Saia, Inc. Aktie

Good day, and welcome to the Saia, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Chad. Good morning, everyone. Welcome to Saia's First Quarter 2026 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should note that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all of the statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

I will now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss Saia's first quarter results. As we moved into 2026, we remain focused on serving our customers enhancing operational efficiency and integrating our newer terminals into our national network. Q1 2026 was no different than history with weather impacting operational results. This year was pronounced as we saw weather patterns impacting our core and profitable Texas and Mid-South regions. However, much like history, we saw seasonally -- seasonality increase in March and particularly in the second half of the month as our customers began to tap our national network.

Our teams, fleet and footprint are well positioned to take advantage of this opportunity to support our customers' seasonal demands. Service metrics continue to improve through the quarter. During the quarter, our team remained focused on what matters most, serving the customer. We achieved a cargo claims ratio of 0.5%, which is our sixth straight quarter of claims ratio below 0.6%, a record of consecutive quarters achieving this milestone.

Customers also value our ability to reliably pick up and deliver freight in the time frames that meet their requirements and expectations. Across our KPIs, we continue to meet and exceed expectations throughout the network. Despite the dynamic environment this quarter, we improved operationally. Most notably, we saw a significant increase in miles between preventable accidents and a significant improvement in hours between lost time injuries. Miles between preventable accidents were a first quarter record, while hours between lost time injuries were at the highest first quarter level since 2020. Both metrics are a testament to our ongoing commitment to safety, training and technology.

Our operational execution is driven by our continued investments in our network and optimization technology. Although we're still in the early stages of realizing the full long-term benefits of a national network, execution remains strong across the organization, improving upon trends seen in the back half of last year. Increasingly, customers value consistency and reliability and our performance in these areas is enabled by the longer-term investments that are core to our strategy. As a result, productivity continued to improve in the quarter, with making their strongest performance since the third quarter of 2024, improving more than 2.5% compared to the first quarter of 2025 and improving approximately 1% sequentially from the fourth quarter.

These metrics demonstrate the impact of our ongoing investments in optimization technology. As the freight backdrop improves and we continue to build density on our national network, we anticipate additional network leverage and asset utilization. With service levels among the best in the industry and our increasing value proposition to our customers, we continue to make progress on pricing and mix management. Revenue per shipment excluding fuel ramped throughout the quarter in part due to our efforts around contractual renewals, which were 6.7% for the quarter. While there's still movement among shipments with ever-changing backdrop, our renewal rates reflect our value proposition to the customers and our ability to provide solutions that meet their needs.

First quarter results were largely in line with our expectations as volumes in late March were strong, offsetting, to some extent, a weather impact to January and February. Revenue for the quarter was $806 million, a record for the first quarter and a 2.4% improvement over prior year. While trends in the first couple of months of the year can always be volatile, I was pleased to see the volume acceleration in the back half of March, resulting in a shipment increase of 1% for the quarter. As customers continue to value our expanded presence in our now national network, we saw shipment growth in both our legacy and ramping markets.

Weight per shipment, while still down compared to prior year, improved sequentially each month of the quarter, a result of our targeted actions around mix management and improving shipper sentiment throughout the quarter.

Now I'll provide additional detail as it relates to cost. However, it's important to note, we were negatively impacted in March by the 30% increase in diesel costs in a matter of a few days. This rapid increase in cost created a meaningful short-term impact on profitability, given the timing difference of our surcharge program, which is based on weekly national average diesel prices.

I'll now turn the call over to Matt for more details from our first quarter results.

Thanks, Fritz. Revenue was a record for any first quarter, increasing by 2.4% to $806.2 million, partially as a result of an increase in fuel surcharge revenue as well as a 1% increase in shipments for workday. Revenue per shipment, excluding fuel surcharge, decreased 1.2% to $297.11 compared to $300.76 in the first quarter of 2025, largely as a result of lower weight per shipment and shorter length of haul compared to the prior year. However, I was pleased to see revenue per shipment, excluding fuel surcharge, increased throughout the quarter.

Revenue per shipment, including fuel, increased 0.7% compared to the first quarter of 2025. Fuel surcharge revenue increased by 12.3% and was 16.5% of total revenue compared to 15.1% a year ago. Tonnage decreased 2.1% compared to the prior year, attributable to a 3.1% decrease in our average weight per shipment. Our average length of haul decreased 1.7% to 890 miles compared to 905 miles in the first quarter of 2025. Yield, excluding fuel, increased by 1.9%, while yield increased by 3.8%, including fuel surcharge compared to the first quarter of 2025.

Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased $4 million or 1% compared to the first quarter of 2025. This increase was primarily driven by a $7.9 million increase in health insurance costs as well as a $1.4 million increase in workers' compensation costs, both of which are primarily the result of escalating cost of claims. These increases were partially offset by a $5.1 million or 1.8% decrease in salaries and wages combined compared to the first quarter of 2025, as head count at the end of the quarter was 6.3% lower than the first quarter of '25 and was 0.7% lower than the fourth quarter of 2025.

Excluding linehaul drivers, head count decreased 7.9% compared to the first quarter of 2025. These reductions were a result of our continued focus on operational efficiency and network cost management. Purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles increased by 7.5% compared to the first quarter last year, and was 8% of total revenue compared to 7.6% in the first quarter of 2025. Truck and rail PT miles combined were 13.4% of our total linehaul miles in the quarter compared to 12.4% in the prior year.

The increase in purchased transportation usage was driven entirely by rail that match customer service expectations, as we leverage the most cost-effective mode. Fuel expense for the quarter increased by 3.6% compared to the prior year, while company linehaul miles decreased 4%. The increase in fuel expense was primarily the result of a 13.6% increase in national average diesel prices on a year-over-year basis, as national average price per gallon increased more than 30% from February to March. Due to the rapid rise in diesel cost in March, our costs were elevated in real time while the fuel surcharge table updates the followup week.

This period of quickly rising diesel costs resulted in an approximately $3.5 million margin headwind. Claims and insurance expense increased by 6.3% year-over-year. This increase was primarily due to rising insurance premium costs in addition to inflationary costs associated with the claims expense. While claims costs continue to escalate at a rapid pace, our efforts to remain focused around safety and training, resulting in a significant decrease in preventable accidents compared to the first quarter of 2025. Depreciation expense of $62.2 million in the quarter was 5.3% higher year-over-year primarily due to ongoing investments in revenue equipment, real estate and technology.

Moving to costs on a per shipment basis. Cost per shipment increased 2% compared to the first quarter of 2025, largely due to increases in self-insurance related costs. Health insurance alone accounted for more than 50% of the year-over-year cost per shipment increase due to cost inflation and claims mix trending more towards -- towards more high-cost claims. Compared to the first quarter of 2025, salaries, wages and purchase transportation combined were down 1.2% on a per shipment basis as a result of our actions around cost control and network optimization. Meanwhile, higher fuel costs contributed to the increase in cost per shipment compared to the prior year, as fuel prices surged during March due to external factors.

As a reminder, while our fuel surcharge program helps mitigate rising fuel costs, our fuel surcharge table updates weekly, whereas fuel costs are incurred in real time. The impact of this timing is more pronounced in a rapidly increasing fuel environment.

Total operating expenses increased by 3.1% in the quarter and with the year-over-year revenue increase of 2.4%, our operating ratio increased to 91.7% compared to 91.1% a year ago. Our tax rate for the first quarter was 23.3% compared to 24% in the first quarter last year, and our diluted earnings per share were $1.86, which is flat compared to the first quarter a year ago.

Focusing on the balance sheet. We finished the quarter with $39 million of cash on hand, $12 million drawn on the revolving credit facility and $113 million in total debt outstanding.

I'll now turn the call back over to Fritz for some closing comments.

Thanks, Matt. While 2026 has shown some positive demand signals, the ever-changing macroeconomic environment continues to create uncertainty from a customer perspective. One constant, however, is our team's ability to adapt to change and deliver solutions for our customers. As we remain focused on serving our customers while driving efficiency across our operations, I'm increasingly excited about the opportunity ahead.

Our disciplined approach to cost management is reflected in our cost structure. We remain vigilant about managing cost. We noted in Q1 that employee-related costs associated running the business continue to be inflationary. It's critically important that we invest in what we feel is the best team in the freight business. At the same time, we continue to invest in the technologies that allow us to best manage and deploy the industry-leading team. Dating back to 2017 since we began our journey to becoming a national network, we've opened 70 facilities. Throughout, we've maintained a competitive cost structure or deployment of data analytics and optimization tools that have served us well. We'll continue to invest in those capabilities and expand the use of those tools, which remains core to our strategy.

Looking forward, we remain committed to executing our long-term strategy of getting closer to the customer, providing a high level of service and being appropriately compensated for the quality and service provided. As the industry is perhaps emerging from a 4-year free recession, we see size upside as significant. We've invested with keen focus on supporting success, which has required a best-in-class team, a national terminal network, a flexible modern fleet and a technology stack to bring all these elements together.

Over the last 36 months, we've invested approximately $1.8 billion in our network and fleet alone, representing more than 19% of total revenue during that time. This investment is a clear signal of our commitment to customers, and we believe we're still in the early stages of fully realizing the benefits of these investments, which we expect will generate substantial long-term value for our shareholders.

With that said, we're now ready to open the line for questions, operator.

[Operator Instructions] And the first question will be from Jordan Alliger from Goldman Sachs.

Great. So maybe, I guess, in the context of perhaps underlying demand feeling maybe a bit better. Can you talk or give your thoughts on margin progression as we go Q1 to Q2 and perhaps some of the specific levers that underpin that, whether it be volume yield cost?

Jordan, sure. So I'll go ahead and give the shipments and tonnage stats monthly just so everyone has those and then get into the margin commentary. So Obviously, January and February, we're already out there, but just to reaffirm those and reiterate January shipments per day were down 2.1%, tonnage per day was down 7%. February shipments per day up 0.3% and tonnage per day down 2.7%. March shipments per day up 4.3%, tonnage per day up 2.8%. And April to date, shipments are tracking up about 5.5%, tonnage up about 6.5%.

And as we think about what the Q1 looked like, I mean, we saw some nice acceleration in the back half of March, which was good to see that didn't come to fruition last year, so it was good to see that back around this year. But strong back half of March. And obviously, you see the April-to-date number. So when we think about what margin progression looks like, if I look back in history, Q1 to Q2, typically about 250 to 300 basis points of improvement sequentially from Q1 to Q2. This year, we think with what we've got going, the momentum we see, we think we can do about 400 to 450 basis points of improvement, which would be obviously a significant step-up from where we are.

Now with that, obviously, there's a lot going on in the backdrop. We're projecting, as we stand now, May and June to be seasonal. A lot of factors out there with demand and what the diesel environment looks like and everything like that. But where we sit right now, if we we see May and June come together a normal seasonality. We feel like we can hit that. And if things really get better and the environment is really improving dramatically that we can outperform that, but that's where we stand right now.

And the next question will be from Ken Hoexter from Bank of America.

So if you dig into the revenue per shipment ex fuel down 1.2%, Matt, you mentioned lower weight, shorter length of haul, but but it also decreased sequentially. But then you noted an acceleration in the quarter. Maybe, I don't know if you want to do that by month over month? Or how do you see that accelerating? I don't know if you want to talk about maybe core pricing or contract pricing within that, so we can kind of understand what is really going on there? And I guess with that, the weight per shipment, you're going to lap the Southern Cal issues in April, and I don't know if you get in the truckload spillover maybe in that same thing, how does it work with weight per shipment shifting as well?

Yes, we'll unpack those pieces a bit. So if I -- obviously, from a year-over-year standpoint, the Los Angeles region headwinds that we've talked about we're still there. They have made it a touch, but that region shipments were still down about 14.5% on a year-over-year basis. That's typically our highest revenue per bill region longer length of haul. But also included in that on a year-over-year basis, we're still winning in these 1- and 2-day land markets. And that's not a bad business. But generally, it's not going as far -- the price is a little bit less compared to something that's going more on our company average length of haul. That's not a bad business.

And what we're seeing is more and more opportunities with customers as we're putting dots on the map. We're getting it back with them, and they're routing as different freight that we may not have had access to before. So that's a good business for us. That mix shifts around a little bit Q4 to Q1 as you start to get it more seasonal. But I mean we're pleased to see the weight per shipment improved throughout the quarter, along with our revenue per shipment month by month.

Part of that's our actions on contractual renewals. You heard for it to get the 6.7%. That was the highest number that we've seen in quite a while, and that was capped by a March number that was north of 7%. We feel good about that. But there are shippers that are still moving around. The environment is still a little bit dynamic around some of that. So we continue to manage the mix. There is nothing that's changed from our efforts and focus on pricing. But we're getting more of that in some of these shorter-haul markets.

And the next question will come from Jonathan Chappell from Evercore ISI.

I understand there's a lot going on, and we don't want to get ahead of our skis here, but those numbers that you just noted for 2Q, especially, Matt, as we think about the rest of the year, the full year OR improvement guide from February of 100 to 200 basis points with the high end assuming some volume tailwinds, with what you think you have line of sight on with 1Q being done, the acceleration of tonnage through April and that 2Q bogey you just laid out there, does the high end become the low end? Or are we still I don't know, kind of questioning the pace of demand in the back half?

I think it's -- John, you bring up good points. I think I'll start with what we're hearing from customers. We -- as you might expect, we spend a fair amount of time connected to customers, we survey, we communicate, try to understand where their business is. And I think the 1 thing that I would say is that we like to hear right now are 2 things.

Number one, they track and give us feedback on our performance all the time in our Net Promoter Scores and our customer set have never been higher. They continue to improve, and we're excited about that. The second part of that, which I think is more tied to your question, is their sentiment is they're getting -- it's more positive. They see a better second half. Now Matt and I are -- and I talked to you about before, we tend to be a little bit more, let's show me, right? So those are positive tones. We like that.

I'd like to see it in the results. I think right now, what we're excited about was what's in front of us for Q2. And I think the ranges that we've talked about earlier in the year, the $100 million to $200 million is certainly within range, but there's still a lot to go on. And the macro is still -- diesel costs are at high levels. Overall, transportation structure costs are high. Does that have an impact on demand down the road? I don't know yet. But I do know that short term, customers think we're doing a great job. It's showing up in the April results in second half of March, like all that. The feedback from customers is great. So we feel good about what we've talked about for Q2. And I think the trends would indicate that the second half of the year could be pretty good.

And the next question is from Tom Wadewitz from UBS.

Yes. Let's see, I wanted to see if you could talk a little bit about the, I guess, weight per shipment, what that's doing and what it kind of did in kind of March to April? I guess also if you could just kind of help us understand, you're assuming normal seasonality in May, June. What does that mean in terms of like what your year-over-year tons per day, shipments per day look like? So I think just some more about kind of both how you see shipments developing and also what doing and how much that kind of matters to how you're looking at things?

Sure, Tom. Yes. I mean, we saw weight per shipment increase throughout Q1, which was good to see. As Fritz noted in the prescripted comments, that's what we feel is partly driven by our actions around core pricing increases and how we're targeting business and mix management. We also feel like it's a little bit to do with the backdrop improving and we've seen some positive signals, customer conversations, as you talked about. But you get into some of the spring periods and that you have some rollout at times or different mix with customers, but it increased pretty steadily throughout Q1, which was good to see.

As we go into April, it's up a touch. You saw that in the tonnage numbers that we've talked about from a shipments and tonnage standpoint in April. Remains to be seen what that does in the back half of the quarter. Obviously, there's a lot going on. Shippers are still trying to figure everything out. So we feel good about where the trends are now. But we've got a couple of important months to go through and what is generally the peak quarter of freight.

In terms of what seasonality does, typically, you'd see a step up of 1% to 2%-or-so in the March to April time frame. Somewhere in the middle is generally where that lands. And then what you'd also see is a step up April to May and May to June as well. So typically, what you're getting through Q2, which again is the most seasonal -- most typically strong period in the quarter, you're getting step-ups throughout the quarter. So that's what we're assuming right now as we stand. And as we're talking to our customers and getting demand signals from them, that's how we're forecasting right now.

What about -- and Fritz, I apologize if you might have said this in your remarks, but what about the growth in the kind of new terminals versus growth in the legacy terminals? Is that kind of similar? Or are you seeing meaningfully higher shipment growth in the kind of the terminals from the last 2 years? .

I'll give the number, Tom, and then Fritz will comment on it. But we -- one of the things we were really excited about in this quarter is we saw shipment growth in both the legacy and the ramping facilities. We've seen it for a while on the ramping facilities, obviously, but this was the first time in 5-or-so quarters that we've seen it in the legacy. So that was good. But the ramping is still outperforming legacy, but those grew for the first time in a while.

Yes. I think it's -- what's exciting about this is having the legacy facilities grow at the same time in the new facilities are growing at a faster rate as we'd expect. And what's fantastic about that is that customers are considering us more for their complete solution. And they said, look, you can do a great job for us in markets you've always been in and now you've got these new points. So this is kind of the plan coming together. We're kind of getting to the point where growth in a legacy market is often tied to the fact that we can provide service in a ramping market at the same time.

So you're now becoming a more important part of the customer's supply chain. So the percentages matter perhaps a little bit less now because the customer is looking at us as a solution rather than kind of in the legacy market.

The next question is from Scott Group from Wolfe Research.

So the pricing renewal numbers sound good, but if I just look at like a blended average of the pricing metrics you're actually reporting in the quarter, they're basically flat. So I guess, when do you think we should start to see sort of those yields and rev per shipment numbers actually improve and get closer to some of the renewal numbers? Or do we start to see some of that in Q2? And just I don't know, any thoughts there?

Yes, I think we'll start to see some of that in the back half of Q2. Obviously, we're right now just lapping some of that big change in the Los Angeles region business from last year. And there's still volume moving around with shippers and you don't always know what you take, and they move around a bit. But as the environment hopefully continues to tighten, we should see some of that come. I think we'll get closer to that as we get into the back half of the year. But I'd also expect us to see some of that improve in the back half of this quarter as well.

Yes. I think the top part of the SoCal market for us, I think we start exiting out of that kind of in May, where it's more kind of we start lapping that we're past those tough months.

Maybe just to that point, like we've got some moving parts there are obviously, like fuel is a big factor right now on yield trends, like within that margin guide that you gave us, like any way to like sort of like bracket, what sort of the revenue assumptions are?

We don't give that level of detail, Scott. But I mean, from a volume perspective, we talked about seasonality. Fuel plays a factor in that. But as we talked about, I mean, we're paying fuel costs in real time during that run up in March, they've stabilized a little bit. I think anyone's guess is as good as ours in terms of what that market is going to do. It doesn't seem like it's changing real time right now. So I would say that it's more just about the guide that we gave is underpinned by seasonal May and June is what I would say.

And we're not assuming a change in fuel. It's like whatever it is presently, we're going to -- it could go up or down, diesel can go up or down from here through the end of the quarter.

The next question will come from Ravi Shanker from Morgan Stanley.

If you can just unpack what you're seeing in terms of end markets, particularly retail versus industrial? And what's the typical lag between retail kind of end markets picking up versus industrial going into a cycle?

Yes. I don't necessarily have a call out for retail and industrial. What I would tell you is that what we see the feedback we're getting from customers is kind of across the board. So it's across all the markets. So there is a one that's necessarily outpacing another for us presently. The -- so that I think is overall is probably positive, maybe it's more broad-based. I think that in some of the end markets, we participate and have pretty good line of sight to markets that are attractive will be grocery here that your data center businesses, all those sorts of things, we represent pretty well in there. And I think that those -- it's pretty across the universe. I think it's pretty consistent feedback both from we're doing a good job, and they feel maybe a little bit positive about the balance of the year.

Got it. And maybe I can squeeze in a quick follow-up here. Just on the tech side, kind of you mentioned a number of new investments on productivity. Are there any kind of big tech products or packages that you're dropping in that you think should see like a step function improvement in your optimization efforts here?

I don't think that there is a -- we're quite ready to talk about any step-function changes. But what we continuously have been investing in the core optimization tools that we've had that are really critical to the cost structure that we have. I mean if you consider you benchmark us against the other public national carriers, not only are we the smallest of the public national carriers, but we're also -- our cost structure is very, very competitive. And what I would say is I point that specifically to how we run our linehaul network and how we plan our city operation.

Those are all large -- our models or AI -- early stage AI models that we've been working on for a number of years, and there'll be continued enhancements around that. Now certainly, from here, how we interact with customers. We can deploy AI around customer service things, around track and trace as an example. Customers really value that. It's a cost-effective way for us to provide data to customers. Those are kind of things that we've launched, but they don't necessarily change the cost structure.

If you got down the road and looked at things like Vision AI or things in that area, we're investing, those are things that are potentially operationally significant. I think that the big thing for us is that I think as we continue to focus on this national network, technology deployed and where we can optimize -- continue to optimize our pricing will be the real opportunity over time. So that -- our technology investment and focus is across the board. The cost things you have to do to stay ahead of inflation. And certainly, there are opportunities to continue to improve that. But I don't know that there's a step function out there yet for that. but we'll continue to focus our investments around optimization tools.

And you see that in our numbers, Ravi. If you look at the commentary around our touch is improving best since they've been in the third quarter of '24, you see it in the per shipment cost of salaries, wages and PT, that's how we always think about it in terms of what it takes to run a network to run an operation that on a per shipment basis is down. That's all a product of optimization, technology of cost management. And keep in mind, over that period, there's 20-plus new terminals in our network.

So those are by no means are mature yet or fully efficient. So it's not new for us. We're going to continue improving that. But that's been the root of where our focus has been for a long period of time. And then to Fritz's point, the opportunity around pricing for us, the customer conversations that we now have are more equal on a footprint than they've ever been. We've got a national network. We can do more for them, and we're seeing more of that in these 1- and 2-day wins, but that's just a product of us being able to say yes to more things.

The next question will be from Eric Morgan from Barclays.

I was wondering if you could give us some thoughts on what we're seeing in the truckload market. Just curious if any of this tightness is driving some incremental volume onto your network? And maybe I'm not sure if that's the reason -- or 1 reason for the weight per shipment upward trend. And then my follow-up, just on your answer to the 2Q touch question, you said that you usually see that improvement from April to May and May to June. Is there any way to just translate that into what it would equate to on a year-on-year basis for the quarter?

We don't give the year-over-year base, Eric, and that was in shipments that I was referring to just for clarity on shipment type.

Yes. So on your market question, I think what I would say is that I think you're -- over time now, you're starting to see freight moving, it's through its more historic moats and customers in a supply chain that is seeing increasing costs, what you're seeing is it may be a flight to quality, right? You're in an environment where you need to move freight inventory through your supply chain. It's expensive. You want to make sure it's delivered on time because you can't afford in a higher cost environment. So I think you're starting to see the reliability of our network starting to shine.

And I think more broadly across all modes of transport. I think as you see the truckload market tighten up a bit, you see LTL freight returning the LTL market. That's probably a help in there somewhere, but I think, specifically, as it relates to us, I think it's reflective of our performance for our customers.

And the next question is from Chris Wetherbee from Wells Fargo.

I guess, I wanted to ask about sort of the density or the building density and the newer more newly open parts of the network. And I think in the past, you guys have given us sort of operating ratio for facilities that have been open a couple of years. Just maybe get a sense of how that's progressing, particularly in March and April where it seems like the volume performance is looking a little stronger.

Yes. We're pleased with this. I mean they're still above company average, right? I mean there's a group of facilities are still relatively immature. We saw them improve. If I look at just those batch facilities, compared to where they were in the prior year. So the way we're thinking about this now is the '23 and '24 openings now we're past the 22%. So we're considering those kind of just part of the whole -- but the way that we look at those, I mean, that actually facilities year-over-year, they improved margins by over 2 points on the OR side, which is good. I mean there's still in the upper 90s, and we -- they are a drag on the overall. But we're going to continue working those down. They're still relatively new, but good performance from those on a year-over-year basis.

Chris, I think part of the OR guide into Q2 is reflective of growth not only in our legacy markets, which we like, but it's continued sort of leverage in the ramping new markets, which is really, really key to the whole value story here. And I think that's what we're excited about.

And then just on sort of that -- the legacy versus the new, I guess, just getting a sense of how you're feeling the demand potential improvement? I guess, I don't know if you can measure that by thinking about how much is growth in legacy versus new in terms of what's kind of core demand and maybe what Saia initiatives, i.e., you're getting the opportunity freight for existing customers in the new network or vice versa. I just want to get a sense if there's anything you can tell from that sort of broadening out of this demand dynamic?

Well, I think the big thing that I would point out, right, is we've highlighted that our legacy facilities are back -- first quarter reflected the first quarter and a number of quarters, we actually saw growth in those markets. And I think what that is indicative of it, I think this is an important piece. We're now in a bigger part of the customer supply chain in these new facilities. We're doing a great job for those customers in the facilities. And now when you're in that -- a little bit of a synergy that's coming out of this, it simply says when you're a national player and you could do more for a customer, you're hacking a lot easier to do business with. So now it's like, all right, well, let's give them more freight from Dallas to Atlanta because that makes sense because I know that they can cover.

When they do the pickups for everything that's going into Montana, that matters too, right? So the combination of all that, I think we're starting to see the building of value of having that footprint because you're able to solve all those upper Midwest problems or markets where we haven't covered well historically. Now you're able to do that. So now the customer can say, look, let's lean into it in businesses that we've long done business with you, but now you're moving up to the top of the stack in our supply chain. So that -- I think that's exciting for us. And that's really what I think is going to drive the growth Q2 and [Audio Gap] citing force. I don't see an impediment short of a broader economic slowdown that would say that we can't continue to drive margin performance in this business and in the long term real value-creating goals that I think that we have, which are sub-80 OR is -- that's out there for us, and I think we can get there. I don't see an impediment to that.

And then just 1 follow-up on my end. Free cash flow, no 1 touched on it yet, but it was very strong in the quarter. Could this market inflection here? Or is there some other considerations we need to be thinking about?

Well, we've long talked about our plan this year was to be free cash flow positive. Obviously, we understand our duties to the shareholder, and we've feel good about how we've returned the investments in the business, but a lot of that build-out is done now. We still have some terminal opportunities here and there. So we understand that we're stewards of the shareholders' capital, and -- but absolutely, if this market continues to tighten our plans around that could escalate further. I think there's still some of the unknown out there in this near term. But based on the indicators that we're seeing from the demand side from customer conversations, we feel like this could be a really great inflection point for us.

And the next question will be from Jason Seidl with TD Cowen.

This is day on for Jason Seidl. Maybe just 1 for me on circling back on pricing. So on your last call, I think you spoke to some better-than-expected capture on GI since then freight markets generally have tightened up, your core pricing is sounding robust. Have you seen any changes or improvements on the capture side there as the year has progressed? And does that telegraph anything further for momentum on core pricing as you move through those annular fees?

I would say that it's been relatively steady. No major difference there. Some of the movement we see is generally around the national accounts or the larger customers a bit more who typically are -- they're using more carriers or they've got a more sophisticated TMS, things like that. So there's always some movement with that. But I would say it's been relatively similar to what we've been seeing on the capture side. And I think a big component of that is our ability to do more for our customer. It's harder to make a change when we can do everything before. Just you're thinking about it twice when you have to make that decision now.

And now that we've got 214 facilities in the national network, we feel like our value prop to our customer is better than it's ever been. So relatively in line with where it's been, but I think every time that we can say yes to a customer and do more, then we get that chance to hold on to that at a higher price.

And the next question is from Richa Harnain from Deutsche Bank.

It's Richa here. Yes, maybe I can revisit how you manage purchase transportation. I know you look at it holistically with size, wages and benefits and optimize that in totality. Matt, you said it a couple of times your siren benefits plus PT per shipment, was impressively down in Q1. But just as truck rates rise, do you plan to enforce more or do you think your pass-through mechanisms with purchase transportation give you enough protection?

And then just to clarify, I know Fritz, we talked about like the upside scenario. It seems like the macro is providing some help right now, which is nice. But if that doesn't materialize, given all the uncertainty out there, do you still think you can improve OR by at least 50 bps this year? Or could it actually be higher than that with all the momentum and productivity initiatives that we're hearing about in earnest today?

No problem. Good question. On the PT side, one of the things that when we go through our decision-making process around PT, we always focus on, all right, number one, how does that match what customers need? Like what's the service schedule? Does it meet the quality standard that we need. What we found in Q1, particularly in the second half of March, we saw opportunities to really lean into rail.

And the rail -- the entire increase of our PT year-over-year, I mean there's certainly some rate underneath, but the real piece is we really leaned into using rail, which on a cost per shipment base or cost per mile basis is upwards of $0.50 cheaper than our internal model. So in that case, because we could meet the customer need, the cost decision became sort of straightforward and we made that call.

Now over time, I think one of the things that's important, and I think you've got to on track with this and that is as we build density in this network and scale, the opportunity for us to run more balanced schedules across the network, which allows us to use -- potentially use a Saia driver for the linehaul move, in that case, we've got freight for them to go from if he's traveling east, when he comes back west, you'll have a full load, and that's cost optimal and that makes a lot of sense.

As the maturity of the network grows, there'll be opportunities to do that. But at the same time, we're going to take advantage of when PT works for us, starting with service, then we'll get to dealing with the cost side. If the cost side is better, where it makes sense for us to better utilize our resources maybe on another part of the network.

With respect to kind of the momentum we're seeing in the business, I think there is certainly in a flattish kind of softening macro environment, can we get OR improvement in the business? I think we can. I think we've got some underlying efficiency goals that we have in place that we're achieving. I think that there -- as we get new volume in those facilities that are ramping that automatically gets us a bit of a cost leverage there. So I think we're in the process right now of really shoring up what I would say is the lower end of the range, right? So if macro softens up, can we still get better? I think we can.

Is it 50 bps sort of idea, is that out there in a tough flattish market, I think we can achieve that, particularly as we continue to have success with customers in those new markets. So all in, I think what's exciting about this because of where we are, we've got line of sight to things that we can improve on and are improving and optimizing as we go.

Okay. And can I just ask 1 quick follow-up? The good demand that you're seeing, I think legacy facility is seeing growth after like 5 quarters. Any sense of that being pulled forward or any concern around that based on your customer feedback?

I don't think so. I think that what we see is it's more of a sort of broader sort of sentiment in the marketplace. So meaning, I don't see anybody making the decision to let's move the freight quickly now before things become more inflationary. I think it jumped up. The inflationary diesel cost jumped up pretty rapidly. And as a result of that, I don't think someone could necessarily foresaw kind of those cost increases that maybe move that forward. So I conclude that I don't think that we see any real pull forward there.

[Operator Instructions] The next question is from Brian Ossenbeck from JPMorgan.

Just wanted to ask about the capacity and, I guess, ability to make service if you do have a more significant inflection in demand and volume, I don't know if you're ramping up for that probability already? Or if you have more productivity, you think you can leverage in that scenario? So maybe you can talk through that a little bit in terms of how you were planning for it right now? And if it were to actually materialize, how you would handle that, would you maybe even trim down some of the volume coming in to your that service is met in that type of scenario?

It's a good question, Brian. Thank you for that. A couple of things. We feel like we -- because of our ability to manage PT efficiently and effectively, I think that's always going to be a bit of a natural leverage for us. So if you -- if we had unexpected short-term or shorter-term volume variation, we've got that sort of safety valve that we know how to manage. So I think we can handle that in the short term.

I also think that as we scale the business, we have certainly continued efficiency opportunities. So I think that that's kind of within our framework. And then I think the other thing is, quite frankly, is that these are scarce assets, meaning the -- our fleet -- we're doing a good job with the fleet, with the real estate terminal network, the technology that's all inflationary. So in an environment, as it strengthens and firms up, we're going to expect to not only provide great service to our customer, we're also going to expect that we would be compensated for that significant investment we've made.

So that may help manage sort of volume inflections and changes in terms of in a stronger backdrop, we probably focus more on making sure we're compensated for all of that investment that we've made. Because when you do business with Saia, you're going to get -- you get best-in-class service. So we expect to get paid for that investment. So that probably becomes a bit more of kind of our focus in that sort of the backdrop.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Sias President and Chief Executive Officer, for closing remarks.

Thank you, operator, and thanks to all that have called in. At Saia, we believe that our value proposition to the customer continues to be significant and we look forward to talking about the success we will achieve in the quarters and years to come. Thank you, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day and welcome to the Saia Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President, Chief Financial Officer. Please go ahead.

Thank you, Betsy. Good morning, everyone. Welcome to Saia's Fourth Quarter 2025 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties and actual results may differ materially.

We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ. Also, in the third quarter of 2025, we recorded $14.5 million in net operating expense impact from a gain on real estate disposal and impairment of real estate. When we discuss adjusted operating expenses, adjusted cost per shipment adjusted operating ratio or adjusted diluted earnings per share for the third quarter 2025 or full year 2025 in our comments, it refers to adjusted results that exclude the gain from that sale and impairment on that property.

See our press release announcing fourth quarter results for a reconciliation of non-GAAP financial measures. That press release is available on the Financial Releases page of size Investor Relations website as well.

I will now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss Saia's fourth quarter and full year results. As we look back on 2025, I am proud of our team's resilience and focus, delivering strong execution for our customers even as volume patterns shifted day-to-day a bit constant change.

Having now completed our first full year of the national network, I'm more excited than ever before about the future of Saia. Throughout the year, our now national footprint provided opportunities with both new and existing customers as our expanded reach enabled us to provide our industry-leading service in more markets. Having a national presence provides us with the opportunity to solve more problems for more customers, which we believe has resulted in increased market share.

Our record capital investments of more than $2 billion over the last 3 years have allowed us to rapidly expand our footprint in a short period of time, and I believe we're still in the early stages of capitalizing on the opportunity that a national network provides. Of course, our achievements would not be possible without a best-in-class team. While the demand environment remained dynamic throughout the year, our team responded to our customers' needs every day.

Our core operations performed as we expected for the fourth quarter. However, reported results were impacted by self-insurance costs late in the quarter. Our fourth quarter operating ratio of 91.9% reflects these increased self-insurance costs. The sequential deterioration from third quarter's adjusted operating ratio was impacted by unexpected adverse developments on a few cases arising from accidents that occurred in prior years, which required reserve increases in the approximately -- in the period of approximately $4.7 billion.

As we well know, accident-related costs continue to rise due to increased litigation costs and settlement values as well as general inflation and can develop sometimes unexpectedly over several years. Regrettably, this unexpected need for reserve increases was related to the accidents that happened years ago. However, we continue to invest in industry-leading training and safety technology. We're seeing positive trends in our safety statistics. During 2025 despite having the largest fleet in company history and internal miles increasing by 2.4% year-over-year. We saw a 21% reduction in our preventable accident frequency and a 10% decline in lost time injuries, reflecting the benefits of these ongoing investments in safety. Focusing on the fourth quarter, volumes continue to reflect the muted demand environment the industry experienced throughout the year.

Shipments per day were down 0.5% compared to the fourth quarter of while tons per day was down 1.5% compared to the same period last year. As is typical, we experienced some volume shifts in the weeks after the GRI, which was implemented on October 1, and we remain extremely focused on ensuring that we are compensated appropriately for the quality of service provide to customers.

When we analyze the results of the GRI closely, we're pleased to see customer acceptance trends slightly above historic levels. Similarly, contractual renewals remained strong in the quarter averaging 4.9% of the book of business contracted in the quarter. We continue our efforts to ensure that we are fully compensated for quality and service we provide and have seen a 6.6% contractual renewal increase in the month of January 2026.

Despite the volume decline, our fourth quarter revenue of $790 million is a record for any quarter in our company's history. Mix headwinds continue to impact our results with slight decreases in weight per shipment and length of haul compared to the fourth quarter of 2024. Additionally, revenue per shipment, excluding fuel surcharge, decreased 0.5% and compared to last year. As we've discussed in our prior quarters, the volume decline in our Southern California region continued as volume in the region in the fourth quarter was down about 18% compared to the prior year. This region is typically our highest revenue per bill market and the volume decline caused an estimated $4 million revenue reduction for the quarter.

While the Southern California region continues to play a factor in our mix dynamics, we're seeing growth with customers at both legacy and rampant markets as our expanded footprint allows us to get closer to our customers and handle segments of their business that we may not have had access to prior to the network expansion, reflecting our ability to provide industry-leading service in more geographies, we're able to drive revenue per shipment, excluding fuel surcharge, up 1.1% sequentially from the third quarter.

Our nationwide network has now been fully operational for 1 year, giving us clear perspective on the impact of our generational opportunity to expand the network over a very short period of time. Over the past year, we strengthened relationships with existing customers while bringing our high-quality service to many new customers, contributing to what we believe is a record level of market share gain. These customer relationships will continue to develop, reflecting the long-term value of the strategic investments we've made over the past few years.

With our network expansion, we're able to achieve cargo claims ratio of 0.47% in the fourth quarter, which is a company record for any quarter. Considering the size and scope of our national network with newer locations still in early stages of their life cycle and employing newer SI employees, this customer-centric metric is a testament to the culture instilled at each location in our organic expansion and our team's ability to perform at the highest level. This level of service reflects our team's consistent effort and attention to detail. Core strengths that have helped establish Saia as a leading national LTL carrier.

I'll now turn the call over to Matt for more details from our fourth quarter results.

Thanks, Fritz. Fourth quarter revenue was largely flat compared to the prior year, increasing by 0.1% to $790 million. While revenue per shipment, excluding fuel surcharge, decreased 0.5% to $297.57 compared to $299.17 in the fourth quarter of 2024.

Fuel surcharge revenue increased by 6.1% and was 15% of total revenue compared to 14.1% a year ago. Yield, excluding fuel surcharge, increased by 0.5% and while yield increased by 1.6%, including fuel surcharge. Tonnage decreased 1.5% attributable to a 0.5% shipment decline in addition to a 1% decrease in our average weight per shipment.

Our length of haul decreased 0.1% to 897 months. Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased 6.1% compared to the fourth quarter of 2024. This increase was primarily driven by increased employee-related costs, which include a company-wide wage increase of approximately 3% on October 1, partially offset by a 5.1% reduction in head count compared to prior year as we continue to improve efficiency and match hours to volume. Excluding linehaul drivers, head count decreased 6.4% compared to the prior year. The year-over-year increase in salaries, wages and benefits also reflects the rising cost of self-insurance which continues to be inflationary.

Our network expansion and continued investments in technology have positioned us to in-source miles, a trend that has continued over the past few years. As a result, purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles decreased by 0.8% compared to the fourth quarter last year and was 7.3% of total revenue compared to 7.4% in the fourth quarter of 2024.

Truck and rail PT miles combined were 12% of our total line hauls in the quarter, down from 13.1% in the fourth quarter of 2024. Fuel expense for the quarter increased by 0.2% compared to the prior year, while company line haul miles decreased 2%. And -- the increase in fuel expense was primarily the result of a 4.8% increase in national average diesel prices on a year-over-year basis. Claims and insurance expense for the quarter increased by 12.3% year-over-year.

As Fritz noted, this increase was primarily due to adverse claim development on a few accident cases late in the fourth quarter of 2025 related to accidents that happened in prior years. In 2025, we are pleased to see a decrease in the number of preventable accidents year-over-year. However, the cost per claim continued to rise due to increased cost of litigation and increases in settlement values. Depreciation and amortization expense of $62.9 million in the quarter was 16.4% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate and technology.

Compared to the fourth quarter of 2024, cost per shipment increased 6.1%, largely due to increases in self-insurance related costs and depreciation. Group health insurance alone accounts for more than 30% of the year-over-year cost per shipment increase due to continued inflection in health care-related costs. We continue to believe that we provide best-in-class benefits to support our employees who drive increased customer satisfaction and while a headwind, we have absorbed the majority of the market rate increases that we have seen over time.

Total operating expenses increased by 5.6% in the quarter and with the year-over-year revenue increase of 0.1%. Our operating ratio increased to 91.9% compared to 87.1% a year ago. Our tax rate for the fourth quarter was 22.7% compared to 23% in the fourth quarter last year, and our diluted earnings per share were $1.77 compared to $2.84 in the fourth quarter a year ago.

Moving on to our full year 2025 results. Revenue was a record for Saia, increasing 0.8% compared to 2024, while operating income was $352.2 million. Adjusting for onetime real estate transactions, our operating income was $337.7 million for 2025. Our operating ratio for the year deteriorated by 410 basis points to 89.1% and while our adjusted operating ratio was 89.6% for 2025. Focusing on the balance sheet, we finished the year with just under $20 million of cash on hand and $63 million, [indiscernible], on the revolving credit facility to bring us to approximately $164 million in total debt outstanding at the end of the year, which is down from $200 million at the end of 2024.

Looking back on 2025. I was pleased with our team's core execution despite a challenging macroeconomic environment. We insourced more miles compared to the prior year, cost optimally scaling and leveraging our fleet's national network and technology investments, driving our optimization efforts. Further evidence of our network optimization efforts shows in our handling metrics, which improved sequentially every quarter through the year and exited the year 1.5% below their first quarter peak. From a quality standpoint, our cargo claims ratio of 0.5% for the full year was a company record and improved year-over-year in every quarter compared to 2024.

We continue to see the benefit of our investments in safety, training and technology, lost time injuries in 2025 declined 10% year-over-year, and preventable accident frequency declined 21% year-over-year. While the underlying nature of self-insurance remains inflationary, our reduced incidence has helped mitigate the rising costs. Importantly, our record investments have enabled us to drive increased customer satisfaction in more markets.

Our ramping terminals or those opened since 2022, operated profitably for the year despite the relative inefficiencies that come with opening 39 terminals in such a short period of time. the 21 terminals that we opened throughout 2024 continue to mature, and we estimate that those terminals increased revenue market share by approximately 80 basis points in 2025.

In aggregate, our ramping terminals while weighing on the company's operating ratio contributed incremental operating income for the year. We are seeing tangible results with our customers through our expanded service offerings and I believe we are just beginning to unlock the full potential of our national network and technology investments.

I will now turn the call back over to Fritz for some closing comments.

Thanks, Matt. Despite uncertainty surrounding volumes in the broader macroeconomic environment in 2025, I'm proud of how our team adapted to each day to meet our customers' needs every day represents new variables that our ability to consistently deliver strong service and quality metrics reflects the strength of our siculture across both our legacy and ramping terminals.

While the inflationary costs associated with our industry continue to be more pronounced in certain areas, we're actively working to manage these costs through the use of network optimization technology. We accelerated our network optimization efforts that began in the first quarter of 2025 and are already seeing cost savings as a result.

Fueled by our ongoing investments in technology. These initiatives improved density and efficiency across our national footprint, which handles declining steadily from the first quarter peak. As our network continues to scale, adding density enhancing and enhancing our ability to service customers, our value proposition continues to become increasingly clear. These investments we have made over the past 3 years, more than $2 billion, has strategically allocated capital to our real estate revenue equipment and technology to support our long-term profitable growth. In addition to the investments we've made in our network expansion, investments in revenue equipment and fleet modernization have improved operating efficiency and safety while also positioning us to improve the customer experience.

We've also invested heavily in technology to optimize network performance and drive operating leverage, including advanced analytics for operational and profitability in sites. Customer-facing capabilities, employee training and process automation. We believe that the combination of these investments strengthen our competitive position and support sustainable value creation for shareholders. As we look to 2026, our focus remains on strengthening core execution by continuing to invest in both technology and our people.

Our national network provides a complete LTL solution for our customers, and our success is defined by consistently meeting and exceeding customer expectations while generating an appropriate return for these significant investments. we believe strongly that our national network is poised to scale as macroeconomic conditions improve. By leveraging these investments, combined with our team's commitment to excellence, we expect to drive incremental improvements to our performance in 2026 even if the macro environment remains soft as it was in 2025. The network investment over the past few years reflects a considerable deployment of capital, which requires a return.

Our emphasis through 2026 will be an intense focus on ensuring that we see a return on these investments. We expect to be fairly compensated for these investments as our customers benefit from the increasing scale and quality that we provide. Over time, we'll need to continue to reinvest in the inflationary and capital-intensive network and find ways to continue to deploy technology and operate more efficiently. Ongoing investment will require that we are appropriately compensated to provide a return to our shareholders. With that said, we feel very strongly that our business has never been in a better position to drive value for our customers and returns for our shareholders.

With that said, we're now ready to open the line for questions, operator.

[Operator Instructions] The first question comes from Jordan Alliger with Goldman Sachs.

I was just wondering, can you perhaps in the context of how you're monthly tonnage data has been going through the quarter and then October -- sorry, and in January, how that may tie into your thoughts around sequential margin seasonality, 4Q to 1Q?

I'll give the monthly so that everyone has that. So October shipments per day were down 3.4%, tonnage per day, down 3.3%. November shipments per day up 2.6%, tonnage, up 1.8%. December shipments up 0.6%, tonnage, down 2.2% and then when I look at January, obviously, we had some of the weather impacts that passed through.

So shipments per day down 2.1%, tonnage per day down 7%. But keep in mind, we've seen consistent weight per shipment for the past 5 or 6 months now, which is good to see that stability. We're comping some pretty heavy-weighted shipment periods in the first quarter last year. So keep that in mind from a weight per shipment standpoint, if you remove the impact of the storm or normalize them, shipments in January would have been slightly positive, which continues the trends that we've been seeing. So relatively in line there. And from the margin standpoint, look, if you look at history, Q4 to Q1 sequentially is typically a degradation of about 30 to 50 basis points worse.

If we get a normal February, normal March, we think we can outperform that and beat that and if we get a stronger than normal March and see some of that come to fruition, and we think we can even further outperform that and get below where we were last year, which really feels like we had for a pretty good backdrop from that point.

Yes. And I think that's really important point is that we get through Q1, we've seen the macro data that's out there that has come up, but it's been positive. There are trends out there that would appear to be positive. I think this is our top, right? So this is the time where we've invested and positioned ourselves for this opportunity. And I think that you build off of what we could see in the first quarter, as Matt outlined, and I think you're looking at a full year kind of OR improvement, 100 to 200 basis points. And if the market -- if macro is kind of at the upper end of the kind of the trends that I think that's only better for us, right? So -- this is the scaling point. This is why we did. This is the time why we made the investments we have over the last number of years.

And just one point, Jordan, to clarify the sequential margin, we're viewing that off of a normalized right, if you remove the one-off impacts that we called out. I just want to make that clear.

And so that excludes that $4.7 million of insurance.

That's right.

The next question comes from Jonathan Chappell with Evercore ISI.

Just one super quick clarification. Fritz, that $100 million to $200 million that you just mentioned. Just what's the tonnage backdrop behind that? I know it's like the macro is not getting better, but is it positive? Is it [indiscernible] et cetera...

Yes. I would just say that I'm looking at the ISM data, the -- so I'm expecting that there'll be some positive backdrop there, right? So in a positive backdrop -- that's good for Saia. I think that we've seen some other macro data out there that would be positive.

I think that would lead to a market in which we'd see some potential tonnage growth. And if that's the case, then I think that's an opportunity for us. So I think it's more about if those things come together, this is why this is such a compelling opportunity for us. If those things don't come together that I think we're in a position where we could still improve OR, but clearly would be at the lower end of the range I described. But in a favorable backdrop, I like the opportunity.

All right. And you said several times getting compensated appropriately. You mentioned the GRI. I maybe Matt said the GRI acceptance was a little better than usual. Is this a year where if you get a little bit of volume tailwind and like the weight seems to be relatively consistent, what type of range are we looking at for pricing yield? How do we want to measure rev for shipment type of growth this year?

I mean look, we're -- obviously, we haven't been netting the renewals that we've been taking part of that is just volume shift in the period.

But we -- core inflation in this business is going up. We've got to be able to push and take rate. And part of that's been the ability to close the network gap and to provide more equal service in these markets with the national scale. So that's how we think about it. The weight per shipment, obviously, is a headwind to year-over-year in Q1. But after that, you start to normalize a little bit more. Revenue per shipment improved 1.1% sequentially from Q3 to Q4. So we're -- you see it in the renewal number. We're focused on it, and we'll we're not taking a day off from that, even though the environment is a little bit light. We've got to get paid for it.

I mean this is year 2 of a national network, and we would -- should expect to price ahead of inflation. And develop a margin on that. $2 billion of investments over the last 3 years, last 3 years in terms of return, and we're focused on getting that return and being in a position to reinvest in the business over time.

The next question comes from Chris Wetherbee with Wells Fargo.

I guess I wanted to ask about the new terminals open and kind of relative profitability. It sounds like they did contribute positively to operating profit for the year. Can you give us a sense of where maybe the OR for those are? And then Fritz in the context of the 100 to 200 basis points, how do we think about the contribution of the new terminals -- is that where if you can get some incremental volume, you could see much more material improvement in the OR there to drive towards the top end of that 100 to 200?

Yes. From the first part, Chris, the -- obviously, they are a drag on the company-wide -- there -- so they range, right? We've got some that are sub 95%. We've got some that are higher than that in aggregate. They're sort of mid to upper 90s. But a lot of these, if you think about it, they're still within -- then when we open them in '24 for the biggest batch, those weren't all opened early in the year.

So throughout the course of last year, we just closed a year of these operationally, which is really something that we're pleased with and proud of. We've got room to go, and obviously, work to do, but they're in that region.

And I would add that the margin improvement is going to come from the new -- they're not going to be a drag over time. And I'd point you back to when we did the Northeast expansion, right? We saw that in those developed sort of maturity, we can drive incrementals in those. I think what's different this go around in the Northeast is that the incremental opportunities across the business -- if you study our network cost stats that we described earlier, we were able to in-source and scale more of our line haul network.

That's all about building densities across a national network. Part of that is the contributions of the new facility. So I think that this is the -- why this is such -- was such a compelling investment to make. And if we get the environment, we can accelerate that sort of performance, -- but I think it's great because it's going to come for both new and old, but it's going to benefit the national network.

We're seeing real opportunities with that, Chris, just in customer conversations. You always get turned on overnight to some of that business, but the level of discussions that we can have with customers or even frankly, customers that we didn't have the opportunity to get in the door with because they want simplicity, they want to ease of doing business. When you've got a full national network, you get that opportunity.

So to Fritz's point, it's not just the scale and the new ones, but even though we covered some of these markets before, we're getting new opportunities because we can have those discussions at a better level of detail and do more for the customers.

The next question comes from Stephanie Moore with Jefferies.

Maybe returning to the pricing commentary. Maybe you could discuss a little bit on what you're seeing in the overall pricing environment. And also, as you think about your higher pricing capture, would you say this is more so customers starting to recognize the investments that you've made? Or maybe it's both? Or are you being a bit more tactful with your own pricing actions?

From the environment, I'd say it's -- we continue our own initiatives. We don't ever take a day off from that as a business is inflationary. We have to go get rates. So we're continuing those efforts. And and really pushing the envelope harder and a lot of instances. So no change from us there. Obviously, with capacity where it is for everybody, shippers have options, and they maybe were willing to move to a more regional carrier or something for a time being, but that's just a product of where we are. I wouldn't say that's new.

We've been seeing that for the past couple of years at this point with the capacity environment the way it is. But our view is that if you look at history, when the environment gets a little bit tighter from a capacity standpoint, there's a flight back to quality and a flight back to national carriers. So we're not taking a day off from the pricing aspect of it. In terms of our higher capture rate, we track that very closely. We study the results of the GRI and all pricing actions really closely. I think it's a combination of 2 things. We're getting more granular than we have before, and we're using our analytical tools to focus on key opportunity areas for us. But I think importantly, the opening of these terminals that's given us national scale has made it harder for customers to change out. And when you've got a better value proposition and you've got the opportunity to go and talk to them about what you can do for them in every market, which we haven't always had the ability to do. You get more conversation point. So I think it's a combination of both.

Yes. I would just add, and I would emphasize Matt's last point, national network, high level consistent service that makes that pricing discussion more palatable, right? If you're doing a great job, you come and say, "Look, this is the value I'm creating for your supply chain. And this is what we need to do to be able to continue to support our customers' success and continue to invest in our business, that is an opportunity -- continued opportunity for us and only heightens now because of the success of the national network.

Now that's important context. And maybe just a follow-up on the volume trends and the sequential improvement we've seen for the last couple of months, as you kind of look at what your customers are telling you or what you're seeing, do you think that it's generally more optimism kind of like what we've seen maybe in some of the macro data points? Or is this truckload capacity how does this compare to maybe what we saw at the start of 2025? Any context on the overall demand environment would be helpful.

I think it's a little bit of everything. I think it's a little bit of -- maybe a little bit more positive into the year, which is good. I think there's maybe some structural market sort of influences here. But I think in total, the tenor might be just a bit more positive, right? And I think that's good.

Now I will caution just by saying, look, we're seeing it and hearing it a bit in customer conversations I'd like to see it more in volumes, too, right? So that's -- some of that will develop through the quarter. We think it will, but it's -- that's still -- so we actually see it in the results. There is a potential that things could change. But Overall, I would say year-over-year, that the factors are -- would appear to be more positive.

The next question comes from Scott Group with Wolfe Research.

So can you just not -- you were going pretty quick. What was the comment about Q1? Maybe it's going to improve, maybe it's not going to improve on a year-over-year basis. I just want to ensure like the 2 different sort of environments you were talking about? Just if you can just add a little bit more color and then I have a follow-up.

Yes. So if you normalize for the Q4 item that we called out and use that as the anchor point. history says that Q4 to Q1 typically deteriorate 30 to 50 bps in that range. There's different years, obviously. We think we can beat that and just thinking about if we get a normal rest of the February and normal March. But if March comes in a little bit more strong, and we're starting to see some of the ISM data come through whatever it may be.

We think we can further outperform that and potentially get it below where Q1 operated last year. Obviously, a long way to go between here and there, but that's the distinction between the 2 would be more about March coming in a little bit stronger than what we would typically see in history.

Okay. And then just a couple of other just things. The -- when do you think we start to see like the yield or revenue per shipment trends catch up to the renewal trends? And then it sounds like you're talking a little bit more about in-sourcing linehaul. Like when do you think we start to see like that purchased transportation line start to more meaningfully decline as a percentage of revenue.

On the revenue per shipment side, I mean, keep in mind how weight per shipment impacts yield, weight per shipment, you get a read from how that looks just with January numbers. So a headwind there from a revenue per shipment standpoint, that helps yield but then it starts to normalize a little bit more in Q2, Q3. Weight per shipment has been relatively steady for us over the past 5 or 6 months, which has been good to see. So once you start lapping some of the Q1 weight per shipment headwinds. But I think we start to see that in the Q2, 3 period. And obviously, if the environment tightens up a little bit more, we're going to see that run further and we're going to press the gas even harder on that.

If you look at from a PT standpoint, I mean, one of the things that we've talked about for a long time is just the ability to run more balance when you've got a whole nationwide network selling and out of more geographies, all of that PT as a percent of total miles over -- for the full year of 2025 was 12.1%. If you go back to '21 period, that number was over 18% of miles.

So we've reduced it pretty dramatically over time, cost optimally, we still feel really good about how we use PT. But when you have a nationwide network, you're able to balance the network more, run more efficiently as you get more balance between your terminals. So it's come down a good bit over the years, but we still feel really good about how we use it. As the network continues to scale and certainly, as volume comes back, we're going to have further opportunities around that. But we feel good about how we use it.

Yes. I think, Scott, too, just to add, we look at that kind of we stay more cost per shipment and total network cost per shipment. So there the PT line unto itself, that certainly is one line, but our salary, wages and benefits also as internal costs in there. So that we kind of look at those 2 combined. And so over time, we like that trend. And I think as the business scales, I think we'll continue to see that improve meaningfully.

The next question comes from Richa Harnain with Deutsche Bank.

See, just quick clarification on the January information, Matt. You said that ex weather shipments were up a little bit. Could you tell us what tonnage was doing ex weather? Sorry if I missed that. And then my main question is.

Oh, go ahead. You can go first and then I'll ask the second one.

Yes, shipments would have been up a little bit and tonnage down about 4%, 4.5%.

Got it. Okay. And then you both have been talking about how the network is very poised to scale. I wanted to ask about like trends in cost per shipment. Ex those self-insurance costs bumping higher, it still felt like it was it was higher than what we usually see sequentially per your 10-year average, I think cost per shipment was up 5.7%.

Usually, we see a 4% increase Q3 to Q4. I know Q3 was a very solid cost out quarter for you, and that's part of it, the base being lower, but how should we think about like cost going forward? Are you carrying just extra cost as a result of your network expansion and it's going to take a more pronounced upturn to absorb all that. Maybe just talk about that. And along those lines, you can mention how much excess capacity or slack you feel like you have in your system today to absorb extra volume to come in.

Yes. So if I look at the cost side of it, so we don't typically look 10 years back, our business has changed so much over that period. So if you look at a little bit more of a shorter period of time, Q3 to Q4, cost per shipment generally is up in a sort of 5-ish, 5% to 5.5% range. And keep in mind, too, that includes historically where you have a wage increase impact both in Q3 and Q4. We didn't have the wage increase in Q3 this year, we had it on October 1.

So that's an automatic headwind of an increase in costs compared to what you would see in a historical number. So that's 1 piece of it. You've got volume that's down 0.3% Q3 to Q4 on just a calendar period. And you've got 2 fewer work days in the period. So you've got fixed costs that are just over a shorter amount of days. And I would say even all those workdays aren't real revenue days a day after Christmas is a workday, but it's not a full volume day. So you just don't get that leverage. But if you think about that, there's just -- that piece is important on the wage increase where it wouldn't have been in that historical number. So obviously, we're going to always work on that. We've got room to improve, but we feel like we managed it pretty effectively if you look in line with some of those historical trends. And we called out the head count portion, to head count year-over-year in Q4, excluding linehaul drivers, is down 6.4% and if you look at that sequentially from Q3, that's down about 2%.

So we continue to match ours with volume and feel good about how we're managing it, but we can't take a day off from that. We have to work through that all the time. And -- on the network standpoint, obviously, we've got excess capacity, like Fritz said, we opened all these terminals for a reason. It was a generational opportunity for us to expand the network. We have -- it's going to vary by market, but I'd say on a broad base, excess capacity. We're prepared for an inflection. But important to note, capacity in LTL comes in a lot of different ways. It's terminals, certainly, but it's also doors, it's yard space, it's people. you're really the lowest common denominator of all of those pieces when you think about capacity. But this is why we did this. We expanded and what's turned out to be a prolonged freight cycle. But if we had it to do all over again, we do the same thing because we feel really good about what the opportunity is for us over the long term of the business. But we feel really poised to scale when the environment gets a little bit of an uplift.

The next question comes from Ken Hoexter with Bank of America.

Just want to clarify, you were down 7% in tons in January, 1 of your peers was flat. So I just want to understand what's going on in the market maybe a little bit. Were you more impacted by weather as a national carrier as they are? Is there a difference in end markets, SMB adds? Just want to understand if somebody is being more aggressive in pricing versus that differential? And then in the past, I just want to take this another level, you've noted revenue per shipment ex fuel is a good indicator for price. So a lot of discussion here on rev per shipment given that it was down year-over-year. And I get the weight, Matt, but you noted contracts were up 6.5% in January, accelerating from just shy of 5% in the fourth quarter.

So is that demand picking up? And so thoughts on pricing is accelerating. Just maybe one on tonnage, one on pricing, if you can.

Yes, I encourage you to look through -- I mean, first of all, we're not seeing anybody on the pricing side act differently. So environment continues to remain rational, nothing different from what we've continued to see there. The tonnage comp for us, if you look at just where weight per shipment was the first 3 or 4 months of last year, that's the biggest component of this. Weight per shipment has been relatively steady call it, sort of May, June of 2025 to where we are now. We're just lapping some weight per shipment comps that are much higher than that.

So that's why the tonnage number is what it is for us, I would say from the peer set that you're talking about, I think wage per shipment is relatively consistent. I have to go back and look. But that's really what the driver of that is the higher weight per shipment comp, which we continues to be a headwind in the -- through March, April time frame and then it starts to flatten out compared to where we are now.

I think the only thing I would add just on January discrete, we've incorporated the impact of this in our -- in that discussion around when we think about Q1 in total. But that weather system, but I this outdoor support, you got to deal with weather every year. But when Dallas gets shut down, our Texas market is impacted, that's our -- from a relative -- that's the biggest portion of our company.

So that's going to have a relative large impact on us versus maybe some of our peers. But our guys did a heck with job rallying getting us back in position. But what Dallas through Memphis is frozen and Texas is frozen and we're not operating, and we track that on our website. That's tough for us. But because of the great work by those teams, recovered from that. We're back full-scale operation now. So I feel good about what the trends are for the fourth quarter. But January, there are a few days there and that was pretty tough.

And if I could just get 1 clarification just because I've gotten some questions on the assumption for the first quarter, the OR commentary. I know you tried to answer this before but I just want to get a clarification. The tonnage that you're now assuming, I know you said it could get better what's the base case for that $100 million, $200 million, maybe midpoint in your tonnage assumption?

I mean Obviously, the Q1 headwind from a weight per shipment standpoint, then it flattens out. But I think for the top end of that range, like Fritz talked about for the full year, A little bit of a shipment and tonnage lift would be embedded in that. But importantly, we still feel like we can drive improvement even if the macro environment doesn't give a lot of uplift and it just stays similar to what it was last year. And we look at historic slough the quarter from here, right? So January is tough. We had the weather. But Feb and March should be like our normal typical seasonality.

The next question comes from Tom Wadewitz with UBS.

So wanted to understand a little bit more your thoughts about flat market, flat freight market, just how you would think Saia will perform if that's the case, like be great if ISM is right and you see a better backdrop. But what if you don't see that cyclical improvement. So in particular, do you think you'll transition to shipment growth, if that's the backdrop, or would you say you just kind of -- it kind of seems like the December and January, it's hard to see outperformance versus the market or it's not as clear maybe versus what you've been going at. So how do you think about when you get beyond the tonnage headwind in 1Q you get beyond weather, what does shipment growth look like for Saia against a flat freight market?

Well, I think I'd look back to last year and how we performed in the market, how everyone describe it, flat, soft, recessionary, whatever. Growth for us came in our developing new markets, ramping markets, I think that would -- that's going to continue into the year into this year. I don't see any reason why that sort of level of customer acceptance would continue. I think in our legacy markets, I think what you'd see that is sort of normalized, flatten out there compared to what we saw in '25 and then it's a focus on core execution, probably see in a flat market from here, you probably would see kind of us grinding out some share primarily because customers look at us and say, "Hey, that's a great product. This is a national network. This is working.

We take share in that way. and we price accordingly to try to continue to get those returns. So I think it's the last -- it's the 2025 playbook in a flat market into '26. But if the ISM develops like you would sort of indicate, I mean, I think that's what's exciting, right? That's where I think you could accelerate that. Do I look at December and January volume trends I always comment or not over the course of the year, I don't know if Feb, January or December are the 9, 10 or 10, 11, 12 most important months of the year, I don't know. I don't know if there's a huge trend in there. But I think it's -- I think the underlying execution for us has been good despite sort of the macro conditions.

So okay. Well, I appreciate that. So how do we think about the low end of that 100 to 200 basis points? Do you think that -- does that assume some growth in revenue per hundredweight, do you kind of get -- I know you've got questions on it, but does that assume you get to 2 points of growth in revenue per hundredweight, something like that? And then also a little bit of shipment growth? Or what kind of revenue growth backdrop do you need to get that low end of your OR comment?

Listen, I think that if we get sort of a macro freight market that is growing a bit. I don't know, 1%, 2%, yes, that would be great. But at the end of the day, I'm not necessarily interested in we're not interested in leading the league in shipment growth. This is more about focusing on generating returns.

So if the market were stronger than that, you might see more of more of our return coming from evolving or developing revenue per shipment. That probably accelerates in that kind of environment. And we'll get some growth in our new markets will continue to grow. So the combination of that would take us up and that revenue piece is really going to drive the incrementals. So I would say that in that range that we've given, we've assumed that when we talked last back in last quarter, we said 50 basis points of improvement into this year, just on a steady-state grind environment. If we had a little bit of growth in the year, can we get to 100 absolutely. And if you get more growth and a little bit more pricing as well, then you're going to go to the upper end of that range. And if you're investing and looking at Saia, which you're focused on, as you say, wow, these guys know how to monetize the capital that they've deployed in the business, that's where the incrementals really look good. And I'd encourage you to consider that over time. And we can point to history. We know we've done it before.

Okay. So you probably get some revenue to get to the low end of that 100 to 200. And obviously, if the market is stronger, you can do a lot more. Is that -- it sounds like...

Absolutely, absolutely.

The next question comes from Brian Ossenbeck with JPMorgan.

First, just a follow-up on the in-sourcing line haul. It sounds like the network is helping with that from a density perspective. But you also mentioned some technology. So is there more of a structural benefit you're getting here from an investment -- and then maybe just wanted to hear an update on the mix of the portfolio. You mentioned the weight per shipment rather headwind. West Coast exposure, you had 1 to 2 lien growth previously. So maybe just an update in terms of where we are in that? Is that still going to be part of a tougher comp from a mix perspective here maybe in the first couple of quarters?

Yes, Brian. So what I would point to, and I think 1 of the things that's always important when you consider our cost structure is kind of reference or compare us to our competitors, all the public guys are all larger than we are. And by and large, on an apples-to-apples basis, we've got a pretty good cost structure -- and that is largely dependent on the deployment of technologies over the last few years around how we plan, schedule and run our line haul network.

So we have never been necessarily concerned with using PT if it's cost optimal, right? So as we have modeled the network over time, we have to use PT freely would have made sense to match our cost structure and most importantly, match customer expectations. So that same -- we deploy that technology, that optimization technology on a larger scale as we grow the business. And as you add 39 ramping points across the network, which you can do that is you take that same technology and you figure out, all right, so what's the better way to schedule and manage that our sort of network cost, which is our line haul and PT and that's why the cost structure is, we feel like pretty competitive. And although it's challenged in a seasonally soft fourth quarter, it's still pretty good overall compared to much larger competitors.

So that's kind of a key skill set, a technology-based solution that we deploy. We'll continue to -- like any technology, you continue to invest in it because over time, you want to continue to improve whatever it is, a logic or algorithm that's driving those sort of decision points you want to continue to refine and improvement.

So that's something we'll continue to focus on going forward. And I think that's a competitive skill set that we have.

From a mix standpoint, Brian, I mean the L.A. headwind, weight per shipment headwind, those late April -- excuse me, late March, April-ish time frame or when those start to lap. In the -- obviously, shipments were down. But in the areas that are growing, it is typically a little bit more on those the shorter-haul segments right now. But I think part of that is just the expansion of the network. You get opportunities with customers to solve more problems. But from a larger standpoint, really that LA weight per shipment part that received a little bit after the late Q1, early Q2 time period. But importantly, we're focused on driving returns on the investments and focusing on price. We've got to get paid for the service that we provide. And we've got more conversation points than we ever have with the wider network. But those are the key points on the mix portion of it.

All right. So just to clarify for the optimization? Is it just more -- doing more with the same technology, nothing really new incremental, just a broader base with better density. Is that correct?

Yes. I mean that is. But I think, Brian, what's important to underscore here is that we continue to invest in that technology, right? So further refine the algorithms we use for that. And the tools that we deploy was that around how we plan the network going forward. So it's not a static investment where we say, "Hey, last -- 2 years ago, we deployed this technology, we're not making changes to it. We continue to invest there. But that's really key for us.

The next question comes from Ravi Shanker with Morgan Stanley.

Just 1 follow-up to start. Just to confirm on this insurance, like is this -- like should we treat this as a onetime item what happened in the fourth quarter? Or is this the new baseline going forward -- and also, you mentioned you've seen some volume shifts after you pushed through the GRI. Can you unpack a little bit more kind of who did that go to? Was that entirely price-driven kind of was that a new customer an old one? Any further detail there would be great.

Yes, on the -- I'll take the self-insurance on the accident expense, that's a few years ago. Unfortunately, that is -- it was an unexpected adverse development. So it's appropriate to recorded reserve for that. I don't I don't expect that to be the new run rate. Certainly, you don't want things coming from prior periods like that. But the reality of it is that underlying this business accident expense as part of the business, right? So you've got to make sure further explanation why you're going to focus on pricing and make sure you understand those things. But I don't -- I wouldn't consider that number as a run rate item. We we highlighted it simply because it was unexpected adverse from prior periods.

On the GRI aspect of it, you always see a little bit of volume move when you take the -- and part of that is temporary, where customers are trying to shift things around, try to save some dollars. That's -- we did it in what's typically a seasonally weaker period of the year. But there's always a little bit of movement around that. We feel pretty strongly that we're really well positioned as that starts to flow back, but that's not out of the norm. We're -- typically, we talk about sort of keeping 80% to 85% of that we're on that segment of business. we're seeing a flow-through rate just in excess of 90%. So we feel like we're getting a better hang on to that. And we feel like it's partly the network. We've got more opportunities where customers are saying, "Hey, side doing a great job for me and more locations than they ever have. But you always see a little bit of volume trend. But importantly, the acceptance rates where we're focused and where we're going to continue to press on.

Next question comes from Ariel Rosa with Citigroup.

This is Ben Moore at Citi for Ari. -- it's Matt, good to hear from you. You've previously noted not seeing meaningful restocking at retailers. And curious to here, as you're having your conversations with customers, what's the sense on restocking? Is it starting to happen? If not, what's your sense on kind of throughout the year when that might inflect?

Yes. I don't know that we've got a specific call out for that, Ben. I think that it's what we would expect from here based on at least what the sentiment you say is that kind of maybe more normal, if you will. So I don't know that it's accelerated level of restocking or just more of a normalized supply chain management.

So I don't know that we're in the how would I say the sort of up and down time with that. I think it seems to be stabilizing a bit. So we don't see quite the volatility that we might have seen even 6 months ago, again as people were addressing the changes in their supply chain. We don't see as much of that now as we did then.

Great. Really appreciate that. And maybe just as an add-on or a clarification on your 20% to 25% excess capacity you mentioned earlier, you've in the past talked about may be anticipating as much as 35% to 40% incremental margins on the excess capacity on an inflection. And kind of reaching gradually your sub-80 OR long-term target. What's your sense on that right now? Are those numbers still kind of what you have in mind, targeting perhaps maybe not '26, but '27 and beyond?

Listen, a $2 billion capital investment -- like what we've deployed in this business, the returns that we're expecting are sub-80 of , right? So now when does that happen I think the market is going to influence that. But I don't see any reason why we don't drive the performance of the business in the low 80s and into the 70s.

So parts of the network even today that have some level of maturity, we actually operate in the upper 70s now. We use that as a guidepost. We say, look, we ought to be able to do that everywhere. And that's why we made the investment. So I don't think there's any hesitation on our side to say that, that can't be achieved.

The next question comes from Reed Seay with Stephens.

I wanted to touch on salaries, wages and benefits here in the fourth quarter. You talked about head count being down, I think, above 5% year-over-year. Obviously, you had the wage increase here in October. But you would think that maybe like the head count coming out on the wage increase on a year-over-year basis would offset each other. Can you talk about maybe -- or just dig into the expenses in the salaries, wages and benefits line a little more. Is there anything in the fourth quarter that maybe won't repeat going forward? Or is there any reason that, that could potentially be elevated? Or just more color there would be helpful.

Yes. I mean you've always got -- we talked about the health insurance inflationary environment. We talked a little bit about that in the pre-scripted comments. If I look at headcount, excluding linehaul drivers, that's down 6.4% compared to Q4 last year and down about 2% sequentially from Q3 to Q4. But on a cost per shipment basis, which I think is where you're getting at, Reed, look sequentially -- and you've got 2 fewer work days. So your fixed costs are spread out over fewer days, fewer shipments. You've got a shipment deterioration that you see in the sequential Q3 to Q4 numbers. And then the days that you have shipments, they're not all full revenue days, but the fixed cost of head count of salaries in a way, some of the insurance items those are all embedded in there. But we're pleased with the pace that we continue to match ours with volume. We're never going to be -- that's just part of our business. You've got to match ours with volume. So I think more than anything, it's just -- you didn't have the wage increase in Q3.

So we did it in Q4. So that's an automatic increase compared to you were just kind of looking and modeling historically. But we feel like we manage it pretty effectively in what's a challenging period of the year, plus with a more challenging environment. We knew that October shipments were on the last call, and that was a 23 workday month, which is the most important month. November was 18 days. So just some of those nuances and headwinds on how the calendar lines up, but we feel like we manage costs what we typically do on a headwind from a wage increase that was only in 1 period versus the combination of the two.

And then if I could just follow up on the previous question on capacity. Can you talk about the capacity difference in your new markets versus your legacy markets? I would assume you have a little excess -- a little more access in your new markets as you try to build density in those. But just kind of get a feel for where the legacy markets are as well.

Yes. I think Matt walked through this pretty well at. But I think you got to remember that capacity is measured by not only door count, it's yard space, it's drivers, it's equipment into new markets, we continue to have and would expect to this stage ample capacity. We can -- if things grew in those markets at a rate faster, you could easily add drivers or recruit drivers and equipment, that sort of thing. In the legacy markets, we feel pretty well positioned there. When we say 20%, 25% -- we're taking a whole range of assumptions and locations, unlike maybe some of our larger more established mature peers.

Our number is a whole range of variations. So there's not a lot of insight there that I can give you beyond to say, look, new markets, plenty of capacity, probably upwards of 50% Newmark legacy a little bit less, probably around 20-ish -- you got to wait how big are the new versus old, I don't spend a lot of time worrying about it, to be honest.

Next question comes from Jason Seidl with CD Cowen.

If we look at these 39 terminals, it's -- and by the way, it's great to see them turning a profit now. How should we think about the walk to sort of an average legacy profitability? So if we assume normalized economic environment and a rational LTL pricing environment? How many years till these terminals walk up to the average?

Well, there's a wide range in these. Obviously, in that 39 in, you've got a Garland, Texas facility that's more meaningful than some of the smaller ones just in terms of freight environment and magnitude. Historically, we think about these on sort of a 3-ish year time horizon to get towards company average. Now the comment that you made was on a better macro.

And a better macro backdrop. Yes, normal, we think about it in a 3-year time horizon. We've got some of these that are already operating below the company number. I mean it's not all of them. It's a minority, certainly, only a couple of them, but that's good to see in the scale impact of it. But typically, we think about them on a 3-year time horizon. And if the macro gives us a little bit of an uplift and it's a bit of a recovery scenario, if you think about that, what Fritz just said in the prior previous question around excess capacity, will you have fixed costs that are just associated with running these terminals. And obviously, you've got variable costs in there as well. But the fixed costs are going to scale even more so in an uplift environment. That's what gets us so excited about this. in a volume uplift environment, you're not having to add cost at a 1-for-1 level.

We can scale -- the investments that we've made are not for the results in these terminals in the next 3 months or 6, it's a 3-, 5-, 10-year investments that we're making these in. But that means that there are fixed costs embedded in those and then efficiencies that aren't in some of the markets that have been open for much longer. So we get really excited about the opportunity to scale just because we're really in the top of this many new terminals in a short period of time. it's the right long-term move, but it really sets us up to take advantage in a bit of a better macro.

Right. No, that makes sense. Just a quick follow-up on the insurance side. given sort of the rise that we've seen in sort of the mini nuclear verdicts that's been more recently, any thought given to maybe upping your self-insurance level going forward?

We -- we're always looking at unique ways and conversations around our insurance tower. We factor in a lot of different things as we're going through those negotiations and the renewals. I think very important we invest and we've said this for a long period of time. We invest and we'll continue to invest in every piece of safety technology. best-in-class equipment with all safety technology on it. So we're never going to take a break from that, but the environment is inflationary. I mean you hear everybody talk about that. So -- the best way to prevent that is to have fewer incidents, and we are pleased with the progress we've made this year. So we have a pretty wide ranging discussion every time on the insurance renewal side, so we take -- there's no still in turn when we're talking about on the same.

I would challenge that we would say likely has, if not the top from a safety feature set fleet as anybody in the business. I mean we have never kept corners on that driver facing, forward-facing cameras, all the acmitigation technology onboard training to support that -- that's important to us. We have -- the most important thing we can do around safety is to keep our drivers safe, get them home safely. That's how you save on insurance, get people back Homesafe back to work tomorrow is safe.

The next question comes from Eric Morgan with Barclays.

I just wanted to follow up on the last one on insurance. I know you said you don't think we should be including the prior period developments in the run rate. So -- just want to clarify, I mean, if we back out the 4.7% from the quarter, I think insurance costs would have come down sequentially a healthy amount to like $20 million. So I just want to double check if that $20 million or so is the run rate you're thinking going forward? And -- if so, what's kind of driving that sequential improvement? I know you mentioned claims ratio improved there. So I'm not sure if that's a factor as well.

Yes. The math you did Eric, is right on the impact of that. So that would point to us. We're having what was embedded in our guide. Obviously, a pretty good quarter from an experience standpoint. No, I think you've got to use a longer-term average, certainly, when you're thinking about it from a modeling standpoint. It's -- you look in our history, and you'll see pluses and minuses and just how that moves throughout the year. Environment is going to continue to be inflationary. But I think importantly, as Fritz noted a second ago, we've spent a lot of time and will continue to on the training the -- and we were seeing it in our results, and we continue to preventable accidents down 21% compared to the prior year, and that was embedded in some of that Q4 look. But I think you've got to use a longer-term average. These discrete ones are part of the run rate moving forward. But that line continues to be inflationary. I think it's fair to use more of a longer-term average with some inflation on top of it.

And then when we build in our guides, we think about what OR improvements are, that's assuming what we understand to be about sort of a normal case development, right? These -- the handful that we described, we called out here were extraordinary in a sense that the tail on them. But what we think about the guide, we appreciate that, that is an inflationary line.

So we try to include that in that analysis, and that would include some development of cases that have happened over time. So Matt's description around looking at that over time to port.

The next question comes from Harrison Bauer with Susquehanna.

Squeezing in here. Matt, building off your -- some of your thoughts on fixed versus variable cost. Some of your peers have offered what their view is on incremental margins in the early stages of a growing tonnage environment, considering you've similarly invested heavily into your network with ample capacity. As you get this network running, can you share what your views are for incremental margins in your business before you'd have to invest materially in more capacity and if that's drastically different from the 40% plus that your peers have described.

No. I mean, look, this is -- to Chris' earlier point, this is why we did this. And -- we do have these costs that are associated with opening 39 terminals over the past 3 or so years, but we feel really poised to scale out of that. There is no reason -- I mean, we think about those same types of numbers in a slight uptick environment. And then certainly, if it escalates further a 30%, 40% incremental margin number, and you'll see that probably in excess of that in some of these markets that are relatively new because you're not -- you're not adding costs at the same pace as what the volume and the revenue is coming in, which is part of having a national network and part of why we scaled. And history proves that point. If you go look at the execution and the incremental margins post the Northeast expansion, that's exactly what we saw.

And there's nothing that stops us from getting to that point. So that's exactly how we think about it. And if the environment runs a little bit further or faster the capacity environment tightens, we feel like we can outperform that, but that's absolutely the types of numbers that we think about.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer, for any closing remarks.

[indiscernible]

The next question comes from Tyler Brown with Raymond James.

I just had a couple of quick ones. So Fritz, I think you talked about your $2 billion investment. That was obviously largely on real estate. I think you just gave CapEx guide of $350 million to $400 million. But Matt, where would you peg maintenance CapEx? And is this year's CapEx largely just fleet and fleet catch-up?

There was a lot, obviously, in real estate over that past period. But there's also a big investment in equipment over the past couple of years. If you look at past couple of years, the biggest tractor investment in company history, the biggest trailer investment in company history.

A lot of that was to catch up with all the volume growth over the past several years. So it is a lot of real estate, but it's also a lot of equipment as well in that period. From a maintenance CapEx standpoint, I mean, that's really what this year is from an equipment standpoint is maintenance CapEx. Obviously, volumes are a little bit down compared to where we expected them to be when we walked into 2025. So we feel really good about the equipment pool. That is inflationary, just like every other line of our business. But that's -- from an equipment side, it's really a maintenance is by this year, for sure.

Okay. So it feels that you guys will be still cash generative. You should have solid free cash. Your leverage is very manageable. M&A probably isn't a story -- and clearly, Fritz, you see a ton of upside. So does there come a point that you guys will contemplate additional shareholder returns? I mean maybe through a buyback or will you guys hold capital back for another CapEx cycle down the road, but how do you guys think about that over the next couple of years?

So I would say all those things are in play, right? So first of all, we understand and respect the fact we're stewards of shareholders' capital. So as this business generates returns, we'll consider buybacks, dividend, whatever that might be, but that's important, right? Because this is a business that we expect to generate a return. At the same time, I think that we're going to have to balance that with opportunities will present -- be presented to us as the market adjusts as terminals become available in markets that we don't necessarily service as well as we would like to.

We've got 212, 213 facilities right now nationwide. And I think that, that potentially goes to 230. And I think that potentially there's some markets where we may have to build -- there could be other markets where I think we're going to be able to find available real estate. So we're going to have to balance the deployment of capital in that way. I think the way to think about that though is obviously, we're going to be stewards first, first and foremost, to the extent the investment opportunities present themselves, those are going to be accretive from a return on invested capital as well. So that would further fund shareholder returns in future years because I think there's a lot of growth potential in this business still. So we're excited about that opportunity.

I think important to add to that, Tyler, to the point you made at the beginning of being free cash flow generative this year is a big deal. That's what we expect to be.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer, for any closing remarks.

Thank you, operator, and thanks to all that have called in. At Saia, we believe that our value proposition of the customer continues to be significant, and we look forward to talking about the success we will achieve in the quarters and years to come. Thanks all for the time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Saia, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Clay. Good morning, everyone. Welcome to Saia's Third Quarter 2025 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should note that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

Also, in the third quarter, we recorded $14.5 million in net operating expense reduction from a gain on real estate disposal and impairment of real estate. When we discuss adjusted operating expenses, adjusted cost per shipment, adjusted operating ratio or adjusted diluted earnings per share in our comments, it refers to our adjusted results that exclude the gain from that real debt sale and impairment on that property.

See our press release announcing third quarter results for a reconciliation of non-GAAP financial measures. That press release is available on the Financial Releases page of Saia's Investor Relations website. I will now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss Saia's third quarter results. We are very pleased to share that our results for the third quarter reflect our continued focus on customer service network optimization and cost control efforts.

Our customer-first focus remains paramount as we continue to mature in our newer markets. Although the economic backdrop continued to exhibit the trends seen throughout 2025, with customers awaiting a more certain environment, we are pleased that our expanded footprint continue to provide opportunities to service customers in both our legacy and ramping markets.

Our ramping markets, which are made up of the 39 terminals opened since the beginning of 2022, grew sequentially in improving their operating ratio by over 100 basis points compared to the second quarter and are now operating at a sub 95 OR. 17 of these terminals have just completed their first year of operations, making the overall improvement in performance even more impressive.

Our nationwide footprint allows us to build deeper relationships with customers, and we're seeing the benefit of the investments made in our network over the past several years. Compared to the second quarter, we experienced revenue growth in both legacy and ramping markets. Customers value ease of doing business and with our now national network, we are better positioned to provide solutions than we ever have been.

Our third quarter revenue of $839.6 million was relatively flat compared to last year's third quarter, reflective of the macroeconomic landscape. While our third quarter operating ratio was 85.9%, adjusting for the onetime real estate transactions, our adjusted operating ratio was 87.6%.

Adjusting operating ratio -- adjusted operating ratio increased by 250 basis points compared to our operating ratio of 85.1% in the third quarter last year, but improved by 20 basis points compared to the second quarter of 2025 outperforming historical seasonality.

The improvement from the second quarter was achieved primarily due to our focused cost control efforts resulting in a decrease in sequential adjusted cost per shipment despite headwinds from increases in self-insurance and related costs. Excluding the net impact of the real estate transactions, our adjusted cost per shipment improved sequentially from the second quarter by 70 basis points.

The sequential improvement reflects our continued focus on operational execution and efficiency while still maintaining our focus -- our performance standards. For the quarter, our cargo claims ratio was 0.54%, which is our fourth straight quarter of sub 0.6 cargo claims ratio, a notable company record. Additionally, reflective of our expanded offering and continued service performance for customers, our contractual renewal rate for the quarter was 5.1%.

Volumes for the quarter were in line with our expectations based on how the overall freight market has trended in 2025. Compared to the third quarter of 2024, shipments per workday increased -- decreased 1.9%, while sequentially, shipments per workday improved 3.2%. We continue to experience outsized growth in our newer markets where our expanded footprint and service offering provides more opportunities as customers come to understand and see the value in our expanding service capabilities.

Our ramping facility saw a 4.2% sequential improvement in shipments per workday in the third quarter of 2025. And facilities opened prior to 2022, shipments increased 3% sequentially and decreased 4.8% compared to the third quarter of 2024. We are pleased to see both legacy and ramping facilities grow sequentially reinforcing the value of a national network through our expanded service offering despite a softer overall LTL freight market.

In Q3, we saw continued benefits from our accelerated network optimization efforts that began in the first quarter of the year, enabled by our ongoing investments in technology, these initiatives improved efficiency across our national footprint as handles or the number of times the shipment is touched as it's routed through our network continued to be lower than their first quarter peak.

We expect our national footprint to continue to scale moving forward, aligning with our long-term strategy of getting closer to this customer, improving service levels and providing solutions that meet customers' needs. We're already seeing the benefit of our investments in our results and conversations with customers reinforce our value proposition.

Optimization of mix remains an intense focus for us, and our ongoing efforts around pricing remains one of our biggest opportunities. As noted earlier, our expansion strategy is yielding tangible results as we get closer to customers and can provide more solutions to meet their needs. Sequentially, over 70% of our volume growth came in 1- and 2-day lanes across our network, with over 2/3 of that growth coming from customers that we already do business with. Growth in these lanes helped drive an increase in operating income and profitability compared to the second quarter. This growth driven largely by our National Accounts segment demonstrates the impact of our expansion and ability to grow existing customers and build relationships with new customers.

We implemented a GRI on October 1 at a rate of 5.9%. As a reminder, this increase will impact approximately 25% of our operating revenue and varies by mix of business and lane. Ensuring that we drive returns on our substantial network and service investments remains a focus and this GRI is another step in the right direction in obtaining the compensation we expect from our customers for the service we provide in this inflationary business. I'll now turn the call over to Matt for more details from our third quarter results.

Thanks, Fritz. Third quarter revenue was relatively flat compared to prior year, decreasing 0.3% to $839.6 million, while revenue per shipment, excluding fuel surcharge, increased 0.3% to $294.35 compared to $293.39 in the third quarter of 2024.

Fuel surcharge revenue increased by 2.1% and was 15.2% of total revenue compared to 14.8% a year ago. Yield, excluding fuel surcharge, decreased by 0.1% while yield increased by 0.5%, including fuel surcharge. For the third quarter, shipments per workday decreased 1.9%, while weight per shipment and length of haul increased slightly compared to the third quarter of 2024.

With this change, tonnage per workday for the quarter decreased 1.5% to approximately 24,700 tons compared to approximately 25,000 tons in the third quarter of 2024. Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased 0.7% compared to the third quarter of 2024.

This increase is primarily driven by increased employee-related costs including group health insurance and workers' compensation costs due to cost inflation and experience. These increased costs were partially offset by reduced wages compared to prior year as we continue to match ours to volume. Compared to the third quarter of 2024, head count was down 3%.

Purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles decreased by 9.5% compared to the third quarter last year and was 7.1% of total revenue compared to 7.8% in the third quarter of 2024.

Truck and rail PT miles combined were 12% of our total line haul miles in the quarter. Fuel expense for the quarter increased by 0.9% compared to prior year, while company line haul miles increased 1%. The increase in fuel expense was primarily the result of an increase in national average diesel prices by over 1.8% on a year-over-year basis. Accident claims and insurance expense increased by 22.5% year-over-year.

The increase compared to the third quarter of 2024 was primarily due to development of existing accident-related claims and inflationary increases in cost per claim. Depreciation expense of $64 million in the quarter was 17.2% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate and technology totaling over $600 million over the last 12 months.

Compared to the third quarter of 2024, adjusted cost per shipment increased 4.6%, largely due to the increases in depreciation and self-insurance related costs. On a sequential basis though, adjusted cost per shipment improved 0.7% from the second quarter of 2025 as cost management and core execution remained a heavy focus. This sequential improvement was achieved despite the headwinds from sequentially rising fuel costs and self-insurance related costs.

Total operating expenses increased by 0.6% year-over-year, but after backing out the net gain on real estate in the third quarter, total adjusted operating expenses increased by 2.6% for the quarter. When combined with the year-over-year revenue decrease of 0.3%, our adjusted operating ratio increased to 87.6% compared to 85.1% a year ago.

Our tax rate for the third quarter was 24.8% compared to 24.4% in the third quarter last year. And our diluted earnings per share were $3.22 compared to $3.46 in the third quarter a year ago. Our adjusted diluted earnings per share for the third quarter of 2025 were $2.81. I will now turn the call back over to Fritz for some final comments.

Thanks, Matt. I'm pleased with our team's ability to focus on what we can control at this point in the cycle. Each state brings new variables and the ability to improve operating ratio sequentially from the second quarter despite headwinds from increased fixed costs in addition to elevated insurance-related expenses, speaks to our team's ability to remain steadfast in our focus on core execution and cost management.

This quarter is yet another example of our team's operating performance being the best in the industry. In addition to the GRI, we also implemented a wage increase of 3% effective October 1 for all employees. We recently completed our annual engagement survey. And for the third year in a row, had a participation rate over 6 -- or over 80%.

This participation rate remains among the strongest in the industry and most significantly, our overall employee engagement remains high and actually improved compared to last year. The results of the engagement survey continue to reflect an engaged workforce despite the economic trends seen throughout the year. While we always have areas in which we can improve, I'm very pleased with the results of the survey and the ongoing commitment of our teams throughout the network.

Saia has expanded footprint is supported by our best-in-class team and the commitment of the team shows in the results seen in Q3. In a down freight cycle, we continue to focus on the customer by providing a high level of service while at the same time, maintaining cost management and improving core execution. We have remained resilient amid customer shifts that seem to transpire on a day-to-day basis and are well positioned to leverage our investments in the network over the last few years into an opportunity to turn Saia into one of the largest players in the LTL industry.

Given the ongoing market conditions, the results we're seeing from the investments in our network and our ability to adapt to uncertain environment, we believe that we're still in the very early stages of realizing our full potential. With that said, we're now ready to open the line for questions, operator.

[Operator Instructions] The first question comes from Chris Wetherbee with Wells Fargo.

Maybe 2 quick questions here. Just kind of curious how things have been trending in October from a tonnage perspective or a shipments perspective. And then Fritz, I noted you put the wage increase in October 1.

Maybe you could give us a little bit of color or framework around how you think about the fourth quarter operating ratio in the context of the improvement you're making on the cost per shipment but also obviously some changing dynamics with seasonality and volumes. So a couple of questions there would be great.

Sure. Thanks, Chris. I'll go ahead and give the monthly for Q3 as well, just so everyone has it. So in July, shipments were down 1.2%, tonnage down 0.9% -- excuse me, up 0.9%. August shipments down 2.2%, tonnage down 2.2%, September down 2% -- 2.5% on shipments and 3.3% on tonnage.

In October so far, shipments are down around 3.5%, tonnage down about 4%. If we look at October so far, we've seen trends be a little bit depending on the day, up and down a little bit. I think there's maybe a few things that, that could be attributable to, but the first couple of weeks were a little bit lighter than we anticipated.

We still have a couple of days to go, but that's where we're tracking as we stand right now. We think about the OR portion, and I'll hand it over to Fritz to for some commentary as well. But if we think about the OR, if you look back in history, the average sequential Q3 to Q4 is about a 250 to 300 basis point degradation usually, assuming years it's a little bit better. There's obviously tails on either side of that.

With October trending a little bit lower this year than what we've expected so far, I think, a fair range, probably in the 300 to 400 basis point degradation range. A lot of that's going to be volume dependent, just seeing where we are so far in October. October is a big month, 23 workday month, followed by an 18-day November, which has its own challenges and just around the holidays in general. So with what we see now, that's where we stand. It's going to be volume dependent as we look forward.

Yes. I think just to add, Chris, I mean, I think that the overall environment that's kind of leading the trends that we see, it's been pretty muted throughout the year. I think if you look at the month of October, I mean, certainly, we don't have a direct exposure to sort of the government per se, in terms of business with various different departments. We're downstream from that.

And I think to assume that, that doesn't -- hasn't had some impact on kind of the overall environment is probably a bit naive. But I think there's something to that. But at the same time, I'm pleased with what we're doing at Saia around kind of driving the results. So could we get to more the history we could for sure. And I think it depends on how November develops and into December.

The next question comes from Jonathan Chappell with Evercore ISI.

Fritz, updates on the, we'll call them the new terminals, the 39 open since the start of '22, went from breakeven to high 90s OR now you said less than 95. And I assume you're doing that without the volume that you had anticipated when you open that up. Is this all strictly a productivity, cost efficiency?

And given what you just laid out for October, is it possible for those new terminals to continue to edge better on a margin front without any volume through -- or an accelerated volume throughput in the near term?

Good question, Jonathan. The -- our focus as you get developed maturity in those facilities, what's exciting about them is that the incrementals can be pretty positive, and you start to see a bit of that. So I think that as we get -- continue to grow in those markets, both inbound and outbound, that's a benefit to us.

Now we're going to run into bit of challenges around seasonality for sure now, right? It is just -- Q4 is typically a slower time of the year. But the opportunities there are -- it's about maturity in those facilities. I mean you -- we're just now lapping, getting full year behind us on '17 last year. So we're really pleased with what we're seeing around operating efficiencies as we build density across not only in those facilities, but across the line haul network, right? So as you build those opportunities out, that's what's exciting about where we are at Saia.

The next question comes from Scott Group with Wolfe Research.

I want to talk about the pricing environment. If you look at yield and rev per shipment ex fuel, both kind of flat. What are you seeing with the pricing environment? Do we -- I know you don't tend to give updates, but maybe it would be helpful if you did, right? And do you think that we should be expecting those yield metrics to turn positive in Q4? Just sort of any color there?

Yes. Listen, I think broadly, Scott, the environment is around pricing is disciplined and focused. I mean, I think that this -- the underlying nature of the business is inflationary. And we've talked about that, and I know others have talked about that as well. And -- so it's important to get the pricing right. I think it's also important when you study the metrics at Saia that you understand a few elements of that, right?

So this is a emerging the mix of business in our -- for us is changing as we go. Right now, we highlighted for you that the growth in the business from Q2 to Q3, a good chunk of that came in 1 and 2-day lanes which we're really excited about because that's -- those are opportunities to grow share of wallet with customers.

But those are also, by definition, 1- and 2-day lane pricing, that tends to be relative pricing versus 3 and 4-day lanes are -- it's going to be less, right? That's just the market, but that's not a bad thing. So you're going to have a mix of businesses in there. And I think the other element to consider too in -- we look at year-over-year third quarter, that's down high double digits, 18-or-so percent shipment wise.

So that's a negative mix headwind for us from -- on the revenue line. But we look at that holistically, what we've been able to do in the ramping terminals. And in the others, I think that's been pretty good performance. So there's a lot moving in and -- I'd point all this out because there's a lot moving in and out of our revenue lines.

Okay. And then again, if you have any thoughts on the Q4 yield, I know you don't do it, but I think it would be helpful. And then just when I look at the margin progression, right, Q1 was top down 700 basis points in Q2 was down a little bit better down 450, Q3 down 250, so more progress.

But it sounds like Q4 takes a step back and it's down 300 to 400 basis points again. So just curious your thoughts on why it's getting worse again. And it's -- maybe it's just too early, but any sort of early thoughts you have about -- how to think about margins next year?

Yes. So we just did a GRI of 5.9%. So that kind of gives you a feeling of what we think about pricing in the environment. We're continuing to push contractual renewals. So that's part of what the opportunity is for us. So we'll continue to focus on pricing and yield management. So that's critical to us. That hasn't changed.

I think we need to recognize that we saw that in October so far, it was a bit soft. It's 1 month in the fourth quarter, 23 workday month. We have November coming up, which is 18 workdays, the fixed costs remain the same. You don't have the opportunity to reduce those in a month short month like that. So could we over outperform the thoughts around Sequential, we could. And -- but we're trying to be realistic around what we're seeing trend-wise right now and that's reflective in the guide.

Want to add to the pricing environment, Scott. Fritz talked a lot about mix. And obviously, we're getting a lot of great opportunities with customers that were really exciting about. It's -- this is why we put those dots on the map and we get a chance to talk to them about an expanded offering. And we've had several customers tell us that we're getting awarded this because we can just now solve more problems for them, and we get excited about that.

It's great opportunities that we're going to continue to take advantage of. So there is some mix shifts in there. But if we look at just the contracts that we renewed Q3 of last year and how they performed Q3 of this year, on like-for-like business, we're netting a little over 4% revenue per bill on those specific contracts. So we're seeing good flow through on those.

We would like it to be more, but that's part of the environment we're in now. But importantly, there's mix shifts in some of these new businesses. But we -- underlying pricing environment, we feel remains very rational. This is an inflationary business. We have to get price.

The next question comes from Jordan Alliger with Goldman Sachs.

You mentioned in your opening remarks, your network optimization efforts continue. Can you provide a little more or remind some of the things you're specifically doing, whether it be on the legacy side, the total network side? And where are you in that process? I mean, is it still relatively early in the improvement front on that side of things?

Yes. The -- I think the way we studied this or I've described it before. So one of the key things, key initiatives that we have as you build out a network and you -- it changes. There was a time -- a year ago at this time, we had several -- 17 fewer terminals, right? And as you add those to the terminal, how you schedule and manage freight through connecting all of the dots, how you design that network is critical to how you optimize cost.

So when we deploy our AI models around how do we reroute freight, you want to do it in a way that you synchronize the system such that you have fewer handles through the system. So if you went back to Q1 of this year as we were challenged in that environment, one of the things that we were really focused on was that in that period, we had what we call peak handles, which meant as freight was routed through our networks, particularly our largest brake facilities the amount of work that was being -- the number of touches of freight going through those facilities was an all-time high for us.

So we've been continuing to work that down over time. And the way you do that is you're building efficiencies around how do you build out loads and build density in a market, say, like a threaten or a new market like that and handle that freight and not have it touch any other dock worker facility through the network. And it's part of its maturity, part of it's scheduling. Part of it is really taking the data that we have and figuring out ways that we can better optimize that.

So it's an ongoing effort. I'd tell you, I think we're in the early innings because it's -- what's critical to that is I think we're in the early innings of monetizing this network expansion. I think from the beginning, we have said pretty clearly that the idea wasn't to fill the terminals up as quickly as possible to do it in a way that people -- customers understood the value paid for that service.

And at the same time, we have to continue to optimize the cost structure behind it. It's been a bit of a challenging environment. Had we had more sort of growth in those markets, I think we'd have been in a position to take advantage of that quicker. But the great thing about it is it's set up for really significant incrementals going forward if -- as the market improves.

The next question comes from Ken Hoeter with Bank of America.

Fritz and Matt, maybe parse a little bit of the 300, 400 basis point sequential margin change. Maybe how much of that is what you're talking about volume? How much is it of the timing of the 3% wage increase. That was a big issue, I think, when you were debating the timing of the wage increase last time.

So I just want to see how much of that is affecting that sequential change? And then thoughts on October, if seasonality holds the 3% down, is that a good read on the full quarter? Or is it normally just given the holidays, does it normally get worse as we go through? Just want to understand where we are on that.

In terms of the OR guide, Ken, if -- so the GRI and the wage increase went into place on the same day, October 1 for both of those, that -- you can consider that to just wash out amongst each other in terms of the guide in terms of the impact. So net neutral from the combination of 2 of those.

I mean, Fritz commented on the fixed cost impact. If you look at the holiday months, they're just overall challenged from a demand standpoint. But when you've got fewer workdays, there's some workdays that are workdays and they're revenue days, but they're not really full revenue days, but you get all the fixed cost aspect of it.

So if you look back in our history, I mean, we've had some quarters where there's an OR that's higher than our average. And a lot of that, you've got weather in there, you've got demand trends. So with what we're seeing in October is trending a little bit worse than what we would typically see.

I wish we had a crystal ball and read into what November and December would look like, it's just -- generally those holiday months have their own impacts and challenges. So we're focused on core execution. We're focused on the 4 walls in our business. There's an externality component on demand that we can't always control. But when we look at the bridge between that is just where we're seeing things in October so far, versus what's ahead of us in those couple of holiday months.

But it's -- I would view that as -- October is an important month in the quarter, right? So it's 23 workdays without holidays, and then you get into November and December and those have them. So that's kind of the [indiscernible] for it.

But Matt, are you saying that we're subseasonal and this holiday season or something is getting worse than normal? Or just because you always have the same fewer days in November, December, right? So October is more meaningful, but I'm just trying to understand if your commentary, is that something got noticeably worse and it's accelerating on the downside on the volume here as we enter the fourth quarter?

Well, October to date is a little bit softer than where we expected to be. I don't know how that reads out fully from November to December. But we're just taking what we see so far in October and our daily trends that we look at our -- at the reports every day and see what's coming through.

So not a great readout. I mean we have thoughts that it sort of bounces back a little bit towards more normal seasonality, but what we're seeing so far in October is below that.

Okay. And then any thoughts on excess capacity? I know that's a number that the industry gives a lot in terms of your capacity. And I don't know if you want to throw in a thought on AI and technology, everybody seems to be talking about what they're adding on. I don't know if that's something you want to -- if that's something you're adapting in any way to accelerate the productivity gains?

Yes, I'll jump in there. I mean I think the capacity, there are many, as you know, Ken, there are many ways to measure capacity, be it drivers, be it doors, be it acreage, all those sort of things. I think we've got ample capacity across our network. Maybe because of where we are in the maturity of the network, we're going to have facilities that are 20% capacity, and we're going to have some that are 85%.

So I think it's a relative number depending on where you are. As far as technology initiatives and AI, I mean, we've for a number of years, we've been investing in network optimization tools, which are AI tools. That's how we've been able to drive our efficiencies around network redesign, all the things that we've done around our line haul network, the initiatives that we have around route planning around our city operations to what we're doing to manage our staffing model. All those things are optimization tools which are AI-based.

Our view on that, quite frankly, it's not new. These are things that we've been investing in for a number of years. And I think I'd point back to kind of our successes over time, that's been based on those tools. And the way we think about those tools is that there is always a new version. There is always a new feature. There's always a new analytic that comes into that. So we're continuously investing in that.

The next question comes from Tom Wadewitz with UBS.

Yes. What do you see if you could give us some thoughts about -- I know there are a lot of moving parts in the business, right, and mix and new terminals and legacy terminals and weak freight market and kind of less rate out of L.A. So a lot of moving parts, but if we get to a more kind of normalized backdrop where there isn't so much mix, I just want to try to contemplate when that could be, right? Like is that possible as you go into '26?

And if so, then do you think it's reasonable for us to see what you're talking about, we call it, 4% contract pricing, something like that actually come through in the revenue per underweight or revenue per shipment because it just seems like that's been something where market discipline, what you're doing, your services, you've got more capacity, all the good things, but it just doesn't seem to show up in the numbers we see. So that's -- yes, I guess, that's kind of the first element. I have a follow-up too.

Yes, it's a good question, Tom. I mean I think the underpinning of what we're doing, the organic expansion is quite candidly, is unlike anybody else in the LTL business. So when you do that, not everything -- unfortunately, not everything moves in a straight line or kind of on a continuous slope.

So we're -- we have to manage through challenges around differences in mix of business as that changes in the environment. You see new competitors in some spots or some parts of the network. Those are all part -- that's part of the challenge. I think what's really, really compelling about Saia is that the network is poised for real opportunity, both for our customer and for the shareholder and for the company, right? The national footprint gives us reach to markets that we haven't been able to do.

I mean we get anecdotes on a daily basis about how we've won a new piece of business simply because we've been able to solve somebody's problem into the great plains where they say, you know what, you can solve that problem. I don't have to deal with anybody else. Now I can do more business with you because of that. And that's an important value that we contribute to the customer.

I think in a more normalized freight environment where maybe there's a bit more in the industrial sector, industrial production improves a bit. I think we're poised to really take advantage and see the incrementals that we saw in the last freight cycles, right? And I think they actually could probably see what we've seen before, simply because we have a footprint that allows us to not only drive value in the local customer market for the customer.

But then it's also one that where you have a national footprint, you can drive line haul efficiencies well. And you're seeing we're getting efficiencies right now through network redesign efforts, and we don't have the volume that we expect to get. And if we leverage and get the volume, I think the incrementals could really be compelling.

We're getting cost efficiencies in a challenged environment. And that's a big deal in this business. And with facilities that quite candidly are, in many cases, immature. So I think that longer term, there is a compelling opportunity for Saia. And I think we're going to continue to grind on generate value in the short term. And when the market does and the freight market does change, I think we're poised to win.

One of the things we're really pleased with, I mean, cost per shipment was down 0.7%, and that's -- it's sequential. And if you think about what Fritz just said, too, it's -- we've got terminals that are not mature yet. I mean we've opened 39 terminals since 2022, 17 of those, like Fritz said, just crossed over a year. So there's naturally and efficiencies with those, there's fixed costs that are associated with them.

So we're very pleased with the cost performance and the execution of the team on a day-to-day, but we don't open these for 1-year time horizon. These are long-term investments for us. very proud of the execution that we have in the near term. But when that comes back, the incrementals are going to be strong because we have that opportunity to leverage it in the new markets, but also the existing markets where we're getting more of best because we can solve more problems.

So it's not about just about growth in these ramping markets. When we can solve more problems, we also get business in our existing markets. We're seeing that now. And that just gets better when the freight environment gets better, too. But we're seeing the fruits of that labor now.

Yes. That's great. And the quick follow-up is, I think it's better in this type of market to be a low price point than to be a high price point. another LTL that reported this morning talked about kind of gap versus the high price point in the market and how they're closing that gap.

So I -- just to kind of level set, I think there is opportunity for you over time. to deliver service and maybe kind of improve price more than the market, right? So how do you think of your gap versus whether it's OD or XPO or just kind of broader LTL market, your gap on price point?

Listen, Tom, that's an ongoing opportunity. We make no mistake, we pay really close attention to that. We think that is -- continues to be an opportunity for us. And I would encourage anybody to study what -- sort of whatever their view of revenue per bill across the public sector and compare that to what we -- where Saia is, and we feel like we got to continue to close that gap.

I think what's really compelling is with that analysis, you take that and look at our cost per shipment and see how that stacks up, and you see a really compelling OR that gets spit out at the bottom, right? And that's really what the value is in the business. And for those who understand that, I think they understand that, that's what we're focused on.

But do you have -- I mean, do you think it's 15 points or how wide do you think the gap is between, say, you and OD or whatever benchmark you want to look at?

Yes, it's going to be a number like that. I have to be honest, I haven't studied the results that were published by others today. So I'm sure it's probably at a discount to that. I think that our service stacks up as well, if not better than others. And I think that warrants pricing.

And now that we have a national network that is matches up with some of those guys. I think that it's a different game, right? And that lets us compete on an equal footing and an equal footing major in an equal market, that means you get the opportunity to continue to push pricing.

What a national network allows us to do, Tom, is to have those conversations at a different level. when you're able to solve more problems and then you're having a conversation about the value you're providing, you're harder to replace. You're stickier. The reality over the years is we've been doing a great job without a like-for-like footprint.

We have a national network now for the first time that we've opened all these facilities. So we get to have that conversation more and more. That helps pricing become stickier when you're doing more for a customer, you're harder to replace. That's a great value of the national network.

The next question comes from Ravi Shanker with Morgan Stanley.

Would love to just expand on your initial comments on the Mastio survey and kind of how the results they have received. Are you guys happy with your spot? Do you think it's worth investing more to get further up? Or is it the sweet work for you right now?

We need to continue to invest in service regardless of what the Mastio result says, right? Because we know that our -- the value that we generate in the business for our customers is all about service. So we're hyper focused on driving that. Are we satisfied with the Mastio results?

We would have preferred to be a different position there. But I think there's some pretty interesting data if people look underneath the covers. You look into that, you see that we over-index based on where we are in terms of our relative share relative to the market. I think that says that people are giving us a shot.

We got to continue to focus on completely satisfying those customers as they get to know us and that turns into value both for them and for us. So listen, I -- regardless of where we are today in Mastio, we're focused on investing behind our customers, and that's critically important to driving value in the business.

Understood. That's pretty helpful. And maybe as a quick follow-up, apologies I missed this. Just on the 4Q OR walk, I'm assuming the starting point in 3Q is adjusted for the gain this quarter.

That's right. Yes, that's right. .

The next question comes from Bascome Majors with Susquehanna.

If we exit this year in the kind of down year-over-year tonnage, 3%, 4% range that you're trending in October. Do you think that there's an opportunity to grow tonnage next year without a meaningful improvement in the industrial economy?

I think we'll continue to have the opportunity to develop share of wallet opportunities with our customers. So as we continue to solve problems, there will be accounts that we grow with. And I think those accounts will understand and appreciate and value the service they get from us.

And I think it's going to be that kind of -- that's where the growth is going to come from. If I think about the overall shipments and tonnage growth, I have to be honest with you. We like the idea of continuing to grow share, but what we really like the idea is generating a return for the network investments that we've had.

So it's -- for us, it's really not about how quickly we can grow shipment count for the sake of shipment count. It's going to be about growing the -- our share of wallet with customers that value the service they get from us. So I think there is an opportunity to grow that into next year. Now what the market makes available. I don't know yet. But I think our idiosyncratic story continues. And I think that opportunity certainly is right in front of us and we'll continue to work through that into next year.

And maybe expanding on that, it sounds like from your commentary on the fourth quarter, the margin pressure is really about volume operating leverage and absorption on that than necessarily anything, you have some grade the wage increase timing or anything like that. If we're in a more flattish tonnage environment next year?

And kind of noticing that you have headcount now and you've done a very good job of controlling costs in the last couple of quarters here. Is there an opportunity to expand margin without growth in tonnage?

I think so. Not meaningful, like big growth in tonnage. I think we can continue to drive efficiencies and continue to focus on pricing, continue to make sure that we get paid for all the services we provide. That's certainly an opportunity.

Keep in mind, to the extent that we do get a little bit of growth, in a network that is underutilized because we invested for the long term, the incrementals are going to be pretty good, right? So it's not going to take a whole lot. And -- so we'll continue to be focused on that. I think there are incremental returns that we'll get in the business, and I think we'll continue to drive that value into next year.

The next question comes from Bruce Chan with Stifel.

Maybe just a follow-up on the customer mix comments as you round out the network. You've talked about wallet share expansion with existing customers, which is certainly very encouraging to see -- maybe you can just talk about where else you're targeting growth and how that process is going.

I don't know if you can parse what field account penetration looks like versus enterprise, for example, and maybe whether there are any new end markets that you think are big opportunities. Some others have talked about, events business, grocery consolidation. So any color there would be great.

I think the growth opportunities are all the above for us, right? So -- but I think that let's break those apart specifically. So if you look at the facilities that have been open since 2022, the -- what we call the ramping facilities. Those -- the opportunities in those markets is to date, one of the things we've been able to do is we've grown national account business into those markets, in part because we already had established relationships with those customers.

So it's an opportunity for us to kind of leverage in those markets. And that was really part of the growth thesis. But the second part of that, that I think that is underappreciated is in some of these places, we haven't done business before. And so getting that Saia brand name out there, the next legs of growth in those markets are going to probably come from the field accounts or the accounts that who's this company with the red and white trucks? That remains to be opportunity for us, right?

So I think as you mature in markets, you start with the relationships you have, you grow that business. And then the secondary opportunities come from finding that customer doesn't know us. And for people that have follow us, Bruce, like you have, you know that we know how to do this. So if you go back to our Northeast expansion, that's exactly how we've grown that business to be a meaningful part of our total portfolio.

We started at those national accounts because they knew who we were, and we've done a great job of developing that. The local business or field business, as we call it, as those facilities mature. We like verticals and that particularly in spaces that value service, that value our on time and value our investment in technology. Those are customers that are in business to deliver whatever product or service that they offer, they need a good LTL partner that can achieve at a very high level.

That's where we come in. And those markets that you described are all ones where we can win, be it trade show or grocery or whatever it might be. Those are markets that value our level of service. They're getting to know us in some cases and in some markets, because we're new, they're finding out about us in there. So I think the growth is for us, and this is the really exciting part about the company is across all markets all verticals because we're just now getting to maturity.

That's super helpful. Maybe just a quick follow-up. I imagine there is a margin uplift opportunity as that mix changes. Any thoughts on what that differential with those new field accounts looks like versus the legacy national?

Listen, the margin uplift, like if you just get the average sort of pick up market pricing opportunity, right? So if we get the pricing, we come in and get the business at market. The first uplift is going to happen is you have a very underutilized facility be it a city driver, equipment line haul network that are already in place.

And if you get market pricing on that new business, put it on that underutilized piece of equipment, that is a really interesting, compelling incremental margin opportunity. We know, despite our inefficiencies, we got a pretty good cost structure that we can leverage and scale from here. So I think the opportunity comes in a couple of places, right? It comes with growth around good pricing, but then it's also scaling a very, very competitive cost structure.

The next question comes from Brian Ossenbeck with JPMorgan.

So maybe first, just to follow up on that line of question. When you get those new field accounts, does that -- is that incremental to the volume you have already there with the nationals and just drop straight in and help balance it out the mix? Or does that -- you shift those ramping facilities to have more of a percentage mix of some of that national might churn and go away. Maybe you can help provide some thoughts around that and what that -- where that would show up if it's more on the rev per piece side or if it's more on the cost per shipment side rather?

It's going to end up in both places, Brian. So if I just go back at our Northeast experience, right? So look at as we expanded in that network, you find customers that are willing to pay for the value that you're providing, right? So that's the top line.

And that may require that you find a piece of business that you picked up and you realize that, geez, the pricing is not right, or this isn't working, you exit that business and then you bring in something that's maybe a little bit more appropriately priced. You get all the accessorials and that's an incremental, right, in terms of the pricing line. And regardless, the volume is going to be incremental to leveraging the cost structure.

So if I have a facility that is underutilized, that's an opportunity for us to win on both accounts. We're not necessarily targeting, hey, is it field? Is it national account? Is it different segments of the business. We're more focused on customers that say, let's look at the value that Saia provides, and we're willing to pay for it, right, and understand what that investment is.

And those are customers that fit best for us. Sometimes that's a national account. Sometimes that's a field account. Sometimes it's a combination of both, and it could be across industries. So it's more of that profile that we're pursuing that makes the most sense for us.

All right. And then a quick follow-up for Matt, can you just give us some more details around the CapEx continuing to come down, I think, for the third straight quarter here. Where is that trim coming from? And do you think that's set a good place as you exit the year? And maybe some early thoughts on next year as well. .

Sure. Sure, Brian. We have a pretty robust real estate pipeline that we look at. And from an equipment standpoint, pretty much all the equipment for this year has been delivered and in service. So that's more on the real estate front. When we go through and look at projects.

We're going through diligence on these, having conversations about what the market opportunity is going to be serviced by different locations. So that's just looking at projects that we've got in flight and being a little more discerning on those. And it's not that we're never going to do them.

It may just be that we're delaying a little bit. We've seen us push a little bit of that out as we stand. I think that's probably in a good range for this year, depending on what -- a couple of things that may flow through. But I think that's probably a pretty good range. And then it's still early. We're looking at next year.

But I'd say early read is probably more in a $400 million to $500 million range from a CapEx standpoint. So obviously, way down from last year will be down again from this year. And again, the network build out, we still have opportunities and dots that we need to put on the map. But we've made big strides in that, that shows in the CapEx line over the past couple of years.

So still some finalization to be done for 2026, but I'd say probably a $400 million to $500 million number is probably a fair range.

The next question comes from Tyler Brown with Raymond James.

I missed the first part of the call, so I apologize if you addressed it. But I think last quarter, we talked about peak touches in line haul maybe in Q1 or Q2. And I think Patrick's got a number of initiatives to kind of, let's call it, fundamentally redesign line haul to basically take touches out regardless of volume.

I think your cost per shipment fell sequentially for the second straight quarter. So can you just kind of talk about where we're at on that touches or brakes per shipment journey? And do you feel at this point that you're basically past peak pain?

Yes, Tyler, I think we're past peak pain. I think we're continuing every -- as we pass into the next few months into next year, we continue to have steps around our network redesign, line-haul optimization efforts. As we continue to refine and deploy our AI-based routing tools around that. I think there continues to be opportunity around that.

And I think it's -- I think what's really, really interesting is the value of that we haven't necessarily monetized yet because I think there's still a lot of growth to come in facilities that are still immature. So when I say that we have the opportunity to monetize that. I think the cost structure is very effective.

And as we continue to grow in markets that have been open less than 3 years, you're going to be doing that and further leveraging those sort of cost savings initiatives. So I think the incrementals, that's going to help drive the incrementals into the future. So I -- it's early innings on what the opportunity is.

Now it's challenged into the fourth quarter, right? Because you've got this is a notoriously this time of the year, inefficient time of the year in the first quarter. But I would tell you that I think that the scaling opportunity is really interesting we haven't run through a full year of leveraging that redesigned network.

Yes, agreed. And so what about balance as well because is the outbound inbound mix starting to balance out. And I would assume that as you build that outbound side, particularly on the new terminals, that's going to help with this touch issue as well because you're going to be able to build more direct. Is that right?

Tyler, great point. I mean, we're early innings on that stuff, right? So if you think about just in the simplest form, these are not huge markets. But if you just took the -- great Plains states. So the immediate value we can provide to a customer, we can go to those points now.

So you have a customer say that's in Dallas that says, "Hey, I need to go to Montana. Well, Saia can now go to Montana. We solved the problem. So that's an opportunity. Now the challenge for us is that immediately makes us sort of out balance, right? So you have those Montana markets, we don't have the freight coming out of there yet.

The opportunity for us is to grow out of those markets to the extent there's available freight, that's a balancing opportunity, right? So those are the smaller markets. Then you take a big market like a Triton or Loredo. Man, we're early innings there, too. So those facilities had just cross over a year, there -- the opportunity to grow both the inbound and outbound is very, very meaningful.

And that is all a scaling, leverage the network build directs, take touches out, and we've already got a good cost structure to start with. So I think there's an opportunity to keep getting better from where we are.

That part doesn't even factor in the value that you get when a little bit of uplift from the environment. You're also getting the volume back from those best legacy networks, right, the Newarks, Dallas, Houston, all those. When you get that volume back to, it's an opportunity to continue to leverage that density that's been built over the years. So it's going to be a combination of both and the opportunity to service customers.

You're right, Tyler. It's the direction really matters in this business, too, where the freight is coming from. So length of haul and weight per shipment are important metrics, but direction really matters, too.

If you take a handle out, you have the opportunity to improve service to a customer. You might be able [Audio Gap]

The next question comes from Eric Morgan with Barclays.

I guess just one for me. Could you give us an update on conversations with customers heading into '26? I know that real-time volume picture sounds pretty sluggish. But I guess just curious if you're getting any early reads on potential green shoots or just broadly how your customers are positioning into next year?

So I think right now, the way I would characterize this, people are -- they're incrementally maybe a little bit more confident, positive than they were at the beginning of the year, right?

So you think through, we've kind of got a view of what the tariff landscape is. We've got a view of what tax policy is. We've got a view around interest rates. All that is incrementally positive, right? I'm waiting to see it in the numbers.

And I think that, that's -- we haven't seen that yet, but I think customers, we're kind of ticking off the uncertainties, which is good. Now we just need the next step, I think, is for customers to have the confidence to say, now is the time to build my -- launch the new product or build a new facility or whatever it might be, ramp up production, that sort of thing.

The next question comes from Richa Harnain with Deutsche Bank.

So just a few quick clarification one for me. First, the 300 to 400 bps of OR deterioration, I know, Matt, you talked about how October being lower than you expect is contemplated in that outlook. But what are you assuming for November, December? Do we assume an in-line seasonality type results for those months? Or do we assume that things continue to be subnormal.

And then, Fritz, did you say when you were talking about margin expansion opportunity next year? I just want to clarify, that was a year-over-year comment, i.e., you can still maybe expand margins next year even if the environment remains lackluster. And then lastly, contract renewals. Can you remind us what those were in Q3?

Yes, I'll start and then hand it back over to Fritz. So I'll hit the contractual renewals number on quickly. So 5.1% for that piece. In terms of the margin progression, like you referenced October, what we're seeing so far is contemplated.

What we've got our thoughts around for November and December is that it gets back a little bit more towards seasonality. So that's different plus or minus, it could impact where we land from what we're projecting and thinking through right now. If there's a bounce back in November, could we do on the lower end of that? We certainly could.

But I think a lot remains to be seen in those holiday periods, but our assumption is that we're getting sort of back towards what normal seasonality would be, which are usually declines from October. Usually, what you'd see in October to November would be a decline in shipments and then November to December would be another decline in shipments. So that's what we're forecasting now, but we'll see what we get from the October exit rate.

Yes. And with respect to 2026, we haven't given you a number around. But I think in a sort of steady state environment, I think we could be in a position where we could see some incremental improvement around OR and operating income. .

The next question comes from Ari Rosa

I think that -- I'm sorry.

Pardon me. Go ahead.

Okay. Sorry, I may get garbled there for a second. So I'm not sure what you missed, but I think could we have operating income and OR improvement next year versus -- 2026 versus 2025. So we haven't quoted a number around that yet, but I think there's an opportunity for us to drive some performance in the next year. and which we're excited about.

I think the maturity of the facilities that have been opened since '22 is going to be a key catalyst for that. And then I think that as we continue to develop that share of wallet with our customers, I think that will be continue to be a positive for us. And those will all be contributors for us next year.

Are we ready for the next question?

We are.

Wonderful. The next question comes from RE Rosa with Citigroup.

So Fritz, you mentioned the cargo claims ratio. And with all due respect, I'm aware it's a little bit higher than kind of the best-in-class player. How do you think about your service kind of in context? And to what extent is that holding back some of the pricing opportunity or kind of the ability to realize better pricing?

So just to kind of level set a bit. So our cargo claims ratio is a GAAP number. So I'm not exactly sure how everybody else calculates it. I think the best thing we can do to improve our cargo claims ratio is to get our pricing in line because with market. So that's a way to drive improved cargo claim ratio right away. I don't think that there is a situation where we lose business because of the cargo claims.

I think that a customer looks holistically at doing business with us around everything from picking up on time, delivering on time, meeting the promises being able to meet their expectations. So there's not a singular limiter that says, "I'm not going to do business with you because you got a 0.54 cargo claims ratio.

We haven't lost business with that. We've had opportunities around that. I think it's not a discernible difference from other numbers. I think where we win though is that alongside of all the other things our team does for customers, and that's where we win. And then we continue to focus on driving pricing and that obviously, is in the denominator. So that would improve cargo claims ratio, too.

Got it. That's helpful. And then I wanted to shift gears a little bit just on my follow-up. It sounds like potentially CapEx coming down a little bit. I got to say, Fritz, I've heard you sound more confident, I think this call in terms of the incremental opportunity from expanding the network and into 2026. And yet the stock is obviously down quite a lot. And it sounds like maybe the free cash flow is going to be pretty robust over the next couple of years.

How are you thinking about the opportunity maybe to initiate a buyback here or get a little bit aggressive in terms of driving shareholder returns for kind of long-term holders?

So I'm excited about and have been incredibly excited about the Saia opportunity. And this is entirely why we invested in our network is to generate value not only for our customers but for the shareholders of Saia. We did it on an organic basis. We did it with the idea of creating long-term value for our customers and for the shareholders.

I think that we are on the right on the cusp of really taking advantage of -- when we have an improving market, better macro backdrop, I want to put the work 213 facilities and drive the incrementals out of that. Customers will see what service they get and a business that we know how to scale. We've got a record history of being able to do that. And I think that gives us confidence.

I'm confident because I watch every day to see what our team is doing for our customers, seeing the performance there, seeing what response we're getting in a lackluster market. So I think about if there's a big market or a positive market, Matt, what the potential is, I've always known it's there. I'm just excited about it right now because I think that longer term, people need to understand that. Now we are also and always have been stewards of the shareholders' capital.

So the opportunity to drive value is going to generate returns for Saia that will give us investment opportunities to further expand this network because I think there are opportunities to do that. But at the same time, I think there's going to be an opportunity, and I just don't know when to return capital to our shareholders in any number of forms. But I think that those are things that are front and center for us.

But the biggest thing, all that happens if we drive value out of the network we've just -- we've invested in. And so as we look into next year and frankly, the capital numbers even this year, we see slow growth. And as a steward of shareholders' capital, we're slowing capital investment as it relates to that and making sure we're in a position -- position the company to take advantage of the opportunities that will inevitably be there for us.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Si's President and Chief Executive Officer. Please go ahead.

Thank you, everyone, for taking the time to listen and learn about Saia's results. We're very pleased with the outcome of Q3. Q4 in the current environment continues to present challenges. But I think what's critically important is the underlying value that Saia is creating for customers ultimately is underlying value for our shareholders, and it's really about the story from here how we drive incremental improvements in margins in the business that we've invested in over the last number of years.

Company is built for the long term and long term is long-term value-creating for the shareholder. So thank you for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning. My name is Drew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2025 Saia, Inc. Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Matthew Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Drew. Good morning, everyone. Welcome to Saia's Second Quarter 2025 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe.

Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

I will now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss Saia's second quarter results. Our second quarter operating ratio was 87.8%, compared to our operating ratio of 83.3% in the second quarter of last year, and the results represent a 330 basis point improvement from the first quarter of this year. The sequential operating ratio improvement outperformed the historical average of 250 to 300 basis points despite the lack of typical volume ramp that's usually seen throughout the second quarter.

We operate our business with a focus on the customer and managing the things that are within our control. Our efforts to optimize our variable costs and improve our network efficiency contributed to this outperformance and these results reflect our ongoing efforts to manage the business in the short term with an intense focus on executing our long-term strategy.

I'm pleased with the team's ability to focus on the things that we can control during this quarter, taking care of the customer, mix management, core execution and operational efficiency. Throughout the quarter, we were able to adjust our cost structure to align with volumes that trended below historical seasonality. We typically see significant monthly volume increases throughout the second quarter. And while June trended more in the line of historical seasonality per workday basis, tonnage for the quarter was only up 0.4% from the first quarter.

Our second quarter revenue of $817 million decreased slightly from last year's second quarter by 0.7% due to continued muted volume trends as a result of the macroeconomic landscape. Overall, shipments for Workday were down 2.8% year-over-year. Customer acceptance in our newer markets remained strong, which continues to demonstrate the value of our long-term strategy of getting closer to the customer and providing unique solutions to meet their needs.

Terminals opened less than 3 years saw sequential -- about a 4% sequential improvement in shipments for workday in the second quarter of 2025, compared to the first quarter. In aggregate, these facilities operated in the mid-90s in the second quarter, improving from breakeven in the first quarter. In our legacy facilities are those opened longer than 3 years, shipments were up about 2% sequentially in the second quarter of '25, compared to the first or were down about 3.5% compared to the second quarter of 2024. While we continue to see strong results in our newer markets, the overall shipment trends reflect the continued cautious approach from customers amidst an ever-changing economic landscape. That said, we remain pleased with the opportunities we're seeing with both new and existing customers, which is reinforced by the volume trends seen in our newer facilities.

Revenue per shipment, excluding fuel surcharge, increased 2.7%, compared to the second quarter of last year, while revenue per shipment, including fuel surcharge increased 1.8% in the quarter. For the second quarter, we saw tonnes per workday increased 1.1%, compared to the second quarter of 2024, weight per shipment increased 4%, and length of haul increased slightly compared to the second quarter last year. However, both of these components of mix decreased sequentially from the first quarter, creating a revenue headwind of approximately $4.5 million to $5.5 million compared to the first quarter.

Our pricing and mix optimization initiatives remain an intense focus. Sequentially, our mix of business shifted to handling slightly more national and retail customers, which partially led to a lower weight per shipment compared to the first quarter. Additionally, we saw muted trends out of our Los Angeles region, partially contributed to the shorter length of haul compared to the first quarter, which is a headwind to sequential revenue per shipment.

Throughout the quarter, we were able to continue to provide unique solutions for our customers in both new and existing markets, which further validates our value proposition. Contractual renewals averaged 5.1% in the quarter, reflecting our customers' confidence in the high-quality service that we continue to provide. We remain steadfast in our approach to providing industry-leading service levels while also managing controllable costs and productivity. While we cannot control the external factors, our focus remains intently on what we can control and taking care of our customers is at the forefront.

Customers value certainty and reliability in their supply chain, we believe that we're well positioned to provide that service in every market. This hyper focus on the customer remained on display in Q2 as we achieved a cargo claims ratio of 0.5% this quarter.

From an operating expense standpoint, we drove a 4% sequential decrease in cost per shipment compared to the first quarter despite headwinds [indiscernible] as a result of investments in our fleet and network expansion. We continue to focus on adjusting our resources to the shifting volume levels and reduced head count by about 4.2% from March to the end of June.

We continued our focus on optimizing our maturing network as the 2024 network investments and related growth while beneficial for the long term created unique short-term challenges and inefficiencies in our network particularly in the slower Q1 operating environment. We accelerated our network optimization efforts in Q1 and saw the benefit emerging in Q2 as we leverage density in our larger network and our efforts to drive greater efficiencies began to materialize. These results reinforce our commitment to expand the geography and nationwide footprint, which increasingly allows us to compete on a more even playing field with peers.

As we look forward, we'll continue to execute our long-term strategy and keep an eye on the macro environment, maintaining discipline around our cost structure and adapting the changing landscape across our network.

I'll now turn the call over to Matt for more details from our second quarter results.

Thanks, Fritz. Second quarter revenue decreased year-over-year by 0.7% to $817.1 million while revenue per shipment, excluding fuel surcharge, increased 2.7% to $298.71, compared to $290.72 in the second quarter of 2024. Revenue per shipment, including fuel surcharge, increased 1.8% to $351.36, compared to $345.7 last year. Fuel surcharge revenue declined by 5.8% and was 14.6% of total revenue compared to 15.4% a year ago. Yield, excluding fuel surcharge, decreased by 1.2%, while yield, including fuel surcharge decreased by 2.1% compared to the second quarter of last year.

Tonnage increased 1.1% compared to the second quarter last year, attributable to a 4% increase in our average weight per shipment, partially offset by a 2.8% shipment decline. Our length of haul increased year-over-year by 0.6% to 893 miles.

Shifting to the expense side for a few items to note in the quarter. Total operating expenses increased by 4.7% in the quarter compared to the second quarter last year. Salaries, wages and benefits increased 5%, which is primarily driven by our July 2024 wage increase, which averaged approximately 4.1% for all employees, excluding executives as well as increased employee costs, including group insurance as the inflationary pressures continue to drive this line items elevated level.

Purchase transportation expense, including both non-asset, truckload volume and LTL purchased transportation miles decreased by 5.5% compared to the second quarter last year, and was 7.1% of total revenue compared to 7.4% in the second quarter of 2024 and 7.6% in the first quarter of 2025. Truck and rail PT miles combined were 12% of our total linehaul miles in the quarter.

Fuel expense decreased by 4.3% in the quarter compared to the second quarter last year, while company line haul miles increased 2.1%. The decrease in fuel expense was primarily the result of a decrease in national average diesel prices by over 7.8% on a year-over-year basis, partially offset by the increase in linehaul miles run.

Claims and insurance expense increased by 21.2% year-over-year. The increase compared to the second quarter of 2024 was primarily due to the development of open claims, increased claim activity and increased cost per claim. Depreciation expense of $62.5 million in the quarter was 19.1% higher year-over-year, primarily due to ongoing investments in revenue equipment -- revenue equipment, real estate and technology. We believe the investments we have made and continue to make in our network, technology and our people during this down cycle position us well for the future. We are constantly evaluating investments to ensure they meet the return profile we expect and we plan to spend approximately $600 million to $650 million in capital expenditures this year, consistently investing in our network expansion, equipment and our people aligned with our long-term strategy.

Compared to the second quarter of 2024, cost per shipment increased 7.7%, primarily due to increased salaries, wages and benefits to support a broader network of terminals and increased depreciation expense associated with the record investments made in the network in 2024. As Fritz mentioned, our cost per shipment decreased 4% sequentially from the first quarter in spite of the lack of typical volume uplift that would allow us to better leverage our fixed costs. Decreased head count of 4.2% compared to the first quarter of 2025 was a contributing factor to the sequential improvement.

Additionally, we were able to manage our costs in the second quarter while maintaining a claims ratio that was largely flat sequentially, reflecting our ability to make these adjustments while preserving core execution and customer service.

Our tax rate for the second quarter was 25.3%, compared to 24.4% in the second quarter of last year, and our diluted earnings per share were $2.67, compared to $3.83 in the second quarter a year ago.

I'll now turn the call back over to Fritz for some closing comments.

Thanks, Matt. As I mentioned in the opening, I'm pleased with our team's focus on things that we can control. The operating performance of our team continues to be among the best in the industry, and we remain focused on our customers' needs. While volume did not step up as traditionally seen in the second quarter, margins outperformed the normal sequential progression, representing our team's ability to adapt to a dynamic environment. .

In Q2, we relocated our centralized customer service function to our field locations. We reduced our overhead costs in this process, but more significantly moved our customer service capabilities closer to the customer.

Our customer-first focus is yielding tangible results, especially in our new markets as our facilities open for less than 3 years, continue to lead the charge in volume and revenue growth, performing in line with seasonality in these markets. We're excited about the early success of these locations, and we see considerable runway as we continue to penetrate those markets. With our talented and engaged workforce, the value proposition to our customers continues to expand to match our network -- national network of facilities. A key component of our long-term strategy is to get closer to the customer and give them a chance to choose Saia for their LTL needs more often.

At Saia, we've emphasized the importance of the customer and focusing on things that we can control. As our industry adapts to the evolving economic landscape over the coming months, my conviction about the long-term prospects of Saia remains steadfast. Great employees, great service and a national footprint are all key to securing our position as a long-term leader in the industry.

Our network planning tools continually refined and honed from our original deployment several years ago are foundational to our resilience and our ability to operate and monetize [ in our ] complex national network. At the same time, these tools are key catalysts to continue to find cost optimal solution to meet customer expectations. Over the coming quarters, we'll be further investing to continue and enhance these robust capabilities, which we believe will continue to generate returns in the business. Although these network planning tools provide a framework for the company to operate fundamentally, core execution remains in the hands of a highly engaged team focused on supporting our customers' success and delivering returns on the substantial investment in creating a national network. We remain in the early innings of tapping the potential of this business.

With that said, we're now ready to open the line for questions, operator.

[Operator Instructions] The first question comes from Ken Hoexter with Bank of America.

Fritz and Matt, great job on the pricing. I think that's really a nice flow-through. But given normal seasonality, should we see volumes -- will they stay -- can they turn positive? Or will they stay negative in third quarter? Just if you think about seasonality? And given the strong pricing in mid-single-digit renewals, should pricing continue to climb. I guess that's leading me to the OR thoughts, right? Normal seasonality, I think, is flattish from 2Q to 3Q. Just want to -- maybe your thoughts on an outlook?

Yes. Just on the tonnage piece, well, keep in mind that we opened 6 terminals in Q2 last year, many of those in the back part of the quarter and then we opened 11 terminals in Q3. So the comps get tougher on the shipments and tonnage line as we start to lap those new openings.

And then on the pricing side, we're focused on -- what we've been focused on, we're making sure that the business meets the returns that we expect and that we're evaluating what we're handling for customers throughout each bid, each renewal. That's core to what we do over the years, and it continues to be a focus. If you look at history on the OR line, typically, Q2 to Q3, OR degradates between 100 to 200 basis points sequentially. And we think we can keep it around 100 basis points of degradation sequentially from Q2 to Q3 this year.

I think just to add to that, Ken, I think the important part is that we have made significant through the quarter optimization efforts in Q2 to kind of better match our national linehaul network and network overall to meet kind of what a now national network looks like, right? So I think that part of the efficiencies that we drove through Q2 will continue into Q3. So that's part of that, how we can get to the bottom end of that range that Matt described.

So far, I don't mean to do another follow-up, but is that just because of the optimization on a national network? Or was that because you were talking about seeing a slowing volume, so you move to full cost and cut employees? .

No, it's both, right? You -- in this business, you always have to match cost to what the available business is. But this -- at this time last year, we didn't have 21 facilities. We have 21 facilities that are maturing from last year that we opened last year. And the opportunity that we have, part of that opportunity is as you build densities across that network now. We described for you in the first quarter some of the challenges we had managing through facilities that hadn't been opened that long. And now we're starting to see some of the benefits of that. We continue to look for opportunities to redesign our linehaul network. As you know, that's the biggest cost bucket in this business. And that's an area that, as you do all maturity, that becomes sustainable cost advantage over time.

The next question comes from Richa Hernan with Deutsche Bank.

So I wanted to ask a little bit about the labor reductions that you've done and sort of what you did with wages this year. I just wanted to clarify, was there a wage increase this year? And then in terms of the labor force, what type of cuts were made and as we look out going forward as you try to balance your customer-centric focus and building out the network with sort of where we are in the cycle and trying to manage costs? Like what's further runway for that, what should we expect?

Yes. So just to -- our sort of wage increase program, typically, we do that in the second half of the year. So we haven't done anything with that yet. The -- as far as the headcount, it's real important in an environment like this where you see volume changes, you've got to -- you actually have to match the hours that are available hours to what the volume levels are. So that's really about how we manage head count by location or hours by location, I think, is a better sort of picture of that because somebody that maybe a year ago was working a lot of overtime. At this point, we're maybe not working over time. So it's a cut in hours, build some efficiency that way or productivity that way.

The linehaul network is a really important story for Saia though. One of the things that you do when you have a now national network, some of those facilities that we have added, places like Youngstown, Ohio, we -- part of the reason why we bought that facility was to be able to drive line-haul cost savings across the eastern part of the country. And we have a facility now that allows us to run triples across Ohio. Well, that's a 30% reduction in cost compared to a traditional [indiscernible] connected, right? So that -- those are important cost savings that you can start deploying across the network, and that's sort of agnostic to what's going on in the environment, right?

This is just taking advantage of having a now national network. And people are certainly impacted by that. You optimize to more of internal drivers, maybe you reposition your line haul drivers into different locations to better match where volume movements are, where our customers are. And that all creates efficiencies. You use a little bit less PT in some markets. And if you look at our cost structure, Q1 to Q2, I think that shows up there for sure.

Okay. Great. So as we think about Q3, then, should we continue to see that momentum in the cost per shipment line? [indiscernible].

We'll have to see what the market has in store for us, but I think we've got some additional sort of opportunities through the quarter that I think we'll see materialize. We're still not 100% certain around what the top line looks like. But I do know that we have -- we'll continue to look for cost optimization opportunities and deploy our tools to do that. And that's built in that why we think we're going to beat our sort of historical trend from Q2 to Q3.

The next question comes from Jordan Alliger with Goldman Sachs.

So there's been a lot of -- there's been talk, of course, of industry capacity. Just sort of curious your take on it. would you say going into the next up cycle that overall LTL capacity should look less actually than pre Yellow bankruptcy levels due to the various unsold terminals, even though some of the larger players out there do have excess stores today? And what could this mean for pricing on a recovery?

Yes. I think that if you look at -- I don't think the long-term trend around LTL capacity is going to change. In other words, it's been shrinking over time. And I think that there are -- yes, certainly, there is available capacity today with a number of the competitors. I think what is really significant is that this remains an inflationary business. I think that people expect to get a return on a substantial capital investment in this business. We're no different than anybody else.

So I think that, that will keep the industry healthy. I think that the -- for us, and what we look at is that we're really excited about the opportunity to leverage what we have, right? The market returns -- Saia is poised to take advantage of this. We know how to operate in an up market. So that -- this is the time we've been waiting for. So we think, for us, it's a unique opportunity.

And keep in mind, too, Jordan, terminals and doors are absolutely important, but capacity also comes in equipment and it comes with drivers in the next up cycle, it's drivers that are critically important. You need the terminals of the doors, but if you don't have drivers and equipment, that's a capacity constraint. And like Fritz said, we feel great about the investments that we've made. We've never been better positioned, but capacity comes in all 3 of those.

The next question comes from Chris Wetherbee with Wells Fargo.

Maybe can you give us a sense of how things are going from a volume perspective, maybe some insight into what July tonnage looks like and maybe your sort of overall view on what you're seeing from your customers in the end markets?

Chris, could you repeat? I think you got garbled there a little bit on the question.

Apologies. Hopefully, you can hear me a little bit clear now. Sorry about that. Just curious if you can give us an update on what you're seeing from a tonnage perspective in July and sort of how the third quarter is starting, what you're hearing from customers in the market from the end markets that you're serving?

Sure. I'll go ahead and give the monthly Q2 as well. So April shipments per day were down 1.9%; tonnage per day, up 4.4%. May shipments per day down 3.2%; tonnage per day, down 0.4%. And June shipments per day down 3.4%; tonnage per day, down about -- down 0.8%. And if we look at July month to date, obviously, still have a week or so to go. But shipments per day are down about 2.25%, tonnage is trending around flat. And as mentioned earlier, there's -- we're lapping comps in the back half of Q3 with terminal ads. But from an end market standpoint and customers, I don't know that we'd really call anything out differently than what we've been seeing, and we continue to stay really close to our customers, understanding their business and their trends more and more. But I don't know that there's anything specific for us to call out that we've seen differently over the past few weeks than what we were seeing in June.

Yes. I think we pointed out that the -- our sort of L.A. region was a little bit stood out a little bit softer. Some of that is our own action around making sure that we're compensated appropriately. Part of that, I think there's a little -- has been, at least for us, a little bit of softness in that area. But other markets have been pretty good.

Okay. That's helpful. And just a follow-up on the comment about normal wage increases for the third quarter. I was just kind of curious, are you suggesting that you haven't done it yet or that it may not happen in the third quarter. Just want to get a sense of how you're thinking about that normal process?

Yes. And if you look at it over Chris -- over time is that we would typically do that in the third or fourth quarter. We haven't made up formal call on that yet. So it could still happen this quarter or it could be in the fourth quarter. But we'll let you know as we kind of figure out where the market is and what we need to do.

The next question comes from John Chappell with Evercore ISI.

I know contract renewals are just a small piece of the portfolio. The 5.1% that you mentioned is much lower than [indiscernible] we've seen recently [indiscernible] function of more difficult comparison [indiscernible] that a more competitive pricing overall?

John, we heard you clearly in the first half, but then it broke up a little bit. Would you mind repeating?

Yes, sorry. 5.1% contractual renewals in the quarter, a lot -- a little bit lower than the 8%, 9% that we've seen recently. Is this representative of just more difficult comparisons? Or is this speaking more to the competitive nature of the market right now?

Well, and just to provide a little clarity on the first part of that. About 60% to 70% of our business is subject to a contract. Those renew pretty ratably throughout the year. So it's the majority of our business. The renewal number, we -- it gives us an indication of how the customers are viewing our service and what they're willing to pay for the quality and service that we provide. But what's most important that we track very diligently is what happens after that goes into place. Are we handling the volume that we expect? Are we growing in the lanes that we expect? That's where we look really closely to understand what's happening afterwards and be able to talk with our customers to better understand their freight flows and where we should be handling business and making sure that it's our rate.

So the pricing environment remains rational. We haven't seen anything different than that. We remain really focused on making sure that we get compensated fairly for what we do and provide for customers. So no change from that perspective. And where we get really excited is we continue to see great opportunities with both new and existing customers throughout the network. We've never had 213 facilities like we do right now to sell to our customers. And getting more and more about than we have in prior periods. So that gives us more opportunities.

And I think it's important to note, too, Jonathan is that the -- that our renewal number is reflective of the book of business that actually got renewed in the quarter. And it's -- so that can change quarter-to-quarter. So it's reflective of those. That set of customers only.

Yes, that makes sense. And it just a quick follow-up. The move in the new terminal OR from breakeven to mid-90s, you're doing that in an environment where freight demand is still somewhat compressed. Is that strictly a function of just getting experience repetitions, a little bit of scale there? Are you making some of the big [indiscernible] in the new terminals that you're in legacy?

Well, the first and -- first thing that has to happen in the new terminal is you better be doing a good job, right? So claims are going to be good, on times got to be good. Customers care about that, right? So if you do that, you get a shot at more business. And the great thing about those facilities is because they are well positioned. We've got a good team in place, the opportunity to scale those, meaning the incrementals on them can be pretty good. And that's kind of what you saw Q1 to Q2. So good execution, actually it's some of the great execution, customer satisfaction, and that leads to profitability improvement because you're basically leveraging your investment at that point.

The next question comes from Ravi Shanker Morgan Stanley.

Just one for me on the cost side. How -- you said that you are taking these cost actions in response to the volume environment is completely understandable. But how much of these cost actions do you think would be classified as short-term tactical, given the downturn versus longer-term structural gains. And also kind of if you are taking cost actions now particularly in head count, is there a risk that might limit the operating leverage a little bit when the upcycle has come?

Ravi, that's a fair question. You've been around it long enough to know. I mean the core tenet of this business is as volume goes up and down, the variable nature of your short-term labor costs that tends to move with it as well. So that -- there's certainly a fair number of the head count that were impact or the hours of our impact would come back if the volume scales. But I think what is really significant for us that might be different than a traditional model is that as we optimize our linehaul network, we're building density as we grow from here. The density play is really significant. So the incrementals have potentially could be pretty good, and they don't require a lot of head count add backs.

So to the extent that in our legacy facilities, which is where most of the impacted hours are. They would -- naturally, some of those would come back, but I would not expect the linehaul hours or the network cost to ratably increase simply because I think there's a scale opportunity for us. That's why we made those changes in those investments.

The next question comes from Stephanie Moore with Jefferies.

I wanted to maybe touch on the pricing environment a little bit. You talked about making progress on kind of -- I guess if you could talk about the progress you've made on repricing some legacy freight as well as freight and new terminals. Clearly, mix is always a factor, but maybe any opportunity that you've seen in terms of winning heavier freight and the likes?

Well, I think it's important, Stephanie, just in general, the pricing actions are a bit of a journey sometimes, right? Is that over time, as you win new customers, you come in, you want to be at market. Sometimes you find out maybe you're not. Sometimes you find out the customer freight is a little bit more complex than you expected. So you've got to make some adjustments there. I think what we are internal measurements. We simply look at public data that's out there, revenue per shipment versus our peers are now peers national footprint peers, and we continue to see opportunity there.

So to the extent that we're pleased with progress in the quarter and the last quarters for that matter, I think there's still a fair amount of runway there. And as I look around and I look at sort of public data, I look at the national footprint, which more -- looks more and more like others, we got to continue to press to market. We can only do that if we continue the sort of high level of service that we're providing. So that's kind of how it is -- [indiscernible] early innings. So opportunity remains for sure, but pleased with progress.

And just a follow-up to some comments you made previously in terms of optimizing your business or your network given now being a national carrier, and making pretty strict actions in the second quarter. Could you just give us a couple of maybe the key areas that changed in the second quarter? What specific actions are put in place that really optimize your network or from the national footprint?

Sure. I mean I think the real center of this is that when you have a network that was established over a number of years and it didn't have sort of full national coverage, a lot of our -- your freight goes through different sort of routings in our network. So if we were probably the east example is that historically, we haven't had that corridor across North Dakota, Montana, all the way to the West Coast. Now we can actually run direct line haul from, say, Minnesota to Seattle. And having that ability to build density along that, we'll introduce triples to those lanes in the coming months, that will be important. That's a density play.

I mentioned earlier the Ohio example around linehaul about building the triple sort of operation and a recently purchased facility. That's all about linehaul optimization. And that's -- in the first quarter, we talked about the challenges we have with new facilities having a route freight through our big break operations. Well, now if you build a little bit of density in the originating market, now you can build a direct that maybe bypasses a break operation. It's 1 less handle in the network. That's important. So we realigned where some of our hub and sort of where we routed freight in this second quarter. That allowed us to build some density in some key lanes. And doing that, you see cost leverage at surfaces in our line haul network. And that -- I would encourage you to study the -- not only the salary and wages line but the PT line together, those 2 together are really kind of what -- how we measure kind of our wage structure, and that was -- that performance is driven exclusive largely -- I mean, certainly, some of it at the terminal levels as well, but a big part of that came through the linehaul cost savings.

The next question comes from Brian Ossenbeck with JPMorgan.

First, just a clarification. I got a couple of questions [indiscernible] just clear, is the quarter-to-quarter guidance you're talking about, is that assuming you put the wage increase through in the third quarter or not just to be clear. And then one thing I thought was pretty interesting. We've seen this NMFC shift coming for a little while now, but largest carrier earlier this week pushed it out for, I guess, 150 days or so to early December. Just wanted to see if that had any implications for your business for the broader industry, I say that shippers are having a hard time getting there with the new codes. So just some thoughts on those 2?

Yes, in terms of the guide and the wage increase, like Fritz mentioned, we are evaluating our time line. Our guide includes what our forecast is on that. So it's inclusive of where we stand right now, and we'll provide some information on that as time moves on. But in terms of the NM FTA changes, look, we're not backing down on the implementation of that. It's good for the industry. Long term, we feel like this is a trend in the right direction. We sell space on our trailers, and this aligns more of the book to be density based, which we feel is important for us, important for our shippers.

So from our standpoint, we dimensioned 75 percentage of our freight every day. We get a view of what that looks like. We've invested heavily in [ dimensioners ] over the years for that exact reason. We leverage that technology. So we're working closely with our shippers, and we feel like we had a good opportunity to get in front of that and get ahead with them and talk about what the impact could look like. That's all about the partnership with our customers. So we don't -- we don't have any plans to back that off. I guess it remains to be seen what that does for others. But in our view, it's a good -- these changes from the NMFDA are good for the industry, and we're here to support it.

Just to be clear, it's been a long week. So the current guide for the sequential was based on what you think right now, which is to be determined. So I guess we'll have to stay tuned for an update. Is that right?

Yes. .

Yes.

The next question comes from Eric Morgan with Barclays.

I wanted to ask about the mix management initiatives you referenced. Just looking at second quarter shipments, I think you had the smallest sequential improvement in maybe at least 20 years outside the pandemic. So just curious how much of that is the action you took to manage the book relative to underlying demand softness and looking ahead, is there more work to do on that? Or should we be thinking about sequentials from here as more reflective of underlying demand you're seeing?

Just to confirm, Eric, you're talking about the sequential change Q1 to Q2?

Correct.

Well, keep in mind, we're starting to lap terminals that we opened last year, and we opened 6 in Q2 last year. Those were some of the larger facilities that we opened. But we've been bucking the trend because we've been growing, but the freight environment has been negative for 3 years now. Industrial production hasn't been great. Our legacy markets are looking a little bit more like what others are, but less because we're getting more and more opportunities with customers. So I think that's really just a component of what the industrial backdrop looks like, what the landscape looks like. But we're -- again, we've never had 213 facilities like we do now to sell to our customers, which we feel like really positions us well.

So I mean I think just to add to that, Eric, the -- our focus is on what we can control, right? So we've got to perform for the customer. We've got to do that in a cost optimal way. That was a big part of what we achieved in this -- in the second quarter. But at the same time, we spent $1 billion in capital last year, and we're providing a very high level of service. So there is a -- we have an expectation that we'll get a return on that. So we are going to continue to focus on finding the customers that value that sort of strategic and long-term investment in them. And so the pricing is part of that as well and mix management is part of that.

In an environment we're in right now, maybe it's a little bit muted. Certainly, as you look at our trends, through the quarter, I mean it's -- we're off -- have not been on seasonality, the historical seasonality. That would be quite honest in the business. That's a little bit of life in the big city. So you've got to focus then on what can we handle inside our 4 walls, and that's what we do.

Appreciate that. And maybe just a quick one on the balance sheet, if I could. I think your CapEx should be coming down in the back half. Do you think you'll be able to start reducing your leverage and interest costs in the back half? Or how should we be thinking about how to manage our expectations for cash on the balance sheet?

Yes. We'll still be into the line. We've got some spend in the back half of the year, $600 million to $650 million is probably where we land in terms of the full year on the CapEx line. But I'd expect it to start to taper down on online usage in the back part of the year in Q4. But a lot of that depends on timing with some of the real estate opportunities that are in our pipeline. But we -- we'll still be into the line, but I expect that will start to trend down in the back quarter of the year.

The next question comes from Tyler Brown with Raymond James.

Fritz, you've given some really good operational color, but I just kind of want to hammer this home. So what are you guys seeing from a network balance perspective? So have you guys started to see that those new markets have built on the outbound side. Just any color maybe on that inbound outbound ratio in those newer terminals, because I would assume that if that balance has started to improve, that's been maybe a driver to that mid-90s outcome?

Tyler, it's a good read. Yes, the answer is it's improving. Is it where it needs to be? No. And I think that the opportunity is -- that's the opportunity for us, not only this year but into next year as we continue to mature those facilities. We're not in the game of trying to fill them up, though, in the sense of let's go see how much volume we can get in there. It's we've got to be very strategic around that, make sure we're picking up freight that works. But I think the opportunity absolutely to build scale in those facilities, and it really shows up in the linehaul network costs. As we move freight through our operation, not only building a direct from Trenton West surely drive some efficiency versus building a pop that goes through Harrisburg somewhere else, right? So that we know those are efficiencies that we're gaining as we build maturity in these markets. And that's -- we're really excited to see that trend.

I think you see that in the cost per shipment, Tyler, too, it's down 4% sequentially. And usually, if you're on seasonality, Q2 typically is the best volume ramp in volume quarter for us. So you'd get even more leverage on those fixed cost lines like depreciation that we got a little bit of, but not all of. So that balance and that execution, you see in our cost per shipment line despite that lack of typical ramp that helps you leverage the fixed cost. And that's where when this thing ramps back up, great incremental margin opportunity for us because you're able to leverage that even more over a network that's becoming more balanced that you've got more in and out opportunities.

These terminals have really been open less than a year that we opened last year. So each month that passes, we continue to work on that.

Right. So the message is, it's improved, but there's still plenty of work to do?

Yes. This business, we don't see a reason why it shouldn't operate in the 70s and part of getting there is building densities in those markets. .

Right. And then this kind of goes hand-in-hand with that last question. But one of the key side effects of a greenfield strategy in LTL is that you need more brakes. You just can't run a lot of direct without that outbound density, right? So I don't know how you measure it, but if you looked at something like brakes per bill or your direct percentage, do you feel like you've seen peak pain on those metrics at this point and basically on the downward slow?

Well, freight flows change. But if we look at our productivity metrics very closely, and one of the things that we monitor is handling and handling our touches. And touch has improved sequentially from Q1 to Q2, and we saw that continue into June. So it's -- you always have to continue that work because freight flows changed and customer patterns change. But we were really pleased with the execution. We saw that come through in the productivity metrics and the handles.

We gave that example before about how things have to route differently, and Fritz talked about it. When you can route direct and you eliminate a handle, that's a big deal, not only the service to a customer that could be different, but you'll eliminate the cost that's associated with the handle. And we saw that improvement, but we are always working on that because every day is a little bit different in the business.

Right. I mean if you run more direct, you run more triples, I would assume that would have a profound impact on linehaul?

Listen, like-for-like triples versus a set is 30% reduction, right? So that's a big deal.

The next question comes from Ari Rosa with Citi Group.

Fritz, you mentioned in your prepared comments, just conviction around the long-term prospects remain intact. I was hoping you could speak a bit more to that -- just what's the progression to getting to a sub-ADOR and really growing the revenue in a meaningful way from here?

Well, I think that one of the things that would help broadly, right? I think that if we saw a little bit stronger macro backdrop, I think you'd see a little more conviction from our customers, and there's probably a little bit more growth. We've been dealing with this sort of freight economy for a number -- a couple of years now. But that said, I think that there is an opportunity for us to continue to methodically grow our business, winning in the marketplace, taking share, frankly, because we're performing at a high level. And we may not get the outsized growth that you might see in a more stronger backdrop. But I think we have an opportunity to continue to drive improvements.

Now, do I know what that's going to look like into next year? I think to be fair, I think we all need to figure out what exactly that macro looks like. But what I would say, though, is if I look across our operations and we look at our reference benchmark facilities where we have the most maturity, the most sort of long-established, well-known brand efficiencies, all those things, this business operates in the 70s, so -- in those markets. We don't see a potential that says the newer markets or newer regions of the country for us couldn't approach those sort of levels.

So the long-term opportunity is certainly there. I think it's still open as to what the timing of that would be. I think we need to get a little more clarity around what that looks like. But I think the fundamentals for us are good. And as we're pointing out in the last question is that this -- the ability to develop maturity in a national network is an important scaling opportunity for the overall cost structure of the business.

That's encouraging to hear. And then I just wanted to clarify, I think you mentioned that there was a shift or -- shift in mix towards more national customers, more retail accounts. I'm a little surprised by that because when we hear from some of your peers, it seems like there's a big focus on moving the other way with kind of regional accounts being more profitable. So I was hoping you could just kind of address what's driving that strategy and what's really driving the revenue mix?

Yes. And just to clarify that a little bit, Ari, it's not necessarily new customers that are coming in that are more national retail. More business with customers that we already work with and have worked with for a long time. If you look back in our history, that's not uncommon in Q2, maybe late Q1, but more so Q2. That trend to a little bit more seasonal retail-type freight is not uncommon for us. And we -- when you get an opportunity to serve more markets for customers that you already work with and have worked with for a long time, you get more opportunities at freight in some of these newer markets and even legacy markets because you can just do more for them. So that shift is not something that's uncommon for us in our history.

And that's not necessarily a bad thing, right? I mean it's -- you certainly have things like pickup economies. If you further penetrate a national account, meaning you get more business there, you have the opportunity, you have some density you build on your pickups or frankly, on your deliveries. So part of what may be driving that is some of those national accounts are tapping a national network. And that's part of the opportunity for us.

Now you could argue that part of our opportunity in some of these new markets, those regional accounts or field accounts that haven't gotten an sight, that's opportunity for us. That's runway. So I look at this as kind of a maybe a win-win problem, if that makes sense. Jeez, we're growing some of the business that we've done has had good partnerships historically, that's good. And we still have opportunities in new markets that may drive that mix of business a little bit different in the future.

The next question comes from Daniel Imbro with Stephens.

Fritz, maybe a follow-up just on the service. I think you mentioned claims ratio was flat at 0.5% from the first quarter. I guess what about other service metrics, on-time deliveries, missed pickups, and then continuing that discussion on legacy versus new markets, I mean, how different are the service metrics that you're getting from the field between the legacy and the new markets?

Well, the good on time, and we're pleased with the results there. On time as well as pick up completion, those are all trending at high levels, which are key service metrics for our team, very, very competitive. We think probably as good as anybody in the industry. What's really exciting is that the service metrics generally between the new facilities and the old facilities are pretty consistent. And that matters to those national account customers because they know they can count on the same service everywhere they go. That's how you win share in new markets.

Okay. That's helpful. And then, Matt, maybe as a follow-up, I'll ask the wage increase question in a different way. Understanding, we don't know what happens this year, but historically, how much of the normal degradation of 100 to 200 basis points is from the wage increase. So we can understand how impactful this either will or won't be for the third quarter?

Yes. And like first said, I mean we're evaluating our time line on that. So if you look back in history, it ranges depending on the volume levels and the hours worked and things like that in the period. But I'd say probably in the 75-ish bps range on that number in the past. Again, varies with some of the volume and seasonal patterns and trends like that, but that's probably a pretty good long-term average.

The next question comes from Bruce Chan with Stifel.

A lot of helpful commentary around the linehaul density so far. And maybe just related to that, Matt, I think you mentioned that you're a 12% outsourced PT now. How are you thinking about that number as you go forward, especially with the maturing network and the planning tools that you have in place and some of the changes like Young town that Fritz mentioned. Is there sort of a target number that you're thinking about over the next year or so?

So Bruce, I'll jump in on this one. Our target number is to get whatever we have to do to provide great service to a customer that gets to 75 OR or 70s OR, right? So there could be times where it makes the most sense for us to use PT. As long as we do not, in any way, disappoint the customer, that's kind of the critical decision-making. So when we think about what it takes to run our line haul network, it's sort of a network cost sort of perspective.

The decision tree starts with what's the customer need. And in any way, do we impact the customer, answer is no, or we meet their expectations. That's critical. And then the second step is what's the most cost optimal way to do that. So what that could mean is in some markets, we use more PT because it may be a market that is not in balance and we know that we don't have outbound freight from the market. It could be in other markets like when you build the triples operation, you say, boy, we got a lot of efficiency we can drive here because we're in balance. So it's -- that's kind of how the decision works for us. So we figure out -- we're focused more on sort of the financial return and meeting customer expectation than we are specifically around a target around what percentage of PT.

Okay. That's fair enough. And then maybe just a quick follow-up on a comment that you made, Fritz. I appreciate what you said about moving the customer service to field locations. It sounds like a wise investment in service. Just curious if there is any cost impact to call out as a result of that, whether onetime or ongoing?

Now over time, that will -- we think that will actually be a lower investment because we took out a duplicative sort of resource. So both groups were focused on touching the customer. We think that having the frontline engaged with the customer is the best easiest, most efficient, transparent way to help that customer get what they need. So yes, there's a bit of a cost savings in there, but we'll also invest in some areas, we may add back resources and field locations to meet that. So it's kind of a transition right now. Pleased with the early results with it, though.

The next question comes from Bascome Majors with Susquehanna.

Matt, just sort of a housekeeping item. I think last year, you said normal margin seasonality in the fourth quarter was about 250 bps of degradation. Without commenting on where you might come in versus that, is that still a decent measure of a seasonal bogey?

Yes. We're really focused on Q3 for now, but that's probably the right long-term average. Q4 always varies dependent on where the holidays fall and calendar and things like that, especially now were holidays tend to be a little bit more stretched out in some of the business environment, demand and things like that, but that's [indiscernible] right now.

But I'd caution you a little bit of that, Bascome because this will be the first time that we've had 21 facilities that we didn't have before. So I don't know -- we don't know exactly what that -- what history looks like there yet. We're intently focused on Q3, and we'll have a better view and picture of what we think Q4 will be down the road.

Understood, and thank you for clarifying that with the color about the new facilities. And I think certainly, with just kind of following seasonality out, does feel that volume is going to be under pressure through the back half of this year, maybe even the 1Q with the comp, and I think analysts and investors are coming to terms and understand that. But rather than talking about when it gets better and how quickly it gets better just from a macro perspective. If we were to enter a world where we're back to kind of low to mid-single-digit tonnage growth in the Saia network. Do you have a sense of how we should think about that financially? I don't know if it's an incremental margin framework. Just any way to kind of tops down, think about without necessarily putting a date on it, what the recovery looks like for Saia so we can kind of run your thoughts into our models?

Yes, no problem. That's a fair question. I think the first thing I would do, I would go back and look at what side did -- through after our Northeast -- through our Northeast expansion and see the incrementals that we were generating per quarter as we've matured those parts of our network. I think we return to that. And arguably, because this is a national scale, we might be able to do even better than that. So it's -- the network, the benefits of having a national network certainly provide all kinds of benefits to customers, but it also allows us to build scale. So the opportunity for us to drive incrementals, I think there would be some of the incrementals you saw in the highest -- the best periods as we grew out of the Northeast expansion. And I think you'd see that going forward from here.

I just -- I don't know when that starts, certainly a little volume will help that. But I think the incremental volumes in the facility that's running at 30% capacity today, boy, those are pretty good, adding a third linehaul trailer, that's all incremental, right, in terms of efficiency for our line-haul network. So all those things would contribute to some very, very long-term nice performance and returns to shareholders.

The next question comes from Christopher Kuhn with Benchmark.

I'm just wondering on the pricing maybe out of the new markets or from the newer freight you've taken on, how that's been progressing?

Well, it's -- I mean we're just starting to lap some of these. And what we really try to do when we enter a new market is find what the market rate is and work with our customers and find that. One of the great things about entering into these new markets is our lead list every single time is our existing book of customers. We get to go to them and say, "Hey, we're doing a great job for you in these markets. We're now in these, we can provide national service. " So we get to have conversations about the freight mix and the characteristics.

Now we can't necessarily go turn around and raise the rate the next day because we are growing and building density and inefficient in some of these markets. But we're trying to find the market rate. And the big opportunity for us is that when we do more for customers and we improve our share of wallet, we're able to provide service in more markets. We become stickier with them. We are harder to change out because we're doing a great job for them in a lot of markets over time, that gets us price. So we continue to see that, and we see those opportunities and it often opens us up to a larger mix of that customer's business that we may not have had access to before because we weren't able to cover that directly or at the level that they wanted us too. So that's an ongoing initiative for us.

And number one, first and foremost, like Fritz said before, you have to do a great job for the customer in that market. None of the rest of it happens without doing a good job for them. So we get that opportunity every day and more [indiscernible] than we've ever had.

So you still -- you see opportunity to price those as you continue to serve those customers?

Very simply, we look at the publicly available data, and it tells us that we are cheaper than our peers that are national coverage. That's what we look at. That's our benchmark. So absolutely.

The next question comes from Tom Wadewitz with UBS.

So I wanted to -- I know you've had a good amount of discussion on, I guess, probably a little bit on mix. But can you give any thoughts on how we might model revenue per hundredweight ex fuel or revenue per shipment in 3Q versus 2Q. Do you think that keeps going up sequentially? Or I guess, I think revenue per under weight was up sequentially, but per shipment down sequentially. Just trying to think about how that potentially moves and whether it's reasonable to model that up sequentially?

Well, we don't give a guide on that, but mix plays a big component of that. We saw some muted trends out of the Los Angeles region that maybe is an indicator of what some of the port activity was. But mix plays a role in that. So we don't give a guide on that, but we're critically focused on making sure that we get compensated appropriately for the service that we provide. We don't take a day off from that, but we're focused on ensuring that margins meet our expectations with each individual customer, but mix plays role in that. When we per shipment moves around a little bit and length of haul does that -- those are components of mix, but direction also matters. Freight flows the balance of the network. So no guide from us there, but we're focused on price and the environment remains rational for that. That's where we remain intently focused.

Okay. And I guess in terms of the impact and kind of runway on idiosyncratic initiatives that help the OR in the current freight environment, which is -- continues to be pretty muted, right, relative to just showing tons of operating leverage when trade really picks up, right? Because I think it's fairly clear really strong incrementals. How do you think about that? Like can you keep -- can you show meaningful OR improvement to kind of mid-80s, 100 basis points a year if you don't get a freight improvement? Or is this about you're doing what you can, but the big lever is really the market?

Yes. That one is a tough one, Tom. I think it -- I think there clearly are cost opportunities for us kind of going forward to continue to build density kind of methodically. We are seeing growth in our new facilities, which is important. Those are ones at scale. So there's -- in this environment, so you got to make sure you take advantage of that and be able to leverage that linehaul network.

At the same time, you've got to manage the hours and sort of the workload in the markets where maybe aren't growing or slightly declining. So it's tough to say kind of where -- where that could go in the environment we're in right now. All I know is that we're focused on let's manage the cost because that's in the 4 walls that we can handle, right? And let's make sure we manage the service at the same time. So right now, that's about the best guide we can give. So I think we can -- we'll continue that focus.

So maybe you can do a little better than seasonality without improvement in freight, but it's maybe not a big difference. Is that fair?

That's fair. I mean, I don't know that there's a huge breakthrough for us, but there is a methodical chipping away building density opportunity for us.

The next question comes from Jason Seidl with TD Cowen.

I just wanted to talk a little bit more about your tonnage numbers. You said you're about flat in July. Just curious, did you guys see any pull forward in July with all the tariff stuff in your consumer business at all? Or has it been relatively stable?

It's hard to tell. I'd say relatively stable bounces around in a given day -- week really. I mean so I wouldn't call out anything specific in terms of end markets or pull forward or anything like that at all. It all sounds good to us, but until we see it in the data, there's not much that stands out to us.

And you called out that you have tougher comps, I think, on the tonnage side in the back half of the quarter. Can you remind us when they start?

Yes, shipments and tonnage, both tougher comps, just as we start to lap the facility. So when we opened 6 in Q2 last year, and a good chunk of those started in the back half of May and June. So those started to ramp, and then we opened 11 in Q3 with the majority of those happening in August and September. So those -- just as those volumes start to come on and those terminals came online, we opened 2 in July last year, 6 in August and 3 in September that make up the 11 in Q3. So the back half of the quarter, those have started to come online.

So the right way to think about it, if nothing else changes in the demand side, if you're flat in July, you'll probably have a negative comp in August and September then?

Yes, that's fair.

The other thing is you guys obviously are seeing some nice progress in getting those newer terminals to profitability. I guess where are you seeing those density gains? Is it more from your existing customer base? Or are you adding more new customers to sort of help out that profitability?

The -- I don't want to say it's the easiest because it's a tough hurdle [indiscernible] service a customer and do it effectively. But the nice thing about the strategy and just to remind you kind of the basics for us when we open a new facility, we call on our existing customers first. So that raises the bar for us. They have an expectation that we're going to repeat the same high level of service in a new facility.

So you kind of penetrate those customers to start. And then what's really interesting over time, and we know this from our Northeast expansion is that once you're in the market and you establish your foothold with existing legacy customers, that's when you build some density and then you've got the opportunity to go win some new business and with customers that maybe aren't familiar with you. So that's kind of next leg for us. And I think that that's longer term, it certainly is part of the opportunity.

Okay. Gentlemen, I appreciate the time. Those are my 2. Best of luck.

And our last questioner today will be a follow-up from Ken Hoexter with Bank of America.

Appreciate you coming back to me. First, I guess the stock has moved from maybe 12% up 2.5%. So I think there's some confusion. I just want to give you maybe a chance to kind of talk through the message here. So maybe it was on the 100 to 200 basis points normal OR, you said you could do 100. But if you do add wages, whether it's in 3Q or 4Q, it would be another 75 basis point hit. So sounds like you'd still be within your range on the OR normal seasonality. I don't know maybe if it's on the volumes that Jason just ran over if given you started off flat and it's going to get tougher, maybe just hit on the messaging again because it seems like there's some confusion and obviously, you don't give pricing thoughts that Matt highlighted. So I don't know if you just want to dig into that for a minute?

Yes. So what we said, let's be clear, a 100 to 200 basis point degradation Q2 to Q3 has been history, right? We said we would encompassing all available things, which could be a wage increase, it could be volumes, we said 100 is kind of what we're targeting for the quarter. There are, as we all know and hope we all understand there are a lot of variables in this business, right? So we're managing all those variables. So we give that kind of a guide. What we're giving is our best assessment of all those options and what we think all those variables and all the things that we can consider. And -- so that -- I don't -- hopefully, that's clear, but that's kind of how we thought about it.

Yes. I appreciate it. I just want to run it through because I've been getting a lot of things during the cultures [indiscernible] want to make sure I fully understand.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe for any closing remarks.

Great. Thank you, and I appreciate everybody calling in and hearing about Saia's second quarter. We're very, very pleased with the execution that we had in the quarter, particularly what we did for the customer. We like the operating side of our performance as well around costs. We look at kind of what the opportunity is from Q2 to Q3. And I think we'll be able to outperform our traditional sort of 100 to 200 basis point degradation from Q2 to Q3 OR. Lot of variables in this business. We're going to manage all of them to kind of that sort of range. And -- but more importantly, for the long-term investor, the thesis around Saia is very, very strong, and we're excited about what the prospects are for us in this new national network.

Thank you all for taking the opportunity to listen to our results and I look forward to future conversations.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.