TFII

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 Bédard, Chairman, President, and Chief Executive Officer, and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Mr. Alain Bédard. Please go ahead, sir.

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. 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 earnings of $97 million represented a 5.7% margin, and our net cash from operating activities 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 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 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 the prior year, and our OR was 92.7, improved by 100 basis points. Lastly, our truckload return on invested 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 ended the 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-$1.60. Net CapEx excluding real estate for the full year, we're expecting a range of $225 million-$250 million, unchanged from previous expectation. As always, our outlook range assume no significant change, either positive or negative, in the operating environment. With that operator, David and I would be happy to take questions. If you could please open the lines.

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

Great. Thanks, everyone. Alain, obviously a lot has changed, since your previous call with the cycle and the current environment.

Yep.

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 and LTL, et cetera.

That's a very good question, Ravi. 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, 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, you know, 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 U.S., I mean, we're focused on the industrial freight, right? We're not a carrier of retail freight in our truckload world.

We are really industrial, and we feel 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, you know, it's always the same story. When the markets start to tighten up, shippers want to be partners with truckers, right? I mean, we're seeing that. We're very happy with what's going on. You know, the investment we made in Daseke two years ago has been, you know, average so far. We were really busy investing in technology and financial system and all that consolidation.

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 you know, the future of North America, U.S. and Canada. I feel 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. I would say that what we're seeing now is slowly we probably gonna 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 gonna 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 Traikos 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 you know, getting their act together. We're not perfect. We're far from that yet, but we are improving. I mean, if you remember the Mastio report, for the first time, okay, we've shown an improvement, okay? I mean, I feel in a long time. I mean, the last two or three years have been very difficult for us at TFI.

I think that finally we're gonna turn the corner, turn the page on very difficult 2023, 2024 and 2025, even 2025 being the worst of the three. I think that 2026 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. 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? When do you think you might restore full year guidance in there?

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. Until we have that, and hopefully we'll have that by the end of the summer, okay. Also with more experience where this market is going, I mean, we have a fuel situation with what's going on in Iran. I mean, this free trade agreement between North America. 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.

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? 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? This gotta change. 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.

The next question comes from Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Afternoon. Alain, you mentioned inflecting to hopefully some growth in LTL. Are you still providing breakout U.S. versus Canadian LTL? Are you seeing growth, both U.S. and Canada, within that comment? I don't know, maybe just along those lines, any thoughts on, like, on the margin-

Yeah.

Margin outlook for the LTL segment.

Yeah.

For Q2.

Here is the deal, Scott. I mean, no, we don't separate U.S. and Canada anymore because, you know, more and more what we're saying, the same as our truckload and our logistics, we are a North American player. 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. That's why we feel pretty good that organically, in our sectors, truckload the same, okay, logistics the same. We feel that we're gonna show some organic growth in Q2, 2026 versus 2025 year-over-year.

Okay.

Yeah.

Maybe just, you know, I asked for LTL, but maybe you could sort of walk, you know, 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'd 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. For TFI as a whole, we expect OR improvement of 400-500 basis points. Taking it through the segments. I'm talking about sequentially from Q1 to Q2. LTL, we expect 600-700 basis points of sequential improvement, Q1 to Q2. Truckload, 200-300 basis points. Logistics, 75-125 basis points of improvement.

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? It's a pretty big

Yeah.

Sequential.

A couple of points. First of all, Q1 was probably unusually bad because of the weather in the beginning of the quarter. We're exiting the quarter way better than we entered the quarter. Just to give you a little bit of sense across that, around that, in January, LTL shipments were down year-over-year 10%, okay? In March, they were up 8% year-over-year. 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 and as well as the other things that the team has been working on. Fuel is a part of it, only where we have really strong density.

It's really more around the volumes and some of the pricing actions that we will be putting through.

Also, David, if I may add, don't forget that our GRI, okay, was not in place in late 2025. We delayed that, and it was put in place mid-March, right? We have that a little bit of tailwind on that, Scott.

Yep.

Although this is only.

Thank you, guys. Appreciate it.

For about 25% of our shipment. Hey, Scott, this is only for about 25% of the 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.

The next question comes from Ari Rosa with Citigroup. Please go ahead.

Hey, good afternoon, Alain and David. 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 that 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.

Yeah. 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. I mean, that's not too good, right? This is what the operating guys have been working at, okay, missed pickup. If you look at our claims, okay, consolidated, we're at 0.6. If you remember when we were showing that separate, I mean, U.S. was not that good. That's another area that we are improving. Stability in your sales team also helps you, okay, with the customer relationship and all that. This is like a goodwill thing.

Hopefully macro will start to help us down the road at one point when the market, you know, is stronger. In the meantime, okay, we still have lots to do for us to improve our service. 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. The second and the third day service, we have some issues. The guys are working on that. 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.

We're still, okay, working on changing this culture of we're not a monopoly anymore, okay? We are a 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 my peers, right? The reason we are some kind of a discounted carrier is because our service is not where it should be. This is the chicken and the egg, right? Where does this start? Well, it starts with providing the acceptable service comparable to our peers. This is an ongoing thing that our ops guys are doing.

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 mi 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. It's a team effort. Again, I mean, we're still in a position of working hard to get closer to the service level of our peers.

Okay. Understood. 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 what TFI's ability has been to capitalize on that, particularly in Daseke. Broadening it out to the broader business, how you think about what upcycle earnings could look like both for Daseke and for the broader business. Let's assume for a moment kind of a benign resolution to USMCA.

Listen, guys, I mean, our revenue/mi is up in our TFI specialty truckload. Absolutely, our revenue/mi is moving up, okay? We drive more miles per truck per week, okay? This is a productivity effort that Steve, the leader 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. I'll give you the example of Lone Star, which is Texas-based. Today, we run 100 trucks, highly specialized, $7-$8 a mi, okay? Which is great. Next to that, in Lone Star, we also run over the road at $2.25-$2.40 a mi.

What we're saying is that, you know, being Jack of all trade, master of none, what 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. The over the road thing there, we're gonna 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. 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. You used to have 200 trucks, now you're down to 275, okay?

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. We're doing all these changes at the same time that we are working on reducing our costs, reducing our asset base. If you look at our brokerage operation in our truckload sector, last month, revenue-wise, we were up 7%-8%. The goal is to drive more revenue with less steel on the road. 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.

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

Yeah.

Yeah. Go on.

Maybe, I can jump in on that.

Go ahead, David.

We're renewing 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 those kinds of numbers. The renewals there are more like in the low-single digits.

Okay, very helpful. Thanks for the time.

Pleasure.

The next question comes from the line of Ken Hoexter with Bank of America. Please go ahead.

Hey. Great, Alain. David, good afternoon, and thanks for the details on the outlook. The historical sequential change in LTL, TL logistics. Dave, I know you gave the 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? Then maybe talk about the highs, lows in the target, the $1.50, $1.60.

Yeah. 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. I'll just, you know, ask folks to look at that. You know in terms of the range, the high and you know 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. Bédard, if you'd like to comment on what could drive you know where we land within the range.

It's what we feel, Ken, that is reasonable and attainable, okay, right now, based on what we've seen so far. Don't forget, there's lots of instability right now, right? This is based on what we've seen so far in April. This is based on when we talked to our three top guys, our three senior EVPs about how they see the quarter. We asked those guys to reforecast, okay, so that we can give you guys that kind of guidance, okay? These are fresh off the press, revised number from our guys. I mean, we could be wrong, okay? We feel pretty confident, based on what we've seen so far and the trend.

If I could just follow up on that. I mean, just given right now, right up 8%, both March and April in LTL tonnage, I presume you're talking about or shipments. Then-

Shipment. No, that's shipment numbers.

Okay. Shipments. That's not just catching up from the weather, that's actual economic upturn? I just wanna understand the feeling behind that and same on truckload, your ability to kind of capture that share back real time. Thanks.

Well, it's always 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 would continue all the way into April. I mean, when I look at the LTL shipment count, it was down 10% in January, it was flat year-over-year in February, and then, like I said, we're on 8% in March and looking similar in April. Now the important piece is to press on the revenue per shipment and make sure that, 'cause 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%.

Maybe some work to be done there. In terms of truckload, listen, like Mr. Bédard was saying, there's been a lot of good work that was done last year, taking excess trucks out of the system. 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. You see that in the D&A, 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.

Yeah.

On top of that, we've got brokerage up another 7%. That trend is continuing into April. This is the direction that the segment is going. We haven't really seen the impact of this pricing yet, right? Because all these renewals are taking place now.

Wonderful. Appreciate that. Thanks, David. Thanks, Alain.

It's a pleasure.

Thank you. The next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Good afternoon, Alain. Good afternoon, David. I wanna-

Good afternoon.

Perhaps just ask a couple kind of modeling questions here. 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? I know and just as a second question here, I know you're not giving guidance for full year, but historically, I mean, 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, you know, is it fair to say 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?

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

Okay, sounds good. Yeah. On the tax, we have a permanent tax benefit which was related to our financing structure. That increased a little bit as we increased the size of that financing structure through additional M&A. That's a permanent benefit. When profit before tax came down in Q1 quite a bit, 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. That should be directionally where we land over the course of the rest of the year.

Then Walter, on your question, I mean, although we don't give guidance, okay, on three and four for 2026, but what I could say is this. I mean, our logistics sector is gonna do probably a lot better, okay? I mean, one of our major contributor to our logistics is we move trucks, right? For PACCAR and DTNA, and we just signed a deal also with Volvo, okay? We start Volvo late this year. We haul about 70% of all the trucks manufactured in North America right now. If you read what the OEMs are saying, and I could tell you that we're very busy so far in Q2. 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 four data centers, so this is something new for us. I feel really good about, you know, 26 in our logistics truckload. Like David was saying, the renewal rates are really helping us. Thanks to the U.S. administration with these guys, you know, they took the bull by the horns with all these illegal and unsafe drivers. This is really helping the industry in general. Hopefully, the industry will stop chasing drivers and chase rates instead of always chasing drivers. We learn from that after three years of being like famine on rates.

In our LTL, I mean, Cal and the team there are working, and finally, on the commercial side, we have stability. To answer your question, Q3 normally, 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. 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.

Pleasure, Walter.

The next question comes from the line of Jason Seidl with TD Cowen. Please go ahead.

Thanks, operator. Hey, Alain. Hey, David.

Hi, Jason.

Wanted to talk a little bit, Alain, about a comment you made that you guys are still discounted in terms of the LTL pricing versus your peers.

Yeah. Mm-hmm.

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. Where do you think it needs to go? And are you gonna 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 and 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.

You know, when you look at TFI, our Canadian LTL over time has built one step at a time, right? If you look at one of my best peer, 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? It takes us way more time than I thought, you know, way more time. We're gonna get there, and the service is the key because if you don't provide a 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. We've not been in a strong market for three years. Now we're getting ready to have a better market. 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, you know, combat some of the very questionable capacity that has flooded the market over the last couple years.

Mm-hmm. Yeah.

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 what? 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. These Driver Inc. guys took advantage of that, and that loophole has been closed as of December 25. Now if you're a Driver Inc., your employer has to issue you an employment... What do they call that? Certificate that tells you your earnings, et cetera, et cetera. Now you cannot cheat the tax, right? 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?

The Canadian approach is slower, after 10 years of complaining, they start to do something. We're starting to see a little bit of that effect because those Driver Inc. don't pay any taxes, right? They can offer a customer that doesn't care a much better deal than us. Now, as of December 2025, the employer had to issue kind of what we call the T4, it's like a W-2 in the U.S. or W-9, okay? This is the statement of your earnings, okay? Now you're stuck with paying taxes because this information has been sent to CRA, the Canadian Revenue Agency, right? It's much slower than what we've seen in the U.S. I mean, the U.S. is really very active. You know what? There's a safety reason there, okay?

Those drivers are not safe. Their equipment is not safe, you know. It's gotta be resolved. 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.

Alain, great color as always. I appreciate the time.

Pleasure, Jason.

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

Yeah, hi. Afternoon.

Hey, Jordan.

Hi. Sort of question, now that you've sorta streamlined or re-streamlined the segments into the three broader categories, I was wondering, Alain, 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, you know, should be at. Thanks.

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 at 95 in Q1, okay. Based on what David just talked about, how do we see Q2, probably a sub-90 OR, okay. In a normal environment, you have to run an LTL division between an 80-85 OR, okay? That's our goal in North America LTL. For sure, okay, the edge that we have is our Canadian operation. Everybody knows that. It's always been, you know, a gold standard, right? Our U.S. operation has never been a gold standard. This is why it's a unified operation under Cal now.

We believe that our U.S. operation over time will get closer to our gold standard that we run in Canada, right? To say that a 80-85 OR in a normal environment in our LTL, we, 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. Our customers are industrial. We are a specialty. Our drivers are not just driving a truck, they also operate something, right? 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. It's not just the driver. He's also an operator. This is why you cannot run, okay, with a 90 OR.

That doesn't make any sense. If you look at our Q1, okay, we're running a 92-something OR, which is terrible, okay. Our goal is to be under 90 OR very soon, okay. In a normal environment, where should we be? Well, we have to be between, let's say, 82-86 OR in our specialty truckload. 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. In a normal year, we should be between 10%-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 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 got 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. If you do the sum of all that, TFI is not a 90 OR company. I mean, that's where 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, end market, in a normal environment, it's more like an 85 OR, right? Globally. 85-87.

Got it.

Right?

Got it. Thank you very much.

The next question comes from the line of Brian Ossenbeck with JPMorgan, please, go ahead.

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 U.S. How did that-

Yeah.

Work out? It sounded like perhaps there's another action coming just based on what you were talking about earlier. 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. LTL.

Yeah. Well-

Sorry.

You know, like, well, you know what? Go ahead, David. I'll let you go with that.

Yeah. Listen, 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 have improved, now we have to be more selective. That's the work that's being done right now and will sort of develop, you know, over time. In terms of weight per shipment, it didn't move too much when you look at this quarter, right? We're kind of year over year, kind of flat. That's true in the U.S. as well.

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

Yeah. 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 is much improved over March, because in March it was down low single digits. We're flat revenue per shipment in April with 6% more shipments.

The next question of our friend David was about.

The acquisition?

Yeah.

The one in logistics, Brian? Is that...

Yeah, that was the one.

It's the one? Yeah. I mean, listen, it's a great value-added kind of logistics niche-y business. It's similar to. In concept, it's similar to the JHT acquisition, meaning, yeah, 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. It's just another example. It's 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 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.

Yeah. Sorry, if I may add, guys. I mean, it these guys are a solution provider to our customer, right? 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. This is really a good thing. Now, like David is saying, we're talking to our truck OEM, which we moved their trucks, right? 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. We are involved with those guys on that, in the U.S. That division is, I would say, David, what, 85% U.S. and 10%-15% Canadian.

Yeah. Yep.

Of revenue-wise.

Yeah. Yep.

The split. It's really U.S.-based.

Okay, very helpful. Thanks very much, guys.

The next question comes from the line of Tom Wadewitz 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. Alain, and it's, you know, 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, this is focused on U.S. LTL. You know, you kinda 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 U.S. 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 good quality? You know, I think it relates to some of the other questions you've had.

Yeah.

Maybe additional to that is, like, how long is the lag between service and really getting, you know, more on price, right? Because you're-

Yeah.

You know, the industry leaders get, call it 4%-5% revenue per hundredweight. You know, that's something you can, you know, do, I think with really high service. I guess a couple components on just kinda where you're at in U.S. LTL.

Yeah. You know 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, right? Because then you give the guy a blanket rate that mean they will use you when you're the cheapest and lowest guy in the world, right? We said, "This doesn't make any sense." We have to move closer to CSP, customer-specific pricing, okay? This is stickier because it's customer-specific to a 3PL customer, okay? 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 two big retailers that want to squeeze you 45 times a day on the rates. We just said, "I'm sorry, okay? We can't afford to service you because we can't make money with you guys. You know, we can't run business with a 150 OR." At the same time that we're moving our SMB to where they should have been at the time, and our corporate, okay, shipments is about flat. Why is that? Because we got rid of two retail guys, okay, that were very important to us about a year and a half ago, and now they are kind of still with us, but very, you know, negligible in terms of the size.

If you look at the mix between SMB, corporate, government and 3PL, 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 freight that fits us better than anyone else, right? This is the goal, is to get that fit, that freight that fits us better than anyone else in our industry, right? This is the focus that we have with our guys. Not a price game. It's just get the right price, but something that fits us, right? 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?

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. 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. As an example, one area that we're pushing more and more is transborder freight between U.S. and Canada and vice versa, right? We are a large player in Canada, and we know that the profitability of a transborder shipment is way better than a domestic U.S. or a domestic Canadian shipment. Until a year ago, the focus, we kept talking about it, but it didn't walk the talk.

Now, okay, we see also on the transporter side, okay, way more focus on growing that highly profitable business.

Okay. That makes a lot of sense. What about the lag between service improvement and price? Like, I don't know if you wanna say kinda what your revenue per hundredweight was, you know, in the quarter year-over-year or how you think that progresses. 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-

Yeah.

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 gonna get more dollars, okay, from our customer because our service is up to par to our peers." We're not there yet. Right now where we are there, though, is that through the stability of our 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 say, a year ago. That we can say. We know, okay, because we have experience, that the more that your service is closer to your peers, then your revenue per shipment, unless you're stupid, okay, will be closer to your peers, okay? 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. 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.

The next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.

Good afternoon, Alain and David. Alain, maybe I want to ask you first on the demand side. You know, I think a lot of people are talking about obviously the trucking rates are going, you know, up a lot. Fuel prices have surged as well. You know, clearly, you know, the truck rates combined with the fuel price is what the shippers see at the end.

Yeah.

You know, in this environment, I mean, what are you seeing from demand perspective? You know what I mean? Like, I'm curious to know because I know you said you're a discounted carrier in some respects in U.S. LTL, so maybe it's not such a big an issue for you. You know, at some point, I mean, there's some price elasticity perhaps. I'm just trying to see, you know, what are you seeing from that perspective. Where do you see shippers becoming more sensitive or less sensitive now?

Well, Konark, for sure. I mean, right now it's a double whammy for the shippers, right? They get the pressure of the fuel surcharge, right, which is huge. 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. I mean, for sure it's difficult. 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?

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 economic war right now, right? Because they're not really shooting at each other. I mean, it's a financial thing there, and it's gonna get resolved at one point, right? Is it in a month? Is it in two months? This fuel surcharge will start to disappear slowly over time. At the same time, okay, we hopefully believe that because of our business focus on industrial, okay, not retail, on the truckload side I'm talking here, this is gonna start...

The demand is gonna 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 you know, 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 you know, it is what it is, right?

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, you know, what's your focus here now, you know, given the market seems to be turning? I think you have-

Yeah.

Waited for some time, you know.

Yeah.

I think to pull the trigger, I guess. Your free cash is still good. You know, more earnings power probably means more cash flows. How do you see capital allocation, you know, maybe heading into 2027?

Yeah. Yeah, yeah. Well, for sure the problem we have right now on M&A, Konark, is very simple, that everybody is waiting because everybody believes that things will get better. The seller says, "You know, why would I sell now? Okay, I'm gonna wait. I'm gonna wait because my numbers, my profitability will improve over the next six to 12 months or 18 months." Because we are having serious discussion on some nice tuck-ins. Everything is on hold right now because everybody says, "Whoa, whoa, things will get better." We wait. Now, for us in the meantime, myself and David we're gonna 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.

I mean, with like you said, Konark, with the huge free cash flow that we're gonna generate, I mean, Q1 was an exception because we pay fuel short-term, and our customers pays us on average about 40 days. This is why our free cash flow took a beating in Q1. You know, when fuel situation gets normal, I mean, this cash flow is gonna get back to, you know, the usual numbers that we see, $700 million-$800 million of cash. We're gonna work on reducing the debt. The dividend, I mean, we grow that dividend every year. We've grown that, what? $0.02 a quarter last year.

Yes, maybe a little bit of dividend growth, but really it's gonna 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 rates will start to go up. We said, "You know what? Let's reduce our debt level." 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 2026 in terms of M&A, besides what we've done so far.

Konark, we make the best of whatever situation the market gives us. The market gave us over the last three years a very difficult cycle. During those last three years, we deployed more capital than we ever have in any three-year period. When we look at 2023, 2024, 2025, and first quarter, we've deployed $2.5 billion in investments. $1.8 billion of that was M&A, and $620 million of that was buybacks. We feel very good about that timing. We're optimistic that now in this environment, we're gonna start to see the returns on those investments.

We'll use the cash flows to delever a little bit and get ready for the future.

That's great. Appreciate the time as always. Thank you.

Thank you, Konark.

The next question comes from the line of Benoit Poirier with Desjardins. Please go ahead.

Hey. Good afternoon, David. Good afternoon, Alain. Thanks for the update on capital allocation and the update on M&A talk. 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?

You know, Benoit, that's. It takes two to dance, right? So far, in a discussion that we had with one of our target, it didn't work, right? It didn't work. 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. Took me two years to convince DHL to sell DHL Canada. So I mean, we're very how would you say that? I mean, you know, we're used to people saying no to us, okay? We don't let go when we believe that for the shareholder, the target and our shareholder, a deal would be beneficial, right? Right now, it's still a no. It's still no, no, no. You do something else. Call someone else.

Don't bother me. You know, it's still the best deal that we could do in a lot of deals that we're looking at. Right now it's difficult, right? You know, like David was saying, we're gonna be busy this year in 2026. We still have a lot of good stuff to go. I mean, Daseke 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. The difference being good truckers like to service customer and hope that they'll make money. Good businessmen, you know, are focused on making money servicing customer well. It's not the same, right? This is the kind of TFI education on truckers that we try to do.

M&A is the blood of TFI. 2026 is probably gonna be very quiet. Hey, listen, we're getting ready. Like David was saying, I mean, we made a ton, $1.8 billion of investment. The last few years, I mean, we were not able to show how good these were because the market was so bad. Now 2026, 2027, hopefully things are starting to turn. 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 color. 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.

Mm-hmm. Yep.

... segment under a normalized environment. How fast do you think we could get into a normalized environment, given this cycle and improved fundamentals? Could we see a normalized environment in 2027 or maybe 2028?

You know what, Benoit? 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, we feel pretty good that interest rate is an issue, right? Interest rate being high is related to inflation being high. Now we have the problem of the fuel, but the problem with the fuel will probably be settled soon. As soon as, you know, 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, you know, it's, they're being squeezed. When your customer is squeezed, he tries to squeeze you, so this is why I don't wanna 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.

The guys are saying, "Hey, we gotta do something about that." 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 TFI Global Logistics division over there in Washington State. 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 color, Alain. Thank you very much for the time.

It's a pleasure.

The next question comes from the line of Cameron Doerksen with National Bank. Please go ahead.

Yeah, thanks. Good afternoon. You know, just a question on the logistics segment. I mean, obviously you guys are feeling pretty optimistic about the truckload 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, you know, what the outlook looks like for the next few quarters?

Yeah. Yeah. 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. Very importantly is our logistics sector that is the old Dynamex operation that we run both U.S. and Canada. Highly profitable last mile operation. Also we have a small brokerage, $500 million brokerage operation that's called WT, TForce Worldwide, okay? That is an LTL play. All these business unit, 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? You know, 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, 2027." We feel pretty good about where we're heading, guys. 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? Most importantly is what's the bottom line? Well, the bottom line is about 10 points or close to 10, right? This is a big area of focus of ours, and it's a beautiful business.

Okay. That's helpful. Just maybe, I guess, a quick question on the fuel impact. I mean, you mentioned the impact on the free cash flow in the quarter, just the timing of collections. 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-

Yeah.

the 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.

The net income 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. 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.

The next question comes from the line of Bruce Chan with Stifel. Please go ahead.

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

Um-

No, there's no.

No.

Please go ahead, Mr. Bédard. Please.

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

Yeah.

No. No.

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. Just a kinda final quick one here. You talked about the data center exposure, which is obviously, you know, very exciting. You said that it's a small piece of the business. Can you know, maybe just remind us of what that exposure looks like today versus, you know, 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.

Great.

That's all in trucking.

That's super helpful. Awesome. Appreciate the time.

Sure.

You're welcome.

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

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.