TFI International Inc Stock

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Second Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that this conference call may contain statements that are forward-looking in nature and is subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on July 27, 2026. Joining us on the call today are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I would now like to turn the conference over to Mr. Alain Bedard. Thank you. Please go ahead.

Well, thank you, operator, and welcome, everyone, to our call this afternoon. Within the past now where TFI International reported stronger-than-expected quarterly results with adjusted diluted EPS of $1.85, exceeding our outlook range of $1.50 to $1.60 and up 38% year-over-year. All 3 of our business segments grew operating income by double digits, and we again produced solid free cash flow, which, as you know, is a long-standing priority of ours. Put simply, the investment we made during the recent slowdown, both in internal operation and strategic M&A are beginning to benefit our performance. We now have a balanced and diverse portfolio of operating companies and attractive end markets, which we continue to serve while always maintaining our focus on efficiency and related operating principles.

And of course, there is no better than the hard-working people of TFI to execute on our plan and capitalize on the resulting opportunities. The foundational support for TFI International's thoughtful approach to value creation, both cycle in and cycle out, begins with our strong balance sheet, which improved further during the quarter. We generated more than $200 million of free cash flow, further supporting our ability to strategically allocate capital and, very importantly, return excess capital to shareholders whenever possible, including close to $40 million in quarterly dividends paid during the quarter.

So let's take a high-level look at our second quarter financial results. Starting with the top line. Our total revenue before fuel surcharge of $1.9 billion was up 6% over the past year, while operating income climbed nearly 30% to $220 million. That reflects a margin of 11.6%, which was up more than 200 basis points relative to 9.5% figure a year earlier. Also on a consolidated basis, our net cash from operating activity rose to $256 million from $247 million. Now let's dig deeper into each of our 3 segments, starting with LTL, which was 38% of our segmented revenue before fuel surcharge. We generated $725 million of LTL revenue before fuel surcharge, up 3% year-over-year. Our LTL adjusted operating ratio was 88.5% and operating income of $86 million was up a very solid 17%, producing a return on invested capital of 12%.

Now let's move to our truckload, for which revenue before fuel surcharge came in at $761 million, up 7% the past year and now representing 40% of our segmented total. Revenue per truck per week, excluding fuel surcharge, rose 13% year-over-year. We increased our brokerage revenue by 34% in addition to this. Our operating income of $106 million was up a very robust 50% from the prior year quarter, and our adjusted OR of 86.1% improved by 400 basis points. Our return on invested capital for the truckload was 6.9%.

Stepping back, as capacity has come out of the truckload sector, we've worked to reduce our own capital intensity and right-size equipment level, creating significant operating leverage. We've also focused on optimizing our business mix and end market exposure, which now includes an attractive mix of flatbed and specialized expertise.

Rounding out our segment discussion, Logistics revenue before fuel surcharge was up 10% year-over-year to $432 million, accounting now for 23% of the segmented total. Operating income expanded at 32% to $50 million, reflecting an 11.5% margin, which was up nearly 2 percentage points versus the second quarter of 2025, and our return on invested capital was 13.3%.

So before opening up for Q&A, let me discuss our balance sheet and provide our updated outlook. As I mentioned, we generated just over $200 million in free cash flow during the second quarter of the year and ended June with a funded debt-to-EBITDA ratio of 2.4, which has improved from 2.5 at the start of the year. And lastly, looking ahead for the third quarter results, we expect adjusted EPS of $1.70 to $1.80, which would represent a 50% year-over-year increase at the high end. We also expect year-over-year adjusted operating ratio improvement of 500 to 600 basis points in the Truckload segment, 250 to 350 basis points in the Logistics segment and a comparable operating ratio in the LTL segment. For the full year, we continue to expect net CapEx, excluding real estate in the range of $225 million to $250 million, unchanged from previous expectations. And I'll mention, as I do each quarter that our outlook range assumes no significant change, either positive or negative in the operating environment.

And now, operator, if you could please open the line, both David and myself will be happy to take questions.

[Operator Instructions] And your first question comes from the line of Scott Group from Wolfe Research.

I wanted to start on the LTL business. I'm not sure if I heard right. Are you saying, sort of, a flattish year-over-year margin in LTL? And if that's right, maybe just talk through what you guys are seeing from a demand standpoint, a service capacity standpoint and maybe a pricing standpoint?

Yes. I think, Scott, that the world of truckload has changed tremendously, okay, over the last 6 to 9 months, okay, with the what the administration has done in the U.S. with all these things that they've done to help us with reducing the supply. So that's really the truckload. But I still find that the LTL market in the U.S. and the same in Canada as well, it's still very soft. I mean there's no big revolution in the demand there. So this is why we're saying that, yes, we're conservative, okay? But we want to say that LTL, we don't see a lot of major improvement, okay, versus what we can see on the truckload sector or on the logistics sector.

Okay. And so maybe just to follow up there, like I guess you're not seeing spill from truckload into LTL. It doesn't sound like you're seeing that. And then on the truckload side, you're saying pretty meaningful improvement. Maybe just talk about like the pricing that you're seeing right now on the truckload business and any sort of differences between the flatbed and some of the other parts?

Yes. That's a very good question, Scott. And I'll ask David to talk about that. But for sure, what we see on the pricing side of the truckload is very impressive. I mean -- and it's -- the way we see it is that it's mostly because of the supply constraint, not because the demand is just going through the roof. It's just the supply, right, David? So maybe you could add to that.

Yes, absolutely. Because what we're seeing on the LTL, the reason that the margins are expected to be flat is because we have too much volume and not enough price. And that's what we're working on fixing, okay? So that's a specific thing. I don't know if that's really to be extrapolated to the market or not. It's related to us. And of all of the issues to have, it's probably the one that we -- it's clear what to do. And we know that we just need to raise the price, and we're working on that. On truckload, yes, the dynamics are really good. So actually, we saw the pricing or the revenue per truck accelerate throughout the quarter. So in April, we were at 11.1% revenue per truck per week year-over-year growth that increased to 13.3% in May, and it was 14.4% in June. So the dynamics there are strong and the LTL issue that we have, you'll see, I mean, the shipment count was up 7.5% in the quarter in LTL. It's just that the revenue per shipment before fuel was down 2%.

But you know what, Scott, we're very proud of what our truckload guys have been able to accomplish with -- if you just look back at our Q1 OR in our truckload, we were above 90%, right? We were, I think, a 93% OR in our truckload. And now we're down to an 86.1%, okay? I think that this is quite an accomplishment, okay? And the investment that we made 2 years ago in the U.S. specialized truckload is just starting to pay off now.

Yes, exactly, because you see that in the depreciation. We talked about this a couple of quarters ago. Well, the depreciation is down double digits now. And the revenue is up, right? So we're saving a fortune on equipment costs. And the brokerage revenue was up 35% year-over-year.

So this goes back to the saying, do more with less instead of doing less with more.

And your next question comes from the line of Ravi Shanker from Morgan Stanley.

Alain and David, maybe if I can just follow up to your last response on LTL, where you said, obviously, you have too much volume and not enough price. David, do you think that is a -- that's something you can reset in one cycle? Or is it a multi-cycle process to get the price where you want it? And also, if it is a multi-cycle, kind of if you can give us a sense of how much you can do kind of this cycle versus the next, et cetera?

Yes. So you know what, Ravi, I mean, the issue we have with pricing is wins in one sector per se, right? So SMB, no. Corporate, no. The biggest culprit where we probably made a mistake is 3PL, and it's mostly on our blanket thing there where we got inundated with volume, okay, because probably we were the cheapest guy in the country, right? So this is what now our commercial team is working on fixing, okay, because this is like a no, no, right? So it's not all over at TForce Freight, okay? SMB and corporate, not an issue. But blanket 3PL has been overwhelmed with volume and with pricing that probably does not reflect the market. Maybe we were not aware of where the market was going, and now we have to react to that.

And that's what David was saying that it's probably in all the problems that we can have, I mean, it's probably the one that could be fixed. Now does that take 3 quarters? I don't think so. I mean our guys are already -- we know what the issue is. We know that the market is still soft to assess, but we're very, very cheap right now with our rates in some sectors. So we're going to be fixing that now. We're fixing that now as we speak.

Understood. And maybe as a quick follow-up, are you getting any more confidence in the cycle to maybe restore a full year guide?

Yes, to restore full year guide, look, as things -- I hope that at some point, we'll restore a full year guide, absolutely. We are starting to get confidence in this truckload cycle, that's for sure. The fact that it's so supply driven and therefore, has sustaining power is -- gives us a lot of confidence. And I think that the delta is going to come from getting the LTL to produce to its full potential.

We're sub-90 this quarter.

Right? But we could be a lot more sub-90 if we fix this pricing. And by the way, when we do that, we won't have all the excess cost that we had this quarter. This quarter, we were dealing with a lot of excess costs related to the surge in volume, which is not necessarily an ongoing thing. So we'll see. We hope that we come back to a full year guidance soon.

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

So just sort of curious, coming back to LTL quickly. With the pricing actions that you guys are working on, I mean, would you expect -- because your tonnage is obviously outgrowing most of the LTL industry. Would you expect that to sort of come down a little bit as you sort of work to repair the price? And then on the flatbed side, specifically, are there pockets -- I know the discussion has been supply tightness, but I'm just curious, are there pockets where demand on flatbed is looking better? And I know you're not giving a full year guide per se, but just because I'm perhaps not as familiar, is there a way to think about seasonality in the truckload/flatbed business 3Q to 4Q?

Yes. So I mean, when you think about the flatbed thing there, Jordan, okay, we are highly involved in wind, and wind is growing, okay? We're also highly involved in data center and everything that is industrial. Now what we've been able -- Steve, our Senior EVP, has been able to do with our flatbed operation is to create within the old Daseke organization, some niche carriers. So I'll give you the example of what Steve and his team have done with one of our carriers that's called SPD on the West Coast, where these guys were running 200 trucks and the old saying, 'jack of all trades master of none.'

Now these guys are a niche carrier for the aerospace business. So with Boeing and with Bombardier and with others, okay? Now we see some growth there. I'm sure you're familiar with Boeing. Those guys, I mean, they're quite busy. And we're piggyback on Boeing. But now we made a niche carrier of SPD. So these are sectors like the aerospace, the wind, the data center, that we see a lot of opportunities, steel too, okay? So our TSH group, which specializes in steel, okay, those guys are -- they're up like revenue-wise, I would say, 20%, 25% year-over-year, okay?

So steel is -- we're very busy with that. So a lot of steel probably goes into the data center. I don't know where it's going, but it's -- we're really very busy with that. But on the other side, if you think about drywall, okay, we're a significant player in that business, but drywall is maybe not the best business you want to be in right now because not a lot of people are building homes, right? So it's kind of a mix. But I mean, what our team has been able to do, is kind of having within the specialty truckload, our business unit being more specialized in the world, okay?

Instead of -- if I take the other example of Lone Star, which is something that's happening now out of Texas, I mean, those guys are good with wind. They're good with data center. They're good at moving everything that nobody wants to move because it's too big or it's too heavy, okay? So now we said, you know what, the over-the-road operation within NOSA, that doesn't fit you. So what we'll do, we'll move that to those specialists within SFI, our Truckload division, Wiley, okay? Wiley is our -- the king of the over-the-road for us, right? So this is what's happening on the truckload side. Now the first part of your question was, David, I don't remember exactly.

Can you repeat the first one?

Yes. Well, I was just curious on the less-than-truckload side, given the price actions, repair actions you're taking, your volume is strong. I was just curious how that might look from here a little bit.

Yes, for sure, volume is going to come down a bit because, as you know, the minute you start to get back to closer to market, okay, if we get too close to market because we still have to improve our service. I mean the guys are working on that. But like David was saying, we incurred way too many costs in our Q2 operation because of this huge surge in volume, but also our service offering, right? So now we're fixing price, but we're also fixing our service because our service was improving this time just before we got this crazy weather in Q1, okay? And at the same time, this huge surge of volume mid-Q1 into Q2. So now it's very clear what the mandate is for Kal and his team, and we'll get there. But for sure, I mean, we will have to drop a little -- a few shipments to get there.

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

Alain, can you talk maybe a little bit about the truckload pricing? Are you touching at all right now given the improvement is just maybe given the mix of how much is contract, how much takes time? Just want to see where you are in the marketplace and able to reprice that.

Yes. Yes. So on that, David, I mean, I think that we're not a big player on the spot market. Okay. I don't remember exactly the split between contract and...

On the U.S. side, it's about 25% spot.

25% spot?

Yes.

But for sure, I mean, we are really -- I mean, you know how the shippers are. I mean the market is going down, contract or no contract, they will sit down and try to bring prices down, right? So the market is going up right now. So yes, we have agreement, but we have to sit down with customers because at the same time that the market is moving up and our contract is too far away from the market, then we have to sit down. And we did that. We did that. I mean, we did that with some major customers, and they understand. I mean now it's a different situation. And we're not in the business of hauling freight just to -- for the pleasure of hauling freight. We're in business to service customers so that our shareholders make money, right?

Yes. And I really want to stress that you have two things going on in our truckload. One, we're exposed to the right end market, yes. Two, the market is turning because of the supply, yes. But the last thing, and this is unique to us, is that we've dropped our depreciation by $12.5 million in this quarter alone. And yet the organic revenue is higher than it was last year. So we're truly getting an enormous benefit to the bottom line as a result of that. And that's really specific to the work that the team has done over the past year, making sure that our trucks are being deployed in the right places, trucks that are not being deployed, we move them, and then we broker out what we don't want to do ourselves. That's it.

Because Ken, don't forget, we bought Daseke in '24. In '24, we were stuck with the Daseke CapEx, like these guys like to buy trucks and trailers. So we had way too much CapEx in '24. Then we get to '25. It's too early in the game. So we still bought too much equipment in '25 versus what the market, okay, could bear. So now after 1.5 years of experience with Steve and the team, now we are adjusting our asset base to the business that we want, the business that's highly profitable. That's why we're an 86 OR, right? And we're saying, you know what, those customers, maybe we could broker the freight to some good carriers that want to work for us.

Great. And if I can get a follow-up on capacity on both sides. Maybe talk a little bit about how much capacity you have, utilization on miles per tractor. And then in the LTL with shipments up 8%, talk about what excess capacity you have now? You've changed your management there with Kal. Are you focused more on culling that 3PL business, more on price? How do we think about usage of that capacity as we move forward?

Yes. So on the first one, I'll answer that. We report revenue per truck, not miles per truck. And the reason for that is that some of our business, we bill by the mile, but some of the specialized is build like by the day, for example. It's not so much by the move. So it's not so much of a mileage thing. So revenue per tractor is what we report, and that's up 13%. And as I mentioned earlier, it was increasing as the quarter went on. We exited the quarter around 14.5%.

So -- and then in terms of capacity, I mean, we're at capacity. We have to reduce our volume in the LTL because we've had to -- because it went up so quickly that we had to spend money in ways that we wouldn't normally spend money, lots of overtime, lots of third-party carriers to help us out in the pinch. All of these things that you do when volume increases 10%, 12%, 13% overnight. And so if you ask us where we are in capacity, well, we don't have any capacity. We're raising price in order on the brokers in order to bring down that rate of growth.

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

David, Alain. I would like to start on pricing, but more in a more conceptual longer-term kind of way to look at it. And I'm just curious, when you look at the drivers of pricing, you mentioned supply driven by whether it's the non-domiciled ELD or CLDs (sic) [ CDL ] or the English language proficiency or even the Montgomery ruling. These things seem like it's not in the -- like in past cycles where it's something that can be easily or quickly reversed. I know, Alain, you've been in this business a long time, looking back at previous cycles where pricing has come up. Do you feel like this has more stickiness? Can this -- can the pricing here hold for longer given the type of drivers that have caused that pricing to go higher? And can it be sustainable?

Well, you're absolutely right, Walter. I mean, in a normal trucking environment, I mean, guys used to make a lot of money when the demand was high, okay? But demand high doesn't last. I mean it can last a month, could last a year, could last 18 months, and then you go back to -- you got too many trucks because now the demand is falling. What I like about this, which I've never seen before in 30 years being a trucker, okay, is now it's the supply, right? And I was just reading about what the administration wants to do in the U.S. is that they have a particular group of drivers that they're saying now, okay, so we have the CDL, the illegal, the English proficiency, like you just said, but now they're also focusing on another group of drivers that according to the U.S. administration are dangerous, are not safe, et cetera, et cetera. So to me, on the U.S. side, I think that this move that we're seeing now on the truckload sector, which is not the same with LTL or P&C.

I mean, for truckload. I mean, I think that this is more of a permanent thing than we've ever seen before. So this is why, Walter, it's a reflection of what our guys have been able to do in this market, even if the demand is not crazy in the truckload -- specialized truckload sector. But those guys were smart enough to take advantage of the situation that we're going through right now -- and that's why from a 93 OR, which was really bad in Q1, okay, now we're down to an 86 OR. And we just said in our presentation that we believe that in Q3, year-over-year, we're going to see, again, another major improvement, okay, in our truckload sector. Some also in our logistics, not so much in our LTL for now because like David is saying, okay, we have to attack some issues that we have in the U.S. right now, U.S. LTL and the guys will do the job. So I think that it's way more permanent, the situation that you were describing, Walter, than ever before. And this is typical of the U.S. market.

On the Canadian side, we have a little bit of that, but not so much because, as you know, the Canadian government now is asking the truckers, the employers of owner or whatever to issue a T4A. So now these illegal guys in Canada now have a T4A. So they have to report that as revenue, and now they have to pay tax. So that's all -- also we're starting to see, okay, some major improvement on the Canadian side because the Driver Inc. fiasco is starting to become less. It's still there, but it's not as bad as it used to be.

Yes. And then the only thing I would add to that is that the brokers are now very careful about wanting to broker loads to well-capitalized serious carriers that are serious about safety and they are spending the money on that. So the whole industry is being cleaned up in a way that's going to result in better safety and normal rules being followed. No more cheating.

Fantastic. There you go. Looking at your capital plan for this year, I know you're not seeing any significant changes in growth, but you mentioned on the subsegment area where you have exposure, you are seeing growth. Is that causing you at all to revisit your capital plan? I think you had us at $225 million to $250 million for the year of net CapEx. Is that still the plan? Or is there opportunities for you now to invest to take advantage of some of those subsectors?

Yes. So far, I mean, we're still in that range, Walter. I mean, for sure, we're seeing a lot of discussion with customers, okay? The other thing also I'd like to point out, Walter, is that now what Steve Brookshaw has done is now we have a Chief Commercial Officer for our U.S. Truckload operation, Mr. Hoppe. Scott Hoppe is our Chief Commercial, which is going to be a big thing for us because if you look at the way Daseke was run, it was like a 9 sales team and 9 of everything. So now we are consolidating a lot of that. And commercial side is under Scott Hoppe, and Scott has got a tremendous experience, okay, in the U.S. I mean, he's lived all his life into that world, right? So that's going to help us. I mean that is for sure, having a one commercial team under Scott, I mean, we're already seeing the benefit when we talk to our customers.

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

Maybe I just wanted to understand a little bit better if you can make some changes or have made changes to the LTL commercial team and maybe how it ties in together with operations because I would think that at least with the blanket pricing on 3PLs, you can adjust that relatively quick and not the only network, we've heard, that got a little bit flooded, but maybe just some thoughts on what could be done differently or changes you've already made for the next time.

Right? So it's the mistake that we encounter is that focus was, hey, guys, we need to grow organically. And we got overwhelmed because our pricing was too low, right? So we fixed that. One thing I could tell you is that we are implementing a pricing software, the one that most of our peers are using. So we are getting rid of the old UPS freight pricing. We've also, through our finance team now getting our finance team involved through AI, okay, to help those guys make the right decision by lane, by customers, et cetera, et cetera. So maybe, David, you could give a little bit more details on that.

Yes, absolutely. It's very interesting. I mean we now have tools where we're taking spreadsheets, which have an entire month of shipments. So these spreadsheets have about 500,000 lines and tons of columns, tons of data. And we're able to really isolate very specifically the problematic lanes, very specifically the problematic freight, the terminals, the customers. And so -- and then we're using that to help our pricing team go in and be real surgical and move faster. So we're able to treat large amounts of data in ways that we haven't been able to in the past to be much more surgical with the pricing actions that we're taking.

Okay. I appreciate that. Just kind of a cleanup question. You talked a couple of times in the release about this incremental accident reserve. It's like $10.5 million in the quarter. Does this recur? Is this a prior period adjustment? Because I think when we look at the corporate line, that certainly stood out this quarter.

It's not recurring. That's for sure. We sure hope not. No, it's -- yes every quarter, we go through and we assess very clearly where our reserves need to be, and we'll make adjustments to various files -- and we don't -- it seems like some people wait until year-end to do that. We don't do that. We do it every single quarter.

But also, David, if you could just add to that, I mean, the approach that through Brandon and the new team, okay, versus the old way that we used to do it until about a year ago. So by trying to settle, okay, ASAP, okay? And I mean, this is also a part of the change.

Yes, that's actually -- it's very interesting. So from a business perspective, what you want to do is be very forthcoming and very aggressive with settling matters quickly. And so what we've done over the last couple of years is built a Miami-based legal team of in-house lawyers who are managing all of our claims and are working with the external lawyers and really driving it because the external lawyer doesn't always have your interest in mind given how they get compensated by the hour or our interest is getting it done.

And what's interesting about that is that when you start settling things fast, right, your actuarial reserves actually need to go up because the actuarial assessment is not looking at the fundamentals of what's happening. It's just saying, well, you guys had a ton of spend this quarter. Yes, we did have a ton of spend. But the reason we had a ton of spend was that we took care of a bunch of things that are not going to come back to bite us down the road.

And so over -- so right now, we're in that lump where the actuarial reserves are actually a little coming in high because of those settlements. But of course, when that then translates into less spend down the road, those reserves are going to come back and it will unwind into -- in the other -- in the opposite direction.

Yes. And also maybe a few words on settling on the spot, what we're doing.

Yes. Yes, absolutely. We do that with our internal team as well as an external provider in terms of when there's an accident, we dispatch somebody immediately to the scene with authority to settle on the spot. And so we've had a lot of success with that. And it's -- yes, it's an important part of our strategy.

Yes, because the problem with claim grows with time. I mean, over time, it's not going to get any better. It's just going to get more expensive. So this is why we changed completely the approach there is if it's a minor thing, for sure, if it's major, okay, nobody is going to solve on the spot. But if it's a minor thing that could turn over time after a year or two, something like way more expensive. So we went, like David says, with our own team and with also an external provider to try to settle as much as we can on the spot right away before the lawyers comes in, before or whoever, okay? And now I don't remember how many cases we settled.

It's about 200.

200, right? On the spot. So I mean, over time, this is, for sure, is going to help reduce our cost of claims.

So just to understand, it seems like you've been doing this for a couple of years, at least had the team in Miami doing it, but you feel like you've sort of hit an inflection in cleaning up some of the stuff. And so now quarterly is going to be more of a standard practice. It seems like it still could be a little bit lumpy just based on the activity.

No, I think that this quarter's reserve increase in reserve is exceptional. We do not expect these types of movements every quarter.

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

Alain, David, I wanted to get a clarification question in first. I think you said that in terms of your spot TL exposure, it was at 25%. I was wondering if that includes all the heavy haul because it seems a bit higher than I thought it would be. I think like Daseke legacy was about 5%.

No, that's the U.S. flatbed. It's 25%. The heavy haul and the legacy specialized in Canada is very, very negligible.

No.

There's none. So when we talk about...

It's like the over-the-road, Jason, the over-the-road flatbed, not the special -- highly specialized tank, okay or dumps or whatever. It's really the over-the-road thing, the regular flatbed, if you want to...

Okay. My next one is more of a macro question. Alain, did you guys see sort of any pull forward into June and maybe talk about the July trends that you're seeing out there?

So far, I mean, what we're seeing in July, okay, or in June, I mean, I think that if you look back, David, the month of June, I mean, this was a great month of June. I mean May was a little bit soft. June was great.

Yes, exactly. I mean, in July, right now, up until today in July, the revenue per truck in the truckload is 14.5%, which is the same as it was in June. And then what we're seeing in the LTL is what we expect, right, which is that the revenue per shipment is down less, right? It wasn't down 2%, it was down less. And then also the shipment count is coming down. So we're starting to see the effect of that price increase that we're putting through, and work through in the way that we expect it to.

Yes. And this is with the 3PL, okay? So corporate and SMB, I mean, it's steady for us volume-wise and price-wise. Yes.

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

So my first question is on the LTL. I'm just trying to understand the move from Q2 to Q3. For the second quarter, the LTL operating ratio was, I think, 88.5%, which is, I think, better than the mid-point of what you were expecting heading in. Now you're saying flat in Q3, which probably means about 88.8%. Now if you had high 3PL volumes and higher costs in Q2 and working to address that in Q3, why is that Q3 operating ratio not improving sequentially from Q2? I mean, is there -- is it because it's going to take time to resolve those things? Or is there some other noise in Q3?

Okay. So Konark, there's one thing that you got to keep in mind is USD versus Canadian dollars, right? So our Canadian profit now are discounted at -- it's $1.40, okay, versus the average of Q2. So that's a little bit of an issue, okay? The other thing also, part of our forecast, is what's going to happen with fuel. So for sure, there's no question about that, that the only area was -- where it's really a tailwind fuel is the Canadian LTL and P&C.

I mean, truckload is never a tailwind for us and U.S. LTL is never a tailwind or logistics. So for sure, not knowing where we're going, okay, with fuel, this is why our Canadian folks, okay, when they gave us their forecast, they went with maybe a little bit conservative on fuel versus what it is today, right? So now we're, again, above USD 5 a gallon. But that's why our Canadian folks are being very cautious about where this is going to go. So you've got USD, okay. So what is USD versus CAD at? $0.01 difference on us, David?

Yes, $0.01 is about $0.01 of EPS. Yes, it's about 1:1 now.

And then...

By the way, Konark. To make sure [ you're ] understanding those margin improvements that you put in the press release and then -- and you mentioned, those are year-over-year numbers.

Yes, absolutely. I mean, I think your Q3 LTL year-over-year being flat also somewhat means your sequentially flat given you had 88.8% and 8.5%. So that's a good explanation. And if you can help us -- I know you guys are not disclosing your regional operating ratios. But from a trend perspective, is the U.S. LTL operating ratio likely to make a bigger move, a bigger and better move in the next coming quarters compared to your Canadian operating ratio because that's where you're seeing service improvements. Is that fair?

Yes, absolutely, Konark. I mean, the biggest bang for the buck is on the U.S. LTL. I mean, on the Canadian side, we are running very, very lean and mean and very efficiently compared to the only peers we have in Canada. I mean, when we compare ourselves to the only peers we know about, I mean, yes. So it's really the U.S. where -- I mean, we still have a lot of work to do, okay, to get to where we have to be.

Okay. And then just to put that into context, Alian. How far are you from mid-80s on that? Like is it like a year away or it's more like 6 months away in the U.S.?

I mean, Konark, I've been at it with the team for 5 years. And -- I mean, every year, we have a different kind of an issue, and we're just saying when is this going to end, right? So if you would talk to [indiscernible], that is exactly what he's going to tell you. But we fixed a lot of things, okay? I think that we're getting close to the end, right? Because once our commercial team is like way better, okay? We have stability in our commercial team now, which never happened before. Our operating team, we definitely need some improvement there, and we're working on that. Our fleet, okay, in terms of the asset and in terms of the management of our fleet, I mean, it's major improvement.

So I mean, we're heading in the right direction. But -- I mean, we fell in Q1, Q2, okay? But now we're back on our feet, and we're going to be correcting that, okay, in the next quarter. It's been much easier, Konark, to turn around a truckload operation because if you look back, okay, and you look at Daseke today, I mean, the SFI Truckload in the U.S., I mean, it's day and night versus what these guys were doing 2 years ago. I mean, much easier to turn around, okay, a truckload division versus a big network, okay, that was probably not very important to the previous owner, okay? So this is why the tools, the fleet, the real estate, the morale, the management team was probably not priority for them, but it is for us.

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

Let's see. I wanted to ask a little bit more on LTL and the brokerage piece, there's the 3PL piece. How much of the book in LTL is with 3PL? Is that 30%? Is it bigger or smaller than that? And then I think in terms of just like maybe if we look to, let's say, 2027, how do you think these 2 big businesses you have, so LTL and truckload develop? It seems like you are seeing a lot of really good news in truckload this year.

Is there kind of more significant runway or a similar improvement in '27? Or is that kind of more moderate? And then LTL, just from a, I think, margin and pricing perspective, is taking a bit longer, but is that kind of any ways to think about the delta and the improvement you could experience in '27 in LTL? So I guess a couple of questions within that.

Yes. Okay. You know what, on the truckload side, we're just starting. We're just starting, right? So we're just starting in a sense that what we've done with SPD, now SPD is focused on, okay, one business, okay? We're doing the same thing with [Lone Star, okay? So Lone Star, your focus is going to be, let's say, the wind, the data center, everything that is big and heavy and long, et cetera, et cetera. Next is we're going to be working with another of our division, okay, that we're going to do the same thing. And then we're going to attack another one of our division. So this is an ongoing process, okay? And it's not going to end in '26.

It's probably going to go all the way to probably summer of '27, maybe Q1 -- by Q1 of '27, we should be done, okay? And then we have one company that's called SFI, okay, with one leader of commercial, which is our friend, Scott Hoppe, okay, on TMS, which is the McLeod system that now it's going to be implemented all over with one finance system, which is our Infineon system, okay? With one fleet management, which is called MiR.

So with one visibility. So we're also implementing Salesforce for Mr. Hoppe and his sales team. So it's going to be one company versus when we bought Daseke, it was more like 9 companies that were all over the place. Now this is truckload. So what you see an 86 OR right now, are we going to do better than that in '27? If the market is about the same and the same is true of this supply constraint, yes, we'll do better. Can we get to, let's say, an 80% to an 82% OR, 83% I think so, okay? If market stays about the same, and the supply is not changing, okay? I think so. I mean, we still have lots of good stuff going on. Our brokerage operation with our specialty truckload is growing, like David was saying, I think, 35%, okay, with good margin. And we are protecting ourselves, okay?

We use carriers that are professional that we deal with them on a day-to-day basis. We don't deal with fly by night that -- so this is really our truckload operation. On the LTL side, okay, we're working on improving, okay, like we said, post freight. But at the same time, okay, we have a very small nonunion LTL business today in the U.S. very small, 1,000 shipments a day, 1,300 shipments a day, which is peanuts, right? But, I mean, we are working to build that up, okay, over the next few years and do the same thing as we do in Canada.

So in Canada, we run union or we run nonunion, right? So we run both. And this is what we'll also be focused on is trying to beef up that nonunion LTL slowly, with small -- and we don't want to be in states where there's no density. So when you build from scratch, the advantage you have is you pick the states. So where we want to be? Well, we want to be in Texas. That's for sure. We want to be in California. That's for sure. We want to be in Ohio. We want to be in Michigan. We want to be in New York, we want to be in the Carolinas, okay? So this is the beauty when you build from scratch. And with 1,000 shipments, that's what you would call that, build from scratch, right? Whereas with TForce Freight, we have a huge network, okay? And we have to live with what we've got, and we're working on improving it every day.

Any thoughts on just like mix of 3PL within your LTL today? How large it is?

Yes. It's over 1/3. It's balloon to over 1/3, yes, as the volumes increase.

So do you -- I mean it's pretty sizable. It's not atypical, but do you think that there's a significant loss of shipments as you price up because I think the 3PLs do tend to be -- they shift things around as your pricing changes, I guess, as you saw by having low prices.

Well, if you talk about the 3PL, the CSP, the customer-specific pricing, no, okay, don't -- they don't move around because what you give them is a specific pricing for a specific customer. So that is way more stickier than the blanket. The blanket, you're right, okay? When you get the shipment, it's probably because you're the cheapest guy in town, okay? And this is where, okay, we're working on changing the mix, okay?

Until a few years ago, blanket was probably like 80% to 85% of the shipment that we're getting from the 3PL. Now if I remember correctly, our CSP customer specific, we're at 45%, 55% is blanket. And this is where we got overwhelmed with volume, and this is what we're fixing. Now one thing is for sure is that 33% with 3PL is too much. And the approach has been with [ John ] and the rest of the team is you want to use maybe the blanket as a loss leader when you are in a soft period, let's say, December, January, and February, so that you don't have to lay out your workers, you could maybe use some of those 3PL blanket shipments to keep your employees, okay, at work. And then you don't have to rehire people when you become busier, let's say, in February and March.

And your next question comes from the line of Kevin Chiang from CIBC.

I'll keep it to one. Just when I think back to your Canadian Truckload segment during the last peak, we saw ORs below 80% there. And now you're having the drivers in model getting tackled more aggressively by the federal government. Just wondering within your Canadian TL segment, do you think margins can achieve a higher peak than you saw in the last cycle given that cycle also saw the driver in headwinds?

It's still early, Kevin. But I would say that if you look at -- the problem we have is that some sector of the Canadian truckload are still very weak like steel, right? As you know, steel is -- on the Canadian side because of the tariff, steel is an issue. The other thing also that is an issue still in Canada is forest products, right, lumber, plywood, et cetera, et cetera. So because of those weaknesses, okay, in some sector, because we still don't have a deal with the U.S., right? So this is why we're seeing major improvement, okay, on the Canadian side.

But can we see more? Maybe if ring continues to disappear, okay? The problem that we have is that we have some sector on the Canadian truckload side, steel, forest products that are being affected, okay, because of we don't have a deal with the U.S. so far. Aluminum, okay, we have lots of tariff on aluminum. But aluminum, it's not an issue because right now, I mean, if you look at the situation in Qatar, that they probably supply 10% of all the aluminum in the world and those guys are out, okay? So this is why our guys, the aluminum from B.C., although B.C. is small for aluminum, but Quebec is big. I mean this is like flying out the door. I mean really, really busy with that. But the issue is steel and forest product.

And your next question comes from the line of Bascome Majors from Stephens.

To follow up on Tom's question about where you think there might be opportunity in your larger businesses to really continue to deliver significant growth in the next year. Where are the places that are most likely to show acquisitive M&A growth in the next year? Do you have a sense of that? Any walk-through of how you feel on that side of the business would be helpful?

You mean -- excuse me, but you mean -- does you mean on M&A side?

Yes, what settlements would grow though M&A?

Okay. Well, what we like in M&A for sure -- I mean, and you've seen it with the Daseke acquisition is that if we could find something of size that fits well in our specialty truckload, absolutely. But between you and me, like I said, a small nonunion LTL, okay, that could be added to our small nonunion LTL that we have today, let's say, a $200 million LTL that would be a great fit for us to start with to build that network. And logistics. I mean, us, we're a big fan of logistics. I mean, we love logistics. We love to make money. And if you exclude the intangible, okay, I mean, we do really, really, really, really well with our investment in logistics.

So if we could have a chance to put our hands like we did in December, we bought is fantastic, but it's small. It's only, I think, $150 million revenue, but it's highly profitable. And we have a solid team there that's going to grow, but it's still small. It's only USD 150 million, right? So, I mean, you say -- well, I mean, this is all. I mean, yes, absolutely. because TFI's blood is growth through acquisition. Yes, we like to grow organically, but M&A has been the success story of TFI. And with the huge free cash flow that we generate, okay, our leverage is down to 2.4. If we don't do anything of size, our leverage is going to come down to close to 2 by year-end, right? Why is that? Well, because we generate so much cash, right? So we're very well-positioned, okay, solid balance sheet, huge free cash flow. So -- and we're on the hunt for sure. I mean, yes.

And your next question comes from the line of Ari Rosa from Citigroup.

Just very quickly a point of clarification. For the U.S. LTL business, does the third quarter guide assume deterioration in the OR there? And then continuing on Bascome's question, Alain, you're usually very good about giving us your thoughts on kind of the M&A landscape and how it might have changed and where there might be value. Maybe you could speak about what you're seeing there.

Yes. So on the Q3 for our U.S. LTL, no. I mean, they will improve the profitability of the company. There's no doubt about that versus Q2. And in terms of M&A, I mean, I've always said you buy bad news and you sell good news. So that's why we invested $1.8 billion over the last 3 years. So now people are starting to think that, "Oh, now times will be better, right?" So then M&A could be more expensive, right? So this is why when you have the M&A market more expensive, what's important is the fit, okay? How does that fit you?

So if you have a target that profitability, let's say is $10 million, okay? And instead of paying 5x, you have to pay 6x because the market. So what are you going to do with that $10 million? If the $10 million is after 2 years, going to be $ 10.5 million, maybe it's not the best deal. But if you think that the $10 million will become $15 million or $18 million, well then that's a great deal, right, even if you have to pay a little bit more.

So this is that balance, okay, that we have to look at. But never forget that one of the easiest things to buy is your own stock, right? So that's also the thing that we have to look at, right? So if I'm buying a TFI, I know what I'm buying. I mean, we've built TFI over the last 30 years. So we know TFI, right? So that's always the balance between buying an opportunity or buying TFI or just reducing your leverage.

Okay. Very helpful. And just quickly, I'm curious -- it probably seems a little bit out of left field. But could we get your thoughts on kind of autonomous trucks and the development there? And any opportunities to maybe leverage that in line-haul operations? Or do you see that as still being kind of far down the road?

No, no, no. As a matter of fact, I mean, we are talking right now about that, okay? We're talking -- so maybe, David, you could give us a little bit more insight on that.

No, absolutely. It's actually exactly for our line-haul as a first step, but we're very eager to roll this out. So we are talking with one of the major providers of this autonomous truck technology. And it was a surprise to us that this has moved a lot faster than we thought to this particular company has driven millions of miles on railroads all around the southern part of the U.S., spanning from the west to the east. And they've gotten into 0 accidents. And that's an incredible, incredible fact.

So you look at this and you say -- okay, there's a bit of an upfront cost and then there's a cost per mile. But what you benefit from is, first of all, it's like a team. So it can drive day and night, there's no hours of service. Second of all, it drives the truck way better. There's no idling. There's no acceleration. There's no braking, it's all very measured. And so you get better utilization out of the truck. [indiscernible]. And so -- and there's the reliability of knowing the truck is going to be able to be driven. You don't have to deal with the driver turnover and the reality of people not showing up to work and whatnot. So it's very, very, very exciting.

So we're rolling it out in the U.S. LTL on the line-haul. In the first instance, the way the business model works is we broker to them like immediately. So they operate the truck, we get used to in loading their vehicle, navigate it in our yard. We sort of work in that way, but we broker it to them and they know what the operation.

Purchase transportation, it's PT.

But then as soon as next year, we're going to be able to buy technology, which gets put into new trucks. And then we build this out. And if it works, we'll roll it out beyond the line-haul in the LTL. There's tons of applications for us.

Got it. So it sounds like starting small, but opportunity to scale if it works. Like anything on time line in terms of what that could look like getting to scale?

Well, the brokerage is happening this year to them. I expect that it will go well and then we'll be owning some of this technology next year. And then we'll just see how quickly we can scale it. So it's too hard to say right now how quickly. But we're -- the dynamics of no accidents, better utilization on the truck, it's basically a team, all of the things that we discussed is really, really interesting.

And then it's extremely interesting to think about as this gets rolled out broadly through our industry, what that means for consolidation among the well-capitalized truckers, right? That's very interesting to think through. And I think that what it means is that you're going to have a lot more consolidation and large capitalized players who can afford this technology are going to be dominating it and trucking probably looks a little bit more like the rail in that way.

Yes, we are definitely embracing that technology. That's for sure.

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

I guess, I wanted to just ask a little bit about the logistics, the operating ratio improvement that you've indicated for Q3. Obviously, on a year-over-year basis, you've had some acquired businesses that are helping that. I'm just wondering how much the -- maybe an expected improvement in the truck moving business is impacting the Q3 year-over-year? Is that more of a Q4 into 2027 when we'll see kind of those volumes pick up just based on, I guess, the production plans for some of the truck OEMs?

Yes. So what we're seeing on the truck moving business is that if you go back to '25, okay, and '26, it's like the reverse. So the first 6 months of '26 was way lighter than the first 6 months of '25. And the last 6 months of '25 are very light compared to what we anticipate to be the last 6 months of '26, right? So it's like the reverse, right? So for sure, our truck moving business is going to be very, very, very busy in the last 6 months of '26 and into '27, right?

But is it -- I guess, are you seeing that yet? Or is it more so in Q4.

Yes. No, no, we're seeing that in Q3, I think.

Toward the end of Q2?

Yes.

And your next question comes from the line of Benoit Poirier from Desjardins.

Maybe, Alain, I appreciate the color about flat LTL expectation for Q2 -- Q3 with some improvement. But any thoughts whether the tighter market for TL could eventually help the LTL market at one point? And when would you expect the pricing action to kick in a more material manner?

Yes. You know what, Benoit, we were talking to one of our peers in the industry, and he was telling us -- he's in the LTL business, and he was telling us that he's already starting to see, okay, shipments moving from truckload back to LTL. I mean us -- I would say us, we have not seen that, okay? But this is what this guy from the industry was telling us last week, right?

So I think that the fact that the truckload guys are getting busier because the supply has been reduced, reduced, reduced, then you just say, you know what? This is -- these LTL shipments, it's too big of a hassle, okay? I'm going back to just your truck, right? So this is a transition that is probably starting as we speak, okay? But this is affecting the van guys, okay, to the LTL, this is not affecting us in our specialized truckload operation because we don't really move LTL shipments in our specialty truckload sector.

That's great color. And maybe just in terms of follow-up, there was some more talks today about the renewed liability risk after the legal case with -- against C.H. Robinson. So I don't know if you have any thoughts on what could -- there could be some -- any potential impact on your brokerage business, Alain?

What I would say on that is, first of all, remember, most of our logistics is not brokerage, okay? So our Logistics segment has some brokerage, but it's a lot of niche asset-light businesses that -- what they have in common is that they're asset-light, it has nothing to do with brokerage, last mile, trucking business, value-added warehousing, et cetera.

As it relates to brokerage, yes, for sure, I mean, listen, we have a very serious safety review process for our carriers, and we're looking at exactly, if anything, what we need to enhance in that regard. But we're already operating at an adequate level. What I would say, though, is that as soon as Montgomery came out, as soon as the judgment came out, not the one against the broker that came out probably -- I mean, when the Supreme Court ruled. As soon as that happened, we started getting calls like crazy from all these small brokers we had never heard of, right? And they were calling us and trying to build those with us. Why? Because those are probably the ones that are feeding fly by night carriers, and it's too dangerous now to do that.

And I think that with this judgment that we've seen, it's only going to increase the level of diligence that brokers are going to do on their carriers, right? And so it's going to become unquestionable. You're going to have to work with a well-capitalized, professional, auditable safe carrier. And so I think this is going to benefit folks like us and also some of the major truckload carriers who are doing everything they can on safety. That's...

And Benoit, at the end of the day, I mean, I think the shipper also, it could be a wake-up call for the shippers to say, you know what? Why would I deal with a guy that's got no money and is a risk, right? So I mean, this is all things that are helping, like David was saying earlier, clean up our industry of all the bad actors that have been there for so long.

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

Just want to follow up on some of your comments around forestry products and Canadian steel. Obviously, we've had a lot of variability, let's call it, in the trade situation. And now there's discussion about new tariffs on Canadian goods in August. Just want to get your thoughts on how that might affect volumes, especially to the extent that anything is baked into guidance and whether you're expecting or seeing any inventory front-loading at this point?

Yes. No, we're not seeing any movement exceptional, okay, like pre-buying or pre-shipping, okay, because of the 30-day implemented implementation deadline, okay? So we're not seeing that. So this is not the same as what we've seen in Q1 '25, where everybody was trying to chase volume into the U.S. prior to that. So we're not seeing that. The feedback that we're getting, okay, so far is that -- I mean, it will be implemented.

So we've asked our Canadian folks to look at what it is. And so far, I mean, it's huge for the Canadian economy, right? So I think it's $20 billion of export. But for us, I mean, there's no real issue. The biggest issue we have between U.S. and Canada trade is forestry and steel. And when we look at those next round of tariff, I mean, there's no real issues for what TFI is doing transporter in Canada-U.S., U.S.-Canada.

That ends our question-and-answer session. I will now hand the call over to Mr. Bedard for any closing remarks.

Well, thank you again, everyone, for joining us and of course, for your ongoing interest in TFI International. So as we move through the back half of the year, we will keep you posted on our progress, and we look forward to seeing many of you at upcoming events. Please don't hesitate to reach out if you have any further questions, and I hope that you have a great evening. So thanks again.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes. I can jump on that.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The 1 in logistics, Brian, is that?

Yes, that was the one. .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I second the motion.

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

Yes.

Yes.

Yes.

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

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

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

I second the motion.

So all those in favor, please say, yes.

Yes.

Yes.

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

I move that the meeting be terminated.

I second the motion.

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

Yes.

Yes.

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

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

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

Okay, well...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Third Quarter 202 Earnings Call. [Operator Instructions] Please be advised that this conference call may contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on October 31, 2025.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Next question will be from Jordan Alliger from Goldman Sachs.

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

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

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

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

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

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

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

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

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

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

Next question will be from Scott Group at Wolfe Research.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And more freight.

And more freight.

Better retention.

Yes. Less turnover.

Less turnover.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Next question will be from Konark Gupta at Scotia Capital.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, just Canada, yes. Yes.

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

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

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

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

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

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

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

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

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

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

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

Next question will be from Brian Ossenbeck at JPMorgan.

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

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

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

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

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

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

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

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

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

The next question will be from Tom Wadewitz at UBS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Next question will be from Bruce Chan at Stifel.

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

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

Next question will be from Ariel Rosa at Citigroup.

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

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

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

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

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

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

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

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

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

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

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