Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Second Quarter 2024 Results Conference Call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. [Operator Instructions] Please be advised that the conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties and that could cause actual results to differ materially. Also, I’d like to remind everyone that this conference call is being recorded on Friday, July 26, 2024. I’ll now turn the conference call over to Alain Bedard, Chairman, President and Chief Executive Officer of TFI International. Please go ahead sir. Alain Bédard: Well thank you operator, and welcome everyone to our call today. Our results released yesterday after the close, we are again very solid with a year-over-year increase in both revenue and operating income. In all of our segments, our performance is still very lackluster freight environment. Our results reflect the hard work every day of our skilled and dedicated team members, as well as strong management and are many other self-help initiatives that will continue to benefit us going forward. But our overreaching focus as a company is on the long held operating principle that got us here. We are focused on the details, including quality of service that drives volumes. We are focused on freight quality, maximizing weight and revenue per shipment and always striving for cost management through greater efficiencies. I believe that especially during weaker freight cycles, it is this adherence to the fundamentals that helps us perform. All the while, we maintain a solid financial position that allows us to seek highly strategic M&A opportunities to intelligently invest in the business and to return excess capital to shareholders whenever…

Thank you Mr. Bédard. [Operator Instructions] And your first question will be from Ravi Shanker at Morgan Stanley. Please go ahead.

Thank you. Good morning. Alain. We've heard from some of your US, trucking peers that they're seeing better seasonality in 2Q, some signs of project business and some tightening in the market, we see that in the data as well. Would you underwrite that view? And are you getting any more optimistic by the cycle in the back-half? Or do you think it's still too early? Alain Bédard: It's too early, Ravi. I mean what we're seeing us is that it is still more of the same. It's still a very, very difficult market right now. If we look at the US, our specialty truckload, I mean we still have pressure on rates per mile, although the guys are doing a good job of having the trucks on the road and moving freight around. But I’d say, that '24 is going to be a difficult year. This is why we have not changed our guidance. We still think that the guidance that we provided in Q1 is attainable for the year. But when I look at the global, North American market, the US and Canada, I think that Q3 and Q4 will still going to be difficult quarters. '25 may be a different story, hopefully. But what we're seeing right now is our focus is to do more or less is to be more efficient. If you look at what we've done so far with Daseke on the Truckload side, I mean, we're attacking costs like there's no tomorrow. And that's how we're able to bring an 88 OR combined with our, with our own operating Truckload business that was last year an 85, something 85.7 I think. So now, Ravi I think let's be conservative, okay? I hope I am wrong, right? I hope that things will get better but I don't have this sense right now.

Understood. And maybe as a follow-up on the LTL side. How are you seeing the environment right now? Obviously, there is some idiosyncratic kind of factors there on the capacity side as well. Do you think the market is tightening enough to support pricing to the cycle? Or are you concerned about too much capacity there, maybe kind of losing the streams a little bit? Alain Bédard: No, I think that we will win the war us on LTL being more efficient is by reducing our cost. Our costs are way too high, our admin costs are way too high. Our fleet cost is too high. And for us, our focus at TForce Freight is really, really to be more lean and mean, to be more efficient. For sure, we are implementing new technology within this company in terms of linehaul, in terms of billing, master file and all that. But still if I look at my IT costs as a percent of revenue is way too high, and it is also true at Daseke. I mean if you look at our IT at Daseke twice as much as the TFI Truckload IT costs as a percent of revenue. So for us, really, Ravi, the name of the game to our US LTL to break that 90 OR once and for all, is all our costs. Hopefully, the market stays okay. I mean the market is not -- not that strong. I mean if you look at what's going on right now. I mean our shipment count I'll say is steady, but it's not growing. I mean what we are able to do is to grow the weight and grow the revenue per shipment that's why we are able to do that so far. But we still don't have our cost down in terms of reducing the miles for our P&D, improving our density. We're still not there. We still have a lot of work to do.

Understood. Thank you Alain. Alain Bédard: Thank you Ravi.

Next question will be from Ken Hoexter at Bank of America. Please go ahead.

Hi, great. Good morning Alain. Just picking on the Ravi's kind of topic on the backdrop, maybe a little bit more on the LTL side. You mentioned it's all about cost. But as you get peers opening more facilities, you had a peer this morning talk about more lightweight volumes that are kind of disrupting their network. It looked like your revenue per shipment ex fuel decelerated, it was down sequentially. Maybe talk about the rate environment on the LTL side. Alain Bédard: Yes. Very good question, Ken. And for sure, I mean, what we're seeing a lot of RFPs, we're seeing a lot of pressure, because the market, like I said earlier, is still soft. I mean -- so it's a fact. I mean, we've lost a major player a year ago in the industry, but it seems like we are back to square one in terms of volume. So this is why my comment is so important that our focus for us is to keep what we've got in terms of volume, try to improve it, try to grow it slowly. But for us the name of the game is we need -- we're too fat. I mean, we've got too much cost, okay? If you compare our US costs versus the way we do business in Canada, I mean we are like way too fat. So we have to attack the costs. Our IT costs are too high, our fleet management costs, maintenance costs is too high, et cetera, et cetera. So this is us. So this is us. I mean, we have to do the job. Now the market -- is the market going to help us? I don't think so, right? Like you could hear from some of our peers. If you look at the…

Yes. Let me ask a quick follow-up on Logistics, right, which usually, I don't know if -- would you call that, I mean solid results there. Would that be an early indication of some sort of turn? Or would you look at it and say, wow, that's just benefiting from the weak market? Or is it even last mile, not even an indication of the Logistics side? Alain Bédard: Again, Logistics results are second to none. I mean when you look at that, we are very proud of what the guys are doing over there. I mean -- and they will continue to improve. They will continue to improve and we made a fantastic acquisition a year ago, when we bought JHT. I think we have more to come in that sector, probably hopefully, and for sure, we are in business to make money. We don't like returns of 2%, 3%, 4%, 5%, 6%. So this is why if you look at our OR, for the first time we broke the 90, okay? We've never been under 90 OR in our Logistics. For the first time now, we are under 90. As a matter of fact, even under 89. So we feel good because like I said, on M&A side on the US side, we are looking at two sectors really only right now. It is either an LTL play or a Logistics play for '25. I mean, because -- I mean we've been busy in '24 with Daseke. We are also busy, okay, with small tuck-ins, mostly in Canada okay, because it is easy for us to do small tuck-ins in Canada because we have a bench strength by second to none. But in '25, we are getting ready. This is why, if you look at my leverage right now, I'm at 2.15, something like that. Our plan is to be by reimbursing debt, like I mentioned on the call, we are going to be at 175 probably by year-end, right? TFI, it's a cash flow machine, a free cash flow machine.

Yes. I was just wondering if there was just an indication of the market. I get you are doing a great job. Just if it's telling you --. Alain Bédard: I don't think it's a market, hey, Ken, I don't think it's the market. I think it's our guys that are doing a fantastic job. But we'll see, I mean, when the -- an RFPs comes up, I mean we'll have a better understanding.

Wonderful. Thanks Alain. Appreciate. Alain Bédard: Thank you Ken.

Next question will be from Walter Spracklin of RBC Capital Markets. Please go ahead.

Yeah. Thanks very much operator. Alain. Good morning. If you could touch a little bit on your trends towards your target of US LTL 88, you referenced it in your -- earlier in the call. I'm just noticing you're at about a 92 year-to-date in your US LTL 85-ish for the rest of the year to hit the 88. Is that still an achievable target? And can you talk about what will cause you to do that step down? Alain Bédard: No, no, Walter. I mean for sure for the year 88, as I see it right now, it is impossible. What we're trying to do between now and the end of the year is to break the 90, okay in Q2 and Q4, right? When we look at our plan in the fall of '23, when I listen to our guys, our team, we thought that we would grow our shipment count at the same time as reduce costs. So what we are seeing is we're not growing our shipment counts. I mean our shipment count is steady eddy, about the same, okay? And we anticipate that probably by year-end, I mean, we're still maybe going to grow the shipment count a little bit but not much. So really, the name of the game to break the 90 OR is going to be all cost for us, reduction of our cost in the Q3 and in Q4 to finally break this 90 which has been a difficult task for us to do. And going into '25 though, if market condition stays about the same as '24, I think that we'll be able to be on a yearly basis, okay under the 90 OR. But if you look at what we have done so far, after six months, like you said, we're 92. So I believe that with our cost control and implementation of better productivity, we'll be probably in the same market condition in '25, we'll be able to show after six months of '25, under 90, okay? If we keep working at attacking our cost.

Okay. That's great. And just on the follow-up to the macro just a few small questions here. Like you mentioned you don't – you are not calling for an upturn. I'm curious if you would at least -- do you see it as a bottoming. I know a few of your peers have said they believe at least it is not getting worse. And whether an upturn comes or not, may be delayed, but at least it's bottoming. And then are you seeing any positive or negative impact from shipper diversions that are avoiding the Canadian rail strike? I know CN and CP have called out some diversions away from their lanes in worrying about a strike. Is that impacting you at all, either positive or negative? Alain Bédard: You know what, Walter, when they started talking about a strike in Canada 2 months ago, yes, we saw a little bit of that but you know what, us, we run a lot of stuff on the rail, right? So it's a positive on one side. But it's also a negative on the other side because if you look at our intermodal LTL the minute these guys started to talk about strike. I mean they start moving our LTL that's today run on the rail moving on the road. So for us, it is not that good to have a strike with the rail guys. I mean hopefully, these guys could settle and get this thing behind us. Now in terms of -- have we hit the bottom? That is probably right. I mean, can we see this thing getting worse? I don't think so. But I don't see that major improvement in '24. I think it's going to be more the same, okay, for the rest of the year. And…

Okay, I appreciate the color Alain as always. Thank you. Alain Bédard: Thank you Walter.

Our next question will be from Tom Wadewitz at UBS. Please go ahead.

All right. Good morning. Alain. And why don't I ask you a little more on US LTL. What's the mandate for salespeople in US LTL right now? I mean you've talked about kind of bad mix of shipments, too much distance between pickups. You've talked about maybe like heavier weight per shipment. When I look at the numbers, it looked like you did see some sequential growth in shipments, but some decline in revenue per shipment. So I guess I was just wondering, yes is it focused on better mix? Is it, hey we'll give up a little price to get more shipments? Or what's the focus you got for the salespeople in US LTL right now? Alain Bédard: Yes, yes. So the focus is, number one is, guys, we have to move the weight per shipment up because we're paid by that way, right? So when we bought UPS rate, these guys were hauling average weight at 1,075. So now we're just a little bit above 1,200. But if you look at my peers, the average is probably 1,500. So rule number one, guys, is that we have to slowly get more into the industrial freight okay, versus the retail freight. Okay, fine. So that's -- let's say, target number one. Target number two for these guys is, you know what, guys, to pick up a shipment. Okay. Let's try to pick up more shipment per stop versus what we're doing now. So when you have a discussion with a customer, let's talk about getting more shipment from this guy when we go there and pick up freight okay? Target number three is us, we have what we call within TForce a GFP, Ground Freight Pricing. We are the only one that has a partnership with our friend, UPS…

Okay. Yes, that's very helpful. Just one quick follow-up. I think people are trying to get their arms around what's happening with the pricing dynamic and U.S. LTL, right? And I think there's the underlying assumption that there's discipline. But it just seems like you wonder because the market is a little soft. And do you think that there is some pressure developing on price in US LTL? Or do you think it's just like hey, this is normal and freight is a little bit soft, and there's still good discipline in the market. Alain Bédard: You know what, Tom that's a very, very good question, because for sure when we look at guys adding doors, adding capacity, then we say, oh, that doesn't look too good. But we can't control that, right? We can control what some of our peers are doing. So this is why when I talk to my guys, hey guys we have to be lean. We have to be on a diet, okay? We have to reduce our cost because if something happens to the quality of revenue in this market, although it is never happened last, if you look at the last 10 years, I mean this industry, the US LTL has always -- got price increases, et cetera, et cetera. But there could be some concern where a few players are adding so much capacity that maybe if the market is not growing, okay, there could be pressure on rates. So how do you win. How do you win with that kind of an environment? Well, we have to become in the US like we are in Canada, because in Canada, we have a lot of competition with some guys that don't like to make money. Okay like Purolator owned by Canada Post,…

So you are not necessarily seeing it, but you're concerned it could happen? Alain Bédard: It may happen. But at the end of the day, we don't control what's going on in the market, right? So this is my -- me what I'm saying to my guys, guys what I'm seeing, okay, when I see adding doors, adding doors, I see wow huge investment okay? And the market is not growing. So guys, hey, let's speed up the diet.

Yeah. Okay. That all make sense. Thank you for the time Alain. Alain Bédard: Thank you Tom.

And next question will be from Brian Ossenbeck at JPMorgan. Please go ahead.

Good morning Alain. Alain Bédard: Good morning Brian.

To ask another TForce rate question, but maybe more on the footprint. I think you said that you were looking at potentially M&A in the LTL for next year. I don't know if that would be for the U.S. and if you can expand on that because you still have a pretty big real estate footprint, there's still some more terminals out there from YRC that could be sold. So maybe you can elaborate a little bit more on that. Bigger picture, what you think the network could look like in a couple of years' time? And what are some of the bigger changes we should be focused on there potentially, whether it's divestitures or potentially some M&A? Alain Bédard: You know what Brian, I think that TFI in Canada, we're second to none in LTL. I mean -- and we cannot be the Number #1 guy in the U.S. I don't think it's possible. But I don't want to be the Number #6 or Number #7 or Number #8 in terms of volume. So for sure, at one point, okay, we have to take action on the US LTL market because I still believe even with what I just said to Tom about this little bit of a concern I have with this capacity maybe. But I still think that the U.S. LTL is the best place to be, okay? So this is why -- and I said to Tom this may be short term, maybe it's just maybe a year, two years. But I think long term, okay we have to be a larger player in the US LTL market. So this is why. Once we close '24, once our leverage is down to, let's say, 175 once we reduce our debt by $500 million, $600 million like…

Just follow up very quickly then in terms of the Q4 straight footprint, I thought you are still trying to maybe consolidate or rationalize some of those terminals, maybe you are through that already, but it sounds like you actually want to get bigger over time. So is that just more different markets that you would like to be in different lanes you want to fill out? How should we think about that when at least the current book sounds like you still want to shrink that first, perhaps or maybe I'm is reading that. Alain Bédard: Brian, for sure. I mean right now, we are doing a deal with one of our peers with one terminal. So we are selling one terminal to one of our peers. Why is that? Because it makes sense for us, it's good for them. Okay. We are selling one terminal in California, South California right now to a guy that's going to demolish the terminal, right? So we have about 35% overcapacity in our doors today at TForce rate. So for sure, it is way too much, right? So we are reducing, reducing, reducing and cashing. So I believe that our real estate will generate probably between $25 million to $50 million of cash between now and the end of the year. So that is going to be used to fund our small M&A that we are doing in Canada and a little bit in the US. That will also help us reduce our debt, right? So going back to your point, no, we are not adding capacity to our network. As a matter of fact, we are reducing capacity because we know that if we are successful in buying another LTL company, probably these guys also will have overcapacity. Maybe that depends on who it's going to be. So this is why wait, okay? So we're taking action now. So as a matter of fact, we bought one terminal, okay. Well, we bought two from the YRC thing there. In Sacramento, we used to have two terminals. Now we move into one. And those two terminals are for sale, and we -- one is being sold right now. And Lexington, Kentucky, we move into the YRC terminal. And one of the sales that may happen before the year-end is our old TForce rate Lexington terminal is being sold right now, right? So we are taking action to be more close to our capacity in terms of real estate because we believe that if we are able to do what we want to do add some LTL revenue into an M&A acquisition, I mean we need to be more leaner in terms of our capacity.

Okay, Alain. Thanks for the clarification. I appreciate it.

Next question will be from Jason Seidl at TD Cowen. Please go ahead.

Thank you operator. Good morning Alain. Alain Bédard: Good morning Jason.

Two quick things here. One, I wanted to focus a little bit on the Daseke side. I think heading into your earnings print, we were a little concerned, given what we saw sort of some weaker pricing in the flatbed market. So maybe if you can sort of dive into that. Was that maybe offset by some strength in your specialty business? Alain Bédard: You know what, Jason, for sure. I mean if you compare year-over-year our revenue per mile, okay, in our specialty operation in the US specialty truckload operation we are down. I mean we are down. There's no question about that. We're having price pressure in there. But at the same time, okay, our revenue per truck is up because we do a better job of reducing empty miles and et cetera, et cetera. So I'm really happy with this Daseke acquisition in terms of the operating units. And these guys -- Daseke was a roll-up, right? And first thing that we are trying to do is to break all these walls between those operating units within Daseke. So as we speak, there is a weekly call between all of our flatbed operation in North America between US and Canada. So everybody is on the same call, talking about the market, the environment, the opportunities, et cetera, et cetera. So this is why I feel really, really good that even in a soft market because the market today is softer, we have more pressure on price, on rates per mile today than a year ago, okay? Hopefully, this starts to change, hopefully next year. I don't see that changing this year. But now we do a better job. We’re more efficient, and we'll continue doing that.

So it sounds like that $0.50 accretion number is still pretty good to use? Alain Bédard: Jason we are conservative. I think that we will do better than that, but let's be conservative, right? So as an example, like I was saying earlier, just the IT costs. I mean, we fell off a chair when we look at the IT cost, the consultant, I mean, all these guys taking advantage of the company. I mean we're reducing that. Darren Levine, which runs our IT for our specialty truckload within TFI now is involved with the Daseke Group. I mean, these guys, like I said, I think, earlier, they used to run Oracle Finance, very expensive Oracle. They pay a way more money than us at TFI. So Oracle will probably be disappear within Daseke, and we are going to move all this to Infineon, use saving. And then down the road, once everybody is on Infineon, maybe we'll go back to Oracle in two to three years, but it's going to be more of a TFI Oracle, not a Daseke Oracle that cost of fortune. We have to pay Deloitte to support us, which is nonsense. So we have a lot of work to do on the admin side. At the same time, okay, we have a lot to do within the business unit to be more efficient in talking to one with the other, right, eliminating those walls between the business units.

That sounds good. And if I could just follow up on something Walter was asking about on the potential Canadian rail strike. I mean do you guys already have alternative set up to sort of supplement a line haul because I can't remember the last time, both Canadian rails went on strike, and this would obviously impact your Canadian LTL linehaul, a big deal. Alain Bédard: Yes. Yes. For sure, we have a plan Jason. Hopefully this will not happen. And I think that the federal government will get in fast because this is going to be terrible for the Canadian economy. So, for sure we have plans. For sure we know what to do. And so far between you and me adjacent fires is more of an issue for us. Flood and fire, okay, is more of an issue than rail, rail strike. I mean, the fires is becoming a big problem, okay? And flood too.

Yes. When I saw news up in Jasper, that was pretty bad. Well and time is always and have your guys stay safe out there for sure. Alain Bédard: Thank you Jason.

Thank you. Next question will be from Konark Gupta at Scotia Capital. Please go ahead.

Good morning Konark. I wanted to ask you on Daseke. Thanks for sharing some of the details here, and good to see a pretty good quarter from the Truckload business despite all the pressure you're seeing in the market. Obviously, Daseke seems like it's progressing well. Can you help us understand like what was the exit June OR run rate at Daseke? And how do you see the bridge to sub-90 OR there? Like what are some of pit-stops, and what are some of the key drivers besides IT, et cetera, to get to some idea. Alain Bédard: Yes. So I would say that if you look at Daseke's Q2 number, okay. So most of our guys are running close to 90 OR. So we have one business unit, one business unit right now that loses money. But by the end of August, they will stop losing money because we're going to shut them down, right, and move whatever good business remains into other business units within the TFI world in the US. And then I've got another one that is running a very high OR of 98. So after we have got rid of that one that loses money is going to be the next one. And then I've got another one that's running at 95 OR. So this is why on average, okay, we are closer to a 92, 91, 92, 93 OR globally, okay? But we are going to weed out the losers. And we're going to improve the ones that can be improved. But then again, like I said earlier, we need to talk more between the TFI specialty truckload business unit. And that is something that I have started already, okay, because there's lots of opportunities. Within Daseke I have got one or two business…

That's great Alain. I think it seems like you guys are on a very, very good path on Daseke for sure. Okay. And just a quick follow-up on the LTL side. I know you laid the ground with some factors about how the rates could evolve and what you're probably planning to do on the cost side? I wanted to ask you about the competitive dynamics here that could unfold over the next year or two. One of the biggest and actually, the biggest LTL player in the market is looking to divest the freight business, FedEx. I wanted to know how do you perceive that as a competitive dynamic change situation, if at all it happens. Alain Bédard: Well, you know what, Konark. If this happens at FedEx, I mean we would be the happiest guy in the world. I mean I think that would be great for the market. I think that this is a great company, FedEx Freight. And being stand-alone, I think it would be fantastic. We have a relationship with them. We work with them into areas of BC mostly the Vancouver area. We also work with them in Saskatchewan. We're having discussions with them if we could -- if we can help them elsewhere in Canada. So I think that having this spin-off if everything happens, I think it is going to be good for the market overall. And I think it's going to be really good for us at TFI.

Thanks so much. Perfect. Thank so much Alain. Good luck thank you. Alain Bédard: Thank you. Thank you Konark.

Next question will be from Jordan Alliger at Goldman Sachs. Please go ahead.

Hi. Just a follow-up question again on LTL. I know Alain in the past, you talked a lot about service on LTL. And I don't know if I've heard as much about it today, service being like a critical COG in that revenue per hundred way to at some point inflect positive. So can you maybe talk a little bit about LTL service where you are? And thank you. Alain Bédard: Yes. Yes, that's a very good question because without service, it is difficult for you to grow the business. It's also difficult to you to guard and protect. So absolutely. This is a balance between cost and service. So what we've been trying to do is improve the service at the same time, reducing costs. And for sure when you take the culture of a company that's been really lazy and not being focused like some of my peers are in terms of cost and service. It doesn't change overnight, right? So what we've been able to do is to change the culture, hey guys, we can improve service and reduce costs at the same time. So where we've been very successful is on the linehaul. Why? Because we were able to move away from rail to a certain degree, okay? So 4% of our miles today are non-rail, they're more on the road with our own people. So that improves the service. So yes, you're scared because, oh, cost of the road is going to be more than the rail. Well we were able to do that at kind of a breakeven. So guys and say, guys, we have improved service, and there's not been an effect on cost, okay? So we have not moved cost up. Those 4% miles now makes a lot of sense. They are…

Great. Thank you. Alain Bédard: You’re welcome.

Next question will be from Daniel Imbro of Stephens. Please go ahead.

Hi, thanks. Good morning. Thanks for taking my question. Alain, I want to point to a follow-up on U.S. LTL. You talked about being lean, and obviously, that's showing up in EBIT per shipment kind of up sequentially despite the revenue per shipment being down. I just want to understand the back half outlook. So was your expectation that this mix headwind continues on the US LTL for revenue per shipment, but that you can just offset it by finding more efficiencies and being leaner in the back half. So revenue -- sort of EBIT per shipment could keep growing? Alain Bédard: Yes, absolutely. Because you know what we don't control the market. And I think that the market has been soft in 2024, and I don't see it getting stronger. So the only way -- the only way that we can be successful is we have to do the job ourselves on the cost side, right? So I'm saying the same thing again and again I mean the admin cost of TForce freight is like 500 basis points too much compared to what we do in Canada. So this got to be a focus of ours. Our IT costs is about 2 times to 3 times more than what we have as an IT across in Canada. So that's the focus now. Don't forget, IT, we could not really work on IT, because until year until, let's say, summer of last year, we were stuck with a lot of spend on IT because we had to walk away from UPS on the TSA, but that's behind us now. So we have to keep reducing this cost. So the market is going to help us in Q3 and Q4 hopefully, but I'm not sure about that. What I can be sure of is that Bob and Keith, okay, and their team, they have to be focused on doing more with less.

That makes a lot of sense. And maybe to follow up more directly is on LTL pricing. If we strip out this mix noise, I guess first should that mix headwind continue to worsen in the back half? It sounds like yes. When do you think that will turn the corner when you look at the business? And if you exclude mix, I guess, how are contracts like-for-like repricing today? Or are they still pricing at a similar level of increased excess mix shift as they have been the last few quarters? Alain Bédard: Yes. Yes. I think the pricing is not so bad right now. It's okay. I mean it's not very strong. But then again, I mean, I don't foresee Q3 and Q4 in terms of the market condition to improve? Are they going to get better? I don't think so. Are they going to get worse? I don't think so. I think it's going to be more steady heady. Us, the only way we're going to break this 90 OR, once and for all, we have to grow our GFP, which is an asset that nobody has and also we have to reduce our costs. That's the only way we're going to break this 90 OR.

Helpful color. Best of luck. Alain Bédard: Thank you Daniel.

Next question will be from Benoit Poirier at Desjardins Capital Markets. Please go ahead.

Good morning Alain. And congrats for the strong execution overall. Alain Bédard: Thank you Benoit.

Yes. Just looking at your comments with respect to M&A skewed towards Logistics and also LTL in 2025. Could you maybe remind us about your comfort level in terms of leverage? And what are kind of the M&A and look that you would be looking in 2025? Alain Bédard: Good question, Benoit. So if we don't do anything upsize, okay, let's say, until Q3 of '25, our leverage is going to be under one, okay? So we're going to end up the year probably at 1.75. And after three quarters of '25, our forecast is that we're probably going to be at between 0.5 and 0.75. So this is why it's never going to happen. This is why something of size will happen. Now we bought Daseke for $1.1 billion last year. Well, no, this year. Okay. We made the deal last year, but it's this year. So I think that for TFI, easily, we could do a deal between $2 billion and $3 billion of costs for TFI. And I think that you've noted about a year ago and your note is that -- I mean, you can't stop TFI. Why is that on M&A because they generate so much cash, right? And you are right. That is the proof. The proof is in the pudding right now, right? So we bought this company for $1.1 billion, and in Q2, we reduced our debt by $100 million and we will reduce our debt for the year by about $500 million to $600 million and bring the leverage down to 1.75. I think TFI is probably one of the best story that is not known is how big TFI is on the free cash flow. And what's the opportunity that creates with a free cash flow machine like TFI, right? So this is why. I think that if you look at the end of '25, because what we're talking about is probably more like in the summer, '25 to the fall of '25, if we are successful because M&A you can try, but we've been very good at that. But until you get the deal done, you are never sure that the deal is going to get done, right? So we feel good that we're going to be very well positioned late '25 to do a deal of size, that could be up to $3 billion and if ever there is also part of that in paper, well, then it could be maybe up to $4 billion or $5 billion. We'll see.

Okay. That's great color. And just in terms of follow-up question, you made great comments about the overall market environment. And also some comments about OR expectation for U.S. LTL. When looking at 2025, I know it's still early, but how much should be -- do you need the economy to be supportive in order to achieve $9 of EPS next year? I'm just curious about any key levers or moving parts, including the $0.50 of EPS accretion from Daseke. Alain Bédard: Yes. Well, there is one thing that's easy to say, Benoit, is that when our leverage goes down, my interest cost also goes down. So if you look at Q2, my interest cost went through the roof, right, okay? So one easy thing that's going to happen without doing anything, right by reimbursing the debt, okay? So if we reimburse $500 million, $600 million, okay, that will not exist next year. That's already after tax, $20 million, $25 million, and we'll continue to reducing that. So overall, in '25, if we don't do anything of size we are probably going to generate $40 million after tax, okay just on reduced interest, right? So that's very easy to do because the only thing we have to do is pay down the debt right with our free cash flow. So that's going to help us. I think that our specialty truckload by moving, our friend Daseke from, let's say, a 95 OR, okay, 93 to 95. They were back down to under 90. Well, we said $0.50 for 2025 for the contribution for Daseke, I think we'll do better than that, okay, from what I'm seeing. Now if the market is helping us, well, maybe it could be better than $0.50 or maybe it's going to be like $0.75 or…

That’s a very good color, Alain. Thank you. Alain Bédard: Pleasure Benoit.

Thank you. Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead.

Hi, thanks. Good morning. Alain Bédard: Good morning Cameron.

I want to come back just to the Logistics segment. Obviously, segment that's doing quite well. I just wondered if you could talk a little bit about the trends in kind of the individual businesses within Logistics. I mean it is a bit of a grab bag of different businesses in there. And obviously, some of the 3PL businesses are doing, it is a tough market. But just any color you can provide on how some of the other businesses doing in there? And then what is the key driver here of the improvement? Alain Bédard: Yes. So within our Logistics, Cameron, okay sector number one is our last mile operation, okay? So last mile operation is US and Canada. It is a combination of both countries. And those guys are really, really doing well, right? So those guys are sub-85 OR right? Because we are not stupid. We are not in business to practice delivery, right? So we service customers, we reduce our costs, we are very lean and mean. So that's number one. Then number two is we have our brokerage operation, okay, which the biggest player in there is our TForce worldwide operation. Now these guys have suffered a big time okay? So the revenue is down. These guys used to be a $600 million, $700 million company. Now we are down to about $550 million. And also the margin have suffered as well. So that sector is not doing as well as the rest. And the rest of our brokerage operations are also suffering, okay on the revenue side but not so much on the profitability side. So revenue is down profitability is about stable with the rest of our kind of brokerage operation. And the third is what we call our specialty services where we…

Okay. No, that is really helpful to get that detail. And maybe just a second question for me, just more of a curiosity. I'm just wondering about the decision to move P&C into the LTL segment. I mean I would have thought it might make more sense to moving into Logistics, just given that you already have a package delivery business within Logistics. So just wondering about the rationale there. Alain Bédard: Yes. you know what Cameron, yes, I never thought about that. But at the end of the day, really P&C is a network operation whereas our last-mile operation is not a network. So last-mile is in Logistics, but it is not a network, right? So we don't run network in our last-mile. Whereas in our P&C we run a last-mile. What am I missing? We run a network, right? So that's why it makes sense to be part of LTL because LTL is also a network.

Okay. That make sense. Appreciate the questions. Thanks very much. Alain Bédard: Okay, Cameron. Pleasure.

Thank you. Next question will be from Bascome Majors at Susquehanna. Please go ahead.

Alain, as you look forward, you've mentioned the potential spin-off that you publicly disclosed about eight months ago a couple of times on the call. How do you feel today eight months further into both, I guess, a few months in integrating Daseke, eight months further into the cycle about both the fundamental industrial logic and the call it, valuation arbitrage logic of that decision as you look forward? And between that and integrating Daseke, do you think those are some of your final big moves for the business before you start to move further into retirement? Or is these kind of $2 billion, $3 billion, $4 billion, $5 billion deals that may come up in the next couple of years you think those come under your umbrella as well. Thank you. Alain Bédard: Yes. You know what that's a very good question, and that's the kind of discussion I had with the Board yesterday, and I told the guys listen, I don't know. I have to do this deal okay, the spin-off down the road. So this is why I said, guys, I'm in at least for another five years. So sorry to say for the guys that want to take over CEO's position at TFI, at least another for another 5 years because this is going to have to happen under my watch, right? And it is not going to happen now. Why? Because like you just said, we have to digest Daseke. And I think that Steve and his team are doing a fantastic job, and it will take us at least a year but so '25 will go by, right? And then in '25, if we are successful trying to add revenue, okay, in the sector that we love in North America, then we will be well positioned to do something maybe late '26 into '27 and that is the time line. But don't forget that at the same time, Bob and his team at TForce Freight, okay, I have a big job to do, okay, into generating a little bit more revenue, but even more importantly, way more OE than what we're doing now.

Thank you for that. Alain Bédard: Pleasure.

Next question will be from Kevin Chiang at CIBC. Please go ahead.

Good morning. Alain, maybe just one clarification question. I don't know if you mentioned this earlier, you talked about a sub-90 OR in US LTL without improving -- without the need for an improving macro, I know you were initially targeting 88 this year, that's a little bit more difficult. Should we be thinking of that being kind of shifted into 2025? Was that kind of the messaging there? Alain Bédard: Yes. Absolutely, Kevin. I mean part of this commitment from our team, okay to get an 88 OR in '24 was based on cost and also based on improving the shipments count. The shipments count is not happening, right? So we are flat. Shipments were flat. We have improved the quality of the shipment, yes. Okay. No doubt about that. And we have also improved the cost to a certain degree, but not enough, right? So what we are saying is that, guys, okay. So let's change the thinking that -- let's say, the volume will stay about steady or maybe improve a little bit, but that's not going to help us. So we got to double the effort and to be faster and being more efficient and reducing costs. And we've got to be mentally ready to be on a diet, okay, at TForce Freight diet in terms of costs, right? So we got to do a better job of doing more with less I mean, we've been doing that in Canada for a long time. If you look at -- if we can run Canada with a sub 80 OR like we're doing now, as a matter of fact, we're what, 75 OR, I think in Canada, even with the Kindersley acquisition, that Kindersley those guys they were not making a lot of money. But Kindersley in…

That makes sense. And just maybe in your P&C division, just wondering if you're seeing any benefits or disruption from Chinese e-commerce. I mean there's been a lot of headlines around that in the past, I guess, past a little bit here. Is that something you're seeing within your P&C network up here in Canada? Alain Bédard: Not yet. Not yet. The biggest issue we have in Canada has always been the same e-commerce guy that's moving more and more of shipments in-house and the guys that are serving him or used to serve him, okay, are losing the volume and now they become very aggressive right? So this is why we had a really soft patch in Q1, when we look at our P&C results in Q1, it was a disaster. But don't forget, Q1 '24 reflects the decision that was made in the summer of '23. And we made some mistakes there. So Chris took over that. And we are doing a much better job and we will keep improving Q3 and Q4 but it is a tough market. So if you look at our revenue per shipment in our P&C, we’re down a bit, okay? There’s more pressure over there because the biggest e-commerce in Canada is moving freight in-house, and we got some of our peers that are stuck with their pants down.

Right. That make sense. I’ll leave it there, have a great weekend Alain. I appreciate taking my questions. Alain Bédard: Thank you. You’re welcome.

Thank you. And at this time, Mr. Bedard, we have no other questions. Please proceed. Alain Bédard: All right. Thank you very much, operator, and thanks everyone for joining us today, keep you updated as we move through the year and we look forward to our next call. And in the meantime, please don't hesitate to reach out with any additional questions. So enjoy the weekend, and we'll be in touch. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.