Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's First Quarter 2025 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. 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 April 24, 2025. Joining us on today's call are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I'll now turn the call over to Alain Bedard. Please go ahead, sir.

Thank you for joining our call today. After the market closed yesterday, we reported our quarterly results during a time of ongoing economic uncertainty and a decline in freight volume across the industry. Despite these cyclical challenges, we are pleased to have generated over $190 million in strong free cash flow, which remains a core focus for us. This free cash flow enables us to maintain a robust balance sheet and invest strategically in both organic growth and appealing acquisitions, while also returning excess capital to shareholders whenever feasible. In our consolidated results, we achieved total revenue before fuel surcharge of $1.7 billion, an increase from $1.6 billion a year ago, supported by the Daseke acquisition made a year ago this month. However, the industry-wide downturn in volumes led to an operating income of $115 million, resulting in an operating margin of 6.7% compared to $152 million and a margin of 9.4% from the prior year. Our quarterly adjusted net income was $56 million, down from $93 million, and adjusted EPS was $0.76, down from $1.24 a year earlier. Cash from operating activities reached $194 million, slightly down from $201 million in the first quarter of 2024. Our free cash flow, as previously mentioned, stood at a substantial $192 million, up significantly from $137 million, thanks to favorable working capital, effective management of capital expenditures, and the dedication of our talented team members who uphold operational excellence, even during slower industry periods. Now, I'll provide an overview of our first quarter results for each of our three business segments, starting with LTL. LTL represented 39% of segmented revenue before fuel surcharge, declining by 13% year-over-year to $679 million. Operating income was $47 million compared to $85 million in the prior year, with margins reflecting typical seasonality in Q1. The LTL operating ratio was 93.1%, up from 89.2% in the first quarter of 2024, and our LTL return on invested capital was 14.4%. In Truckload, we generated $666 million in revenue before fuel surcharge, accounting for 38% of the segmented total, an increase from $398 million a year ago, due to the Daseke acquisition. The operating income for Truckload was $49 million, up from $41 million in the prior year. Our Truckload operating ratio was 93.7%, compared to 89.6% a year earlier, with industrial end markets facing tariff-related uncertainties that were noticeable in the first quarter before the April 2 announcement. Nonetheless, we observed improvement in our Canadian operating ratio, while Specialized was consistent with normal seasonality. Our return on invested capital for Truckload was 6.7%. To conclude the segment overview, logistics accounted for 22% of segmented revenue before fuel surcharge, totaling $385 million for the quarter, down from $442 million in the first quarter of 2024. Logistics operating income was $31 million compared to $40 million last year, reflecting an operating margin of 8.1% versus 9.1%, while our return on invested capital was 17%. The solid free cash flow of $192 million during the first quarter supported our strong balance sheet, which remains a priority for us. We ended March with a funded debt-to-EBITDA ratio of 2.21. During the quarter, we repurchased $56 million worth of shares, and combined with the dividend payout, returned $94 million of excess cash to our shareholders, which is always an important goal for us. Looking ahead to our business outlook for the second quarter of 2025, we currently anticipate EPS to range between $1.25 and $1.40 based on the trends we have observed thus far in Q2, assuming no significant changes in the macro environment. Additionally, for the full year, we expect capital expenditures to be approximately $200 million. With that, David and I would be happy to take your questions. Please open the lines.

Our first question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Hey, great, good morning. This is Christyne McGarvey on for Ravi. 2Q guide, very helpful. I appreciate that. Can you maybe just unpack a little bit more the high and low end of that? I know it's not a massive range, but just how you guys are thinking about that? And then any thoughts on full year? Clearly, macro visibility is quite limited, but any sort of scenario analysis you guys are thinking through, particularly on the recession side of things, if that comes to fruition, how the business might perform?

Given the current uncertainty, we can only provide guidance for the quarter, which we've established between $1.25 and $1.40 based on what we know today. Our specialized truckload operations in North America are facing challenges as our end customers are hesitant, waiting to see how the situation unfolds. Predicting the year is difficult until we have a clearer understanding of the tariffs, and while there's ongoing discussion, we haven't seen any outcomes yet. Based on our knowledge from April, we believe TFI can achieve an EPS in the range of $1.25 to $1.40. Additionally, we are reducing our capital expenditures because we are not utilizing our trucks to their full capacity, resulting in a decrease in CapEx from a typical $300 million annually to around $200 million. Our CapEx in Q1 was minimal, but we anticipate increasing it in the next three quarters to meet the $200 million target for the full year.

Very helpful. Appreciate that. And if I could just ask one more. Maybe just digging in on the US LTL a bit more, can you just parse out to the extent you can, how much of some of the year-over-year pressure we're seeing in operating income is idiosyncratic versus the market maybe being a bit more challenging? And if it is idiosyncratic, kind of any updated thoughts on the trajectory of OR improvement there?

You know what, if you look at our Q1 results, which are very disappointing. I mean, we had a very difficult month of January, very difficult month of February. But we made some change in the leadership at that time, mid-February, we made some changes because, I mean, we were not heading in the right direction. What I could say is that when I look at April, when I looked at March, I mean, I can see some very important change. The morale of the troop has never been so good. I mean the guys are working hard. And under the leadership of Kal and Chris and Keith, I feel pretty good about where we're going. I mean, the name of the game, and I said that on Q4, okay, we've lost so much small and medium-sized accounts, and we replaced that with more like corporate accounts with lower margin or maybe sometimes negative margin. I mean that trend is reversed right now, okay? So we're starting to see growth on the small and medium-sized accounts, okay? At the same time, we are replacing some major accounts where we lose money, right? So I feel really good. The guys now are very well focused. And that's also based on what we are seeing so far in April, okay, we see a change over there. The guys are really working hard on the cost side, at the same time on the revenue side to head this company in the right direction. I've always said that there's no reason why this company cannot be a sub-90 OR. And we've not done that so far. I understand. I get that after four years of buying the company. But I think that we're on the right track with this leadership, the plan that these guys are working on, I feel really good.

Yeah. And Christyne, I would just add that when you look at Q1's OR in the US LTL, it's a 160 basis point deterioration relative to Q4, which is exactly the same as the seasonal deterioration last year Q4 to Q1. So you can think about this quarter as the same as last quarter. But we've made changes, and we're seeing those changes start to show some green shoots.

Great. Really appreciate the thoughts. Thanks, guys.

Thank you.

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

Yeah, hi. Just two follow-up LTL questions. One, can you maybe perhaps update some of the operational improvement efficiency plans that you guys have talked about in the past, whether it be technology or other efforts to improve things? And then secondly, how do you think about your pricing strategies now and the industry's pricing strategies given the ongoing softness in manufacturing, et cetera? Thanks.

Yeah, very good question, Jordan. So in terms of technology, we've made a lot of progress within TForce Freight over time. So one of the last leg that we're working on right now is we've implemented Optum for our linehaul planning, okay? So we're not done with this improvement in technology on our linehaul. But at the same time, okay, we're looking at something similar, probably Optum for our P&D. So we're going to be starting this project of Optum P&D operation in Canada first, okay? And then we'll move that to the US sometime in '25. So that's going to be helping us in doing a better job on the planning and on the execution of our P&D operation, and the connection between linehaul and P&D at that time, okay, will help us do a better planning for the linehaul. That's number one. Number two is that our software for pricing and master file management, that's been a rock in our shoe for so long, okay? We've started the implementation of that early '25, okay? And this is moving along. It's taking us a little bit more time, okay? But during the course of '25, we should be done with that. Now for sure, our pricing department right now because our sales focus is growth now, okay, with our team, our pricing guys are very busy going back to the sales team with a pricing proposal for customers because we've adjusted our approach to customers in the sense that we have to go back to the small and medium-sized accounts. And these guys, they represent about 2% of our volume more today than they were just three months ago. So we are growing those small- and medium-sized accounts. And for sure, that requires better pricing, better price, okay, strategy for our pricing department, which these guys are working on. Anything you'd like to add on that, David?

No.

Good.

Thank you.

And your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.

Thank you, and good morning. You mentioned uncertainty in your macro outlook, which is creating some challenges in planning. I'm interested to know if you've observed any significant changes in customer buying patterns this quarter due to that uncertainty. Also, regarding your market share, are these shifts in buying behavior causing customers to move to lower-priced competitors? Are you losing market share, or are customers just reducing their orders and volumes because of the current environment? I'd like to hear your insights on these near-term trends and how they affect your competitive situation.

That's a very good question, Walter. If you're a US farmer right now, you're likely feeling uncertain because your primary customer, China, is saying they don't want your products. A portion of our customers is in the industrial sector, manufacturing tractors and agricultural equipment. They aren't selling much because their customers, the farmers, are feeling insecure about the future. That's just one example of what we're encountering in our US truckload operation, specifically in our specialty truckload, which includes a lot of flatbed work. Our industrial base customers are on hold because their customers are unsure about what lies ahead. In terms of our miles in the first quarter in the industrial sector for flatbed operations, we experienced a decline of about 10% to 15%, depending on the week. As of April, there is still a lot of uncertainty, but the decline has moderated to high single digits, around 8% to 9%, although we are still down year-over-year. The only positive is that our rate per mile has improved, which is unexpected in a challenging environment, as typically we would expect rates to be under pressure. However, since mid-March, we have noticed a year-over-year improvement in the rate per mile, even though activity is down. Regarding the market, we don't see any pressure on rates in either Canada or the US. Our Canadian team has performed well, except in certain sectors like steel, which is under pressure due to high tariffs. Additionally, our US truckload operation has been affected by having too much equipment on hand. We had significant capital expenditures in the second, third, and fourth quarters for our US specialty truckload operation, and with miles down, we now have an excess of trucks and trailers, which also impacts our depreciation. This situation should start to correct itself in the second and third quarters of '25, as we are lowering our capital expenditures to align with the current activity levels. Is there anything else you'd like to add on this, David?

None.

Good.

Can you provide an update on your budget for any tuck-in M&A for the year? Additionally, there was some activity this morning with Andlauer being acquired by UPS in your markets. Are there any emerging opportunities, and are you actively considering them?

We recently closed two very small deals in Q2. There was one transaction that we were quite interested in; however, due to the uncertainty surrounding tariffs, we decided to walk away from it. It was a deal we were excited about, but we felt it was best to pass for now and potentially revisit it later once there is more clarity. Therefore, our M&A activities in 2025 are expected to be minimal. Instead, we are focusing on buying back TFI shares, which we started in Q1 and continued with another 0.5 million shares in April. This cautious approach will define our M&A strategy in 2025, as we look to purchase undervalued assets. Our goal is to turn the US LTL business around to regain confidence, and we'll strive to achieve that. In the meantime, we won't be pursuing any major M&A activity in 2025, aside from the two small deals and stock buybacks. We aim to maintain a conservative leverage ratio, keeping it below 2.5, and currently, we are at 2.2. In Q2 and Q3, we anticipate generating $0.75 of EPS. Given the April trend, we feel optimistic about reaching $1.25 to $1.40, which should help reduce our leverage over the next few quarters.

Thank you very much for the time.

Pleasure, Walter.

And your next question comes from the line of Ariel Rosa with Citigroup. Please go ahead.

Hi, good morning. Alain and Dave, thanks for taking the call. This is Ben Mohr at Citi on for Ari. I wanted to just ask if you could share some thoughts on your US LTL OR outlook for 2Q and full year '25 and similarly, your EPS outlook for maybe full year '25, considering the 2Q, $1.25 to $1.40.

Yeah. So based on our forecast right now, we believe that sequentially, Q2 should improve by about 200 basis points, right? So we're at 99, so we should go down to 97. But on top of that, we believe that there's also another at least 100 basis points of improvement from better market, okay, better freight, et cetera, et cetera, and also better cost management on costs on the P&D side and on the linehaul side to a certain degree. So I mean, from, let's say, 99, we go down probably into Q2 to a 96 OR on the way, okay, down to closer to a 90 OR, hopefully, 92, 93, something like that by the end of '25, right? So that's the trend that the guys are working on. And let me tell you that the morale at TForce Freight has never been as good as what it is today. We've made some changes in the leadership. So our friend, Keith, that used to run all of TForce Freight now is focused only on the operating side of it. Chris, one of our EVPs at TFI, is helping on the commercial side. And Kal, one of our senior EVPs has taken over everything else, which is finance, IT, fleet and the operation for sure, working with Keith. So I feel pretty good where we're at, okay, with this change in leadership and also the focus on growing those small and medium-sized accounts that killed us in Q3 and in Q4 in terms of profitability. And so the guys are on the right track. They're focused on the right thing. And I think that we're going to start to see some improvement there.

Great. Thanks. And also maybe as a follow-up, thanks for sharing that you're replacing your SMB accounts with enterprise accounts and it sounded like you just mentioned…

The other way around. Yeah.

It's the other way around. We're replacing the big accounts, okay, the corporate account with the small account, okay, which is completely the opposite of what we were doing in Q3 and in Q4 of last year.

Great. Great. Thank you for that. And it sounds like it's up 2% sequentially.

Yes.

Can you discuss in more detail how you're doing this? Any progress in reducing the SMB customer attrition? And are you growing new accounts? Is it bringing back the same accounts, the same lanes or different lanes? And are there any other customer segments similar to SMB that could be at risk of customer attrition and what you might be doing to reinforce customer retention in those segments?

Yeah. So one of the first things that the new team has done is that, let's say that you go with a GRI of 5% and you have an account that runs an 85% OR and the guy just walks, right? Because he's an 85% OR and you had 5% and the market is soft, so the guy walks. So you lose an 85% OR account. So what the new team has said is that this is a little bit stupid in this kind of an environment, okay? So instead of going with a GRI of 5% on an 85% OR account, how about if we just go with 1% or 2% so that we don't lose this business, right? And we don't end up with a major churn, which happened to us in Q3 and in Q4, and we just act smart. And then by keeping those accounts and growing the small, medium-sized accounts because our pricing is more a reflection of the profitability of the account instead of being just stupid and going ahead with a 5% global and don't forget that all the large accounts will always negotiate that 5% down to 1% or 2% anyway, right? So, let's be more smart and let's be more focused on keeping those small guys and growing that, which is completely the opposite of sadly we did in Q3 and in Q4 of last year, right? So, in terms of better pricing for those small guys, for sure, our pricing department, there's some things that they've been addressed like the weight per shipment. So if you look at our trend, our weight per shipment is about stable at about 1,200 pounds, which is acceptable, but we would prefer to get closer to 1,300. So this is where we made some small adjustment. And at the same time, our GFP, which is terrible. I mean what we've done there, I mean, we've lost revenue like there's no tomorrow, okay? We've refocused our sales team, our local sales team to be part of the solution instead of being part of the problem. So that's also another area of major change in the approach of our sales team under this new leadership is GFP, we have to stop degrading the revenue on that, and we have to start recapturing growth because if you go back in time, okay, let's say in '22, GFP's revenue was $100 million in the quarter. And now we're down, David, we're down to what, $30 million.

$33 million. But I will note that this is the first quarter in a long time where GFP is flat sequentially.

Yeah. Well, we need to grow.

For sure. We're starting to see a little bit of the benefit of this refocus in Q1.

We have a fantastic product that no one else has, but UPS has recently announced a similar offering. This is a great product for our customers. We need to improve our sales efforts, and I believe that the changes in our sales leadership will assist us in this endeavor.

Great. Thanks very much.

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

Thanks, operator. Good morning, Alain and David. Hope you are doing well.

Good morning.

Good morning.

So Alain, you mentioned the guidance for Q2, which is helpful. Regarding TForce, you brought up the leadership changes in mid-February with Keith, Kal, and Chris. I recognize that leadership shifts are significant, but I'm curious about how quickly employee morale is changing with these changes at the top. Is it solely related to leadership, or are there structural issues within the business, such as unions or other employees further down the value chain impacting culture or morale? Is there an opportunity for improvement that could be addressed with additional changes in the future?

The approach we have with Kal and Chris is to focus on building and growing TForce Freight. We can't just cut costs while losing revenue because that won't lead to growth or satisfied shareholders. The goal for this new team is to get hands-on and focus on expanding the company instead of continually reducing volume and trying to generate more profit from an already acceptable operating ratio. There will definitely be some necessary changes at certain terminals, and we've already started implementing some adjustments. We have detailed financial information for each terminal, so we understand where costs are manageable and where they need attention. Keith's role is focused on operations alongside his regional VPs to improve costs across the board, while Chris is engaging the sales team to prioritize growing our small and medium-sized accounts to increase our market share. We also need to reemphasize our efforts on GFP, which had been declining for four years but finally stabilized recently. Now, we must work on increasing our numbers. We have a standout product in the market, and the recent losses in revenue were due to a lack of focus. The morale is positive, and the team recognizes that our strategy should not just be about cutting costs but also about enhancing growth.

That makes a lot of sense, Alain. Thanks so much. And if I can follow up with respect to the competitive landscape. in the US LTL market. Are you noticing any big changes there? Like we can clearly see some of the data points we track like some of the competitors like Saia, they're ramping up volumes where volumes are down for the market overall. Are you seeing any changes in terms of like with your culture and morale improving, there is an opportunity to kind of regain some of the market share that you may have lost? Or you did not lose any market share at all? Like was it all market that was soft and you held your market share?

Konark, we have indeed lost market share. One of the factors contributing to this is the quality of our service. We've discussed missed pickups extensively; in Canada, we have no missed pickups. Currently, in the US, our missed pickup rate stands at 1.7% of our total shipments, which is not acceptable. Just two years ago, this issue wasn't even on our radar, but now, after reducing it from 4% to 1.7%, our goal is to eliminate it entirely, just like we have in Canada. Additionally, there's the matter of service quality. While it's easy to claim we're 98% on time with various excuses, that's part of the past. Moving forward, our service is genuinely improving without the excuses, as we recognize that business growth is impossible without delivering the service we committed to. We're shifting more freight from rail to road because we maintain better control over road logistics, unlike rail. This commitment reassures our sales team that we intend to deliver what we promise to our customers. Our service improvements are not just theoretical; we are enhancing the reality of our service, particularly regarding next-day and multi-day transit times. While we still have a long way to go, progress is being made. This will help reduce customer churn, which is currently significantly lower in Canada compared to the US. In Canada, we outperform all competitors, but in the US, our service levels have driven higher churn rates. By enhancing our service, which is a key focus of Keith and his operations team, we will decrease churn and start increasing our shipment numbers, which is our primary objective.

I get it for sure. Thanks so much for the time and all the best. Thank you.

Thank you, Konark.

And your next question comes from the line of Daniel Imbro with Stephens. Please go ahead.

Hey, guys. This is Reed Seay on for Daniel. I'm just going to follow up real quick on that last question. On service, you've talked a lot about Keith focusing on operations and improving service in the near term. Can you provide maybe some examples of what Keith and the team are working on to improve that in the near term?

Well, yes. The linehaul, okay, it's an issue, right? So if you load the trailers and you have a linehaul provider, okay, would it be a rail or a third party that's not delivering the freight on time. Well, everything in that trailer is going to be late, okay? So the biggest issue okay, that we have in the US in terms of service is providing the linehaul service. So this is why we're moving away as much as we can, as fast as we can away from the rail because we have no control on rail. I mean you give them the freight and you hope that it's going to be there on time. When it's road, when it's us, I mean, if we make a mistake, this is something that we can manage and we can correct. So this is the big thing that the guys are working on, number one. Number two is, like I said many, many times, missed pickup is a disaster in the sense that the customer is waiting for you to pick up the freight and you don't show up. I mean that doesn't help your reputation. That doesn't help, the churn into your business. So this is why a major emphasis has been put on missed pickup, okay, and also improving our linehaul. The next-day service, when the linehaul is only 400 miles, which is next-day service, I mean, we're doing quite well. It's when you have to move, okay, with two or three days connection, there we need to improve. And one way that we're doing that is we're moving away from rail as much and as fast as we can, number one. And number two is also the third party that we're using, they have to deliver based on the commitment, like we have commitment with customers.

Got it. Thank you. And on the rate side, obviously, it's been a little bit challenged for a few quarters here. I assume some of that is from the shift to enterprise in the back half of last year. As you've refocused the company, when do you expect to have visibility to yields flipping positive year-over-year?

Listen, what we're seeing so far, okay, in April is there's an improvement in trend, but it's still early in the game. But for sure, the focus is there. I mean, we can't do business with an account that runs at 115 OR because we lost so much medium-sized accounts that runs an 85 OR, right? So this is nonsense that we went through in Q3 and in Q4, like I said on my last call of Q4, and this has to change. And this is why we made some change in TForce Freight leadership. I mean there's no way, and we have to reduce the churn, and this goes back to the operation. We have to meet commitment that we have with customers. So, we will start to see improvement. And this is why, like I said earlier, 99 OR in Q1 is really, really bad, okay? But we believe that sequentially, we will improve 200 basis points just because of the cycle. But we're also going to reduce at least 100 basis points based on quality of revenue, reduced churn, better service, et cetera, et cetera. So this is why we feel that we can say to the market on Q2, we believe that this company would deliver between $1.25 to $1.40 of EPS, okay? This is based on better results at TForce Freight. And also our US truckload operation, specialty truckload operation will do better in Q2. We are unloading excess assets over there that are penalizing us on depreciation and interest costs. So this also will help us participate in that $1.25 to $1.40 down the road.

Got it. Thank you, Alain.

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

Yeah, good morning, Alain. Thanks for the great answers about the USP. Now if we move on Daseke, it looks like that the OR was closer to 99% in Q1. You mentioned a lot of details around the weaker economy, especially on the industrial side. But I would be curious whether there's also some question mark or issues around the culture and the management team and what we should expect from Daseke in the coming quarters?

Daseke's operating ratio in the first quarter is closer to 96 than 99. The level of activity in the first quarter significantly impacted our specialty truckload operations in the U.S., with miles down by as much as 15% depending on the week. We also faced challenges with excess trucks and trailers, but I expect that to normalize by 2025. The culture within the specialty truckload sector in the U.S. is not problematic like it was at TForce Freight a few years back. Moving forward, we aim to drive fewer miles while increasing revenue. In our reporting of logistics revenue, our asset-light operations within the U.S. specialty truckload sector should grow. While the asset side of the business will likely remain about the same size with fewer assets, we anticipate improved revenue and better miles driven per truck. In the first quarter, revenue per truck in our U.S. specialty truckload was better, despite having fewer miles per truck and slightly lower revenue per mile. However, the situation improved in the second quarter with better rates per mile and an increase in miles per truck. I want to highlight that the Daseke acquisition brought in an outstanding operating team, and we believe we can transition very good truckers into effective business-minded individuals. Profits are important; we remain committed to serving our customers, but it’s essential that we achieve profitability as well. In our Wiley division, which has 150 trucks and 600 trailers, we found we're over-equipped. We plan to reduce the trailer count significantly and also cut back on trucks to ensure efficiency. The current operating ratio of 96 is unacceptable, and the team understands that we need to improve. Our Canadian van operations manage a 90 operating ratio, which shows that there is room for improvement in our specialty operations. While challenges exist due to uncertainty in tariffs and volume, I believe within three to six months we'll gain better visibility, and demand in the industrial sector, which is crucial for us, will begin to recover.

I think it's important to keep in mind the context of this quarter. Our customers in the specialized end markets, which are particularly impacted by the trade situation and uncertainty, are scaling back on production and orders as they wait to see how things unfold. That's the immediate situation. However, in the long term, we have confidence in North American industrialization and production, which aligns with the direction of the economy. This is why we want to maintain our presence in this area.

Yeah. Absolutely.

That's great color. And just in terms of follow-up quickly, guys, we've seen a lot of headlines about cargo volume that is expected to be down significantly in the second half given the reduced imports from China. So comments from the ports and RF could be down somewhere 10% to 20%. So I understand that it's pretty foggy out there, but any thoughts about how this could impact TFI and whether this could make the typical second half pickup maybe a little bit less pronounced than it has been historically?

Yeah. That's a very good question. And we know that the port activity, okay, will be less because there's less ship coming from Asia to the US in Q2. We know that. But if you go back to what we're saying, Benoit, about our specialty truckload, what we're moving has got nothing to do with Asia, right? It's industrial activity in the US. That may be affected a little bit, okay? It's more like the retail stuff, okay, that probably will be affected. And until that they fix this tariff situation with Asia, I mean, there could be some pressure in Q2 and in Q3. But in our specialty truckload, I mean, when we talk to our customer, okay, that's not the reason why they're slow. The reason they're slow is that nobody knows, if you're a farmer in the US today, and you're a crop, you don't know who's going to buy your crop because the Chinese are saying, you know what, we're going to buy from Brazil. We're not buying from the US anymore, right? Then you're not going to buy a tractor, you're not going to buy a combine, you're not going to do anything until you have better visibility. So this is what's affecting our volume today. When we talk to Yellow Iron, okay, all this construction material, where you have interest rates that are quite high still in the US, I know Mr. Trump wants them lower, but so far, I mean, they're still high, right? So it affects construction. Construction is us. I mean, we're moving building material. We're moving all this related to industrial activity. It does not affect whatever China shifts to the US that much, okay, for us. Maybe a little bit on the LTL side, but not that I know of, Benoit. But for sure, I mean, Q2 could be for our world, okay, more difficult in the US based on the number of ships that are not coming to the US because of what's going on.

Yeah. And I think the best way to try and quantify that is to look at Page 4 of the MD&A where we actually list out our end markets by percentage of revenue. You can see that retail is 19%. The remainder are various, mostly industrial end markets. And so that can help people get a sense.

If you look at the automotive segment, it's predominantly based in the US. In this area, we have GHT moving trucks and I would estimate that 90% of our automotive revenue comes from the US. It's not from Canada or other regions; it's primarily US-focused work we do at TA for specific customers. Most of what we move from GHT is directed towards the US market, with only a small portion from Canada and a little bit from Mexico. But overall, it is mostly for the US domestic market.

Okay. That's very good color. Thanks for the time.

Thank you, Benoit.

Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Hey, thanks, good morning. Just a quick follow-up on specialty truckload. Relative to that 94% OR in Q1, how do you think about the progression there into Q2 in the guide and maybe back half of the year?

Embedded in the guide is a 91, 92 for specialized in Q2.

Okay. Do you believe there is more potential for self-improvement at Daseke, or will further enhancements mainly rely on the trucking cycle?

Yes, Scott, there has been some improvement on the Daseke side, particularly in the financial aspect. We are focusing on enhancing our administrative and IT systems as well as safety, which is crucial for us given the number of accident claims. There is a strong emphasis on understanding that accidents are our responsibility, not just an issue for the insurance company. Prioritizing safety is essential. We are also addressing a business unit in the US that underperformed in Q1, and if we are unable to improve it, we may have to make significant changes with that unit. This unit is not part of Daseke. The only change we made within Daseke was to shut down Bulldog, a small unit. Overall, we have a clear plan moving forward. Additionally, we have too many assets in the business due to the previous Daseke management's inclination to acquire trucks, resulting in an excess of both trucks and trailers for our current volume. This surplus will be removed from our books, decreasing our depreciation expenses. Simultaneously, we are pursuing smart capital expenditures in our truckload operations, aiming to shift the balance between asset-heavy and asset-light operations in the US. One of our goals is to increase revenue from asset-light operations while keeping asset-heavy revenue stable, with growth focused on the asset-light side.

And then maybe just last quick one. I saw a few weeks ago, UPS announced an expanded version of their own GFP business, maybe on some bigger sized shipments. Is there any impact to you from UPS making a bigger push into GFP?

No, not at all, Scott. They've always been in that position, and it's never been significant for them. They are likely trying to grow it. But at the same time, we didn’t perform as expected. When you look at what TForce Freight has accomplished over the last four years, UPS has to be wondering what they're doing. However, we faced challenges with certain customers that our partner, UPS, prefers not to engage with, including some resellers. This contributed to our revenue drop. We acknowledge that we didn’t do our job, but morale is now very high, and the team is energized. As David mentioned, we were flat quarter-over-quarter on GFP for the first time. Our focus moving forward is to grow this business again, and there’s no reason we shouldn’t succeed because we offer a top-tier product for small shipments with UPS's quality of service. The quality of service from UPS is unquestionable. So, let’s sell it and move forward.

Okay. Thank you, guys. Appreciate it.

Thanks, Scott.

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

Hey. Hi, Alain and David. Thanks for taking my question. This is Adam Roszkowski on for Ken Hoexter. I guess going back to US LTL, how much time do you think before you start seeing material improvement in the claims ratio? I was at 0.9% this quarter, flat and a little worse year-over-year. Anything that's happening right now that's starting to move the needle on that? And I guess I asked because it sounds like the small business share you were winning is being done more or less with price. So just any kind of thoughts on the service side.

No, I would say that we are currently at 0.9% of revenue for claims, which is unacceptable. There is a lag in addressing these issues, and our team believes we can do better in Q2. We are still dealing with mistakes from 2024, and you should see improvements soon. In our Canadian operations, we are performing at about 0.2%, which is best-in-class. Our goal is to reach that level again, as we used to be better at TForce Freight, with numbers as low as 0.4% or 0.5%. Now, we've unfortunately increased to 0.9%. We expect to make progress in 2025. Regarding the new business we're acquiring in the small and medium sector, our pricing remains competitive and does not undercut our profitability. The issue in Q3 and Q4 was that we lost some quality freight from smaller clients and replaced them with major accounts that pay slowly, which hurts our margins. Our sales team, under Chris and Kal's management, is making significant changes, and we anticipate positive outcomes. We should see improvement in our claims ratio moving from a disastrous 99 to a more acceptable level, and ideally closer to a 90 operating ratio in the future as we strive to break through that milestone.

Thanks for the color. I guess then just on maybe the pace of contractual pricing renewals. I mean you previously noted pricing at the lower service end of the US LTL space has been competitive. So any update on just the kind of quarterly contractual pricing renewals run rate, particularly as you have started to make these shifts over these past couple of months?

I think that everything is normal on that side. David, I mean, what we're seeing.

Yes, the renewals are occurring in the mid-single digits. The challenge is that our revenue per shipment has declined due to a shift in our customer mix from small to larger customers. However, the renewals are still in the mid-single digits.

Got it. Thank you.

Thank you. Presenters, I am not showing any further questions at this time. I would like to turn it back to Mr. Alain Bedard for closing remarks.

All right. Well, thank you, operator, and thank you, everyone, for joining us today and for your ongoing interest in TFI International. So we look forward to keeping you updated as we move through '25. And as always, please reach out if you have any additional questions. Stay safe. Enjoy the day, and thanks again.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.