TFI International Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on July 28, 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 very much, operator, for the introduction, and thank you everyone for joining today's call. Within the past hour, we reported our quarterly results that demonstrate solid margin performance across all of our business segments. This reflects the artwork of the talented team members across our organization, even as economic uncertainty continues to weigh on industry-wide freight volumes. As you've heard me say, strong free cash flow is always a top priority at TFI International, and I'm pleased to report that we had yet another strong quarter in that regard, producing $182 million of free cash flow. As you know, we use excess cash flow to return capitals to shareholders whenever possible. Thus, we repurchased a significant number of our shares both during the second quarter and into the third. This while maintaining a strong balance sheet, which has long been a pillar of our strength. In fact, we further strengthened our balance sheet during the quarter through a private placement bond offering that I'll discuss in a moment. So let's begin with a quick review of our consolidated results. During the second quarter, we had a total revenue before fuel surcharge of $1.8 billion compared to $2 billion a year earlier. As I mentioned, we had strong margin performance across the board, and we generated 170 million of operating income, representing a 9.5% margin of just a percentage point compared to 2.5 in the prior year period. We also produced adjusted net income of 112 million relative to 146 million last year, and our adjusted EPS of $1.34 compares to $1.71. In terms of net cash from operating activity, we generated $247 million, which was virtually flat with the prior year period. And free cash flow, as you heard me say, was $182 million, and that was significantly above the second quarter of 2024, results of $151 million. That's up 20% due in part to favorable working capital dynamics, as well as moderately lower capex relative to last year. We owe these solid results to the dedication of men and women of TFI International who really focus on the executions during the quarter, taking the opportunity to strive for quality of revenue and improve efficiencies, including at acquired operation, while maintaining a keen focus on cost control. Let's turn to the next second quarter results for each of our three business segments, starting with LTL. This quarter was 39% of segmented revenue before fuel surcharge and down 11% year-over-year to $704 million. Operating income of $74 million compares to $110 million in the year-earlier period. The LTL operating ratio of 89.5 compares to 86.2 in the second quarter of 2024. However, this represents a 360 basis point sequential improvement relative to the first quarter of 2025. Our LTL return invested capital was 12.9%. Next up is truckload, which was also 39% of segmented revenue before fuel surcharge, which came at $712 million compared to $738 million a year earlier. Operating income was $71 million versus $81 million in the prior year period. And our truckload OR of 90.1 is relative to 89 in the second quarter of 2024. Tariff-related uncertainty continues to wait on industrial and market demand. However, this quarter's OR also delivered 250 basis points sequential improvement relative to the first quarter of 2025. Wrapping up, on truckload, our return invested capital was 6.4%. Our last business segment to review is logistics, which at $393 million was 22% of this quarter's segmented revenue before fuel surcharge and down from $442 million the prior year. Logistics operating income was $38 million compared to $51 million representing a 9.6% operating margin as compared to an 11.4% in the prior year second quarter, and our return investor capital was 15.7%. In terms of the balance sheet, we benefited from the $192 million of second quarter free cash flow and ended June with a funded debt to EBITDA ratio of 2.4 times. As I mentioned, we also eagerly repurchased shares during the quarter, $85 million worth, and also paid out another $39 million through dividends for a total of $124 million of excess capital returned to shareholders. fulfilling one of our long-standing important commitments. Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares. I'll wrap up with our outlook for the third quarter of 2025. We currently look for an EPS in the range of $1.10 to $1.25, and this assumes no significant change, either positive or negative, in the operating environment. In terms of net capex, we continue to expect approximately $200 million for the full year. All right, so with that, operator, if you could please open the line. Both David and I would be happy to take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. A reminder, please limit yourselves to one question and one follow-up. Your first question comes from the line of Ravi Shankar from Morgan Stanley. Your line is now open.