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Date
Friday, July 25, 2025 at 2:00 p.m. ET
Call participants
President and Chief Executive Officer — Fritz Holzgrefe
Executive Vice President and Chief Financial Officer — Matthew Petay
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Takeaways
Operating Ratio-- Operating ratio was 87.8% in Q2 2025, a deterioration from 83.3% year-over-year in Q2 2024, but represented a 330-basis-point sequential improvement from Q1 2025, exceeding the typical 250-300-basis-point sequential gain for the second quarter.
Total Revenue-- Revenue totaled $817.1 million in Q2 2025, down 0.7% compared to Q2 2024.
Year-Over-Year Volume-- Tonnage rose 1.1% compared to Q2 2024, despite shipments per day declining 2.8% year-over-year.
Revenue Per Shipment-- Excluding fuel surcharge, revenue per shipment rose 2.7% to $298.71 in Q2 2025; Including fuel surcharge, it increased 1.8% to $351.36; Revenue per workday declined 2.8% year-over-year.
Fuel Surcharge Revenue-- Fuel surcharge revenue decreased 5.8% year-over-year in Q2 2025, representing 14.6% of total revenue versus 15.4% in Q2 2024.
Contractual Renewals-- Contractual renewals averaged 5.1% in Q2 2025; Approximately 60%-70% of business is under contract, with renewal rates cited as an indicator of customer confidence.
Cost Per Shipment-- Cost per shipment increased 7.7% year-over-year in Q2 2025 due to higher salaries, benefits, and depreciation; Cost per shipment decreased 4% sequentially from Q1 to Q2 2025, aided by a 4.2% reduction in headcount from March to June 2025.
Salaries, Wages, and Benefits Expense-- Salaries, wages, and benefits expense increased 5% year-over-year in Q2 2025 compared to Q2 2024, mainly due to a 4.1% average wage hike introduced in July 2024 for non-executive employees and higher insurance costs.
Purchased Transportation Expense-- Purchased transportation expense fell 5.5% year-over-year in Q2 2025 and made up 7.1% of total revenue, down from 7.4% in Q2 2024; Truck and rail purchased transportation miles comprised 12% of total line haul miles in Q2 2025.
Fuel Expense-- Fuel expense decreased 4.3% year-over-year in Q2 2025, reflecting a 7.8% drop in diesel prices year-over-year and company line haul miles increased 2.1% in Q2 2025.
Claims and Insurance Expense-- Claims and insurance expense grew 21.2% year-over-year in Q2 2025, primarily due to higher claim activity and increased cost per claim.
Depreciation-- Depreciation expense totaled $62.5 million in Q2 2025, up 19.1% year-over-year amid continued network-related investments.
Capital Expenditures Guidance-- Full-year capital expenditures are expected to range between $600 million and $650 million in 2025 to support network, equipment, and personnel investments.
Diluted Earnings Per Share-- Diluted earnings per share (GAAP) were $2.67 in Q2 2025, a decline from $3.83 in Q2 2024.
Customer Service Metrics-- Cargo claims ratio held at 0.5% in Q2 2025, with on-time and pickup metrics trending at high levels.
Facility Performance-- Terminals under three years old improved to a mid-90s operating ratio in Q2 2025, up from breakeven sequentially; Legacy terminals saw shipments rise 2% sequentially compared to Q1 2025 but fall 3.5% year-over-year compared to Q2 2024.
Network Cost Optimization-- Realigned line haul network to enable direct routings, contributing to improved productivity and reduced touches per shipment.
Summary
Management highlighted ongoing network optimization and disciplined cost controls as key drivers of sequential profitability gains in Q2 2025, despite a challenging demand landscape and muted seasonal volumes. The company reported shipment softness but achieved positive tonnage growth through heavier weight per shipment, while enhanced network maturity and density, especially in newer terminals, drove cost efficiencies and improved operating leverage. Executives emphasized that service consistency between legacy and new facilities is enabling market share opportunities and positioningSaia(SAIA 8.95%) to benefit from an eventual market recovery. Strategic investments in technology, facilities, and personnel are expected to support ongoing margin expansion initiatives, even as customer mix shifts and competitive pricing pressures persist.
Holzgrefe stated, "We like the operating side of our performance as well around costs." referencing strong execution of expense management initiatives.
Petay noted, "Our guide includes what our forecast is on that. So it's inclusive of where we stand right now" clarifying wage expense outlook remains fluid for coming quarters.
Network optimization through direct routings and advanced planning tools is credited with meaningful sequential reductions in line haul costs and handling frequency in Q2 2025.
Claims and insurance expense increased 21.2% year-over-year in Q2 2025, directly linked to open claims development and rising claim amounts, as described by management.
Petay cited, "We've never had 213 facilities like we do right now to sell to our customers." highlighting the scale advantages from recent network expansion.
Industry glossary
Purchased Transportation (PT): Costs paid to third-party carriers for moving freight, typically measured as a percentage of total transportation mileage or revenue.
Operating Ratio (OR): Total operating expenses divided by total operating revenue; a lower ratio indicates better operating efficiency.
Triples Operation: Truck configurations that allow a tractor to haul three trailers, improving line haul cost efficiency compared to standard two-trailer sets.
Break Operation / Handle: A facility where freight is unloaded and reloaded between line hauls; 'handles' or 'touches' are process steps that add cost and reduce efficiency.
LTL (Less-Than-Truckload): Freight transportation for shipments too large for parcel but not requiring a full truckload, typically between 400 and 10,000 pounds.
Full Conference Call Transcript
Fritz Holzgrefe: Good morning. 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 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 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 the 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 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, per 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 three years saw sequential about a 4% sequential improvement in shipments per workday in 2025 compared to the first quarter. Aggregate, these facilities operated in the mid-90s in the second quarter improving from breakeven in the first quarter.
Our legacy facilities, with those open longer than three years, shipments were up about 2% sequentially in the second quarter 25% compared to the first or down about 3.5% 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 tons per workday increase 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, 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 lower weight per shipment. Compared to the first quarter.
Additionally, 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 also managing controllable costs and productivity. 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 the 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. We continue to focus on adjusting our resources to the shifting volume levels and reduced headcount by about 4.2% from March to June.
We continued our focus on optimizing our maturing network as a 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 efficiency 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. I'll now turn the call over to Matt for more details from our second quarter results.
Matthew Petay: 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 $297.02 in the second quarter of 2024. Revenue per shipment including fuel surcharge increased 1.8% to $351.36 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. 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 item's elevated level. 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 second quarter of 2024. And 7.6% in the first quarter of 2025. 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.
The increase compared to 2024 was primarily due to the development of open claims increased claim activity and increased cost per claim. Depreciation is 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, 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 aligns 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 headcount of 4.2% compared to 2025 was a contributing factor to this 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.
Fritz Holzgrefe: 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 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 are 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 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 refine and hone from our original deployment several years ago, are foundational to our resilience and our ability to operate and monetize the now complex national network. At the same time, these tools are key catalysts to continue to find cost-optimal solutions to meet customer expectations.
Over the coming quarters, we'll be further investing into continuing enhanced 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 customer success and delivering returns in the substantial investment creating 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.
Drew: We will now begin the question and answer session. And you would like to withdraw your question, please press star then 2. The first question comes from Ken Hoexter with Bank of America. Please go ahead.
Ken Hoexter: 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 the third quarter just if you think about seasonality and given the strong pricing and mid-single-digit renewals should pricing continue to climb? And 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.
Matthew Petay: 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 phase, each renewal. That's core to what we do.
Over the years and it can continues to be a focus 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. Sequentially from Q2 to Q3 this year.
Fritz Holzgrefe: 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 kind of better match our national line haul 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 part of that how we can get to the bottom end of that range that Matt described.
Ken Hoexter: So for autonomy to do another follow-up, but is that just because of the optimization on national network or was that because you were talking about seeing slowing volume, so you moved to pull costs and cut employees?
Fritz Holzgrefe: No, it's both, right? You got to in this business, you always have to match cost to what the available business is. But 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 open that long. 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 delve maturity that becomes sustainable cost advantage over time.
Ken Hoexter: Great. Thanks for the time guys. Appreciate
Drew: The next question comes from Rija Harnain with Deutsche Bank. Please go ahead.
Rija Harnain: Hey, thanks guys for the time. So I wanted to ask a little bit about the labor reductions that you've done and 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, you know, 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? Thank you.
Fritz Holzgrefe: Yeah. So I just 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. 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, so it's a cut in hours.
Build 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 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.
So that those are important cost savings that you can start deploying across the network and that's stick to what's going on in the environment, right? You've 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.
Rija Harnain: Okay, great. So as we think about Q3 then, should we continue to see that momentum in the cost per shipment line?
Matthew Petay: 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.
Rija Harnain: Awesome. Thank you.
Drew: The next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.
Jordan Alliger: 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 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. What could this mean for pricing on a recovery? Thanks.
Fritz Holzgrefe: 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 business. We're no different than anybody else. So I think that will keep 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 enough markets so that this is the time we've been waiting for. So we think for us it's a unique opportunity.
Matthew Petay: Keep in mind too Jordan, terminals and doors are absolutely important, but capacity also comes in equipment and it comes in drivers. And then 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, capacity comes in all three of those.
Jordan Alliger: Thank you.
Drew: The next question comes from Chris Wetherbee with Wells Fargo. Please go ahead.
Chris Wetherbee: 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?
Fritz Holzgrefe: Hey, Chris, could you repeat? I think you got garbled there a little bit. On the question.
Chris Wetherbee: Apologies. Hopefully, you can hear me a little bit quicker now. There we go. I'm just curious about Yeah. Thank you. Sorry about that. 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 Petay: 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 about down 0.8% And if we look at July month to date, obviously still have a weak week or so to go. But shipments per day are down about two and a quarter percent. Tonnage is trending around flat and as mentioned earlier, there's you know, we're lapping comps in the 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.
Fritz Holzgrefe: 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 in that area, but other markets have been pretty good.
Chris Wetherbee: Okay. That's helpful. And just a follow-up on the comment normal wage increases for the third quarter. Was just kind of curious, suggesting that you haven't done it yet or that it may not 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 time is that we would typically do that 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.
Chris Wetherbee: Got it. Thanks for the time. Appreciate it.
Drew: The next question comes from John Chappell with Evercore ISI. Please go ahead.
John Chappell: 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 eights and nines we've seen recently. Is that just a function of more difficult comparisons or should we read that into more competitive pricing by an overall
Matthew Petay: John, we heard you clearly the first half but then it broke up a little bit. Would you mind?
John Chappell: Repeating?
Matthew Petay: Yes, sorry. 5.1% contractual renewals in the quarter. A little bit lower than the 89% that we'd 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 Petay: 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, it gives us an indication of how the customers are viewing our service and 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 at our rate. So the pricing environment remains rational. We haven't seen anything different in that. We remain really focused on making sure that we get compensated fairly for what we produce and provide for customers. So no change from that perspective. And 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 of that. And we have been prior periods.
So that gives us more opportunities.
Fritz Holzgrefe: And 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.
John Chappell: 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 experienced repetitions a little bit of scale there? Or are you making some of the big cost changes in the near term that you're seeing in the legacy?
Fritz Holzgrefe: Well, the first and first thing that has to happen in a new terminal is you better be doing a good job. Right? So claims are got to be good, on time has got to be good. Customers care about that. 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 some great execution, customer satisfaction, and that leads to profitability improvement because you're basically leveraging your investment at that point.
John Chappell: Thank you.
Drew: The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.
Ravi Shanker: Great. Thanks, morning, everyone. Hopefully, you can hear me okay. Just one for me on the cost side. How much you said that you're taking these cost actions in response to the volume environment, which 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 headcount, is there a risk that might limit the operating leverage a little bit when the up cycle does come? Thank you.
Fritz Holzgrefe: Ravi. That's a that's a fair question. You've been around it long to know. I mean, the core tenant 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 if that, you know, there's certainly a fair number of the headcount that were impacted or the hours that were impacted would come back at 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. The density play is really significant.
So the incrementals have potentially can 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, 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: Very good. Thank you.
Drew: The next question comes from Stephanie Moore with Jefferies. Please go ahead.
Stephanie Moore: Hi, good morning. Thank you. Know, wanted to maybe touch on the pricing environment a little bit. You know, you talked about making progress on kind of re I guess, if 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 likes. Thanks.
Fritz Holzgrefe: Well, I think it's important, Stephanie, just in general, the pricing actions are a bit of a journey sometimes, right? Is it 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 got to make some adjustments there. I think what we our 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 we've '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. And I as I look around and I look at 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 in we continue to sort of high level of service that we're providing. So that's kind of how it is that we're early innings. So opportunity remains for sure, but pleased with progress.
Stephanie Moore: And just a follow-up to some comments you made in terms about optimizing your business or your network given now being a national carrier and making, you know, pretty swift actions in those 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 into place really optimized your network work for the national footprint. Thanks.
Fritz Holzgrefe: 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 easiest example is that historically we haven't had that corridor across North Dakota, Montana all the way to West Coast. Now we can actually run direct line haul from say Minnesota to Seattle. And having that ability to build density along that will introduce triples of those lanes in the coming months. 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 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. Well, that's one less handle in the network. That's 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, it surfaces in our line haul network and it 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. And 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: Thank you.
Drew: The next question comes from Brian Ossenbeck with JPMorgan. Please go ahead.
Brian Ossenbeck: Hey guys, good morning. Thanks for taking the question. First, just clarification. I got a couple of questions, if I'm right, but just clear. 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? Then one thing I thought was pretty interesting, we've seen this NMSE coming for a little while now, but largest carrier earlier this week pushed it out for I guess, hundred and fifty days or so to early December. Just wanted to see if that had any implications your business, for the broader industry.
Does that say that shippers are having a hard time getting there with the new codes. Just some thoughts on those two. Thanks.
Matthew Petay: Yeah. In terms of the guide and the wage increase, we 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 terms of the NMFTA changes, look, we've we're not 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 dimension 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 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 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 gonna long week. The 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?
Matthew Petay: Yeah. Yes. Correct.
Brian Ossenbeck: Okay. Thanks very much.
Drew: The next question comes from Eric Morgan with Barclays. Please go ahead.
Eric Morgan: 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, think you have the smallest sequential improvement in maybe at least twenty 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?
Matthew Petay: Just to confirm, Eric, you're talking about the sequential change Q1 to Q2?
Eric Morgan: Correct. Well, keep in mind, we're starting to lap terminals that we opened. Last year. Right? We opened six 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 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 we've never had 213 facilities like we do now to sell to our customers, which we feel like really positions us well.
Fritz Holzgrefe: So I mean, I think just to add to that, Eric, the you know, 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 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. So there is a we have an expectation that we'll get a return on 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, you maybe it's a little bit muted. Certainly, you look at our trends through the quarter, I mean, it's we're off, have not been on seasonality historical seasonality. That 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 four walls and that's that's what we do.
Eric Morgan: Appreciate that. And maybe just a quick one on the balance sheet, if I could. Your 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 Petay: Yes. We'll we'll still be into the line. We've got some spend in the back half of the year, $600 to $650 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 lot of that depends on timing with some of the real estate opportunities that are in our pipeline. But we'll still be into the line, but I expect that will start to trend down in the back. Back quarter of the year.
Eric Morgan: Thanks a lot.
Drew: The next question comes from Tyler Brown with Raymond James. Please go ahead.
Tyler Brown: Hey, good morning guys. Can you all hear me? We can. Loud and clear. Hey. Hey, Fritz. You've given some really good operational color. I just kinda wanna hammer this home. So what are you guys seeing from a network balance perspective? So have you guys started to see that those new market bill have built on the outbound side? Just any color maybe on that inbound outbound ratio those newer terminals? Because I would assume if that balance has started to improve, that's been maybe a driver to that nine mid-nineties outcome.
Fritz Holzgrefe: 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 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, only building a direct from Trenton West surely drives some efficiency versus building a pump that goes through Harrisburg somewhere else, right. So that we know those are efficient that we're gaining as we build maturity in these markets. And that's we're really excited to see that trend.
Matthew Petay: I think we 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 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 opened less than a year that we opened last year. So each month that passes, we continue to work on that.
Tyler Brown: Right. So the message is it's improved, but there's still plenty of work to do.
Fritz Holzgrefe: Oh, yeah. This business, I 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: 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 how you measure it. 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 Petay: 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 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. When you can route direct and you eliminate a handle, that's a big deal.
Not only is service to a customer that could be different, but you eliminate the cost that's associated with the handle. We saw that improvement, but we are always working on that because every day is a little bit different in the business.
Fritz Holzgrefe: Yeah. Simple. Listen, like for like triples versus a set is 30% reduction. Right? So that is that's a big deal.
Tyler Brown: Right. Okay. Thanks for the time, guys.
Drew: The next question comes from Ari Rosa with Citigroup. Please go ahead.
Ari Rosa: 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 those sub-eighty percent OR and really growing the revenue in a meaningful way from here?
Fritz Holzgrefe: 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 a little more 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 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 in the 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 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 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. 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: 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 Petay: Yeah. And just to clarify that a little bit, Ari, it's not necessarily new customers that are coming in that are that are more national retail. It's 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, more so Q2, That trend's 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 work with for a long time.
Get more opportunity to freight in some of these newer markets and even legacy markets because you can just do more for So that shift is not something that's uncommon for us in our history.
Fritz Holzgrefe: 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, 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. 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 Saia yet, opportunity for us, that's runway.
So I look at this as kind of 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 so it may drive that mix of business a little bit different in the future.
Ari Rosa: Got it. Okay. Thanks for the time. Good luck with that.
Drew: The next question comes from Daniel Imbro with Stephens. Please go ahead.
Daniel Imbro: 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. 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 that you're getting from the field between the legacy and the new markets?
Fritz Holzgrefe: 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. 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: Okay. That's helpful. And then Matt, maybe 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 Petay: Yeah. And like Chris said, when we were evaluating our timeline on that, so if you look back in history, it you know, 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 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: Okay. Super helpful. Appreciate the color.
Drew: The next question comes from Bruce Chan with Stifel. Please go ahead.
Bruce Chan: Hey, good morning, gents. 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 you know, the maturing network and the planning tools that you have in place and, you know, 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?
Fritz Holzgrefe: 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 to get to 75% OR. 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. So when we think about what it takes to run our line haul, network, it's sort of the 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. 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.
Bruce Chan: 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's any cost impact to call out as a result of that whether onetime or ongoing?
Fritz Holzgrefe: Yes. No, over time that'll we think that'll actually be lower investment because what we're we took out 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 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.
Bruce Chan: Okay, great. Appreciate the time.
Drew: The next question comes from Bascome Majors with Susquehanna. Please go ahead.
Bascome Majors: Thanks for taking my questions. Matt, just sort of 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?
Matthew Petay: Yeah. We're 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 right now. 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 what 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: 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, you does feel that volume is going to be under pressure through the back half of this year, maybe even the one q with the comp, and I think analysts and investors are coming to terms and understand that. But you're rather than talking about when it gets better and how quickly it gets better just from a macro perspective, You know, if we were to enter a world where back to kinda low to mid single digit tonnage growth, in the Saia network.
Do you have a sense of how to how we should think about that financially? I don't know if it's an incremental margin framework Just any way to kinda tops down, think about without necessarily putting a date on it, you know, what the recovery looks like for Saia so we can kind of run your thoughts into our models. Thank you.
Fritz Holzgrefe: Yeah. No problem. But that's a fair question. I think the first thing I would do, I would go back and look at what Saia did through after our Northeast 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 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, right? I 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 running it 30% capacity today boy, those are pretty good. Adding third line haul 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.
Bascome Majors: Thank you for that.
Drew: The next question comes from Christopher Kuhn with Benchmark. Please go ahead.
Christopher Kuhn: Yes. Hey, thanks for the question. So Matt, for its 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 Petay: Well, it's I mean, we're just starting to lap some of these in 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 get to have conversations about the freight mix and the characteristics.
Now, can't necessarily go turnaround and you know, 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 marker 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. 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 at best than we've ever had.
Christopher Kuhn: So you still you see opportunity to price those you know, as you as you continue to serve the customers.
Matthew Petay: 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: Got it. Thanks, guys. Appreciate it.
Drew: The next question comes from Tom Wadewitz with UBS. Please go ahead.
Tom Wadewitz: Yes. Good morning. So 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 you know, revenue per 100 weight ex fuel or revenue per shipment in 3Q versus 2Q. Is it 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 Petay: 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 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.
When weight per shipment moves around a little bit and link to haul does, that's 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 our we remain intently focused.
Tom Wadewitz: Okay. And I guess in terms of the you know, impact and kind of runway on idiosyncratic initiatives that help the OR in the current freight environment, which is, you know, continues to be pretty muted. Right? Relative to just showing tons of operating leverage when, you know, when freight really picks up Right? Because it's you know, I think it's fairly true. You should have really strong ethanol. How do you think about that? Like, can you can you keep, you know, can you show meaningful OR improvement to kinda mid-eighties you know, a 100 basis points a year if you don't get freight improvement?
Or is this about a, you're doing what you can, but the big lever is really the market?
Fritz Holzgrefe: Yeah. That one's 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 those are in this environment, so you got to make sure you take advantage of that and be able to leverage that line haul network. Same time, you've got to manage the hours and sort of the workload in a in the mark in the markets where maybe you 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, you know, 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 continue that focus.
Tom Wadewitz: So maybe you can do a little better than seasonality without improvement in freight, but it's it's maybe not a big difference. Is that fair? That's fair. I mean, it you know, we I don't know that there's a huge breakthrough for us, but there is a methodical chipping away building density opportunity for us.
Matthew Petay: Yes. Okay. Great. Thank you.
Drew: The next question comes from Jason Seidl with TD Cowen. Please go ahead.
Jason Seidl: 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 tariff stuff in your consumer business at all? Or has it been relatively stable?
Matthew Petay: It's hard to tell. I'd say relatively stable. Bounces around in a given day, a given week, really. I mean, 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: And you called out that you have tougher comps, I think, the tonnage side the back half of the quarter. Can you remind us when they start
Matthew Petay: 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. So those started to ramp and then we opened 11 in Q3. With 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. So the back quarter, those just started to come online.
Jason Seidl: So the right way to think about it, if nothing else changes in the demand side, if you're flat in July, you'll you'll probably have a negative comp. And August and September.
Matthew Petay: Yeah. That's that's fair. Like, August, good. The other thing is, you know, 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? Or is it more from your existing customer base? Are you adding more new customers to sort of help out that profitability?
Fritz Holzgrefe: Yes. The I want to say it's the easiest because it's always a it's it's a tough hurdle to always service the customer and do it effectively. But 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 the 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're you're 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 kind of next leg for us. And I think that's longer term what it certainly is part of the opportunity.
Jason Seidl: Okay. Gentlemen, I appreciate the time. Those are my two. Best of luck.
Drew: And our last questioner today will be a follow-up from Ken Hoexter with Bank of America. Please go ahead.
Ken Hoexter: Hey, great. Appreciate you coming back to me. Fritz, I guess the stock has moved from a 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. So it maybe it was on the 100 to 200 basis points normal OR. Said you could do 100 But if you do add wages, whether it's in three q 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.
Know maybe if it's on the volumes that Jason just ran over, if given you started off flat and it's gonna 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. So know if you just want to dig into that for a
Fritz Holzgrefe: 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 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. What we think all those variables and all 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.
Ken Hoexter: Appreciate it. Just want to run it through because I've been getting a lot of things during call. Just wanna make sure I fully understood Thank you. Yep. No problem.
Drew: This concludes our question and answer session. Would like to turn the conference back over to Fritz Holzgrefe, for any closing remarks.
Fritz Holzgrefe: 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. 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.
Drew: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.