

[David Saperstein, Chief Financial Officer at TFI International]

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 a little use if you get renewals that are up, but then the customers that pay you more give you less freight and the ones that pay you less give you more freight.

[David Saperstein, Chief Financial Officer at TFI International]

Right? So that's really what we're looking at. But specifically to answer your question, that's where the renewals are. Good.

[J. Bruce Chan, Director at Stifel Financial Corp]

Okay. Perfect. Thank you. Thank you.

[Operator]

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

[Alain Bedard, President, CEO & Chairman at TFI International]

All right. So thanks very much, operator, and thank you for 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.

Participants

Executives

• Alain Bedard, President, CEO & Chairman
• David Saperstein, Chief Financial Officer

Analysts

• Ravi Shanker, Managing Director at Morgan Stanley
• Scott Group, Managing Director at Wolfe Research
• Walter Spracklin, Canadian Research Management & Co-Head of Global Industrials Research at RBC Capital Markets
• Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs
• Tom Wadewitz, Senior Equity Research Analyst at UBS Group
• Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan
• Daniel Imbro, Managing Director at Stephens Inc
• Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets
• Ari Rosa, Senior Analyst at Citigroup
• Ken Hoexter, Managing Director at Bank of America
• Bascome Majors, Senior Equity Research Analyst at Susquehanna
• Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities
• Konark Gupta, Equity Research Analyst at Scotiabank
• Elliot Alper, Vice President at TD Cowen
• Cameron Doerksen, Research Analyst at National Bank Financial
• J. Bruce Chan, Director at Stifel Financial Corp