TFI International Inc.

Ladies and gentlemen, thank you for standing by. Welcome to TFI International's third quarter 2025 earnings call. At this time, all participant lines 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 one follow-up. Again, that's one question and one 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 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 the call today are Alain Bédard, Chairman, President, and Chief Executive Officer, and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Alain Bédard. 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 US LTL. In fact, across our entire company, the men and women of TFI International double 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 nine-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 an 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 USLTL, 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 three 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 US 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 investor 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 R came at 92.3 versus 90.6. Lastly, our truckload return investor 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 logistic return on invested capital was 14.6. So next, I'll move on to our balance sheet, which remains very strong, benefiting from the 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 2.4 times. From this position of strength, we're 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 counts. So before we turn to Q&A, I'll provide a four-quarter outlook. We expect four-quarter adjusted diluted EPS to be in the range of 80 to 90 cents. And we now expect full-year net capex, excluding real estate, to be $100 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, David and I would be happy to take questions. If you could please open the lines.

Thank you, Monsieur Bédard. Ladies and gentlemen, if you do have any questions at this time, as stated, please press star 1 on your touchtone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by 2. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. And out of consideration to other callers on the line today and time allotted, we ask again that you please limit yourself to one question, one follow-up, and get back into the queue. Thank you. Your first question will be from Ravi Shankar at Morgan Stanley. Please go ahead, Ravi.