TFI International Inc. (TFII) Earnings Call Transcript & Summary

Thank you. Good day, ladies and gentlemen. Thank you for standing by. Welcome to the TFI International Third Quarter Conference Call. [Operator Instructions] Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on Friday, October 30, 2026. Joining us on today's call are Alain Bédard, Chairman, President and Chief Executive Officer, and David Saperstein, Chief Financial Officer. I'd like to turn the call over to Alain Bédard. Please go ahead, sir.

Thank you very much, Operator, and welcome everyone to this morning's call. Yesterday, after market close, TFI International reported another quarter of solid results with a standout performance from our truckload segment. Overall, adjusted diluted EPS was $1.67, up nearly 40% over the prior year's $1.20. Our overall operating income grew 17% to $180 million despite an office-related real estate impairment charge. And this was driven by truckload operating income that nearly doubled and logistics operating income that was up almost 60%. Another important highlight is that this was the second consecutive quarter that TFI International achieved a sub-90 operating ratio on a consolidated basis. Of significant importance to our business strategy, we generated another $116 million of free cash flow, bringing our year-to-date total to more than $440 million, even while investing for growth. As a result, our leverage ratio further improved this quarter, as I'll discuss in a moment. This very solid financial foundation allows us to thoughtfully invest for the future during up and down cycles alike, and also allows us to return excess capital to shareholders whenever possible, which we did both during and subsequent to the third quarter, as I'll explain. Taking a step back, our current strong performance is the direct result of the investment we made during the down cycle. We invested in our operation, we made strategic acquisitions, and as a result, we now have an enhanced focus on specialized freight, which improves diversification towards industrial end markets and across multiple modes of transportation. All the while, the talented men and women of TFI International have maintained their focus on efficiency and the related operating principle that drives our profitability. With that, let me quickly review our consolidated third quarter results before taking a closer look by business segment. Our total revenue before fuel surcharge of $1.9 billion was up 8% over the past year, while operating income reached $180 million, up 17%. Our operating margin of 9.7% was up 80 basis points over the prior year's quarter of 8.9%. Turning to our segment, we will begin with truckload, which simply had a phenomenal quarter and now represents 40% of segmented revenue before fuel surcharge at $753 million. That was up 10% the past year, and our revenue per truck per week, excluding fuel surcharge, climbed 13%. Operating income nearly doubled to $100 million, from $53 million in a year ago period. And our industry-leading adjusted OR of 86.7% marks a 560 basis point improvement over the past year. Lastly, our return on invested capital for truckload was 8% up from 6% last year. In addition to the tightening capacity industry-wide, these results directly reflect our favorable exposure to the right-end markets, our emphasis on the specialized side of the business, and our limited capital intensity with an optimal asset mix and improved fleet productivity. Next up is our LTL. LTL was 36% of segmented revenue before fuel surcharge at $678 million, which was roughly flat year over year. Our adjusted OR was 91.3 million and operating income was $44 million again. That's including a non-cash impairment and equates to a return on investor capital of 11.1%. To finish up the segment, logistics also had a strong quarter with revenue before fuel surcharge of $437 million, up a robust 19% year-over-year, and logistics now accounts for 23% of our segmented total. Perhaps more impressive, our operating income jumped 59% to $49 million, and that equates to an 11.3% margin, up nearly 3 percentage points from the prior year's 8.4%. Our logistics return on investor capital was 14.9%. Turning to our balance sheet, as I mentioned, $440 million of year-to-date free cash flow has further added to our overall strength, and we ended September with an adjusted funded debt to EBITDA ratio of 2.1. Please note that this is an updated measure which excludes the letter of credit and contingent consideration which affected the previously communicated banking covenant ratio. I'll wrap up my prepared remarks this morning with our updated outlook, which include fourth quarter adjusted EPS of $1.30 to $1.40, which at the high end would represent a 28% year-over-year increase. In addition, we continue to expect year-over-year adjusted operating ratio improvement of 400 to 500 basis points in the truckload segment, 100 to 200 basis points for our logistics, and a slight decline maybe of 100 basis points up to 200 basis points for our health care. And lastly, in terms of our outlook, we continue to expect net CAPEX excluding real estate to be in the range of $125 million to $250 million, demonstrating improved capital efficiency. As always, our outlook ranges assume no significant change in the operating environment. With that, Operator, David and I are ready to take questions. If you could please open up the lines.

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

Hey, Greg, good morning. You know, you kind of ran through, Alain, thank you. You ran through truckload and logistics in, I guess, more detail than LTL. Maybe just take the opportunity to dig into LTL, talk about your thoughts on the U.S. performance, maybe talk about fuel, the benefit, and then throw that into your fourth quarter outlook. You know, how should we think about the improvement potential and going forward?

Going into fourth quarter and next year? Yes, a very good question, Ken. You know, if you talk about Canadian LTL, I mean, fuel is some kind of a tailwind because of our density, right? So our density in Canada is second to none. But in the U.S., it's the opposite kind of thing. Our density is so bad that when you have inflation like we went through in Q2 and in Q3 with fuel, I mean, that turns to be some kind of more of a negative because our density is not that good. We do about 20,000 shipments a day, we cover all of the U.S. and our density is not good. Now, as you know, we've been going through a very rough patch in our U.S. LTL for the year '25, '26. We're not very happy at all with the result that we have in '26. And we're in for major improvement, I think going into '27 with improvement in the team and all that. But that being said, we've tried something, Ken, trying to grow organically at TForce Freight, and the results, our timing was probably bad because we tried that in Q1 of '26, when the weather was not helping us at all. Okay, if you remember January, February, I mean, it was like difficult, even Dallas was tough to deal with. And then you go into Q2, we end up with something like 22,000 shipments a day, and our guys are not able to manage that. I mean, it's just, we're really sad about that, that we have to say that, but those guys were not able to do that. And then we end up with inflation on the line haul because at the same time that our guys cannot, our driver in our line haul department cannot take this excess volume, we have to go on the spot market. The spot market in Q2 and in Q3 for line haul is just killing us, right? So we have that negative affecting us. And at the same time, also, we've tried to grow in terms of volume, but, you know, we had to discount a little bit on the price. So it's like a double whammy where you get less revenue per shipment. At the same time, you got more cost per shipment. So this does not work. Okay? Okay, so this is why it's, when you look at our Q3 numbers, we did fantastic everywhere except our U.S. LTL, which is like a broken story. I mean, it's like we keep repeating the same story time over time, and hopefully, you know, with the improved teams that we have on board now, okay, under Cal's leadership, you know, we could finally get this ball up and running. Now, I'm sure you saw in our MD&A, okay, another little thorn in our shoe for our U.S. LTL is our six years partnership with our friend at UPS is coming to an end, okay, in early '27, right? So this is again another reason why, if you look at our forecast EPS for Q4, okay, because this partnership is ending early in '27, we anticipate that some customers will have to find a solution somewhere, okay? We're working on a solution of our own, but this is difficult to do to try to replace UPS with someone else, right? So this is why we're very careful about the guidance that we're giving for Q4. We feel really good about our truckload, like I said on the script, okay? We feel really good with our logistics, but another rock in our shoe on our U.S. LTL is what I just said about JFP, okay? The partnership that we have for six years with UPS that will come to an end at the end of January '27. I mean, when you look at that, you say, hey, I mean, you've been at it for years and years and years. And I agree. And we were never able to turn the corner with this. I mean, '21, '22 were way better. '23 was not so bad. But then '24, '25 with freight recession, increasing inflation on the cost, et cetera, et cetera. We believe that we're going to turn the corner in '27. Now, that's an opportunity, because if you look at our revenue and the small margin that we get out of that, I mean, once we fix that, I mean, TFI is going to be like, wow. That's the big rock that we have in our shackles. Okay. But that's also the big opportunity down the road if we can fix that. And we have to fix it because, I mean, this is huge revenue for us and the contribution is minimal. Right. So, I mean, the good thing is we've acquired Descartes 2 years ago. And that Descartes has been turned around very, very fast. I mean, if you look at when we bought Descartes, these guys were running at 97%, 98% OR. In Q2, okay, we did a good job. In Q3, now we're coming with a sub-87 OR in our truckload compared to my best peers in the U.S. I mean, we're doing great. I mean, the Canadian operation is doing even better, but our U.S. operation slowly is catching up.

Yes. Do you need to just to follow up? I mean, do you need to acquire to get the density there or is that something you can do on your own?

It's a union shop, right? So the only other union shop, I mean, those guys, they do a great job. They're better than us, right? And for sure, I mean, we've tried to do something and it never worked. So the plan, again, has been simple, is that we're building, okay, in parallel to our 20,000 shipments. Slowly, we're going to start building in a non-union operation. Today, we do about 1,000 shipments a day, non-union through Hercules, our U.S. operation. Hercules has got partnership with some of our Canadian business as well. But this is small, right? But, I mean, unless there's something of size that comes to us, the plan is going to be really to slowly build that non-union, okay, like we do in Canada, because in Canada we run both. So we run union and non-union. So to me, I mean, it's okay. We'll run a second network if we can. And the idea is to bring more stability to our TForce Freight because, you know, again, if you look at history, the way we used to do things in the U.S. is, okay, volume goes down, okay, because of December, January, we let go people, then we call them back in March. Those guys are not available. You have to rehire. I mean, this is instability, and this is 1 thing that we're working on. Working on with Cal and his team, okay, to try to have a volume that is steady, okay, month over month, okay, in that 20,000 shipments a day range, which we are now.

Thanks for the thoughts, I appreciate it.

Very good, Jeff.

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

Hey, thanks. Good morning. So just a couple of follow-ups on that LTL. Can you share, where's the U.S. LTL margin right now and the UPS relationship that's sort of ending? Does this impact just the GFP business? Is that going away or is there a broader impact than?

No, no, Scott. The GFP thing is just that partnership that we have with UPS. Okay, that's going to come to an end at the end of January '27. After 6 years of partnership with UPS, as a reseller of UPS services, this is going to go away. Okay? So that's a GFP thing. About the profitability of our U.S. operation LTL, okay, for sure, when we report a 91% OR, okay, I mean, you can think that our U.S. operation is more closer to a 97% OR and our Canadian operation is more like a sub-75% OR operation. But the size is not the same, right? We do about 10,000 shipments a day in Canada, we do 20,000 in the U.S.

Right. And then, so can you just like, how big is this GFP business today?

Well, the operating income in Q3 was a little over $4 million.

Okay, thank you, David. And then maybe just like, Alain, bigger picture, like in that first question, you said it feels broken, we have no density, but you also said like, we think we can improve it in '27. So, like, help us, you know, square those 2 comments. And then like, when you just, when you think about like allocating capital to the business, it felt like a few years ago, we wanted to allocate more capital to LTL, we were thinking about deemphasizing truckload, like, are we now, is the message different that we want to allocate more capital to truckload? Or how should we think about where you want to, like, invest incremental capital?

Okay, you know what, Scott, that's a very good question. So if you look at opportunities right now, okay, so in our U.S. truckload operation or even our Canadian operation, I mean, we still have a good year to go to fine-tune everything that we do in our U.S. truckload operation. Something nice comes around, okay, in mid-'27, for sure we're in a position to look at it. On the LTL side, on the Canadian side, I mean, there's not much that we can do. But on the U.S. side, union side of our operation, I mean, there's nothing we could do except build some kind of a non-union network in parallel to the network that we have. In the meantime, okay, for sure, we're adapting the network, okay, to a 20,000 shipment company. So as an example, we're going to have a transaction with 1 of our friends in Chicago, where they will take over 1 of our terminals, in discussion also with 1 of our terminals in the New York area to reduce our footprint, okay, to that 20,000 to 22,000 shipments a day. And also at the same time, our focus is going to be, you know, try to bring more density to that 20,000 shipments. The average miles that we drive today between each and every stop in our P&D is about twice as much as our Canadian operation. Why is that? Because in Canada, we focus trying to do business with customers that are close by and not run 100 miles to do a delivery. We've been working at it with our friends there at the U.S. LTL, but it seems to be difficult to do. We're getting some support. We just hired an executive that hopefully is going to be able to help us drive change. But there's more team members that we need to have to drive more change and to bring that density down because fuel is high. Okay, in Canada, like I said that with Ken, it's a tailwind for us, okay? But in the U.S. truckload or in our U.S. LTL, it's not a tailwind. It's more of a headwind, right? So truckload has been, I mean, we did fantastic in Q3, with that headwind in our truckload, but we did very poorly in our U.S. LTL in Q3 with that headwind, that cost inflation on our line haul because the market has been very hot on the spot. So, all that really turned out to be not a great quarter for us at all. Now, in terms of investment, if you look at CAPEX, okay, this year, in our U.S. LTL, we did a lot of CAPEX to support this company. I mean, we bought 1,500 trailers this year. We bought a little over 600 trucks. I mean, we continue to do the investment, but the return has been not great at all. Okay, so this is why it's like, guys, we have to turn this thing around. I mean, there's no other solution. I'm very happy, like I said earlier with, you know, the capital intensity of our truckload in the U.S. that has improved tremendously. Our revenue per truck, okay, is up big time, not just because of the revenue per mile is up, the usage, the number of miles per truck is also up. We've also been able with Steve and his team to transform our U.S. truckload operation with more like niche carriers. So if you just look at 1 of our carriers, PD on the West Coast, I mean, these guys were, they were like jack-of-all-trades, master of none. They were servicing the aerospace industry like. Like Boeing and Bombardier and others. But that was with 75 trucks. But they had also 125 trucks losing money. So we said, no, no, forget about that. So those 125 trucks have been moved to Wiley. And now SPD is making money with the truck, making money with the brokerage. We've also attacked our friend in Texas, Lone Star. Again, very great carrier, okay, with the wind, with the data center and all that. But they also had an over-the-road operation that was just killing them. So they said, no, no, no, this is over, my friend. This is just happening Q3. Over-the-road is going to Wiley. Okay, fine. This is the fine-tuning that we, Steve and his team, still have to do. We're working on COTC right now, and then it's outsource. So that's why I'm saying '27 Q4, '26, '27 for our truckload. We see great improvement there. Truckload is great. Logistics is great, U.S. LTL is not. And that's again, I mean, I feel like I'm a broken record on that. We got to correct the situation. We know what to do. It's just, you know, we need the soldier. We need the management to jump in and do the right thing.

Thank you, Alain.

Okay. Thank you very much. Pleasure.

Your next question comes from Jason Seidl from TD Cowen. Please go ahead.

Hi, morning, this is Uday for Jason Seidl. Maybe just to go back to the U.S. LTL, Alain, revenue per shipment, I think, decelerated a bit here in the third quarter. Last quarter you spoke about Canadian 3PL mix being a factor. I'm just wondering, is that still a factor in the third quarter? And then if that was the case, then thoughts on how you plan to rationalize that?

Yes, it is still a factor in Q3, but over the course of Q3, it's been improving. So Q3 is 3 months, right? So it was not good in July at all, okay? It got a little bit better in August and better in September, and we keep improving that for our Q4 situation there. So yes, it's been an ongoing thing where our commercial team, you know, has been really hard working at it. So yes.

All right, thanks. That's helpful. And maybe just sticking on the – you mentioned the line haul pressures here. Can you maybe give us some detail, maybe remind us how much rail you utilize presently and maybe on the trucking side, is there an opportunity to enter more contract-type exposure?

And reduce freight? Yes, yes. So if you look at our situation today, I mean about 55% of our miles is done through our own people, okay, our own drivers. About 20% some percent is rail, okay. And then we have about 125 owner-ops, okay, that is also exclusive to us. And overall that, we have also contract. But when the volume went from, let's say 19,000 shipments to 22,000 at the peak, we have to go on the spot market because, I mean, we didn't have enough power with our own team, okay, we move a little bit more volume on the rail, but there again, I mean, then you end up with service issue, it's not the solution. So we went on the spot. The spot was about what, $2.75 to $2.90 a dollar, whereas, let's say 8 months ago it was like $2.20, right? So that killed us, okay, in Q2 and in Q3. Now, at the end of Q3, and we're back to normal because now, okay, we don't have to go on the spot market to get power for our line haul.

All right, very helpful. Thank you very much, Alain.

My pleasure.

Your next question comes from Ravi Shankar from Morgan Stanley. Please go ahead.

Great, thanks, Alain and David. Thanks so much for the details so far. Alain, you've been very clear on the idiosyncratic changes you guys need to make in the LTL business. I'd love to hear your characterization of the LTL market overall as well. Where do you see demand right now, relative to where ISM is in the mid-50s? Where do you see the pricing environment? How do you see competition and capacity shaping up, et cetera?

Well, the chance we have in our U.S. LTL is our peers are smart. I mean, we're not competing with stupid peers. Our peers are really, really smart, doing a great job. And so this is why to me, okay, volume is soft a bit. Yes, it's been soft for the last few years, but at least the pricing is holding. I mean, there's no, from what I can see, pricing war because we have smart leadership in the U.S. LTL, okay? The leader, okay, running a 70% OR with the second next one running an 80% OR, I mean, you got smart guys doing a great job on the market. So to me, the market is soft a bit, but price-wise, I mean, we, us, it's us, we are the problem, us. I mean, it's not the market that's the problem, it's us. Okay. So we have to do a better job, okay, commercially to identify what fits. Okay. And the average weight per shipment. You see another of our peers' weight per shipment is up. I mean, this is the way to go because you're paid by the pound. Okay, so, I mean, our weight per shipment is down a bit. So that's the wrong direction, guys. So we have to move this into more heavier industrial. I mean, we love U.S. industrial freight. Why is that? Because this is us with our truckload operation. That's what we move. Everything is industrial. We don't move retail. We don't have, let's say, dollar store as a customer retail. I mean, we don't move that. We move industrial. So again, those industrial customers have LTL. But us, with the old UPS approach, they were focused on retail freight. So now we're opening more doors with the size that we have now in truckload industrial freight. We're saying to our U.S. LTL guys, wake up and let's piggyback our U.S. LTL commercial team working with our truckload commercial team to get more of that industrial, okay, great in our LTL environment. At first with the old team there, we got pushback, oh, there's lots of claim, all kinds of story. But now this is something that's ongoing to try to improve the weight per shipment at the same time as the revenue per shipment. But Ravi, in my mind, this U.S. LTL market is way ahead, way better than the Canadian one. It is way better. The leadership is great. The market is soft, but at least the pricing is holding. And the leaders are getting more dollars, right, per hundredweight. So, I mean, it's not the market. It's us.

Understood. And maybe quickly as a follow-up on the TL side as well, shifting gears a little bit, can you talk about the potential upside you see for '27, especially around rates and bid season, especially as '27 kicks off?

Well, I think that on the truckload side, the market is still soft. I mean, the demand is not there. It's not really wow, but it's the supply, okay, because of the administration, okay, what these guys have been doing with CDL illegals, the guy can't speak the language and all that story, okay? has helped us to a certain degree so far in '26. No, going into '27, I think that this is some kind of a permanent change. And if the demand starts to grow, like in the building material, for example, this is like dead for us. Who's buying a house now, right? Who's building? No one. Okay, interest rates at 7%. Okay, fine. But this is going to come to an end at 1 point. So building material is key to us, steel, aluminum and all that. So we feel very good about '27 because at 1 point the demand will start, the supply will stay constrained and us, like I said, during the course of '27, we still have some tweaks to do. Mr. Brookshaw and his team, they still have some improvement of our own to do, and it's going to take us another 6 months in '27, maybe all year of '27 to have a state-of-the-art U.S. operation like we have in Canada.

Yeah, and the thing I'd add to that is the nature of our business, the structure of the business has changed. And you see that in the reduction in the capital intensity, right? We have a principle which is to do more with less. And you really see that here. You see more revenue, with less trucks. And so as a result, the OR goes from 92% to 86.5% because depreciation expense is far lower, the productivity on the trucks is far higher, our brokerage revenue in the quarter was up 49% year over year. So we're basically taking our assets, we're putting them to the most productive use, meaning the end markets that are the most productive, the customers that provide the highest return for us, where we have real competitive advantage, niche businesses, and the rest we're brokering and we're using independent contractors, and that's where our return on investment capital and truckload, it jumped from 6% to 8%. It's enormous, it's a 33% increase in ROIC year over a year and I would encourage you to benchmark other truckload players for true after-tax ROIC. Nobody's at 8%. Nobody's even close to 8%. And the reason for that is that it's like a hybrid business. It's not a pure asset-based business. It's a hybrid business that we've built in this way to get these returns. And you're seeing that transformation take place. And so when Mr. Bédard talks about these further adjustments that are still to come, in addition to the market, this is what we're talking about. We're talking about more right-sizing of the capital intensity and more increases in the returns as a result.

And guys on the brokerage, if I may add, I mean, we're not like some of our peers in the brokerage world, okay? No. I mean, so us, we have specific carriers that we use, okay, all the time. I mean, we're not using Joe today and Peter tomorrow and then someone else the next day. No, no, no, no, no. Us, we have a portfolio of carriers that deal with us, okay, on a daily basis, daily basis that we deal. The same is true of GHT as an example. Okay, when we're moving trucks for our OEMs, we have 1 of our agents that is going to do probably out of the 250,000 trucks that we move, this guy will probably move for us 40,000 trucks. Okay, so it's brokerage for us, but we don't deal with 45 different companies, we deal with 1 guy, right? That we know, that we know that he's got coverage, that he's got insurance, right? That he's a professional, not an illegal guy that today decided to lease a truck and he becomes a truck driver.

Understood. Thanks for both, for the color.

Your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Good morning, Alain. Good morning, David. Good morning. I coming back to your costs, I've, I've had a number of questions with regards to your cost structure perhaps being able in theory to be more insulated against some of the wage inflation aspects that other carriers might have that may be more reliant on owner-operators or may not be unionized and therefore could see more competitive moves. We're not really seeing that in these results. Can you speak a little bit to, is that just kind of great in theory but not in practice? Love to hear your thoughts on your cost structure there.

Yes, so Walter, I mean, are you talking about LTL or truckload or both? Mainly on that where you're seeing the most inflation? Yes, in the area.

Where you're seeing the most labor inflation, wage inflation?

Okay, well, on the truckload side, for sure, Walter, U.S. and on the Canadian side, I mean, as of Q2, we're starting to see, okay, some inflation on the salary. Okay, I mean, that's a given. Why is that? Because there's a, you know, the eternal shortage of drivers, right? If you would talk to Steve Brookshaw, he would tell you, my main thing is I need drivers, right? So what happens when you need drivers is the price or the cost of a driver goes up, right? So we are going through some inflation, for sure, okay, with the driver wage. But at the same time, we have to be more efficient with our asset, okay, our drivers and our trucks. So this is what David was saying, okay, more revenue for trucks. Also, the other thing that Steve and his team has focused is the empty miles, right? Between the unloading of your customer and the reloading of your next customer, between the 2, nobody pays fuel surcharge. So when you're buying fuel at $6 a gallon versus $3 a gallon a year ago, I mean, this is inflation to your cost, right? So the smarter you are, you are by improving your density in your truckload, that's going to be a huge benefit for you. So that's the truckload. Now on the LTL side, labor, okay, is not an issue so far because like you said, in the U.S., most of our labor is unionized, so we have a contract, it's 3%, so we deal. It's the third party that we're using, okay, for line haul, or for the last mile, is where we got a lot of cost increase, okay, and this is why we have to go back to do it ourselves, okay, instead of using a third party that's going to cost $2.90 a mile to haul a trailer from point A to point B, okay, whereas we used to pay on the spot, contract rate $2.20. So this is where we had inflation in Q3 and it will continue with when you have inflation at 3% to 4%. I mean, for sure, we're going to have cost pressure. So this is why, like we said, like I said to Steve, we got to do more with less. So forget about, you know, those guys that bring revenue of $3,000 a week on a truck. I mean, this guy, don't give him a truck. I mean, he's always sick, he's always on vacation, he, this, that. No, no, forget about this guy. Okay, get, get this guy out. Okay, we need $5,000, $6,000 per week.

For truck per week, okay, because under that, it's difficult to be profitable. Yeah, no, and as it relates to the LTL and the cost pressures we saw in the quarter, part of that was also related to the transition around the rate of volume growth. So if you remember last quarter, we had too much volume growth, the rate of growth was too high, so we raised price aggressively on the blanket 3PL rates to slow the rate of growth and you see that right, the year-over-year shipments and LTL is 4% this quarter as opposed to 7.5% last quarter, and but those costs came out of the network over the course of the quarter, not necessarily in lockstep with the volumes coming out. So as we look though now towards the end of the quarter, the balance is there. Into October, the balance is there. And so some of those excess cost lags were impacting acute Q3 and are no longer there too.

And you know what, Walter, when you think about the theory is, you know.

I think that's a good point, Walter.

If a guy delivers 15 shipments a day, you give him 2 more, okay, I mean, this is going to be very profitable. But if the guy comes back with those 2 shipments and you have to give that to a third party, I mean, it's a losing proposition, right? So this also was part of our, you know, I was not very happy with what happened there, right? So this is why I said, Cal, Cal, we need stability. We need better management. We need to better manage our costs and manage our people. So we have great terminals within the TForce Freight network, highly profitable terminal, but we also have dogs. So we're attacking those dogs where you give a guy more shipment and you just come back with those shipment. He says, well, we'll do it tomorrow. No, no, because then we miss service, my friend. We have to do it today. So again, this is part of all this situation that we are aggressively working on. And that's also part of that inflation that we had to because we had to hire a third party to do the delivery of that additional freight, if you want to call it.

That. That's great color. And, Alain, I'm going to ask you a question. I don't know to what extent you're going to be able to answer it, but it is about kind of leadership succession planning. We just had a bunch of retirements in the railroad sector last night. Our friend Gilles Layla announced he's putting up the gloves as well. When I look out to your plan and your strategy over the next year or 2, you'd always articulated the idea of acquiring to build scale in LTL and then spinning truckload and kind of going that path. If that gets delayed and we're not able to get the right acquisition and you're not able to bring in the right scale that you talked about and density that you're looking for. Are you looking at any other avenues? Is, you know, are divestitures in the works? Is it, you know, are there any other things that you're considering as we go toward a change in leadership eventually when you, we don't want you to retire, but when you do, I know we know it's inevitable, but, how are you thinking about that over the next couple years if things don't pan out from an M&A perspective as you hoped in '27 or '28?

But you know what, Walter, we got a lot of opportunity on $150 million to $200 million EBITDA with low DAW. We don't like DAW at all. Okay, there's some that happened in Canada that we passed on and my friend made the deal. Okay, great. But, you know, we had to digest the DAW acquisition. And if you go back, '25 was not great for our truckload business. I mean, because we had all kinds of problems. Because of this acquisition that we were doing the integration. But if you look at '26, forget about Q1 because Q1 was like the tail of '25. But from Q2, we start to see the results of what Steve and his team have done in the U.S. It's a confirmation in Q3 and we still have some work to do, but if the right thing, the right investment comes along, sometimes in '27, we're ready, we're ready. Now, it could be of size, it could be $100 million with that company, it could be a $200 million to $300 million. Got capital to justify through debt, a billion, a billion and a half, okay, acquisition, cost of an acquisition. And, you know, what we've looked at is always the same thing is the U.S. LTL, okay, we'd like to do something there, okay, and the logistics. Us, we're big fans of logistics, and I think that our team is doing it really, really well. I mean, just look at the results of Q3. I mean, those guys came in with an 11% bottom line. I mean, this is great news. And we're not stuck with all this issue of, you know, you're brokering to a jack-of-all-trades and you got the risk. Like some of our peers, us our logistic is not just brokerage. I mean, we do brokerage, yes, but we move trucks, we do all kinds of work for Ford in contract logistics, et cetera, et cetera. So it's not just 1 thing that we do. And and we are really in control. So if the right opportunity comes along with a great logistics company, that would be a fantastic fit. But we're not looking at a guy with a 2% bottom line. I mean, this is not for us. We leave that to the other guys.

Appreciate the call as always, Alain. Thank you.

You're welcome.

Your next question comes from Brian Ossenbeck from J.P. Morgan. Please go ahead.

Hey, good morning. Thanks for taking the question, guys. Just 2 quick follow-ups first on LTL, U.S. LTL. Is there any operational impact to the network when GFP doesn't get renewed? Does that affect density even further or I guess complexity of the network? And then just speaking of complexity, how would a, would a non-union, I guess, bolt-on or expansion work, you know, functionally with the current footprint? Is that something you need to acquire more, need to expand, or maybe I forget how you use some of the terminals? Maybe just a little bit more detail on that because it does sound like that's more part of the future plan here.

Okay, so on that, Brian, GFP is like a brokerage operation for us. Okay, so everything was done by UPS, our partner. Okay, so it does not affect our operation at all. Okay, so that's number 1. Number 2, what we're building as a non-union, okay, with just 1,000 shipments, it's more of an asset-light carrier, right? So if you look at capital intensity in Canada, I mean, it's really, really low. Why is that? Because we use a lot of third party, okay? The only thing really that we manage in Canada except for TST where we have assets, is the dock. And this is the direction that we're going in the U.S. in the non-union LTL operation, is that we're going to manage the dock, yes, us, but all the P&D, all the line haul will be third party. So why are we doing that? It's because we hate capital intensity. So this is where we're going to start building that because we believe that 1 day in the U.S., there will be an LTL company that's going to be an asset-light operation, like in the parcel world. Right? So you got this big blue machine that's running on third party everywhere, basically. Okay, so if those guys decide 1 day to be in the LTL world, they will probably go asset light. So this is why us, we cannot be asset light in our union environment, okay. We could do it to a certain degree, but not like 80%. So like we did, in Canada, we are slowly going to build a non-union asset-light operation in the U.S. We find a solid operator at the reasonable price, then we'll see. But in the meantime, if we got to go baby step trying to build this network, that is the intention. That's where we're going.

Okay, understood. Thank you. Just for a quick follow-up, I guess it relates to that comment about going more asset-light. It looks like some of the reserves for accidents were up, and that includes a reversal. I guess, from the prior years. Maybe you could just talk more broadly about the complications of going more asset-light in this sort of backdrop, and I guess how you're experiencing that. Right now, just from a, not only from a brokerage liability perspective, but also just from an auto liability claims and how that's also inflationary. Thanks.

Yeah, well, so, so the fact that, so our accident accrual this quarter was very much in line with normal, right? Most of that is, a lot of it is in corporate costs, especially for the larger accruals, and you can see our corporate costs were around $14 million, $15 million, very normal for the quarter. What you saw last year this quarter, was that we settled a claim for $5 million less than our accrual. And so that is a testament to the machine that we built to handle our accident liability. We've got a fantastic team that is out there settling claims early, sometimes on the spot. We're very, very close to this in the finance team in terms of really following each of these cases, getting them done fast, making sure the accruals are right, and taking the time to do that. And so really the year-over-year change in the quarter should be viewed as a very positive thing. It's not an increase in accident expense. Yes, arithmetically it's an increase. But really what it is, is it's highlighting the fact that we got something done less than the cost of our accrual in the year prior. And more broadly, is it related, relates to managing this, the approach, of course, is to have adequate risk management as it relates to the insurance program. But the most important thing to reduce accident claims is to reduce accidents. And so this is why we invest in technology and we invest in driver safety. This is why we're very careful about all of these things. And when there are incidents, we deal with them a group of people progressively and quickly and proactively because time is against you in these things.

And if I may add, in our truckload, guys, we are starting to implement, okay, inward-facing camera, that's number 1. We're also implementing, okay, to teach our driver simulator, okay, like, you know, those airline pilots, okay? So we are introducing simulator, okay, to our GHG team, to our TForce Freight team, okay? So that you can test a driver, okay, in all kinds of different environment. Okay, so that's ongoing. And then on top of that, if I go back to brokers, pure brokers that we do, okay, because our loss ratio is so minimal. Okay, David, so what did we?

What did we do with the insurance on that? Well, on the brokerage, we did go out and buy much higher limits, much higher costs. Leverage on the brokerage and it cost us very little because our loss ratio in brokerage is 0.

Your next question comes from Jordan Alliger from Goldman Sachs. Please go ahead.