TFI International Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the TFI International third quarter conference 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. For 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 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 Friday, October 30, 2026. Joining us on today's call 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 Alain Bedard. Please go ahead, sir.

Thank you very much, operator, and welcome, everyone, to this morning's call. Yesterday, after market close, TFI International reported another quarter of solid results with a standout performance from our truckload segment. Overall, adjusted diluted EPS was $1.67, up nearly 40% over the prior years of $1.20. Our overall operating income grew 17% to $180 million despite an office-related real estate impairment charge, and this was driven by truckload operating income that nearly doubled and logistics operating income that was up 60%, almost 60%. Another important highlight is that this was the second consecutive quarter that TFI International achieved a sub-90 operating ratio on a consolidated basis. Of significant importance to our business strategy, we generated another $116 million of free cash flow, bringing our year-to-date total to more than $440 million, even while investing for growth. As a result, our leverage ratio further improved this quarter as I'll discuss in a moment. This very solid financial foundation allows us to thoughtfully invest it for the future during up and down cycles alike and also allows us to return excess capital to shareholders whenever possible, which we did both during and subsequent to the third quarter as I'll also discuss. Taking a step back, our current strong performance is the direct results of the investment we made during the down cycle. We invested in our operation, we made strategic acquisitions, and as a result, we now have an enhanced focus on specialized freight, which improves diversification towards industrial and markets, and across multiple modes of transportation. All the while, Okay, the talented men and women of TFI International have maintained their focus on efficiency and the related operating principle that drives our profitability. With that, let me quickly review our consolidated third quarter results before taking a closer look by business segments. Our top total revenue before fuel surcharge of $1.9 billion was up 8% over the past year, while operating income reached $180 million, up 17%. Our operating margin of $9.7 was up 80 basis points over the prior year's quarter of $8.9. During our segment, we will begin with truckload, where it simply had a phenomenal quarter. and now represents 40% of segmented revenue before fuel surcharge at $753 million. That was up 10% the past year and our revenue per truck per week, excluding fuel surcharge, climbed 13%. Operating income nearly doubled to $100 million, up from $53 million in the year-ago period and our industry-leading adjusted OR of 86.7 marks a 560 basis point improvement over the past year. Lastly, our return investor capital for truckload was 8% up from 6% last year. In addition to the tightening capacity industry-wide, these results directly reflects our favorable exposure to the right-end markets, our emphasis on the specialized side of the business, and our limited capital intensity with an optimal asset mix and improved fleet productivity. Next up is or LTL. LTL was 36% of segmented revenue before fuel surcharge at $678 million, which was roughly flat year over year. Our adjusted O.R. was $91.3 million and operating income was $44 million, again. That's including a non-cash impairment and equates to a return on invested capital of $11.1 million. Finish up the segment logistically Also at a strong quarter, with revenue before fuel surcharge of $437 million, up a robust 19% year-over-year, and logistics now accounts for 23% of our segmented total. Perhaps more impressive, our operating income jumped 59% to $49 million, and that equates to 11.3% margin, up nearly 3 full percentage points from the prior years of 8.4%. Our logistics return invested capital was 14.9%. Turning to our balance sheet, as I mentioned, $440 million of year-to-date free cash flow has further added to our overall strength and re-ended September with an adjusted funded debt to EBITDA ratio of 2.1. Please note that this is an updated measure which excludes the letter of credit and contingent consideration which affected the previously communicated banking covenant ratio. I'll wrap up my presentation. Prepare remarks this morning with our updated outlook, which include for quarter adjusted EPS of $1.30 to $1.40, which at the high end would represent a 28% year-over-year increase. In addition, we continue to expect year-over-year adjusted operating ratio improvement of 400 to 500 basis points in the truckload segment, 100 to 200 basis points for our logistics, and a slight decline maybe of 100 basis points up to 100 basis points for our LTR. And lastly, in terms of our outlook, we continue to expect net capex, excluding real estate, to be in the range of 225 to 250 million, demonstrating improved capital efficiency. As always, our outlook ranges assume no significant change in the operating environment. With that, operator, David and I are ready to take questions. If you could please open up the lines.

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. If you'd like to withdraw your question, press star 2. As a reminder, please limit yourself to one question and a follow-up. One moment, please, for your first question. Your first question comes from Ken Oster from Bank of America. Please go ahead.