Tfi International Inc ((TSE:TFII)) has held its Q1 earnings call. Read on for the main highlights of the call.
TFI International’s recent earnings call reflected a mixed sentiment, showcasing resilience through strong free cash flow and revenue growth despite facing macroeconomic challenges and industry headwinds. However, the company also experienced significant declines in operating income and margins, particularly within the LTL and Logistics segments, highlighting operational difficulties. Efforts to address these issues include leadership changes and a strategic focus on improving service and cost management.
Strong Free Cash Flow Generation
TFI International reported a robust free cash flow of over $190 million in Q1 2025, marking a significant increase from $137 million the previous year. This growth was attributed to favorable working capital and effective capital expenditure management, underscoring the company’s financial resilience.
Revenue Growth Despite Industry Challenges
Despite facing industry challenges, TFI International achieved a revenue increase before fuel surcharge, reaching $1.7 billion from $1.6 billion year-over-year. This growth was supported by the strategic acquisition of Daseke, which bolstered the company’s revenue streams.
Truckload Segment Improvement
The Truckload segment saw notable improvements, with revenue before fuel surcharge climbing to $666 million from $398 million a year earlier, largely due to the Daseke acquisition. Operating income for this segment also rose to $49 million from $41 million, reflecting operational gains.
Share Repurchases and Strong Balance Sheet
TFI International demonstrated financial strength by repurchasing $56 million worth of shares, returning a total of $94 million to shareholders during the quarter. The company maintained a healthy funded debt-to-EBITDA ratio of 2.21, highlighting its strong balance sheet.
Decline in Operating Income and Margin
The company faced a decline in operating income, which decreased to $115 million from $152 million, with the operating margin falling to 6.7% compared to 9.4% in the prior year period. This decline reflects the operational challenges TFI International is working to address.
LTL Segment Revenue and Income Decline
The LTL segment experienced a revenue drop of 13% year-over-year, with revenue before fuel surcharge down to $679 million. Operating income in this segment decreased to $47 million from $85 million, and the operating ratio worsened to 93.1% from 89.2%.
Logistics Segment Revenue and Income Decline
Similarly, the Logistics segment saw a decline in revenue, falling to $385 million from $442 million year-over-year. Operating income also decreased to $31 million from $40 million, indicating challenges within this business area.
Drop in Adjusted Net Income and EPS
TFI International reported a drop in quarterly adjusted net income, which fell to $56 million from $93 million. Adjusted EPS also decreased to $0.76 from $1.24 a year earlier, reflecting the financial pressures faced during the quarter.
Challenges in US LTL Operations
The US LTL operations faced significant challenges, with a 99 OR, missed pickup rates of 1.7%, and a claims ratio of 0.9%. These issues highlight the service and cost management difficulties that the company is actively working to overcome.
Forward-Looking Guidance
Looking ahead, TFI International has provided guidance for the second quarter, forecasting an EPS range of $1.25 to $1.40. The company also plans to maintain a full-year CapEx expectation of approximately $200 million, indicating a cautious yet optimistic outlook despite current challenges.
In summary, TFI International’s earnings call revealed a company navigating through a challenging economic landscape with a mix of resilience and operational hurdles. While strong free cash flow and strategic acquisitions have bolstered revenue, declines in operating income and challenges within specific segments underscore the need for continued strategic focus and operational improvements.