Q4 2021 Saia Inc Earnings Call

Speaker 1: Good day, ladies and gentlemen, and welcome to the SIA Incorporated 4th Quarter Full Year 2021 Earnings Call. At this time, we're gathering additional participants and should begin in a couple minutes. We appreciate your patience and ask that you please remain online.

Welcome to the Cyan incorporated fourth quarter full year 2021 earnings call. At this time, we are getting additional participants and should begin in a couple of minutes. We appreciate your patience and ask that you. Please remain on line.

[music].

Speaker 2: T He New Year.

Speaker 1: Good day, ladies and gentlemen, and welcome to the SIA Incorporated fourth quarter and full year 2021 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Doug Cole. Please go ahead.

Good day, ladies and gentlemen, and welcome to the Cyan incorporated fourth quarter and full year 2021 earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Doug Col. Please go ahead.

Thanks Keith.

Speaker 3: Good morning, everyone. Welcome to size 4th quarter 2021 conference call with me for today's call is size President and Chief Executive Officer Fritz Holtz.

Good morning, everyone welcome Besides fourth quarter 2021 conference call.

With me for today's call are <unk>, President and Chief Executive Officer Fritzls great.

Speaker 3: 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.

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 1095.

Speaker 3: 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'll now turn the call over to Fritz for some opening comments. Good morning, and thank you for joining us to discuss SIA's fourth quarter results.

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'll now turn the call over to Fritz for some opening comments.

Morning, and thank you for joining us to discuss <unk> fourth quarter results.

Speaker 4: I'm excited today to release record 2021 results and want to acknowledge the efforts given by thousands of dedicated employees, again this past year, to make these results possible. Our fourth quarter revenue of $617 million surpassed last year's revenue by 29.5%. Operating income also grew by 92.3% to $97.4 million.

I am excited today release record 2021 results and want to acknowledge the efforts given by thousands of dedicated employees again this past year to make these results possible.

Our fourth quarter revenue of 617 million surpassed last year's revenue by 29, 5% operating income also grew by 92, 3% to $97 4 million.

Speaker 4: And our 84.2 operating ratio in the fourth quarter marked the sixth consecutive quarter where our OR was sub 90.

At our $84 two operating ratio in the fourth quarter marked the sixth consecutive quarter, where our or with sub 90.

The quarter was marked by consistent levels of demand from our customers and growth in shipments per workday stepped up each month in the quarter total shipments per workday grew by three 3% compared to the fourth quarter of last year.

Speaker 4: The quarter was marked by consistent levels of demand from our customers and growth in shipments per workday stepped up each month in the quarter. Total shipments per workday grew by 3.3% compared to the fourth quarter last year.

Speaker 4: I continue to be impressed by our operations team and how they're handling the supply chain and workforce challenges still prevailing across our network. Our on-time service was 98% in the quarter and our cargo claims ratio was among the best in our industry. It was achieved with a dock workforce that grew by 17% during the year. This attention to quality is critical to meeting and exceeding our customers' expectations.

We continue to be impressed by our operations team and how they're handling the supply chain workforce challenges still prevailing across our network. Our on time service was 98% in the quarter. Our cargo claims ratio was among the best in our industry. It was achieved with the dock workforce grew by 17% during the year this attention to <unk>.

All of these critical to meeting and exceeding our customers' expectations.

Speaker 4: These high levels of service require that we continue to ensure that we are fairly compensated to support our investment in high service levels and to offset inflationary costs. Our LTL revenue per hundredweight increased 19.6 in the quarter. This measure of pricing reflects both specific pricing, actions, and improvements in mix of business.

These high levels of service required that we continue to ensure that we were fairly compensated to support our investment and high service levels and to offset inflationary costs are <unk> <unk> revenue per hundredweight increased $19 six in the quarter. The measure this measure of pricing reflects both specific pricing.

Actions and improvements in mix of business.

Speaker 4: Our approach to pricing is simply market-based. We're looking, we're charging customers for the level of service they're receiving and are seeking to set pricing in line with our competitors who offer comparable levels of service.

Our approach to pricing is simply market based.

Looking we're charging customers. So the level of service they are receiving and are seeking to set pricing in line with our competitors who offer comparable levels of service.

Speaker 4: The combination of improving yield and mix change has resulted in a 28.4% increase in our revenue per shipment of $317, a record for our company.

The combination of improving yield and mix changes resulted in a 28, 4% increase in our revenue per shipment the $317 a record for our company.

Speaker 4: Our total revenue in 2021 crossed over the $2 billion level for the first time, and at $2.3 billion was up more than 25% from the prior year.

Our total revenue in 2021 crossed over the $2 billion level for the first time in a $2 3 billion was up more than 25% from the prior year.

Speaker 4: Operating income rose 85.9% to $335 million, and our operating ratio for the full year of 85.4 was 470 basis points better than in 2020.

Operating income rose 85, 9% to $335 million and our operating ratio for the full year of $85 four was 470 basis points better than in 2020.

Speaker 4: We opened seven new facilities in 2021 and across our network deployed 286 million in capital expenditures as we focused on our efforts on expanding our terminal network and enhancing service levels throughout the organization. We continue to invest in the latest safety technology and in clean diesel and fuel efficient technology and have supplemented this investment with pilot programs using alternative fuels including electric vehicles and compressed natural gas.

We opened seven new facilities in 2021 and across our network deployed 286 million in capital expenditures as we focused our efforts on expanding our terminal network and enhancing service levels throughout the organization will continue to invest in the latest safety technology in a clean diesel fuel efficient technology and have supplemented the SIB.

<unk> with pilot programs using alternative.

Fuels, including electric vehicles, and compressed natural gas with.

Speaker 4: With that said, I'll turn the call over to Doug for a review of our fourth quarter financial results.

With that said I'll turn the call over to Doug for a review of our fourth quarter financial results.

Thanks, Brett.

Speaker 3: The fourth quarter revenue increased by $140.6 million to $617.1 million. The components of revenue growth in the quarter were as follows. Tonnage grew 9.2%, a combination of 1.6% shipment growth and 7.5% increase in our average weight per shipment. On a workday basis, tonnage grew 11% and shipments increased 3.3%.

Fourth quarter revenue increased by $140 6 million to $617 1 million the components of revenue growth in the quarter, whereas follows.

Tonnage grew nine 2% a combination of one 6% shipment growth and seven 5% increase in our average weight per shipment on a workday basis basis tonnage grew 11% in shipments increased three 3%.

Speaker 3: yield excluding our fuel surcharge improved by 14% and increased by 19.6% including the fuel surcharge.

Yield excluding fuel surcharge improved by 14% and increased by 19, 6%, including the fuel surcharge youll.

Speaker 3: Fuel surcharge revenue increased by 80.1% and was 14.6% of total revenue compared to 10.5% a year ago.

Fuel surcharge revenue increased by 81% and was 14, 6% of total revenue compared to 10, 5% a year ago.

Speaker 3: Now a few expense items in the quarter. Salaries, wages, and benefits increased 10.1 percent, driven by wage increases across our driver and dock workforce, as well as hiring and referral bonuses paid in the quarter to attract new employees. Additionally, our January and August wage increases of approximately 3.5 percent and 4.7 percent, respectively, contributed to this increase on a year-over-year basis.

Now a few expense items in the quarter salaries wages and benefits increased 10, 1% driven by wage increases across our driver and dock workforce as well as hiring and referral bonuses paid in the quarter to attract new employees.

Additionally, our January and August wage increases of approximately three 5% and four 7% respectively contributed to this increase on a year over year basis.

Speaker 3: Purchase transportation costs increased 56.1% compared to the fourth quarter last year and were 11.3% of total revenue compared to 9.4% a year ago. Truck and rail PT miles combined were 19.5% of our total line haul miles in the quarter compared to 16.3% in the fourth quarter of 2020.

Purchase transportation cost increased 56, 1% compared to the fourth quarter last year and were 11, 3% of total revenue compared to nine 4% a year ago.

Truck and rail PT miles combined were 19, 5% of our total line haul miles in the quarter compared to 16, 3% in the fourth quarter of 2020.

Fuel expense increased by 65% in the quarter, while company miles increased by six 2% year over year. The increase in fuel expense was primarily the result of national average diesel prices rising by nearly 50% year over year in the quarter claim.

Speaker 3: Fuel expense increased by 65% in the quarter, while company models increased by 6.2% year-over-year. The increase in fuel expense was primarily the result of national average diesel prices rising by nearly 50% year-over-year in the quarter.

Speaker 3: Claims and insurance expense increased by 86.8% in the quarter reflecting increased frequency and accident severity in that expense line and higher premium costs versus the prior year.

Claims and insurance expense increased by 86, 8% in the quarter, reflecting increased frequency in accident severity in that expense line and higher premium costs versus the prior year claim.

Speaker 3: Claims and insurance expense was up 9.7% or 1.5 million sequentially from the third quarter.

Claims and insurance expense was up nine 7% or $1 5 million sequentially from the third quarter.

Depreciation expense of $35 9 million in the quarter was five 1% higher year over year, driven by investments in real estate equipment and technology.

Speaker 3: Depreciation expense of $35.9 million in the quarter was 5.1% higher year-over-year, driven by investments in real estate, equipment, and technology. Our total operating expenses increased by 22% in the quarter, and with the year-over-year revenue increase of 29.5%, our operating ratio improved 520 basis points from a year ago to 84.2%.

Our total operating expenses increased by 22% in the quarter and with the year over year revenue increase of 29, 5%, our operating ratio improved 520 basis points.

From a year ago to 84, 2%.

Speaker 3: Our tax rate in the fourth quarter was 23.9% compared to 19.8% last year, and our diluted earnings per share were $2.76 compared to $1.51 last year.

Our tax rate in the fourth quarter was 23, 9% compared to 19, 8% last year and our diluted earnings per share were $2 76, compared to $1 51 last year.

Speaker 3: Moving on to the financial highlights of our full year 2021 results, as Spritz mentioned, revenue was a record $2.3 billion and operating income of $335.1 million was also an annual record.

Moving onto the financial highlights of our full year 2021 results as Fritz mentioned revenue was a record $2 3 billion and operating income of $335 1 million was also an annual record.

Speaker 3: Our operating ratio improved 470 basis points in 2021 to a record 85.4.

Our operating ratio improved 470 basis points in 2021 to a record $85 four.

For the full year 2021, our diluted earnings per share were a record 948 compared to $5 20 earned in 2020.

Speaker 3: For the full year 2021, our diluted earnings per share were a record $9.48 compared to $5.20 earned in 2020.

In 2021, we made capital investments totaling $285 $7 million.

Speaker 3: In 2021, we made capital investments totaling $285.7 million. We reduced our long-term debt by $19.4 million to $31 million. Our balance sheet remains strong with $106.6 million of cash on hand at year-end and more than $300 million of availability through our revolving credit facility and additional outside borrowing source.

We reduced our long term debt by $19 4 million to $31 million or.

Our balance sheet remains strong with $106 6 million of cash on hand at year end and more than $300 million of availability through our revolving credit facility and additional outside borrowing sources.

In 2022, we anticipate capital expenditures will be in excess of $500 million.

Speaker 3: In 2022, we anticipate capital expenditures will be in excess of $500 million.

And we also anticipate an effective tax rate of approximately 24% to 5% for the full year.

Speaker 3: And we also anticipate an effective tax rate of approximately 24 to 25% for the full year.

I'll now turn the call back over to Fritz for some closing comments. Thanks, Doug Our company as posted record results in the months and quarters that followed the pandemic Lockdown in 2020 in 2021, which brought even more challenges the monster winter storm that ravaged most of Texas in February of last year, as well as hurricane Ike, which dramatically impacted our employee.

Speaker 4: I'll now turn the call back over to Fritz for some closing comments. Thanks, Doug. Our company has posted record results in the months and quarters that followed the pandemic lockdown in 2020 and 2021, which brought even more challenges. The monster winter storm that ravaged most of Texas in February last year, as well as Hurricane Ida, which dramatically impacted our employees and their families in the Gulf Coast area last August , were added to the ongoing COVID-related challenges and the supply chain disruptions we face.

And their families in the Gulf Coast area last August were added to the ongoing COVID-19 related challenges in the supply chain disruptions we face.

Speaker 4: Our employees responded exceptionally well and professionally to all these disruptions and managed to not only take care of our valued existing customers, but also work to execute our ongoing growth strategy.

Our employees responded exceptionally well and professionally to all these disruptions and managed to not only take care of our valued existing customers, but also work to execute our ongoing growth strategy, we're able to recruit and hire to support. The addition of seven new terminals across our network and ended the year with 176 terminals our efforts to build out our <unk>.

Speaker 4: We're able to recruit and hire to support the addition of seven new terminals across our network and end of the year with 176 terminals. Our efforts to build out our network to provide more direct coverage and get closer to our customers is increasingly putting us in a position to offer differentiated service.

Network to provide more direct coverage and good.

Closer to our customers increasingly putting us in a position to offer differentiated service and additional lease terminal openings. We also closed on several land purchases in 2021 to build our development pipeline as part of our multiyear growth strategy. As we look forward into 2022, we're planning to add 10 to 15, new terminals and will also be really.

Speaker 4: In addition to these terminal openings, we also closed on several land purchases in 2021 to build our development pipeline as part of our multi-year growth strategy. As we look forward into 2022, we're planning to add 10 to 15 new terminals, and we'll also be relocating 10 or so existing terminals into larger or better positioned facilities as well. Our planning horizon for future terminals additions, expansions, and relocations includes not only 2022, but 2023 and beyond.

Okay, 10, or so existing terminals into larger or better positioned facilities as well our planning horizon for future terminals additions expansions relocations includes not only 2022, but 2023 and beyond the.

Speaker 4: To support our pace of openings, our human resources group is continuously recruiting and onboarding the talent that is required to open and operate these facilities. We're expanding our driver academy program this year and will partner with driver schools and technical colleges in some markets to increase our candidate pipeline.

To support our pace of openings, our human resources group has continuously recruiting and onboarding. The talent that is required to open and operate these facilities were turning we're expanding our driver Academy program this year or partner with driver schools and technical colleges and sub markets to increase our candidate pipeline.

Speaker 4: I'm excited to see what 2022 holds for our company as we enter year six of our organic growth strategy.

I'm excited to see what 2022 holds for our company as we enter year six of our organic growth strategy, knowing how our team handled all of the adversity of the past two years and still managed to provide great service and grow our business gives me confidence that we can continue to be successful stay our course and total as Doug mentioned we.

Speaker 4: Knowing how our team handled all of the adversity of the past two years and still managed to provide great service and grow our business gives me confidence that we can continue to be successful and stay on course.

Speaker 4: In total, as Doug mentioned, we expect more than half a billion dollars invested in real estate equipment and technology in the coming year. We'll also continue our investments in people and talent development in 2022, as these efforts have been critical foundational elements of our strategy.

More than half of $1 billion invested in real estate equipment and technology in the coming year. We will also continue our investments in people and talent development in 2022 as these efforts have been critical foundational elements of our strategy. Our company continues to hybrid heightened our focus on providing excellent and differentiated service for our culture.

Speaker 4: Our company continues to heighten our focus on providing excellent and differentiated service for our customers. Ultimately, this focus will drive the growth of our company while continuing to improve our operating performance over time. With that said, we're now ready to open the line for questions, Operator.

For our customers ultimately this focus will drive the growth of our company, while continuing to improve our operating performance over time.

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

Speaker 1: Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star 1 on your telephone keypad. Please make sure the mute function on your phone is turned off so the signal can be read by our equipment. Star 1 for questions. We'll pause a moment

Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad. Please make sure the mute function on your phone is turned off so the signal can be red bar equipment.

Star one for questions, what pause a moment to assemble our phone queue.

We will take our first question from Jack Atkins with Stephens. Please go ahead.

Speaker 1: We'll take our first question from Jack Atkins with Stevens. Please go ahead. OK, great. Good morning, and congrats on the great result, guys.

Great Good morning, and congrats on the great results guys.

Speaker 1: Thanks, Jack. So, I guess maybe for the first question, we'd just love to get an update on January trend so far. You know, Doug, if you could maybe give us an update on tonnage and shipment trends on a year-over-year basis, and then also maybe if you could fill us in on how December trended.

Thanks, Jack So I guess, maybe for the first question would just love to get an update on our January trends so far.

Doug if you could maybe give us an update on tonnage and shipment trends.

On a year over year basis, and then also maybe if you could fill us in on how December trended as well.

Sure. Thanks Jack.

Speaker 3: Sure, thanks, Jack. In December , our shipments for Workday grew 4.8%.

In December our shipments per workday grew four 8%.

And our tonnage actually grew 13, 7% so a bit of acceleration from the first couple of months of the quarter.

Speaker 3: And our tonnage actually grew 13.7%, so a bit of acceleration from the first couple of months of the quarter.

Speaker 3: You know, moving into January , historically, there's a little bit of a step up in shipments per day.

Moving into January historically, there is a little bit of a step up in shipments per day, and we didn't see that as much in January but some of thats related to how the holiday fell around new year's.

Speaker 3: And we didn't see that as much in January , but some of that's related to how the holiday fell around New Year's.

Speaker 3: That day after the New Year's weekend, a lot of our customers, you know, took partial day or took a full day off. So that was a little different than the norm. But January finished up pretty good. We were up 1.3% on a shipment basis and 7.5% on a tonnage basis.

Day after the new year's weekend, a lot of our customers to.

To partial day or took a full day off so that was a little different than the norm, but January finished up pretty good we were up one 3% on a shipment basis and seven 5% on a tonnage basis. So.

Speaker 3: So, you know, the first week or two is, as everyone knows, it was, it was, it's always going to happen sometime and we got hit pretty good with weather, you know, across the map and had a lot of facilities that were either, you know,

First week or two as everyone knows it was it was it is always going to happen sometime and we got hit pretty good with weather across the map and a lot of facilities that were either.

Speaker 3: shut or partially closed for a day or two. And some markets, there's ongoing kind of rolling embargoes, depending on either weather or.

<unk> or partially closed for a day or two in some markets, there's ongoing kind of rolling embargoes dependent on either weather or.

Speaker 3: you know, COVID-19 challenges, things like that. So all in all, I mean, to be positive, um, with that kind of start of January , we're pretty pleased with and, and, uh, you know, the end of the month we were pleased with business levels and

Covid challenges things like that so all in all I mean to be positive.

Would that kind of start to January we're pretty pleased with it.

And.

At the end of the month, we were pleased with business levels.

Speaker 3: You know, winter can happen any month in the first quarter. Let's hope we got it out of the way in January . We'll see how February goes.

Yes.

Enter can happen any month in the first quarter lets hope we got it out of the way in January I will say I will say our February goes.

Speaker 1: No, that makes sense. Thanks for that, Doug. And I guess just for my follow-up question, Britt, in your prepared comments, you talked about the number of service centers or terminals that you plan to bring online this year, I think you said 10 to 15. Then relocating, I believe you said 10 more. Could you maybe talk about what that will do for you in terms of additional capacity into your network? You know, I don't know if you want to talk about it from like a door count perspective.

That makes that makes sense, thanks for that Doug and I guess just for my follow up question. Brent in your prepared comments you talked about the number of service centers of terminals that you plan to bring online. This year I think you said 10 to 15.

Relocating I believe you said 10 more.

Could you maybe talk about what that will do for you in terms of additional capacity into your network.

I don't think we'll talk we'll talk about it from like a door count perspective, but just be curious how you would expect that trend maybe year end 'twenty two versus year end 'twenty, one if that helps.

Speaker 1: Just be curious, you know, how you would expect that trend, maybe, you know, year end 22 versus year end 21.

Sure I mean.

Speaker 4: Sure, I mean, the key focus there, obviously, the facilities, the incremental facilities will give us expanded sort of addressable market, if you will.

The key the key focus there obviously the facilities that the incremental facilities will give us expanded.

Sort of addressable market, if you will.

Speaker 4: That we touch. So for example, we've got in the pipeline That will happen in the first half of the year They'll three facilities that will help us more effectively cover the Chicagoland Act area So that that'll do two things for us one It'll create capacity and existing facilities that we have but then at the same time it gets to that differentiated sort of

We touched so for example, we've got in the pipeline.

That'll happen in the first half of the year. The three facilities that will help us more effectively cover the Chicago land area. So thats that will do two things for us one it'll create capacity in existing facilities that we have but then at the same time.

It gets to that differentiated sort of.

Speaker 4: service level that kind of comes along with that, right? So we can better meet the customer's expectation.

Service level that kind of comes along with that right. So we can better meet customers' expectations.

Speaker 4: And in other markets, you know, simply as we've grown over time, you know, I look at the Northeast, that's gone well.

Other markets simply as we've grown over time.

I look at the northeast that's gone well.

We're going to expand the fulfill our major break operation there in Harrisburg, but if you remember when we first opened there we moved into a facility we replace that and now we're at the place where we've got to expand what we have because it's a business that needs to be there to support ongoing growth. So some of it is.

Speaker 4: You know, we're going to expand the facility, our major break operation there in Harrisburg. And if you remember, when we first opened there, we moved into a facility, we replaced that, and now we're at the place where we've got to expand what we have because it's the business that needs to be there to support ongoing growth. So some of it is, you know, the new openings obviously give us new addressable market. The others give us some capacity. The Chicago examples give us capacity, and Harrisburg gives us more flexibility.

New openings, obviously give us new addressable market.

The others gives us some capacity.

Chicago Examples gives us capacity in Harrisburg gives us more flexibility.

Speaker 4: So, you know, that's kind of the context. It's kind of more of our continuing sort of strategy.

So.

That's kind of the context is kind of more of our continuing sort of.

Strategy with Florida.

Yeah.

Yeah.

Speaker 5: We'll take our next question from Amit Mathurotara with Deutsche Bank. Please go ahead.

We will take our next question from.

Matt <unk>.

Sure.

Which bank. Please go ahead.

Thanks, Operator, Hi, Fritz Hey, Doug I.

Speaker 6: Thanks, Operator. Hi, Fritz. Hi, Doug. I just wanted to follow up on the margin question. I guess, Fritz, last quarter, you talked about 150 to 200 basis points of margin.

I just wanted to follow up on.

The margin question I guess last quarter, you talked about 150 to 200 basis points of margin opportunity and maybe opportunity to get to the top end or even potentially above the top end of this year I don't know if that's evolved or changed at all.

Speaker 6: and maybe opportunity to get to the top end or even potentially above the top end this year. I don't know if that's evolved or changed at all, if you can just talk about that. And then, Doug, I appreciate the comments on January , it's a tough operating environment, whether labor-wise.

Could you just talk about that and then Doug I appreciate your comments on January .

It's a tough operating environment, whether labor wise, hoping you could kind of help us think about the sequential movements in operating ratio in the context of all of that.

So.

Speaker 4: So I, you know, I'll start off, we'll kind of divide that up. I'll start off with the sort of overall margin question. I mean, you know, we've long said that two things is that, you know, there's a range out there, 150 to 200 basis points.

I'll start off of ultra divide that up ill start off with the sort of overall margin question.

<unk> said that.

Two things is that there is a range out there of 150 to 200 basis points over time, we feel like is very achievable and I think the other thing thats important to understand.

Speaker 4: over time, we feel like is very achievable. And I think the other thing that's important to understand is that over time, as we have developed our own tools and capabilities around execution, I think we've...

Is that over time as we have developed our own tools and capabilities around execution I think we've.

Speaker 4: Shown that you know, we'll show that we've short up the bottom of that range

<unk>.

We will show that we've shored up the bottom of that range and I also think in environments, where it is.

Speaker 4: And I also think in environments where it is.

Favorable if you will or the strong economic backdrop, we ought to be able to meet or beat the top end of that range and I think thats kind of where we are.

Speaker 4: Favorable if you will or the strong economic backdrop We ought to be able to meet or beat the top end of that range And I think that's kind of where we are

We've got it we've got to continue to execute through the first quarter. Certainly January is only one month of this of the period or in the quarter and Theres a lot of weather that could still happen, but we feel pretty good about the idea of <unk>.

Speaker 4: You know, we've got to we've got to continue to execute through the first quarter certainly January is only one month of

Speaker 4: this of the period or the quarter and you know there's a lot of weather that could still happen but I you know we feel pretty good about the idea of you know top end of that range and let's meet or beat it and I think we've I think we can do it feel good about you know our execution in the fourth quarter. The key thing that we saw through the year just to emphasize and why we feel better about it is that you know as we build sort of momentum with our customer base and they understand that differentiated quality and service.

Top end of that range, and let's meet or beat it and I think we've I think we can do it.

Feel good about our execution in the fourth quarter a key thing.

We saw through the year.

The size and why we feel better about it is as we build sort of momentum.

Momentum with our customer base and they understand that differentiated quality and service we have the opportunity to get paid for that and that's important because it's a business that requires quite a bit of investment.

Speaker 4: you know, we have the opportunity to get, you know, be paid for that. And that's important because it's in a business that requires quite a bit of investment and a business that has a high inflationary sort of cost structure. So that's working and our operations team's delivering it and our sales team's communicating that message. So I think that's something that's sustainable into the year and in a positive economic environment, I think that leads us to the top end of the range and we'd like to meet it or beat it.

Business that has high inflationary sort of cost structure, so that that's working.

Our operations teams delivering it and our sales teams communicating that message. So I think thats something thats sustainable into the year and a positive economic environment I think that leads us to the top end of the range and wed like to meet or beat it.

Yeah.

Yeah, Good morning, Matt.

Speaker 3: On the second part of your question, like I said, I mean, you know, for January to finish positive 1.3% on the shipment side, you know, on a workday perspective is, is pretty encouraging. We've got a much easier shipment comp moving into February .

The second part of your question like I said I mean for January to finish positive one 3% on the shipment side on a workday perspective is it's pretty encouraging we've got a much easier shipment comp moving into February .

Speaker 3: as a result of the big storm that impacted Texas in the Southwest.

As a result of that the big storm that impacted Texas and the southwest last February so like I say, hopefully we got our winter the worst of our winter behind us, but historically, we've seen about a 50 basis point erosion in Q4 into Q1.

Speaker 3: uh... last February so i can say hopefully we got our winter the worst of our winter behind us but historically you know we've seen about a fifty basis point erosion q4 into q1

Speaker 3: I think that that probably makes sense this year as well. I mean, we're not making it easy on ourselves, right? I mean you for was a record by four or five hundred basis points. So that's a good thing that

I think that it probably makes sense this year as well I mean, we're not making it easier on ourselves or item in Q4 was a record by four or 500 basis points.

Good thing that the challenges is there for us each quarter against the records, we're comping against but.

Speaker 3: The challenge is there for us each quarter against the records we're comping against. But 50 basis points probably makes sense. The timing of our GRI is pretty similar to last year. The magnitude of it is a little bit larger. But I think we probably stick to the historical 50 basis point guide on the deterioration.

50 basis points, probably makes sense, the timing of our <unk> pretty similar to last year.

The magnitude of it it's a little bit larger but.

I think we probably stick to the historical 50 basis point guide on that deterioration.

And then and then just for my follow up.

B.

Speaker 6: I guess the biggest discrepancy when I look at kind of my expectations or our expectations

Tonnage I guess I guess, the biggest discrepancy when I look at kind of my expectations, our expectations for the company and maybe where we are.

Speaker 6: censuses seems to be really on tonnage growth and understanding what tonnage growth can look like as you take market share, add all this new capacity. And so I just kind of want to come out and ask, you know, do you think tonnage growth can be in that up-digit territory in 22? And then, related to that, you know, this Mastio data that came out, you guys are just doing a great job on claims ratio, which is important, but you haven't really seen it, I would say, to the certain extent, whether it's net promoters.

Consensus.

Seems to be really on tonnage growth and understanding what tonnage growth can look like if you take market share at all this new capacity.

And so I just kind of want to go.

And ask do you think tonnage growth can be in that double digit territory.

In 'twenty, two and then related to that.

This is Matthew data that came out you guys are just doing great job on claims ratio, which is important but you haven't really seen it I would say to the certain extent, whether it's net promoter scores or some other criteria that the customers.

Speaker 6: or the perception of SIA. We've seen improvement, but maybe not to the level that we would have expected given some of the progress you guys have made on the clean trace.

And there's a perception of size, we've seen improvement, but maybe not to the level that we would have expected given some of the progress you guys have made on the exchange ratio I just wanted to just if you could talk about that as well.

Not that two part follow up question that any of them it alright.

Speaker 3: Look, that two part follow up question in there, didn't you? All right, so in terms of your tonnage expectations, look, I mean, we're probably going to grow our door count this year. If I think about just new openings, you know, in the mid single digit range, like Fred said, we're building out other parts of the, you know, the existing network to handle more growth.

And then in terms of your tonnage expectations look.

We're probably going to grow our door count this year, if I think about just new openings in the mid single digit range Mike.

Like Chris said, we're building out of other parts of the existing network to handle more growth, but at the end of the day.

Speaker 3: But at the end of the day, I mean, I know we all want to grow and we all love growing volume when we can do it. But in a strained network, you know, in the network business, when you're when you're strained either on the labor side or maybe supply chain issues.

I know, we all want to grow and we all grow in volume when we can do it but in a strained network and the network business. When you when you strained at on the labor side or maybe its supply chain issues.

Speaker 3: You know, the right thing for us is to is to grow the revenue, grow the revenue per shipment, and cover some of these inflationary costs and meet the challenges and, you know, you know, earn at a rate that allows us to go invest in the business. So, you know, I think we you know, we'd like to grow tonnage at a higher rate, potentially down the line. But, you know, I think mid single digit kind of shipment growth would be our expectation if the environment holds up.

The right thing for us is to grow the revenue grow their revenue per shipment and cover some of these inflationary costs and meet the challenges and.

Earn at a rate that allows us to go invest in the business. So.

I think we'd like to grow tonnage.

Higher rate potentially down the line, but I think mid single digit kind of shipment growth would be our expectation if the environment holds up and.

Speaker 3: and we're building out the network to handle more than that, but we'll take it when it comes to us at the right price. We love the margin improvement we're making, and a measured pace of shipment and tonnage growth is the way we've gotten there, so I think we're going to keep on that path.

And we're building out the network to handle more than that but we'll take it when it comes to us at the right price and we will.

The margin improvement, we're making in a measured pace of shipment and tonnage growth is the way we've gotten there. So I think we're going to keep on that path.

And then on the <unk> piece.

Speaker 4: What I just comment generally about that, Amit, is that

What I would just comment generally about that a bit is that.

Speaker 4: You know, we are, you know, at this point in measured against all the national carriers as compared to where we were several years ago. And that's reflecting the national coverage map. So that's going to include opportunities where we've grown into new markets that maybe others have been more established, more familiar with those brands.

We are at this point and measured against all the national carriers as compared to.

Where we were several years ago, and that's reflecting the national coverage maps. So that's going to include opportunities, where we've grown into new markets that maybe others have been more established more familiar with those brands. We're actually when we look at the mass deal work or the results this year.

Speaker 4: We're actually, when we look at the Mascio work or the results this year, we feel pretty good when we see, there are a couple of players that are above us. And then there are five or six below us.

We feel pretty good when we see there.

A couple of players.

Above us and then there are five or six below us.

Speaker 4: and the more nationally, more resource, more outstanding or brands that have been out there. So we actually look at the result and conclude, hey, that's a good, we're moving in the right direction.

The more nationally more <unk>.

Resource more outstanding or brands that have been out there. So we actually look at the result, and conclude a that's a good we're moving in the right direction.

Speaker 4: You know, we are appearing more and more in the data set of what customers are providing feedback, and we're doing a great job taking care of the freight, getting it there, meeting their expectations. Those things are getting

We are hearing more and more in the data set of what customers are providing feedback and we're doing a great job.

Taking care of the freight getting at their meeting their expectations those things are getting.

Better over time.

Speaker 4: better over time. And I think that's a differentiator. But I tell you, one of the things that's in there that, you know, where we have maybe disappointed a customer has been, you know, when you when you point out that you're doing a providing high levels of service to a customer, your claims ratio is

I think that's a differentiator, but I'd tell you one of the things thats in there that.

Where we have maybe disappointed a customer has been.

When you when you pointed out that Youre doing a providing high levels of service to our customer your claims ratio is.

Speaker 4: you know, arguably, you know, top in the industry, and you're meeting all those expectations, well, you got to get paid for that. And that's, that's significant. So if you recall, this year, we've been very focused on making sure that we bill for all of those accessorials, all the services that we provide. And when you do that, customer looks at that and says

Arguably.

Top in the industry.

We're meeting all of those expectations will you gotta get paid for that.

That's significant so if you recall this year, we've been very focused on making sure that we bill for all of those.

<unk> all the services that we provide and when you do that customer looks at that and says.

Speaker 4: You know, maybe it's difficult to do business with SIA. These things are changing. I viewed them as a value before. Now they're more expensive.

Maybe it's difficult to do business with some of these things are changing I view them as a value before now they are more expensive.

<unk>.

Speaker 4: Listen, you look at the Mastio data, we score the best where we're pointed out as a value. And for us, for what we're having to do to invest in this business to maintain those high levels of service, frankly, that's not sustainable, right? We've got to fix that over time. And I think we will, because I think we are continuing to build momentum around providing that great service.

Let's say if you look at the Mascio data, we scored the best where we're pointed out as a value add for us for what we're having to do to invest in this business to maintain those sizable high levels of service frankly that that's not sustainable right. We've got we've got to fix that overtime and I think we will because I think we are continuing to build momentum around providing.

That great service people are starting to understand what that means and are our team's communicating that delivering it.

Speaker 4: people are starting to understand what that means. And our team's communicating that, delivering it. And the result of that is that I think you see that show up in our pricing structure over time. Yep.

The result of that is that I think you'll see that show up in our sort of.

Pricing structure over time.

Yes, that's a great point, okay. Thank you guys appreciate it.

Okay.

We will take our next question from Scott Group with Wolfe Research. Please go ahead.

Hey, Thanks, good morning, guys.

Speaker 7: Can you give us an update on the pricing renewals in the quarter? And then the GRI you guys just took was pretty outsized relative to the industry and your history, just some thoughts on that as well.

Can you give us an update on the can you give us an update on the pricing renewals in the quarter and then the <unk> you guys. Just took was pretty outsized relative to the industry and your history, just some thoughts on that as well.

In terms of the contractual renewals I mean, it's still running at a double digit clip.

Speaker 3: In terms of the contractual renewals, I mean, it's still running at a double-digit clip.

Speaker 3: 10.4% I think in the quarter. So, you know, again, a pretty good indication of what the shipper's expecting, kind of more of the same around their supply chain struggles and their desire to secure good capacity. You know, in terms of the GRI, I mean, you know, we've talked about it.

10.4% I think in the quarter.

So again, a pretty good indication of what the shippers are expecting kind of more of the same around <unk>.

Supply chain struggles and their desire to secure that capacity.

In terms of the <unk>.

We've talked about it.

The pricing gap for years and years so it's.

It's not that we went out and put a seven 5% increase across the entire tariff we're doing it in a very targeted way to to help us work on mix I mean mix has been a big part of our story finding the freight that works for us whether it's the right weight break or the right length of haul whatever the case may be so you kind of use your adjustments to the tariff.

It's not it's not going in and set in the whole thing at.

At times 175, it's more targeted than that but.

The acceptance early on we're only a week into it but.

I think in the market in general I think we saw some higher <unk> than the prior year out of some of our competitors and then we saw some <unk> come earlier.

Ours was right about the same week, maybe even a week later than in the prior year. So.

Nothing more than that.

Okay, and just to that point about mix, so weight per shipment up 8% year over year.

How much of this is sort of truckload in your mind, that's coming to you or how much of this is more we are focused on changing improving our mix and this is more sustainable and any thoughts on our goal our goal for weight per shipment this year.

Yeah.

We don't think there's a good chance and stays where its at or maybe moves a little bit higher I mean, we don't think of much of what's in our network today is truckload spillover business and if im thinking about the tariff for example, some of those heavier weight breaks like above 10000 pounds. They got they got higher increases right.

That's a different load in a different profit profile. So.

I don't know.

We're not we're not necessarily shutting all of that business, but we need to.

Get the rates in line so.

We don't do a lot of our businesses as truckload spillover freight has kind of found the mode, where it's supposed to be right now it's not like the disruptive environment that we had.

Summer of 2020.

Okay. Thank.

Thank you guys.

Thanks, Scott Thanks, Scott will.

We will take our next question from John Chappell with Evercore. Please go ahead.

Thank you good morning.

If we look at salaries.

And benefit the purchase transportation in aggregate improve.

The improvement from <unk> over <unk> I think if you go back and.

To see that so the question is is the pricing momentum jets still favorable that you were pushing through inflationary plus in growth.

Growth.

Tight pricing or where you're turning away business, maybe a little bit in <unk>, because you werent necessarily didn't have the capacity that we're appropriately staffed or could get the purchase transportation to meet all the demand that was back.

I think we are.

The fair answer there is we're always managing that mix of business right. So.

Our goal is essentially to keep the pricing at at or tracking door sort of market levels right. So that it's less of a model around cost plus certainly there is there is a point at which you say.

I can do this I can take this business because it is.

Accretive versus something you already have but the focus has really got to be around that and certainly in the as the.

Market changed and we had to deal with disruptions or.

Challenges in given markets.

Just what that market is and that may include.

Implementing <unk>.

Coverage changes or embargoes that sort of thing.

But it's all about it's kind of a fluid process.

I think what we have.

We would change our profile is to the extent that we needed to to adjust to the market conditions. So that's kind of the demo that we have.

When we kind of manage these and sort of short timeframes like that.

Okay.

And then kind of sticking with that theme I think theres just perception.

<unk> your <unk>.

Terminal growth this year that there's some upfront costs associated with either hiring or the land equipment et cetera are you at the point.

The size of your network and the National breath, a bit where do you think you can onboard eight to 10 terminals and really not see any upfront costs or or drag associated with that type of expansion.

Well I think where we are on this I'll just comment that two ways.

We think we've developed a core competency around.

Opening organic openings. So we feel like we know how to do this the cadence of.

When you start recruiting when you onboard people when do you make sure you have a pipeline of leadership.

Leadership that you can put into our region. So we feel like we've developed that competency so theres a bit of an efficiency that comes with that.

At the scale that we are.

It is certainly challenging to open up facilities, so don't want others underestimate that but at the scale. We are we're doing things that in many cases I gave you. The Chicago example earlier.

The facilities, we're going to open or add or ones that are going to be incrementally beneficial of that market. So you create some efficiency within your legacy network. So your legacy terminals. So maybe we're trying to cover.

Rockford, Illinois from.

The two terminals in Chicago, well, if you have a facility there that certainly changes the service level and your cost structure.

Stem times all of those things. So there is a cost savings that kind of comes along with that so that helps.

I guess offset some of that investment.

As we continue to focus on our initiatives.

We will absorb the opening cost and relocation costs and all the sort of margin structures that we've kind of commented on so we feel pretty good that our model here allows us to do that.

Okay. That's great. Thank you Charles.

We'll take our next question from Todd Fowler with Keybanc capital markets. Please go ahead.

Okay, great Thanks, and good morning.

As you think about the growth going into 'twenty. Two parts can you talk about your availability to get rolling stock and equipment.

<unk>.

Basically how that didn't replace with with purchase transportation on a shorter term basis.

We feel like we've got pretty good plans and visibility to the rolling stock right now to what we're going to be able to get this year and we think it will support our.

Business plan at.

At the same time.

We feel like we've got the ability to recruit the necessary drivers and.

Doc staff and leadership team to make that so we don't see a constraint right now we certainly see the and the rolling stock area much like anything you see these days it is inflationary inflationary.

We saw in 2021.

Often the Oems had struggled to meet timelines right now we've kind of built our plan around the idea of what we think we will get from them not necessarily what they.

They have represented that they would provide us in terms of timing. So we've built in a little bit of it.

Cushion to that if you will.

But I don't think it's going to be a hindrance right now.

As we all know things can change, but right now we feel pretty good about it.

And then so in that context is this PT kind of stay in this low double digit percent range or does that trend a little bit higher or lower how does that kind of work into the growth factors as well.

That was a tough one Todd because right now what we do as we build out density and that gives us the opportunity to maybe recruit drivers.

Phil and equipment in the right place those sorts of things. So I think it's going to be a little bit of a.

I can't give you a kind of a clear focus on where that's going to go this year because it is going to be dependent upon how the growth works for us or where it comes into play I can tell you. This that as we look at our total line haul costs will seek to optimize it either with our internal sort of resources and assets or where applicable we will continue to use <unk>. So.

Yes.

All of that has to be cost justified or margin justified.

We certainly wouldn't be in a position, where we add a bunch of volume that is.

The roads are improvements over time, it just doesn't make sense to us that would be business, we would pass on.

Okay that makes sense.

Just as a follow up I remember several years ago celebrated when you were hitting 30% Incrementals and now you are kind of doing that very consistently yes, I know that the incremental margins can vary quarter to quarter and based on investment in.

Seasonality and those sorts of things, but is the 30% incremental safe baseline to think about where you can be.

Bringing on new business, yet or are there other things that we should be thinking about as to why or why or why not that would be the right level of incremental margin.

I think thats, a reasonable range I mean, it's going to be plus or minus around that right. So on a newer facility.

We're moving it and adding incremental business quickly you would expect those incrementals will be better over time.

I think overall those kind of averages makes some sense.

But at the same time, if you can get more of that in pricing, then youre going to push that range up.

Mix of business Youre going to push that range up.

So we're.

Our focus is.

Probably for Lee.

Look at the.

Kind of where we kind of land on this we would we'll take margin improvement operating income improvement over growth for growth's sake.

Those are that's an important characteristic of how we manage this.

Okay got it alright, thanks for the time this morning.

We will take our next question from Bascom majors with Susquehanna. Please go ahead.

Yes. Thanks for taking my question I wanted to go back to your comment on your core competency you feel like you've developed an organic openings.

Five or so terminals you opened since the end of September can you give us some thoughts on how quickly those who filled up where they track versus kind of what normal capacity utilization might be in and how that compares to time.

Your history and Matt Thank you.

No problem, but these have been.

Pretty good ones that we've added they all are good but the ones that we've added youre re so I'll give you. The best example, I can think of is around Calhoun, Georgia, that's northwest to Atlanta.

That's an area that our sales team.

We have a great product for them in that market.

With this.

Time to get from southwest or southeast Atlanta.

With West Atlanta has pretty cumbersome. So we didn't meet the expectations of the customer so that that's turned in to be a winning terminal pretty quickly out of the gate simply because of its market positioning and I think as you see over time as we add in the.

Markets like Chicago or add the northeast Atlanta terminal, which will do sometime this year.

Those are going to have similar economic profiles meeting.

They are ones that we kind of cover already but.

But we don't have a great offering around it.

Now we can now we're in a position where we can jump on that and it becomes incrementally beneficial.

Out of the gate.

Youngstown, Ohio is a facility we opened in October that was a.

Facility that was.

It was a little bit of a light spot on the map for US. It was it's an important point for us in that part of Ohio, but also as important handoff point into the northeast.

So into Pennsylvania, and such so that one is a classic the economics on that location are really about just being positioning in the network.

And addressing the local market so.

What's exciting about the incremental ones that we have and why we think this is so important is this is about addressable market or being able to provide better service in a market and when you do that I think you've covered the costs more quickly because you create cost savings almost immediately.

And you can meet those customers' expectations. When you do that you have the opportunity to charge for it so.

These the profile of everything that we add from here is going to be more like those sorts of facilities. There maybe when we get into the markets that were entirely new to that there may be a little bit of small startup costs that may be a drag for a while but most of these are are getting to our company average youll are pretty quickly.

And.

Not to ask you to spoon feed it to us, but do you have just a rough sense of what that time line used to be the company average or what it's looking like more recently well sure I mean, if I go back to the northeast terminals. I mean, we were excited to get them below a 100 or kind of in a year year and a half right. So now I'm not talking.

About 100 or a company averages 84 two.

Our folks skill disappointed because they'll say well, we've got new business at 85.

Okay.

That's not as good as the rest of the business. So it's.

It's a focus the new ones youre thinking about months rather than years.

And there are all different so I don't mean to be evasive on it. It's just tough to get say eight months seven months six months I don't know.

Thank you and Baskin.

To add on the core competency piece of it I'm not sure I could have mentioned this when Jonathan asked his question about it but.

And we do it seamlessly and still get or improvement.

I don't.

Just to be clear, we opened seven terminals this year and we had a record or.

470 basis point improve so I think that's where we gain confidence in Florida the competency issue.

Thanks.

We will take our next question from Jason Seidl with Cowen. Please go ahead.

Hey, Thanks, Operator, Hey, guys good morning.

Wanted to focus a little bit on sort of a longer term look there is a lot of LDL companies expanding.

The terminals, both new and also larger ones I wanted to see what do you think thats going to do to sort of the competition for labor, which already is in a tight market as we look through 'twenty, two and beyond and then longer term.

Where do you think this is going to help the <unk> for <unk> going forward one of your competitors talked about a longer term or in the sixties based upon an improved network and the pricing environment would love to get sort of your opinion on where you think side could go.

So on the cap break that two piece is just on the labor front.

I would.

A couple of pieces on the labor front I mean, we're competing certainly with <unk>.

Businesses as well are the typical competitors that we all know about but in many cases for labor you're also competing with.

Large warehouse industrial real estate sort of anybody's kind of warehouse operation that could they could be competing for the same dock workers that were looking for right. So it's the labor thing isn't just discrete to our industry. So you have to you compete basis on what the company's values culture, obviously paying benefit.

It's a critical part of that but you differentiate on those items the rock quality in place to work and we've got a pretty good we feel pretty good about our company around that and the growth profile certainly helps kind of drive.

Drive that.

With respect to the other companies that are expanding as well.

I think it's also to keep it keep in mind that there are also some that are exiting.

And we saw some of that just in the quarter and that creates available real estate.

Terminals that we potentially could pursue.

And others.

And there are also other folks that are outside of <unk> that would be competing for that real estate, because it's potentially attractive real estate that could be.

<unk> the industrial real estate property. So there is a there's a few dynamics and that for sure.

With respect to.

Kind of longer term or.

Listen when Theres, a marker out there and whatever the number is.

I don't see a reason why we shouldnt.

Pursue something similar and how do we get there.

Same time or in the near future.

I don't know what that cadence looks like but I think that so long as we stick to providing that great quality and service to our customers, we have an opportunity to close that gap.

Does that take our business from kind.

Kind of the mid <unk> into the <unk> I think in time that does I don't see it an impediment.

We think we've got a great product, we've got a great team. There is nothing the sky's the limit where that goes and what the timing.

Is it dependent on things, sometimes that are out of our control, but we feel like they said if others set a mark or lower than that just that sets our marker lower.

Okay Fair enough I appreciate the time as always.

We will take our next question from Kenn Hoekstra.

Bank of America. Please go ahead.

Hey, good morning, Fritz and Doug.

So just if you step back for a second look at the market, obviously spiked from ecommerce growth and being a COVID-19 beneficiary in the sector.

Do you see any fade away of that or or do you see continued growth and I know, we talked about the growth going forward and adding to capacity just seems like the market is expecting this kind of near term pullback in that demand I just wanted to understand what youre seeing on that underlying demand and then if there is a rollover in that demand just because of the tightness from.

The growth of our Covid do you think about any pause in the margin potential.

So I think in the sort of the macro situation right now and I think the one thing that the last couple of years have shown us is that.

In a disrupted supply chain.

Certainly our assets can flex to meet those requirements and I think other <unk> are similarly positioned so I think the industry's that's a good place to be.

And I think going forward I don't see a retrenchment back to a time that.

Supply chain don't have to be fluid.

I think that maybe they may.

Maybe they're not as disruptive as they are now but going forward people will adjust how they consume goods or how the things are purchased and how at.

What that supply chain looks like where those warehouses are where the goods get delivered how all that works, but I think our assets continue to match that.

And I think that's important.

Could things slow down absolutely.

Could but I think our our positioning is unique in this sense is that I think we are.

Mascio and others have pointed out we're doing a great job for the customer. So that's a point of differentiation. So a slower market, we continue that and we.

We continue to execute our plan.

I guess one of the benefits in some regard is that if you're relatively inexpensive more inexpensive compared to the competition. There is some.

Our opportunity remains we need to be at market for what we're doing particularly if we're doing it really well.

So I think that continues it may go to slower rate.

But I don't think it stops.

So just to hit on that.

Doing great job for the customer it looks like claims and insurance nearly doubled in the fourth quarter, yet for a full year up 25% same as revenues.

Is there any way to gain efficiency on that metric or I know you talked about your cargo claims being at a solid level. What do you think on on that line going forward there.

Yeah, Hey, Ken.

That line covers not only cargo claims expense.

Insurance expense around auto accidents would be in that number too. So that's where you see some of the most of the inflation in some of the volatility.

We've over the years we've.

Taken a little bit more of the risk ourselves and that line on the auto side is as we've made investments in technology and our fleet, we're willing to kind of bet on ourselves to some extent versus paying some of the highly inflationary premiums that are out there. The last few years, so there'll be volatility in that line, but again.

We've invested heavily in safety.

And.

The premium itself is going to be inflationary, 20% to 30% is usually what would have been expecting in the last few years.

But on the frequency and severity side I think I think we're going to make headway over the next few years with all the improvements in technology technology that are out there and our adoption of them.

Great and my last one just real quick on the $500 million Capex, maybe talk a bit about whats carryover, what what's not I know you're doubling the service centers.

From seven but is that mostly real estate is attract or catch up maybe talk about what what's kind of carryover and what's what's growth.

Yes, it's a mix of both.

We fell short of trailer side and getting all the deliveries we wanted last year.

Bill.

Pretty good number of trailers in that number.

On the tractor side.

It will be another.

You know.

Pretty good number because not only do we have growth tractors and they're doing some buying for age of fleet.

But real estate is always a wildcard in that line I mean, we could spend.

Can spend more than twice of what we did this year on the real estate line. If we're able to put the deals together I think in the last couple of weeks.

Closed on some small real estate deals two or three small deals.

If some of the bigger ones fall into line the real estate number could be two or three times, what it was last year, but.

Mainly on the equipment side. It was mainly trailers that were pushed out.

And that's that's that's a piece of the step up in spending that we plan.

We've got a couple of big projects in the year that are in process.

Started late last year into this year.

Thanks, guys I appreciate it.

Thanks, Jeff We will take our next question from Tom <unk> with UBS. Please go ahead.

Yes, good morning.

I had to ask you a bit about pricing and how you think renewals or if you wanted to just talk broader kind of revenue per hundredweight X fuel.

I think your renewals, where something like 14% in the third quarter and you talked about 10% in fourth quarter. So those are obviously, both very strong numbers, but some deceleration.

How do you think about renewals. The next couple of quarters, you think you'd stay in kind of high single digit 10% area or do you think it kind of come down to a more normal LDL level of maybe mid single digits.

Well I mean, they've been running double digit for probably I guess three quarters in a row now and highest single digit before that I mean, so were running into some pretty good comps each.

Each quarter's number that we shared.

The book of business it looks different I think that we renewed in the fourth quarter, probably 10% more contracts than we did in the third quarter and.

I can factor into it as well.

Some that have recently been.

<unk> recently seen <unk> increases in your coming on top of those.

The following year, maybe they don't get as much.

But you know.

I think what we're seeing around the environment with the <unk> is a pretty good indication to us that.

Pricing is going to be another opportunity. This year I mean from the truckload and intermodal companies I've seen reports so far I mean.

Talking about double digit pricing opportunities out there for them and were.

We're exposed to some of the same cost pressures, especially labor so.

I think our G. R is an indication of what we think is going to be achievable for the year end.

Again, we primarily give you all the contractual renewal rate just kind of let you know with the shippers or our sensing out there.

That's their forward look at the environment. So it was still double digit in the fourth quarter.

Right Okay.

And then the.

Second question is.

You've got pretty strong.

Capacity growth story idiosyncratic footprint story so.

I would think you probably do better than the market in terms of growth, but how.

How do you think about the impact from a cyclical perspective.

I think you have had a lot of strength in <unk> and maybe some some truckload shipments move in do you think that that will kind of swing. The other way later this year and be a headwind.

Or are you just think that the kind of dynamic is is it that in this cycle and maybe thats not very meaningful factor just thinking more about kind of LTE market.

More so than size specific.

I'd say I think our commentary around that I think Doug alluded to earlier from.

Our book of business and we think generally is that.

Things are kind of back to their more historic modes. So that as we look at our portfolio of what we're providing service for right now as we see it.

Just kind of typical sort of mix of business. If you will in terms of.

If you go back a year back into the midst of Covid, yes, there was a little bit of spillover, there, but right now we're pretty comfortable with it.

I think.

If the macro things were to slow a bit I mean, I think that <unk>.

<unk> is in a position to deal with a lot of that.

And the supply chain turmoil change if you will over time, so I think those things are all.

We sustained through that now depending on where you think macro environment could go certainly that could temper.

Some of the growth opportunity, but one of the things that we as we look at our facilities and our.

Opportunities to make investments, we're not thinking about it in terms of 2022, we're thinking about it on a 10 year kind of horizon. So.

That implies that we think through the cycle and that's important because.

These these facilities that network is something that generates great value through a cycle.

Do you think loosening in supply chain or supply chain improvements kind of good or bad for <unk> shipments.

Yeah.

Listen I think the <unk> shipments do well as supply chain adjust to consumer or commercial demands right. So as people go through maybe back to more of a JIT sort of situation.

Any of that I think those were uniquely qualified to do that and the industry is.

Sure.

I think that we benefit from that over time.

Great. Thanks for the time.

We'll take our next question from Stephanie.

Moore with truth. Please go ahead.

Hi, good afternoon.

Hi, Stephanie.

I wanted to follow up just on a previous question that was asked.

Just first on the comments on the demand side.

Now that you've called out in early January clearly thing.

<unk>.

You know some disruptions due to weather, but are you still seeing a lot of your customers just general disruption when it comes to <unk>.

Man in volumes, just simply from supply chain congestion, meaning that there is still kind of our capri opportunities anything.

Sure.

Hi.

My comment around that is I think that that I think what's.

Is it people and maybe even side around as we've gotten better at handling the disruption, but things are still disrupted.

What's going on in the port activity, that's not back to normal yet.

And the Covid.

<unk> sort of that's probably tempering a little bit here in the last week or so but yeah. There was a time in early January December that was every bit as bad as the depths of delta or the first round of it so.

I think it I think if anything people have adjusted to that sort of.

Change or challenge over time so.

Yes, I think the end of the year I'd like to think we get farther away from that and maybe back to what might be defined as normal.

Understood and then switching gears the last month or so theres been several announcements suggest size expansion with the EV trucks. So maybe if you could talk a little bit about those some of those allies are agreements that are in place and maybe any work you've done you know as you kind of think forward about how some of these <unk>.

Compared to normal Capex spend is as well as just ongoing potential maintenance.

<unk> et cetera by outstanding warranty deed.

We're still early on.

Collecting the data so our the way we think about this this is sort of our R&D. If you will around the equipment that we have either leased or purchased to date, we need to figure out what the profile of what that looks like what what is the utilization look like what.

What is the range look like all those sorts of things. So we're still pretty early on on this and we're pretty open with Oems give us a shot at some of this we want to see how this works.

We want to be an early adopter assuming that these things perform.

We introduced first the <unk>.

Although evs in the first part of the year.

There are some parts of that that I think are compelling the range in <unk>.

Kind of what the ongoing operational costs.

We're still a long way away from that being a permanent part of the fleet.

As we look at the emissions requirements in some parts of the country, we focus more on adding some <unk> equipment. So we feel good about what that looks like what the performance profile of that is.

We think that over time, that's probably as you go from a sort of a.

The emissions environment that we are now to where ultimately where everybody wants to be that's probably going to be a stepping stone technology. So.

Sort of in the middle of diesel and maybe ultimately or Evs.

That case, that's one where we need to make sure we understand what the operating characteristics are of that and then more recently, you're probably talking about the.

The release, we had around the Nikola product.

Theres some.

That looks like that could be really interesting.

But the key part of that is that we need to get to look at it we need to see how it works you get our hands on a test drive it run it in the operation.

Data and so it's early on but we're very open to the idea.

Okay.

Great. Thanks, so much.

We will take our next question from James Monaghan with Citi. Please go ahead.

Hey, guys. Thanks for taking the question wanted to touch on the timing of the capacity additions is there any detail you could provide about the Georgia door as maybe first half or second half.

Just touching on the capacity and the ramp there how should we think about that is it something thats relatively.

Mid single growth in shipments should we think about capacity actually growing faster than that.

So we're gonna open sort of the 10 to 15, I think five or six of them are going to be in the first six months of the year.

And then the balance are going to be.

Second half of the year we're.

We're going to end up opening all 15.

That sort of range. The question is you got to get through the timing of dealing with maybe a zoning issue or upgrade or all those sorts of things, but the first ones. We've got really good line of sight around that we're planning hiring and all those sorts of things along with it those will be ones. The first one because the three that are Chicago land related.

You're probably not going to notice necessarily there won't be any I don't expect any drag from those at all but none of them actually but those in particular, because those are immediate sort of market improvements for us and service improvements so theres going to be a cost savings that comes with that and theres going be some incremental business, we likely get out of that right out of the gate because it's.

Service, we couldn't offer before so.

It's built into kind of what our overall sort of growth plan is for the year. So I don't I don't really have a breakout for those individually.

But as I've described in a couple of other questions.

The key things with all of these is when Youre moving in sort of what we'll call saturation terminals. They they benefit you pretty closely right out of the gate. So I don't expect a lag.

Anything thats going to be part of our growth for the year.

Got it and then how should we think about leverage here as disciplined or maybe a buyback make sense or are you holding it back for some flexibility in the ladder should we think about it.

Sure.

Our organic growth or could you basically could you use that leverage to sort of accelerate the organic expansion beyond 2002.

Yes, so the way we're thinking about this we said 10 to 15 terminals and this year I think that repeats again next year.

In 2023.

That's going to require fleet investment.

Ongoing as well so I think for the <unk>.

Next couple of years anyway, I think you will see sustained levels of capital spending. We're also quite frankly very conservative around the idea that we need to manage this be able to manage this business through and take advantage of opportunities if I come to us that are unexpected.

One player exited the market.

In December or the fourth quarter and what we certainly those are assets that are of interest to us and there could be others down the road. So we're always going to have powder.

To take advantage of those opportunities.

So, but we're also custodians of the shareholders capital. So over time, we will have other.

We'll explore what we need to do the best you utilize the cash and cash flow.

Got it thank you.

Yeah.

We will take.

We will take our next question from Bruce Chan with Stifel. Please go ahead.

Hey, Fritz Hey, Doug good morning, or I guess afternoon here.

I just want to go back to some of your comments around mix and freight selection I know that.

You mentioned a lot of that has stopped the rapid but as you think through some of the dynamics around maybe the consumer recovery being a little bit longer that unit versus the industrial recovery or <unk>.

Rig count recovery are you expecting or are you seeing any kind of headwinds from the market for that.

I don't know if I'd call them tailwind, but activity remains strong I mean manufacturing data continues to roll out month after month positive I think the ASM numbers.

Showing growth for the past 19 months.

On the RTL volumes in tonnage are tied very closely to what goes on with the industrial manufacturers.

Inventory levels are still low as Fritz mentioned, the port congestion congestion really doesn't seem to get better. So far and then you think about our contractual renewals.

And how strong they remain I think that.

It tells us that at least through the first half of the year and into the second half of the year I mean, we remain pretty positive on the environment.

Houston activity was real strong in the fourth quarter Dallas.

L a.

Some of that could be tied in in the Houston and Dallas markets to energy.

Some of the Houston activity could be helped a little bit by repair work going on after the hurricane came through Louisiana. So.

Activity remains good and the manufacturing that is good so that's primarily what we track.

Okay. Great. That's helpful. And then can you just remind us of where your exposure stands to energy I know that used to be a fairly sizable chunk of your legacy business.

No yes.

You're right. It did as we grew up out of our Gulf Coast roots, we were certainly more heavy energy than our competitors, but it's it's kind of it's probably a mid single digit percentage now if you think about shipments across the network our footprint a lot bigger than we've grown out of some of the energy.

Some of the energy markets.

Okay, great well, that's all from me I appreciate it.

Thanks.

We'll go next to Tyler Brown with Raymond James. Please go ahead.

Hey, good morning, guys.

Morning.

Hey, so of the 10 to 15, new facilities in the 10 reloads, what's the breakdown between owned and leased and is there still good product out in that lease market.

So.

I don't have the breakout.

Most of them most of them are going to be one there are going to be some leases in there.

There are good products.

Either facilities to purchase or facilities the lease.

I don't think Thats, an impediment, it's the typical real estate challenges you have to deal with sometimes it's.

Maybe it's a zoning issue like we have a facility that we're planning on buying its can be in a position, but it's been idle for a while so you have to go redo zoning when that happens so.

Those are those are the challenges there, but we're we haven't changed our profile around the idea of owning strategic assets. This market right now.

There's a lot of interest in industrial real estate investments. So in many cases, you can't necessarily by which you'd like to buy you have to lease them, but the assets are available.

Okay. That's helpful. And then you kind of touched on it with the Rockford example, but now that you've been accelerating the terminal investments over the last couple of years are you actually starting to see it show up in your P&L productivity because I assume those 10 times are getting reduced or is that something that's more on the come as the network saturates and matures.

And the examples I've given them we've seen them.

But when we think about longer term the magnitude of them will become greater over time as we fill in the map. So we're we're still early on in the fill in the back part so the saturation part so I think that's an opportunity toller.

Tyler for sure over time.

The good thing is that it has played out in the instances where it's.

For it to start visible necessarily because of the larger company and all the other things going on.

Right right. Okay, and then is it right to think about the new terminals as call. It new market entrants is or the saturation and big Metros and then are these reloads largely in.

In the bigger brakes. So one is that true and two if you are expanding your brake capacity does that alleviate some pressure I mean I'm, assuming your line haul isn't optimized that youre needing more capacity.

It's a little bit of all of the above so there are we're always going to we'd rather own assets. So some of these that we have in the pipeline are simply in smaller markets, where we might be leasing something where we've got an available purchase saw swap those out so that's a reload in other markets. It is.

<unk>.

It's a capacity play at a certainly a market position place so maybe it's a facility.

<unk> positioned in the market.

That we can grow from so it's really kind of a combination of all of them, but it's a bit of a maturity that comes along with that and with respect to the.

Comments about PT, absolutely so over time as we build out this network the opportunity to build our own sort of I'll call. It internal density and use more of our own assets that certainly there, but we're always going to be in a position, where we're making a cost decision around.

Inside or outside for Whitehall.

Okay. Okay. That's helpful and just my last couple one Doug you have a day count for 'twenty two.

Yeah.

We want it by quarters.

Sure.

So at 64, 64, 64, and then 61 in the fourth quarter.

Okay. That's helpful and then real quick.

Okay. Okay. Good and then what is your on tariff versus foreign tariff mix today.

Of our tariff business.

The majority of it.

When we say tariff business is 25% or so.

The lion's share of that is onsite tariff.

Yeah, Okay, all right perfect. Thanks, guys.

Ladies and gentlemen. This concludes today's question and answer session. At this time for closing remarks, I would like to turn the conference over to Fritz Fredrik. Please go ahead.

Yeah.

Yes, Thank you and thank you everybody for participating in this earnings.

Earnings call.

We're excited about the results of our record 2021, and we're looking forward to 2022 and hopefully breaking some more records.

Providing the updates along the way thank you and have a great day.

Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.

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<unk> day, ladies and gentlemen, and welcome to the Cyan incorporated fourth quarter and full year 2021 earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Doug Col. Please go ahead.

Thanks Keith.

Morning, everyone welcome to <unk> fourth quarter 2021 conference call with me for today's call is <unk>, President and Chief Executive Officer Fritzls Greg.

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 1095.

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'll now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss <unk> fourth quarter results.

Excited today release record 2021 results and want to acknowledge the efforts given by thousands of dedicated employees again this past year to make these results possible our fourth quarter revenue of 617 million surpassed last year's revenue by 29, 5% operating income also grew by 92 three <unk>.

<unk> to $97 4 million.

At our $84 two operating ratio in the fourth quarter marked the sixth consecutive quarter, where our or with sub 90.

The quarter was marked by consistent levels of demand from our customers and growth in shipments per workday stepped up each month in the quarter total shipments per workday grew by three 3% compared to the fourth quarter of last year.

I continue to be impressed by our operations team and how they're handling the supply chain and workforce challenges still prevailing across our network. Our on time service was 98% in the quarter. Our cargo claims ratio was among the best in our industry and it was achieved with the dock workforce that grew by 17% during the year.

This attention to quality is critical to meeting and exceeding our customers' expectations.

These high levels of service required that we continue to ensure that we were fairly compensated to support our investment and high service levels and to offset inflationary costs are <unk> <unk> revenue per hundredweight increased $19 six in the quarter. The measure this measure of pricing reflects both specific pricing actions and improvements in mix of.

Business, our approach to pricing is simply market base.

Looking we're charging customers. So the level of service they are receiving and are seeking to set pricing in line with our competitors, who offer comparable levels of service the combination of improving yield and mix changes resulted in a 28, 4% increase in our revenue per shipment the $317 a record for our company.

Our total revenue in 2021 crossed over the $2 billion.

Global for the first time in a $2 3 billion was up more than 25% from the prior year.

Operating income rose 85, 9% to $335 million and our operating ratio for the full year of $85 four was 470 basis points better than in 2020.

We opened seven new facilities in 2021 and across our network deployed $286 million in capital expenditures as we focused on our efforts on expanding our terminal network and enhancing service levels throughout the organization will continue to invest in the latest safety technology in a clean diesel and fuel efficient technology and have supplemented this ed.

Investment with pilot programs using alternative.

Fuels, including electric vehicles, and compressed natural gas with.

With that said I'll turn the call over to Doug for a review of our fourth quarter financial results.

Thanks Fritz.

Fourth quarter revenue increased by $140 6 million to $617 1 million the components of revenue growth in the quarter, whereas follows.

<unk> tonnage grew nine 2% a combination of one 6% shipment growth and seven 5% increase in our average weight per shipment on a workday basis basis tonnage grew 11% in shipments increased three 3%.

Yield excluding fuel surcharge improved by 14% and increased by 19, 6%, including the fuel surcharge if.

Fuel surcharge revenue increased by 81% and was 14, 6% of total revenue compared to 10, 5% a year ago.

Now a few expense items in the quarter salaries wages and benefits increased 10, 1% driven by wage increases across our driver and dock workforce as well as hiring and referral bonuses paid in the quarter to attract new employees.

Additionally, our January and August wage increases of approximately three 5% and four 7% respectively contributed to this increase on a year over year basis.

Purchase transportation cost increased 56, 1% compared to the fourth quarter last year and were 11, 3% of total revenue compared to nine 4% a year ago.

Truck and rail PT miles combined were 19, 5% of our total line haul miles in the quarter compared to 16, 3% in the fourth quarter of 2020.

Fuel expense increased by 65% in the quarter, while company miles increased by six 2% year over year. The increase in fuel expense was primarily the result of national average diesel prices rising by nearly 50% year over year in the quarter claim.

Claims and insurance expense increased by 86, 8% in the quarter, reflecting increased frequency in accident severity in that expense line and higher premium costs versus the prior year claim.

Claims and insurance expense was up nine 7% or $1 5 million sequentially from the third quarter.

Depreciation expense of $35 9 million in the quarter was five 1% higher year over year, driven by investments in real estate equipment and technology.

Our total operating expenses increased by 22% in the quarter and with the year over year revenue increase of 29, 5%, our operating ratio improved 520 basis points.

From a year ago to 84, 2%.

Our tax rate in the fourth quarter was 23, 9% compared to 19, 8% last year and our diluted earnings per share were $2 76, compared to $1 51 last year.

Moving onto the financial highlights of our full year 2021 results as Fritz mentioned revenue was a record $2 3 billion and operating income of $335 1 million was also an annual record.

Our operating ratio improved 470 basis points in 2021 to a record $85 four.

For the full year 2021, our diluted earnings per share were a record 948 compared to $5 20 earned in 2020.

In 2021, we made capital investments totaling $285 $7 million.

We reduced our long term debt by $19 4 million to $31 million, our balance sheet remains strong with $106 6 million of cash on hand at year end and more than $300 million of availability through our revolving credit facility and additional outside borrowing sources.

In 2022, we anticipate capital expenditures will be in excess of $500 million.

And we also anticipate an effective tax rate of approximately 24%, 25% for the full year.

I'll now turn the call back over to Fritz for some closing comments. Thanks, Doug Our company as posted record results in the months and quarters that followed the pandemic Lockdown in 2020 in 2021, which brought even more challenges the monster winter storm that ravaged most of Texas in February of last year, as well as hurricane Ida, which dramatically impacted our employees in there.

Families in the Gulf Coast area last August when added to the ongoing COVID-19 related challenges in the supply chain disruptions we face.

Our employees responded exceptionally well and professionally to all these disruptions and managed to not only take care of our valued existing customers, but also work to execute our ongoing growth strategy, we're able to recruit and hire to support. The addition of seven new terminals across our network and ended the year with 176 terminals our efforts to build out our.

Network to provide more direct coverage.

Closer to our customers increasingly putting us in a position to offer differentiated service and additional lease terminal openings. We also closed on several land purchases in 2021 to build our development pipeline as part of our multiyear growth strategy. As we look forward into 2022, we're planning to add 10 to 15, new terminals and will also be really.

Okay, 10, or so existing terminals in the larger or better positioned facilities as well our planning horizon for future terminals additions expansions relocations includes not only 2022, but 2023 and beyond the.

To support our pace of openings, our human resources group has continuously recruiting and onboarding. The talent that is required to open and operate these facilities returning or expanding our driver Academy program this year or partner with driver schools and technical colleges in some markets to increase our candidate pipeline.

I'm excited to see what 2022 holds for our company as we enter year six of our organic growth strategy, knowing how our team handled all of the adversity of the past two years and still managed to provide great service and grow our business gives me confidence that we can continue to be successful stay our course and total as Doug mentioned we.

More than half of $1 billion invested in real estate equipment and technology in the coming year. We will also continue our investments in people and talent development in 2022 as these efforts have been critical foundational elements of our strategy. Our company continues to hybrid heightened our focus on providing excellent and differentiated service for our culture.

For our customers ultimately this focus will drive the growth of our company, while continuing to improve our operating performance over time.

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

Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad. Please make sure the mute function on your phone is turned off so the signal can be read Barclays Bank.

Star one for questions, what pause a moment to similar phone queue.

We will take our first question from Jack Atkins with Stephens. Please go ahead.

Great Good morning, and congrats on the great results guys.

Thanks, Jack So I guess, maybe for the first question would just love to get an update on our January trends so far.

Doug if you could maybe give us an update on tonnage and shipment trends.

On a year over year basis, and then also maybe if you could fill us in on how December trended as well.

Sure. Thanks Jack.

In December our shipments per workday grew four 8%.

And our tonnage actually grew 13, 7% so a bit of acceleration from the first couple of months of the quarter.

Moving into January historically, there is a little bit of a step up in shipments per day, and we didn't see that as much in January but some of thats related to how the holiday fell around new year's.

The day after the new year's weekend, a lot of our customers to.

To partial day or took a full day off so that was a little different than the norm, but January finished up pretty good we were up one 3% on a shipment basis and seven 5% on a tonnage basis. So.

First week or two as everyone knows it was it was it is always going to happen sometime and we got hit pretty good with weather across the map and had a lot of.

<unk> that were either.

Shut or partially closed for a day or two in some markets.

Ongoing kind of rolling embargoes dependent on either weather or.

Covid challenges things like that so all in all I mean to be positive.

With that kind of start to January we're pretty pleased with.

At the end of the month, we were pleased with business levels.

Winter can happen any month in the first quarter lets hope we got it out of the way in January I will say I will say our February goes.

That makes that makes sense, thanks for that Doug and I guess just for my follow up question, Chris in your prepared comments you talked about the number of service centers of terminals that you plan to bring online. This year I think you said 10 to 15.

Relocating I believe you said 10 more.

Could you maybe talk about what that will do for you in terms of additional capacity into your network.

I don't think we'll talk we'll talk about it from like a door count perspective, but just.

Just be curious how you would expect that trend maybe year end 'twenty two versus year end 'twenty, one if that helps.

Sure I mean.

The key the key focus there obviously the facilities that the incremental facilities will give us expanded.

Sort of addressable market, if you will.

We touched so for example, we've got in the pipeline.

That will happen in the first half of the year. The three facilities that will help us more effectively cover the Chicago land area. So thats that will do two things for us one it'll create capacity in existing facilities that we have but then at the same time.

It gets to that differentiated sort of.

Service level that kind of comes along with that right. So we can better meet customers' expectations and <unk>.

Other markets as simply as we've grown over time.

Look at the northeast that's gone well.

We're going to expand the fulfill our major break operation there in Harrisburg, but if you remember when we first opened there we moved into a facility we replace that and now we're at the place where we've got to expand what we have because it's a business it needs to be there to support ongoing growth. So some of it is.

New openings, obviously give us new addressable market.

The others give us some capacity.

Chicago Examples gives us capacity in Harrisburg gives us more flexibility.

So that's.

That's kind of the context is kind of more of our continuing sort of.

Strategy in Florida.

Yeah.

Yeah.

We will take our next question from Amit Mehrotra.

<unk> with Deutsche Bank. Please go ahead.

Thanks, Operator, Hi, Fritz Hey, Doug.

I just wanted to follow up on.

The margin question I guess last quarter, you talked about 150 to 200 basis points of margin opportunity and maybe opportunity to get to the top end or even potentially above the top end of this year I don't know if that's evolved or changed at all.

And you can just talk about that and then Doug I appreciate your comments on January .

It's a tough operating environment, whether labor wise, hoping you could kind of help us think about the sequential movements in operating ratio in the context of all that.

So.

I'll start off a holdco divide that up ill start off with the sort of overall margin question I mean, we.

We've long said that two.

Two things is that there is a range out there of 150 to 200 basis points over time, we feel like is very achievable and I think the other thing thats important to understand.

Is that over time as we have developed our own tools and capabilities around execution I think we've.

<unk>.

We'll show that we've shored up the bottom of that range and I also think in environments, where it is.

Favorable if you will or the strong economic backdrop, we ought to be able to meet or beat the top end of that range and I think thats kind of where we are.

We've got it we've got to continue to execute through the first quarter. Certainly January is only one month of this of the period of the quarter and Theres a lot of weather that could still happen, but we feel pretty good about the idea of <unk>.

Top end of that range, and let's meet or beat it and I think we've I think we can do it.

We feel good about our execution in the fourth quarter, a key thing that we saw through the year.

The size and why we feel better about it is that as we build sort of momentum.

Momentum with our customer base and they understand that differentiated quality and service we have the opportunity to get paid for that and that's important because it's in a business that requires quite a bit of investment.

Business that has high inflationary sort of cost structure, so that that's working.

Our operations teams delivering it and our sales teams communicating that message. So I think thats something thats sustainable into the year and a positive economic environment I think that leads us to the top end of the range and wed like to meet or beat it.

Yeah.

Good morning, Matt.

The second part of your question like I said I mean for January to finish positive one 3% on the shipment side on a workday perspective is it's pretty encouraging we've got a much easier shipment comp moving into February .

As a result of that you know the big storm that impacted Texas and the southwest last February so like I say, hopefully we got our winter the worst of our winter behind us, but historically, we've seen about a 50 basis point erosion in Q4 into Q1.

I think that it probably makes sense this year as well I mean, we're not making it easier on ourselves or item in Q4 was a record by four or 500 basis points. So that's a good thing that the challenges is there for us each quarter against the records, we're comping against but 50 basis points, probably makes sense the timing of our <unk> pretty.

Similar to last year.

The magnitude of it.

A little bit larger but.

I think we probably stick to them.

Historical 50 basis point guide on that deterioration.

And then and then just for my follow up.

E D.

Tonnage I guess I guess, the biggest discrepancy when I look at kind of my expectations, our expectations for the company and maybe where we are.

Consensus.

Seems to be really on tonnage growth.

With tonnage growth can look like if you take market share at all this new capacity and so I just kind of want to go.

And ask do you think tonnage growth can be in that double digit territory.

In 'twenty, two and then related to that.

This is Matthew data that came out you guys are doing great job on claims ratio, which is important but you haven't really seen it I would say to the certain extent, whether it's net promoter scores or some other criteria that the customers.

The perception of size, we've seen improvement, but maybe not to the level that we would have expected given some of the progress you guys have made on the exchange ratio I just wanted to just if you could talk about that as well.

Note that two part follow up question that any of them it alright.

In terms of your tonnage expectations look.

We're probably going to grow our door count this year, if I think about just new openings in the mid single digit range Mike.

Like Chris said, we're building out in other parts of the existing network to handle more growth, but at the end of the day.

I know, we all want to grow and we are all growing volume when we can do it but in a strained network and the network business. When you when you strained at on the labor side or maybe its supply chain issues.

The right thing for us is to grow the revenue grow their revenue per shipment and cover some of these inflationary costs and meet the challenges and.

Earn at a rate that allows us to go invest in the business. So.

I think we'd like to grow tonnage.

Higher rate potentially down the line, but I think mid single digit kind of shipment growth would be our expectation if the environment holds up and.

And we're building out the network to handle more than that but we'll take it when it comes to us at the right price.

The margin improvement, we're making in a measured pace of shipment and tonnage growth is the way we've gotten there. So I think we're going to keep on that path.

And then on the on the <unk> piece.

What I would just comment generally about that Amit is that.

We are at this point and measured against all the national carriers as compared to.

Where we were several years ago, and thats, reflecting the national coverage maps. So that's going to include opportunities, where we've grown into new markets that maybe others have been more established more familiar with those brands. We're actually when we look at the mass deal work or the results this year.

We feel pretty good when we see there.

A couple of players.

Above us and then there are five or six below us.

The more nationally more <unk>.

Resource more outstanding or brands that have been out there. So we actually look at the result, and conclude a that's a good we're moving in the right direction.

We are hearing more and more in the data set of what customers are providing feedback and we're doing a great job.

Taking care of the freight getting at their meeting their expectations those things are getting.

Better over time, and I think that's a differentiator, but I'd tell you one of the things thats in there that.

Where we have maybe disappointed a customer has been.

When you when you pointed out that Youre doing a providing high levels of service to our customer your claims ratio is.

Arguably.

Top in the industry.

We're meeting all of those expectations will you got to get paid for that.

That's significant so if you recall this year, we've been very focused on making sure that we bill for all of those.

<unk> all the services that we provide and when you do that customer looks at that and says.

Maybe it's difficult to do business with some of these things are changing I view them as a value before now they are more expensive.

Listen if you look at the Mascio data, we scored the best where we're pointed out as a value and for us for what we're having to do to invest in this business to maintain those high levels of service frankly, thats not sustainable right. We've got we've got to fix that overtime and I think we will because I think we are continuing to build momentum around providing.

That great service people are starting to understand what that means in our.

Our teams communicating that delivering it and the result of that is that I think you'll see that show up in our sort of.

Pricing structure over time.

Yes, that's a great point, okay. Thank you guys appreciate it.

Okay.

We will take our next question from Scott Group with Wolfe Research. Please go ahead.

Hey, Thanks, good morning, guys.

Can you give us an update on the can you give us an update on the pricing renewals in the quarter and then the <unk> you guys. Just took was pretty outsized relative to the industry and your history, just some thoughts on that as well.

In terms of the contractual renewals I mean, it's still running at a double digit clip.

10.4% I think in the quarter.

So again, a pretty good indication of what the shippers are expecting kind of more of the same around <unk>.

Supply chain struggles and their desire to secure that capacity.

In terms of the <unk>.

We've talked about it.

The pricing gap for years and years so it.

It's not that we went out and put a seven 5% increase across the entire tariff we're doing it in a very targeted way to to help us work on mix I mean mix has been a big part of our story fine in the freight that works for us whether it's the right weight break or the right length of haul whatever the case may be so you kind of use your adjustments to the tariff.

It's not it's not going in and set in the whole thing at.

At times 175, it's more targeted than that but.

The acceptance early on we're only a week into it but.

I think in the market in general I think we saw some higher <unk> than the prior year out of some of our competitors and we saw some <unk> come earlier.

Ours was right about the same week, maybe even a week later than in the prior year. So.

Nothing more than that.

Okay.

Just to that point about mix, so weight per shipment up 8% year over year.

How much of this is sort of truckload in your mind, that's coming to you or how much of this is more.

We are focused on changing improving our mix and this is more sustainable and any thoughts on our goal our goal for weight per shipment this year.

Yeah.

We don't think.

There's a good chance and stays where its at or maybe moves a little bit higher I mean, we don't think of much of what's in our network today is truckload spillover business and if im thinking about the tariff for example, some of those heavier weight breaks above.

10000 pounds, they got they got higher increases right.

Different.

And a different profit profile so.

We're not we're not necessarily shutting all of that business, but we need to.

Get the rates in line. So we don't view a lot of our businesses as truckload spillover.

Great has kind of found the mode, where it's supposed to be right now it's not like the disruptive environment that we had in the <unk>.

Our 2020.

Okay.

Thank you guys.

Thanks, Scott Thanks, Scott.

Take our next question from John Chappell with Evercore. Please go ahead.

Thank you good morning.

If we look at salaries wages and benefits and purchase transportation in aggregate.

<unk> from <unk> over <unk> I think if you go back and see that.

So the question is is the pricing momentum jets still favorable that you were pushing through inflationary plus in.

Growth plus.

Tight pricing or where you're turning away business, maybe a little bit in <unk>, because you werent necessarily didn't have the capacity and we are appropriately staffed or could get the purchase transportation to meet all the demand that was black.

I think we're there.

The fair answer there is we're always managing that mix of business right. So.

Our goal is essentially to keep the pricing at at or tracking door sort of market levels right. So that it's less of a model around cost plus certainly there is there is a point at which you say.

I can do this I can take this business because it is.

Accretive versus something you already have but the focus has really got to be around that and certainly in the as the.

Market changed and we had to deal with disruptions or.

Challenges in given markets.

Just what that market is and that may include.

Implementing <unk>.

Coverage changes or embargoes that sort of thing.

But it's all about it's kind of a fluid process.

I think what we have.

We would change our profile is to the extent that we needed to to adjust to the market conditions. So that's kind of the demo that we have.

When we kind of manage these and sort of short timeframes like that.

Okay.

And then kind of sticking with that theme I think there is this perception that you accelerate your <unk>.

Terminal growth this year that there are some upfront costs associated with either hiring or the land equipment et cetera are you at the point.

The size of your network and the National brought today, where do you think you can onboard eight to 10 terminals and really not see any upfront costs or or drag associated with that type of expansion.

Well I think where we are on this I'll just comment that two ways.

We think we've developed a core competency around.

Opening organic openings. So we feel like we know how to do this the cadence of.

When you start recruiting when you onboard people when do you make sure you have a pipeline of <unk>.

Our leadership that you can put into our region. So we feel like we've developed that competency. So theres a bit of an efficiency that comes with that.

At the scale that we are.

It is certainly challenging to open up facilities, so don't want others underestimate that but at the scale. We are we're doing things that in many cases I gave you. The Chicago example earlier.

The facilities, we're going to open or add or ones that are going to be incrementally beneficial of that market. So you create some efficiency within your legacy networks, who are legacy terminals. So maybe we're trying to cover.

Rockford, Illinois from.

The two terminals in Chicago, while if you have a facility there that certainly changes the service level and your cost structure you stem times all of those things. So theres a cost savings that kind of comes along with that so that helps.

I guess offset some of that investment.

As we continue to focus on our initiatives.

We will absorb the opening cost and relocation costs and all the sort of margin structures that we've kind of commented on so we feel pretty good that our model here allows us to do that.

Okay. That's great. Thank you bill.

We will take our next question from Todd Fowler with Keybanc capital markets. Please go ahead.

Okay, great Thanks, and good morning.

Do you think about the growth going into 'twenty. Two parts can you talk about your availability to get rolling stock and equipment.

And <unk>.

Basically how they are doing.

Place with with purchase transportation on a shorter term basis.

We feel like we've got pretty good plans and visibility to the rolling stock right now to what we're going to be able to get this year and we think it will support our.

Business plan at.

At the same time.

We feel like we've got the ability to recruit the necessary drivers and.

Doc staff and leadership team to make that so we don't see a constraint right now we certainly see the and the rolling stock area much like anything you see these days it is inflationary inflationary.

We saw in 2021.

Often the Oems had struggled to meet timelines right now we've kind of built our plan around the idea of what we think we will get from them not necessarily what.

They have represented that they would provide us in terms of timing. So we built in a little bit of it.

Cushion to that if you will.

But I don't think it's going to be a hindrance right now.

As we all know things can change, but right now we feel pretty good about it.

And then so in that context is PT kind of stay in this low double digit percent range or does that trend a little bit higher or lower how does that kind of work into the growth factors as well.

That was a tough one Todd because right now what we do as we build out density and that gives us the opportunity to maybe recruit drivers.

Fill in.

The equipment in the right place those sorts of things. So I think it's going to be a little bit of a.

I can't give you a kind of a clear focus on where that's going to go this year because it is going to be dependent upon how the growth works for us or where it comes into play I can tell you. This that as we look at our total line haul costs will seek to optimize it either with our internal sort of resources and assets or where applicable we will continue to use <unk>. So.

It.

All of that has to be cost justified or margin justified.

So we certainly wouldn't be in a position, where we add a bunch of volume that is.

Erodes, our or improvements over time, it just doesn't make sense to us that would be business we pass on.

That makes sense and then just as a follow up I remember several years ago celebrated when you were hitting 30% Incrementals and now you are kind of doing that very consistently yes, I know that the incremental margins can vary quarter to quarter and based on investment in.

Seasonality and those sorts of things, but is it a 30% incremental safe baseline to think about where you can be.

Bringing on new business, yet or are there other things that we should be thinking about as to why or why or why not that would be the right level of incremental margin.

I think thats, a reasonable range I mean, it's going to be plus or minus around that right. So in a newer facility where.

We're moving in adding incremental business quickly you would expect those incrementals would be better over time.

I think overall those kind of averages makes some sense.

But at the same time, if you can get more of that in pricing, then youre going to push that range up and.

Mix of business Youre going to push that range up.

So we're our focus is.

Probably for look at the.

Kind of where we tend to land on this we would we'll take margin improvement operating income improvement over growth for growth's sake. So it's those.

Those are that's an important characteristic of how we manage this.

Okay got it alright, thanks for the time this morning.

We will take our next question from Bascom majors with Susquehanna. Please go ahead.

Yes. Thanks for taking my question I wanted to go back to your comment on your core competency you feel like you've developed an organic openings.

Five or so terminals you opened since the end of September can you give us some thoughts on how quickly those who filled up where they track versus kind of what normal capacity utilization might be in and how that compares to time or your history and Matt. Thank you.

These have been.

Pretty good ones that we've added they all are good but the ones that we've added here. So I'll give you. The best example, I can think of is around Calhoun, Georgia, that's northwest to Atlanta.

That's an area that our sales team.

We have a great product for them in that market because it.

Time to get from southwest or southeast Atlanta.

With West Atlanta has pretty cumbersome. So we didn't meet the expectations of the customer so that that's turned in to be a winning terminal pretty quickly out of the gate simply because of its market positioning and I think as you see over time as we add in the.

Markets like Chicago or add the northeast Atlanta terminal, which will do sometime this year.

Those are going to have similar economic profiles meeting.

They are ones that we kind of cover already but.

But we don't have a great offering around it.

Now we can now we're in a position where we can jump on that and it becomes incrementally beneficial.

Out of the gate.

Youngstown, Ohio is a facility we opened in October that was a.

Facility that kind of was.

It was a little bit of a light spot on the map for US. It was it's an important point for us in that part of Ohio, but also as important handoff point into the northeast.

So into Pennsylvania, and such so that one is a classic the economics on that location are really about us being positioning in the network.

And addressing the local market so.

What's exciting about the incremental ones that we have and why we think this is so important is this is about addressable market or being able to provide better service in a market and when you do that I think you cover the costs more quickly because you create cost savings almost immediately and.

And you can meet those customers' expectations. When you do that you have the opportunity to charge for it so.

These the profile of everything that we add from here is going to be more like those sorts of facilities. There maybe when we get into the markets that were entirely new to that there may be a little bit of small startup cost that may be a drag for a while but most of these are are getting to our company average youll are pretty quickly.

Okay.

Not to ask you to spoon feed it to us, but do you have just a rough sense of what that time line used to be the company average or in what it's looking like more recently well sure I mean, if I can.

Go back to the northeast terminals I mean, we were excited to get them below a 100 or kind of in a year year and a half right. So now I'm not talking about 100 or unlike our company averages 84 two.

Our folks skill disappointed because I still say, what we've got new business at $85.

Okay.

That's not as good as the rest of the business. So it's.

It's a focus the new ones youre thinking about months rather than years.

And there are all different so I don't mean to be evasive on it. It's just tough to say is it eight months seven months six months I don't know.

Thank you and Baskin.

To add on the core competency piece of it I'm not sure I could have mentioned this when Jonathan asked his question about it but.

And we do it seamlessly and still get or improvement.

I don't.

Just to be clear, we opened seven terminals this year and we had a record or.

470 basis point improve so I think that's where we gain confidence in that part of the competency issue.

Thanks.

We will take our next question from Jason Seidl with Cowen. Please go ahead.

Hey, Thanks, Operator, Hey, guys good morning.

Wanted to focus a little bit on sort of a longer term look there is a lot of NGL companies expanding.

The terminals, both new and also larger ones I wanted to see what do you think thats going to do to sort of the competition for labor, which already is in a tight market as we look through 'twenty, two and beyond and then longer term.

Where do you think this is going to help the <unk> for <unk> going forward one of your competitors talked about a longer term or in the sixties based upon an improved network and the pricing environment would love to get sort of your opinion on where you think side could go.

So on the breaks at a two piece is just on the labor front.

I would.

A couple of pieces on the labor front I mean, we're competing certainly with <unk>.

Businesses as well are the typical competitors that we all know about but in many cases for labor you're also competing with.

Large warehouse industrial real estate sort of anybody's kind of warehouse operation that could they could be competing for the same dock workers that were looking for right. So it's the labor thing as a discrete two our industry. So you have to you compete basis on what the company's values culture, obviously paying benefit.

It's a critical part of that but you differentiate on those items around quality of place to work and we've got a pretty good we feel pretty good about our company around that and the growth profile certainly helps kind of drive.

Drive that.

With respect to the other companies that are expanding as well.

I think it's also to keep it keep in mind that there are also some that are exiting.

And we saw some of that just in the quarter and that creates available real estate.

Terminals that we potentially could pursue.

And others.

And there are also other folks that are outside of <unk> that would be competing for that real estate, because it's potentially attractive real estate that could be <unk>.

<unk> to industrial real estate property. So there is a there's a few dynamics and that for sure.

With respect to.

Kind of longer term or.

Listen when Theres, a marker out there and whatever the number is.

I don't see a reason why we shouldnt.

Pursue something similar and how do we get there.

Same time or in the near future.

I don't know what that cadence looks like but I think that so long as we stick to providing that great quality and service to our customers, we have an opportunity to close that gap.

Does that take our business from kind.

Kind of the mid <unk> into the <unk> I think in time that does I don't see it an impediment.

We think we've got a great product, we've got a great team. There is nothing the sky's the limit where that goes in it with the timing.

Is it dependent on things, sometimes that are out of our control, but we feel like they said if other set a mark or lower than that just that sets our marker lower.

Okay Fair enough I appreciate the time as always.

We will take our next question from Kenn Hoekstra.

Bank of America. Please go ahead.

Hey, good morning, Fritz and Doug.

So just if you step back for a second look at the market, obviously spiked from ecommerce growth and being a COVID-19 beneficiary in the sector.

Do you see any fade away of that or or do you see continued growth and I know, we talked about the growth going forward and adding to capacity just seems like the market expecting this kind of near term pullback in that demand I just wanted to understand what youre seeing on that underlying demand and then if there is a rollover in that demand just because of the tightness from.

The growth of our Covid do you think about any pause in the margin potential.

So I think in the sort of the macro situation right now and I think the one thing that the last couple of years have shown us is that.

In a disrupted supply chain.

Certainly our assets can flex to meet those requirements and I think other <unk> are similarly positioned so I think the industry's that's a good place to be.

And I think going forward I don't see a retrenchment back to a time that.

Supply chains don't have to be fluid.

I think that maybe they may.

Maybe they're not as disruptive as they are now but going forward people will adjust how they consume goods or how the things are purchased.

What that supply chain looks like where those warehouses are where the goods get delivered how all that works, but I think our assets continue to match that.

And I think that's important.

Could things slowdown absolutely they could but I think our our positioning is unique in the sense is that I think we are.

<unk> <unk> and others have pointed out we're doing a great job for the customer. So that's a point of differentiation. So a slower market. We continue that and we continue to execute our plan.

I guess one of the benefits in some regard is that if you're relatively inexpensive more inexpensive compared to the competition. There is some.

Our opportunity remains we need to be at market for what we're doing particularly for doing it really well.

So I think that continues it may go to a slower rate.

But I don't think it stops.

So just to hit on that.

Doing great job for the customer it looks like claims and insurance nearly doubled in the fourth quarter yet for a full year up 25% same as revenues is there any way to gain efficiency on that metric or I know you talked about your cargo claims being at a solid level. What do you think on on that line going forward there.

Yeah, Hey, Ken.

That line covers not only cargo claims expense.

Insurance expense around auto accidents would be in that number too. So that's where you see some of the most of the inflation in some of the volatility.

We've over the years we've.

<unk> taken a little bit more of the risk ourselves and that line on the auto side is as we've made investments in technology and our fleet, we're willing to kind of bet on ourselves to some extent versus paying some of the highly inflationary premiums that are out there the last few years.

There'll be volatility in that line, but again.

We've invested heavily in safety.

And.

The premium itself is going to be inflationary, 20% to 30% is usually what would have been expecting in the last few years.

But on the frequency and severity side I think I think we're going to make headway over the next few years with all the improvements in technology technology that are out there and our adoption of them.

Great and my last one just real quick on the $500 million Capex, maybe talk a bit about whats carryover, what what's not I know youre doubling the service centers.

From seven but is that mostly real estate is attract or catch up maybe talk about what what's kind of carryover and what's what's growth.

Yes, it's a mix.

Mix of both.

We fell short of trailer side and getting all the deliveries we wanted last year.

Still a pretty good number of trailers in that number.

On the tractor side.

It will be another.

You know.

Pretty good number because not only do we have growth tractors and they're doing some buying for age of fleet.

But real estate is always a wildcard in that line I mean, we could spend.

Can spend more than twice of what we did this year on the real estate line. If we're able to put the deals together I think in the last couple of weeks.

Closed on some small real estate deals two or three small deals.

If some of the bigger ones fall into line the real estate number could be two or three times, what it was last year, but.

Mainly on the on the equipment side. It was mainly trailers that were pushed out.

And that's that's that's a piece of the step up in spending that we plan.

We've got a couple of big projects in the year that are in process.

Started late last year into this year.

Thanks, Tom.

Thanks, John we'll take our next question from Tom <unk> with UBS. Please go ahead.

Yes, good morning.

I had to ask you a bit about pricing and how you think renewals or if you wanted to just talk broader kind of revenue per hundredweight X fuel.

I think your renewals, where something like 14% in the third quarter and you talked about 10% in fourth quarter. So those are obviously, both very strong numbers, but some deceleration.

How do you think about renewals. The next couple of quarters, you think you'd stay in kind of high single digit 10% area or do you think it kind of come down to a more normal LDL level of maybe mid single digits.

Well I mean, they've been running double digit for probably I guess three quarters in a row now and highest single digit before that I mean, so were running into some pretty good comps each.

Each quarter's number that we shared.

The book of business it looks different I think that we renewed in the fourth quarter, probably 10% more contracts than we did in the third quarter.

I can factor into it as well.

Some that have recently been.

We recently have seen increases in your coming on top of those.

The following year, maybe they don't get as much.

Got it.

I think what we're seeing around the environment with the <unk> is a pretty good indication to us that.

Pricing is going to be another opportunity this year I mean from the.

The truckload and intermodal companies I've seen reports so far I mean.

They are still talking about double digit pricing opportunities out there for them and were.

We're exposed to some of the same cost pressures, especially labor so.

I think <unk> is an indication of what we think is going to be achievable for the year end.

Again, we primarily give you all the contractual renewal rate just kind of let you know with the shippers or our sensing out there.

That's their forward look at the environment. So it was still double digit in the fourth quarter.

Right Okay.

And then the.

Second question is.

You've got pretty strong.

Capacity growth story idiosyncratic footprint story so.

I would think you probably do better than the market in terms of growth, but how.

How do you think about the impact from a cyclical perspective.

I think you have had a lot of strength in <unk> and maybe some some truckload shipments move in do you think that that will kind of swing. The other way later this year and be a headwind.

Or you just think that the kind of dynamic is is it that in this cycle and maybe thats not very meaningful factor just thinking more about kind of LTM market.

More so than size specific.

I think our commentary around that I think Doug alluded to earlier from.

Our book of business and we think generally is that.

Things are kind of back to their more historic modes. So that as we look at our portfolio of what we're providing service for right now as we see it.

Just kind of typical sort of mix of business. If you will in terms of.

If you go back a year back into the midst of Covid, yes, there was a little bit of spillover, there, but right now we're pretty comfortable with it.

I think.

If the macro things were to slow a bit I mean, I think that <unk> is in a position to deal with a lot of that.

And the supply chain turmoil change if you will over time, so I think those things are all.

We sustained through that now depending on where you think macro environment could go certainly that could temper.

Some of the growth opportunity, but one of the things that we as we look at our facilities and our.

Opportunities to make investments, we're not thinking about it in terms of 2022, we're thinking about it on a 10 year kind of horizon. So.

That.

<unk> that we think through the cycle and that's important because.

These these facilities that network is something that generates great value through a cycle.

Do you think loosening in supply chain or supply chain improvements kind of good or bad for <unk> shipments.

Listen I think the <unk> shipments do well as supply chain adjust to consumer or commercial demands right. So as people go through maybe back to more of a JIT sort of situation.

Any of that I think those were uniquely qualified to do that in the industry.

I think that we benefit from that over time.

Great. Thanks for the time.

We will take our next question from Stephanie.

With truth. Please go ahead.

Hi, good afternoon.

Hi, Stephanie.

I wanted to follow up just on a previous question that was asked.

First on the comments on the demand side I know that you called out in early January clearly thing.

<unk>.

You know some disruptions due to weather, but are you still seeing with your line of your customers just general disruption when it comes to demand and volumes just simply from supply chain congestion, meaning that they're still kind of our capri opportunities anything in the air.

Hi.

My comment around that is I think that that I think what's happened is that people and maybe even sigh around as we've gotten better at handling the disruption, but things are still disrupted.

Watch what's going on in the <unk>.

Port activity, that's not back to normal yet.

And the Covid.

On the chrome sort of that's probably tempering a little bit here in the last week or so but yeah. There was a time in early January in December that was every bit as bad as the depths of delta or the first round of it so.

I think I think if anything people have adjusted to that sort of.

Change or challenge.

Over time so.

Yes, I think the end of the year I'd like to think we get farther away from that and maybe back to what might be defined as normal.

Understood and then switching gears the last month or so theres been several announcements just size expansion with the EV trucks. So maybe can you talk a little bit about those some of those allies are agreements that are in place and maybe any work you've done.

Think forward about how some of these might compare to normal capex spend is as well as just ongoing potential maintenance costs et cetera.

Any warranty deed.

We're still early on.

<unk> the data so our the way we think about this this is sort of our R&D. If you will around the equipment that we have either leased or purchased to date, we need to figure out what the profile of <unk>.

What that looks like.

Utilization look like.

What is the range look like all those sorts of things. So we're still pretty early on on this and we're pretty open with Oems give us a shot at some of this we want to see how this works.

We want to be an early adopter assuming that these things perform.

We introduced first the <unk>.

Although evs in the first part of the year.

There are some parts of that that I think are compelling the range in <unk>.

Kind of what the ongoing operational costs.

We're still a long way away from that being a permanent part of the fleet.

As we look at the emissions requirements in some parts of the country, we focus more on adding some <unk> equipment. So we feel good about what that looks like what the performance profile of that is.

We think that over time, that's probably as you go from a sort of a.

The emissions environment that we are now to where ultimately where everybody wants to be that's probably going to be a stepping stone technology. So.

Sort of in the middle of diesel and maybe ultimately where evs. So.

That case, that's one where we need to make sure we understand what the operating characteristics are of that and then more recently, you're probably talking about the.

The release, we had around the Nikola product.

Theres some.

That looks like that could be really interesting.

But the key part of that is that we need to get to look at it we need to see how it works get our hands on a test drive it run it in the operation.

Data and so it's early on but we're very open to the idea.

Okay.

Great. Thanks, so much.

We will take our next question from James Monaghan with Citi. Please go ahead.

Hey, guys. Thanks for taking the question wanted to touch on the timing of the capacity additions is there any detail you could provide about the Georgia door as maybe first half or second half.

Lee just touching on the capacity and the ramp there how should we think about that is it something thats relatively immediate.

Mid single growth in shipments should we think about capacity actually growing faster than that.

So we're gonna open sort of the 10 to 15, I think five or six of them are going to be in the first six months of the year.

And then the balance are going to be.

Second half of the year we're.

We're going to end up opening all 15.

That sort of range of the question is you got to get through the timing of dealing with maybe a zoning issue or upgrade or all those sorts of things, but the first ones. We've got really good line of sight around that we're planning hiring and all those sorts of things along with it those will be ones. The first one because the three that are Chicago land related.

You're probably not going to notice necessarily there won't be any I don't expect any drag from those at all but none of them actually but those in particular, because those are immediate sort of market improvements for us and service improvements so theres going to be a cost savings that comes with that and theres going be some incremental business, we likely get out of that right out of the gate because it's.

Service, we couldn't offer before so.

It's built into kind of what our overall sort of growth plan is for the year. So I don't really have a breakout for those individually.

But as I've described in a couple of other questions.

So the key things with all of these is when Youre moving in sort of what we'll call saturation terminals. They they benefit you pretty closely right out of the gate. So I don't expect a lag.

Anything thats can be part of our growth for the year.

Got it and then how should we think about leverage here as disciplined or maybe a buyback make sense or are you holding it back for some flexibility in the ladder should we think about it.

Sure.

Our organic growth or could you basically could you use that leverage to sort of accelerate the organic expansion beyond 2002.

Yes, so the way we're thinking about this we said 10 to 15 terminals and this year I think that repeats again next year.

In 2023.

That's going to require a fleet investment.

Ongoing as well so I think for the next couple of years anyway, I think youre see sustained levels of capital spending. We're also quite frankly very conservative around the idea that we need to manage this be able to manage this business through and take advantage of opportunities if I come to us that are unexpected.

As a.

One player exited the market.

In December or the fourth quarter and what we certainly those are assets that are of interest to us and there could be others down the road. So we're always going to have powder.

To take advantage of those opportunities.

So, but we're also custodians of the shareholders capital. So over time, we will have other.

We'll explore what we need to do the best you utilize the cash and cash flow.

Got it thank you.

Yeah.

We will take.

We will take our next question from Bruce Chan with Stifel. Please go ahead.

Hey, Fritz Hey, Doug good morning, or I guess afternoon here.

I just want to go back to some of your comments around mix and freight selection I know that.

You mentioned a lot of that is self directed but as you think through.

Through some of the dynamics around maybe the consumer recovery being a little bit longer that unit versus the industrial recovery or rig count recovery are you expecting or are you seeing any kind of tailwind from the market for that.

I don't know if I'd call them tailwind, but.

Activity remains strong I mean manufacturing data continues to roll out month after month positive I think the ASM numbers.

Showing growth for the past 19 months.

The <unk> volumes in tonnage are tied very closely to what goes on with the industrial manufacturers.

Inventory levels are still low as Fritz mentioned, the port congestion congestion really doesn't seem to get better. So far and then you think about our contractual renewals.

And how strong they remain I think that.

It tells us that at least through the first half of the year and into the second half of the year I mean, we remain pretty positive on the environment.

Houston activity was real strong in the fourth quarter Dallas.

L a.

Some of that could be tied in in the Houston and Dallas markets to energy.

Some of the Houston activity could be helped a little bit by repair work going on after the hurricane came through Louisiana. So.

Activity remains good and the manufacturing that is good so that's primarily what we track.

Okay. Great. That's helpful. And then can you just remind us of where your exposure stands to energy I know that used to be a fairly sizable chunk of your legacy business.

No yes.

You're right. It did as we grew up out of our Gulf Coast roots, we were certainly more heavy energy than our competitors, but it's it's kind of it's probably a mid single digit percentage now if you think about shipments across the network our footprint a lot bigger than we've grown out of some of the energy.

Some of the energy markets.

Okay, great well, that's all from me I appreciate it.

Thanks.

We'll go next to Tyler Brown with Raymond James. Please go ahead.

Hey, good morning, guys.

Morning.

Hey, so of the 10 to 15, new facilities in the 10 reloads, what's the breakdown between owned and leased and is there still good product out in that lease market.

So.

I don't have the breakout.

What does most of them most of them are going to be one there are going to be some leases in there.

There are good products.

Either facilities to purchase or facilities the lease.

I don't think Thats, an impediment, it's the typical real estate challenges you have to deal with sometimes it's.

Maybe it's a zoning issue.

We have a facility that we're planning on buying its can be in a position, but it's been idle for a while so you have to go redo zoning when that happens so.

Those are those are the challenges there, but we're we haven't changed our profile around the idea of owning strategic assets.

This market right now.

There's a lot of interest in industrial real estate investments. So in many cases, you can't necessarily by which you'd like to buy you have to lease them, but the assets are available.

Okay. That's helpful. And then you kind of touched on it with the Rockford example.

Now that you've been accelerating the terminal investments over the last couple of years are you actually starting to see it show up in your P&L productivity because I assume those 10 times are getting reduced or is that something that's more.

More on the come as the network saturates and matures.

And the examples I've given them we've seen them.

But when we think about longer term the magnitude of them will become greater over time.

As we fill in the map. So we're we're still early on in the fill in the back part so the saturation parts I think that's an opportunity.

For sure over time.

The good thing is that it has played out in the instances where it's <unk>.

For it to start visible necessarily because of larger company and all the other things going on.

Right right. Okay, and then is it right to think about the new terminals as call. It new market entrants is or the saturation and big Metros and then are these reloads largely in.

In the bigger brakes. So one is that true and two if you are expanding your brake capacity does that alleviate some pressure I mean I'm, assuming your line haul isn't optimized that youre needing more capacity.

It's a little bit of all of the above so there are we're always going to we'd rather own assets. So some of these that we have in the pipeline are simply in smaller markets, where we might be leasing something where we've got an available purchase saw swap those out so that's a reload in other markets. It is.

<unk>.

It's a capacity play in a certainly a market position place or maybe it's a facility.

<unk> positioned in the market.

That we can grow from so it's really kind of a combination of all of them, but it's a bit of a maturity that comes along with that and with respect to the.

Comments about PT, absolutely so over time as we build out this network the opportunity to build our own sort of I'll call. It internal density and use more of our own assets. That's certainly there.

But we're always going to be in a position, where we're making a cost decision around inside or outside for Whitehall.

Okay. Okay. That's helpful and just my last couple one Doug you have a day count for 'twenty two.

Yeah.

We want it by quarters.

Sure.

So it's 64 64 64, and then 61 in the fourth quarter.

Okay. That's helpful and then real quick.

Okay. Okay. Good and then what is your on tariff versus foreign tariff mix today.

Of our tariff business.

The majority of it.

When we say tariff business is 25% or so.

The lion's share of that's onsite tariff.

Yeah, Okay, all right perfect. Thanks, guys.

Ladies and gentlemen. This concludes today's question and answer session. At this time for closing remarks, I would like to turn the conference over to Fritz Fredrik. Please go ahead.

Yeah.

Thank you and thank you everybody for participating in this earnings.

Earnings call.

We're excited about the results of our record 2021, and we're looking forward to 2022 and hopefully breaking some more records.

Providing the updates along the way thank you and have a great day.

Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.