TFI International Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Consolidated Results: Total revenue before fuel surcharge was $1.8 billion (down from $2 billion year-over-year). Operating income was $170 million (9.5% margin, up 1 percentage point year-over-year). Adjusted net income was $112 million (down from $146 million year-over-year). Free cash flow was $182 million (up 20% year-over-year).
• Balance Sheet: Ended June with a funded debt-to-EBITDA ratio of 2.4x. Repurchased $85 million of shares during the quarter and paid $39 million in dividends, totaling $124 million returned to shareholders.
• Segment Actions: Implemented Optym for linehaul, working on P&D side. Focus on cost control, safety improvements (hired Marc Fox), AI integration to reduce costs.
• Outlook: Q3 2025 EPS expected in the range of $1.10 to $1.25, assuming no significant change in operating environment. Full-year net CapEx expected approximately $200 million.

Segment Performance:

• LTL: Segmented revenue before fuel surcharge was $704 million, 39% of total, down 11% year-over-year. Operating income was $74 million, with an LTL operating ratio of 89.5% (360 basis points sequential improvement from Q1 2025) and return on invested capital of 12.9%.
• Truckload: Segmented revenue before fuel surcharge was $712 million, 39% of total, down from $738 million year-over-year. Operating income was $71 million, with a Truckload OR of 90.1% (250 basis points sequential improvement from Q1 2025) and return on invested capital of 6.4%.
• Logistics: Segmented revenue before fuel surcharge was $393 million, 22% of total, down from $442 million year-over-year. Logistics operating income was $38 million, with a 9.6% operating margin (down from 11.4% year-over-year) and return on invested capital of 15.7%.

Guidance:

• Q3 2025 EPS expected in the range of $1.10 to $1.25, assuming no significant change in the operating environment.
• Full-year net CapEx expected approximately $200 million.

Risks:

• Tariff-related uncertainty weighing on industrial end market demand.
• Instability in the Canadian market due to trade uncertainties.
• Potential impact of macroeconomic conditions on freight volumes.

Question and Answer: Q: Remind on margin ceiling for LTL with internal actions?

A: Alain mentions implementing Optym for P&D, reducing rail linehaul miles, working on claims and safety, AI integration to reduce costs.

Q: Color on Q3 guidance and margin assumptions?

A: David says Q3 guidance is normal seasonality, Alain expects LTL margins around 94%-95% in the back half.

Q: Macro outlook and relief timing?

A: Alain expects U.S. industrial freight to improve with Trump administration's budget, confidence returning, but Canadian instability remains.

Q: SMB mix recovery and reasons?

A: Alain says SMBs came back because of focus on service and care, not rate cuts.

Q: Sustainability of free cash flow?

A: Alain and David discuss transitioning to an asset-light model, switching revenue from asset to non-asset to improve free cash flow.