TFI International Q3 2026 Earnings Call Transcript
TFI International (TSX:TFII) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
TFI International reported strong Q3 results with a notable 40% increase in adjusted diluted EPS to $1.67, driven by a significant performance in the truckload segment.
The company achieved a sub-90 operating ratio for the second consecutive quarter and generated $116 million in free cash flow, enhancing its financial strength.
Truckload segment revenue increased by 10%, with operating income nearly doubling to $100 million and an improved operating ratio of 86.7.
LTL segment revenue was flat, with operating income of $44 million, while Logistics saw a 19% revenue increase and a 59% rise in operating income.
TFI International’s leverage ratio improved, ending September with an adjusted funded debt to EBITDA ratio of 2.1.
The company provided Q4 adjusted EPS guidance of $1.30 to $1.40, expecting continued improvements in operating ratios across segments.
Management highlighted challenges in the U.S. LTL business, emphasizing the need for operational and management changes to drive future improvements.
TFI International plans to focus on asset-light operations and strategic investments while considering share buybacks given current stock valuations.
Overall, the company remains optimistic about future growth opportunities, particularly in the truckload and logistics segments, despite ongoing challenges in the U.S. LTL market.
Full Transcript
OPERATOR
Ladies and gentlemen, thank you for standing by. Welcome to the TFI International third quarter conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and a follow-up. Again, that’s one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time.
Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on Friday, October 30, 2026. Joining us on today’s call are Alain Bedard, Chairman, President and Chief Executive Officer, and David Sapernstein, Chief Financial Officer.
I will now like to turn the call over to Alain Bedard. Please go ahead, sir.
Alain Bedard (Chairman, President and Chief Executive Officer)
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 60%.
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 also discuss. 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 segments, 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% over the past year and our revenue per truck per week, excluding fuel surcharge, climbed 13%. Operating income nearly doubled to $100 million, up from $53 million in the 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 and operating income was $44 million. Again, that’s including a non-cash impairment and equates to a return on invested capital of 11.1.
To finish up the segments, 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 full percentage points from the prior year’s 8.4. Our Logistics return on invested 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 includes 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 100 basis points for our LTL.
And lastly, in terms of our outlook, we continue to expect net capex excluding real estate to be in the range of $225 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.
OPERATOR
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 one question and a follow-up. One moment please for your first question. Your first question comes from Ken Hoexter from Bank of America. Please go ahead.
Ken Hoexter (Analyst at Bank of America)
Hey, great, good morning. You 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. How should we think about the improvement potential going into fourth quarter and next year?
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, 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 more of a negative because, you know, our density is not that good. We do about 20,000 shipments a day.
We cover all the U.S. and our density is not good. Now, as you know, we’ve been going through a very rough, 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.
If you remember, January, February, it was difficult. Even Dallas was tough to deal with. 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 linehaul because at the same time that our guys cannot—our driver in our linehaul department cannot take this excess volume, we have to go on the spot market.
And the spot market in Q2 and in Q3 for linehaul 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 we had to discount a little bit on the price. So it’s like a double whammy where you get less revenue per shipment and at the same time you got more cost per shipment. So this does not work, OK? So this is why 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 with the improved teams that we have on board now, OK, 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, OK, 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, OK, in early ’27, right? So this is again another reason why if you look at our forecast EPS for Q4, OK, because this partnership is ending early in ’27, we anticipate that some customers will have to find a solution somewhere, OK? 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, OK? We feel really good with our Logistics. But another rock in our shoe on our U.S. LTL is what I just said about UPS, OK? The partnership that we had for six years with UPS—that will come to an end the end of January ’27. Now, I mean, when you look at that, you say, hey, 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, OK, 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 shoe, Ken, OK?
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 Daseke two years ago and that Daseke ship has been turned around very, very fast. I mean, if you look at when we bought Daseke, these guys were running at 97, 98 OR. In Q2, OK, 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, OK. But our U.S. operation slowly is catching up, right?
Ken Hoexter (Analyst at Bank of America)
Yeah. Just to follow up—do you need to acquire to get the density there, or is that something you can do on your own?
Alain Bedard (Chairman, President and Chief Executive Officer)
It can. 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 try, 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 come to us, the plan is going to be really to slowly build that non-union like we do in Canada. Because in Canada we run both. We run union and non-union. So to me it’s okay. We’ll run a second network if we can. And the idea is to bring more stability to our TForce rate. Because 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 one thing that we’re 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.
Very good, Jack.
OPERATOR
Your next question comes from Scott Group from Wolfe Research. Please go ahead.
Scott Group (Analyst at Wolfe Research)
Hey, thanks. Good morning. So just a couple follow-ups on that LTL. Maybe 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 GFP? Right. And then so can you just, like, how big is this GFP business today?
Alain Bedard (Chairman, President and Chief Executive Officer)
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 27th. After six 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 could 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.
David Saperstein (Chief Financial Officer)
Well, the operating income in Q3 was a little over $4 million.
Scott Group (Analyst at Wolfe Research)
Okay, thank you, Dave. And then maybe just like, Alain, bigger picture 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 two comments. And then like, 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 de-emphasizing 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?
Alain Bedard (Chairman, President and Chief Executive Officer)
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. But let’s say something nice comes around, okay? In mid 27 for sure, we were 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 can do except build some kind of a non-union network in parallel to the network that we have. In the meantime, for sure, we’re adapting the network to a 20,000-shipment company. So as an example, we’re going to have a transaction with one of our friends in Chicago where they will take over one of our terminals. We’re in discussion also with one of our terminals in the New York area to reduce our footprint, okay, to that 20, 22,000 shipments a day. And also at the same time, our focus is going to be try to bring more density to that 20,000 shipments.
Try to—you know, the average mile 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, right. This culture, 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 add to drive more change and to bring that density down because fuel is high, okay. In Canada, like I said 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 even 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 linehaul, 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 our capex 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, okay. 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 the capital intensity of our truckload in the U.S. that it has improved tremendously. Our revenue per truck is up big time. Not just because 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 one of our carriers, SPD on the West Coast, I mean these guys, they were like jack of all trade, master of none.
They were servicing the aerospace industry like Boeing and Bombardier and others, but that was with 75 trucks. But they had also another 125, 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 we said, no, no, this is over, my friend. This has just happened in Q3. Over the road is going to Wiley, okay, fine. So 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 offshore.
So that’s why I’m saying 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.
Scott Group (Analyst at Wolfe Research)
Thank you, Alain.
Alain Bedard (Chairman, President and Chief Executive Officer)
Okay, thank you very much. Appreciate it. Pleasure.
OPERATOR
Your next question comes from Jason Seidl from TD Cowen. Please go ahead.
Udayan (Analyst at TD Cowen)
Hi, morning. This is Udayan for Jason Seidl. Maybe just to go back to the U.S. LTL revenue per shipment, I think decelerated a bit here in the third quarter. Last quarter you spoke about 3PL mix being a factor. I’m just wondering, was that still a factor in the third quarter? And then if that was the case, then thoughts on how you plan to rationalize that?
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, it’s still a factor in Q3 but over the course of Q3 it’s been improving. So Q3 is three 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 yeah, it’s been an ongoing thing where commercial team, you know, it’s been really hard working at it, so… yeah.
Udayan (Analyst at TD Cowen)
All right, thanks. That’s helpful. And maybe just sticking on the—you mentioned the linehaul pressures here. Can you maybe give us some detail? Maybe remind us how much rail you utilize presently? And maybe, you know, on the trucking side, is there an opportunity to kind of enter more, you know, contract type exposure and reduce…
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, yeah. 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-op, okay, that is also exclusive to us. And over that, we have also contract. But when the volume went from, let’s say, 19,000 shipments to 22 at the peak, we had to go on the spot market because, I mean, we didn’t have enough power with our own team, okay.
We moved 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, $2.90, whereas, let’s say eight months ago, it was like $2.20, right. So that killed us, okay, in Q2 and in Q3. Now at the end of three, we’re back to normal because now, okay, we don’t have to go on the spot market to get power for our linehaul.
Udayan (Analyst at TD Cowen)
All right, very helpful. Thank you very much, Alain.
Alain Bedard (Chairman, President and Chief Executive Officer)
My pleasure.
OPERATOR
Your next question comes from Ravi Shanker from Morgan Stanley. Please go ahead.
Ravi Shanker (Analyst at Morgan Stanley)
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, kind of. 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?
Alain Bedard (Chairman, President and Chief Executive Officer)
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 could see, pricing war because we have smart leadership. The U.S. LTL, okay. With the leader. Okay. Running a 7 OR with the second next one running an 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 us, it’s us. We are the problem us. I mean, it’s not the market, that’s. It’s us, okay? So we have to do a better job, okay, commercially to identify what spits. 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 in retail. I mean, we don’t move that. Us, we move industrial. So again, those industrial customers have LTL. But U.S., 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, guys, wake up and, you know, let’s piggyback our U.S. LTL commercial team working with our, you know, truckload commercial team to get more of that industrial, okay, freight 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, okay, 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 better than the Canadian one, 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.
Ravi Shanker (Analyst at Morgan Stanley)
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 2027, especially around rates and bid season, especially as 27 kicks off.
Alain Bedard (Chairman, President and Chief Executive Officer)
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? So this has helped us to a certain degree so far in 26. But you know, going into 27, I think that this is some kind of a permanent change. And if the demand starts to grow, I mean like in the building material for example, I mean this is like dead for us.
I mean, 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 one point. So building material is key to U.S. steel, aluminum and all that. So we feel very good about 27 because at one 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 six months in 27, maybe all year of 27 to have a state-of-the-art U.S. operation like we have in Canada.
David Saperstein (Chief Financial Officer)
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. 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.
Right. 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 invested capital in truckload, it jumped from 6% to 8%. It’s enormous. It’s a 33% increase in ROIC year over year.
And I would encourage you to benchmark other truckload players. 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 built in this way to get these returns. And you’re seeing that transformation take place. And so when Mr. Vidar talks about these further adjustments that are still to come, because 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.
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah. And guys, on the brokerage, if I may add, I mean, we’re not like some of our peers in the brokerage world, okay? 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 that we deal. The same is true of GHT. As an example, okay, when we’re moving trucks for our OEMs, we have one of our agent 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 one 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.
Ravi Shanker (Analyst at Morgan Stanley)
Understood. Thanks for both the color.
OPERATOR
Your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead.
Walter Spracklin (Analyst at RBC Capital Markets)
Yeah, thanks very much. Good morning, Alain. Good morning, David. Coming back to your costs, 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.
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah. So, Walter, I mean, are you talking about LTL or truckload or both?
Walter Spracklin (Analyst at RBC Capital Markets)
Mainly on the, where you’re seeing the most inflation. Yeah. In the areas where you’re seeing the most labor inflation, wage inflation.
Alain Bedard (Chairman, President and Chief Executive Officer)
Okay. Well, on the truckload side, for sure, Walter, us. 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 per trucks. Also, the other thing that Steve and his team has focused is the empty miles, right? Between, okay, the unloading of your customer and the reloading of your next customer between the two, okay? 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 by reduce, or 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%. It’s no big deal. It’s the third party that we’re using for linehaul or for the last mile. That is where we got a lot of cost increase. And this is why we had to go back to do it ourselves 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, 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 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 is this, that. No, no, forget about this guy, okay?
Get this guy out, okay? We need $5,000, $6,000 per truck per week, okay? Because under that it’s difficult to be profitable.
David Saperstein (Chief Financial Officer)
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 in LTL is 4% this quarter as opposed to 7.5% last quarter.
But those costs came out of the network over the course of the quarter and not necessarily in lockstep with the volumes coming out. So as we look though now in towards the end of the quarter, the balance is there, and October, the balance is there. And so some of those excess cost lags were impacting Q3 and are no longer there today.
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah. And you know what, Walter, when you think about the theory is, you know, if a guy delivers 15 shipments a day, you give him two more. Okay. I mean, this is going to be very profitable. But you know, if the guy comes back with those two 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. You know, 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. You 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, okay, of that additional freight, if you want to call it that.
Walter Spracklin (Analyst at RBC Capital Markets)
That’s great color. And 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 plan. We just had a bunch of retirements in the railroad sector. Last night our friend Giselle announced he’s putting up the gloves as well. When I look out to your plan and your strategy over the next year or two, 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? Are divestitures in the works? 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 2027 or 2028?
Alain Bedard (Chairman, President and Chief Executive Officer)
But you know what, Walter? We got a lot of opportunity on 150 to 200 million dollars EBITDA with low DA. Okay. We don’t like DA 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 Daseke acquisition. And if you go back, 25 was not great for our truckload business. I mean, because we had all kinds of problems, okay, 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 US and it’s a confirmation in Q3. And we still have some work to do. But, you know, if the right thing, the right investment comes along, okay, sometimes in 27, we’re ready. Okay, we’re ready. Now. It could be of size. Okay. It could be, you know, a $100 million EBITDA company. It could be a 2 to 300. I mean, we’ve got capital to justify through that. A billion. A billion and a half. Okay. Acquisition cost of an acquisition. And you know, what we look at is always the same thing: it’s the US LTL, okay, we’d like to do something there.
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’re brokering to a jack of all trades and you got the risk like some of our peers. Our logistics is not just brokerage. I mean, we do brokerage, yes, but, you know, we move trucks, we do all kinds of work for Ford in contract logistics, etc., etc. So it’s not just one thing that we do. 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.
Walter Spracklin (Analyst at RBC Capital Markets)
Appreciate the color as always, Alain. Thank you.
Alain Bedard (Chairman, President and Chief Executive Officer)
You’re welcome.
OPERATOR
Your next question comes from Brian Osenbeck from J.P. Morgan. Please go ahead.
Brian Osenbeck (Analyst at J.P. Morgan)
Hey, good morning. Thanks for taking the question, guys. Just two quick follow ups. First on US 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 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 bifurcate 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.
Alain Bedard (Chairman, President and Chief Executive Officer)
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 one. Number two, what we’re building as a non-union, okay, with just a thousand 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, okay, is the dock. And this is the direction that we’re going in the US in the non-union LTL operation: we’re going to manage a dock, yes, us, but all the P&D, all the linehaul will be third party, right?
So why are we doing that? It’s because we hate capital intensity. So we’re going to start building that because we believe that one day, okay, in the US 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 one 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%, like we did in Canada, okay. We are slowly going to build a non-union, asset-light, okay, operation in the US. That’s the goal. Unless we find a solid operator at a 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.
Brian Osenbeck (Analyst at J.P. Morgan)
Okay, understood, thank you. Just for a quick follow up, I guess it relates to that comment about going more asset light. Looks like some of the reserves for accidents were up and that includes a reversal, I guess, from the prior year. So 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, not only from a brokerage liability perspective, but also just from an auto liability claims and how that’s also inflationary.
David Saperstein (Chief Financial Officer)
Yeah, well, so the fact that—so our accident accrual this quarter was very much in line with normal. Right. Most of that, a lot of it, is in corporate costs, especially for the larger accruals. And you can see our corporate costs were around 14, 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 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 as it relates to managing this, the approach, of course, is to have kind of 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, this is why 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 aggressively and quickly and proactively because time is against you in these things.
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah. And if I may add, in our truckload guys, we are starting to implement inward-facing cameras, that’s number one. We’re also implementing to teach our driver simulator, like, you know, those airline pilots. So we are introducing simulator to our GHT team, to our TForce Freight team, so that you can test a driver in all kinds of different environment. So that’s ongoing. And then on top of that, if I go back to brokerage, pure brokerage, that we do, because our loss ratio is so minimal.
Okay, David, so what did we do with the insurance on that?
David Saperstein (Chief Financial Officer)
Well, on the brokerage we did go out and buy much higher limits, much higher coverage on the brokerage, and it cost us very little because our loss ratio in brokerage is zero.
Brian Osenbeck (Analyst at J.P. Morgan)
Okay, very helpful. Thanks, guys.
OPERATOR
Your next question comes from Jordan Alliger from Goldman Sachs. Please go ahead.
Jordan Alliger (Analyst at Goldman Sachs)
Yeah. Hi. Morning. Just a couple things. One, on the logistics front, which is doing quite well, is it primarily being driven by brokerage? I know you have other services in there as well. Can you maybe talk a little bit about that? And then secondly, just on the LTL, appreciate all the comments on it in terms of things to think about and how to fix. But Alain, do you have a time frame for the fix where we could start to see better profitability?
Is this 6 months, 12 months? And is there a point in time where you say, okay, we have to start the script over and come up with a new three-year plan? Thanks.
Alain Bedard (Chairman, President and Chief Executive Officer)
Okay, so in terms of the time, you know, we bought this company, think about that, five years ago, okay, in May of this year. It took us two years to get financial information that we can manage, okay—so 21, 22, all the way up to the summer of 23. So we’ve been at it for three years and it’s not doing well. Right. So we made some changes. We’ve invested in talent coming from outside the world, okay, the Canadian team. Because what we’ve done since day one is we brought some Canadian guys to help the US team.
But now, okay, what we’ve been able to accomplish is to bring an executive from one of our peers, okay, that had retired, and we said, hey, maybe you’re up to another challenge. I mean, so this guy joined us October 1st. So I think that now the recipe is to try to improve. I remember one of our shareholders, major shareholder, always told me, Alain, I mean, you got to hire a super guy like one of your peers did. And us were saying, well, yeah, but we’re unionized, okay. And maybe this guy was right, okay, one of our investors at the time. But now that’s what we’re doing: we’re beefing up with people from outside this UPS world, UPS Freight world, okay, that we got.
Because we’ve tried, we’ve tried, but it’s like, you know, you’re trying to change a guy that’s been in an environment for some 20-some years and, you know, he’s been used to not care too much about service, not care too much about cost because, you know, it’s just the way it is. You’re trying to change this guy, but nah, it doesn’t work, right? So new broom sweeps clean. So after three years of trying and trying and trying, okay, we said we got to change the recipe, okay.
And that’s what we’re doing now, okay. We’re changing the recipe. So we’re going to bring more executives from some of our peers that’s got experience in our world to turn this ship around and to change this mentality of we don’t really care. Right? It’s simple why we have executives that don’t care or employees that don’t care in that world. It’s because the previous owner did not care about UPS Freight. I mean, they did not invest in the fleet, they did not invest in real estate, they did not invest in the technology. Because for them it was like, forget about it. I mean, we don’t need that. Our focus is the other company and we’re doing great there. Okay, fine. So all this, we tried to change this old executive team there and improve them by giving them financial tools, better technology, better assets, etc., etc., but it’s not working.
I mean, if you look at the result, it’s not working. Right? So we said now, okay, guys, this doesn’t work, okay. So we need now to change course and that’s what we’re doing now. Your first question— Logistics. What was that, Jordan? Could you repeat it?
Jordan Alliger (Analyst at Goldman Sachs)
Yeah, just what’s driving the logistics? Obviously, brokerage. Last mile. You have other things in there.
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, yeah. So on the logistics side, for sure. I mean, we’re piggyback on the OEMs, right? So the OEMs, like Paccar and DTNA, those guys are doing good. Well, for sure we’re going to do better, right? So this is something that’s helping us. The other thing also that’s helped us is the acquisition we did December of ’25, late last year, of two entrepreneurs that built a fabulous company. Okay? So now with these guys, we are now involved in data centers.
We’re involved also with one of our customers on the storage, you know, the battery storage that these guys are building. So, I mean, those guys are really building a fantastic business. So that’s helping our logistics. Our U.S. last mile also is doing quite well. On the Canadian side, we’ve lost a little bit of business. We had the business with the banks in Canada through Symcor that was doing great. I mean, 15 years ago that business was supposed to disappear and now it’s disappearing, right? So we rode the horse until it dies, but that horse is dying on us right now. Okay, that’s on the Canadian last mile operation. So we have all kinds of puts and takes, but at the same time we are growing the business organically in our logistics sector.
Piggyback on, yes, we’re big with two major OEMs, but also growing with the smaller guys like Hino and Isuzu and all these guys. And for sure, I mean, on the EV side of the truck, that’s something new for us. Okay, for sure. These guys will not use only one carrier. They will probably use three carriers. We’ll be one of them. So again, I mean this is all nice opportunity that we have in terms of growing this business.
David Saperstein (Chief Financial Officer)
Yeah. And the logistics, as you can tell, the margins are really top of the peer group and growing fast. Right. We did 49 million of operating income in the quarter. That’s up from 31 last year. And so it’s really a collection of asset-light businesses. This is not just commoditized brokerage at all. It’s a collection of asset-light businesses where we’ve got really good market share, good barriers to entry, good connectivity with our customers. They’re all just a collection of great businesses that continues to grow.
Thank you.
OPERATOR
Your next question comes from Cameron Darkson from National Bank. Please go ahead.
Cameron Darkson (Analyst at National Bank Financial)
Yeah, thanks. Good morning. You touched a little bit on this already, but I’ll maybe ask it again or a little different way just on the U.S. LTL business. I mean, obviously this is a source of frustration for you and for investors as well. But if the desire, I guess, for the company as a whole is to become more asset-light, and obviously you indicated that you’re looking at potentially asset-light LTL acquisitions in the U.S., is there an option, or does it make sense at all, to maybe divest the TForce Freight business in the U.S.?
It just seems like this may be something that takes a lot longer to get to the type of returns that you really want than maybe you’re willing to be patient about.
Alain Bedard (Chairman, President and Chief Executive Officer)
You know what, Cameron? We sold a few business in my 30 years’ life with TForce, with TFI. We sold the waste to GFL and we sold… what did we sell? Okay, the waste and CFI. So, you know, the waste, the reason we sold the waste is because we can’t grow it, right? Because we were trading at 6 and the market for waste was 10. So we sold it. And CFI was we don’t want to be in the truckload sector. If you look at TForce Freight, the van world, okay. If you look at TForce Freight, we want to be in the LTL.
So to me, it’s been a disappointment. It’s been… I’m not happy at all with what’s going on, but it’s a fight, and we’ve been fighting but losing. So, I mean, we’re going to keep fighting. And I think that Cal’s approach is, you know, we’re going to change the recipe. We’re going to change… I mean, we’ve invested tons of dollars with the asset, the fleet and the real estate, the tools, etc., etc., and it’s not working. So then what’s left? Well, it’s the human asset that we’re going to have to invest and change and improve.
So this is the kind of war that we’re going to go through in the next year and two. This question that was asked, how long is this going to take for you to fix it? Well, I mean, it’s going to take time, but I mean, we fell, we’re on the floor, okay, but we’re going to stand up again and we’re going to keep fighting on that, Cameron. So we have no intention of selling our U.S. LTL at all. I mean, but we want those guys to be efficient, to be productive, and after improving everything except the human side of the business and it’s not working, we’ll say, hey guys, the problem is the human.
I mean, there’s no more excuse on the fleet, there’s no more excuse on the financial tools or whatever. I mean, it’s just that we have the wrong guys.
Cameron Darkson (Analyst at National Bank Financial)
Okay, no, that’s helpful. I’ll leave it at one question. Thanks very much.
OPERATOR
Your next question comes from Kevin Chang from CIBC. Please, go ahead.
Kevin Chang (Analyst at CIBC)
Hey, thanks for taking my question here. Maybe if I just take a step back, and I think back to the last cycle, and I know different factors were at play, but you achieved over eight bucks of EPS, clearly during a more robust volume environment. I think expectations were that you could reach a higher high as U.S. LTL hit the KPIs you wanted. But let’s say, excluding a recovery in U.S. LTL, is that level of EPS growth, like $8, $9, still achievable for the rest of the business?
Just given, clearly TForce Freight wouldn’t have been much of a contributor back four or five years ago.
Alain Bedard (Chairman, President and Chief Executive Officer)
Well, Kevin, I mean, I think that today, based on what I know about this market that is still in… we’re still in a freight recession, right? So let’s say that we accomplish $1.40 in Q4, we end up the year at, what, $5.50 or something like that, okay. Which is still far from eight. I mean this is a long way from me. Now, with all the tweaks that we have to do with the rest of our business, logistics and truckload and all that, can we add a buck?
Okay. In this freight environment, maybe. Okay. I’ve not seen ’27 plan yet, okay. I’m going to be in Toronto two weeks to review all that with the team there. But it’s difficult until we have freight coming back to normal, okay. And we need the contribution of TForce Freight to be an eight-dollar guy. I mean, if those guys continue to be minimal contribution to us, it’s going to be tough for us to be back to eight. We need those guys to get the job done right to get to that $8.
Now, don’t forget when we got $8.22, we didn’t have GHT, we didn’t have Daseke, okay. But don’t forget also that we pay, in terms of interest, because our debt is still around $2.2 billion, okay. We don’t do anything of size, okay. In ’27 our debt from 2.2 is going to go down to maybe, I don’t know, down, let’s say, $500 million, okay. At 5% of interest costs it’s $25 million. After tax, let’s say it’s $20 million on 80 million shares, okay. Well what is that? $0.25, okay. So we’re heading in the right direction if this happens. But we’re not at $8 at all. So we need the freight market to come back to be an $8 guy in my mind, and the contribution also of TForce Freight.
Kevin Chang (Analyst at CIBC)
That’s helpful. You need the contribution. Maybe just a quick follow-up. Just given where the stock is now, just changes in maybe near-term capital allocation. Do you lean more on the buyback here? You were active in October. Does that accelerate here just given the move in your share price?
Alain Bedard (Chairman, President and Chief Executive Officer)
Well, for sure. I mean, Kevin, I mean we, like you said, we bought back about 400,000 shares in October. You know, we’re at a crossroad right now, okay. Based on… so what do you do? Do you do M&A, okay, or do you just buy back your stock and wait, let’s say, 6 months, 12 months to have more confirmation that this freight environment is changing, or you just do some small tuck-ins like we always do. So, I mean, this is, for us, it’s going to be a major decision into ’27.
It’s that based on the stock price, based on what’s going on with our industry. If you just go back to, let’s say, six months ago and today, our stock is down, what, 30%, David? Or about. Right? So, I mean, were we overvalued then and now we’re undervalued? But it’s not just us. I mean the industry in general is down big time, okay. So, I mean, it’s going to be a balance, okay, that we’re going to have to look at. So for sure, we’ll look at the reaction on the stock, we’ll look at the reaction of our investors, okay, and what they’re saying. And for us, if we don’t do anything of size, to buy back a million shares at 100 U.S., I don’t know if the stock is 100, but we’ll see, it’s just 100 million U.S., and we’re going to generate probably, without any large M&A transaction, another 7 to $800 million of cash in ’27, even if this soft environment continues.
So why take the risk of huge M&A when you’ve got a stock that is in the doldrums?
David Saperstein (Chief Financial Officer)
That’s always been the beauty. That’s why we have a 30-year track record of compounding so tremendously. It’s just that we generate so much free cash and we reinvest it. We give back a solid amount to the shareholders in the form of a dividend, which has a very long track record of increasing each year, but the rest is reinvested and it compounds over time. So that’s always been the key to the long-term success.
Kevin Chang (Analyst at CIBC)
I appreciate you taking my question and best of luck as you close out 2026 here.
Alain Bedard (Chairman, President and Chief Executive Officer)
Thank you.
OPERATOR
Your next question comes from Bruce Chen from Stifel. Please go ahead.
Bruce Chen (Analyst at Stifel)
Hey, good morning, gents. Just a couple of cleanups here. You know, on the truckload side, you’ve made some nice progress on pricing. And I know you said, Alain, that you see some upside in bid season for next year. Just want to get a sense maybe for what you’re seeing in terms of contract renewals. And then, David, is there anything that we should be thinking about as far as headwinds for driver cost inflation given the tightness in the market?
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, yeah. So we know that contract rates, I mean, the guys are working on that. I mean, we have a customer, okay, contract is due November 1st and we’ve honored the contract, us, and we’re saying, Mr. Customer, I mean, you’re going to have to pay 20% more. So the guy says, oh, this is a lot. I mean, can we extend the contract for another year? And we said, no, no, because this is reality. So for sure, and also what we’ve done, what Steve has done, is that now we have a commercial team under one leader, which is Scott Hoppe, right?
So Scott sees everything that’s going on, right? So this customer, our friend Scott is involved. And for sure, this is what we need. Now, it’s not easy when the market has to be adjusted 20% to reflect market condition, but I mean, we’ve audited the contract. Now this is reality, Mr. Customer. So what we see in contract renewal is that prices are going up. Prices are going up. Now to the second leg of the question. Like we said, we have pressure on labor costs. Why is that? Because everybody is looking for drivers, right? And it’s the eternal issue that when, okay, you got more freight, although we don’t have more freight, but we have less drivers’ availability while everybody is looking for drivers right now. So that brings inflation to the salary, which, between you and me, I think is needed when you have 3–4% inflation.
So you need to adjust the salary of those guys. And at the same time, I mean, we have to push customers around that. This is the new reality, my friend, and this is the new price. And we’re not in the business of practicing delivery. Just fun. No?
David Saperstein (Chief Financial Officer)
Yeah. And I think in terms of quantifying it, the revenue per truck per week, which we publish, is a really good indication of where pricing is. Right? We’re up 13%, because it’s always… that’s where the facts really hit, right? Because it’s one thing to get contract rate increases, but the question is, how many miles do you get at those contract rates? It doesn’t help you if a customer gives you a big rate increase and then he doesn’t give you any freight.
So where the rubber meets the road is really, what’s the revenue per truck? Is that going up or is it going down? In our case, it’s going up 13%. So that gives you a sense for realized pricing. And of course, there’s a little bit of productivity, more miles in there. But then the beauty of our model is that in the face of driver shortage, difficulty recruiting, et cetera, we’ve been able to grow our revenue while decreasing our truck count. Why? Because we’re brokering more. And so this enables us to sort of work through this driver inflation kind of situation more effectively because we’re actually reducing our driver pool while increasing our revenue.
Alain Bedard (Chairman, President and Chief Executive Officer)
Hey, you know what? We were heading in the right direction in ’25. I mean, from ’25, okay, everything… our service was improving big time. Then we messed it up. I mean, we messed it up in ’26, right. Why is that? Well, first we start the year with this issue with the weather. I mean, everybody’s got issues with the weather, but it seems for us it was more prevalent, okay? And then we add volume and the shit hit the fan, right? So our service tanked.
So this is the wrong direction. Now we’ve addressed that. So from that disastrous nine months of ’26, now we’re heading in the right direction in terms of… because we have stability. Now we’re at 19.5, 20,000 shipments. Now we have stability. And now the focus is, guys, we have to deliver on time. We cannot lose customers’ freight, okay? Et cetera, et cetera. So to improve the service, because that’s the key. This is like the chicken and the egg. What comes first? Well, what comes first is the service, okay? Once you have the service, then you could be a top-class carrier and you can ask for more money. But until such time that you’re a dog in terms of service, it’s difficult to get the premium revenue per ship, right?
So this is why the trend has to be, hey, guys, okay, forget about the first nine months of ’26. We… we shit the bed, okay? But now let’s roll up our sleeves and do the job. And this is what the team and the executive team that we’re building, okay…
OPERATOR
Good. Your next question comes from Konark Gupta from Scotia Capital. Please go ahead.
Konark Gupta (Analyst at Scotiabank)
Thanks, operator. Good morning, Alain and David. Thanks for squeezing me in. Alain, we probably haven’t talked a lot about 2027 yet. I’m sure you’ll probably talk about that with Q4. But just to build a framework for where things are heading, 2026 was like a hybrid year, right? I mean, you had parts of recession and parts of some rebounds and capacity exits and rate improvements, et cetera. I mean, when you look at 2027, do you expect, broadly, volumes in your Truckload and LTL segments to be up, margins to further improve, and maybe further growth in Logistics?
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah. You know, Konark, we believe that ’27, on the Truckload sector, the freight environment is going to be still soft, but the supply is going to be constrained, okay? So that’s going to help us in ’27 like it helped us in Q2, 3, and 4 of ’26. And like I said earlier, we still have some tweaks to do of our own to improve our profitability on that. On the LTL side, U.S. LTL side, I think that the market will still be soft too, and us there, we have a big job to do. I mean, in terms of doing a better job in terms of service, reducing the cost, etc., etc., improving the mix, improving the revenue per shipment and all that. So like I said, the chance we have in U.S. LTL is our peers are smart. I mean, we’re dealing with guys, professionals that are really good, okay? So at least the market is stable in terms of pricing.
There’s no war on rates and all that. Volumes are down a bit. You know, everybody is doing a great job except us, okay? So this is why, you know, we are addressing that by… you know, we’ve done everything we could on the fleet, the financial tools, all that. We did everything that is possible to do and we don’t have the results. So then, like I said earlier, now we’re attacking the human side of it, okay? Because, you know, if you’re sitting on your hands, I mean, we don’t need you, right?
And this is where we’re at now. I mean, we got too many of those service managers or that day-to-day team that accept things that are completely unacceptable. So that, to me, we should see some improvement during the course of ’27 in our U.S. LTL. Canadian LTL, we’re doing great. Logistics, we’ve got some great opportunity in ’27. So this is why we feel really good about what these guys have done, okay? And the potential for ’27. I mean, we have a great team. The only cloud is the bank business in Canada that we’re losing, okay, because of technology. So that’s a little bit of an issue in Canada, but the team will replace that business. It’s going to take us some time, maybe a year to two years, because this was great business for us.
But really, in our Logistics world we have a fantastic team with a lot of organic growth potential. A little bit like Steve Brookshaw in the U.S., our revenue is up, so it’s organic growth. And the way we’re set up now with Steve Huppey, Scott Uppie in charge of all of our commercial team in the U.S., we’re going to see huge benefit, in my mind, of that during the course of ’27.
Konark Gupta (Analyst at Scotiabank)
Okay, that’s great, Alain. I appreciate that. And just if I can squeeze one more in here. On the LTL, you laid out some expectations for operating ratio to be up as much as 100 basis points in Q4. Can you frame expectations for tonnage and yield into Q4?
Alain Bedard (Chairman, President and Chief Executive Officer)
I think it’s going to be year over year… I don’t know that, Konark, but I would say that versus Q3, it’s probably, in terms of pounds, in terms of volume, going to be probably about flat versus Q3.
David Saperstein (Chief Financial Officer)
Yeah. And Konark, if you look at the press release, I want to make sure that you see what’s in the press release. We say that 0 to 100 basis points decline in LTL year over year.
Konark Gupta (Analyst at Scotiabank)
That’s in the model.
David Saperstein (Chief Financial Officer)
That’s what’s in the press release.
Konark Gupta (Analyst at Scotiabank)
Yeah. Not… and I think… right… I mean, sorry. The decline is an improvement? No,
David Saperstein (Chief Financial Officer)
No, no, no. It’s… no, no, no. It’s improvement in the quarter. So if you look at how it’s written, talk about… when you talk about Truckload, it’s an improvement of 400 to 500 basis points for Truckload, 100 to 200 basis points for Logistics, 0 to 100 basis points decline
Konark Gupta (Analyst at Scotiabank)
the LTL. So improvement is Truckload and Logistics, deterioration is in the LTL?
David Saperstein (Chief Financial Officer)
Yeah, in the LTL. Absolutely.
Konark Gupta (Analyst at Scotiabank)
Okay, I got it. Perfect. Thanks. So tonnage is flattish on… deterioration. Perfect. Makes sense. Thank you.
OPERATOR
Your next question comes from Benoit Poirier from Desjardins Capital Markets. Please, go ahead.
Benoit Poirier (Analyst at Desjardins Capital Markets)
Yes, thank you very much. Good morning, Alain. Good morning, David. Just on the TL, if I look at the implied guidance for Q4, it implies that you’ll be finishing the year with a 400 bps improvement versus last year, so probably around 89%. So I was just wondering what kind of OR improvement we might be thinking of for next year. And I understand that there are some investments to be done with Mr. Brookshaw. So I’m just wondering what could be some reasonable expectation.
Doesn’t look like that you have the ability to hit 83 or 80% as it was previously discussed before on this call, given the current macro backdrop. So if you could provide more details around TL, that would be great.
Alain Bedard (Chairman, President and Chief Executive Officer)
Thank you. I think, Benoit, if you look at ’27, we still have some tweaks. Now, Q1 ’26 was not good for us, right. So I think that Q1 ’27 is going to show major improvement versus Q1 ’26, okay. That’s number one. And globally, okay, like you said, if you look at the year, you know, can we… year ’27, can we be a sub-85 OR? I mean, we’ve done that before. But the market, the demand is still soft. What’s helping us is the supply, but the market is still soft.
So with the same kind of market condition, I think that to be an 85 OR for ’27, I think that this is… this is probably the best that we can do with this kind of an environment. Now, don’t forget that our Canadian operation has been affected by tariffs, right. So steel, for example. So we don’t know what’s going to happen with steel, but we know one thing is that us, okay, we’re the largest carrier of steel in Canada, right, or Canada to the U.S., and we don’t move a pound right now of steel between the two countries. So that’s something that we don’t know. Probably steel will still be 50% tariff. So if this is the case, whoops, this is not going to help us.
So there’s a lot of small things that could help us, but we don’t anticipate anything major to help us in ’27. Except, okay, the supply constraint is going to continue. Fuel, we believe, is going to stay high, which is not helping us at all in our Truckload, okay. Because right now fuel surcharge is 100% of the freight bill. This is tough to swallow for customers, right. So if you add all that, Benoit, I think that if we get 85 and grow organic growth too, right, on the revenue side, Mr. Brookshaw and his team will have done a fantastic job in ’27.
Benoit Poirier (Analyst at Desjardins Capital Markets)
Okay, that’s great. And you’ve been talking about some external help to join the team at TForce Freight. So I was just wondering where the new guy comes from and what will be his role versus Carl and Chris. That would be good.
Alain Bedard (Chairman, President and Chief Executive Officer)
So, Benoit, this will come public, okay, probably within the next few weeks, right. So it’s still not public, okay, so this is why we’ll say that publicly in the next… probably before, because I’m having a meeting with those guys in Toronto, I think it’s the week of November 15th. And so this is why after that, okay, it’s going to be public.
Benoit Poirier (Analyst at Desjardins Capital Markets)
Okay, perfect. And maybe just a quick one. Obviously on the LTL there, I would expect more details. There are still some investments to be done in 2027. If I look at the guidance, it implies you’ll be about 91.5% OR for the year. So what kind of reasonable expectation we might see for LTL? Could we see even some deterioration given all those investments to be made, or you would expect some improvement in terms of OR from LTL next year?
Alain Bedard (Chairman, President and Chief Executive Officer)
I don’t think so, Benoit. I think that we’ve done everything that we could, okay, in terms of investment. Now we’re investing in people, okay. And I think that I would be very disappointed for ’27 if we don’t break the 90 OR, globally.
Benoit Poirier (Analyst at Desjardins Capital Markets)
Okay, okay. Okay, that’s great. Thank you very much for the time, Alain.
Alain Bedard (Chairman, President and Chief Executive Officer)
Very good, Benoit, thank you.
OPERATOR
And your last question for today comes from Ari Rosa from Citigroup. Please go ahead.
Ari Rosa (Analyst at Citigroup)
Hey, good morning, Alain, David. So I want to stay on kind of the subject that everyone else has been talking about, but I want to ask it from a slightly different angle if I could. Alain, in the past you’ve spoken about viewing the U.S. LTL business as not necessarily structurally broken, given the union. And now I hear you talking about wanting to expand in kind of non-union areas within LTL. I’m just curious to hear, like, has your thinking evolved in that regard?
I mean, I hear you saying kind of the people are the problem, the mindset, the culture is the problem. I’m just wondering, like, what do you say to skeptics who… hey, the business seems to be structurally broken? You know, if we’re looking at a management change and we look forward kind of 12 months, 18 months, and we’re still seeing that business under pressure, like, what’s the answer? What then?
Alain Bedard (Chairman, President and Chief Executive Officer)
Yeah, yeah. You know, you can’t blame the drivers, okay? I mean, if those guys are not efficient, it’s got nothing to do with the driver. The driver will do what he’s supposed to do if he’s managed properly, okay? And if he doesn’t do what he’s supposed to do, then the management has to sit down with this employee and make sure that he’s going to do what he’s supposed to do or he’s going to have to look for another job, okay? So when I talk about the issue of people, I’m talking about the management.
I’m not talking about the dock guy or the driver. I mean, those guys will do what they’re supposed to do if you manage them properly. So it’s a management thing. So this is why I’ve said don’t blame the union. Don’t blame the fact that the guy’s a unionized guy to say that the results are poor, okay? No, because we have the same issue in Canada. We have unionized guys. And the results are great. So it’s not the union or the driver. Yeah, maybe we have some guys that are cheating, et cetera, et cetera, but the start is really the day-to-day management of those guys.
So that’s for TForce Freight. And in terms of building a non-union in parallel, the objective is really to build an asset-light network. And an asset-light can be done in a non-union environment. So it’s not like we’re trying to build a non-union environment just to be in a non-union world. Our objective is to build something that is asset-light and in order to do that you can’t have a union. Right. So that’s really the direction that we’re going.
Unless we could find down the road maybe an LTL operation that makes sense of size. Right. We’ll see. I mean we’re having some discussion with some carriers that, hey, you want to join the team? Okay. And we’ll see how this goes. But in the meantime, our TForce Freight business is not performing well at all. But it’s not the issue of the driver or the dock guys or the union, it’s the issue of the local management that are not managing properly or effectively those guys.
Thanks. Because we have a huge revenue with basically little contribution. So this is the issue we have, guys. I mean, if you look at the latest investment of Daseke, this thing has been turned around. Okay. We’re doing well. Our logistic is doing well. Right. The big rock that I got in my shoe for the last few years is TForce Freight. So we tried everything with those guys, right? The fleet, the financial tools, the real estate. We’ve tried everything and the results is not good.
So now we’re saying, guys, the problem is the people, right? Not the drivers, not the dock workers. I’m not saying that. I’m saying the way we manage those guys, okay, that is problem number one that we got to fix. We got to bring pride to this company that, you know, if you look at all of our business units, even the Daseke companies that we two years ago, we have people that are pride of their company. I’m not too sure how many people are proud of TForce Freight today. With every investment that we’ve made, it’s still like, well, you know what? We don’t really care about what’s going on. I mean, we don’t provide good service. We bring back the delivery of this shipment back to the dock.
We were too busy. We were too busy at the coffee shop, probably, and we’re just bringing back. I mean, service suffers, right? So this is all these things that you say, well, did you see that before? Right? After three years of looking at it, well, there was always, well, we need this, we need that, we need this, we need that. Now you got everything. You got everything that you need, and you’re still not performing well. So the problem is the guy that’s sitting on that chair.
My pleasure.
OPERATOR
And there are no further questions at this time. I will turn the call back over to Alain Bedard for closing remarks.
Alain Bedard (Chairman, President and Chief Executive Officer)
All right, so thank you, operator, and like to thank everyone for joining our call and for your interest in TFI International. So we look forward to finishing the year strong and seeing many of you at the sixth investor conference that we’ll be attending before year end. As always, please don’t hesitate to reach out with further questions, and please enjoy the weekend. Thanks again.
OPERATOR
Ladies and gentlemen, this concludes today’s conference call. You may now disconnect. Thank you.
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