Q1 2023 Saia Inc Earnings Call
Speaker 1: Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I'd like to welcome everyone to SIA, Inc's first quarter, twenty, twenty three earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker 2: If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Doug Cole, SIA's Executive Vice President and Chief Financial Officer. Please go ahead, sir. Thanks, Regina. Good morning, everyone. Welcome to the call. With me for today's call is SIA's President and Chief Executive Officer, Fritz Holzgren. Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results made different materially. We refer you to our press release and our SEC filings for more information on the exact risk factors and the risks of the SIA's
Speaker 2: that could cause actual results to differ. I'll now turn the call over to Fritz for some opening comments.
Speaker 3: Good morning, and thank you for joining us to discuss SIA's first quarter results.
Speaker 3: While it's always more exciting to discuss robust shipment trends and record margins, today's call will be more about how our team managed through a challenging volume environment and produce what I view as solid results in the first quarter of 2023. In the quarter, we averaged approximately 28,500 shipments per day. In 2019, USEDI consolidated 1,waters while overISH their 3-year-old-sales delivery. In 2019, USEDI participated 2,000tests a year. At this point the Danish Planet has never opened, despite more of its changes and new developments. But we certainlyMathematics have determined we will not27 be below mine. In has exception. Only 10 11
Speaker 3: or about 7.1% fewer shipments per day than in the same quarter last year. We experienced an increase in the average wafer shipments as tonnage fell by only 5.5%.
Speaker 3: The mixed shift to a heavier average weighted shipment, along with positive pricing, drove a 6.3% increase in average revenue per shipment, excluding fuel surcharge. And total first quarter revenue was $660 million, essentially flat with last year despite the falloff in volumes.
Speaker 3: Our revenue per shipment ex-fuel surcharge continues to be the result of positive pricing and effective mix management. Our yield or revenue per 100 weight excluding fuel surcharge increased 4.5%, reflecting a constructive pricing backdrop. We saw some of the benefits of our geographic expansion in the quarter.
Speaker 3: As West Coast volumes were down significantly year to year, we're very pleased with the results and some of the middle markets that we have entered or invested in the last several quarters.
Speaker 3: significantly year to year. We're very pleased with the results in some of the middle markets that we have entered or invested in the last several quarters. Further evidence of...
Speaker 3: A stable industry pricing was seen in our average contractual renewal increase of 7.5% in the first quarter. We're committed to providing excellent service to our customers and are investing heavily in the business to expand coverage. And it is gratifying to see that our customers see value in our service offering.
Speaker 3: Our first quarter operating ratio of 85 deteriorated by 60 basis points compared to our operating ratio of 84.4 posted in the first quarter last year. Doug will provide some details around the specifics of our margin performance, but I'd like to highlight the operational execution in the quarter.
Speaker 3: We were able to adjust our line-haul infrastructure and quickly adapt to the changing macro environment across our network. We saw productivity improvements across all of our major terminals. The net result of these changes allowed us to manage operating costs quickly. Most significantly, these changes had no impact on the customer experience.
Speaker 3: And in fact, in some cases, we actually reduce transit times. I'll now turn the call over to Doug for more details from our first quarter results.
Speaker 2: Thanks Fritz. As mentioned, first quarter revenue decreased by 0.7 million to 660.5 million. Yield, excluding fuel surcharge, improved by 4.5% and yield increased by 5.8%, including fuel surcharge.
Speaker 2: Tundish decreased 5.5%, attributable to a 7.1% shipment decline, slightly offset by 1.8% increase in our average weight per shipment.
Speaker 2: Length of haul decreased by 2.5% to 892 miles.
Speaker 2: Both the increase in wafer shipment as well as the decrease in length of haul were headwind to the reported yield improvement.
Speaker 2: Fuel surcharge revenue increased by 5.6% and was 17.8% of total revenue compared to 16.8% a year ago.
Speaker 2: Revenue per shipment ex-fuel surcharge rose by 6.3% to $289.87 compared to $272.58 in the first quarter of 2022.
Speaker 2: Shifting to the expense side for a few key items of note in the quarter, salaries, wages, and benefits increased 3.3%. From a combination of our July 2022 wage increase, which averaged 4.3% across our employee base,
Speaker 2: and also the result of our employee headcount having grown by approximately 1.5% year over year to support our network expansion over the last 12 months.
Speaker 2: Purchase transportation expense decreased by 40.3% compared to the first quarter last year and was 7.1% of total revenue compared to 11.8% in the first quarter of 2022. Truck and rail PT miles combined were 10.5% of our total line haul miles in the quarter.
Speaker 2: compared to 19% in the first quarter of 2022. Fuel expense increased by 2.5% in the quarter, while company miles increased 3.2% year over year.
Speaker 2: The increase in fuel expense was primarily the result of national average diesel prices rising by over 4% on a year-over-year basis.
Speaker 2: Claims and insurance expense increased by 31% year-over-year in the quarter and was down 10% or 1.6 million sequentially from the fourth quarter of 2022.
Speaker 2: Depreciation expense of $42.9 million in the quarter was 7.3% higher year over year, primarily due to the onboarding of new equipment and structures as part of our continued network growth.
Speaker 2: Total operating expenses increased by 0.6% in the quarter and with year-over-year revenue decrease of 0.1%, our operating ratio deteriorated to an 85.0 compared to 84.4 a year ago.
Speaker 2: Our tax rate for the first quarter was 23.2% compared to 22.5% last year, and our diluted earnings per share were $2.85 compared to $2.98 in the first quarter a year ago. I'll now turn the call back to Fritz for some closing comments.
Speaker 3: It's always nice to get the first quarter and all the weather challenges behind us. Moving into our typically seasonally stronger months of the year, we're seeing what I would call a tepid start to the spring season. Shipments per day are up in April compared to March, but March underperformed normal seasonality and we entered April off a lower base of daily shipments.
Speaker 3: We track, monitor, and manage our customer metrics on a daily basis. It is gratifying to see net promoter scores from our survey work indicate that we're on the right track and our customers are seeing increasing value in the service we provide. This continued focus is absolutely critical to drive growth across our network.
Speaker 3: We've opened four new terminals in 2023, including the opening this past week of our new Northeast Atlantis facility. This opening is one of the most vibrant freight corridors in the state. It's exciting to see the immediate customer enthusiasm as well as the positive operational impact as we're able to more efficiently provide outstanding service.
Speaker 3: This opening is a prime example of adding a location in a great freight market where we have a presence for a long time but still have excellent share opportunity.
Speaker 3: All of these openings, both the new and relocated terminals, are important to our strategy of enhancing our service offering. While our pipeline for terminal openings carries well into 2025, keep in mind the key benefit of our organics expansion strategies is it allows us to go at a pace that suits us.
Speaker 3: Our business is subject to cyclicality, and depending on where we are in the cycle, we may see an opportunity to accelerate or slow our terminal expansion activities.
Speaker 3: We have one additional terminal opening coming in May and expect that we'll open two to three additional terminals in the second half in established markets. We'll continue to update all of you quarterly on any changes in our opening plans. Each new terminal opening supports our strategy of getting closer to the customer and adding value to their supply chain.
Speaker 3: At the same time, we continue to develop the markets around the other 21 facilities we've opened over the last two years. Although we're excited by the early success of these locations, we see considerable runway to continue penetrating these markets.
Speaker 3: We continue to see great response from our existing customers who are asking us to handle their freight needs in these new markets. And as our brand grows in the market, we pick up additional customers that are new to SIA.
Speaker 3: So before moving on to questions, I'll just say that our current view of the pricing environment remains constructive, and indications are that cost inflation will continue in the business. Pricing to maintain and improve margins is critical to an inflationary cost environment, and will continue to do our part for our customers. – Thanks, Chris. – Thanks for the question.
Speaker 3: providing great quality and differentiated service to justify the pricing.
Speaker 3: With that said, we're now ready to open the line for questions, operator.
Speaker 4: As a reminder to ask a question simply press star 1. Our first question comes from the line of Jack Atkins with Stevens. Please go ahead. Okay great. Good morning and thank you for taking my question. So I guess just to start, if we could kind of go back, Fritz, to your comments on April and maybe some clarity on March as well.
Speaker 2: Sure, Jack, good morning. In terms of seasonality, just in general, Q1 felt like normal. Early January probably benefited a little bit like we talked about from the mess of late December . And then in terms of historical moves month to month.
Speaker 2: You know, the January was a little better, like we said. You know, February kind of underperformed, you know, seasonally from January . You know, March, you know, I would say the February to March move was, you know, pretty consistent. And then, you know, so far here in April .
Speaker 2: You know, we've seen an uptick in shipments per day in the low single digit percentage range. That's pretty normal March to April . It's just off a lower base. I mean, April , you know, we can go through the months. I'll give you the months. But April to date, you know, shipments are running down about 5% year over year. And, you know, we continue to see an uptick in weight per shipment. So our tonnage April to date.
Speaker 2: is down a little bit less than 1%, you know, with a day to go here. So, that's been a favorable driver of results for us. You know, that effort to get that heavier weighted LTL shipment into the network just brings more revenue for Bill, and that's really the key to driving, you know, OR performance and maintaining, you know, the appropriate level of profitability, but...
Speaker 2: I can go ahead and I mean the exact numbers for March. I mean, I mean I can go through the first quarter I know the first two months are already out there, but the January shipments were down 4% year-over-year and tonnage was down 3.7% February shipments were down 7.6%
Speaker 2: and tonnage was down 7.6%. And then March, you know, with an easier count, March was down a little bit more on the shipment side. March was down 9.4 on the shipment side, but a nice pickup in weight per shipment and tonnage was only down 5.2 in March. And again, you know,
here for the month of April tonnage is down less than a percent. Okay that's great I think really a really good outcome in April as well. I guess just for my follow up on that Doug, you know I think that
Others have talked about some challenges with some of their 3PL-related traffic, in terms of some share moving around with that particular slice of the market. I know Saya has been working to kind of cull some of that business out of the network over the last couple years through some targeted price increases. Where does that stand for you guys today? Well, what percentage of your business...
in that ballpark. You know, we're focused on kind of growing profitably. If there are opportunities there in that segment to grow, we will definitely do that. But it's important that it works on our terms. I mean, those are...
You want to be able to provide outstanding service. You want to be in a position you can operate efficiently. Okay, that makes a lot of sense. Thanks Rich. Have a great time.
Your next question comes from the line of Jason Seidel with TD Cowen. Please go ahead.
Thank you, Robert. Morning, gentlemen. Talking a little bit about that sort of sequential move from 1Q to 2Q, since the tonnage is faring, I think, a lot better than your peers, how should we think about that typical OR move sequentially?
Yeah, good morning, Jason. You know, typically you get a strong seasonal uptick in Q2 and that drives much better OR historically in Q2 from Q1 and I think historically it's probably been 200 or 300 basis points on average over the last several years. I mean, you know, we don't have a crystal ball on what happens with volume in May and you know...
over quarter revenue growth, I mean, we're going to try to drive a little bit of OR improvement. So, you know, maybe if we could get 100 basis points, OR improvement, you know, it's not as good as the seasonal norm. But I think in this environment, especially carrying, you know, 21 terminals we've opened in the last two plus years that weren't opened because of the opportunity, you know, of this current cycle, we open these terminals, you know, for the long term.
But we're carrying a bunch of terminals to this soft patch here. So with a little bit better revenue sequentially, we're going to try to drive a little lower improvement. So the sooner basis points would be it.
you know, for us, I think as we sit here with one month under our belt, I think we'd be pleased if we could do that. Yeah, I think considering that you open up these terminals, that's for sure. Also, wanted to talk a little bit, you mentioned obviously, you know, coming off of a week march. Can you talk about that weakness? Was it more...
on the retail side of things or was it more on the industrial side of things or was it more evenly split? You know, Jason, I think I would say that it was pretty evenly split, but what I think, what I would point out is that we saw, particularly West Coast volumes were down year over year.
and that was a bit of a call out for us. It's port-related, I would say. So that would be across the business. But what I'm really excited about is that we have focused on our emerging middle markets.
been able to grow those to help offset part of that change. And I think that's a bit of network maturity and business maturity. So it, you know, historically maybe there were times where that would have been a we wouldn't have been able to absorb it, but offset at least part of it across our book of business.
I'm pleased with the results that we see in markets across the country, but I would say that the West Coast has been soft year over year. Now, did you see an uptick in some of the East Coast ports, like say New York, New Jersey, or Savannah? Yeah, we saw a little bit there, but I think for sure we did. We saw nothing short of it.
I think what I tell you is that our performance has been a bit more broad-based around just around growing the developing markets for us, either terminals that we've opened in the last two years or frankly just as you build that network density, you have the opportunity to really drive service in markets that maybe you're a little bit smaller. So I think that that... when someone skip the app or they have a Maxv waste of time, it should be a look at their boxv Mermaid record.
That's been, the success has been kind of across the board efforts and markets that we continue to develop. It speaks to our opportunity. Listen, that's really great color. I appreciate the time as always everyone do well.
Your next question comes from the line of John Chappelle with Evercore ISI. Please
Thank you, good morning. Fritz, I don't think it's lost on anybody that your March and April trends, both year-over-year and sequentially, are much better than industry. From what you can tell, is that mostly just market absorption from the terminals that you've opened over the last two years? Or are you gaining share on an apples-to-apples store basis relative to the industry over the last...
what we've seen performance wise is what I'm pleased with this.
Our teams are doing a great job for the customer and you can win on that basis. I think that's why we have seen the performance we have across the network.
Okay. And for my follow-up on those 21 terminals, I think that kind of insinuated that to get you know, OR improvement still with those 21 terminals kind of fully ramping is a good result. Do you have any sense for where those 21 stand on a P&L basis, a margin basis return, how are we going to measure it relative to the existing portfolio and probably how much …
you've got a little over 10% of your terminal base operating in the mid-90s. So where can that go? It goes to the company average over time. And an example of that, I always call out our Northeast region. I mean, it took a couple of years to get the profitability once we opened up the North.
You know, we're excited about the share opportunity. We know we've got good service. And, you know, where we have a presence, you know, a representative presence like our peers, you know, we get more than our general average market share. You know, if you look at size, industry share of revenue, maybe it's, you know, 5.5% or something. But in markets where we have a representative presence in terms of, you know, terminals and penetration, you know, we're excited about the share opportunity. And, you know, we're excited about the share opportunity.
obviously because of the environment, but I don't think there's anything that we've seen that says that we can't continue on the long-term strategy.
Yeah, very helpful. Thank you, Fred. Thanks, Doug.
Very helpful. Thank you, Fred. Thanks, Doug. Thanks, John .
Your next question comes from the line of Amit Mehrotra with Deutsche Bank. Please go ahead. Thanks, operator. Hi, everyone. Fritz, do you think the team can hold the line on OR or even improve it this year off of a very, very strong 2022? And then, you know, I know you've talked a lot about revenue per bill and SIA's discount revenue per bill against...
about where is that weight per shipment coming from because it's such an important piece of the overall puzzle it seems and there's a lot of runway. So if you could just talk about some of the initiatives to further dial up that weight per shipment. Thank you. Yeah, thanks, Amit. Doug and I will tag team this answer. What I would tell you is that on the...
As you look at the market sort of facing part of this, I mean, we spent a lot of time targeting and identifying freight that makes sense for us to handle efficiently. A lot of the work we were around understanding what customers, what sorts of business that we can handle efficiently.
and provide great service and then charge for it. That's been fundamental thesis over the last few years. And what you're seeing in the quarter right now in a challenging environment, it's paying off a little bit here in the sense that we're driving the elements of our customer set or that we do well with. And that's been good. And I think the runway for us continues.
I think it's just something we can build on over a couple of years. It's something we've got to stay, continue to be focused on. Particularly, as you think about it, as we add the facilities across the network, as Doug pointed out, we've added a lot of these that they're not quite operating where they need to be. That's okay. They're in startup mode. They need the same diligence and work that we're doing in the legacy port.
today just simply because of what's going on in this sort of macro environment. And when I think about full year profitability stuff, Doug gave you some indication around what we think about Q2. And a full year is pretty you know, we don't have a great view of what the second half looks like. We're focused on what can we do to give people a better understanding of what's going on. And then we're going to have a lot of
Serve the customer, take care of the customer, and we'll get the freight that's available to us. And that's kind of the focus. You think about full year profitability, Doug will give you those thoughts.
Yeah, I mean, you know, I mean, we're trying to give as much kind of help as we can on modeling this thing, but, you know, with the lack of clarity out there, we're just not going to be very good at it or very helpful. I don't think. But I would say this in terms of on a year over year basis. I mean, we were up in Q1 year over year by sixty bps, you know, if we're able to improve a little bit Q1 into Q2, that would still mean we'd be up year over year quite a bit.
We're going to see, you know, the tougher this thing gets, the more real estate looks we're going to get. And if they make sense, you know, we're putting some capital at work. So.!!!
That's fair. That's totally fair. Okay, thank you very much. Appreciate the time.
Your next question comes from the line of Chris Weatherby with Citi. Please go ahead. Hey, thanks. Good morning, guys. Maybe just wanted to touch on sort of big picture thoughts on pricing and maybe how we see it kind of playing out from here. You guys are clearly outperforming from a tonnage perspective.
We've seen, you know, we've heard a couple of the competitors talk about their approaches to the market being a little bit more dynamic, and it doesn't appear that it's having materially negative impact on your ability to continue to sort of renew contracts. I think that number was pretty healthy, but can you just give us some perspectives on how you see that playing out and if you're seeing anything on the edges that they need to make you nervous or give you confidence that things will continue with strength?
Now, I think the market is pretty disciplined. You look around, the inflationary costs that everybody's dealing with, which points to the need to continue to drive pricing. Cheaper freight in this kind of environment doesn't make much sense.
to us for sure and it wouldn't appear to anybody else. I think what it really says though right now is that you really got to focus on the things you can control. The service levels have to be very high. If you are going to be in a position that you're going to go to the customer and ask for an increase, and that's our focus. Those are things we can control.
And I think that you know where you look at our relative pricing versus others in the market you know maybe we've got we've got more runway there that we've got to keep working at and I think it's part of our longer term opportunity.
Okay, that's helpful. I appreciate that. In terms of the things you can control, I wanted to just ask about the PT line. Obviously, a pretty good decline in that number. And obviously, miles are coming down quite a bit from rail or truckload. Can we just talk a little bit about how you think that plays out relative to your tonnage? Obviously, tonnage maybe on a year-over-year basis.
The first decision tree will always be, what do we need to do to meet the customer's expectation? And there's service level requirements. If it passes that, then the decision is what's the most cost-optimal way to do that. And a lot of times, more recently, we've been able to use more and more of our own driver pool or driver team to make that happen.
Over time, you'd expect as we build maturity in this business, we would build more of the density internally, and you'd probably use over time less outsourced or purchase transportation. I think in the environment that we're in right now,
You know, even the truckload PT, certainly the rates have come down. We have long-term relationships with our PT providers. So that, you know, we've...
We've seen the rate declines, we've built that in, but for us it's really about service. And where we can, we'll continue to try to use more rail, because that's the most cost effective. But it's got to hit the service level first. OK. That's helpful. Appreciate the time. Thank you. Thanks, Chris. Your next question comes from the line of Scott Group with Wolf Research. Please.
revenue trends right now relative to the tonnage down one?
Yeah, you know, on a year-over-year basis, I mean, April's running down, you know, one or two percent just kind of on a revenue basis. But, you know, I just.
I tried to call it out in the script, but our mix change that's driving the heavier weighted freight.
you know, is really important for revenue for bills. So it's, you know, the yield trends are going to look different for all of us, right? Depending on what's going on with mixed, like the haul, weight per shipment and all. So, you know, we've talked about it for a couple years now, but you know, our focus is really on this revenue per bill number and, you know, we keep driving that higher. So I don't know, you know, reported yield.
is one thing and then revenue per bill because of the mix changes is really key for us. But again, sequentially, I think our goal is, we see an opportunity to be up from Q1 into Q2 and we're going to continue to try to drive the right freight in the network. When we put our GRI in.
and up has been really beneficial to us.
Okay, helpful. And then… I'll go on.
Just any color on headcount and how that's trending relative to the.
ton it down slightly and then plan for headcount going forward.
Yeah, I mean, we tried to really manage hours over the last few months, you know, as things have come down. So headcount's one thing, and then, you know, on the wage line, it's how many hours are you getting every day. I think year over year, we're up about 200 employees, you know, Q1 to Q1 last year.
And keep in mind, we've opened 15 terminals in the past year. So we've definitely seen some attrition, and that's okay. We've kind of managed through it and not replaced every, or backfilled every, employee we lost due to attrition. So in terms of where it goes from here, I mean, we've got another terminal. We're going to get open in May. It's not a huge facility, but we've got some employees coming in to get ready for that.
You know, probably got a couple openings in the back half of the year. But other than that, I mean, we just got to see where these volumes go. I mean, you know, seasonally, you know, our line haul drivers are up year over year. That's nice to see. You know, we're able to attract, you know, good quality, you know, professional line haul drivers as we brought more of our miles in house. So we're hanging on to those valuable resources. But.
You know, all in all, to have 15 new terminals open year over year and only 200 additional employees.
It's pretty good control, I think.
Okay, good stuff. Thank you guys. Thanks. Thank you guys.
Your next question comes from the line of Tom Wojtowicz with UBS. Please go ahead.
Yeah, good morning. I wanted to see if I could ask you a little bit more on the, I guess, on the cost side as well. So I think you just, you know, you just talked about headcount somewhat. Where are you at on your line haul utilization and also just, I don't know if you're, you know, talk about doc as well and local efficiency are those.
Pickup and delivery efficiency. Are those things you have room to manage further that would kind of support the OR and match up with the freight level? Or is that something where you kind of did that through the quarter and to the extent that you can support the OR with cost side, you've kind of already achieved that?
Yeah, thanks for the question, Tom. I think that the key thing with the productivity improvements and gains that we saw in Q1 is you got to maintain that now and maybe even improve from here through the second quarter.
You know, there's a fair amount of uncertainty around what's out there, so that's in the category of focusing on what you can control. That's pretty critical. You know, we'll continue to manage those line haul miles. I mean, as we pointed out a minute ago, I mean, line haul, the PT part of line haul is down to 10%...10.5% of the total miles compared to roughly 19 in the first quarter of last year. You know, so there may be some opportunities on the margin there, but...
The reality of it is we might actually increase that investment if we think there's a way for us that's cost optimal across.
across our whole line haul investment. So those are things that are kind of fluid to us because it's most important to continue to drive those productivity and maintain productivity in dock and city operations. In the case of the line haul, we continue to look for opportunities that drive load averages and things like that, which I think are beneficial. So if you.
Think about one of the chief benefits of driving some of our middle market activities that historically, maybe those were underdeveloped outbound markets. Well, if we take that historically had been an inbound market, if we do a good job of selling the market outbound, we have an opportunity to better utilize our line all the infrastructure and investment there. So those are things that we're focused on, and that helps drive some of the efficiency.
weight x fuel number continues to decelerate or do you think something in you know mid single digits is is going to stabilize as you look at the next year over year is it going to stabilize at that level or does it go to low single digits
X fuel number continues to decelerate? Or do you think something in mid single digits is going to stabilize as you look at the next year over year? Is it going to stabilize at that level or does it go to low single digits? Thank you.
Yeah, good morning Tom.
You know, it's hard to say from here, but I mean if we continue to do a good job and working on the next things, I mean
You know, you've been with Fritz and I, I mean, we're just not that focused on that, what that headline number is. I mean, I think we can continue to drive revenue for bill growth, yes, in that low to mid-single digit number. I think that's the opportunity. You're getting a little bit of price and a little bit of mix.
You know, if weight goes higher and that's a headwind and that drove my reported yield down, I'd be okay with that. You know, we've had good success.
you know, bringing in the heavier weighted freight without adding a lot of additional handling units. I mean if weights up, you know, you fractionally add some handling units, but otherwise you're just picking up more revenue and not really changing your cost picture as the weight goes up. So, you know, again, I know that, you know, the street focus is on that yield number, but really for us, you know, that revenue per...
Hi, good morning. I just want to talk about the demand environment again. I know the trends seem a little bit better. One of our industrial companies yesterday did talk about seeing some early cracks in terms of the demand environment that they're seeing. Just any color that you have in terms of conversations that are raising some red flags, any geographies that you may be noticing.
the other parts of our business.
have a good call out for a vertical or an industry or something like that. I would say that just generally it's pretty consistent across the book of business with that regional call out. And the thing that we've seen that I think has been, I've been pleased to see is that there's been a
a fair amount of customer acceptance around the service we've been providing. So that's helping us, I think, differentiate, maybe win the opportunity. I mean, if you're doing a good job for the customer, delivering value in an environment where they may be challenged, freight arrives on time and is not damaged, those things matter. And I think we get a...
I think you said they were in existing markets. Is this just markets where you're starting to see outsized demand or is it sort of more a longer term opportunity or sort of a mix of both? Just any color there.
Every terminal that we're going to open, regardless of the sort of environment, is really about sort of what the 10-year sort of outlook is. It just so happens the ones that we think that were all open still this year are the forefront, are in markets that we already are, and it provides us, and this is a really important opportunity for us because it allows us to operate more closely and efficiently for the customer..
And that's significant because if you have the opportunity to meet customer expectations more quickly, that's important. Pick the freight up when they need it. I mean, if I think about the Atlanta Northeast Terminal that we opened on Monday, it's probably our, you know, we see an improvement just in the Atlanta region, or sorry, the Atlanta market itself. On May 28, 2018, the Atlanta investigative centervideo went into light- podcast show
simply in a matter of four or five days because we've added that facility and we're in a position that we can serve as a customer that we couldn't do it very well before. That facility is one of our top facilities already. And that's just in a few days. So we know that the value of doing this is important, but it starts with a customer.
in a matter of four or five days because we've added that facility and we're in a position that we can serve as a customer that we couldn't do it very well before. That facility is one of our top facilities already. And that's just in a few days. So we know that the value of doing this is important, but it starts with the customer. Great. Thanks for the color.
Your next question comes from the line of Baska Majors with Susquehanna. Please go ahead.
Doug, you talked about adding a few hundred people year over year, but if I square that with the year-end headcount, looks like it might be down a bit. Can you talk a little bit about if you've been able to ease on the headcount sequentially, how you're able to do that while reducing PT so considerably?
and keeping service high and roughly if things were to play out relatively seasonally from here, do you think that counts up or down at year end? Thank you. Yeah, I'll jump in on this one. I mean, I think the key thing that we've been able to do is that, you know, if I think about our line haul network, you know, as we've built, sort of optimized that network over time, we were able to...
better able to use our existing driver force. That allowed us to take on more of what was outsourced as PT. And if I go back all the way to, say, Q2 of last year, we've been kind of working at that for awhile. So that's allowed us we've been successful with that. And then I think on the city side, you know, to the extent that we've been able to, we've done something similar, if we've had drivers that maybe are underutilized in this.
in the city, we've actually reallocated them to our line all that work which allows us to take on even more freight there. And throughout all this across the board, we're managing ours. So it's a, you know, as we look into the balance of this year, you know, we'll see we'll have to add some heads. You know, if we open the new facilities.
Atlanta Northeast, we added heads there for that opportunity. So we're very judicious and cautious about that. But most important, we want to make sure we keep that driver force intact, because that's the key flex that we need when the environment turns more positive.
Northeast, we added heads there for that opportunity. So we're very judicious and cautious about that. But most important, we want to make sure we keep that driver force intact, because that's the key flex that we need when the environment turns more positive. Thank you.
Your next question comes from the line of Ken Hextor with Bank of America. Please go ahead. Hey, great. Good morning, Doug and Fritz. Maybe could we just delve into the weight, Doug? You seem to mention how important that is on the revenue for Bill and we should look at that a bit more. After being kind of flattish in January and February , up.2 and down.1, weight seemed to jump almost 5% in March. Was that a...
Comp issue, is there a shift going on, the elimination of third-party freight? Maybe just delve into what's going on with weights and how you're driving that and what happened so quickly in March. Just seasonally, I mean I guess you know some of our shippers, you know some of our core shippers get a little more active seasonally in March.
You know, earlier in the year, maybe you got, you know, more promotional business going on where you end up, you know, doing some lighter weighted promotional shipping for, you know, a retail customer, for example. But I think generally the trend around weight's been pretty good for a few quarters and it's been driven by, I think, largely by our, not only our targeted GRI adjustments, but, you know, the way we analyze it.
You know, a book of business when a customer's contracts up for renewal, we really spend a lot of time on going through the data and making sure that we give the right price and to attract the kind of freight we want. But just in terms of March itself, we've seen a little volatility month to month. But in general, over the few quarters, the trends been, I think, driven by our efforts. And then just to
If I could just clarify one last thing on your, I think you mentioned to start renewal rates up or contract rates were up 7%. The GRI, your thoughts on the continued flow through in this market.
one last thing on your, I think you mentioned to start renewal rates up or contract rates were up 7%, the GRI. Your thoughts on the continued flow through in this market as you move forward?
Yeah, I think it's a directional indication, right, as to what we think the environment is. But I think as you well know from following this pretty closely, it's all the realization that ends up with how much does the customer actually ship, what freight lanes we ultimately get. None of these contracts are pipe pricing agreements. There's not a volume commitment that goes with it. So we've just got to, it's an indication, I think, that the market is
receptive to pricing and we just continue to pursue that. I mean, that's kind of how we think about the market for where we ought to be. Yeah, I mean, just looking out into Q2, I mean, our weight comparisons year over year, you know, those comps get easier. So, I mean, you know, the March weight per shipment is you know, the exit rate leaving, you know, March is high and I've got some easier comps coming. So, weight per shipment could theoretically be up.
I'm sorry, so your April revenue to date ex-fuel was, should you give that before?
The total revenue is running down a little bit, 1 or 2%. That's right. Okay.
All right, thanks, Fritz. Your next question comes from the line of Ravi Shankar with Morgan Stanley . Please go ahead. Thank you, good morning everyone. So maybe it helps to kind of talk about this call with a bit of a conceptual question here. I think I know the answer to this, but maybe not given how weird the cycle has been.
What is a better indicator of where we are in the cycle right now, shipments or tonnage? Because they seem to be going in slightly opposite directions and kind of both your strategy and your customers approach will be differing a little bit.
Listen, I don't know what makes, is the best call. I know what the best call for us, for SIA, is it's driving profitable rate, right? Mix the business that we can deliver, provide great service, charge for, generate a return. That's how I think about it. There's a scenario in which maybe tonnage is a little bit softer. But as Doug pointed out earlier, if yield's a little bit different, you're in a position where you're gonna be a little bit more sensitive to things like this, or simple things like that, I think there's some type of impact on disOG as well. But overall, we areYYY at was Academy, we are cavalierly atnote of support with the product line. As for us being Tyco and whatnot, as far as I know, you haven't been to SIA or to Leadership Bank,
You obviously got to be getting paid for the freight, so your yield probably goes up a little bit possibly in there. But ultimately end of the day, I mean we're focused on a profitable mix of business. So we need to be able to deal with and identify freight that makes the most sense for us.
Got it. I think the genesis of the question was, is the cycle getting worse, but you guys are just massively outperforming? Is the cycle getting better, and you guys are able to catch that tailwind better? I think the market's starting to get a little bit of color on both the macro environment as well as your own performance within that. Listen, the macro environment is pretty challenging. I think you see all the data that's out there. I think that the market's starting to get better.
our team is doing a great job of delivering value to the customer and maybe we're differentiating on that. And that, to me, is that's where we need to be successful. Those are the things that we can control. We can't control the macro environment. I think we all know, anybody that's on the call knows the challenges that are out there.
GDP was lighter this past week, the reported GDP was lighter, and our results are what they are, and they are focused on the things that we can control in executing. So, are we taking advantage of the environment? Yeah, I don't know. I think we're taking advantage of doing a great job for the customer. I mean, we've also said that, I mean, as we go through the cycle, maybe it's an opportunity for us. We feel like we've improved our service game over the last few years. The customers tell us that's the case.
We're closer to some customers these days, but we've also said we're a little bit cheaper than we probably should be. That stands out as a good value for somebody. So for somebody looking at their supply chain costs in an environment like this, they say maybe we give SIA a shot with some of this. I don't know that the macro is strong enough that we're going to be up, but maybe we're down a little bit less than some of the peers. If we do a good job, we keep that business coming out of this.
That's why our trends look a little different so far this year.
That's really helpful. Thanks for the explanation. And maybe just one quick follow-up on the cost as well. The drawdown in purchase transportation, you said that in some cases it actually improves your customers' outcomes. So do we think of this as a tactical thing given the cycle, or do you think that this can be a structural...
drawdown, just given that it may be the better thing for your customer.
Now let me clarify if there was any confusion about this. We will use PT if it meets the customer expectation, right? If we don't, we use internally. So we don't see this reducing PT as a way to improve customer experience. We think the customer needs to be agnostic to whether or not they are using PT.
we use PT. So that's most critical. I think structurally as you build density across the network, I think there's the opportunity to use less PT. But I think that there are periods and there are markets where it makes the most sense to use PT. So I think it's important to understand how we think about that.
Line Hall is an important part of providing great value to our service, to our customer, and we have to make a cost decision around the most efficient way to meet those expectations.
Very helpful, thank you. Your next question comes from the line of Christopher Coon with the Benchmark Company. Please go ahead.
Yeah, hey, good morning guys. Thanks for putting me in at the end here. Just curious on the length of hall if we see them. You know, West Coast imports picking up a little bit with that potentially help the length of hall down the road.
Yeah, you know provided it's freight that makes sense and it's an opportunity for sure. That probably influenced the like the whole statistics that we have. We reported that it reflects having you know down year over year and on the west coast volume. So.
It you know that that certainly could be a positive force Okay, and just as a follow-up on the s-assorials have they sort of come down now that that the volume has been a little weaker And capacity is a little more plentiful
Not from our perspective. We're providing a service there and the services require us to make an investment. And when that happens, we need to get paid for that. That's a valuable asset or employee equipment and additional costs to provide service to the customer. We've got to make sure we get paid for that.
clarifying question. I want to make sure I heard correctly. So you said aspirationally you would look to have OR improve 100 basis points from first quarter to second quarter. Just want to make sure I heard that right. Because if I look at kind of the last two years, it looks like it was closer to a 400 basis point improvement. Obviously, I understand very different environment but would want to understand I guess.
Where would that be expressed? So is that kind of mostly on the salaries and benefits line item taking kind of a sequential step up? Or what is kind of that mix? And then in your response, if you could address kind of how you think about your split between variable and fixed cost, that'd be really helpful. Thanks.
Yeah, I mean, the step up or the improvement in LR is usually driven by a really nice volume step up. And we're running at lower levels and carrying a bunch of additional new terminals. So we're in a much different part of the cycle than the last couple of years. So, yeah, I mean, if we see a little bit of sequential revenue growth, Q1 to Q2.
Yeah, I mean the step up or the improvement in LR is usually driven by a really nice volume step up. And we're running at lower levels and carrying a bunch of additional new terminals. So we're in a much different part of the cycle than the last couple of years. So, yeah, I mean, if we see a little bit of sequential revenue growth Q1 to Q2.
you know, if we achieved 100 base OR improvement, we think that's pretty good work at this point in the cycle. You know, in terms of fixed versus variable, it's, you know, probably, you know, we've said in general 35% of our business, which probably looks like a lot of other LTLs, is fixed. And then, you know, you've got a variable bucket that's not completely variable because the network has to keep moving even if there's fewer shipments in it each night. The costs don't come out quickly and directly for every shipment. So, for example, video card numbers, for example some pretty small cell numbers that run couple of days, like every just three weeks, we actually go to the table and visit it. In other words, says you have an economic condition everybody works for, and it's basically in the payments box, like no otheritz or any of your other old products So, you know, if we were starting to you know, sell four or five a hundred or fifty dollars per year," you know, I mean, we are really Wardcker brothers from particularly large Starbucks in glamorous food shops inEvery country." who knows, I would never do that. Again, to get it57.
Got her, okay understood thanks. We have no further questions at this time I'll turn the conference back over for any concluding remarks. Thank you everyone for calling in appreciate your participation and learning about the continuous zyagrow story. Look forward to catching up with you next quarter. Thank you.
That will conclude today's meeting. Thank you all for joining. You may now disconnect.