Saia Q2 2025 Earnings Report

Saia EPS Results

• Actual EPS: $2.67
• Consensus EPS: $2.39
• Beat/Miss: Beat by +$0.28
• One Year Ago EPS: $3.83

Saia Revenue Results

• Actual Revenue: $817.12 million
• Expected Revenue: $826.59 million
• Beat/Miss: Missed by -$9.47 million
• YoY Revenue Growth: -0.70%

Saia Announcement Details

• Quarter: Q2 2025
• Date: 7/25/2025
• Time: Before Market Opens
• Conference Call Date: Friday, July 25, 2025
• Conference Call Time: 10:00AM ET

Saia (NASDAQ:SAIA) is a publicly traded transportation company specializing in less-than-truckload (LTL) freight services across North America. Headquartered in Johns Creek, Georgia, the company focuses on the efficient movement of time-sensitive freight for a diverse customer base that spans retail, manufacturing, automotive, and healthcare industries. By leveraging a network of terminals and service centers, Saia provides tailored solutions designed to optimize supply chain performance.

The company’s core offerings include regional, interregional, and national LTL shipping, supported by volumetric LTL and port intermodal services. Saia also delivers temperature-controlled transport, guaranteed expedited options, and specialized handling for high-value or oversized freight. Complementing its transportation services, Saia offers dedicated private-fleet solutions and third-party logistics support, enabling shippers to tap into end-to-end supply chain management and visibility tools.

Saia’s operational footprint spans the continental United States, Canada, and Mexico, with a growing presence in cross-border trade lanes. A network of over 200 terminals and service locations allows the company to maintain transit consistency and flexible regional coverage, while strategic partnerships enhance its ability to serve key markets. Investments in digital freight matching, automated freight billing, and real-time tracking technologies underpin Saia’s commitment to operational excellence.

Tracing its roots to the early 20th century, Saia was founded in 1924 and has evolved through a series of family-led leadership transitions into one of North America’s leading LTL carriers. Over nearly a century of operations, the company has developed a reputation for reliable service, operational discipline, and a customer-centric culture. Saia’s management team continues to prioritize network optimization and service innovation as it adapts to changing market demands and supply chain complexities.

Saia Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The company’s Q2 operating ratio improved to 87.8%, a 30 basis-point sequential gain and ahead of historical seasonality by over 50 bps.
• Negative Sentiment: Second-quarter revenue fell by 0.7% to $817.1 million as shipments per workday declined 2.8%, reflecting continued muted volume trends.
• Positive Sentiment: Terminals open fewer than three years achieved mid-90s% operating ratios (from breakeven in Q1) with ~4% sequential shipment growth, validating expansion strategy.
• Positive Sentiment: Cost per shipment decreased 4% sequentially through network optimization and a 4.2% reduction in headcount, despite ongoing fleet and network investments.
• Neutral Sentiment: Outlook anticipates ~100 bps operating-ratio degradation in Q3 amid potential wage increases, while reiterating focus on customer service and network planning tools.

Presentation

[Operator]

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 twenty twenty five Saia Inc. Earnings Conference Call. All participants will be in listen only mode.

[Operator]

Please note this event is being recorded. I would now like to turn the conference over to Matthew Bate, Executive Vice President and Chief Financial Officer. Please go ahead.

[Matthew Batteh, EVP & CFO at Saia]

Thank you, Drew. Good morning, everyone. Welcome to Saia's second quarter twenty twenty five conference call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Hulscrief. 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.

[Matthew Batteh, EVP & CFO at Saia]

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.

[Frederick Holzgrefe, President & CEO at Saia]

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 three thirty basis point improvement from the first quarter of this year. The sequential operating ratio improvement outperformed the historical average of two fifty basis to 300 basis points despite the lack of typical volume ramp that is 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 cost 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.

[Frederick Holzgrefe, President & CEO at Saia]

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 on a per workday basis, tonnage for the quarter was only up 0.4% from the first quarter. Our second quarter revenue of $817,000,000 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.

[Frederick Holzgrefe, President & CEO at Saia]

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 three years saw sequential about a 4% sequential improvement in shipments per workday in the 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, with those open longer than three years, shipments were up about 2% sequentially in the '25 compared to the first or down about 3.5% compared to the second quarter of twenty twenty four. 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.

[Frederick Holzgrefe, President & CEO at Saia]

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 tons per workday increased 1.1% compared to the second quarter of twenty twenty four, 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 4,500,000.0 to $5,500,000 compared to the first quarter. Our pricing and mix optimization initiatives remain an intense focus.

[Frederick Holzgrefe, President & CEO at Saia]

Sequentially, our mix of business shifted to handling slightly more national and retail customers, which partially led to lower weight per shipment compared to the first quarter. Additionally, we saw muted trends out of our Los Angeles region partially contributed to 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.

[Frederick Holzgrefe, President & CEO at Saia]

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 as a result of investments in our fleet and network expansion.

[Frederick Holzgrefe, President & CEO at Saia]

We continue to focus on adjusting our resources to the shifting volume levels and reduced headcount by about 4.2% from March to the 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 leveraged density in our larger network and our efforts to drive greater efficiencies began to materialize. These results reinforce our commitment to expanded 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.

[Frederick Holzgrefe, President & CEO at Saia]

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

[Matthew Batteh, EVP & CFO at Saia]

Thanks, Fritz. Second quarter revenue decreased year over year by 0.7% to $817,100,000 while revenue per shipment excluding fuel surcharge increased 2.7 to $298.71 compared to $290.72 in the second quarter of twenty twenty four. Revenue per shipment including fuel surcharge increased 1.8% to 3 and $51.36 compared to $345.07 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.

[Matthew Batteh, EVP & CFO at Saia]

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 eight ninety three 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.

[Matthew Batteh, EVP & CFO at Saia]

Purchased 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 2024 and seven point six percent in the first quarter of twenty twenty five. Truck and rail PT miles combined were 12% of our total line haul 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 line haul miles run. Claims and insurance expense increased by 21.2% year over year.

[Matthew Batteh, EVP & CFO at Saia]

The increase compared to the 2024 was primarily due to the development of open claims, increased claim activity and increased cost per claim. Depreciation expense of $62,500,000 in the quarter was 19.1% higher year over year primarily due to ongoing investments in 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 600,000,000 to $650,000,000 in capital expenditures this year. Consistently investing in our network expansion, equipment and our people aligns with our long term strategy.

[Matthew Batteh, EVP & CFO at Saia]

Compared to the second quarter of twenty twenty four, 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 headcount of 4.2% compared to the 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.

[Matthew Batteh, EVP & CFO at Saia]

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

[Frederick Holzgrefe, President & CEO at Saia]

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.

[Frederick Holzgrefe, President & CEO at Saia]

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 opened for less than three 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.

[Frederick Holzgrefe, President & CEO at Saia]

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.

[Frederick Holzgrefe, President & CEO at Saia]

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 customer success and delivering returns in 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]

We will now begin the question and answer session. The first question comes from Ken Hoexter with Bank of America. Please go ahead.

[Ken Hoexter, Managing Director at Bank of America]

Hey, great. Good morning, 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?

[Ken Hoexter, Managing Director at Bank of America]

And given the strong pricing and mid single digit renewals, should pricing continue to climb? I guess that's leading me to the OR thoughts, Normal seasonality I think is flattish from 2Q to 3Q. Just want to maybe your thoughts on an outlook.

[Matthew Batteh, EVP & CFO at Saia]

Yes. Just on the tonnage piece, well keep in mind that we opened six 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.

[Matthew Batteh, EVP & CFO at Saia]

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.

[Frederick Holzgrefe, President & CEO at Saia]

I think that just to add to that, Ken, I think the important part is that we have made significant you know, the quarter optimization efforts in Q2 to kind of better match our national line haul network 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.

[Ken Hoexter, Managing Director at Bank of America]

So Fred, 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 pull costs and cut employees?

[Frederick Holzgrefe, President & CEO at Saia]

No, it's both, right. You got to in this business, you always have to match costs to what the available business is. But this at this time last year, we didn't have 21 facilities. We have 21 facilities maturing from last year that we opened last year. And the opportunity that we have, part of that opportunity is that 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.

[Frederick Holzgrefe, President & CEO at Saia]

And now we're starting to see some of the benefits of that. We continue to look for opportunities to redesign our line haul network. As you know, that's the biggest cost bucket in this business. And that's an area that as you develop maturity that becomes sustainable cost advantage over time.

[Ken Hoexter, Managing Director at Bank of America]

Great. Thanks for the time guys. Appreciate it.

[Operator]

The next question comes from Risha Harnane with Deutsche Bank. Please go ahead.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Hey, thanks guys for the time. 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 which we expect? Thank you.

[Frederick Holzgrefe, President & CEO at Saia]

Yes. So just to kind of 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 headcount by location or hours by location, I think is a better sort of picture that because somebody that maybe a year ago was working a lot of overtime at this point, we're maybe not working overtime.

[Frederick Holzgrefe, President & CEO at Saia]

So it's a cut in hours, built some efficiency that way or productivity that way. The line haul 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, 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 two pups connected, right.

[Frederick Holzgrefe, President & CEO at Saia]

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 there are people that 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 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.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Okay, great. So as we think about Q3 then, should we continue to see that momentum in the cost per shipment line, the better than seasonal I

[Frederick Holzgrefe, President & CEO at Saia]

think it's 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.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Awesome. Thank you.

[Operator]

The next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Yes. Hi, morning. 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 some of the larger players out there do have excess stores today? And what could this mean for pricing on a recovery? Thanks.

[Frederick Holzgrefe, President & CEO at Saia]

Yes, I think that if you look at the 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.

[Frederick Holzgrefe, President & CEO at Saia]

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 we can 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.

[Matthew Batteh, EVP & CFO at Saia]

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

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Thank you.

[Operator]

The next question comes from Chris Wetherbee with Wells Fargo. Please go ahead.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Hey, good morning guys. 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?

[Frederick Holzgrefe, President & CEO at Saia]

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

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Apologies. Hopefully, you can hear me a little bit poker now. There we go. Thank you. Sorry about that.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

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?

[Matthew Batteh, EVP & CFO at Saia]

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%, June shipments per day down 3.4%, tonnage per day down 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. As mentioned earlier, there's we're lapping comps in the back half of Q3 with terminal adds.

[Matthew Batteh, EVP & CFO at Saia]

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

[Frederick Holzgrefe, President & CEO at Saia]

we were seeing in June. Yeah, I think we pointed out that the our sort of LA region was a little bit stood out as 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.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Okay. That's helpful. And just a follow-up on the comment about normal wage increases 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?

[Frederick Holzgrefe, President & CEO at Saia]

Yes. And if you look at it over time is that we would typically do that in the third or fourth quarter. We haven't made a 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.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Got it. Thanks for the time. Appreciate it.

[Operator]

The next question comes from John Chappell with Evercore ISI. Please go ahead.

[Jonathan Chappell, Senior MD at Evercore ISI]

Thank you. Good morning. I know contract renewals are just a small piece of the portfolio. The 5.1% that you mentioned is much lower than a lot of the 8s and 9s we've seen recently. Is that just a function of more difficult comparisons or should we read that into more competitive pricing overall?

[Matthew Batteh, EVP & CFO at Saia]

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

[Jonathan Chappell, Senior MD at Evercore ISI]

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?

[Matthew Batteh, EVP & CFO at Saia]

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 a 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.

[Matthew Batteh, EVP & CFO at Saia]

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 at our rates. So the pricing environment remains rational. We haven't seen anything different in that.

[Matthew Batteh, EVP & CFO at Saia]

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 as we continue to see great opportunities with both new and existing customers throughout the network. We've never had two thirteen facilities like we do right now to sell to our customers and getting more and more of that than we have in prior periods. Gives us more opportunities.

[Frederick Holzgrefe, President & CEO at Saia]

I think it's important to note too, Jonathan, is that the that our renewal number is reflected 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.

[Jonathan Chappell, Senior MD at Evercore ISI]

Yes, that makes sense. And Fritz, 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 cost changes in the new terminals that you're doing in the legacy?

[Frederick Holzgrefe, President & CEO at Saia]

Well, the 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 time has 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.

[Frederick Holzgrefe, President & CEO at Saia]

So good execution, actually some great execution, customer satisfaction and that leads to profitability improvement because you're basically leveraging your investment at that point.

[Jonathan Chappell, Senior MD at Evercore ISI]

Thank you.

[Operator]

The next question comes from Ravi Shankar with Morgan Stanley. Please go ahead.

[Ravi Shanker, Managing Director at Morgan Stanley]

Great. Nice morning, everyone. Hopefully, you can hear me okay. Just one from me on the cost side. How you said that you're taking these cost actions in response to the volume environment, which is completely understandable.

[Ravi Shanker, Managing Director at Morgan Stanley]

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 headcount, is there a risk that might limit the operating leverage a little bit when the up cycle does come? Thank you.

[Frederick Holzgrefe, President & CEO at Saia]

Ravi, that's a fair question. You've been around it long enough to know. I mean the core tenet of this business is that 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 headcount that were impacted or the hours that were impacted 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 line haul network, we're building density as we grow from here.

[Frederick Holzgrefe, President & CEO at Saia]

The density plays is really significant. So the incrementals have potentially can be pretty good. And they don't require a lot of headcount 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 line haul 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 and those investments.

[Ravi Shanker, Managing Director at Morgan Stanley]

Very good. Thank you.

[Operator]

The next question comes from Stephanie Moore with Jefferies. Please go ahead.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Hi, good morning. Thank you.

[Stephanie Moore, SVP - Equity Research at Jefferies]

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

[Frederick Holzgrefe, President & CEO at Saia]

Well, I think it's important, Stephanie, just in general, that the pricing actions are a bit of a journey sometimes, right? Is it over time as you win new customers, you come in, 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 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, our 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, in the last quarters for that matter, I think there's still a fair amount of runway there.

[Frederick Holzgrefe, President & CEO at Saia]

And as I look around and I look at sort of public data, and I look at the national footprint, which more it looks more and more like others, we got to continue to press to market. We can only do that if we continue to sort of high level of service that we're providing. So that's kind of how it is we're early innings. So opportunity remains for sure, but pleased with progress.

[Stephanie Moore, SVP - Equity Research at Jefferies]

And just a follow-up to some comments you made previously in terms about optimizing your business or your network given now being a national carrier and making pretty swift 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 were put into place that really optimized your network for the national footprint? Thanks.

[Frederick Holzgrefe, President & CEO at Saia]

Sure. I mean, 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. If we were probably the easiest 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 of those lanes in the coming months.

[Frederick Holzgrefe, President & CEO at Saia]

That'll be important. That's a density play. I mentioned earlier, the Ohio example around line haul about building the triple sort of operation in a recently purchased facility. That's all about line haul optimization. And that's in the first quarter, we talked about the challenges we had with new facilities having to route freight through our big break operations.

[Frederick Holzgrefe, President & CEO at Saia]

Well, now if you build a little bit of density in the originating market, now you can build a direct that maybe bypass es a break operation. Well, it's one less handle in the network. That's important. So we realigned where some of our hub and sort of where we routed freight in the second quarter. That allowed us to build some density in some key lanes.

[Frederick Holzgrefe, President & CEO at Saia]

And doing that, you see cost leverage at surfaces in our line haul network. That I would encourage you to study the not only the salary and wages line, but the PT line together. Those two together are really kind of what how we measure kind of our wage structure. That was that performance is driven largely, I mean, some of it at the terminal levels as well, but big part of that came through the line haul cost savings.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Thank you.

[Operator]

The next question comes from Brian Ossenbeck with JPMorgan. Please go ahead.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Hey, guys. Good morning. Thanks for taking the question. First, just a clarification. I got a couple of questions, if I'm right, but just clear.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Is the quarter to quarter guidance you're talking about, is that assuming you put the wages 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 NMSE shift coming for a little while now, but largest carrier earlier this week pushed it out for, I guess, one hundred and fifty days or so to early December. Just wanted to see if that had any implications for your business, for the broader industry, that say that shippers are having a hard time getting there with the new codes. So just some thoughts on those two. Thanks.

[Matthew Batteh, EVP & CFO at Saia]

Yes. In terms of the guide and the wage increase, like Fritz mentioned, we are evaluating our timeline. 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 NMFTA changes, look, we're not backing down on the implementation of that.

[Matthew Batteh, EVP & CFO at Saia]

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 dimension 75 percentage of our freight every day. We get a view of what that looks like.

[Matthew Batteh, EVP & CFO at Saia]

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 have any plans to back that off.

[Matthew Batteh, EVP & CFO at Saia]

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.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

Just to be clear, it's been a long week. So the current guide for the sequential is 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?

[Frederick Holzgrefe, President & CEO at Saia]

Yes.

[Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan]

All right. Okay. Thanks very much.

[Operator]

The next question comes from Eric Morgan with Barclays. Please go ahead.

[Eric Morgan, Equity Research Analyst at Barclays Capital]

Hey, good morning. Thanks for taking my question. I wanted to ask about the mix management initiatives you referenced. Just looking at second quarter shipments, I think you have the smallest sequential improvement in maybe at least twenty years outside the pandemic. So just curious how much of that is action you took to manage the book relative to underlying demand softness?

[Eric Morgan, Equity Research Analyst at Barclays Capital]

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?

[Matthew Batteh, EVP & CFO at Saia]

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. We opened six in Q2 last year. Those were some of the larger facilities that we opened.

[Matthew Batteh, EVP & CFO at Saia]

But we've been bucking the trend because we've been growing, but the freight environment has been negative for three 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 two thirteen 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

[Frederick Holzgrefe, President & CEO at Saia]

that, Eric, our focus is on what we can control, right? So we've got to perform for the customer. We 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 $1,000,000,000 in capital last year, and we're providing a very high level of service.

[Frederick Holzgrefe, President & CEO at Saia]

So there is a we have an expectation that we'll get a return on that. So we are going to continue to focus 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.

[Frederick Holzgrefe, President & CEO at Saia]

That, to be quite honest, in the business, that's a little bit of life in the big city. So, you've got to focus then what can we handle inside our four walls, and that's what we do.

[Eric Morgan, Equity Research Analyst at Barclays Capital]

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?

[Matthew Batteh, EVP & CFO at Saia]

Yes. We'll still be into the line. We've got some spend in the back half of the year, dollars 600,000,000 to $650,000,000 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 line 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.

[Matthew Batteh, EVP & CFO at Saia]

But we'll still be into the line, but I expect that will start to trend down in the back quarter of the year.

[Eric Morgan, Equity Research Analyst at Barclays Capital]

Thanks a lot.

[Operator]

The next question comes from Tyler Brown with Raymond James. Please go ahead.

[Tyler Brown, AVP at Raymond James Financial]

Hey, good morning guys. Can you all hear me?

[Frederick Holzgrefe, President & CEO at Saia]

Can. Loud and clear.

[Tyler Brown, AVP at Raymond James Financial]

Hey, 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?

[Tyler Brown, AVP at Raymond James Financial]

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?

[Frederick Holzgrefe, President & CEO at Saia]

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.

[Frederick Holzgrefe, President & CEO at Saia]

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 line haul network costs, as we move freight through our operation, not only building a direct from Trenton West, surely drive some efficiency versus building a pump 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.

[Matthew Batteh, EVP & CFO at Saia]

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 and 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 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.

[Matthew Batteh, EVP & CFO at Saia]

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

[Tyler Brown, AVP at Raymond James Financial]

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

[Frederick Holzgrefe, President & CEO at Saia]

Yes. 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.

[Tyler Brown, AVP at Raymond James Financial]

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 breaks. You just can't run a lot of directs without that outbound density, right? So I don't know how you measure it.

[Tyler Brown, AVP at Raymond James Financial]

But if you looked at something like breaks 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 slope?

[Matthew Batteh, EVP & CFO at Saia]

Well, freight flows change, but if we look at our productivity metrics very closely and one of the things that we monitor is handling handling or touches. And touches 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 change 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.

[Matthew Batteh, EVP & CFO at Saia]

When you can route direct and you eliminate a handle that's a big deal, not only is it service to a customer that could be different, but you eliminate a cost that's associated with a handle and we saw that improvement. But we are always working on that because every day is a little bit different in the business.

[Tyler Brown, AVP at Raymond James Financial]

Right. I mean, you run more directs, you run more triples, I would assume that would have a profound impact on line haul.

[Frederick Holzgrefe, President & CEO at Saia]

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

[Tyler Brown, AVP at Raymond James Financial]

Right. Okay. Thanks for the time guys.

[Operator]

The next question comes from Ari Rosa with Citigroup. Please go ahead.

[Ari Rosa, Senior Analyst at Citigroup]

Hey, good morning. 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-eighty percent OR and really growing the revenue in a meaningful way from here?

[Frederick Holzgrefe, President & CEO at Saia]

Well, I think that there's 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 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 of couple of years now. But with 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 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?

[Frederick Holzgrefe, President & CEO at Saia]

I 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 operation 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 I'm still open as to what the timing of that would be.

[Frederick Holzgrefe, President & CEO at Saia]

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.

[Ari Rosa, Senior Analyst at Citigroup]

That's encouraging to hear. Thanks for that. And then I just wanted to clarify, I think you mentioned that there was a 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? Thanks.

[Matthew Batteh, EVP & CFO at Saia]

Yeah. And just to clarify that a little bit Ari, it's not necessarily new customers that are coming in that are more national retailers, 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 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.

[Matthew Batteh, EVP & CFO at Saia]

So that shift is not something that's uncommon for us in our history.

[Frederick Holzgrefe, President & CEO at Saia]

And it'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 even 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.

[Frederick Holzgrefe, President & CEO at Saia]

Now you could argue that part of our opportunity in some of these new markets, regional accounts or field accounts that haven't gotten to know SI yet, 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. Geez, we're growing some of the business that we've done had good partnerships with 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.

[Ari Rosa, Senior Analyst at Citigroup]

Got it. Okay. Thanks for the time. Good luck with that.

[Operator]

The next question comes from Daniel Imbro with Stephens. Please go ahead.

[Daniel Imbro, Managing Director at Stephens Inc]

Hey, good morning guys. Thanks for taking our questions. 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.

[Daniel Imbro, Managing Director at Stephens Inc]

I mean how different are the service metrics that you're getting from the field between the legacy and the new markets?

[Frederick Holzgrefe, President & CEO at Saia]

Well, the good on time and we're pleased with the results there. On time as well as pickup 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.

[Frederick Holzgrefe, President & CEO at Saia]

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.

[Daniel Imbro, Managing Director at Stephens Inc]

Okay. That's helpful. And then Matt, maybe as a follow-up, I'll ask the wage increase question 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?

[Matthew Batteh, EVP & CFO at Saia]

Yes. And like Chris said, we're evaluating our timeline on that. So if you look back in history, it ranges, but 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.

[Daniel Imbro, Managing Director at Stephens Inc]

Okay, super helpful. I appreciate the color.

[Operator]

The next question comes from Bruce Chan with Stifel. Please go ahead.

[J. Bruce Chan, Director at Stifel Financial Corp]

Hey, good morning, gents. A lot of helpful commentary around the line haul density so far. And maybe just related to that, Matt, I think you mentioned that you're at 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 Youngtown that Fritz mentioned? Is there sort of a target number that you're thinking about over the next year or so?

[Frederick Holzgrefe, President & CEO at Saia]

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 our customer that gets to 75 70s OR, right. So there could be times where it makes the most sense for us to use PT. As long as we meet, we do not in any way disappoint the customer. That's kind of the critical decision making.

[Frederick Holzgrefe, President & CEO at Saia]

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 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 don't have outbound freight from the market. It could be in other markets like when you build the triples operation, you say, well, we got a lot of efficiency we could drive here, because we're in balance.

[Frederick Holzgrefe, President & CEO at Saia]

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.

[J. Bruce Chan, Director at Stifel Financial Corp]

Okay. That's fair enough. And then maybe just a quick follow-up on a comment that you made for it. Appreciate what you said about moving the customer service to field locations. It sounds like a wise investment in service.

[J. Bruce Chan, Director at Stifel Financial Corp]

Just curious if there's any cost impact to call out as a result of that whether one time or ongoing?

[Frederick Holzgrefe, President & CEO at Saia]

Yes. No, over time that will we think that will actually be a lower investment, because what we're we took out a duplicative sort of resource. So both groups were focused on touching the customer. We think that having the frontline engage 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.

[Frederick Holzgrefe, President & CEO at Saia]

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.

[J. Bruce Chan, Director at Stifel Financial Corp]

Okay, great. Appreciate the time.

[Operator]

The next question comes from Bascome Majors with Susquehanna. Please go ahead.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

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

[Matthew Batteh, EVP & CFO at Saia]

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

[Frederick Holzgrefe, President & CEO at Saia]

But I'd be 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 picture of what we think Q4 will be down the road.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

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, it 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.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

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? Thank you.

[Frederick Holzgrefe, President & CEO at Saia]

Yes, no problem. That's a fair question. I think the first thing I would do, I would go back and look at what Saia did through our Northeast expansion and see the incrementals that we were generating per quarter as we mature those parts of our network. I think we returned 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.

[Frederick Holzgrefe, President & CEO at Saia]

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. Just I don't know where that 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 line haul trailer, that's all incremental, right, in terms of efficiency for our line haul network.

[Frederick Holzgrefe, President & CEO at Saia]

So all those things could contribute to some very, very long term nice performance and returns to shareholders.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna]

Thank you for that.

[Operator]

The next question comes from Christopher Kuhn with Benchmark. Please go ahead.

[Christopher Kuhn, Senior Analyst at The Benchmark Company LLC]

Yes. Hey, thanks for the questions. So Matt, Fritz, 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?

[Matthew Batteh, EVP & CFO at Saia]

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.

[Matthew Batteh, EVP & CFO at Saia]

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 priced. 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 to.

[Matthew Batteh, EVP & CFO at Saia]

So that's an ongoing initiative for us. And number one, first and foremost, like Fred 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 at best than we've ever had.

[Christopher Kuhn, Senior Analyst at The Benchmark Company LLC]

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

[Matthew Batteh, EVP & CFO at Saia]

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.

[Christopher Kuhn, Senior Analyst at The Benchmark Company LLC]

Got it. Thanks guys. Appreciate it.

[Operator]

The next question comes from Tom Wadewitz with UBS. Please go ahead.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Yes, good morning. So I wanted to I know you had a good amount of discussion on, I guess, price and a bit on mix. But can you give any thoughts on how we might model revenue per 100 weight 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 hundredweight 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?

[Matthew Batteh, EVP & CFO at Saia]

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 a role in that.

[Matthew Batteh, EVP & CFO at Saia]

When weight per shipment moves around a little bit and length of haul does that, those are components of mix, but direction also matters. Freight flows, 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.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

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 freight really picks up, right? Because I think it's fairly clear you should have really strong ethanol. 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, a, you're doing what you can, but the big lever is really the market?

[Frederick Holzgrefe, President & CEO at Saia]

Yes, that one's a tough one, Tom. I 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 those are in this environment, so you got to make sure you take advantage of that, be able to leverage that line haul network.

[Frederick Holzgrefe, President & CEO at Saia]

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 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 four 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.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

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?

[Frederick Holzgrefe, President & CEO at Saia]

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

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Yes. Okay, great. Thank you.

[Operator]

The next question comes from Jason Seidl with TD Cowen. Please go ahead.

[Jason Seidl, Managing Director at TD Cowen]

Thank you, operator. Hey, Fritz, team. 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?

[Matthew Batteh, EVP & CFO at Saia]

It's hard to tell. I'd say relatively stable. It bounces around in a given day, given 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.

[Jason Seidl, Managing Director at TD Cowen]

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?

[Matthew Batteh, EVP & CFO at Saia]

Yes, shipments and tonnage both tougher comps just as we start to lap the facility. So when we opened six 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 two in July, six in August and three in September that make up the 11 in Q3. The back half of the quarter, those just started to come online.

[Jason Seidl, Managing Director at TD Cowen]

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

[Matthew Batteh, EVP & CFO at Saia]

Yes, that's fair. Okay.

[Jason Seidl, Managing Director at TD Cowen]

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

[Frederick Holzgrefe, President & CEO at Saia]

I don't want to say it's the easiest because it's a tough hurdle to always service the 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 level of service in a new facility. So you kind of penetrate those customers to start.

[Frederick Holzgrefe, President & CEO at Saia]

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've built 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 what certainly is part of the opportunity.

[Operator]

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

[Ken Hoexter, Managing Director at Bank of America]

Hey, great. Appreciate you coming back to me. Fritz, I guess the stock has moved from up maybe 12% to up 2.5%. So I think there's some confusion. Just want to give you maybe a chance to kind of talk through the message here.

[Ken Hoexter, Managing Director at Bank of America]

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 it 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. Obviously, you don't give pricing thoughts that Matt highlighted.

[Ken Hoexter, Managing Director at Bank of America]

So I don't know if you just want to dig into that for a minute.

[Frederick Holzgrefe, President & CEO at Saia]

Yes. So what we said, let's be clear, 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, could be volumes, we said 100 is kind of what we're targeting for the quarter. There are as we all know, I hope we all understand, there are a lot of variables in this business, right? So we're managing all those variables.

[Frederick Holzgrefe, President & CEO at Saia]

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. So that I don't hopefully that's clear, but that's kind of how we thought about it.

[Ken Hoexter, Managing Director at Bank of America]

Appreciate it. Just want to run it through because I've been getting a lot of things during the call. Just want make sure I fully understood it. Thank you.

[Matthew Batteh, EVP & CFO at Saia]

Yes. No problem.

[Operator]

Concludes our question and answer session. I would like to turn the conference back over to Fritz Holzgraf for any closing remarks.

[Frederick Holzgrefe, President & CEO at Saia]

Great. Thank you. 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 on what we did for the customer. We like the operating side of our performance as well around costs.

[Frederick Holzgrefe, President & CEO at Saia]

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. A 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 look forward to future conversations.

[Operator]

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

Participants

Executives

• Matthew Batteh, EVP & CFO
• Frederick Holzgrefe, President & CEO

Analysts

• Ken Hoexter, Managing Director at Bank of America
• Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank
• Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs
• Chris Wetherbee, Senior Analyst at Wells Fargo
• Jonathan Chappell, Senior MD at Evercore ISI
• Ravi Shanker, Managing Director at Morgan Stanley
• Stephanie Moore, SVP - Equity Research at Jefferies
• Brian Ossenbeck, MD & Senior Analyst - Transportation at J.P. Morgan
• Eric Morgan, Equity Research Analyst at Barclays Capital
• Tyler Brown, AVP at Raymond James Financial
• Ari Rosa, Senior Analyst at Citigroup
• Daniel Imbro, Managing Director at Stephens Inc
• J. Bruce Chan, Director at Stifel Financial Corp
• Bascome Majors, Senior Equity Research Analyst at Susquehanna
• Christopher Kuhn, Senior Analyst at The Benchmark Company LLC
• Tom Wadewitz, Senior Equity Research Analyst at UBS Group
• Jason Seidl, Managing Director at TD Cowen