Q3 2024 Saia Inc Earnings Call

Ladies and gentlemen, thank you for standing by my name is Abby and I will be your conference operator today.

At this time I would like to welcome everyone to the Cyan incorporated third quarter 'twenty 'twenty four earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If he would like to ask a question during that time simply presti Starkey followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one a second time.

Speaker Change: Thank you and I would now like to turn the conference over to Matthew, but Hey, Cy as executive Vice President and Chief Financial Officer, you May begin.

Okay.

Matthew: Thank you Ed.

Matthew Hey: Everyone welcome to <unk> third quarter 2024 conference call with me for today's call is <unk>, President and Chief Executive Officer Fritzls briefly 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.

Matthew Hey: 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.

Speaker Change: Now I'll turn the call over to Fritz for some opening comments.

Fritz: Good morning, and thank you for joining us to discuss <unk> third quarter results, while the underlying macro trends remained tepid in our view our year over year results in the third quarter continued to reflect the growth experienced since last summer.

In the quarter, we averaged approximately 37200 shipments per day compared to approximately 34300 per day last year or an increase of eight 5% our third quarter revenue of $842 million increase from last year's third quarter by eight 6% and is a record for any third quarter in our <unk>.

Fritz: These history yield or revenue per hundredweight, excluding fuel surcharge increased one 7%.

Reflecting constructive pricing backdrop, and the impact of changes in our mix of business revenue per shipment, excluding fuel surcharge increased <unk>, 9%. Despite a headwind from weight per shipment, which was down <unk>, 8% in the quarter and like the ball, which decreased modestly our third quarter operating ratio of 85.1 person.

Fritz: Set deteriorated 170 basis points compared to our operating ratio of 83, 4% posted in the third quarter of last year.

Fritz: While weight per shipment stabilized in the into the third quarter. We continued to see some mix headwinds from the softer industrial backdrop and the growth in retail business since last year's industry disruption.

Fritz: Intently focused on mix management and pricing initiatives as seen in our contractual renewals, which remains strong at seven 9%.

Fritz: During the quarter, we opened 11, new terminals and relocated what other continue to execute our long term strategy of improving our service and value proposition to the customer.

Fritz: 11, new terminals in the quarter was a record for any quarter in company history, and I'm proud of the execution from our team each new opening represents its own unique challenges, especially those in new geographies. Most of the terminals opened in the quarter were in the great Plains, a new geography for cider in these locations enable us to extend our addressable.

Fritz: It provide direct service to customers in the in this area of the country with these recent terminal openings. We're now able to provide direct service to all the contiguous 48 states, which significantly enhances our value proposition to our customers and confirms our position as a leading national <unk> carrier.

As with every new opening these new terminals required investments in people equipment and technology, while entering a completely new geography requires additional investments in the customer experience. We are encouraged by early customer acceptance and we're excited to expand our addressable market to better serve both new and existing customers.

Fritz: We are very pleased with the progress of our new terminal openings, especially those that opened in the second quarter. During the third quarter. These terminals continue to grow and become more efficient while still having been open for less than six months. This group of terminals improved their operating ratio by more than 10 points sequentially further supporting the long term.

Fritz: Oh Gee of increasing our addressable market and investing in the customer experience. While these terminals are not at a company market share or operating margin. They are profitable. Each terminal is a long term investment that enables us to provide a solution to a customer in each market. The terminals opened in the great plains in the third quarter allow us to direct.

Fritz: We service, a new geography, and we're proud to bring the scion name to new and existing customers in these communities.

We remain committed to our training requirements for our team members in both new and existing markets, which is critical to building a site culture and enhancing the customer experience. Our teams are committed to accomplishing our growth strategy with an eye on always putting the customer first our customer first initiatives had been the cornerstone of our success over 100 years.

Speaker Change: Ernie and we've seen our customer focus on display throughout each new terminal opening in the quarter.

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

Matt: As mentioned third quarter revenue increased by 67 million to $842 1 million yield excluding fuel surcharge improved by one 7% and yields decreased by <unk>, 9%, including fuel surcharge fuels.

Matt: Fuel surcharge revenue per workday decreased by six 3% and was 14, 8% of total revenue compared to 16, 9% a year ago.

Revenue per shipment, excluding fuel surcharge increased <unk>, 9% to $293 39, compared to $2 90, 79 in the third quarter of 2023 and increased <unk>, 9% sequentially from the second quarter of 2024.

Matt: Tonnage per workday increased seven 7% attributable to an eight 5% eight 5% shipment per workday increase partially offset by a <unk>, 8% decrease in our average weight per shipment.

Matt: The length of haul decreased modestly.

Matt: Shifting to the expense side for a few key items to note in the quarter salaries wages and benefits increased 15, 5%, which is primarily driven by a combination of our employee head count growth of approximately 13% year over year and the results of our July 2020 for wage increase which averaged approximately four 1%.

Matt: Growth in headcount is related to the increase in volume compared to prior year as well as the opening of 18, new facilities opened in the past 12 months. In addition, other employee related costs increased including additional training for Onboarding team members and unfavorable development of workers' compensation claims.

Purchase transportation expense, including both non asset truckload volume and LCL purchased transportation miles decreased by 14, 5% compared to the third quarter last year and was seven 8% of total revenue compared to nine 9% in the third quarter of 2023 truck and rail 80 miles combined were 14, 2% of our tool.

Matt: It'll line haul miles in the quarter.

Fuel expense decreased by one 3% in the quarter, while company line haul miles increased 12, 1%.

Matt: The decrease in fuel expense was primarily the result of national average diesel prices decreasing by over 13% on a year over year basis.

Ladies and insurance expense increased by six 9% year over year and was up 2% or 0.4 million sequentially from the second quarter of 2024.

Matt: The increase compared to the third quarter of 2023 was primarily due to increased claims activity and development of open cases.

Matt: Depreciation expense of $54 7 million in the quarter was 19, 8% higher year over year, primarily due to ongoing investments in revenue equipment real estate and technology.

Matt: Compared to the third quarter of 2023 cost per shipment increased <unk>, 6%. Despite the headwinds from the wage increase and the costs associated with new terminal openings. We are pleased with the continued cost management and execution from our team in the challenging environment.

Matt: Total operating expenses increased by 10, 9% in the quarter and with the year over year revenue increase of eight 6% our operating ratio deteriorated $2 85, 1% compared to 83, 4% a year ago.

Matt: Our tax rate for the quarter was 24, 4% compared to 24, 6% in the third quarter last year and our diluted earnings per share were $3 46, compared to $3 67 in the third quarter a year ago I will turn now turn the call back over to Fritz for some closing comments.

Fritz: Thanks, Matt as we continue to celebrate our 100th year in business I am pleased with our ability is to demonstrate our customer first approach to both new and existing customers in our recently opened terminals across our network every new terminal opening as an opportunity to better position ourselves to provide additional value to our customers while opening 11.

Fritz: New terminals in a quarter is a large undertaking these investments are critical to creating long term value for both our customers and shareholders have any comparable comparable footprint to our peers is critical to our value proposition and full national coverage allows us to offer solutions in every market while.

Fritz: While the macroeconomic backdrop remains uncertain, we believe our operating trends support the continued execution of our long term growth strategy earlier. This week, we opened we welcomed our team members in Akron, Ohio, and we plan to open three additional terminals the remainder of the year. These openings will result in 21, new openings for the year by far a record.

Fritz: In our company's history as we continue to invest in our network to expand our footprint to better serve our customers. We still anticipate capital expenditures for 2024 to be approximately $1 billion.

We remained focused on measuring our performance for customers and Onboarding team members that will reinforce our 100 year culture as we continue to execute our growth strategy.

Fritz: Last year, we have been intently focused on building our national platform with the culmination of 2024 investments and openings. We believe that will position the company for long term growth across all geographies and we have stressed from the outset of this process. We approach these opportunities with a singular focus on the long term prospects.

Fritz: This business. These investments were never about the current quarter, the next quarter or frankly next year, but an opportunity to transform our footprint and market positioning into the future into next year, we will focus on continuing to develop our new markets by introducing new customers to our service and continue to expand and support the success of <unk>.

Current customers, who will continue to invest in equipment technology and facility enhancements or relocations and support this value proposition because we've opened these facilities the focus on the long term, we only we've only begun to start capturing the value of these investments as the <unk> market develops there will be opportunities for us to supplement.

Fritz: Our network with additional facilities in the near term, we see great value and potential in the footprint that we have developed.

We're now ready to open the line for questions operator.

Speaker Change: Thank you and we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Fritz: I would like to withdraw your question simply press Star one a second time.

Fritz: If you are called upon to ask your question and our listening BS speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

To be able to take as many questions as possible. We do ask that you. Please limit yourself to one question and one follow up.

Fritz: Again, it is star one if you would like to join the queue.

Speaker Change: And your first question comes from the line of Ken <unk>.

Speaker Change: With Bank of America. Your line is open.

Ken: Hey, great and great to see the the contract renewals over 7% so great quarter, So Fred some or Matt can you talk about the sequential growth in October it looked like maybe tons and even weight per shipment revenue penetrate look like based on the numbers started to accelerate at the in September at the end of the quarter.

Ken: Can you talk a little bit about how September October or shape or October shaping up and then Matt did you mention a one timer in workers' comp is that something you can put a scale on.

Speaker Change: Hey, Curt.

Speaker Change: I'll go ahead and give the monthly numbers just just so you have them.

Speaker Change: So in July shipments per workday up 10, 6% tonnage per day up 5%.

Speaker Change: August shipments up 7% tonnage up eight 2%.

Speaker Change: September shipments up eight 6% tonnage up 10, 1%.

Speaker Change: And October.

Speaker Change: October to date shipments up about 4%.

Speaker Change: Tonnage up about six 5% and keep in mind in October I mean, we're comping a period, where our peer had a cyber issue.

Speaker Change: Plus there was a hurricane.

Speaker Change: And the early part of October as well, so comps are a little bit strange month to date.

Speaker Change: Just in that number as well, but in terms of September.

Speaker Change: We're starting to lap.

Speaker Change: Yellow period at this point in the industry disruption so.

Speaker Change: Moves around a little bit in Q3 based on when that really started happening in the back half of July so that plays into it but we're also opening a lot of new facilities and we.

Speaker Change: Our expanding our addressable market and should be seeing that so we feel good about our progress there and then in terms of where comp nothing one off just.

Speaker Change: Just part of the business development offices open claims and things like that so nothing to call out there greater head count metric.

Speaker Change: Yeah.

Speaker Change: And just to wrap that up.

Speaker Change: <unk> tons.

Speaker Change: Weight per cent, sorry that that also accelerated in September right.

Speaker Change: Yeah, just with those shipments and tonnage numbers, a little bit at the back but I mean.

Speaker Change: Modest rate those we've talked about before mix can move around a little bit so any given period based on what youre handling for customers that can move around a little bit.

Speaker Change: Alright, I appreciate that and then I guess my follow up would just be on the environment you talked about France. You mentioned the mix you kind of felt like it was done last quarter. How do you feel I guess at this stage now that you've got all these new facilities ramped up are you you mentioned last quarter, you thought was done but now youre talking about a little industrial overhang.

Speaker Change: Is the market stabilizing out there in terms of if you look outside of the new facility.

Speaker Change: Ken the way out where I would think about it is it's.

Speaker Change: Probably somewhat comparable.

Speaker Change: Q2 to Q3.

Speaker Change: It's bounced around a little bit.

Speaker Change: I don't think its.

Speaker Change: I don't think its markedly better or worse.

Speaker Change: There's a little bit of noise in there I think as you open up new facilities you do have.

Speaker Change: Typically that that the new volume typically looks like the rest of the portfolio. If you will so we haven't really seen an impact one way or another there.

Speaker Change: One of them I appreciate the thoughts thanks, guys.

Speaker Change: Thanks.

Speaker Change: And your next question comes from the line of Jordan <unk> with Goldman Sachs. Your line is open.

Speaker Change: Yes, Hi, I was wondering if you could talk a little bit more about the.

The revenue per hundredweight X fuel was up one 7% I know you touched a little bit on mix and price, but maybe talk a little bit more about that.

Speaker Change: And perhaps how that yield trended through the quarter and how we can think about it looking into the next quarter or the fourth quarter. Thank you.

Speaker Change: Well.

Speaker Change: Again, the mix impacts that a little bit too.

Speaker Change: We look we typically look more revenue per bill rather than the yield just because the mix has an impact on that but we feel good about where we stand on our contractual renewals number where it is continues to remain strong as freight moves around a little bit when you take the rate increase at times.

Speaker Change: With the macro backdrop, where it is there is customers that may go find other other options.

Speaker Change: We're willing to let that work, we're not going to go chase that so it's going to come back to us. So we feel when the environment needs it and win.

Speaker Change: When the customer needs good quality of service. So we feel good about that and the other thing is we put <unk> and earlier this week at a rate of seven 9%. So we continue to remain focused on mixed management and making sure that we're getting the margins on what we expect from customers. So our focus has not changed on that it's tightened the <unk> earlier this year than it was.

Last year, we feel really good about our marketing position, our market position and our addressable market that we put that into place a little bit earlier than in the past.

Speaker Change: And I guess, just just sort of is there a way to think about how.

Speaker Change: Yields however way you look at it could could shape up as we go from the third quarter to the fourth quarter. Thanks.

Speaker Change: Well again mix is going to impact that a little bit depending on what happens our view of the industrial backdrop, we're not seeing any anything on our crystal ball.

Speaker Change: Tells us that Q4 is going to all of a sudden turn and get better if it does great, but we really remain focused on the same thing we put the like I said, we put the <unk> in place whenever we do that there is a little bit of shipment shifting in the periods that follow so we will experience a little bit of that but.

Speaker Change: We remain focused on making sure that they are contractual renewals or discussions with customers. We are focused and committed to driving price, we know thats our opportunity.

Thank you.

Speaker Change: And your next question comes from the line of Daniel <unk> with Stephens. Your line is open.

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

Speaker Change: Maybe I'll start on a shorter focus one just following up on the October discussion can you remind us what maybe normal seasonality is from an or standpoint from <unk> and then maybe given the improving wafer shipment in just the tonnage growth how do you see this year shaping up versus that normal range.

Speaker Change: Sure. So what we try to do with this is look back at recent history and do our best to find some some comparable period. So if you look at that.

The past handful of years, the sequential degradations right around 250 basis points on average there's obviously some years on either side of that but that's the average if you look at some of the more recent periods, but.

Speaker Change: With the momentum we have now and what we feel like from a customer acceptance standpoint, with our new markets in our expansion, we feel like we should be able to beat that.

Speaker Change: Great.

Speaker Change: That's kind of where we're targeting at this point.

Speaker Change: Super Helpful. And then maybe stepping back a little bit thinking.

Speaker Change: Thinking about 'twenty 'twenty five for this year has clearly been pressured by start up costs. It sounds like execution is going well there with the new terminal how should we think about or should we think about expense growth moderating in 'twenty, 5% terminal growth moderate these actually become good guy for incremental margins or or what's the right way to think about incremental margins into 2025, as we started to lap really a couple.

Speaker Change: Years of elevated investment across the network.

Yes.

Speaker Change: The elements of that so.

Speaker Change: We're not going to open have an opening year.

Speaker Change: 21 facilities like we are this year.

Speaker Change: Why.

Speaker Change: Two distant future I, just that was a lot for us to take on but we also looked at it and said this is significant opportunity. We've got it we've got to take advantage of it.

Speaker Change: We have.

Speaker Change: I think as we look into next year, what you'll see is now we're much materially bigger company than we were a few years ago to the level of ongoing sort of maintenance capital and sort of thing is going to designated fleets bigger the bigger facility.

Speaker Change: So the footprint that sort of thing to maintain those assets.

Speaker Change: You won't see the openings next year I mean, maybe there's a small handful.

Speaker Change: Five six.

Speaker Change: Something like that depending on what the environment looks like.

Speaker Change: Youll see us reload relocate facilities next year, those we view those as sort of negligible cost because you're generally the ones you have to relocate or ones that maybe you've stretched capacity or fill capacity. So you're moving to something thats got a little bit more operating flexibility. So.

Speaker Change: What we really really like is we're going to exit this year with 214, well positioned facilities across the country.

Speaker Change: Our position to really drive value for our customers and when that happens that gives us the opportunity to really drive value in our business and I think that that's we made the investments this year with an eye to long term value creation, and I think that thats, we kind of spend to more of a value creating mindset.

Speaker Change: Not that the investments work value, creating they absolutely were but in the short term.

Speaker Change: Investments require that.

Speaker Change: Of course, those things aren't free opening 21 terminals are not free now when you monetize those you expect to provide great service to our customer and when you do that.

Speaker Change: You'll look to get paid for it and that's where the return comes in.

Speaker Change: We're really excited about what the ones that we hope the facilities. We opened just in the second quarter I mean, they are profitable already they're not at the company average, which says they've got runway and those are great assets and Thats a great that we opened those so I think as we look into next year it becomes more of a.

Let's capture the value of the facilities now.

Speaker Change: We get a stronger faith.

Speaker Change: Freight backdrop next year I think we can really accelerate as well so I'm excited about the prospects.

Speaker Change: We did these things they've made these investments investments with a purpose.

And now is the time to really capture the value of that.

Speaker Change: Thanks, so much.

Speaker Change: And your next question comes from the line of Tom <unk> with UBS. Your line is open.

Yes. Good morning wanted to I know you offered some maybe high level.

Speaker Change: And I guess thinking about now in 25 or kind of them with new terminals, which you're going to do focus on.

Speaker Change: Value or maybe focus on margin it sounds like a little bit high.

Speaker Change: How do you think about the potential for margin improvement if the macro in 2025, if the macro is stable right like it would be great to have some cycle how but.

Speaker Change: It seems like with <unk>.

Speaker Change: Your traction with customer as Youll improve utilization of terminals that were opened second quarter third quarter.

Speaker Change: Your contractual renewals sound quite strong maybe mix is stable so.

Speaker Change: Just any thoughts about can you get the normal 100 to 150 bps of improvement if you don't get help from macro in 'twenty five.

Speaker Change: So yes, thanks Tom.

Speaker Change: Listen this is.

Speaker Change: The opportunity for us to get back on our sort of normal cadence. So let me be really clear I think I used the word value.

Speaker Change: I think a 214 terminal network across the country, that's providing a very high level service shouldnt be a value there is a pay for theirs.

Speaker Change: People are paying for service in that case and I think we're in a position we can do that and I think in a.

Speaker Change: Kind of an environment that is sort of.

Speaker Change: Tepid neutral however, you want to call. It I think we're in a position where we can expand or into next year.

Speaker Change: I think what's really exciting is if you've got it in a more positive stronger environment I'll take the business scales I love the idea of scaling some of these facilities that we have just opened.

Speaker Change: We have never been about.

Growth for Growth's sake, we have been about let's get the addressable market right. Because we think we can provide something the customers and when we do that we have an opportunity drives drive returns in the business and I think next year is the beginning of that right and I don't see an impediment for us.

Speaker Change: And the next year, if we get a reasonable environment I think we're in a position we can grow though are and I think the range you provided or 100 150 <unk> that's in scope for sure.

Speaker Change: Could it be better than that.

Speaker Change: We know how I mean, if you look back in history, when the us tighter environment or an environment, where there is more macroeconomic growth you know what <unk> will do and I think that.

Speaker Change: We execute that playbook, that's how we operate.

Speaker Change: Okay, and then for the second question.

Speaker Change: How do we think about the levers on mix I guess, if I go pre your big expansion of.

Speaker Change: The terminals it seemed like pretty consistently focused on improving weight per shipment and mix and that was part of the margin improvement equation is that something you can fairly quickly address.

Speaker Change: And kind of go back to that in say first quarter second quarter next year or does that take longer just because you know recognizing the mix has changed a lot as you brought on more retail freight and more more terminals.

Speaker Change: Tom What I would say is first and foremost we've got to really continue to focus on pricing and which we have been you look at our contractual renewals you look at the <unk>, we had a Monday we're not.

Speaker Change: Given up on pricing.

Speaker Change: It all has got to get if we get the business to where we want it to be everything the rates of Gotta go up across the board at all elements of the business.

Speaker Change: I think that what we continue to do though is that we continue to look for customers market opportunities, where somebody says hey, we really we appreciate the value we get from side in terms of the high level of service. The reach of this National network now we can now.

Speaker Change: Ship more of our wallet with side, because we don't have to worry about them handing off rate in markets. We can look at it and say <unk> can go to all of these 214 facilities. So I think that thats an opportunity for us to continue to.

Speaker Change: Reinforce that with customers and I think that you get into the equation, where we get the appropriate pricing in place.

Speaker Change: That'll thought we'll find customers that find great value or opportunity in the assets that we have and that's a way for us to improve mix over time.

Speaker Change: How much of the freight where you handing off just to understand that part of that comment previously.

Speaker Change: Makes sense.

Speaker Change: We haven't given a percent out I mean in those markets aren't necessarily the largest one but I mean, it's impactful retina, we think about it as a.

Speaker Change: Opportunities to improve that portion of it certainly but more importantly, we can offer direct service in those markets and we know that our customers want us to handle it all the way through and that's very important to us and making sure that we can address that and Thats a big Thats why we pushed those facilities and open them.

Speaker Change: And then I think in terms of the mix to keep in mind every new terminal openings as an opportunity to speak with our existing customers about what we do for them. So it's an opportunity to talk about business that we may not have had an opportunity.

Speaker Change: To get a shot at it in the past because we couldnt handle it direct in and out of those markets and now we can at full nationwide coverage. So you may not necessarily get that the next day when you open but when we get the opportunity to share with our customers that we can provide a solution for everything that's impactful.

Speaker Change: Okay makes sense. Thank you.

Speaker Change: And your next question comes from Fatih Sherman with BMO capital markets. Your line is open.

Speaker Change: Yes, good morning.

Speaker Change: Thank you for taking my question. So in the last couple of quarters you've outperformed.

Speaker Change: Your kind of thoughts 10 year average.

Speaker Change: Shipment per day by maybe 200 to 100 <unk> <unk>.

Speaker Change: Quarter over quarter I was just looking at it.

Speaker Change: I mean, if we apply the same principle going into Q4 that would put you in the high single digit.

Speaker Change: Kind of a shipment.

Speaker Change: Shipment per day, just wanted to kind of attack central assumption, how do you feel about it.

Speaker Change: Yes, I think it's without what I would offer is it.

Speaker Change: No we get a little bit of shipment disruption that comes with <unk>.

Speaker Change: Anytime we do at GRE.

Speaker Change: See a little bit of movement around there.

Speaker Change: This quarter, we started the quarter the comp to last year, we mentioned that we saw a bit of.

A little bit of a challenging comp because of what we saw happen over the period a year ago.

Speaker Change: Another sort of factor in there.

Speaker Change: And we started the quarter kind of dealing with the remnants of hurricane and another hurricane. So I think all those things create a fair amount of noise.

Speaker Change: Around sort of shipments into the quarter not to mention that its a seasonal quarter meeting that holidays come into play.

I think what's important though is that over time and I think you're starting to see it with.

Speaker Change: With our shipment growth.

Speaker Change: Revenue.

Speaker Change: And bigger part of the pie.

Speaker Change: So our history.

Speaker Change: <unk>.

Speaker Change: It's changing if you will.

Speaker Change: So it's.

Speaker Change: Got a different sort of baseline.

Speaker Change: So I'm excited about it I think we continue to grow through this.

Okay.

Okay.

Okay.

Speaker Change: Back to the or.

Speaker Change: Not a question, but are you still on the call.

Speaker Change: Yes, we are driving.

Speaker Change: Hello, operator.

Speaker Change: Yes, we are still connected can you hear me.

Speaker Change: Okay.

Speaker Change: I'm on the line can you hear me.

Speaker Change: And ladies and gentlemen, we will pause for just a moment, while we try to reconnect our speakers.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Yes.

Speaker Change: Okay.

[music].

Yes.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: And ladies and gentlemen, thank you for standing by and we are now reconnected with our speakers.

Hi can you hear me now.

Speaker Change: We can hear you loud and clear in Europe. Okay, Yes, yes, we can think so.

Speaker Change: What part of that what part of the question did we drop off.

Speaker Change:

Speaker Change: I heard I heard your entire answer so I think we're fine from that perspective. So my follow up I'll turn part did you hear the part about how disappointed we were that the phone wasn't working.

Speaker Change: I guess, we've heard about.

Speaker Change: Alright perfect.

Speaker Change: <unk> will go down in history, as a kind of a great moment, there alright got it.

Speaker Change: So yes.

Speaker Change: Yes.

Speaker Change: Youre going to give us perspective on the volume side, but I mean, I think it feels like there is no reason for you to continue to kind of build that momentum.

Speaker Change: The new terminal opening which could put your shipment kind of quarter over quarter at.

Speaker Change: A solid pace.

Speaker Change: And with that perspective.

Speaker Change: Im just wondering why wouldnt, the operating ratio seasonality kind of follow a little bit closer to the shipment seasonality given that your startup cost is kind of in the rearview mirror at this point.

Speaker Change: We should start to see that operating leverage beginning in Q4, and just wanted to see if we can narrow width.

Speaker Change: The.

The range or just thinking about what what what <unk> could look like in the fourth quarter.

Speaker Change: Well pay party.

Speaker Change: Sorry for the connectivity issues.

Speaker Change: <unk>.

Speaker Change: Look you always it's Q4 right, it's a seasonally slower period theres always the challenges associated with that.

Speaker Change: But we're not we still have openings in this quarter right I mean there.

Speaker Change: They're not as in terms of magnitude, they're not as big as what what was the count that was done in Q3, but we still have openings associated with with the fourth quarter. So those are at zero now.

Speaker Change: <unk> said earlier in his commentary we've got as we continue to move past further from the openings like we did from Q2 to Q3 of those get better so we.

Speaker Change: We still have the fourth quarter challenges and customer closures and things like that that are just normal for the fourth quarter, but.

Speaker Change: We do have openings that are still going to be embedded into the caution in Q4.

Speaker Change: They're still there.

Speaker Change: Okay I appreciate it thank you.

Speaker Change: And your next question comes from the line of Brian <unk> with Jpmorgan. Your line is open.

Hey, good morning, guys. Thanks for taking question.

Speaker Change: Hey, Brian wanted to.

Brian: Ask about.

Brian: The mass tier survey that just came out.

Obviously, theres a little bit.

Brian: Back side and some of the performance on our observations, but I think it was done through June through September timeframe. So clearly a lot of startups that were going on there. So.

Brian: It's just one data point, obviously, you look at service and everything internally pretty well, but it's one that we can all see from the outside so just wanted to get your perspective on.

Brian: What's the most recent results mean from your from your vantage point.

Speaker Change: So a good question Brian.

Speaker Change: Things I would say that if you look at the <unk> data in total for the industry and so the entire industry got better in terms of product performance to the customer, which I think for the customer base.

Speaker Change: The total positive.

Speaker Change: I think if you look at.

Speaker Change: What industry growth look like.

Speaker Change: Kind of across the board you look at the public competitors and we see <expletive>.

Speaker Change: Declining sort of shipments and tonnage across the space except for sale.

So we've taken on larger percentage of our larger part of the industry we have.

Speaker Change: Growing in new markets as we noted we'll by the end of the year, while 21 openings, so that means new customers new experiences new demands.

Speaker Change: Adjustments to customers.

Speaker Change: And throughout that we've had are probably.

Somewhere around 502000, new employees over the last year or so.

Speaker Change: To support all of that so.

Speaker Change: What it says is that we.

Speaker Change: That was a challenging environment in which we operated in.

Speaker Change: I can tell you that across the board internally when we look at the data we go through it and we say all right. We've got some in here that are positive and as we further analyze the data we will we distill that down to our region and our terminal locations and then we work at it.

And we say listen it's got again, we're going to keep getting better earn and keep.

Our focus on that and not lose side of the price our internal metrics have trended favorably.

Speaker Change: But listen the feedback like that says that we just got to keep doubling down I think that is.

Speaker Change: We continue to develop experience with the customer set in new markets.

Speaker Change: I think we'll be in a position where they come to expect and understand what the great service they get from Si.

Alright, I appreciate that perspective.

Speaker Change: Quick follow up for you, Matt in terms of might be difficult to tell but obviously the hurricane was pretty disruptive for modern transportation networks and some of your customers. So is that part of the noise that you feel like Youre seeing in October and maybe it's a little bit too hard to tell but do you feel like theres at least two maybe a little bit of a catch up that you might see it throughout the rest of this month and some of this.

Speaker Change: I know it gets behind in recovery efforts start to pick up speed a little bit.

Speaker Change: Well I mean, thankfully, we haven't had any impact to our people are our terminals are major issues, but they are absolutely has an impact in that month to date right.

You have a pretty big storm that roles across the South East geography, those are pretty big markets for us and make up a good a good chunk of our revenue so.

Speaker Change: There is an impact in there one of the things that we see is that sometimes that volume doesn't always come back.

Speaker Change: You are really dependent on an order flow at times and really we may be operational but some customers may still be closed. So you faced out a little bit so things are coming back online certainly and we saw that in the week or so after that so it is in the October month to date numbers, but.

Speaker Change: Just part of the challenge in the business, but you don't always get all of that back just based on on patterns and in different order flow.

Speaker Change: I think you've got to keep in mind that.

Speaker Change: Okay.

Speaker Change: The sort of Florida, Georgia, Carolinas, that's becoming a bigger and bigger part of the <unk> business, reflecting investments we've made in the last few years.

Having cleaned and land right on the end of the quarter.

Speaker Change: That certainly had an impact on the third quarter result.

Speaker Change: And then you have thats start to recover and then you get another hurricane in the following weeks. So that's been part of the noise, we deal with as part of the business that we're in and we have to be able to flex and adjust to it but it certainly.

Speaker Change: It did have an impact in the third and early parts of this quarter.

Speaker Change: Okay. Thanks for the time appreciate it.

Speaker Change: And your next question comes from the line of Eric Morgan with Barclays. Your line is open.

Eric Morgan: Hey, good morning, Thanks for taking the question.

Eric Morgan: I wanted to follow up on pricing.

Speaker Change: <unk> had at least a few quarters now at those high single digit contract renewals obviously the.

Speaker Change: Seven 5% Gi last year, I think almost 8% this year or so.

Eric Morgan: If mix doesn't move around too much substantially from here should we start to be seeing some of these types of increases in your realized yields as we get into 2025 at some point or what are some of the other variables we should be considering as we think about modeling that.

Speaker Change: Well I appreciate the question Erika as you know the.

Speaker Change: Biggest one of the biggest challenges in our industry is that contracts. There is really no volume commitments. So we have to always make sure that we're getting what we expect from from customers and the environment, where we are now shippers have options and they may move things around or try someone different in a period like this and we're not we're not going to chase that but.

Speaker Change: All else equal, we're putting rates in at the level that we expect in <unk>.

Speaker Change: When the macro gets a little bit better that should certainly help and we expect to push that forward. It is not always linear, but it's an opportunity for us to put the rates that we need in front of our customer and our sales team is doing a great job negotiating those and speaking to the customers about the value. We provide the other thing that should continue to help us support that is at a national.

Speaker Change: We can do more and more for our customers than we've ever been able to do and with a larger addressable market and should allow us to gain larger share of wallet and mix up with customers where thats.

Speaker Change: The opportunity around that so we feel good about what we've been putting in and in a soft backdrop, where we're confident that we'll realize some of those gains.

Speaker Change: I appreciate that and maybe just a quick follow up on the Capex discussion. Thank.

Speaker Change: You've mentioned some normalization next year after the bigger year. This year any early thoughts on where that could land in 2025 and kind of what the big buckets would be appreciate it yes.

Speaker Change: We're still working to finalize what that number looks like but if you think about the number of this year less the one time.

Speaker Change: Transaction at the beginning of the year I think thats, probably a fair range to start with at.

The business is bigger now.

Speaker Change: Opex number is going to stay elevated.

Got a.

Speaker Change: To support the teams with equipment and there continues to be real estate investments, but I think if you normalize for that big transaction at the beginning of the year. That's a that's a fair range to start with.

Great. Thanks, a lot.

Speaker Change: And your next question comes from the line of Jonathan Chappell with Evercore ISI. Your line is open.

Speaker Change: Thank you and good morning.

Jonathan Chappell: You called out specifically you were pleased with the terminals that you opened in the second quarter. So as we think about the.

Jonathan Chappell: The seasoning of these terminals and you have a full quarter.

Mentation is there any way to kind of frame out what the utilization of the terminal that you opened up in the first half of the year look like relative to these 11 that you opened in the third quarter to help us kind of frame out windows can get to a level, where you feel it's closer to full utilization.

Jonathan Chappell: Yes.

Jonathan Chappell: It's probably going to be a few years before.

Speaker Change: Full utilization because as we've described before is that we don't make an investment with the idea that we got to fill them up on Monday, So we make an investment with the idea that we have.

Speaker Change: A few year runway to support the market the.

Speaker Change: The facilities, we opened up in the second quarter were a much larger scale than the facilities that we opened up in <unk>.

Speaker Change: Third quarter so to.

Speaker Change: To compare to try to compare what.

Speaker Change: A fantastic facility in Butte, Montana looks like to a facility in Laredo, Texas or Garland, Texas from Trenton is really not.

Speaker Change: With that sort of apples and oranges at different roles in our network.

So I think what we would point to is that as we continue to focus on.

Speaker Change: Further finding the customers at match are interested in what we have to offer.

Speaker Change: And we continue we'll grow in those ways I think that the big facilities, reopen where I'm really pleased about that.

Speaker Change: Shouldn't be overlooked is the fact that with.

Speaker Change: In a quarter, we have them all contributing from an operating income perspective, that's a big deal. That's why you make investments.

Speaker Change: In a challenging environment. So we put those in place I think they'll continue to improve from here now that you're in the seasonally.

Speaker Change: Lower time, so you probably aren't going to see the same level of improvements for those facilities into the fourth quarter the.

Speaker Change: The facilities that we opened in the great Plains.

Speaker Change: We're really excited about those because I think that really enhances the value proposition for our customers when they know that when they when side picks up freight that's going all the way to the destination. So those all will overtime will have an important complementary role of the overall network.

Speaker Change: Business and there'll be certainly a big part of creating a lot of value for our customers and keep in mind too John that that's a brand new geography for us entering a new geography is very different than putting a second facility in <unk>.

Speaker Change: Garland, Texas area, where we've been so.

Speaker Change: Like Chris said, it's not it's not overnight and we don't design them to be overnight, but that's a different animal in terms of brand recognition and sharing with customers that were in a completely new geography, so they're all a little bit different right.

Speaker Change: Yes that makes complete sense.

Speaker Change: Just a quick one for you I know its minutia.

And I know the fuels are pass through but you fuel surcharge revenue was almost flat quarter over quarter. Despite fuel dropping you mentioned that diesel prices are down 13% year over year fuel surcharge revenue was down less than 5% year over year with some of your peers have already reported at much bigger step downs, both sequentially and year over year.

Speaker Change: It sounds like a better surcharge mechanism or is there some lag where this decline in fuel prices that we've seen are basically over the last couple of months kind of catches up in <unk>.

Speaker Change: <unk>.

Speaker Change: Fuel is not a pass through.

Speaker Change: We.

Speaker Change: Every part of this business is inflationary and we expect to make a return on every part of it so.

Speaker Change: But I mean, the fuel surcharge mechanism is similar to.

To what's out there for other <unk>, but the mix of business has have an impact and keep in mind when it's a percentage of revenue. So when we're raising rates on customers, we have an opportunity to get more from a fuel surcharge standpoint. So.

Speaker Change: I think one thing to think about in terms of us are our volumes are up compared to.

Speaker Change: Some others, so that plays into it as well, but nothing to comment on there.

Speaker Change: We haven't put anything in different on the fuel side.

Speaker Change: Okay got it thanks, Matt Thanks, Brett.

Speaker Change: And your next question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open.

Chris Wetherbee: Hey, Thanks, good morning, guys.

Chris Wetherbee: Which I think on the last call you mentioned that facilities opened in the last three years kind of operating at about a 95%.

Chris Wetherbee: You talked about <unk> potential openings turning positive in the third quarter I guess I'm. Just curious as you think about that metric that you gave last quarter does it change at all I know, it's only a quarter, but I'm kind of curious if you feel like youre, making more or less progress relative to what you have seen in the past just given the sort of density that you are adding to the network.

Chris Wetherbee: These new regions and creating that sort of 48 contiguous network.

Speaker Change: Yeah, we're real pleased with what we're seeing I think the.

The key thing in this and why it can it can vary a little bit I mentioned in the last question is it terminal openings can have different sort of rolls right. Some facility might provide a really high to high level solution for our customer and the end of the line right. So those facilities are going to take a much longer time to kind of.

Speaker Change: The company average or.

Speaker Change: A big contributor.

Speaker Change: So those some of those that we've opened.

Speaker Change: Historically <unk> been in that sort of met that definition and certainly the ones. We opened in the third quarter kind of met that definition.

Speaker Change: What's really exciting about the second quarter facilities, and frankly all of them as they are making progress in the second quarter ones.

Speaker Change: Our big ones and those were some of the bigger investments we've made around purchasing assets.

Speaker Change: And it's nice to see those progress see them scale.

Speaker Change: And big freight markets.

Speaker Change: And then see them being part of making those ended aligned facilities continue to be a value creator as well I mean, if I. The great thing is that there's great Plains states as a customer that's bringing freight in from Mexico into Laredo, and we've got a shot now to go direct from Laredo to all cover Montana.

Speaker Change: <unk>.

Those are really nice value enhancing.

Speaker Change: Opportunities for the customer and as you've cobbled together a network Laredo is going to scale faster because it's a big facility, but then youre going to get the value out of those smaller facilities because youre in a position to do a great job for the customer in those markets.

Speaker Change: We couldn't do that before I mean, we had customers before that said a solid year fantastic, but we understand your hand off rate into those markets and once you get that solved with them. While they are with US now alright, and so I think that thats because of that sort of dynamic when you look at the trend over time the ones in the second quarter have a bigger impact.

Speaker Change: Now because the larger but the great thing is the progress of all of them over time over the last couple of years, its really exciting to see and that will play itself out over the next year or years.

Speaker Change: As we continue to developer network.

Okay. That's helpful and then towards the end of your prepared remarks, you were talking about the network and what you have now and maybe how that looks over the course of the next year or two would you let that kind of grow and build out I guess I'm curious you know they are still going to be more assets available presumably most of these if not all of these were sort of reviewed during the first process through the yellow auction.

Speaker Change: Just kind of curious how you think about that that's something that has interest to you or what you have right now for the next 10 to 12.

Speaker Change: Months is kind of what you need.

Speaker Change: So I think as I look at the 214 that we have in place right now or by the end of the year, we'll have in place.

Speaker Change: Particularly though the 'twenty one we opened this year there was a really compelling business case around all of those and so we're excited about that the ones that will relocate into next year have similar sort of compelling things, but one of the things that we have to be very mindful of and this business is that over time, there will be places that we have.

Speaker Change: The opportunity to enhance the network that we're in.

Speaker Change: And as these assets trade in the market.

Speaker Change: We'll be a participant in that we won't be in a participant and at the level that we just work, but sort of a onesie twosies and <unk>.

Speaker Change: Two or three here and there or download a couple of years from now maybe there is a year, that's five or six or something like that I think we're well positioned to be able to do that there are markets that even today.

Thrilled with the map, we have but we also see opportunities.

Speaker Change: But.

Speaker Change: As we think about it as a business today, there's a lot of value to create out of the facilities, we're going to exit this year with and then there'll be some that we can add we like the idea of.

Speaker Change: Participating in the secondary market around these facilities as they may or may not become available.

Speaker Change: That's a long term opportunity we've proven if you go back to 2017, we've proven we know how to organically grow so.

Speaker Change: And we are opportunistic around the real estate I mean, even look at the ones that we've opened up this year are there ones that we opened up that didn't come through the yellow auction process. There were in our pipeline and there'll be others like that down the road.

Okay. That's helpful. I appreciate the time this morning, thanks guys.

Speaker Change: And your next question comes from Jason Seidl with TD Cowen Your line is open.

Jason Seidl: Thanks, operator, good morning, gentlemen, I wanted to go back a little bit to October to sort of better understand how we should look at <unk> tonnage.

Jason Seidl: If we if we pushed the hurricane impacts aside early on in October.

Jason Seidl: If we takeaway the impacts of the cyber attack on one of your competitors last year is this six five look closer to double digits.

Speaker Change #101: I don't know that I would go there.

Speaker Change #102: I think Jason what I would focus on is kind of our commitment and focus on driving results out of this business. So we're not in it to try to lead the league in growth we're.

Speaker Change #102: We've got a footprint that we're trying to expand the volume will come we're not chasing volume so yes, theres disruption that's in there.

Speaker Change #102: It had an impact on the results sometimes it's interesting when you have weather events. Sometimes you just don't see you won't see the volume again.

Speaker Change #102: No.

Speaker Change #102: Sure.

Speaker Change #102: That's kind of how it goes we're focused on.

Speaker Change #102: Continuing to deliver for the customer and we're going to get our share out of that and the openings that we've got there.

Speaker Change #102: <unk> contributes I mean, if you look at sort of the growth that we've had this.

Speaker Change #102: This year more and more of it is coming from facilities. We've just opened in the last three years I mean, it's becoming a material part of the business. So we're not we're not to chase volume right sized.

Speaker Change #102: <unk>, we know what we would get from <unk> on your business of xylem.

Speaker Change #102: That's where the growth's coming from so we are not.

Speaker Change #103: Im not in a position to really comment on what it could have been I just know what it was.

Speaker Change #104: Fair enough.

Speaker Change #105: You guys made comments about potentially expanding some of the terminals.

Speaker Change #106: <unk> put up over the past 12 months, maybe next year, what type of a market we have to see to make you want to expand one of your recent additions.

Speaker Change #105: Yeah.

Speaker Change #105: Sometimes what you do is you.

Speaker Change #105: We've got one facility that we've purchased.

Speaker Change #105: And opened this year.

Speaker Change #105: What we already we see nearer and runway around that that terminal that we just needed to expand and create an efficiency make sure that we've got the appropriate amount of flexibility in our facilities.

Speaker Change #105: We're not what we meant when we expand the facility. We're not we're not thinking about next week's volume, we're thinking about alright, how do we make sure we provide a very high level of service and then over the.

Speaker Change #105: Next number of years.

Speaker Change #105: We've got ample capacity to maintain a very consistent level of service for the customer so.

Speaker Change #105: As we get choke points in the network, we absolutely will add expand capacity or maybe even relocating our facility but.

Speaker Change #105: That's kind of how we think about it.

Speaker Change #107: Appreciate the color gentlemen.

Speaker Change #108: And your next question comes from the line of Ari Rosa with Citigroup. Your line is open.

Speaker Change #107: Yeah.

Speaker Change #109: Hi, Great. This has been more on Ferrari at Citi.

Fritz and Matt. Thanks for taking the question your yield growth, maybe going back to pricing discussion has been on a fantastic trend. The last several years and then the Masstige study confirms your successfully taking pricing increases, especially this year versus last year, how much would that be a function would you say of your pricing <unk>.

Speaker Change #109: <unk> catching up to your service that's improved over the last 10 years, that's been something part of your narrowed in the last couple of years and then Conversely, how much of that is a function of being able to provide.

Speaker Change #109: Bigger reach of your network that you mentioned from your new terminal openings over the last few quarters.

But I think it's frankly, it's all the above to be honest with you.

Speaker Change #109: She got break it out, but what I would tell you as part of the compelling part of why you opened 21 facilities as Youre focused on the long term number one and your focus on the idea that if you can repeat that level of service for customers that are satisfied with that you've got a shot to organically grow into that network and <unk>.

Speaker Change #109: Turning to repeat service for customers.

Speaker Change #109: We've proven we know how to do that and when that happens where the best better positioned to be able to say listen in order for us to continue to make the level of investments in this business, we approach the customers and they understand that they're getting a lot of value from <unk> and we're in a position where we continue to focus on.

Speaker Change #109: Making sure that we are appropriately compensated for the level of investment. So this year, we're going to spend $1 billion on the company right and that that deserves a return customers getting return we're going to focus on getting our returns so that becomes part of our pricing thesis that only works. If we've got the appropriate reach in the markets for customers and we continue to replicate.

Speaker Change #109: That service.

Speaker Change #110: Great. Thanks for the color there and maybe as a follow up sticking with the study going the other direction on your service.

Speaker Change #110: You've seen it decline a bit how much would you say the year over year decline in service.

Speaker Change #110: Which.

Speaker Change #111: It seems to be from your new terminal openings how.

Speaker Change #111: How much of that is from not yet building up a large enough customer base and then how much of that do you think is from just a temporary decline in say damage on time pickups deliveries just normal growing pains, and it's temporary and we'll be out of that phase in the next few quarters.

Speaker Change #111: Listen.

Speaker Change #112: The sight internally as we typically what we do with that Mascio data or the survey data as we disaggregate that and we spend a lot of time figuring out how we get that on the trend, which we want to be we want to be best and best in the business right and that's our focus that's our commitment.

Speaker Change #112: In the last year, we've grown this footprint substantially.

We know that in <unk>.

Speaker Change #112: Situation, where your businesses contracting or youre dealing with less volume with the customer it's an opportunity to really enhance your service you can certainly deliver.

Speaker Change #113: High level remarks on your network is not stressed.

Speaker Change #113: We've grown faster than anybody else in the business, we've taken a more customers.

Speaker Change #113: Than anywhere else in the business I would I would guess certainly were representative represented in that survey more than we've ever been and Thats, a reflection of our growing footprint.

Speaker Change #113: More customers more touches.

Speaker Change #113: We've got 500 to 2000, new employees that we've added over the last net add over the last.

Speaker Change #113: Youre going to have to support that.

Speaker Change #113: We got to make sure those folks are all understand at <unk>. This is how we do it.

For the folks that have been here for a longer period of time, it's a recommitment to saying Hey, listen this is what makes US different. This is why we're outgrowing the industry and <unk>.

Speaker Change #113: We will disaggregate that data our teams across the network will be very very focused on how do we get that back on a positive track I'd point out that the industry in total got better and our marks in some cases relatively got fell a bit but I also think that I look at this as really a long game.

This isn't about what's happened here in the last few months or even last year's this is all about the long game.

Speaker Change #114: Great I appreciate the time and insights of Salt Lake.

Speaker Change #115: And your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Ravi Shanker: Thanks, Good morning, everyone. Just a follow up on the last day or that kind of seems like you have more details than we do on the data here.

Speaker Change #117: You have numbers on same store customers ranking versus new customers and that will make it very clear that it's the new terminals that are the issue here and that will take time to ramp up and also how much does something like this.

Speaker Change #118: Influenza pricing discussion with the customer like is this something that just wall Street is focused on kind of how much of a commercial impact does it have.

Speaker Change #119: Yes, Im sorry, I don't have the level of detail you are looking for we certainly disaggregate the data and spent a lot of time looking at it I don't know that we have that specific carve out.

Speaker Change #120: Listen the customer cares about the customers' experience right. So.

Speaker Change #120: We have to be intently focused on that because I think it's for us. It is about supporting the long term.

Speaker Change #120: Customer success customer has to have a <unk> partner that supports that and has the reach and footprint to do that now I think that the as I mentioned earlier the industry in total has gotten better.

Speaker Change #120: Relative to last year has got step back modestly but.

Speaker Change #120: But I think on a key a lot of the key differentiators that are included in the 30. Some that are part of the survey.

Speaker Change #120: We actually improved year over year and a couple of them we fell back some of them, we fall back on our our areas and our.

Around pricing, so sometimes customers don't like the feedback that size coming in and raising rates consistently are charging for accessorial consistently.

Speaker Change #120: Or things that sometimes the customers don't like that and you get negative feedback of that so in some ways. That's actually a good thing for us, but that's not to say we have to be able to do is be consistently better for the customer and that's that's our focus.

Speaker Change #120: When you're in a growth mode like we are in growing versus the rest of the industry.

Speaker Change #120: You've taken a more customers have new experience that haven't been on the side before.

They have an experienced and we've got to make sure that we're delivering to meet their expectations and that's more long term be successful we like the direction, we like the company's commitment to it.

We're not doubling we're doubling down on it that's for sure.

Speaker Change #121: I understood that's really helpful and maybe as a follow up just to go back to <unk>. I think you said normal seasonality that you have is $2 50 deterioration.

Speaker Change #121: Our model is something like 150 setting the.

The comparison, a little bit different so just to level set do you also have your normal seasonality benchmark for <unk> in Tokyo.

Speaker Change #122: I mean, what.

Speaker Change #122: You.

Speaker Change #123: Ravi can you maybe yours has gone a little bit further back I mean, one of the pieces for us that we tried to do for this is it.

Speaker Change #124: 10 years back is just not that valuable for us anymore. The company has changed so much over time, we've opened so many facilities. So some of those sequential trends just arent really is valuable. So we try to look at something more applicable for the recent period.

Speaker Change #124: We we havent given anything out for into next year, Q1, and Q2, yet, but we will do that as we get closer to it.

Speaker Change #125: Yes, great. Thank you.

Speaker Change #125: We took the COVID-19 year.

Horizon, but we just look backwards in recent years.

Speaker Change #126: Understood. Thank you.

Speaker Change #127: And your next question comes from Stephanie more with Jefferies. Your line is open.

Speaker Change #126: Yeah.

Speaker Change #128: Hi, Hi, good morning, Thank you.

Speaker Change #129: Hi, just a quick one for me here as a follow up to I think it was Tom's question earlier, you talked a little bit about 2025, and I think clearly gave your meal.

Speaker Change #128: Yes.

Speaker Change #128: Scenarios in a neutral macro but.

Speaker Change #128: That strong.

Speaker Change #128: Firemen scenario, how are you positioned to kind of take advantage of that inflection, but we need to see incremental hiring equipment or anything else to position you to handle that inflection.

Speaker Change #130: Yes, that's a good question I mean listen if you scale that business from here, we would certainly our variable labor costs.

Speaker Change #130: Certainly change as well and they likely would go up because we would have.

Speaker Change #130: Match driver accounts of growth were higher than what we had expected we feel like we're staffed well right now for.

Kind of the environment that we're in I think it's a pretty good match, but as you get out into the year you could imagine a scenario in which volumes maybe it's up materially the strong out as an illustration you would expect us to.

Speaker Change #130: The scale of the business, but we will still have to add some labor costs and the volume would be free.

Speaker Change #130: So I think but I think what's really exciting the big lifts.

Speaker Change #130: 21 facilities were opened this year are going to be in position in the new world scale. That's why we did this so.

Speaker Change #130: And a stronger background I'd much rather be in a position to start the year with 214 facilities well positioned ready to go and we know that we know how to operate in and we know how to scale up if we have to and we also know how to match down as we need to if we got into an environment, where maybe the volumes worked out.

Speaker Change #130: Would make adjustments on that basis, but.

I'd say the.

Speaker Change #130: Opportunities certainly there in front of us and that's why we made the investments that we've made.

Speaker Change #131: Great I appreciate it.

Speaker Change #132: And your next question comes from Bascom majors with Susquehanna. Your line is open.

Speaker Change #133: As you think into next year and talking about that.

Speaker Change #134: Capex preliminary spend of call. It this year is $1 billion or so minus the $250 million or so you spent on the unique transaction I mean, it looks like that would put you a little above your sort of long term high end of our 15% of revenue.

Speaker Change #134: Are we tapering back into that range longer term just any thoughts on that.

Speaker Change #134: The investment in the business organically and when we might get to the point where.

Speaker Change #134: You're inflicting on cash flow to the point, where where you might want to return some of that to investors and dividends or buybacks. Thank you.

Speaker Change #135: Yeah. So I mean, it's certainly if you look at our percent of revenue it's elevated.

Speaker Change #135: Couple of things to note in that the company is bigger now.

Sure.

Speaker Change #135: Yes.

Speaker Change #135: Service and make sure we have capacity to flex with customers' needs all of that is a bigger number than what it used to be so that's <unk>.

Speaker Change #135: In that as well.

Speaker Change #135: For us when you look at that denominator pricing is a big player in that if pricing gets to market naturally everything else as a percent of revenue comes back down so it's.

Speaker Change #135: Look at that and focus on that as well now in the long term it should trend back down as we continue to grow as a business and close the pricing gap and look at it from a percent of revenue standpoint, but it remains elevated into next year, just as probably a little bit more heavy on the on the tractor side versus trailers. This year. So.

Speaker Change #135: Longer term that should continue to come down and then to the second part of that question.

Speaker Change #135: We're probably not not too far out from having that discussion to the big transaction at the beginning of the year, probably first of all it was the right move for us as a business, but that impacts that timing a little bit, but we're not we're not too far out from that we've we've proved that the return on capital for our approach has been very valuable so far and it was important to continue to get the <unk>.

Speaker Change #135: Work those out, but we remain focused on making sure that the returns are there.

Speaker Change #136: As a brief follow up to your point about getting your pricing to market. I mean, we can compare reported yields for you guys and peers, but there's obviously a huge mix component there.

Speaker Change #137: What's your assessment of how far you might be below market.

Speaker Change #137: Do we think about closing that gap over a multiyear period. Thank you.

Speaker Change #138: Yeah. Good question I think what I would.

Speaker Change #139: This is kind of how we focus on it we look at public public data.

Revenue per shipment is and compare our revenue per shipment.

Speaker Change #139: And certainly we know there are some that have a mix of business that may or may not be the same as ours.

Speaker Change #139: But fundamentally we look at those and say well, maybe we ought to adjust our mix of business or can pursue a more optimal mix of business that.

Speaker Change #139: Allows us to get the pricing.

Speaker Change #139: We see others getting that is fundamentally the opportunity right in.

Speaker Change #139: Part of this this network expansion is about making sure that we have the addressable market to be able to do that and the opportunity to get the at bats with customers get their freight do a great job for them and get us to market more the network as more and more comparable now it's a national network comparable to any of those.

So now it's just we got to keep focus and that's that's a big opportunity.

Speaker Change #140: Thank you.

And your next question comes from Chris Combe with Benchmark Company. Your line is open.

Chris Combe: Yes, Hi, Greg Hi, Matt Thanks for the question yes.

Chris Combe: I know in the second quarter the terminals were larger.

Chris Combe: And some of the costs you called out.

Chris Combe: On the call.

Chris Combe: As we think about the terminals for next year.

Speaker Change #142: That in terms of the size of the cost of the relocations or are they going to be kind of like the third quarter, a little bit smaller a little bit more manageable.

Chris Combe: Yes.

Speaker Change #143: Relocations are candidly pretty straightforward.

Speaker Change #143: Some would say they are incredibly complicated they're really not basically what you do is you get the facility the new facility set up ready to go.

Speaker Change #143: The drivers report team report to a different location Monday morning, and that kind of gets you started so the typically you don't see much in the way of overlap costs those sorts of things.

Speaker Change #143: Game on in many cases, you have immediate efficiencies. So relocations really don't have a meaningful impact on the cost structure typically they offer some efficiencies or.

Speaker Change #143: So those kinds of Manhattan enhancements to the extent that we see opportunistic openings next year.

Speaker Change #143: Theyre going to be.

Speaker Change #143: The scale of them, then maybe yes, it could be a range of sizes, but the impact on a business that is.

If you add a handful four five to a footprint of 214 the run rate of revenue that we have that those are sort of more de minimis impacts when you add 11 in the quarter like we just did or six big ones like we did in the second quarter.

Speaker Change #143: Have a meaningful impact so I think as we go from here.

Speaker Change #143: I think they do.

Speaker Change #143: It will have a smaller and smaller impact.

Speaker Change #144: Yeah. That's helpful. Thank you thanks, Chris.

Chris Wetherbee: No problem.

Speaker Change #145: And your final question comes from Tyler Brown with Raymond James Your line is open.

Tyler Brown: Hey, good morning can you all hear me.

Absolutely can Europe more important in Europe. So.

We can hear you hi, Chris I wanted to I want to come back to the new employee.

Tyler Brown: Add comment that you made earlier I'm, assuming that the vast majority of those are frontline. So how do you feel about frontline productivity.

Speaker Change #147: Productivity be a really big positive story in 25, maybe even into 2006 as basically all of these guys mature.

Speaker Change #148: I would assume your productivity metrics are probably considerably off your peak.

Speaker Change #149: Yes listen.

Speaker Change #149: There is an opportunity to improve that as we as our team.

Speaker Change #149: Matures.

New folks on the team.

Speaker Change #149: Really kind of we feel like we've done a great job of Onboarding people, but for that to really have that size sort of.

<unk> got to continue getting that experience and understand through second then this is what we do for the customer.

Speaker Change #149: And then I think.

Speaker Change #149: That grows I think you also get.

Speaker Change #149: Efficiencies with that productivity out of that and then frankly.

Speaker Change #149: The new markets as you build density around those city pickup operations. That's that's naturally going to come just because you've got a you've got.

Speaker Change #149: Interest you don't start out fully utilized so theres not a leverage point there as well so I think that.

Speaker Change #149: Going forward I think there's a lot of.

Speaker Change #149: But out of that sort of maturity.

Speaker Change #149: Yeah, Okay and this is maybe a good sitting into the call. It is a big picture question, but you know.

Speaker Change #149: Culture is obviously huge and LPL you know this I mean, I noticed I've seen it up close and personal but.

How do you how do you hold onto culture, you got so many new people coming in how do your internal employee surveys look and are they kind of where you want them to be thanks, guys.

Speaker Change #149: So our employee engagements, we measure that every year.

Speaker Change #149: We have through the changes.

Speaker Change #149: We've maintained.

Speaker Change #149: Our employee engagement scores, which have been pretty high for the last three years and we've kept that up so we're thrilled with that but.

Speaker Change #149: You can always get better and.

Speaker Change #149: So we do as we break down.

Speaker Change #149: Employee engagement scores down to all the managers in the company and our thoughts are is that listen.

Speaker Change #149: <unk> well on your employee engagement. This year, what are you going to do next year to get even better and if you've got somebody that's got an engagement opportunity what are we going to do to train and support that person to be successful. So yes, we are.

Speaker Change #149: Intensely focused on that because as you rightly point out Tyler. This this is a business that is we can talk about capital. We can talk about all those things, but fundamentally it's the people that make this happen we have an awesome team will continue to invest in our team.

Speaker Change #149: And we will continue to drive engagement across his team. So that's an important part of the success.

Speaker Change #149: That's why we feel pretty good about listen this mascio.

Speaker Change #149: Sort of.

Speaker Change #149: The change this year this will be an opportunity we've got the team thats going to engage on that because they think it is important.

The customers. The first thing is an important company, making that happen Thats, that's part of our part of our culture. So we're we're well positioned for that but we just got to keep it keep it focused.

Perfect. Thanks, guys.

Speaker Change #150: And that concludes our question and answer session I will now turn the conference back over to Mr. Fritzls Gregg for closing remarks.

Speaker Change #151: Thank you operator first I want to thank everyone on the call for their patients I know that we had a little bit of a technical issue here at least for part of this.

Speaker Change #151: And we apologize for that and we know that it's been a couple of quarters of that but.

Speaker Change #151: Trust us when we say that that is something that we'll continue to figure out a way to get that right.

Speaker Change #151: I know the first 10 years that was with the company. We didn't have any challenges with just more of a recent thing but.

Speaker Change #151: We're on it so but if there are folks that maybe you didn't get all the details that they were looking for.

Speaker Change #151: Or.

Speaker Change #151: Feel free to reach out.

Speaker Change #152: Matt and I will certainly field any questions that may have fallen through the cracks there.

Speaker Change #152: But if you if you did came in and out or the important thing is that we're really excited about kind of where the company is we've just opened 11 facilities in the third quarter.

Speaker Change #152: Significantly we're already starting to see a lot of value generated out of the six that we opened in the second quarter and this supports the long term value proposition as a company. We're excited about the prospects going forward.

Speaker Change #152: Certainly we've made significant investments in the business. This year those invest investments have an eye to the long term success of the business.

Speaker Change #152: We're doubling down on on focusing on taking care of the customer thats, our intense focus because we see a lot of value that will.

Speaker Change #152: That will provide the customers from this network this now national network.

Speaker Change #152: And in the years to come so we're excited about the position and.

Speaker Change #152: We appreciate your time and interest in side. Thank you.

Speaker Change #153: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.

Speaker Change #152: Yes.

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Speaker Change #152: Yeah.

Speaker Change #152: Yes.

Speaker Change #152: [music].

Yes.

Speaker Change #152: [music].

Okay.

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