TFI International Inc.

Thank you. Bye. . . . . . . Thank you. Good day, ladies and gentlemen.

Thank you for standing by. Welcome to TFI International's first quarter 2026 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 one follow-up. Again, that's one question and not a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking in nature and 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 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 69 cents. This performance was driven by the tremendous efforts of our talented team members and their relentless focus on efficiency and related operating principles. Taking a step back, a longstanding 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. Total revenue before fuel surcharge of $1.7 billion was consistent with the prior year quarter. Our consolidated operating earning 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 three segments, beginning with LTL, which represent 38% of our segmented revenue before fuel surcharge. We saw a 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 invested capital for LTL was $11.6 million, 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. Truck load is also a segment for which our past acquisition, including Dasky, have increased our exposure to industrial truck load and 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 the prior year, and our OR was 92.7, improved by 100 basis points. Lastly, our truckload return investor capital came in at 6%. To round out our segments, logistics accounted for 23% of segmented revenue at $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. 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 expectation. As always, our outlook range assume no significant change, either positive or negative, in the operating environment. And with that, operator, David and I would be happy to take questions. If you could please open the lines.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. And to withdraw your question, please press the star too. And your first question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Great. Thanks, everyone. Alan, 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, second derivative 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 didn't make any sense. I mean, the offer has been reduced month after month, and now, slowly, We're getting closer to a balance in the industry where for a long time, this industry was very unbalanced where the offer was way more than the demand. Now, if you look at our truckload operation in Canada and in the US, we're focused on the industrial freight. We're not a carrier of retail freight in our truckload world. we are really industrial and we feel really, really good about where the US is going and even Canada, where the future is for our flatbed operation, our specialty truckload, etc. We're starting to see a change. Customers now are asking for, hey, can you help me? Customers are saying, Can we be partners? Because, you know, 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. You know, the investment we made in Dasky two years ago has been, you know, average so far. We were really busy in investing in technology and financial system and all that, consolidation. But now 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, US 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 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 Trakus and Cal as well. 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 master report for the first time, okay, we've shown an improvement. So, I mean, I feel in a long time, I mean, the last two or three 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 three. 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 restore full-year guidance in the year?

You know what, 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, And also with more experience where this market is going, I mean, we have a situation with what's going on in Iran. I mean, this free trade agreement between North America. So this is why, you know, 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 about. 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, you know, $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.

Understood. Thanks, Alain. Pleasure, Ravi.

And the next question comes from Scott Group with Wolf Research. Please go ahead.

Hey, thanks. Afternoon. So, Alain, you mentioned inflecting to hopefully some growth in LTL. Are you still providing... Breakout U.S. versus Canadian LTL. And are you seeing growth both U.S. and Canada within that comment? And maybe just along those lines, any thoughts on the margin outlook for the LTL segment for Q2?

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 as 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, organic growth in the US 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, logistics the same, we feel that we're going to show some organic growth in Q2 26 versus 25. Year over year.

And then maybe just, you know, 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.

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

Just to, 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's a pretty big... So, yeah, 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 around that, in January, LTL shipments were down year-over-year 10%. In March, they were up 8% year-over-year. And April is looking similar to March. 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, as well as the other things that the team has been working on. Fuel is a 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 will be putting through.

And also, David, if I may add, don't forget that our GRI was not in place in late 25. We delayed that and it was put in place mid-March, right? So we have a little bit of tailwind on that, Scott. Although this is only for about 25% of our shipment, eh, Scott? This is only for about 25% of our shipment, but You know, we're in the penny business, Scott, so every penny counts.

I get it. Thank you, guys. Appreciate it. Thank you, Scott.

And the next question comes from Ari Rosa with City Group. Please go ahead.

Hey, good afternoon, Alain and David.

So, Alain, 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 maybe turning more favorable.

Yeah. Yeah. So you see, Ari, if you look at the worst thing that you can have is you try to sell a service and the service is not there, right? Because that's what we do. We sell a service. We are supposed to pick up the freight and we don't show up. That's not too good. So this is what the operating guys have been working at. Mispick up. And if you look at our claims, consolidated, we're at 0.6. But if you remember when we were showing that separate, the U.S. was not that good. So that's another area 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 goodwill thing so hopefully macro will start to help us down the road at one point when the market uh you know 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 us 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 you know the old days of laissez-faire and I don't really care I mean we're changing that culture you're gonna say Alain you bought the company five years ago I mean five years ago think about that and we're still working on changing this culture. We're not a monopoly anymore. We are an LTL company in North America and we compete with good peers. We're competing with good companies in North America. So we have to be good. Our service has to be up there in order to get more money. Because if you ask me today, Price-wise, we are a discounted carrier compared to some of my 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 does this start? 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. Curious to hear your thoughts on what has TFI's ability been to capitalize on that, particularly in Dasky, and then just broadening it out to the broader business. How do you think about what upcycle earnings could look like both for Dasky and for the broader business? Let's assume for a moment kind of a benign resolution to USMCA.

Yeah, yeah. So listen, guys. I mean, our revenue per mile is up in our – TFI, specialty truckload, absolutely our revenue per mile is moving up. And we drive more miles per truck per week. So this is a productivity effort that Steve, the leader of our truckload division, has been able to do, is do more with less. 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, 240 a mile. So what we're saying is that, you know, being jack of all trades, master of none, we're trying to do with the team there is that guys you know from 100 trucks we'll 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 uh 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, fine. Goodbye. So you used to have 200 trucks. Now you're down to 75. 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 Wiley to be 1,000 trucks, right? Not 500, 600, but 1,000. So we're doing all these changes. At the same time, 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 forecast. Okay, we see some improvement in all of our sector, including truckload.

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

Yeah, maybe I can jump in on that. We're renewing contracts in the U.S. flatbeds, in the high single digits to low double digits. We also have about 20, 25 percent 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 those kinds of numbers. The renewals there are more like in the low single digits.

Okay, very helpful. Thanks for the time. Pleasure.

And the next question comes from the line of Ken Hexter with Bank of America. Please go ahead.

Hey, great, Elaine and David. Good afternoon, and thanks for the details on the outlook. So the historical sequential change in LTL logistics, Dave, I know you gave what you target now in this. Can you give maybe historical, just given combined numbers so we can kind of understand how that is normal or as it stands out, and then maybe talk about the highs, lows in the target, the $1.50, $1.60.

Yeah, so on the historicals, Ken, we've got all of the, in the appendix of the presentation on the website, we've got eight 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 10 cents, right? There's a lot of moving parts. I don't know, Mr. Bedard, 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 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 talked to our three top guys to our three senior evps about how do they see the quarter we asked those guys to re-forecast okay so 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 trend.

If I could just follow up on that. So, I mean, just given right now, right, up 8% both March and April in LTL tonnage, I presume you're talking about, or shipments. Shipments. No, that's shipment numbers. Shipments. 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, and same on truckload, your ability to kind of capture that share back real time. Thanks.

Well, 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, it was down 10 in Jan. It was flat year over year in Feb. And then, 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 were 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, Listen, like Mr. Bernard 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. The DNA 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 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.

Wonderful. Appreciate that. Thanks, David. Thanks, Elaine. It's a pleasure.

Thank you. And the next question comes from the line of Walters Fracklin with RBC Capital Markets. Please go ahead.

Thanks very much. Good afternoon, Elaine. Good afternoon, David. I want to... Perhaps just ask a couple modeling questions here. Tax rate has been pretty low here in the last couple quarters. What tax rate should we assume for the rest of this year, and does that hold for next year? This is a second question here. You're not giving guidance for full year, but historically, putting 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 summer Q3 EPS seasonally does tend to be better than Q2, and should we at least pencil that in for this year?

Yeah, so you know what, Walter? David, I'll let you answer the tax thing there, and then I'll take the rest.

Okay, sounds good. Yeah, 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.

Yeah. And then Walter, on your question, I mean, although we don't give guidance, okay, on three and four 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, one of our major contributor to our logistics is we move trucks, right? For, uh, Packard and DTNA, and we just signed a deal also with Volvo. Okay, so we started Volvo late in this year. So we are 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. So logistics and also the acquisition we did late last year. uh we didn't have that so those guys are doing great we are involved in the data center construction so we are partner with the construction company in michigan with four data centers so this is something new for us so i feel really good about uh you know uh 26 in our logistic truckload Like David was saying, the renewal rates are really helping us. And thanks to the US 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 in drivers and chase rates instead of always keeping chasing drivers. Hopefully, we learn from that after three years of being like famine on rates. So, and in our LTL, I mean, Cal and the team there are working and 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, Walter, in the world right now, okay, so that we say cautious, but we know that we have a lot of good stuff on the go with our team, right? Our team is, you know, all pumped up, and after three years of, you know, very, very difficult environment for us.

Appreciate the time. Thank you. They should want to.

And the next question comes from the line of Jason Seidel with TD Cowen. Please go ahead.

Thanks, operator. Hey, Elaine. Hey, David. I wanted 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 it's 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?

Yeah, 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 in the four-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, you know, the care. Okay, we still have issues with shipment that's supposed to go to A and they're going to B because they've not been scanned. I mean, it's a global problem. You know, when you look at TFI, our Canadian LTL over time has built one step at a time, right? So if you look at one of my best peers, OD, they were built one step at a time over a long period of time. Us, we jump into UPS Freight and, you know, the real estate was abandoned. The fleet was abandoned. The 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, you know, way more time. But we're going to get there and the service is the key because if you don't provide the service that is equal to your peers, you get penalized, okay? You get switched over. Now, for sure in a difficult environment, okay, in a soft market, you suffer way more the investors say, 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 a strong market for three years. So now we're getting ready to have a better market, but no, 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?

Now, Elaine, I totally get that. And let's keep our fingers crossed for a better market. 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, you know, combat some of the very questionable capacity that has flooded the market over the last couple of years. You know, 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, you know, the Canadian with the new prime minister that's not asleep at the wheel like the previous one, they took action. In 2011, they've decided not to issue any employment record for an owner-operator. So these driver-in guys took advantage of that. And that loophole has been closed as of December 25th. so now if you're a driver inc your employer has to issue you an employment what they call that certificate that tells you your earnings etc etc so now you cannot cheat the tax right so so we see an effect okay not as strong as what we see in the us because us they took really the bull by the horn it's not the same approach right The Canadian approach is more slow and okay, fine. After 10 years of complaining, they 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 care a much better deal than us. But now, as of December 2025, the employer had to issue taxes kind of what we call us, it's like a W-2 in the US or W-9. This is the statement of your earnings. And now you're stuck with paying taxes because this information has been sent to CRA, the Canadian tax government. But it's much slower than what we've seen in the US. I mean, the US is really very active, very active. And there's a safety reason there. 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 raise the price. They don't try to chase for oil stupidly.

Elaine, great callers always. Appreciate the time.

Pleasure, Jason.

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

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

Well, in a normal environment, I don't see us running an LTL with an OR that is 90 OR. Right now, we were at 95 and Q1. Based on what David just talked about, how do we see Q2 probably a sub-90 OR. But in a normal environment, you have to run an LTL division between an 80 to an 85 OR. So that is our goal in North America LTL. So for sure, the edge that we have is our Canadian operation. Everybody knows that. It's 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. So to say that an 80 to an 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 flatbed, they operate with the tarp and things like that, the strapping and all that. So it's not just the driver. He's also an operator. So this is why you cannot run with a 90 OR. That doesn't make any sense. So if you look at our Q1, we're running a 92 something OR, which is terrible. So our goal is to be under 90 OR very soon. But in a normal environment, Where should we be? Well, we have to be between, let's say, an 82 to an 86 OR in our specialty truck load. But more importantly, Jordan, is the return on invested capital, which is the problem that we have. Right now, we're at 6%, which is terrible. No, in a normal year, we should be between 10 and 15. Now, this is where we're heading to. In our LTL, we have to be above 20, the same with our logistics sector, above 20 return on investment capital. Our logistics, we've always run at about a 90 EUR. 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? Where we're heading, it's got to be between an 86 and an 88 normal environment, maybe 85 is a good year. 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. Where we're heading with the quality of our people and our market, in a normal environment, it's more like an 85 OR, right?

globally, 85 to 87. Got it. Got it. Thank you very much.

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

Hey, thanks for taking the question.

Just to come back to the GRI, I know you said it was late and low, at least in the US. 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 for shipment improve there as well? So maybe you can talk about the price and mixed trend in US LTL.

Yeah, yeah. Well, you know what? Go ahead, David. I'll let you go with that.

Yeah, listen. So the... the pricing actions that are taking place next are, 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 we'll sort of develop, you know, over, over time in terms of, in terms of weight per shipment it didn't move too much when you look at at the uh this quarter right we're kind of um year over year kind of flat uh and that's true in in the in the us as well all right thanks david um maybe just evolve on that real quick anything into april for weight per shipment as you've given up 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 two percent of consolidated revenue so maybe give us a sense in terms of what you're expecting from that here um into the next quarter to integrate it and for the rest of the year thank you yeah i i don't have the weight for shipment in front of me but i do have um ltl revenue per shipment in april and that's and that's flat

which is 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 that we, yeah.

The one in logistics, Brian, is that?

Yeah, that was the one.

It's the one. Yeah. I mean, listen, it's, it's, it's a great value added, uh, kind of logistics niche business. It's similar to in, in concept. It's similar to, to, to, to the JHT acquisition, meaning, um, niche, good barriers to entry, and these guys are basically providing value-added warehousing, kitting, sub-assembly 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 another example. It's really the kind of business that we like in our logistics. We don't do a ton of brokerage in our logistics. We do have some, but what we really like 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 element to the earnings profile as well.

So if I may add, guys, I mean, these guys are 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 two years on a project. So this is really a good thing. And now, like David is saying, we're talking to our Truck OEM, which we move 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 division is, I would say, David, what, 85% U.S. and 10%, 15% Canadian? Yeah. of revenue-wise, so the split.

So it's really U.S.-based. Okay, very helpful. Thanks very much, guys.

And the next question comes from the line of Tom Radowitz with UBS. Please go ahead.

Yeah, good afternoon, good evening. Let's see. 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, and this is focused on US LTL, you know, you kind of had a lot of shipments in the system and that came down maybe more than you thought, right? There was 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 US network and kind of quality of the shipments you have, is that, you know, kind of on the right track and what you're getting is, is good quality. Um, you know, 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, and really getting, uh, you know, more on price, right. Because you're, uh, you know, the industry leaders get call it four to 5% revenue per hundred weight. you know, that's not something, that's something you can, you know, do, I think with really high service, but I guess a couple of components on just kind of where you're at in US LTL. Yeah. Yeah.

You know what, what the commercial team has done as an example, you know, with our 3PL, you know, what we gave those guys, let's say a year ago was mostly blanket rates, which is the worst that you could do. Because then you give the guy a blanket rate that they will use you when you're the cheapest and lowest guy in the world. So we said, this doesn't make any sense. So we have to move closer to CSP, customer specific pricing. So this is stickier because it's customer specific to a 3PL customer. And what we see now 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, we made a lot of changes there with two big retailers that want to squeeze you 45 times a day on the rates. So we just said, I'm sorry. We can't afford to service you because we can't make money with you guys. We can't run business with 115 OR. 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 two retail guys that were very important to us about a year and a half 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 3PL, 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 trade 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. It's 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 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 trans-border freight between US and Canada and vice versa. So we are a large player in Canada And we know that the profitability of a transporter shipment is way better than a domestic U.S. or a domestic Canadian shipment. But until a year ago, the focus, we kept talking about it, but it didn't walk the talk. So now, we see also on the transporter side, way more focus 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 hundred way was, you know, in the quarter year over year or how you think that progresses. But, you know, 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, you know, nice traction on shipments? price comes next year or price comes a couple quarters out or just how to think about that element of the equation. Thanks.

Hard to say, Tom. I mean, we're not there. We're not there to say that, hey, 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 compared to where we were, let's say, a year ago. That we can say. And we know, because we have experience, that the more that your service is closer to your peers, then your revenue per shipment, unless you're stupid, will be closer to your peers. 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. on the US 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.

Right. Okay. Makes sense. Thank you. You're welcome, Tom.

And the next question comes from the line of Conor Gupta with Scotiab Capital. Please go ahead.

Good afternoon, Elaine and David. So, Ali, maybe I want 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, you know, clearly, you know, 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 demand perspective? I mean, I'm curious to know because I know you said you're a discounted carrier in some respects and USLTL, so maybe it's not such a big an 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 one point. It's an economical war right now because they're not really shooting at each other, but it's a financial thing there and it's going to get resolved at one point. Is it in a month? Is it in two months? And this fuel surcharge will start to disappear slowly over time. But at the same time, hopefully we believe us that because of our business focus on industrial, 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. At the end of the day, when fuel surcharge is 80% of the base rate, it's not a good discussion that you have with the customer. Nobody likes that, but it is what it is.

That makes sense, Alain. Thanks.

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 2027?

Yeah, yeah. Well, for sure. The problem we have right now on M&A, Konar, is very simple, is that everybody is waiting because everybody believes that things will get better. So the seller says, you know, why would I sell now? Okay, I'm going to wait. I'm going to wait because my numbers, my profitability will improve over the next 6 to 12 months or 18 months. Because we are having serious discussion on some nice tokens, but... Everything is on hold right now because everybody says, oh, 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, like you said, Garnar, with 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, you know, when fuel situation gets normal, I mean, this cash flow is going to get back to, you know, the usual numbers that we see, $700, $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, what, two pennies a quarter. last year. So yes, maybe a little bit of dividend growth, but really it's going to be focused 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 the Fed changes mind. 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 two if we don't do anything major in 26 in terms of M&A besides what we've done so far.

Yep. Yep. And on that, Conor, we're we love well we we we we make we we make the best of whatever situation uh the market gives us and the market gave us over the last three years uh a very very difficult uh cycle and during those last three years we deployed more capital than we ever have in any three-year period so when we look at 23 24 25 and first quarter we've deployed 2.5 billion dollars in investments. 1.8 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 And we'll use the cash flows to deliver a little bit and get ready for the future.

That's great. I appreciate the time, as always. Thank you. Thank you, Caroline.

And the next question comes from the line of Benoit Poirier with Day Jordan. Please go ahead.

Hey, good afternoon, David. Good afternoon, 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 US LTL to add density in order to get to a normalized OR of 80, 85%, as you mentioned before? You know, Benoit, that's...

It takes two to dance, right? So, so far, in a discussion that we had with one of our targets, so far, it didn't work, right? It didn't work. But, you know, if you go back in time, it took us five years. I've been working five years to convince UPS to sell UPS Freight. It took me two years to convince DHL to sell DHL Canada. How would you say that? We're used to people saying no to us, but we don't let go when we believe that for the shoulder, the target, and our shoulder, a deal would be beneficial. So right now, it's still a no. It's still no, no, no, no, no. You do something else. Call someone else. Don't bother me. But, you know, 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, you know, like David was saying, we're going to be busy this year in 26. We still have a lot of good stuff to go. Dasky was bought two years ago. We still have a lot of work to do there on working with those guys to turn good truckers into good businessmen. And the difference being good truckers like to service customer and hope that they'll make money. Good businessmen are focused on making money, servicing customer well. It's not the same, right? So this is the kind of TFI education on truckers that we tried to do. So M&A is the blood of TFI. So 26 is probably going to be very quiet. But hey, listen, we're getting ready. We're getting ready. But like David was saying, I mean, we made a ton, $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 could strike a good deal once we have a seller that says yes instead of no.

That's great, Collar. 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 improved fundamental? Could we see a normalized environment in 2027 or maybe 2028?

You know, 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, hospital, 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. Interest rate being high is related to inflation being high. Now we have the problem of the fuel, but the problem of the fuel will probably be settled soon. As soon as we have lowered interest rates, this economy will start to boom again. 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, they're being squeezed. So when your customer is squeezed, he 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 and you're 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, you know, when you are piggyback on the U.S. industrial economy and the direction that this administration wants to go, I feel pretty good.

That's great.

That's great, caller. Thank you very much for the time. It's a pleasure.

And the next question comes from the line of Cameron Dirksen with National Bank. Please go ahead.

Thanks. Good afternoon. 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 major businesses within logistics, what you're seeing there and what the outlook looks like for the next few quarters?

Yeah. You know what, Cameron? Within our logistics sector, we have the truck movers, we have the specialty guys that David was talking about that we just acquired late last year. Very importantly is our logistics sector that 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 T-Force WW Worldwide that is an LTL play. So all these business units, Cameron, are showing good results today. 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 will do better. Our last mile guys are saying, you know what? No, 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, 27. So we feel pretty good about where we're heading, guys. So logistics, I mean, if you look at what the guys are doing with close to $400 million of revenue, it's not chicken shit, right? And most importantly is what's the bottom line? Well, the bottom line is about 10 points. We're 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 your revenue, but there's also maybe in some of your operations, denser operations, maybe the fuel surcharge helped. Just wondering what the net impact was in the first quarter.

Yeah. Yeah, on that, David, I'll let you go with this one.

Yeah, the net end cap was pretty neutral across TFI in March. It was slightly positive in the LTL because of the density that we have in certain areas of the LTL. And 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.

Okay. That's helpful. That's all for me. Thanks very much. Good.

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

Hey, thanks, and good afternoon, guys. I just wanted to clarify a couple of things. You know, first, I understand the rationale for the reporting consolidation between the, you know, different LTL divisions. Just curious if there are any changes planned for, you know, maybe more operational integration between them now?

No, there's no difference.

Oh, sorry, please go ahead, Mr. Medar, please.

No, no, I was just going to say the same as you, David, so I'll let you go.

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

Okay, great. Yeah, that's very clear and very helpful. And then just a kind of final quick one 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?

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

And that's all in truck. Awesome. Appreciate the time. You're welcome.

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

Good evening, Mr. Bedard. And David, thanks for squeezing me in 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? Thank you.

Okay. So I think, David, that you've touched on that, right, the revenue per truck and all that. right yeah so yeah 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 truckload here okay about 65% of revenue from our asset base operation and about 30 to 35 on a non-asset based operation so when we bought Dasky 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 Well, 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 per truck per week, okay? Also, we're starting to get better revenue per mile. We drive more miles with better revenue per mile. Also, we are growing our asset light operation in Q1. We've grown that, David, I think it was 7%, right?

Yes.

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 valley 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 the valley or the trough not the peak right and then When the market is great and the guy says, I need more trucks, whoa, whoa, whoa, just wait. Because don't forget, if you buy a truck, you're stuck for five years with that truck. So if the peak is good for another three months, not too sure if this is going to be good for us. So that is a different approach that we brought to Dasky. And this is going to continue over the next few quarters. So the guys come to us with, oh, I need more trucks because I've got more freight. Oh, you've got more freight for six months or two 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.

Great. Thank you for that, Collar.

Thank you.

And that concludes your 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. Well, ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.