TFI International - Earnings Call - Q2 2025
July 28, 2025
Transcript
Operator (participant)
Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International Second Quarter 2025 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 a follow-up. Again, that's one question and 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 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 July 28, 2025. Joining us on today's call are Alain Bédard, Chairman, President and Chief Executive Officer, and David Saperstein, Chief Financial Officer.
I'll now turn the call over to Alain Bédard. Please go ahead, sir.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you very much, operator, for the introduction and thank you everyone for joining today's call. Within the past hour, we reported our quarterly results that demonstrate solid margin performance across all of our business segments. This reflects the hard work of the talented team members across our organization even as economic uncertainty continues to weigh on industry-wide freight volumes. As you've heard me say, strong free cash flow is always a top priority at TFI International. I'm pleased to report that we had yet another strong quarter in that regard, producing $182 million of free cash flow. As you know, we use excess cash flow to return capital to shareholders whenever possible. Thus, we repurchased a significant number of our shares both during the second quarter and into the third, while maintaining a strong balance sheet which has long been a pillar of our strength.
In fact, we further strengthened our balance sheet during the quarter through a private placement bond offering that I'll discuss in a moment. Let's begin with a quick review of our consolidated results. During the second quarter, we had total revenue before fuel surcharge of $1.8 billion compared to $2 billion a year earlier. As I mentioned, we had strong margin performance across the board and we generated $170 million of operating income, representing a 9.5% margin, off just a percentage point compared to 2.5% in the prior year period. We also produced adjusted net income of $112 million relative to $146 million last year and our adjusted EPS of $1.34 compared to $1.71.
In terms of net cash from operating activity, we generated $247 million which was virtually flat with the prior year period, and free cash flow, as you heard me say, was $182 million and that was significantly above the second quarter of 2023 results of $151 million. That's up 20% due in part to favorable working capital dynamics as well as moderately lower CapEx relative to last year. We owe these solid results to the dedication of the men and women of TFI International who really focus on execution during the quarter and taking the opportunity to strive for quality of revenue and improve efficiencies, including at acquired operations, while maintaining a keen focus on cost control. Let's turn to the next second quarter results for each of our three business segments.
Starting with LTL, this quarter was 39% of segmented revenue before fuel surcharge and down 11% year-over year to $704 million. Operating income of $74 million compares to $110 million in the year earlier period. The LTL Operating Ratio of 89.5 compares to 86.2 in the second quarter of 2024. However, this represents a 360 basis point sequential improvement relative to the first quarter of 2025. Our LTL return on invested capital was 12.9%. Next up is Truckload, which was also 39% of segmented revenue before fuel surcharge, which came at $712 million compared to $738 million a year earlier. Operating income was $71 million versus $81 million in the prior year period, and our truckload Operating Ratio of 90.1% is relative to 89% in the second quarter of 2024.
Tariff-related uncertainty continues to weigh on industrial end market demand. However, this quarter's also delivered 250 basis points sequential improvement relative to the first quarter of 2025. Wrapping up on Truckload, our return on invested capital was 6.4%. Our last business segment to review is Logistics, which at $393 million was 22% of this quarter's segmented revenue before fuel surcharge and down from $442 million the prior year. Logistics operating income was $38 million compared to $51 million, representing a 9.6% operating margin as compared to an 11.4% in the prior year second quarter, and our return on invested capital was 15.7%. In terms of the balance sheet, we benefited from the $192 million of second quarter free cash flow and ended June with a funded debt-to-EBITDA ratio of 2.4x.
As I mentioned, we also eagerly repurchased shares during the quarter, $85 million worth, and also paid out another $39 million through dividends for a total of $124 million of excess capital returned to shareholders, fulfilling one of our long-standing important commitments. Subsequent to the quarter end, we have repurchased in excess of another additional 475,000 shares. I'll wrap up with our outlook for the third quarter of 2025. We currently look for an EPS in the range of $1.10 to $1.25, and this assumes no significant change, either positive or negative, in the operating environment. In terms of net CapEx, we continue to expect approximately $200 million for the full year. All right, with that, operator, if you could please open the line, both David and I would be happy to take questions.
Operator (participant)
Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed with the number two. A reminder, please limit yourselves to one question and one follow-up. Your first question comes from the line of Ravi Shankar from Morgan Stanley. Your line is now open.
Ravi Shankar (Executive Director of India Equity Sales)
Great, thanks. Thanks for your time. Thanks, Alain. Great to see the turnaround and margins here.
I assume that this was all idiosyncratic
to the actions you have taken and not really helped in the cycle. Can you remind us what is the
margin ceiling you can achieve with further
internal actions before the cycle starts to help you out on the LTL side?
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, you know what, Ravi? It's always been a big discussion at TFI. I mean, we are very cost sensitive, us, and what these guys were able to accomplish in Q2, in a very difficult, still difficult market condition. Now, if you look at all the tools that we've implemented so far, one IT technology tool is Optum. We've implemented Optum for our linehaul. Now we're in the midst, in 2025, to implement Optum, that software, to help us on the P&D side. So our linehaul, we're very proud with what happened there. If you go back four years ago, we used to run linehaul miles on the rail for about more than 30% of our miles. Now we're down to closer to 20% of our miles, and we'll probably drop that. This is all because Optum is helping us do a better job on the linehaul.
We believe that the next thing that's going to help us reduce our costs is going to be on the P&D side, where we're going to do more with less. That's one area that we feel good about, and we're implementing that, as a matter of fact, this week. I think, David, if I'm right, we're implementing two terminals, smaller terminals. That's the first of those 100 and some terminals that we're going to be moving towards with Optum. Over and above that, we still have lots of work to do on claims. If you look at our claims ratio, we're not good. We're better. We're at 0.7% of revenue. We used to be at 0.9%. I think TFI's straight best result has been 0.4%. If you look at our Canadian operation, we run 0.2%, and I think the best peer in the U.S. runs 0.2%.
This is again a huge cost for the company. The same is true of accidents. We just hired a guy, Mark Fox, that's going to help us improve our safety. He was the President of Matrec when we used to own Matrec some 10, 15 years ago. Mark has done a fantastic job in terms of changing the culture and improving the culture of safety. Claims and accidents, I think that we need to improve that like 100%. That's going to help us big time. Also, new technology in terms of AI. David, maybe we could talk a little bit about that, what we're looking at doing on AI to help us reduce the labor intensity of our operation. Maybe on the collection side, maybe on appointment freight side, we're looking at all kinds of stuff to reduce, reduce, reduce our costs and be the top tiger, lean and mean.
Ravi Shankar (Executive Director of India Equity Sales)
That is really helpful.
Alain Bédard (Chairman of the Board, President and CEO)
Absolutely. Please go ahead.
Ravi Shankar (Executive Director of India Equity Sales)
Thank you for that. Maybe as a follow-up question, if you can give us a little more color on just how customers are talking to you about the tariff environment, especially Canada, U.S. Are there any structural changes in supply chains and any impact on you guys long-term, if you can tell at this point?
Alain Bédard (Chairman of the Board, President and CEO)
Well, that's for sure. If you look at our Canadian LTL, we're down. We're down. I mean, we're still doing really well, but we're down. One of the reasons we're down is because all the trade between the U.S. and Canada on the LTL side is down. This is the most profitable business that we have on the LTL, the trade between the U.S. and Canada. Normally the flow is two north, one south. Right now, the two north are down to about one. We are losing. The minute the tariff is settled with Canada and Mexico, we should do fine. Things will come back. It's just this kind of instability right now. This should be fixed probably before, well, August 1st. Maybe it's going to be fixed or later on, but for sure in 2025. Yes, we're a little bit affected.
We're mostly affected by the instability in our industrial truckload base in the U.S. where a lot of our customers are just waiting on the sideline to say, hey, where are we going? Where is this going to happen? Where is this going to end? Our miles in our Specialty Truckload are down like around 10%, which is not normal. It's just like, it's quiet. It's very quiet right now. Hopefully with this big beautiful bill, that should help investment. That's what the investment we made on Daseke a year ago was for, because we thought that the industrial business in the U.S. will start to grow again. We missed, we missed a call. Maybe we were maybe one year too early.
Operator (participant)
Very good. Thank you.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you, Ravi.
Operator (participant)
Your next question comes from the line of Scott Group from Wolfe Research. Your line is now open.
Scott Group (Senior Analyst)
Hey, thanks. Good afternoon.
Maybe if you can just give us
a little bit more color on the Q3 guidance $10 to $25, maybe some of the margin assumptions there. It's probably a little bit of a
steeper decline Q2 to Q3 than we typically see. Just any thoughts there.
David Saperstein (CFO)
Scott,
this is really based on just the historical seasonality of the business. If you look last year, Q2 to Q3, we dropped $0.11 of EPS, and margins contracted pretty much across the board, across the divisions and the segments. That's all that we're forecasting. There is just normal seasonal sequential declines. The extent to which we're able to continue to drive these idiosyncratic opportunities that we have over the course of this quarter will of course come to offset some of that.
Scott Group (Senior Analyst)
Okay.
Maybe just a little bit more specifics on how you think
about the progression of U.S. LTL margin Q3. If you have any early thoughts on where you think this should be going in Q4.
Alain Bédard (Chairman of the Board, President and CEO)
You know what, Scott? I think that our guys at TForce Freight will do a great job again in Q3. I would say that, you know, again, I mean, our volume is still too soft. The guys, you know, what they've done so far is they've improved the mix of our freight year-over-year. When you talk to our team here, they think that, you know, what we're focused is a 94% Operating Ratio like we've done in Q2, 94%-95% Operating Ratio I think that that is the goal that is attainable today with the kind of volume we have, right?
Scott Group (Senior Analyst)
You're saying 94%-95% in the
back half of the year is sort of what you would expect?
Alain Bédard (Chairman of the Board, President and CEO)
Yeah. Yeah.
Scott Group (Senior Analyst)
Okay, that's helpful.
Thank you, guys.
Alain Bédard (Chairman of the Board, President and CEO)
Thanks, Scott.
Operator (participant)
Your next question comes from the line of Walter Spracklin from RBC Capital Markets. Your line is now open.
Walter Spracklin (Director of Canadian Research)
Yeah, thanks very much. Good afternoon. Just on the guide in the back half, I know you're not, or I guess, you know, implied guide for the fourth quarter, are you giving any indication as to what we're going to see for the full year? Are you seeing, I know you've been right in terms of what you've seen in the general macro environment saying that it, you know, we're not seeing much relief. Is there anything that would suggest to you that, is this, are you seeing any signs that this could start to improve
front half of 2026, are you thinking
now or back half of 2026? Just curious your view on the overall macro here from the signals you're getting.
Alain Bédard (Chairman of the Board, President and CEO)
In terms of the industrial freight in the U.S., Walter, we believe that this new budget that the Trump administration came up with, I think it's going to revive the investment in the industrial sector, maybe the housing, maybe school, maybe all kinds of investment. This is why, you know, since we saw this new plan of the U.S. administration, we feel way better that we're finally going to get out of this freight recession that has been stuck in the mud for close to three years now. We haven't seen anything yet. It's just like what we're reading, what the guys are talking. We talked to our customers. I had a meeting with our specialty truckload fleet a week ago, and for the first time I heard those U.S. guys saying that we feel better, we feel good when we talk to our customers.
Hopefully things will start to roll, right? We haven't seen anything yet concrete, Walter, but all the signs are there to say that I don't know when, but we're going to get out of that mud, of that real estate, not real estate, but this terrible recession that we went through the last three years. Late 2025 maybe. Early 2026. Don't forget these projects sometimes take time. We'll see. At least the confidence, when I talk to the guys in the U.S., is coming back. On the Canadian side, there's a lot of instability. Once we know what's going to be the deal with the U.S., then the Canadian will be able to say, okay, this is what we need to do now, right?
David Saperstein (CFO)
Yeah.
I think what underpins that is really being able to see the effects of the cash tax savings. Right. Thinking about how that flows through the economy. Just us. Our cash tax savings in the U.S. this year are going to be $20 million and next year it's going to be another $20 million. Think about that throughout the economy. This is really going to go towards companies that are doing CapEx and these are the companies that are our customers. Now that we own Daseke, 72% of our specialized operation in the U.S. is flatbed. We have $1.3 billion of U.S. flatbed exposure revenue. That's this year based on today's depressed dollars.
When you think about rates coming down and you think about all of this tax savings coursing through the economy, that's what gives us a little bit of confidence in there really being a catalyst for a turn in particular for our business units which is our specialized truckload and our LTL.
Walter Spracklin (Director of Canadian Research)
Sounding more confident than I've heard you in a while. That's great. My follow-up question is on M&A. Can you talk to us a little bit about how you're looking at tuck-ins, what your budget would be over the balance of the year and into next for just tuck-in M&A, and then what your thoughts are toward a larger deal? I know you pointed to 2026. Is that still in the cards?
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, for 2025, Walter, it's pretty simple. The M&A activity is buying back TFI. Right. That's what we're doing. That's what we'll continue to do in 2025 because we cannot find another opportunity that cheap. It's impossible. You know, with so much free cash flow, there's no company that we can buy today at a reasonable price that is better than buying back TFI. That's what we're doing now in terms of a larger transaction. I think that probably you could see us getting involved into something of size in 2026. Oh, don't forget the last deal we did was late 2023 into 2024. That was like two years ago. Mr. Brookshaw and his team, you know, slowly we're digesting Daseke. It's more and more every day under our control, we're transforming the good Daseke truckers.
The role that Steve has is to change these guys from good truckers to good business truckers. Right? So a good business trucker is there to make money. A good trucker is there only to service the customer and hopefully he makes money. That's the difference between the two.
Operator (participant)
Thank you very much, gentlemen.
Alain Bédard (Chairman of the Board, President and CEO)
Pleasure,
Walter.
Operator (participant)
Your next question comes from the line of Jordan Alliger from Goldman Sachs. Your line is now open.
Jordan Alliger (Equity Research Analyst)
Yeah.
Hi everyone.
Yeah, I was wondering if you could give
a little more color on the U.S.
LTL side and some of the other
things you've been working on, such as the Salesforce rejiggering, penetration efforts on the
small to midsize businesses, some of that
other initiative stuff that maybe lifted margin better than expected in the second quarter. Thanks.
Alain Bédard (Chairman of the Board, President and CEO)
Very good question, Jordan. I have to tell you that sales has been, since we bought UPS Freight, TForce Freight, it's been a rock in our shoes. We've never done well. We've tried everything. I think that now for the first time since we bought the company in Q2, we're starting to have a good sales team on the small, medium sized account that is highly motivated and getting results. The number of shipments that went down like crazy about six months to nine months ago versus the total shipment now is coming back and the guys are very motivated. We feel really, really good that finally through Chris' leadership, we are kind of regenerating this sales team. At the same time, one thing that has always been an issue with our customer is billing customer. We always have problems with that.
Hey, David, could you talk a little bit about that with Prism, this new software?
David Saperstein (CFO)
Yeah, for sure. Especially now that we've corrected the problems. We can explain exactly what they were. The Prism is a new billing software which is helping us with our billing and our billing accuracy. We've also changed our processes so that we no longer deliver until you have an account with us or we have your credit card. This caused DSO to go down at TForce or in the U.S. LTL, which is primarily TForce. DSO went down from 43 days a year ago to 35 days. It's very rare to see such a dramatic reduction. It's because of the software and it's because of a better process, which is a basic one, which is don't deliver the freight until you have an account and then you get paid quickly.
This also helps the customer service, this also helps the customer experience because there's no running around afterwards trying to figure out the billing.
Alain Bédard (Chairman of the Board, President and CEO)
That also helps the motivation of the sales guy because now they don't get calls from customer and your billing department. They don't know what they're doing or this or that. I mean, it's smoother. It's getting easier to do business with TFI International today than in the prior times. We'll keep improving that experience.
David Saperstein (CFO)
Exactly. You see it in also the quality of the revenue. You'll notice that our length of haul is down a little bit. The SMB mix has improved. The big problem that we had over the last several quarters was a 3% reduction in the SMB mix as a percentage of our total revenue. We've now reclaimed two of those three lost points. We're two-thirds of the way back to where we were, let's say about a year ago. That's important, that's contributing to the results. The last thing is the GFP. We've now put up our third sequential quarter of GFP stability. We're up a little bit, but stability for three quarters now is something that we have not seen in a while. Those two go hand in hand, the local, the SMB and the GFP sales.
Jordan Alliger (Equity Research Analyst)
Great, thank you.
Operator (participant)
Your next question comes from the line of Tom Wadewitz from UBS. Your line is now open.
Tom Wadewitz (Senior Equity Research Analyst)
Yeah. Good afternoon. Wanted to ask you a little bit more on U.S. LTL. I know you guys have been kind of peeling back the onion for a number of years, you know, getting the billing right. I'm sure it sounds like a big positive. What else do you think is left? I guess I was surprised when you said around 20% of linehaul miles outsourced rail. I thought you were like up in the mid-30s, but I don't know, is it insourcing more linehaul? Is it other things, just kind of where you're at in your journey of getting to have the LTL operation and service that you want to have.
Alain Bédard (Chairman of the Board, President and CEO)
You know what I mean for sure. From day one, we were not able to move away from rail because our fleet, our trucks were so bad that it was just a problem. We have invested tremendously into the asset, the trucks, and also the software. Right now we are running about 20%. We didn't add that many road drivers within TForce Freight. It's just like those drivers are doing more. We have also introduced sleeper trucks. Now I would say we're just a little over above 100 sleeper trucks in our fleet at TForce Freight. This is also helping us on the long, long haul because now running sleeper, we beat the service of rail. The customer satisfaction is much, much, much improved. It's a change and we'll continue to improve that. Can we go less than 20%? It's something that we're looking at right now.
It's way better in terms of our service on the three- or four-day service because now we move more and more freight on the truck instead of rail.
Tom Wadewitz (Senior Equity Research Analyst)
Are you kind of where you
want to be then in terms of your service, or are there other kind of big things that you need to do? I guess just maybe related to that, it seems like the pricing is still showing some pressure. I think you had some improvement in shipments sequentially, but you're still kind of down in terms of revenue per hundredweight sequentially and year-over-year. How do we think about that equation of getting to improvement in the price?
Alain Bédard (Chairman of the Board, President and CEO)
Yeah. Our service on the next day is comparable to our peers. We know that where we are not up to par is when it's a two-day or three-day or four-day service. Four days, now we're getting closer to our peers because now we move more away from the rail, and with our own trucks now under two to three days, this is where the guys are working on. Our service is not where it should be. I'm not saying that our service has improved. On the next-day we are comparable to our peers. Until such time that our service is comparable to our peers, our rate cannot be as good as our peers. You have to provide the service first, and then your sales team could say, hey, you know what?
This is the market and this is what we would like to have in terms of rate. We're not there yet, Tom, but the guys are working on it. We've made some major improvements over the last, I would say, year and a half and even more lately. Our missed pickup, which was a cancer for us, a cancer because like nobody cared, we were all the way up to 4% three years ago. Now we're offering around 1%. Still too much because in Canada, we don't have missed pickup. I mean, we're zero, right? One is better than three or four, but one is not good enough. We have to keep improving this service metric, right?
David Saperstein (CFO)
Yeah, for sure. It's something that we're very focused on because as we talked about before, missed pickup is the worst because it's bad service and you lose the revenue. Our missed pickups are down. The missed pickups, pure missed pickups are down over 50%, maybe 53%, something like that, year-over-year in the quarter. When you add missed pickups plus reschedules, because sometimes, you know, I didn't miss it, but I rescheduled it. You missed it. You add those together, we're down like 42%, 43% year over year. A major, major improvement.
Tom Wadewitz (Senior Equity Research Analyst)
Okay. Yeah, great. It's good to see the improvement. Thank you.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you, Tom.
Operator (participant)
Your next question comes from the line of Brian Ossenbeck from JPMorgan. Your line is now open.
Brian Ossenbeck (Managing Director)
Hey guys, thanks for taking the question. Maybe just to follow up on that last train of thought, when does that start to translate? The better service, the consistency, how long does it take for those conversations to result in better yields, bringing it back to the market? Is this something you can see towards the end of this year? Is it really going to take a little bit longer?
Considering it has been such a big change in a short amount of time, are shippers going to want to?
See that for a longer period.
Time before they start paying you in a commensurate rate.
Alain Bédard (Chairman of the Board, President and CEO)
I think you're right, Brian. I mean, one quarter does not make a year. For sure, the shippers, they're smart. For sure, they look at us and they say, "Okay, guys are doing better, but let's wait and see if this is not just a blip of improvement." Then those guys fall back in the same kind of rut. You're right, Brian. It's going to take more time. Now, is it another two or three quarters? I think also when the market starts to firm up, that's going to help us down the road. If things stay the same, I would say that to bring the confidence to our customer that TForce Freight Service is up to par to the peers, it's going to take a few quarters to build that confidence, but we'll continue to improve.
Brian Ossenbeck (Managing Director)
Okay. At Daseke and the flatbed side of things, maybe you can just
go through more detail in terms of, I think at one point you needed
to get rid of some equipment, you had too much trailing equipment, maybe some other operational changes to get these
to be with the business truckloaders instead
of what they were before, some updates on the asset side and then just the processes in terms
of where you are now and what that could look like when the volumes do get better.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, yeah. Very good question on Daseke. I mean, you know, I think, as I said on the call of Q1, by the summer, all of Daseke will be running our own financial system. The same with fleet management. Now we have visibility about what's going on in terms of the asset base. If you look at my trailer count, Daseke, or specialized truckload, I'm down. If you look at my truck count, I'm down, but not enough. I got way too many trucks sitting idling because my miles are down about 10% year over year because my industrial customers are not that busy. You'll see us improving. If you look at my OR of Q1 of my specialty truckload versus Q2, I wouldn't say that the market is better. I wouldn't say that we have more activity. We just did a better job on the cost side of it.
Revenue per truck, we're doing okay, but the rates have improved, but it's the velocity that's not there. Overall, after buying Daseke about a year ago, I'm very proud of what these guys have accomplished so far, but we have a long way to go because I think I've said it on the last call, it's not normal to run a Specialty Truckload with a 90% Operating Ratio. It's not normal. We got to bring those guys back down to an 85%, probably hopefully early 2026. We'll be running at an 87%-88% Operating Ratio and then continue the improvement in a normal environment. If market starts to help us, for sure we'll be way faster going towards an 85% Operating Ratio or an 82% over time. The market is very difficult.
If you look at it, there's not that many peers that came out okay so far in Q2, but you could see that when you have one of my peers losing money in truckload, this is, that tells you, and these guys are good, that tells you how difficult it is in today's market. I'm really proud of the guys improving, what, 200 basis points quarter over quarter on the OR. The guys are working really, really hard now in terms of capital. I would say that to run the business today, we have to shed about $20 million of capital in excess equipment, trailers and truck. This is what we're doing now. For sure, the pre-owned market on equipment is not that great. If you look at it, we're not losing money by selling the equipment right now.
We're making a little bit of money, but this is where the guys were slow. I said, guys, we gotta, you know, be a little bit more active.
Brian Ossenbeck (Managing Director)
Okay.
Thanks very much. Appreciate it.
Alain Bédard (Chairman of the Board, President and CEO)
Okay, Brian.
Operator (participant)
Our next question comes from the line of Daniel Imbro from Stephens. Your line is now open.
Daniel Imbro (Managing Director)
Hey, good evening, guys. Thanks for taking our questions.
Alain,
I want to follow up on the U.S. LTL pricing discussion. I think it makes a ton of sense. You're improving the missed pickups and service, and that'll take time to show up in price. I think the magnitude of the decline down almost 7% year-over-year. Can you just walk through or unpack what the headwinds to yield were this year? Considering service is better, I would have thought maybe we saw a little bit of improvement. Was there mix? Is it just competitive pricing? Kind of what's happening with core yields there?
Alain Bédard (Chairman of the Board, President and CEO)
You know what? I would say that number one is that the market is soft. I mean, what I've seen so far is that some of my best peers, volumes are down 5%-6%.
Okay.
Not the one that came out last week, but, you know, there's price pressure a little bit. Okay, not disastrous, but there is some. For sure, the mix is the minute that we start gaining more on the SMB, where the profitability is better, we should come up with better revenue per shipping, et cetera, et cetera. It's a transition to move away from the corporate account and the 3PL as much as we can and to get to a goal where maybe 40% of your shipment are with the SMB.
David Saperstein (CFO)
Yeah. Also, Daniel, our weight per shipment went up by almost as much as the yield went down. Right. The weight per shipment was up over 5%. You know, carrying heavier freight yields down a little bit. It's the way in this soft market that we're working to kind of preserve that revenue per shipment. We've been able to do that while reducing the length of call a little bit, which takes a little bit of the cost off. The main driver of the yield decline is the growing weight per shipment.
Daniel Imbro (Managing Director)
Great. Helpful color. Maybe one not on the U.S. LTL. On the P&D side, I guess how much benefit, if at all, in the quarter was there from the partial Canadian postal strike or the other competitor strikes? Any surcharges we saw up there, how much? Should we extrapolate the 2Q results into the back half? Thanks.
Alain Bédard (Chairman of the Board, President and CEO)
There was nothing there. I mean, this potential strike didn't help us at all. Very minimal. Okay. It seems like there's not going to be another strike. Very, very minimal. What's killing us, on the P&D side, although our results are fantastic compared to our peers, is on the Canadian side, Carney, the Prime Minister, decided to go away from that carbon tax there. Fuel price went down, and U.S. fuel has always been a headwind, a tailwind for us because of our density. This is the effect of that carbon tax. Nothing specific to the potential strike. There was nothing there for us there.
Daniel Imbro (Managing Director)
Great. Thanks for all the color and best of luck.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you.
Operator (participant)
Your next question comes from the line of Kevin Chiang from CIBC. Your line is now open.
Kevin Chiang (Managing Director and Senior Equity Analyst)
Hi, good afternoon or good evening and thanks for taking my question. When I look at your OpEx within your U.S. Less-Than-Truckload for the past couple of quarters, you're down $56 million-$57 million year-over-year, both in Q1 and Q2. Just wondering, is that a trend where you could continue for the rest of the year? If I look at OpEx, can that be down another $50 million in Q3 again, or are you starting to lap tougher comps? It does feel like you got some excess OpEx in 2024 in the back half of last year.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, for sure.
David Saperstein (CFO)
Yeah.
I don't know. We'd have to look at some of the details to get back to you on those numbers, Kevin, separately. Yeah, I mean, we've been taking out costs. You can see that the truck count is also down in the U.S. LTL. We're trying to adjust the cost to the demand while at the same time we're investing. Part of the reason that we're missing less pickups is that we're staffing a little bit more. We're working the overtime as well. We're making sure that those guys are there. There's the two pieces of it. It's not just about cutting, it's also about making some strategic investments. Certainly, picking up the freight is a very high return on investment.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah.
Kevin Chiang (Managing Director and Senior Equity Analyst)
Right, that makes sense. Maybe just a clarification. David, I think you mentioned the Q3 guide of $110 million to $125 million just assumes normal seasonality. I guess if I ask it this way, would that assume then any incremental success you have on your self help levers outside of what you've realized in the first half of this year, that would be additive to that guidance.
David Saperstein (CFO)
Correct, correct. That normal seasonality would be, we continue to operate the same way that we're operating now. We maintain that.
Right,
Kevin Chiang (Managing Director and Senior Equity Analyst)
okay.
David Saperstein (CFO)
We just kind of have the seasonality applied to it.
Kevin Chiang (Managing Director and Senior Equity Analyst)
Perfect. Thank you for the clarification. Thank you very much.
Operator (participant)
Your next question comes from the line of Ari Rosa from Citigroup. Your line is now open.
Ari Rosa (VP and Equity Research Analyst)
Hey, good afternoon, Alain and David. Congratulations on the nice turnaround here. I was hoping you could talk about the sustainability of the free cash flow. Alain, you opened your comments just talking about free cash flow. I think that's such an important part of the story. Just talk about can you sustain these levels and where does it go to if we see a little bit of improvement in the macro. Thanks.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, you know, that's a very good question. I've always said the proof is in the pudding. You got to look back, okay, five years. Don't forget the last two or three years. It's been very difficult in terms of the macro. Right. We still generate a lot of cash. You know, TFI is a cash cow. This is, and I've said it many, many times, this is the golden goose of TFI is the cash. Because cash permits us. Excess free cash permits us to reduce debt or give more to the shareholders or do M&A. If you look back 30 years of TFI, that's how we've been able to grow. I remember when we turned the company into an income trust in Canada in 2002. People said, you give all your cash away, you're not going to be in a position to grow the company.
We've grown the company from 2002 to 2008. When we reverted back into our corporation at the same time that we had the financial crisis, bad timing there. I mean this has always been the focus. As an example, we just give the example of Daseke where these guys were good truckers, but we're changing those guys into good business truckers. You'll see us brokering more freight to the market and driving less mile with our own asset to have the proper balance that we have in Canada. If you look at the revenue in Canada of our specialty, if you would look at the revenue in Canada of our Specialty Truckload, the balance between the revenue from our asset and the revenue from our brokerage is not the same as the U.S. because in the U.S.
the Daseke guys, their thinking was, we got to run it ourselves with our own asset. Yes, we do a little bit of brokerage here and there. We're changing that in the U.S. Asset from the other guys, not your asset, improve your free cash flow.
Right.
It's the same revenue. Okay, maybe not the same margin, but you're not stuck with the CapEx or the accident, right.
Ari Rosa (VP and Equity Research Analyst)
I'm sorry, Alain. In terms of the sustainability of this level, what's your thought on that? It sounds like there's opportunity for it to step up from here or what is it?
Alain Bédard (Chairman of the Board, President and CEO)
Oh yeah, for sure.
Ari Rosa (VP and Equity Research Analyst)
You can be a little more explicit on that. Thanks.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, yeah. Because if you look at what we do in Canada, I mean, my PNC and my Canadian LTL are really very running light in terms of assets. This is what we're trying to do with Daseke and our specialty truckload in the U.S., the same kind. It's harder to do for us in the U.S. LTL because it's a unionized labor force, a little bit more difficult. This is why to me, okay, by switching revenue from asset to non-asset, going to help our free cash flow down the road. To me, in a normal environment, can TFI with the business we have today, can we do close to $1 billion U.S. in free cash flow if the market is helping us? Absolutely. Yeah.
David Saperstein (CFO)
Because when you think about what's the first contributing element to the free cash flow, it's the net income. Okay, so as the business, as the environment recovers, everything recovers. Net income goes up.
Perfect.
Okay, then what? When we start making a lot of money, we're not going to go out and celebrate and buy trucks. That's not us. We're not going to buy trucks with excess free cash flow. We're going to buy the trucks that we need while continuing to migrate towards this more asset-light
model in the recently acquired businesses that Mr. Bédard went through. The incremental earnings drop straight to the bottom line of the free cash flow. The only thing that you have to kind of look at to offset that would be working capital needs, which might increase as revenue goes up, but that's it. You should expect the free cash to go up along with earnings and you will not see any sort of large step up of adding capacity through assets.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, we have a few one-timers on the real estate side. We have a few one-timers on the real estate side that, you know, because we're also adjusting our real estate portfolio to the reality of the world today. This is also something that is going to help us in 2025, 2026, 2027 down the road.
Ari Rosa (VP and Equity Research Analyst)
Yep, got it. That's wonderful color. I just wanted to stay on the point about the service in the LTL business. I was hoping you could go into a little bit more detail on what are the actual steps that you're taking there to improve the service and get it to look a bit more like peers. Some of your peers have been pretty open about the steps that they take to step up service, whether that's putting airbags around the freight or dimensioners and that sort of thing. Just talk about a little bit more detail, a little more color around how you're actually. What's the progression to get that service improvement?
David Saperstein (CFO)
Yeah. Here are the things that we're looking at. The first is billing accuracy. Okay. As it relates to that, we've talked about the software and we've talked about some of the success that we've had there. The second is cargo claims. There, yes, we're using straps, we're experimenting with cardboard. We are looking at various consumables to be able to improve the cargo claims. The third is missed pickups, which we're addressing through, first of all, better systems. We're using more advanced Optum P&D, but we're also really making sure that we're staffed appropriately and making sure that the culture at the terminal level, at the dispatcher level, is that missed pickups are not acceptable. Of course, the last is on-time delivery. As it relates to that, there's a culture element to that and then there's also a linehaul element to that.
Ari Rosa (VP and Equity Research Analyst)
Got it. Okay, wonderful. Thanks for the time.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you.
Operator (participant)
Your next question comes from the line of Ken Hoexter from Bank of America. Your line is now open.
Ken Hoexter (Managing Director)
Hey, good afternoon, Alain and David. David, good to hear you on the call again. I just want to come back to the second-quarter outlook. Right. It's a big pullback and I know you said it's a normal seasonal drop.
If we go back
two years ago we didn't have that drop. Maybe David, if you can just kind of walk us through what drops off. Right, because Alain already mentioned LTL margins at U.S. should stay basically flat into 3Q, 4Q. Is it truckload, is it logistics, what falls off? Is it just freight in the third quarter?
David Saperstein (CFO)
Yeah, listen, I think so. You know, we said, you know, 94, maybe 95. If we end up in the 95, that would be a point on the LTL. I think the truckload last year compressed a bit as well. The Logistics could also compress a bit with the lack of truck deliveries in our truck delivery business as just the industry pulls back on CapEx. I think there's a question mark that we have that we don't have the answer to and we won't until the quarter's over, which is how much of the freight dynamics that we're seeing right now are related to this stop-start-stop-again, dynamic related to the tariffs. We saw that imports into the west coast of the US were way up in June. We're benefiting from those freight flows now. What's going to happen when those are done?
At the same time, you've got peak season coming. We are just conscious of the fact that it's difficult to extrapolate what you're seeing right now out to the future because of the start-and-stop nature of the imports that have been coming into the country as a result of the tariff stuff, which it looks like maybe the worst of that volatility is behind us.
Ken Hoexter (Managing Director)
David, can you just remind us what percentage is related to West Coast imports?
David Saperstein (CFO)
Oh boy. It's probably so on our LTL, around half of it is retail. I couldn't tell you how much of those are related to West Coast imports, but I think a lot of that retail stuff is coming from China.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, because don't forget we used to be part of UPS and UPS is a retail machine. It's a transition more and more into industrial freight. This is maybe one thing that we forgot to say, David, is that now more and more we are introducing our LTL salespeople to our industrial-based customer that we have at Daseke, right. Because again, UPS was a retail machine, UPS rate was the same. We said, no, no, no, no guys, let's move more into the industrial environment, okay? Through the Daseke sales team, we're opening doors to our LTL team to see, "Hey, can we do something with you guys, right?" Like a Caterpillar, like a John Deere. All these major industrial customers that we service on the industrial side, what we don't on the LTL side.
Ken Hoexter (Managing Director)
Wonderful. My follow-up, I guess, Alain, if you think about shipments down 10%, tons down 6%, you talked about the competitor that's already reported. What's your big picture on the capacity or the cycle here? I don't know if you want to throw in English Language Proficiency impact on the trucking side, just the cycle. On the tonnage side being down much, do you think you're losing share? Have you stabilized? Maybe thoughts on the backdrop?
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, I think that the English thing there is just maybe for the Truckload guys in the LTL world. I mean, when I talk to our truckload guys, they believe that, yeah, there could be some effect to that. To say that we've seen something so far, I would not say that. In terms of our volume, we've been going down for the last two or three years in terms of volume. Now, a little bit like David was saying about the GFP, where finally we have seen some stability. I think that the next few quarters we're going to start having some stability and maybe coming back into some kind of a growth mode. Nothing big. This is also related to improving the service. This is where the guy now understands that it is the chicken and the egg, right? What comes first?
We know what comes first is the quality of service. If you don't have that, and you're competing with good peers that provide a good service, good luck. It's going to be tough. This is why the team is really focused on, like what David was saying about improving all the different factors. You got to be stupid to miss 3% of your shipment missed pickup because that's 3% of shipping that you're not going to have because you just miss it because you're stupid. Now we're down to one. We should be down to zero. These are all things that the guys are focused on and it's like a religion. Like I was saying earlier to a different analyst, it's not one quarter that's going to convince the industry, the shippers that, oh, maybe it's a blip, maybe it's like, oh, it's the flavor of the month now, right?
No, no, no, no. We have to prove that this is going to be consistent, sustainable. This is why, you know, when we go back and talk about U.S. LTL Q3 at 94%-95% Operating Ratio is because we want to be cautious, we want to be prudent. I hope that we do better than that. This is the minimum goal for us.
Ken Hoexter (Managing Director)
Appreciate your thoughts and insight as always. Thanks, Alain. Thanks, David.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you, Ken.
Operator (participant)
Your next question comes from the line of Bascome Majors from Susquehanna. Your line is now open.
Bascome Majors (Equity Research Analyst)
Thanks for taking my questions. David, we go back to the cash flow discussion from earlier. You talked about, I think Mr. Bédard talked about getting, you know, close to $1 billion in free cash flow in a more normalized environment. Do you have a sense of where you might shake out this year? Just to clarify on the quarterly outlook, I know you're optimistic that U.S. Industrial can improve later in the year. If we're kind of bouncing along where we are and that doesn't happen before next year, can you just help us frame your view of seasonality in the fourth quarter as well? Thank you.
David Saperstein (CFO)
Yeah. I think that free cash will be probably in the $700 million range for the year. As it relates to the industrial piece, I do think that it takes time. Stimulus takes time to course through the economy and this big tax break for CapEx is going to take some time. I think that's really a 2026 event when we start to see those projects really, you know, in motion. Exactly. Takes shape. As it relates to seasonality in the fourth quarter, the best way to look at that would be if you're asking about the truckload to look at what we did between Q3 and Q4 last year because we had Daseke in Q3 and in Q4 last year. The whole kind of picture is apples-to-apples and you get a sense for the sequential movements that we would expect to see.
I think that on the LTL side, it was a bit of an aberration in the U.S. what happened to us in Q4. That is not normal seasonality. That was related to us losing a lot of SMB. That will not apply, that trend between Q3 and Q4 in terms of the margin compression that we saw last year, that will not be repeated. It is a more difficult quarter. It's normal to have some pullback in Q4 relative to Q3, but certainly not like what we saw last year.
Bascome Majors (Equity Research Analyst)
Thank you.
Operator (participant)
Your next question comes from the line of Benoit Poirier from Desjardins Capital Markets. Your line is now open.
Benoit Poirier (Managing Director)
Yeah. Good morning, Alain. Good morning, David. Just looking at the financial leverage, you've been a disciplined capital allocator. You ended the quarter with a leverage of 2.35x. Mention a clear desire to pursue buyback given where the stock is. Just wondering what could be the targeted leverage by year end, given the comments about free cash flow generation and where would you like to be before sizing a more transformative deal?
Alain Bédard (Chairman of the Board, President and CEO)
I think our plan, correct me if I'm wrong, David, is that based on our plan, we're going to end up the year around 2.0x-2.1x leverage, right? Let's say 2.1. We're at 2.35x now, 2.1x. This is the way we see it. Now in terms of a deal of size, the approach that we have is that we could live all the way up to 3.0x, because we generate so much cash, but we're not going to go above 3.0x, that's for sure. Up to 3.0, and then very fast that year is we want to bring that leverage down to more like under the 2.5x, 2.2x, 2.25x, 2.35x in that lead.
Benoit Poirier (Managing Director)
Okay, that's very good color. Alain, you mentioned great color about the industrial, your exposure to industrial. The comments, positive comments about the potential recovery in 2026. Obviously logistics is also depressed this year, but there's a pickup expected in 2026. I'm just trying to figure out what could be the normalized earning in 2026. With those positive comments, how much upside could we see next year in terms of earning powers? Whether we could see a $6 of EPS and maybe 90% Operating Ratio for U.S. LTL, whether it's doable.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, it's still. Benoit, it's still too early for us to talk about 2026 because we are having a tough time just to talk about Q3. Going back to logistics, I mean, logistics, okay, our GHT division is going through some tough times right now because nobody's buying trucks, right. The OEMs are down 15%, 20%, 30%. That will correct itself probably in 2026 according to the forecast we have from the OEM. That being said, our U.S. logistics had a, you know, not so good first six months of the year. We were running at about 95% of plan now. We believe that the last six months of 2025 will going to be closer to a 98%, 99% of plan. That should help us because in a normal environment, if everything runs normal, the OE of our Logistics before tax should be between $200 million- $220 million.
With the business we have today, and I think we're going to end up the year probably like $160 million or something like that. GHT is a big, big thing there. According to GHT and the truck OEM, because of this new engine thing there in 2027, those guys will be pumping a lot of trucks in 2026. With this CapEx thing there, with the new plan of Mr. Trump, probably, GHT will be back to being very busy in 2026. That's going to help us.
Operator (participant)
Thank you very much for the time.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you.
Operator (participant)
By the way, your next question comes from the line of Konark Gupta from Scotiabank.
Konark Gupta (Director of Equity Research)
Your line is now open. Thanks. Good morning, Alain and David. Sorry, good afternoon. In fact, just wanted to get back to the SMB mix here. Can you help us understand what made these SMB accounts, whichever you got back, what made them come back? What was the reason in the first place they left here?
Alain Bédard (Chairman of the Board, President and CEO)
Because we're focused on them now. We care about them. As an example, David was talking about missed pickup. We really focus on missed pickup for those guys even more than the general freight that we service. We care about those guys because these are the best margin account instead of just not caring. Now it's a real focus of ours. They didn't come back because of rates, because we cut rates and this and that. No, they came back because we made them a proposal which is fair, reasonable, and we told them, "Listen, we'll provide you with good service." This is why, going back to an earlier comment, my next-day service is comparable to our peers. Where we are not comparable to our peers is the second day, the third day, and the fourth day. The fourth day we're getting closer to our peers.
The third and the second and the third day, this is where we need to make major improvement to correct our service to be closer to our peers. Small and medium-sized account is mostly next day. Now my service is up to par to our peers on the next day.
Konark Gupta (Director of Equity Research)
Makes sense. Makes sense. It's a service-based winning back, not the price-based.
Alain Bédard (Chairman of the Board, President and CEO)
No, no, no. Not the price, no.
Konark Gupta (Director of Equity Research)
Glad to hear. Just my follow up would be on the capacity side. I think you laid out some capacity numbers for the truckload business for Daseke, etc. What about U.S. LTL and Canadian LTL? How many doors, how many trucks or trailers? You're maybe way too much in the U.S. and Canada on the LTL side. Do you need to rationalize some or do you still need to add more for the future?
Alain Bédard (Chairman of the Board, President and CEO)
No, the Canadian side, we're done. Because, you know, we've just acquired Kindersley about a year, year and a half ago. We're done with Kindersley. We've acquired also Hercules in Canada and in the U.S. Hercules, we're done in Canada, we're not done in the U.S. yet. The guys are working on the U.S. side right now. The rest of our business in Canada is okay. We have no issues in terms of U.S. LTL real estate. We still have about 3,000 doors too many, 3,000 to 4,000 doors too many. You should see us during the next six months do some trade, some swaps with some of our peers that we do all the time. That should help us reduce the carrying cost of those real estate that we have no use for. On the truck side, we've talked about Truckload.
On the LTL side, what we're selling is the old UPS Freight trucks with very little value. There's not much capital to regain from the seller. We still have way too many trailers over there and too many trucks, but not a lot of capital tied up there.
Konark Gupta (Director of Equity Research)
Okay, that's very helpful, thank you.
Operator (participant)
Your next question comes from the line of Elliot Alper from TD Cowen. Your line is now open.
Elliot Alper (VP of Equity Research)
Hey, great. Yeah, this is Elliot for Jason Seidl.
Maybe just follow up to the last question on TForce. Are you seeing some of these SMB
customers feeling more of the tariff pressure?
A number of carriers are also going after the SMBs. Is the pricing accretive to maybe the total book? Is it seeing incremental challenges given some
of these players are looking to grow share?
Alain Bédard (Chairman of the Board, President and CEO)
I think on the tariff side, I don't see anything, any issues with the small and medium sized account with the tariff.
Hey, David.
David Saperstein (CFO)
No, we haven't seen that.
Alain Bédard (Chairman of the Board, President and CEO)
No.
David Saperstein (CFO)
In terms of your other question about pricing and other people going after SMB, it's a market, right? It's a market. We all know LTL has good characteristics, good market structure, which makes it a very attractive segment within transportation. It's a market that operates within those parameters.
Alain Bédard (Chairman of the Board, President and CEO)
One shipment could be good for me and one of my peers, not as good for him, depending on where the customer is, where my terminal is. What is good for me is not necessarily as good or what is good for my peers is not necessarily good for me. Just to say that everybody is going after this kind of business, sometimes it fits better me than the other guys or maybe the other guys versus me. It's just to play it smart.
Elliot Alper (VP of Equity Research)
Just bigger picture.
I mean, any indication of how peak season may shape up when speaking with some of your customers? Maybe any pockets of strength or weakness.
Alain Bédard (Chairman of the Board, President and CEO)
It's like more of the same guys.
Elliot Alper (VP of Equity Research)
Thank you.
Alain Bédard (Chairman of the Board, President and CEO)
You're welcome.
Operator (participant)
Your next question comes from the line of Cameron Doerksen from National Bank. Your line is now open.
Cameron Doerksen (Managing Director and Senior Equity Analyst)
Yeah, thanks. Good afternoon. Maybe just a couple of quick, I guess, maybe modeling questions for David. You mentioned, I guess, some of the tax rate changes or cash tax changes from the new U.S. legislation. What's your expectation for, I guess, effective tax rate going forward with that?
David Saperstein (CFO)
Tax rate won't change.
It's just a cash tax benefit. It's a cash tax benefit that we estimate based on our CapEx over five years is worth $75 million cumulatively relative to what our tax would have been without this law. And that $75 million, $40 million is realized in the first two years.
Cameron Doerksen (Managing Director and Senior Equity Analyst)
Okay, that's helpful. Maybe just on the new debt issuance in the quarter, looks like pretty attractive terms. Are you able to update what the kind of average interest rate is now for TFI across the entire company?
David Saperstein (CFO)
I think we put it in the MD. I can tell you that the weighted average interest rate on this particular issuance was 4.8% fixed, and we reimbursed debt that was costing 6.1%.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah, I think globally, David, we're under 5%.
Operator (participant)
Yeah.
David Saperstein (CFO)
Yeah, globally for sure we're under 5%. We can follow up on the exact calculation. This was a great private placement for us. We managed to access the markets at a great window. We reduced our interest expense as we discussed. We increased the availability on our revolver. We actually pushed the maturity out by a year as well in a separate transaction on the revolver. We also better aligned our customers' currency mix with our cash flow, the currency of our debt with the currency mix of our cash flow. We're very happy with the transaction.
Cameron Doerksen (Managing Director and Senior Equity Analyst)
Great, that makes a lot of sense. Thanks very much.
David Saperstein (CFO)
Thank you,
Cameron.
Operator (participant)
Your last question comes from the line of Bruce Chan from Stifel. Your line is now open.
Bruce Chan (Director of Transportation)
Hey, good evening, guys. Thanks for squeezing me in here at the end. Alain, just wanted to ask maybe a bigger picture strategic question. You talked in the past about maybe finding some density in LTL via M&A. I know it's still early, but with some of the improvements that you've seen this quarter, is that still on the table or do you think that you'll be going it organic from this point forward?
Alain Bédard (Chairman of the Board, President and CEO)
You know what, we need to prove to the investor that, you know, we are in control at US LTL. We had a lot of, not a lot, but we have a few shareholders that were very disappointed. They made a lot of money with TFI, but they were disappointed that they thought that, you know, we've lost control of TForce Freight. Now we're starting to show that no, no, no, we're back in control. For sure, to do a deal of size in the LTL right now would not be smart because, you know, our investors, we have to convince them that we are in control. Let's say that we come out Q3 and then Q4 and let's say Q1 of 2026, and now we have one year of showing, hey guys, it's not a blip, it's not a mistake, it's not something, no, no, it's true.
These guys are going in the right direction. Then you could start looking at a transaction of size at that time. Now it would be too early. We have to prove to our investment community that we are in control. They know we are in control of all of our business, but they have a question mark on TForce Freight or U.S. LTL. This is what we have to prove. If we would do a deal of size in the truckload world, when we're running, let's say, a 90% Operating Ratio, and most of my peers are running 95% and worse than that, I would say that probably the investor would say, you know, those guys are really in control in a very difficult environment. They're buying something of size, they have a great team, they'll fix it.
Today, if we do something of size in the LTL, I think it would not be prudent. We have to show that we are in control, and that's going to take a few quarters. In 2026, we'll relook at that. For now, it's easier for us to just buy back TFI. We know the company really well. We know the free cash flow per share is, the yield is like double-digit. There's nothing we can buy today that's cheaper than that with the best potential.
Bruce Chan (Director of Transportation)
Okay, that's great. That makes a lot of sense. Just maybe a last cleanup, you know, perhaps for you, David, I don't think I heard it, but any color on LTL contract renewals?
David Saperstein (CFO)
Yeah, listen, the contract renewals continue to be in the sort of, you know, low to mid single digits. The question is the mix. Right. It's of little use if you get renewals that are up, but then the customers that pay you more give you less freight, and the ones that pay you less give you more freight. Right. That's really what we're looking at. To specifically answer your question, that's where the renewals are.
Bruce Chan (Director of Transportation)
Good. Okay. Perfect.
Alain Bédard (Chairman of the Board, President and CEO)
Yeah.
Operator (participant)
Thank you.
Alain Bédard (Chairman of the Board, President and CEO)
Thank you.
Operator (participant)
There are no further questions at this time. I will now turn the call over to Alain Bédard. Please continue.
Alain Bédard (Chairman of the Board, President and CEO)
All right, thanks very much, operator, and thank you, everyone, for being on the call with us today. We very much appreciate your interest in TFI International, and I look forward to updating you on how we perform through the balance of the year. As always, if you have any further questions, please don't hesitate to reach out. Enjoy the summer and thank you again.
Operator (participant)
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.