Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Fourth Quarter 2025 Earnings Call. Please be advised that this conference call may contain statements that are forward-looking in nature and is 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 February 18, 2026. Joining us on the call today are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Mr. Alain Bedard. Thank you. Please go ahead, sir.

Well, thank you, operator, for the kind introduction, and thanks, everyone, for joining us on today's call. Last evening, we reported our quarterly results showing robust free cash flow driven by international initiatives and the hard work of our team. With overall freight dynamics showing modest signs of stabilization, the men and women of TFI are busy preparing for a potential industry rebound and controlling the controllables. And another focus of ours, which you've heard me emphasize many times is producing strong free cash flow regardless of the cycle. I'm pleased to say that we generated more than $10 per share of free cash flow in 2025 or $832 million for the year, and notably, our fourth quarter free cash flow was 25% higher than the year-ago figure. At TFI, we view this free cash flow as very important given our strong track record of strategic capital allocation. We intelligently invest for the long term, even during down markets, and whenever possible, return our excess capital to shareholders. As you may recall, during the fourth quarter, our Board again raised our dividend. And over the course of 2025, we continued our track record of opportunistic repurchase, buying back over $225 million of common shares. Now let's turn to the other aspect of our fourth quarter results. Total revenue before fuel surcharge of $1.7 billion compares to $1.8 billion a year earlier, and we generated $127 million of operating income, reflecting a margin of 7.6. Our net cash from operating activities improved meaningfully to $282 million, which was up 8% over the prior year quarter. And our free cash flow from the quarter was $259 million, reflecting a 25% year-over-year increase, as I mentioned. Taking a more granular look at our business segment, let's begin with LTL, which represents 39% of our segmented revenue before fuel surcharge. At $661 million, this was down 10% compared to a year earlier. However, we were able to improve our adjusted OR slightly more than expected to 89.9% relative to 90.3% in the year-ago period. Our total LTL operating income was $62 million compared to $70 million a year earlier. We also generated for LTL a return on invested capital of 12.2%. Next up is Truckload, which was 40% of our segmented revenue before fuel surcharge at $674 million for the fourth quarter compared to $693 million in the prior year. While tariff and the general economic uncertainty still affect freight volumes and excess capacity has been an industry-wide concern, we continue to seek growth opportunities that our network and our infrastructure are particularly well suited for. This includes both data center and the broader economic grid, electric grid to market in which we've demonstrated recent successes. Our Truckload operating income of $48 million compares to $60 million a year earlier and our OR of 93.2% compared to 91.5%. So wrapping up on Truckload, our return on invested capital came in at 5.8%. Lastly, in our segment discussion, Logistics was 21% of segmented revenue at $358 million relative to $410 million in the fourth quarter of 2025. Operating income was $31 million versus $43 million last year, and this represents a margin of 8.7% versus the 10.5%. I'll note that despite slightly lower logistics revenue sequentially, we were able to expand our operating margin by 30 basis points over the third quarter. And finally, our Logistic return on invested capital was 11.8. Shifting gears, our balance sheet is a pillar of our strength supported by the $830 million of free cash flow we produced during 2025, including more than $250 million during the fourth quarter alone. Both figures up year-over-year. We ended the year with a 2.5x debt-to-EBITDA ratio. And given this financial foundation, we continue to be an attractive dividend and repurchase more than $225 million worth of common shares during 2025, as I mentioned previously. We also continue to seek accretive bolt-on acquisition opportunities. And I'll conclude with our outlook as we enter the new year. For the first quarter, we look for adjusted diluted EPS to be in the range of $0.50 to $0.60. And for the full year 2026, we initially expect net CapEx, excluding real estate, to be in the range of $225 million to $250 million. As I mentioned in the past, our outlook assumes no significant change, either positive or negative in the operating environment. Before we open up the Q&A, you may also have seen our press release yesterday about the latest change to our Board of Directors. I want to again express my gratitude to my friend Andre Berard for his more than 2 decades of service as a Director of TFI International, most recently as our Lead Director. His impact on our Board since 2003 has been enormously beneficial to the firm, and we all wish him all the very best in his upcoming retirement. I would also like to congratulate Diane Giard on her nomination as our new Lead Director. And now operator, if you could please open the lines for both David and myself, we'll be happy to take questions.

And your first question comes from Ravi Shanker from Morgan Stanley.

This is Nancy on for Ravi. I was wondering if you could help give some guidelines around the fiscal year guide and potential scenarios to get there and how you're thinking about 2026 as a whole would be great.

Yes, that's a great question. We released our Q1 guidance with expectations of $0.50 to $0.60. This represents a decline year-over-year compared to 2025, as we are still navigating a transitional environment. The freight recession we've experienced since 2023 remains ongoing as we approach Q1. However, there are early indications in our Truckload sector that conditions may improve in 2026, though it's still too soon to be certain. Changes in the U.S. with CDL regulations and non-renewal of certain driver permits could positively impact the Truckload industry. In Canada, every owner-operator will now receive a T4A, similar to a W-2, which will require them to report income and pay taxes, leading to a potential reduction in the driver pool in 2026. But it is still early in the Truckload sector. On the LTL side, we are still facing a challenging environment and expect this to continue throughout 2026. However, on the Logistics front, we feel optimistic despite Q4 2025 being less favorable than the previous year. One of our divisions that handles trucks for major U.S. manufacturers like Packard and Freightliner is projected to improve by Q3 and Q4, returning to normal levels. We have a clearer path towards significant improvements in our logistics operations for 2026. The Truckload sector shows some early signs of potential recovery, but it's still uncertain, especially since we are just in February. The U.S. LTL market remains soft, and conditions in Canada are also weak, although our performance there is better than in the U.S. Our revenue per shipment has decreased in Canada, mirroring the U.S. trend, but we’ve managed to maintain an operating ratio comparable to last year, indicating better cost control. For instance, our claim ratio in Canadian LTL was nearly zero in Q4, whereas in the U.S., it was at 0.9% of revenue, an area we need to enhance in 2026. We’ve had some improvements in claims recently, and our focus will be on enhancing service for our U.S. LTL customers, ensuring we handle their freight carefully.

Got it. That's very helpful. I guess touching on that a bit more. Do you guys feel ready for the upcycle that comes within U.S. LTL with the idiosyncratic changes you have made? Or is there a lot more work within 2026.

No, we're really ready. In terms of the management tools we have today compared to just 2 or 3 years ago, we are very well equipped. We now have financial information by terminal, and we've implemented Optym on our line haul. We also have Optym in place on our delivery side, and we're moving to Phase 2 for the pickup side. We're ready and have the necessary tools. Our commercial team is improving, and we have more stability in our sales force than ever. Mr. Traikos has done an excellent job creating a stable environment for the sales team, focusing on their needs. For the first time in a long while, it's still early, but in Q1, our shipment count is likely to be about equal to that of the previous year. It's still early, though. In Q4, we were down 10%, with a 6% to 7% decrease in Canada and almost a 10% decline in the U.S. So, maintaining the volume we had in Q1 '25 would be quite an accomplishment as a first step.

And your next question comes from the line of Jordan Alliger from Goldman Sachs.

I hear your thoughts about the demand environment. As we approach the first quarter, could you provide some additional details regarding the segment margin-related factors that contribute to the $0.50 to $0.60 EPS guidance? I understand that you are not anticipating significant changes in the operating environment, but could you give some insight into how those margins may look seasonally as we progress?

Well, that's a very good question, Jordan. And so this is why I'll pass it on to David, which is our CFO.

Jordan. So we're looking at probably around 250 basis points of sequential margin deterioration in the U.S. LTL. And I just want to qualify that by saying that Q1 is unique in the year in that it's very back-end weighted to March. And so it's very difficult to get a sense for the trends based on January and the first half of February. And this year, particularly so, because we lost at least 100 basis points related to weather, which caused us to have a lot of overtime expense, etc. So we anticipate around 250 basis point sequential deterioration, but it's heavily weighted towards March, which, of course, hasn't occurred yet, and we don't have perfect visibility into. In terms of Canadian LTL, about the same in terms of the sequential move, P&C is 1,000 basis points down and 15% revenue down sequentially, which is normal seasonality for us, Q4 being a peak season in the P&C. Specialty Truckload, like Mr. Bedard was saying, we are seeing some early signs of positive things in the Truckload. And so we expect to be flat sequentially from Q4 to Q1 in the Specialty Truckload. Canadian Truckload, a little bit of erosion, maybe 100 basis points margin deterioration sequentially and then Logistics are around 150 basis points.

All right. Great. And just out of curiosity, I know the weather has had an impact. Are you able to share a little bit more color around, I know March is so important, how's January, February volumes? And is it possible? I know you alluded to it a little bit, can you still make that up in March on the tonnage side for LTL?

Well, listen, January was very, very difficult, both from a volume perspective and from a cost perspective, because of the costs associated with the weather and the disruptions and the inefficiencies that that caused. February, we saw volumes tick up, and that's why Mr. Bedard is making a reference to potentially being flat year-over-year in volumes. We'll see how the pricing follows as it relates to that. But we can see that the volumes did tick up in February.

And your next question comes from the line of Walter Spracklin from RBC Capital Markets.

Good morning, everyone. You mentioned some improvements you are observing, and David also noted the fundamentals of trucking linked to previous testing of CDL. Are you noticing this reflected in your contract pricing? We see movements in spot pricing, but have you seen any enhancements in contracted pricing, especially in U.S. LTL, or does it vary by segment or region? If you could elaborate on that.

Yes, that's a great question, Walter. Spot rates tend to rise first. When shippers notice an increase in spot rates, they often seek to secure long-term agreements at those lower rates. So, to answer your question, yes, spot rates are up. On the van side, we are experiencing inflation on the line haul for our LTL services, as some of our LTL is handled by third parties. We have seen prices increase in the first quarter. However, it takes longer for contract rates to catch up. Shippers prefer to commit to long-term agreements at these lower prices, and as a trucker, the typical response is to pause and observe. Currently, long-term rates are not as strong as spot rates. Nonetheless, we believe it will eventually balance out due to supply and demand dynamics. The available capacity is starting to decrease, while demand remains weak, which has been challenging over the past few years due to the increased capacity added during the COVID era in 2021 and 2022. Now we're seeing a slight reduction in supply, and while demand isn't strong, we expect that if demand begins to rise along with a decrease in capacity, it could create some upward pressure on contract rates in the medium to long term. This trend of decreasing supply and a slight increase in demand could lead to improvements in contract rates by 2026.

That's great to hear. I want to revisit your guidance and discuss some insights I've gathered. It seems you exceeded your guidance, which was set at 80 to 90 for Q4, and your actual performance was much better. Could you elaborate on the differences between the forecasts and your actual results? Specifically, where did you see the most outperformance? Additionally, is this outperformance factored into your Q1 guidance?

Well, Walter, as David mentioned, the challenge we are facing is that we are providing guidance for Q1 based on a very poor January and only early signs of improvement in February. That’s why we are being cautious. We believe we can achieve what we are projecting, but we hope to perform better, like we did in Q4. The other issue is that until we reach a deal between the U.S., Canada, and Mexico, which is expected around the summer of '26, even if there is a reduction in supply, demand is still weak. That’s why we need to proceed carefully until we have a new agreement among the three countries. Once our customers have clarity about the future, we'll feel much more confident in forecasting the company’s potential profitability.

And your next question comes from the line of Brian Ossenbeck from JPMorgan.

I just wanted to hear a little bit more about the Specialty Truckload business, obviously, heavy industrial there. So assuming not seeing too much of an uptick yet, but we've seen a little bit of life in the PMI, but I also want to hear a little bit more about the data centers, the electrical grid, the things that probably have maybe a little bit more longer tail to them, but I'm not sure how big they are and how fast they're growing at this point. So maybe some more details on the industrial side with those 2 in focus.

This is a new area for us, particularly with our Lone Star operation in Texas focusing on wind energy. We're expecting significant activity in wind in 2026 and working on moving equipment for the data center. One of our recent acquisitions is also bidding for projects in northern Michigan and other northern U.S. states, which could be beneficial if they secure those contracts. We're focused on industrial transport, not retail, and we anticipate progress in our construction-related operations. That's why we appointed a Chief Commercial Officer for our U.S. Truckload operations to manage our network in that area. Currently, we're concentrating on sectors like energy, wind, solar, and data centers. We hope the industrial sector, particularly construction materials, begins to pick up in 2026. Our recent acquisition completed in late 2025 has strong potential, and if they succeed in their bids, it could be a significant win for us. We are starting to see early signs of industrial activity, which aligns with our focus. We transport heavy materials like steel, aluminum, and building supplies, not retail goods. We're optimistic that we'll see improvements, especially with recent PMI movements and increased investments under the new administration.

Maybe just a follow-up on the TFF and TForce side of things; it looks like shipment is stabilizing a bit. We're talking about potentially returning to flat tonnage growth in this quarter and possibly improving from there. Is that dependent on service and network, or is it more influenced by the overall economy? I would assume it's more the former, but I wanted to see how far along you are with those improvements to the point where you could potentially grow a bit faster than the market is currently allowing.

Our focus in Canada is on the weight per shipment, which is significantly higher than in the U.S. This is because TForce's previous rate was based on UPS freight, which concentrated on retail, similar to UPS itself. We're trying to shift our emphasis away from retail and more towards freight driven by the industrial sector. Since acquiring the company, our weight per shipment has increased from about 10.75 to around 12.25 or 12.50. We're aiming to transition more towards industrial LTL rather than retail LTL, as we recognize that retail will increasingly be dominated by the gig economy and companies like Amazon. This is why we are encouraging our U.S. team to prioritize the industrial sector over retail. However, the industrial economy is currently soft, which makes this transition challenging. Nevertheless, it is essential for us to shift away from retail as quickly as possible due to the changes in the market dynamics. We have made some progress, but we need to do better and aim for shipments closer to 1,400 or 1,500 pounds. Remember, payment is usually based on weight, but costs depend on the movement. The difference in cost between moving a 1,000-pound pallet and a 1,500-pound pallet is minimal, albeit there can be some variation in line haul costs, which are prioritized over weight.

Yes. And the service point continues to be very important for us, Brian, and that's how we're looking to grow and move. I mean it's true that we took a step back on the claims ratio. But the other service metrics are moving in the right direction. I can tell you that in Q4, the miss pickups were 1.5%, down from 3.3% a year ago, reschedules at 8%, down from 12% a year ago. On time is flat, around 91%. And then we've continued to increase our small, medium-sized shippers as a percent of total, it's around 28% of total revenue, that's up from 25% a year ago.

And your next question comes from the line of Jason Seidl from TD Cowen.

I wanted to touch base a little bit on the data center comments and I think you called it out in the previous release, and you guys typically don't do that. Maybe you could dig a little bit deeper and let us know sort of how big you think this can get for TFI.

Well, Jason, as I mentioned, prior to the acquisition we made late last year, we were primarily focused on servicing the data center sector through our operation in Texas at Lone Star. This is a new approach for both us and the industry, as these teams historically worked with wind and energy in Texas. Now, we're pivoting towards the data center market. We're closely collaborating with Bechtel, and following our recent acquisition in the Michigan area, we are engaged with another builder awarded projects for data centers, including one for Meta and another for Google. We hope to continue supporting this builder with those projects, which could be a significant opportunity for us if our teams perform well. Our strategy involves building partnerships with the builders of these centers, similar to the collaboration that Lone Star has with Bechtel and our northern team has with their builder. Once the data centers are fully constructed, they'll require ongoing service, which is another area we aim to grow. We have plenty of experience in Texas with Lone Star, including a major move for ConocoPhillips valued at nearly $1 million. The team is highly skilled, and while they've excelled in wind and energy, data centers represent a new frontier that we are eager to explore.

Our strategy is to operate as a unified group. We have one of the largest flatbed fleets in the U.S., with over $1 billion in flatbed revenue. We will market our services to large customers as a collective entity, ensuring they receive nationwide service in their area. This effort focuses on sectors such as energy and construction, as well as high-value freight that requires timely delivery. Our expertise, including work with top-secret Department of Defense projects, positions us well for handling high-value shipments.

That makes sense, David. And my follow-up, Alain, you touched on continuing to do acquisitions. There's been a lot of articles out that 2026 could be a big M&A year for the logistics group in general. Maybe talk a little bit more about that? I mean, are you still targeting a larger acquisition this year? Or is that going to be something that's more of a '27, '28 event?

Jason, to pursue a large-scale deal, patience is essential. As I've mentioned before, profit is made during the buying process, not selling. The pricing needs to be reasonable. We could potentially engage in a significant transaction towards the end of 2026 or into 2027. However, I'm currently monitoring the market dynamics, particularly regarding parcels and less-than-truckload (LTL) services. It's likely that we will finalize some smaller deals in 2026, similar to the recent transaction we completed in Minnesota to enhance our Transport America division. We're also considering additional smaller transactions within the LTL sector in the U.S. Larger deals require time and careful planning. Moreover, the uncertainty surrounding agreements between the three countries involved, specifically regarding NAFTA-related matters, poses challenges. Until we have clarity on those agreements, executing a major deal is quite difficult. Therefore, while significant transactions may be feasible by late 2026, it's more likely they will occur in 2027. In the meantime, thanks to our capacity for generating free cash flow, we will continue pursuing smaller deals where the risks differ, given the current uncertainties with our main partners, the U.S., Canada, and Mexico.

And your next question comes from the line of Thomas Wadewitz from UBS.

I wanted to try to drill down a little bit on the non-domiciled CDL impact and how to look at that in your business, right? So Truckloads is an extremely large market. where we expect the supply-side benefit, but the benefit might be different in dry van versus specialty in flatbed. So do you have a sense of kind of how much non-domiciled CDL has impacted specialty flatbed, you were mentioning some of the skill sets are a little more unique in specialty. And I'm just trying to get a sense of like, well, is this really going to cause capacity to come out in dry van and then there's maybe less pricing impact to you. I know they're somewhat fungible, but just trying to get a little more sense of kind of how you would see the driver impact and whether you think there is a lot of activity in supply and specialty that's actually non-domiciled?

That's a really good question. So far, we see more impact on the van side than on the specialty truckload side. In specialty, such as flatbed or tanker operations, there’s more involved than just driving the truck. With van, you simply pick up a trailer and drive it, which is easier than tarping a load on a flatbed. I can’t say for sure what the overall effects will be, but it’s likely we won’t see as much benefit on the specialty side since it’s probably less significant for us. However, there's a bit of a domino effect; when the spot market shifts for vans, we notice changes in reefer and flatbed pricing as well. It's uncertain whether this is due to constrained supply or increased demand. I feel it’s more about supply constraints, as our revenue per mile is improving overall, even though some divisions are still struggling due to market conditions. In Q1, we should start to see improvements, unlike Q4, where we had an unusual situation with the Specialty Truckload operating ratio being worse than our van operating ratio in Canada, which is unacceptable. That being said, market conditions should improve, and while it's unclear whether demand or supply is driving this, I believe the supply-demand dynamic will get better in '26 and '27. The CDL situation is likely helping us more in the van world than in specialty truckload, but we are still seeing improvements in revenue per mile year-over-year.

Okay. That's great. And then a quick one for David or one or two for David. Just I want to make sure I understand your comments on U.S. LTL in 1Q. So if you see flat year-over-year shipments, then that would imply, I want to say, like 3% to 4% growth in shipments per day 1Q versus 4Q. So that would be kind of a meaningful improvement. So I don't know if you were saying kind of flat shipments sequential or year-over-year and if you're saying flat year-over-year, what might be driving the kind of the improvement in activity.

It seems we might see flat shipments compared to last year. It's difficult to predict what will happen in March. The improvement is attributed to the sales team, service efforts, and various initiatives we've implemented over the past year. However, revenue per shipment might not show positive growth, which is why we will monitor it against last year's figures. There is pricing pressure in the market, which could counterbalance any potential increases in volume that might contribute to profitability.

And 100 basis point comment on weather impact, that's a full quarter impact in U.S. LTL?

Yes, we're estimating that we've lost like $5 million to $6 million already on the weather. Just through extra overtime and just inefficiencies and cleaning up the dock and all that cost.

Yes, compared to a typical year, the weather has been a significant issue this quarter. Normally, we don't discuss weather impacts, but this year's situation is exceptional as it has affected key markets like the Northeast, Midwest, and Texas. While adverse weather in places like Idaho or Utah may not significantly impact us, conditions in major cities like Chicago, Dallas, and New York are challenging. For instance, Dallas experienced a three-day shutdown due to ice. The $5 million to $6 million loss mentioned is beyond what we typically expect in terms of weather impacts. This is an extraordinary situation for this year, particularly for TForce Freight, due to the severe weather affecting our primary market.

And your next question comes from the line of Konark Gupta from Scotiabank.

Maybe just a first one on the earnings side of things. I mean, as we kind of look into the back end of 2026, hopefully, conditions improve. But is Q4 going to face a tough comp from like the $1.19 EPS you reported for Q4 of 2025? I mean if I'm looking sequentially, you have like effectively a drop of 50% in EPS from Q4 to Q1 as guided, and that's a little bit wider than what you typically see, right? So I'm just trying to make sure, we're not missing anything when we are comping or lapping the Q4 2025 and Q4 '26.

I think that Q4 2026 will put us in a better position compared to Q4 2025. This improvement is mainly because I believe our logistics operations will perform significantly better in Q4 2026 due to increased customer activity, particularly among OEMs and truck manufacturers. Additionally, we made a valuable acquisition in our logistics sector at the end of Q4 2025, which should enhance our performance. On the Truckload side, I am convinced we will do better despite facing challenges, such as a 93 operating ratio. We've noticed strong performance in certain areas, like our division on the West Coast working with clients like Boeing and Bombardier, but we've also struggled with other accounts. We're proactively addressing these issues, as we recognize the need for improvement. Furthermore, one of our divisions from Daseke is succeeding in one sector while performing poorly in another, and we plan to take similar corrective actions there. We understand that running a Specialty Truckload operation with a 93 operating ratio is unacceptable. When it comes to LTL, our focus is on enhancing service quality, which we are achieving. For instance, we've shifted more freight from rail to road, reducing our reliance on rail, which can compromise service control. As a result, our rail miles have decreased significantly, and we're shifting to road transportation, which we can manage better. Although the rise in road freight rates is putting some pressure on costs, I believe that our improved service will enable our commercial team to achieve organic growth in 2026. However, we need to be realistic about the challenges ahead, as current conditions remain tough. Our customers, particularly in Canada, are uncertain about what the future holds, given the need for agreements between the U.S., Canada, and Mexico. This uncertainty contributes to a weaker outlook for Q1, where we expect significantly lower earnings compared to Q4, influenced by these unique conditions.

That's great clearly. And if I can follow up maybe on logistics. I think you mentioned that sequentially speaking, at least logistics margin expanded from Q3, don't be surprised to see that. So any color you can share in terms of what's driving this improvement? I mean, is it early days? Or is it the mix? Or is there something else? Like how should we extrapolate this performance at logistics into '26.

Yes, I believe we will see improvements in 2026. As I mentioned, the recent acquisition and our large customers will positively impact our operations. Our logistics in Canada is performing well, while our U.S. logistics is experiencing some pressure due to the current truckload market, where spot rates are rising. This situation is challenging as we have fixed contracts with customers who want to extend them, but we are resisting because of market changes. Therefore, in the U.S., we may face some pressure on profitability for the next few months. Overall, I am optimistic about the direction of our logistics. With this new acquisition and our ongoing initiatives, I expect our logistics performance in 2026 to surpass that of 2025. Additionally, I want to highlight that our U.S. truckload brokerage operations are seeing revenue growth, and this trend should continue. Steve and his team are focused on increasing our asset-light operations to achieve a better balance similar to what we have in Canada. In Canada, we've successfully implemented a hybrid model with our own assets while also generating significant revenue without them. After acquiring Daseke, we've identified opportunities to expand this asset-light revenue share. Our goal for the coming years is to increase the proportion of asset-light revenue relative to the total revenue of the company. This strategy will enhance our return on invested capital, as not investing in physical assets reduces capital costs. If our profitability and revenue hold steady, our returns will improve. When discussing this with the Truckload team, we emphasize that we cannot operate with low returns on invested capital, as that would jeopardize our future. We need to take proactive steps, and while the market can assist us, we must also drive our own progress.

And your next question comes from the line of Bruce Chan from Stifel.

You made some helpful comments around the road to rail shift in LTL. I think that makes a lot of sense for service. Maybe you could also remind us of what percentage of linehaul miles are currently outsourced on the LTL side, whether that's the truck or rail. And then given your fleet investments, do you have any plans to bring that number down this year?

Yes. We currently have about 20% to 22% of our operations on rail. We also have owner-operators in addition to third-party services. If I remember correctly, our own team contributes significantly to this. Please correct me if I'm mistaken, David.

Yes, our own guys are doing around 55%. Yes. So it's 45% outsourced.

And of the 45% outsourced, 20% of that is rail. So 25% is third party, owner up and third party.

Okay. Great. And then just maybe broad plans, if you're comfortable with that number as far as its use your model or whether you plan to bring that down over time?

If your average length of haul is 1,000 miles or more, you definitely need some rail. I can't definitively say if 20% is the right figure, but it seems to be close if the average length of haul remains above 1,000 miles. Regarding our own operations, as David mentioned, we could potentially increase from 55% to around 60% over time, as having better control with our own team helps with that. The 20% rail figure seems appropriate if we stay over 1,000 miles, and it might be the best we can achieve. It's important to note that the average weight per shipment has increased from $10.75 to over $12. While the average length of haul has slightly decreased, I’m discussing with Kal and the team that we need to adjust our market approach to gradually lower the average length of haul to reduce handling. To handle products less, we need to shorten the distance, which is a gradual evolution. But again, if you're operating over 1,000 miles, rail is necessary.

And your next question comes from the line of Ken Hoexter from Bank of America.

So Alain, maybe just a bit of a contrasting message, so maybe some clarity. You noted a weak environment, but 1Q should be flat after a down 7% ton and down 11% shipment quarter. So maybe clarity on what's driving that near 50% EPS downtick in the first quarter. And then you throw in, "Hey, it's conservative, we could do better." So is it just the weather that's stepping you back? Are there gains in the fourth quarter or any impacts from the fourth quarter acquisitions in there? Maybe just some clarity on it.

Yes. So David, do you want to give some clarity to Ken on that?

Yes, sure. In the fourth quarter, the only notable item was a tax impact of about $5 million. Aside from that, there were no significant one-time items. The main factor driving performance is the increasing volume, thanks to the efforts of the team. However, the profitability may be affected by revenue per shipment, which means that growth in volume might not translate to expected profits. It's challenging to forecast the first quarter, particularly at TForce Freight, as most earnings are generated in March. Given the tough conditions in January and February, we face a lot of uncertainties. We've done our best to be conservative with our guidance for March.

That was flat on shipments or on tonnage. I think you said both...

The shipments year-over-year potentially on shipments. Yes.

You previously mentioned a margin improvement of 200 to 300 basis points at LTL in a stable environment. If we start off flat in the first quarter, does that imply you're anticipating a flat performance for the year? Is that expectation too optimistic? Can you confirm if the 200 to 300 basis points for the full year remains attainable in your outlook? Additionally, are you expecting EPS to show at least a year-over-year increase?

Yes. Regarding the volume, as I mentioned, for the first time in 2026, we anticipate some organic growth in our U.S. LTL shipment count. We expect the weight to remain flat or increase slightly. Currently, we are experiencing some pressure on revenue per shipment, particularly in Q1, but our team is addressing this issue; we cannot accept a $5 decrease in shipment revenue. It's worth noting that our General Rate Increase (GRI) is relatively small, and although we did not implement one sooner, we plan to introduce it in mid-March, later than most of our peers. We delayed this to focus on improving our service to customers, so we feel confident asking for higher rates. In terms of global TFI, we are confident that our operational efficiency and earnings per share in 2026 will be better than in 2025. We have insights into where our OEMs are heading and recognize that the first half of 2026 will be weaker compared to 2025, but we expect significant improvements in Q3 and Q4. We are facing challenges in our business during Q1 and Q2 compared to last year. While I'm convinced we won't reach a 93 operating ratio in Q1, we are improving on a year-over-year basis during the year. We are taking steps to enhance our LTL service and anticipate modest organic growth. Our guidance is limited to $0.50 to $0.60 due to a challenging start to the year in U.S. LTL, truckload, and logistics, as some customers are less active. This is why we believe this outlook is attainable, and hopefully, we can exceed it.

Yes. And the other thing I would point out on the full year is that in Truckload, we've done a lot of work in 2025 to reduce the capital intensity of Truckload, because we had way too much equipment. And so depreciation expense will be lower in the Truckload in '26 than it was in '25. And you can actually already see that if you look at the DNA of Truckload just in Q4 is $3 million lower than it was the year prior and lower as a percentage of revenue as well, right? So there's real efficiency as it relates to the capital there. And that's going to continue into '26 and the impact would probably be higher in '26 than $3 million a quarter.

Yes. Because if I may add, guys, our revenue, if I remember correctly, our revenue per truck in Q4 is better even with rates per mile that are not that better. So velocity is more.

And your last question comes from the line of Cameron Doerksen from National Bank.

I just wanted to, I guess, follow up on M&A. You mentioned a few times the acquisition you closed in Q4, I guess, the Hearn industrial. I mean, obviously not huge, but you cited it a couple of times here as a really great fit. Can you just talk a little bit about that business? Because it looks like in your disclosures that not a huge from revenue point of view, but a pretty good margin profile for that business.

Those individuals are doing an excellent job as entrepreneurs. What they are achieving today is impressive, and being part of the TFI family is expected to benefit both them and us in the future. This is a new venture for them. For instance, they do not handle freight directly; they focus heavily on the automotive sector, yet they possess some knowledge about freight. This represents a new opportunity for them. They are already connecting with our GHG division, as they have significant capacity that can be utilized to transport freight for us. I believe there will be strong synergies among the members of our family, particularly within the Truckload sectors. They are efficient operators and have been very successful. Overall, I anticipate this will be a valuable acquisition for our logistics sector, similar to our previous ones in that area, including GHG.

Okay. No, that's helpful. Maybe just a bigger picture capital allocation question. I mean you mentioned that you continue to be active with the tuck-in acquisitions. Just wondering if you've got kind of a target for leverage at year-end? I mean, you still pretty comfortable here, great free cash flow still expected in 2026. But just any guess targets there as far as leverage and is the capital allocation priorities?

Capital allocation remains consistent. If we don't pursue any significant actions, we anticipate around $200 million to $300 million in smaller acquisitions in 2026, with a minimum of $200 million. Additionally, we will maintain the dividend. The leftover cash will likely be used to pay down debt or, depending on stock valuations, to buy back shares. We have authorization to repurchase up to 7 million shares. Currently, our leverage is at $2.5 million, but we prefer to reduce it to $2 million over time. Assuming we generate similar free cash flow as last year and account for dividends and acquisitions, we will definitely be lowering our leverage if we do not engage in stock buybacks. I don't have the specific plan in mind, David, but we are aiming to end up closer to $2 million than $2.5 million.

Yes, no doubt. And the other thing we'll point out, and we actually added this into the MD&A, were just under the table where we show the leverage ratio. That leverage ratio is calculated according to the way that our banking covenants are calculated and it includes two things that some investors may not consider leverage. One is letters of credit. And the second is the book value of earn-outs, right, which are subject, of course, to the future performance target companies. So those numbers are a little bigger than they have been in the past. And so that's why we set them out in the table. And so you can see that and you can work out by backing those out, what, let's say, the real economic leverage of the company is, which is a little lower than as presented in the banking syndicate.

Yes. With these numbers, David, I think we're at $2.2 million, right?

There are no further questions at this time. I will now hand the call back to Alain Bedard for any closing remarks.

Thank you. So all right then. Thank you very much, operator, and thank you, everyone, for being on today's call. We appreciate your interest in TFI International. And we're both confident in our position and enthusiastic about what 2026 will bring. As always, please reach out if you have any additional questions. I look forward to seeing many of you on this year's conference circuit. Enjoy the day, and we'll be in touch. Thank you.

This concludes today's call. Thank you for participating. You may all disconnect.