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TFI International Inc. (NYSE:TFII), a North American leader in transportation and logistics, released its first quarter 2025 presentation on April 24, highlighting the company’s financial performance and strategic positioning. While showcasing impressive free cash flow metrics and a diversified business model, the presentation also revealed challenges in certain segments amid ongoing market headwinds.
Executive Summary
TFI International reported an operating margin of 9.2% for the trailing twelve months (TTM) ending Q1 2025, with a free cash flow (FCF) yield of 12.7% and FCF conversion of 82.5%. The company continues to maintain a diversified revenue stream across its Less-Than-Truckload (41%), Truckload (38%), and Logistics (20%) segments, with operations spanning both the United States (69.4%) and Canada (30.6%).
As shown in the following investment highlights chart, TFI has maintained strong cash generation and shareholder returns while continuing its acquisition strategy:
The company’s funded debt-to-EBITDA ratio stands at 2.21, well below the required threshold of 3.50, providing financial flexibility for future growth initiatives. However, the presentation also revealed a one-year total shareholder return of -51%, underperforming the peer average of -21%, indicating significant market challenges despite the company’s operational strengths.
Quarterly Performance Highlights
TFI International’s business model encompasses over 100 operating companies across North America, with an extensive network of 646 facilities, 20,756 trucks, and 42,710 trailers. The company employs 26,312 people, including 13,468 drivers, operating under a decentralized, entrepreneurial management approach.
The following overview illustrates the scale and reach of TFI’s operations:
Segment performance showed mixed results in Q1 2025. The US Less-Than-Truckload segment experienced a decline in Return on Invested Capital (ROIC) to 10.0%, down from 15.2% in Q1 2024. Meanwhile, the Package & Courier segment maintained strong ROIC at 23.3%, and the Canadian LTL segment remained stable at 18.3%. The Logistics segment posted a solid 17.0% ROIC.
The company’s segment and geographic diversification is illustrated in the following breakdown:
Detailed Financial Analysis
A standout feature of TFI International’s financial profile is its asset-light model, with net capital expenditures at just 2.7% of total revenue, significantly lower than industry peers. Truckload peers average 8.0%, Less-than-Truckload peers average 14.9%, and Logistics peers average 1.1%.
The company’s FCF conversion rates also outperform industry benchmarks across all segments, as shown in the following comparison:
TFI International has demonstrated impressive long-term growth, with a 14.8% CAGR in revenue before fuel surcharge, 14.5% CAGR in adjusted EBITDA, and 11.8% CAGR in diluted adjusted EPS from continuing operations from 2002 to 2024. The following chart illustrates this growth trajectory:
Despite recent market challenges, TFI’s five-year total shareholder return stands at 275%, significantly outperforming the peer average of 133%. However, the one-year return shows a marked decline, reflecting current industry headwinds:
Strategic Initiatives
TFI International continues to execute on its acquisition strategy, having completed 91 acquisitions since 2016, including five major acquisitions. The company emphasizes a disciplined approach, focusing on targets that are immediately accretive to EPS and free cash flow, fit with existing segments, generate high free cash flow, and offer synergy potential.
E-commerce represents a significant growth opportunity for TFI, with revenue in this area growing at a 9.0% CAGR from $165 million in 2012 to $478 million in TTM Q1 2025. The B2C component has increased from 57% in 2017 to 61% in TTM Q1 2025, reflecting changing consumer behaviors.
As illustrated in the following chart, e-commerce growth has been consistent and provides additional revenue diversification:
The company serves e-commerce customers from nearly 80 North American cities, with total U.S. e-commerce revenue of US$335.9 million and Canadian e-commerce revenue of US$141.8 million. This extensive network positions TFI to capitalize on continued growth in online retail.
Forward-Looking Statements
While the presentation maintains an optimistic tone about TFI International’s long-term prospects, recent earnings information suggests caution for the near term. According to previous earnings commentary, the company has been navigating a freight recession for nearly two years, with management expecting 2024 performance to be similar to 2023 levels.
The company’s focus on debt reduction aligns with its current funded debt-to-EBITDA ratio of 2.21, as management targets further improvements in this metric. Operational improvements, particularly in the US LTL segment, remain a priority, with efforts to enhance service levels, reduce claims costs, and invest in technology.
TFI International’s diversified business model, strong free cash flow generation, and disciplined capital allocation strategy position it to weather current market challenges while maintaining financial flexibility for future growth opportunities. However, investors should monitor segment performance, particularly in the US LTL business, as the company works to improve operational metrics in a challenging freight environment.
Full presentation:
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