Q1 2025 Saia Inc Earnings Call

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Matt: I would now like to turn the conference over to Matt <unk> Executive Vice President and Chief Financial Officer. Please go ahead.

Speaker Change: Thank you Michael.

Speaker Change: Morning, everyone. Welcome to <unk> first quarter 2025 conference call with me for today's call are sized president and Chief Executive Officer Fritzl screen.

Speaker Change: Before we begin you should note 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 may differ materially we refer you to our press.

Speaker Change: Release in our SEC filings for more information on the exact risk factors that could cause actual results to differ.

Fritz: I will now turn the call over to Fritz for some opening comments.

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

Fritz: Do you open. These two opened the year, we experienced first quarter records for revenue tonnage and shipments of one less workday than the first quarter of 2024 with growth driven primarily by rapid terminals opened in the last three years, our first quarter revenue of $787 6 million increase from last first quarter by $4.

Fritz: 3% the growth we experienced was concentrated in our newer markets, where we're pleased with customer acceptance going into the year. Our business plans for 2025 are focused on execution and leveraging the investments we've made in our network over the last several years, we expect that the macro environment to remain somewhat muted or at least consistent what we've seen over the.

Fritz: Last two years as we approached the end of the.

Fritz: As we approach the end of April the backdrop is notably different historically, we've typically seen seasonal increases in shipments and tonnage of approximately 3% to 4% from February to March and facilities opened less than three years, we saw a 3% sequential improvement and legacy legacy facilities shipments were actually down.

Fritz: Slightly Seth March this.

Fritz: This year's shipments in total for this for the company were only modestly improved from March to April which we attribute.

Fritz: Primarily the uncertain macro environment.

Fritz: <unk> all those satisfy their service and value of our network expansion. There are pure cautious in the current backdrop and are taking a wait and see approach. We estimate the revenue impact of the sub seasonal trends to be approximately $25 million to $40 million. While the first quarter is typically impacted by adverse weather events. This year.

Fritz: <unk> proved more challenging in both magnitude of geographic location.

Fritz: The weather in the southern part of the country prompted closures and lifted up limited operations with some of our most dense and profitable regions, we experienced significantly more closures in terminals with limited operations in 2025 compared to the first quarter of last year with substantial impacts to our Atlanta, Dallas and Houston markets in 2025, we.

Fritz: That the impact of weather to our operating ratio for the fourth quarter was approximately 25% to 75 basis points.

Fritz: Our first quarter operating ratio of 91, 1% deteriorated by 670 basis points compared to our operating ratio of $84 four posted in the first quarter of last year, we remain intently focused on our pricing and mix office optimization initiatives initiatives, we're encouraged to see weight per shipment trends in a positive direction sequentially.

Fritz: Additionally, we saw proportionately more growths in our ramping markets or those opened since 2022, which while great to see can be challenging is a relatively less profitable compared to the legacy markets. At this stage. It is critically important that we maintain and continue to improve our service levels customers value certainty and reliability in their supply.

Fritz: Why chain and we believe that we're well positioned to provide that service.

Fritz: Contractual renewals averaged six 1% in the quarter, reflecting our customers' belief and the high quality of service that we continue to provide however, as the environment has impacted our performance we're focused on improving our service levels, while also managing controllable cost and productivity.

Fritz: Moving forward, we will continue to do our part for customers by providing great quality and differentiated service to justify pricing changes as are necessary to run our business.

Fritz: Now I'll turn it back to Matt to walk us through some key expense items for the quarter. Thanks, Chris.

Fritz: First quarter revenue increased by $32 8 million to $787 6 million a record for any first quarter in company's history fuel surcharge revenue remained flat increasing by 0.2% and was 15, 1% of total revenue compared to 15, 7% a year ago revenue per shipment excluding fuel surcharge.

Fritz: <unk> to 3% to $300 76 compared to $293.96 in the first quarter of 2024 and increased 5% sequentially from the fourth quarter of 2024 yield excluding fuel surcharge declined by five 1% and yield decreased by five 8%, including fuel surcharge.

Fritz: Reflecting the inverse relationship between weight per shipment and yield is a heavier weighted shipments typically drives a lower yield.

Fritz: <unk> increased 11.0% attributable to a two 9% shipment increase and a seven 8% increase in our average weight per shipment length of haul increased one 9% to 905 months shifts.

Fritz: Shifting to the expense side for a few items to note in the quarter salaries wages and benefits increased 13, 9%, which is primarily driven by a combination of our employee head count growth of approximately 8% year over year and the results of our July 2020 for wage increase which averaged approximately four 1% the growth in head count as primary.

Fritz: Related to the opening of 21, new facilities in the past 12 months, resulting in over 500, new employees comprising more than $1 billion in additional wages and benefits for the first quarter compared to last year. In addition to the increase in volume compared to prior year.

Fritz: Also impacting this line item was increased employee costs to keep the network fluid and provide service to our customers during the winter weather disruptions.

Fritz: During the quarter, we ran extra line haul miles and leverage purchase transportation post storms to keep the network running effectively we also ran extra dock operations over some weekends to ensure customers freight was minimally impacted by weather disruption. In addition, other employee related costs increased including workers' compensation and healthcare costs.

Purchased transportation expense, including both non asset truckload volume in LTE, all purchase transportation miles increased by 14% compared to last compared to the first quarter of last year and was seven 6% of total revenue compared to 7% in the first quarter of 2024.

Fritz: Truck and rail PT miles combined were 12, 4% of our total line haul miles in the quarter.

Fritz: Fuel expense increased by one 4% in the quarter, while company line haul miles increased eight 6%.

Fritz: The increase in fuel expense was primarily the result of an increase in line haul miles run partially offset by national average diesel prices decreasing by over 8% on a year over year basis.

Fritz: Claims and insurance expense increased by 23, 4% year over year, the increase compared to the first quarter of 2024 was primarily due to increased claims activity as well as development of open claims and increased cost per claim.

Fritz: Depreciation expense of $59 million in the quarter was 29% higher year over year, primarily due to ongoing investments in revenue equipment real estate and technology.

Fritz: Compared to the first quarter of 2020 for cost per shipment increased nine 4%, partially due to increased salaries wages and benefits to support a broader network of terminals. In addition to the effect of sub seasonal market impact on volumes. Additionally cost per shipment was affected by the impacts from the winter storms on network operations, including increased mileage.

Fritz: <unk> operating expenses to maintain network fluidity and.

Fritz: In addition to step up in depreciation from the opening of 21 terminals and the largest equipment investment in customer company history over the last 12 months also contributed to the increased cost per shipment total.

Fritz: Total operating expenses increased by 12, 6% in the quarter and what the year over year revenue increase of four 3% our operating ratio deteriorated to $91, one compared to $84 four a year ago.

Fritz: Our tax rate for the first quarter was 24% compared to 23, 7% in the first quarter last year and our diluted earnings per share were $1 86, compared to $3 38 in the first quarter a year ago.

Fritz: Now turn the call back over to Fritz for some closing comments.

Fritz: Thanks, Matt while there are challenges associated with the underlying environment and weather events in the first quarter is there signs of continued progress being made as a trusted carrier for our customers as we continue to provide a high level of service across our National network as always we remain intently focused on the long term opportunity to enhance our service offering.

Fritz: And coverage for our customers, while delivering significant long term value to our shareholders. While the 'twenty. One terminals opened in 2024 have all been opened less than a year were beginning to see the benefit of National network that allows us to serve our customers' needs more immediately than has been the case in the past evidenced by our shipment growth in those new markets the mark.

Fritz: <unk> opened in 2024 represented the majority of our shipment growth compared to last year, but these walk market's operated at roughly breakeven in Q1 of 2025, we do not open these terminals for growth in the next month or next quarter. Rather these are long term investments that allow us to provide service to our customers nationwide.

Fritz: As each month passes we continue to build density in these markets and improve operational efficiencies, which will continue to drive long term value.

Fritz: As we look forward, we will continue to manage through macroeconomic environment looking to adjust our cost structure and adapt to the changing landscape across our network all while maintaining our focus on the customer through discussions with our customers no surprised to hear that hesitation and uncertainty around the macroeconomic backdrop, we remain close to our customers and feel strong.

Fritz: We are well positioned to provide solutions that are changing supply chain.

Fritz: The first quarter represents certain challenges are somewhat out of our control. However, we do not see any evidence that would suggest that there is a significant loss. There is not a significant long term opportunity for <unk> in this environment, we continue to commit to providing an exceptional product to our customers. While at the same time continuing to maintain and enhance our very.

Fritz: Competitive cost structure.

Fritz: Long term, we remain confident in our value proposition and the organic growth story that is cited as well as the benefits that will add to our customer and the growth and performance of our company over time, we're now ready to open the line for questions operator.

Fritz: Yeah.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.

Fritz: Your question. Please press Star then two.

Fritz: We ask that you limit yourselves to one question and one follow up.

Fritz: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Chris Wetherbee with Wells Fargo. Please go ahead.

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

Chris Wetherbee: Maybe the question, maybe first big picture on pricing kind of want to get a sense of how you view the current pricing environment, obviously some of the yield metrics.

Chris Wetherbee: It could be pressured by mix, but I'm kind of curious how you guys are thinking big picture about pricing first.

Chris Wetherbee: Hey, Chris Yeah.

Chris Wetherbee: Important to note the weight per shipment impact on yield I know, we've talked before about our focus on revenue per shipment. So the yield metrics have that weight per shipment component.

Chris Wetherbee: I mean for US we're focused on pricing no different than we have been in the past certainly with the.

Chris Wetherbee: The capacity environment the way that it is we see customers choosing other options in certain instances when we're taking rate increases, but we view the environment. The same as it has been before everyone's acting as we would expect we maintain our focus on it so nothing different from us in that regard of course customers always challenge the pricing increases that we propose and when.

Chris Wetherbee: The looser capacity environment that gets a little bit louder, but no difference in focus from our side.

Chris Wetherbee: And then maybe just a follow up on that so if we look at you know.

Chris Wetherbee: Our weight per shipment was up sequentially length of haul was up sequentially and then revenue per shipment was kind of pretty close to flat. It was up a little bit from <unk> to <unk>. So I guess when you think about what are the drivers with a mix there that are kind of offsetting some of those what she'd be currently positive factors for revenue next year.

Fritz: Well as Fritz noted in his comments.

Fritz: Vast majority of the growth for US is coming from these ramping markets are those that have opened in the past three years and the vast majority of that growth is coming from existing customers that we already work with those rates in place with them and each month that passes we're finding out more about the mix that we handle for them and the pricing opportunities that we handle with them. So.

Fritz: We go into these markets our lead list as our existing book of customers and we're winning some heavier weighted share in those markets and we understand where our opportunities are and we're not going to handle business that doesn't work for us, but mixing those markets can be a little bit different than what we handle in our legacy and that's something about going into new markets and learning more about what we handle for <unk>.

Fritz: <unk> in different geographical locations.

Fritz: So it still feels like you have the opportunity to reprice that business. After you onboard. It is what it is and then ultimately address it as we move forward through the rest of this year.

Fritz: Chris.

Fritz: I think if you just look at our top line metrics right. We recognize that the entire book of business relative to peers and folks that are.

Fritz: I have mixed of business weight per shipment length of haul similar even different than ours that there's an opportunity for us to continue to make sure that we get paid for all the service, we're providing our services really good and we feel like we can we should be able to continue to push our.

Fritz: Let's get this to market and we look around and we see that there are opportunities for us to continue to push that we haven't we're unrelenting about that you know just this.

Fritz: Violent right now people have choices so.

Fritz: We haven't.

Fritz: And for the balance of this year and I'm sure to the next couple of we still have runway around that.

Fritz: We're focused on that opportunity.

Fritz: I appreciate it thank you.

And your next question comes from Jon Chapell with Evercore ISI. Please go ahead.

Speaker Change: Thank you and good morning.

Speaker Change: Matt trying to put a little bit of a pin on the sub seasonal trend. So you were expecting 30 to 50 basis points, although our deterioration for Q2 <unk>.

Speaker Change: Chris said weather was 25 to 75, so let's call that 50, so let's say.

Speaker Change: Weather strip all that other stuff out it feels like the sub seasonal trends was about 300 basis points. So as we think about April two two and really going forward for the rest of the year absent some return to seasonality or even kind of a catch up is one Q or kind of the starting point.

Speaker Change: How we think about them you know the deal or cadence going forward or do you think that you know this is a very low bar for <unk> and Theres a lot to catch up into Q1 going forward.

Speaker Change: Well I'll start here and then.

Speaker Change: Chime in too I mean, if you look at.

Speaker Change: We talked about January and February we've talked long about how March is really the make or break month for the quarter and historically as you know we always have some weather. This year was more challenging just in magnitude and location, but there's always weather typically March just makes up for it and we're planning for a seasonal step up in March and like Chris said, we go.

Speaker Change: Got that and those ramping markets in the new but when it doesn't come in the legacy markets. It's just tough to take the cost out in a quick 30 day time period. So we werent expecting a lack of step up from from that seasonal point, obviously, there's a lot going on in the macro and that remains uncertain I wish we had a crystal ball to be able to say what.

Speaker Change: That looks like in April to date, we're seeing sub seasonal trends as well. So I don't think anything stands out to us that would.

Speaker Change: Say that Thats better right now until we see more of that on the ground, but from our view March sub seasonal trends and how they're tracking in April is pretty similar there's a lot going on from the from the customer side right now I.

Speaker Change: I think I would clarify one point that were making on the weather.

Speaker Change: The 25% to 75 basis points.

Speaker Change: Really about what we would say we always have weather in the first quarter. The 25 to 75 basis points as the sort of incremental impact or the how much worse than normal impact. So it's always it's always there.

Speaker Change: And we quite honestly when youre in a freight business and you're running the network cross country, you're always going to have weather.

Speaker Change: What was unusual about this is when you have what our best operating part of the company is shut down.

Speaker Change: That's an impact for us so that's what that's the only reason why we called that out sort of life in a big city for US I think that the.

Speaker Change: Yeah.

Speaker Change: The challenge, though from as Matt was pointing out.

Speaker Change: When we didn't see that sort of seasonal pickup from fab to March that didn't give us the opportunity to pick that up rider to recover if you will from them.

Speaker Change: January February piece.

Speaker Change: As we look forward.

Speaker Change: As we plan and operate the business. We look we just look strictly at sort of what March looks like.

Speaker Change: And we saw that we got to a point that our model around March going forward, we haven't really seen a step up into April.

Speaker Change: I'm not going we're not going to predict may or June or frankly, the rest of the year. So we're very focused on.

Speaker Change: Kind of getting this back to sort of some normalcy around this so you know obviously when you look.

Speaker Change: Q1 to Q2 and you take out the weather.

Speaker Change: We're gonna be at a run rate that I think it's not where we want them to you, but it's better right. So we operated in March.

Speaker Change: Sort of sub 90, right around 89 on a sort of with no changes I think that probably runs in the cute into Q2, that's kind of what we're managing we'd like to get to that kind of a number for the full quarter, but we'll see how that plays out.

Speaker Change: Certainly there, we're taking cost actions, where we can but at the same time.

Speaker Change: And that we maintain the long term structure and opportunity for the business.

Speaker Change: Hum that leads to my follow up Chris I mean, Matt did say when you don't get that seasonal improvement in March.

Speaker Change: Two quick for you to make cost adjustments, but here. We are now almost through April it sounds like it has it sounds like it hasn't gotten any better of course, nobody knows where we're going from here, but certainly more a concern about the macro then it three months ago. When do you start taking some of those cost actions.

Speaker Change: And what could they be to maybe manage into a slower demand backdrop beyond just a two month period.

Speaker Change: Yes, so I mean, we we those are the costs sort of actions are of course in flight and <unk>.

Speaker Change: <unk> got one of the things you have to do it in the <unk> business you have to match labor with what the available freight is both and frankly in our legacy markets and new markets both.

Speaker Change: Some of our network planning initiatives, we're pulling those forward.

Speaker Change: And implementing those around how do we optimize that now national network. Those are in flight. We are looking at sort of what can we how can we repositioned parts of our company to more closely and better serve customers at the same time. There is a cost benefit that comes out of that so that's kind of built into what our planning is.

Speaker Change: Right now.

Speaker Change: You know we feel like we will.

Speaker Change: You'll see those the fruits of those sorts of changes will happen a little bit into this quarter and into the balance of the year.

Speaker Change: It's just all about matching our cost structure with what our customers need a log side of what we need to do to continue to drive performance of the company.

Speaker Change: Okay. Thanks, Matt Thanks, Matt.

Jordan knowledge: Question comes from Jordan knowledge or with Goldman Sachs. Please go ahead.

Jordan: Yeah, Hi morning, just two questions one how are you.

Speaker Change: Our forward do you have visibility on volume and what based on wherever that visibility is are your customers, telling you and then second you still at 13% or so Chinese grabbing the corner, which wasn't enough.

Jordan: Honestly, what as an entity kind of volumes on that front.

Speaker Change: Well, how do we think about to get you back on track seasonally from.

Speaker Change: From an overall volume perspective thanks.

Jordan knowledge: Hey, Jordan.

Speaker Change: To answer the first part.

Speaker Change: I mean, we have a robust forecasting process, but I think as everybody well knows.

Speaker Change: The news changes frequently and so when we hear from our customers like <unk> said in the script. There's no. There's hesitancy I mean I think there is.

Speaker Change: They're trying to understand how long the potential changes can be in place for supply chains are years in the making so it's sometimes hard to flip overnight I think it's it's that wait and see approach. So I think remains to be seen but.

Speaker Change: Depending on how long impacts last I think that's part of it and we're planning right understanding that we're forecasting and doing scenario modeling just just like everybody else is and then on the tonnage side.

Speaker Change: <unk>.

Speaker Change: The tonnage growth in the shipment growth really came from these new markets. Those that have been opened over the past three years. So those are operating roughly breakeven, we're not getting that seasonal lift in the growth from the legacy markets, which are our best operating we've been in those markets for many years really great density. So it's you can.

Speaker Change: Just take the volume and the tonnage growth in isolation because of where it's coming from that matters.

Speaker Change: And I think I would add Jason is that listen we'll continue those new markets Youre going to continue to get better and you know I would expect through Q2 that we'd start seeing some of those in the black because we're gonna be class you know kind of going over that.

Speaker Change: One year Mark for them. So that's great. What you would expect particularly in a tough environment.

Speaker Change: I think for the.

Speaker Change: The balance of the business and.

Speaker Change: Focus has got to be what's the available freight what are we hearing from customers, making sure that our sort of operating model matches that.

Speaker Change: When you don't have seasonal pickup I mean, this may be hard to believe but when you don't see.

Speaker Change: Volumes going from February to March the ability to adapt to that within a matter of days, it's pretty challenging right. If you go to a customer and you're expecting three pallets. It picked up and you get one well you have to still the same driver that's there and you have.

Speaker Change: Significantly less revenue so.

Speaker Change: You make the adjustment to how do you schedule your pickup and delivery operation of ticket take care of that situation right. So you're reducing the number of hours and those are all things that we have to do and are doing March into April and into the balance of the year. So as we look forward you know we hear what we see what our customers are telling us, but then it's yeah.

Speaker Change: This is what they think right now they're uncertain, they're making decisions based on a very short term sort of focus in and we've got to get ourselves kind of upside to that as well, which I think we are.

Speaker Change: And just be in a position to meet their expectations when they need it depending on where it goes.

Speaker Change: Tell you what is really important to not lose sight of in this situation is what is the reason why we invested in the national network when that when the economy does subtle and things go spring. The other way, we will be in a position to capitalize on this and that.

Speaker Change: We can't lose sight of that in a tough environment for two months.

Speaker Change: Just a real quick follow up and I apologize. If you said this already on the legacy terminals the older terminals.

Speaker Change: Can you give a sense for what was the year over year tonnage or shipment growth in those terminals year over year as opposed to seasonal sequential.

Speaker Change: Yeah.

Speaker Change: On the on the legacy ones I mean their shipments.

Speaker Change: Shipments in those markets are down I mean, our legacy book of business is looking like the peer set and the macro right now so year over year in February and March our legacy.

Speaker Change: Shipments were down in those markets.

Speaker Change: Thank you.

Speaker Change: Sure.

Operator: And your next question comes from Fatih Shimon with BMO capital markets. Please go ahead.

Fatih Shimon: Thank you good morning.

Operator: I wanted to get a little bit into the mix because.

Speaker Change: In El sauce.

Speaker Change: Last year for the most part of it.

Speaker Change: It was lighter weight chip in.

Speaker Change: Mixed challenging.

Speaker Change: And then Chile.

Speaker Change: Forward in Q1, we very quickly switched into kind of a very heavy or.

Speaker Change: Oh wait.

Speaker Change: Shipment.

Speaker Change: Which supposed to be margin accretive and it's perfectly but all of them.

Speaker Change: And it looks like.

Speaker Change: If I look at the <unk> the.

Speaker Change: Revenue per shipment the way the lengths of haul realized pricing in Q1 was negative.

Speaker Change: And.

Speaker Change: I know you mentioned price.

Speaker Change: Renewals was plus six I'm trying to reconcile these things.

Speaker Change: What how would you describe the characteristics of this quite that is entering the network.

Speaker Change: Right now.

Having a quiet, but not accretive I'm just trying to reconcile all of these things and why why we're not really seeing much better effect overall on the growth and profitability.

Speaker Change: Yes, so far it is a good question I mean, there's a variety of factors that right. So I.

Speaker Change: I think it's the weight per shipment is a positive trend for sure.

Speaker Change: But wait heavier weight per shipment into at times does.

Speaker Change: Have higher or more difficult handling characteristics. So it does attract some additional cost so it's not a complete flow through.

Speaker Change: But it's positive in general so I think that's good.

Speaker Change: I think what impacted us probably more significantly in the quarter or is that.

Speaker Change: Not seeing the step up in revenue in those legacy facilities. So we got all the growth came from the new market strike, which is good.

Speaker Change: Somewhat attractive.

Speaker Change: Weight per shipment and margin structure and immature facilities. So you have.

Speaker Change: Our line haul cost associated with those are higher than anything else. So that the growth is all there. So the relative contribution of those of that new <unk>.

Speaker Change: Freight mix is not it's not what we'd hope right now, but that's part of the startup.

Speaker Change: Meanwhile, the facilities that have been opened for three years or longer.

Speaker Change: We actually saw declines in March and a bit in February and those that's tough to overcome and that's what we're trying to adjust the cost structure to make that to match that more closely and to build the efficiency more generally across the whole network. So I think there are several factors in there I think the trends the.

Speaker Change: Top line trends are important and they're good but when you're in you know a big part of our sort of footprint is now in a sort of more startup mode that that can be challenging to overcome on the margin side.

Speaker Change: If you think about those locations bottoming there, we're not running as many direct out of those new geographies. So.

Speaker Change: Higher weighted shipments generally yes, we prefer those but you also prefer them in the legacy markets because you get more efficiencies out of those are our newly opened markets, they're often running back to a break to consolidate freight. So there is typically more handling involved with them. So where it comes from matters and this is just the legacy parts were down.

Speaker Change: You see from that so and when you take to expand that further so if you take that.

You run that through a legacy brake operation so that legacy brake operation is as its core sort of local business is down year on year.

Speaker Change: The opportunity to optimize cost because you got to keep your labor in place to be able to handle freight that goes actually passes through the facility rather than has picked up or delivered from that facility.

Speaker Change: Okay.

Speaker Change: Maybe you've answered it partially but okay.

Speaker Change: How should we.

Speaker Change: Interpret this realized pricing seems negative when in reality, saying pricing renewal is quite strong.

Speaker Change: Well I'll keep it there is a really important point is that the contractual renewals at a great sort of a metric that's out there, but that assumes that that mix of business that came along with those contract contractual renewals is exactly what we get.

Speaker Change: And I think right now what you see is customers have options. So we don't necessarily a realization of what we're getting on contractual renewals is.

Speaker Change: It's not one for one it's obviously less so it's that's what.

Speaker Change: We provide that just to give you an indicative sort of view of what the pricing environment looks like what our actual real realization will likely always be different.

Speaker Change: Okay. Thank you.

Speaker Change: And your next question comes from Tom <unk> with UBS. Please go ahead.

Tom: Hi, yes, good morning.

Speaker Change: I wanted to try to get a sense of.

Speaker Change: And I'm sure, it's just hard to do but how much of the path to improvement in or.

Speaker Change: I'm sure you are not satisfied with the go forward of an 89 O R.

Speaker Change: And you know we want to focus on improving that.

Speaker Change: Other factors like service you want to maintain but how much did the path to improvement off of what you talked about with I think March at 89.

Speaker Change: It's purely driven by freight market improvement in but not beyond your control and obviously you don't you don't control tariffs and freight economy and uncertainty all of that and how much do you think he is in your control that it's like Hey, we just need a bit more time to <unk>.

Speaker Change: Types of resources.

Speaker Change: You guys are good at that historically, managing your cost structure and pick.

Speaker Change: Pickup and delivery routes.

Speaker Change: And that would be something that could be in your control maybe theres. Some other things on mix management.

Speaker Change: That are in your control. So I just wanted to see if you could offer.

Speaker Change: Some thoughts on Oahu.

Speaker Change: What are you just waiting for freight and what maybe you can work on.

Speaker Change: So Tom that's a great question I mean internally the way we think about this and this is important.

Speaker Change: We're very very focused on the things that we can control inside the company. So that's things like on time for the customer claims ratios. All those things those are things that we can deal with cost structure are things that we can deal with.

Speaker Change: Do we get to a market in which we think the long term opportunity of businesses 75, O R or better perhaps right.

Speaker Change: Gonna need market help for that in the environment that we're in right now.

Speaker Change: That's gonna be a longwall its theres not a path on the cost side that gets us there yeah can we see continued or improvement at a modest level from here into the balance of the year, yeah, there's going to be some cost levers that we're going to take advantage of it and the ones that you know well hopefully be able to be able to improve service at the same time that we reduce cost.

Speaker Change: Those are things that we can deal with but they're not sequential if you look at our cost structure relative to the competition or the public peers.

Speaker Change: This this is a top line opportunity for us and yeah. There is some cost things that we're going to deal with but.

Speaker Change: But I don't think that that's going to be the path to the low.

Speaker Change: Or that we would that we want and think we can achieve in the short term, there's certainly things we're gonna do.

Speaker Change: Not quite ready.

Speaker Change: Identify kind of what the magnitude of that is largely because I think there's a fair amount of uncertainty around what we think the market is going to do even through the quarter.

Speaker Change: We're focused right now and saying listen there's not a change from.

Speaker Change: Today around the market, we're not expecting some big step up in the second half of this quarter or the next 90 days or anything we're saying listen we got to manage from this point and focus on the things that we can control.

Speaker Change: Okay, great that makes a lot of sense I think.

Speaker Change: For the follow up I know you've been asked on pricing a bit but just one.

Speaker Change: Again, it seems to me like the kind of contracts you could take a L. T L pricing discipline, but obviously it is cyclical. So you know if you thought market pricing was going to be 4% to 5%. This year and you know a weaker freight backdrop, maybe it maybe it's lower than that maybe its two to three maybe it's flat I dunno, how do you think about that I mean.

It does seem like the market that you compete in market pricing pricing is probably softer but do you think that's the right way to look at it do you think it goes negative or do you think it just kind of you know you can't get as much price, but still positive.

It's positive listener.

Speaker Change: <unk>, even even in the fact that the.

Speaker Change: The tonnage profile across the industry right now is soft right now.

Speaker Change: What's been reported.

Speaker Change: The cost structures are all still inflationary right.

Speaker Change: Think that Theres, not really a path that makes a lot of sense, where you cut rates to try to fill up volume and all that sort of it.

Speaker Change: These businesses require they're capital intensive there were taught require a return so I would expect to see the pricing environment to remain stable people will be rational around it now is that going to maybe be kind of a stronger end of that I think it's probably less likely just by the nature of that folks have options right now.

Speaker Change: But I don't I don't see a situation where that turns negative by any stretch. It just may not be what it has been at the same rates in the last number of years.

Speaker Change: Right. Okay, great. Thank you for your time.

Speaker Change: And your next question will come from Scott Group with Wolfe Research. Please go ahead.

Speaker Change: Hey, Thanks, good morning, guys. So.

Speaker Change: Here, yet the March and April tonnage and then.

Speaker Change: I know you don't typically do this but one of the other <unk>.

Speaker Change: I think it's helpful.

Speaker Change: 89 sort of or you're talking about for Q2 like what's the revenue assumption embedded within that.

Scott: Hey, Scott.

Speaker Change: I'll give the.

Scott: Update on the shipments and tonnage for the months. So March was up on shipments to 8% and tonnage up 12, 3%.

Speaker Change: And then month to date in April and this is not good Friday adjustment just just overall shipments are tracking down about 2% tonnage up 5%.

Speaker Change: And then on the second piece of it I mean, we don't give revenue guidance.

Speaker Change: But.

Speaker Change: Our assumption is right now is that we're not really seeing anything in April that would tell us that seasonality is back in check or anything like that so our modeling assumptions right now or what we're seeing in April and what we saw in March just continues on until we see otherwise on the ground floor and we talked about we stay very close to our customers and conversations with them.

Speaker Change: Reflect that.

Speaker Change: Understanding what the environment looks like how to plan their supply chain. So that's what we think about right now and we remain close to them and to the extent that it changes up or down obviously, we manage to that but we're not seeing anything right now that would tell us to model anything substantially better.

Speaker Change: Okay.

Speaker Change: And Matt you want to comment a lot of this new business is coming on from existing customers and we already have contracts in place with them.

Speaker Change: And maybe I'm not understanding this right, but like is there a neighboring.

Speaker Change: Terminal and every shipment had different characteristics in terms of costs and so don't they all need to be priced differently rather than more of like a.

Speaker Change: Blanket price absolutely don't take my comments, Scott as a blanket price my comment around that was when we priced out a customers business, we are providing rates in new markets and we have been it doesn't mean that we get that volume right away or have handled it historically, so sometimes when it comes onboard character.

Speaker Change: <unk> may be different than what we assumed or different than what we handle for them in a different market and we absolutely have the opportunities to go back and have different conversation. So my point around that is that our lead list. When we open new markets is to go to our customers and say Hey, we're doing a great job for you in our legacy Texas market can we.

Speaker Change: We provide a solution for your freight needs and some of these other markets and they turn us on.

Speaker Change: But sometimes we find out that the characteristics are different than.

What we view is across our total book and that's publicly available data, we know that there's a pricing opportunity. So that was what my comment was around that.

Speaker Change: Okay.

Speaker Change: Maybe just first if I can just take a step back big picture I know, we're talking about March tonnage wasn't as good as we thought but like when you look at it cost per shipments up nine in revenue per shipment up too right.

Speaker Change: Really big spread.

Speaker Change: One what is the.

Speaker Change: Getting costs down or is it getting ready for shipment.

Speaker Change: Realistically like how is this does this current quarter or is there or does it take years to start getting back to.

Speaker Change: A positive spread on revenue.

Speaker Change: Revenue per shipment first cost per ship.

Speaker Change: Yes.

Speaker Change: It's not years I mean, certainly.

Speaker Change: You have to think about.

Speaker Change: We scaled for everybody what the.

Speaker Change: Costs.

Speaker Change: Increases were year over year, and if you disaggregate that you would see.

Speaker Change: You know Theres, a big chunk of head count that got out of it that is related to facilities that have been opened in the last year. So you're going to as you mature those facilities that are the returns on that investment. Unfortunately, we cant calibrate down salaries and wages for in new markets to match kind of what that growth looks like.

Speaker Change: Necessarily so you have to you know there's a startup period there so that's going to get better. The other big element that said there is that you have a big step up in depreciation if you look at over the last couple of years are.

Speaker Change: Increases in the size of our fleet to be able to match all the growth that we've had that that's an important step so I <unk>.

Speaker Change: We will see over the as we continue to.

Speaker Change: Yeah, maybe getting a more certain environment I think we're in a position where in a matter of quarters, we're seeing that relationship grow back to where we feel a little bit better about it.

Speaker Change: I don't know that Q1 tends to trend for.

Speaker Change: Forever I mean, if you just seasonally look at our sort of cost structure. We know that as you know if we get any kind of lift there we know how to leverage that pretty quickly. So.

Speaker Change: Yeah, I think it's about time I don't think this is a year of sort of an exercise in the environment that we're in right now I'm not willing to kind of predict that with certainty you know certainly youre not in a position to be able to predict with certainty either what the market's going to look like over the next 369 months. So you know if.

Speaker Change: If we return back to a little bit more normalcy, maybe with the speeds up and on.

Speaker Change: Our cost per shipment basis, I mean, obviously like we talked about it's tough to pull the cost out that quickly when the seasonal step up doesn't come but if we go back to sort of the 'twenty two time period, our cost per shipment only up a little bit from from that period.

Speaker Change: We certainly have opportunity there, but it's.

Speaker Change: When when the growth.

Speaker Change: Shipments and tonnage were still up in Q1, so we have to handle that for it and do a great job for our customers, but our cost structure is still really good and our opportunity remains on the pricing side.

Speaker Change: Pricing and mix of business absolutely.

Speaker Change: Okay, Alright, I think I understand thank you guys.

Speaker Change: Next question comes from Jason Seidl with TD Cowen. Please go ahead.

Speaker Change: Your line, maybe muted hereof.

Speaker Change: Sorry about that.

Speaker Change: Good morning.

Speaker Change: Wanted to follow up on pricing.

Speaker Change: Pricing question.

Speaker Change: Last time, you saw flat pricing and then as a follow up.

Speaker Change: Can you walk us through the percentage of business, that's going to reprice on the contractual side in <unk>.

Jason Seidl: Hey, Jason if pricing was flat.

Q1 versus Q1 basis revenue per shipment ex fuel is up two 3%.

Jason Seidl: I was looking for when was the last time.

Jason Seidl: Is it just that you saw flat LCL prices.

Jason Seidl: Okay.

Jason Seidl: Yes.

Jason Seidl: I don't think we'd have to go back and look I don't have that readily available.

Jason Seidl: Looking back I would imagine, yes, I mean so.

Jason Seidl: So first is pointed earlier this underlying nature of this business is inflation expensive.

Jason Seidl: To run an LTE network and then on the <unk>.

Jason Seidl: Second part of that in terms of the contractual renewals I mean, our contracts renew pretty ratably throughout the year, there's no one bid season.

Jason Seidl: Times may be you see.

Jason Seidl: Customer go out to bid more when the environment is a little bit looser, but our contracts renewed pretty ratably throughout the year.

Jason Seidl: Okay.

Speaker Change: Makes sense and then I wanted to clarify you talked about shipments.

Speaker Change: We're down in March and then I think you said that April sub seasonal as well is that implying that youre seeing shipments down in April.

Speaker Change: That's right month to date shipments year over year are tracking down about about 2% now that does have good Friday in it. So if you adjust maybe it comes back a little bit, but yes, that's right.

Speaker Change: It's still around what's a good Friday.

Speaker Change: Yes, it's down overall, if you don't adjust for it and if you adjust for good Friday, maybe you get back to flattish, but similar trends to what we were seeing.

Speaker Change: Okay that makes sense.

Speaker Change: Yes.

Speaker Change: Just you and me on the Capex side I know you've got it I'm wondering if you could bucket, where you made the big Knutsen.

Speaker Change: Great.

Speaker Change: I mean revenue equipment and equipment overall is mostly in I mean, we brought it revenue equipment in earlier in the year to prepare for peak and that really on the depreciation side, it's more of the legacy markets that as an investment to support the legacy markets and the new but it's mostly in the legacy side. So most of the equipment already delivered.

Speaker Change: Liberate an in service level, a little bit that's still comes through the changes were more on the real estate side and we closely look at projects and evaluate them make sure that we understand the market dynamics and the return and it's not that we're not going to do these projects. We're just deferring them out kicking them out a little bit. So that's the real estate is really the genesis of that.

Speaker Change: Alright I appreciate it thank you guys.

Speaker Change: Okay.

Speaker Change: Your next question comes from Daniel <unk> with Stephens. Please go ahead.

Daniel: Hey, good morning, Thanks for taking my questions maybe to follow up on the sub seasonal volume commentary I think you said March shipments were down in legacy shipments month over month that is weaker than some of the peers have talked about so even in a weak macro it feels like maybe you guys underperformed a little bit from February to March I guess can you talk about why you.

Speaker Change: Do you think that shipment growth underperformed, where their service issues in March that you would point to just curious then if there were service issues because how do you fix that while controlling costs.

Speaker Change: Yeah, I don't know that I'm not aware of any service issues I think we've done a pretty good job through this time.

Speaker Change: I think one of them is really important in this business. There are a lot of variables that kind of puts and takes around monthly daily weekly volume. So you know I don't know.

Speaker Change: No that I have a specific call out to explain why we might be slightly below.

Speaker Change: What somebody else is doing.

Speaker Change: I look more kind of what the broader trend was that legacy markets. Yeah. There were down it could be as simple as we'd have a little bit of weather again in March but you know.

Speaker Change: In fact, the matter is we got to get to continue to serve customers and we got to make sure. We have the cost structure in line with it so it's.

Speaker Change: As much as there maybe underlying trends in there that would explain that.

Speaker Change: Have a call out for you.

Speaker Change: What we're focused on.

Speaker Change: Okay, and then maybe on the cost side, I guess, Matt digging into it I'm trying to understand the magnitude of salary wages and benefits deleverage you called out like head count was added in the back half or added mostly for new facilities, but that was there in the back half of last year and the back half of last year I guess, that's W. B only delivered about 200 basis points that doubled.

Speaker Change: In the first quarter. So can you unpack maybe the drivers of that.

Speaker Change: Remember we also just told you is that shipments in our legacy facilities was down or down year over year right. So that the ramping markets. Yeah. We added the heads.

Speaker Change: They've got a little bit better in the Q1, but when you don't have the same growth in the legacy markets. That's you're inefficient. Despite a short term period of time, where you can delever the cost structure to match shipments down in those markets right. So that that's really more of the stores that are not bad and fragrance.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Same as the other piece right geography matters in those markets.

Speaker Change: Don't have as dense as a customer base, you're not necessarily getting 10 shipments to pick up as some of the locations. It's a brand building exercise all it's important to keep in mind I mean, the 2024 openings. They didn't start until April last year. So they havent even been open a year through the first quarter. So that's when that's where the growth comes from it's they're going to continue to grow market.

Speaker Change: Share and continue to be more efficient and improve but when you don't have that same pick up in a little bit of that divergence between the the ramping markets and the legacy that's where that comes from.

Speaker Change: And first I understand you're cost comment there. So the fix here as we wait for volumes to improve where youre not looking at adjusting the cost structure down I guess to match.

Speaker Change: Oh, no no no let's be 100% clear, we never said, we're not looking to adjust the cost structure, we absolutely look to make sure the cost structure matches, what kind of what's available market and you've got to reduce the number of hours you've got to make sure. You load averages are good you got to make sure. Your dock operations are scaled appropriately to match.

Speaker Change: So yeah. Please do not infer that I said that there was any situation that we would not be considering costs.

Speaker Change: Great. Thanks for the color.

Ravi Shanker: Next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Speaker Change: Great. Thanks morning, everyone. If I can ask a previously asked question another way.

Speaker Change: How confident are you that the industry volume weakness, you're seeing is purely cyclical or macro related.

Speaker Change: Maybe first shift away from larger carriers to smaller private ones Armine Williams.

Speaker Change: Williams, leaving LPL go into the deal market.

Speaker Change: Yes, I like you are maybe you have access to this I don't necessarily see the private company data anywhere so I cant really opine on what their business looks like Im sure Theyre getting some of this as it moves back around.

Speaker Change: <unk> space I think if you you know looking to you know.

Speaker Change: It's a different modes, either be too I guess conceivably in a parcel or two truckload I mean, that's going to be on the fringes that could be going on and I think on the truckload side as people look at different consolidation opportunities certainly that goes on but I think as the market tightens up I think youll see a freight written.

The traditional boats.

Speaker Change: But I don't have a crystal ball, our ability to say with the 100% certainty I think those are the factors you see that or are probably not too dissimilar to what we say Ravi that highlights the importance of having a national network.

Speaker Change: History says that when the market tightens and eventually it will bounce back.

Speaker Change: Shippers flowed back to quality national providers.

Speaker Change: Certainly instances, where shippers are taking a chance and maybe trying to regional or training someone different in this environment, but.

Speaker Change: Having a national footprint matters and its ability to provide a solution to a customer throughout throughout every geography.

Speaker Change: Thats an opportunity that we have now and that will continue to have when the market gets better.

Speaker Change: Understood that's helpful and maybe a falloff granted the weight spectrum.

Speaker Change: I think you've said in the past that a lot of the new facilities are opened in markets that are lighter weight freight maybe more consumer exposure we have.

Speaker Change: Have seen some competitive dynamics, there as well I think UBS just launched a new product in the Amazon entered the inbound NTL business at least can you just talk about what youre seeing there and maybe like if it was the high end there is potentially some freight bleeding from eight <unk> at the low end is there some risk afraid bleeding from LTM.

Parcel.

Speaker Change: I suppose those factors that could happen to us speaking for our own experience what were seeing is actually the new markets that were opening.

Speaker Change: The ones that we've opened the last three years, we actually see higher weight per shipment.

Speaker Change: More.

Speaker Change: Say industrial sort of.

Speaker Change: So that's.

Speaker Change: We're pleased with that and customers seem to appreciate as well.

Speaker Change: Great. Thank you.

Speaker Change: Question comes from Bruce Chan with Stifel. Please go ahead.

Speaker Change: Hey, Good morning. This is my last one for Bruce.

Speaker Change: Follow up here on Capex.

Speaker Change: The change was primarily related to real estate side, we were curious.

Speaker Change: Might be able to perhaps.

Speaker Change: Perhaps scale it back even further should trends I guess deteriorate from here.

Speaker Change: Well the.

Speaker Change: The equipment portion again mentioned already mostly deliberated, mostly in place and we.

Speaker Change: We look at the real estate projects very critically and what's the market dynamics and how does that fit into our investment platform. So I mean, there is the real estate market can change, we don't want to Miss an opportunity to.

Speaker Change: Moving to a facility or get a prop.

Speaker Change: Property that it really fits our network and fits our long term strategy. So we're gonna be opportunistic around that but we closely evaluate the projects and to the extent that the environment deteriorates, we're going to have a pretty critical eye on this.

Speaker Change: Great and then.

Speaker Change: Curious to see your view.

Speaker Change: On the overall state of industry capacity across several TL and perhaps how much excess capacity you currently have in your network.

Speaker Change: Yeah, I mean, I think that if you look at the.

Speaker Change: Across you know kind of what you see around trends across the group I mean, I think there's a capacity we feel for us because we're in a for a good part of our network, it's sort of a startup phase or near startup phase we have a lot of capacity.

Speaker Change: We're not interested in filling it this week or next week those are long term investments.

Speaker Change: So for US we have some legacy facilities that.

Our have less capacity.

Speaker Change: Because the company has grown quite a bit in the last number of years.

Speaker Change: So I think for us on average, we've probably got 25% to 30% capacity and depends on.

Speaker Change: Which markets.

Speaker Change: You know it could be higher or lower than that but I think it's important we think it's important to have a capacity to make sure it's available for customers to utilize that.

Speaker Change: As their businesses grow we're not mostly distress, we're not in the business to try to fill the capacity. So we will over time, but for us it's more about being disciplined making sure. We get a return on all that capacity I think across the network across the industry. If you watch how others are.

Speaker Change: Kind of managing their business I think they understand its an inflationary business. So they're continuing to try to provide a good product a competitive product and focus on being.

Speaker Change: Being disciplined around managing that business in a inflationary environment with you know kind of softer topline. So I think you see that going on I think there's a fair amount of capacity across the industry right now.

Speaker Change: Excellent.

Speaker Change: Okay.

Speaker Change: And your next question comes from Brian <unk> with <unk>.

Speaker Change: J P. Morgan. Please go ahead.

Speaker Change: Hey, good morning, guys. Thanks for taking the question.

Speaker Change: No. There is no shortage of uncertainty out there in the end markets and with some of your customers, but any call outs that you would provide in terms of you know we've seen some good fan.

Speaker Change: Binds the machinery, agriculture, and some modest stuff, but anything that youre seeing in your network from those perspectives and then also anything that's maybe a little bit more positive and durable than you would've thought.

Brian: I would say Brian.

Brian: The board I think that the message around.

Brian: Maybe the caution or the.

Brian: Yeah.

Brian: Let's take time here, let's consider kind of what the macro is I think it's been what is.

Brian: Interesting about this is pretty unique or consistent across all industries. I think you would naturally as you watch what's going on with sort of import volumes.

Brian: Volumes in such certainly anything that is sort of coastal for us is probably a little bit softer than it has been.

Brian: But you know I say that and then you look across other sort of more heartland areas. You also seems in the legacy markets you don't see a real stress.

Strength, there and I think maybe that's people holding back on sort of capital investments or.

Brian: And thats kind of having a trickle down effect are impacting us in the <unk> market more broadly.

Brian: But I I don't know that there is a specific industry callout that is either positive or negative.

Brian: And the customer sets that we serve.

And just follow up on the coastal commentary see no shortage of headlines about volume falling off a cliff in the back half of this year, but.

Speaker Change: Is that something that you're you got any visibility into at this point.

Brian: Not really Brian.

Brian: We're just watching the trends they are watching kind of some of our best performing.

Brian: Facilities and there are those legacy markets and those are California, and yeah through Florida, you know those have been some pretty good operating areas for us as well as Texas, Louisiana All of those places, which have some impacts there and so we're we don't have sort of that.

Brian: Growth of those markets I think you have to point to at least some of that.

Brian: Right and then just to touch.

Brian: On the startup.

Brian: Matt can you give us.

Brian: Maybe a little bit of context in terms of how these will ramp up.

Brian: Rest of the year, obviously breakeven right now you've called out depreciation is a big headwind.

Brian: I'm, assuming labor productivity is a bit challenging right now but.

Brian: Maybe if things stay where they are in April do you have visibility to when these might turn profitable or maybe quantify sort of a headwind do you expect sort of a bit more temporary here given what seems to be needed.

Brian: Sure.

Brian: If you think about the difference in a new market and we've talked about Garland before.

Brian: We wish they were all like that you'd go into a market you've already got several terminals in the market. Good density, but a lot of these new facilities. There brand building exercises were going in and talking to customers about <unk> in those local markets. So when.

Brian: When we look at the 2024 openings, they've all been opened less than a year and even those ramping once 'twenty. Two onwards, we don't open facilities with the expectation that they're going to be at market share company average operating ratio in the.

Brian: The first year or two years, sometimes even even longer than that so each market is a little bit different but I think very important is every conversation we have with customers is an opportunity for us to sell a nationwide network and when you do that you can handle more business for them you can provide solutions for them there is opportunities for us where even.

Brian: In a legacy market, we have not been able to handle a customers business because they ship to one location, we handle and another that maybe we would have handed off in the past now.

Brian: That we have a national network, we get opportunity to both the new market and the legacy market because the customer when they may want to May have wanted to route that entire location. So both in the existing markets in the newer markets you'll have opportunity to build density over time, youre going to be able to build enough scheduled to run direct rather than having to run a break so all of that.

Brian: As part of the natural opening and.

Brian: So year subsequent to that of really improving operations and that takes time, it's something that we're very focused on but we don't expect that to happen in the first nine months and we work hard at it and our teams work hard at it but it does take time.

Brian: Okay understood. Thanks, guys.

Speaker Change: And your next question comes from Brandon <unk> with Barclays. Please go ahead.

Brandon: Hey, good morning, and thanks for taking the question I know, it's been a long call, but I guess strategically I mean, we're listening to you here. This has been a multiyear nature.

Brandon: <unk> nationwide network investment for you guys and Youre, just going to be a multiyear process to to build it out and when you talk about that excess capacity I mean, there's always a balance between scope and scale in our network. So if you're going to continue to serve those customers. I think you brought up a great example, like we're in a better time there'll be picking up three pallets, but now you are picking up one and you'll try to manage.

Brandon: Pickup and delivery labor hours against that but at some point network scope or dictate that youre going to serve that customer. So do you look at that a little bit differently. If we're heading into a downturn commercially do you manage a little bit more towards variable cost thinking if the capacity is going to be there why not try to take some incremental revenue or is that the <unk>.

Brandon: One way to think here.

Brandon: Listen if there if there is an opportunity for us to drive some incremental revenue the right way, meaning that hey, we're in a position that if we schedule our operation or our pickup and delivery that we can get that second or third palette from a customer because we've got a national reach now are making sure that they understand.

Brandon: The stand that we have a national reach when you think about if you had a if you've got a.

Brandon: Manufacturer somewhere and if our sales rep can go into that manufacturer and say listen Hey, you know what I know, we're picking up one pallet of freight and it's going to Dallas right now because that's what we've been doing for a long time, but by the way I've got 21, new facilities. We've opened in the last year and you know what a great job, we do for it and go into Dallas, Hey, how about I guess you get the.

Next two palettes and we'll go to the other 21 facilities and that that's an opportunity for our folks to be able to that's a sales opportunity for them right and that's the right way to grow grow the business and you might say listen you know what we could there's an efficiency that comes along with that.

Brandon: That pickup I just described gives us all three pallets.

Brandon: We can we can provide that service story in it that's kind of in this sort of environment. That's what you have to be willing to do is to go into the customer make sure. They understand what it is what value. It can provide to them and I think our team.

Brandon: We're doing that but you know it takes time to in that customer's going to say well I'm not familiar with you and in these new markets.

Brandon: Maybe it's one powder at a time you already did one now give me two three.

Brandon: Right.

Brandon: So that's.

Brandon: That's a kind of a it's a part of building scale and density into our network.

Brandon: I think that's a bit of our opportunity that remains but in an environment right now where customers are.

Brandon: They're being cautious that's a tough sell but that doesn't mean, we don't give up we give up on us.

Brandon: I.

Speaker Change: Right at that and then just thinking from a line haul perspective, how do you optimize.

Speaker Change: When you were thinking shipments are going to be up and now we're just not getting that growth.

Speaker Change: Yes, so the biggest the biggest thing that we're working on around Whitehall is figuring out how do we are load averages were actually pretty pleased with but as you build density you want to be able to build more what we call direct so rather than having a.

Speaker Change: Freight that moves through two or three a brake operations or hubs to get it say post the coast or even across a more regionally. If you can figure out ways to go drive a little bit of volume gets those customers consolidate that freight and build a direct route from say, our Atlanta, all the way to California without having.

To break the freight through Dallas or Phoenix that that's actually a way for you to build scale you take out a handful of that meaning you don't have to touch that freight quite as often that's a way to build efficiency. So that's something that we're working on it as we've scaled the network there are more and more opportunities for us to do that which will continue to do and.

Speaker Change: So those are that's a core execution sort of program for us.

Speaker Change: Thank you France.

Richard <unk>: And your next question comes from Richard <unk> with Deutsche Bank. Please go ahead.

Richard: Hey, Paul.

Speaker Change: Just wanted to follow up on a couple of points. So on the first question.

Richard: From a public health standpoint.

Speaker Change: So it's very attractive pricing I would say relative to competition.

Speaker Change: I'm just surprised I would think that as customers maybe price more price sensitive in an environment like that you would have more opportunity to take share. If maybe you can just elaborate on that.

No it's happening I can't find especially now that you have a national network.

Speaker Change: Two market and.

Speaker Change: Number two I think skeptics so far maybe just adding too much capacity in Mexico is now really coming from I, just wonder how you would push back against that and is it a cycle turn to get that mix headwind to abate.

Speaker Change: Naturally as you build density that you've talked about at this low point in the cycle.

Speaker Change: Yeah those are good questions.

Speaker Change: I think if I look at although we were not real pleased with where we're expecting more of an uptick into March I think in total you looked at our performance for the first quarter, we reported gross so.

Speaker Change: And I think others haven't reported that so I think we are taking some share there, but it's on the margin at the end of the day to be quite honest with you were.

Speaker Change: Really focus less maybe on market share and more on driving value. So we think value comes from being able to provide that national footprint.

Speaker Change: And provide consistent service across that now we will get our fair share as a result of that will also get a fair return out of that.

Speaker Change: As we look at you know running this business over the long term. We've long said this is all about and an organic.

Speaker Change: Long term investment to build a national network and.

Speaker Change: That's what we've done we've got an asset now that is pretty significant that when the market does turn and I think it will I can't tell you when but it will be in a position to leverage a $213 14 facility network.

Speaker Change: That we couldn't have had we sat on the sidelines and set our heads that would there wouldn't be that value that we can provide our customers. So I think it was those are important investments to make I think the opportunity for us to scale out of this on a.

Speaker Change: Recovery, and maybe a macro or strengthening macro I mean, I think there's a lot of value that we can provide to customers and I think we can provide the shareholders. So I I think about these things on a long term basis and less on what happened in March of 2025, I think about what's the long term values.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: And your next question comes from <unk> majors with Susquehanna. Please go ahead.

Speaker Change: Thanks for taking my questions.

Speaker Change: You can't control what the market gives you I guess you only have a little control of mix and some other factors that are that are impacting the business here, but I think you can manage expectations and.

Speaker Change: What's the right way to think about May.

Speaker Change: Maybe the rest of the year starting from time to 89, a show or that we're tracking out today I mean, typically in <unk> and in a normal seasonal period, we'd have some margin degradation in the third quarter and the fourth quarter can you frame what that looks like are you before but.

Speaker Change: How do we level set expectations to a place where you know.

Speaker Change: Maybe you expect the worst and hope for better I mean can you help us with with that framing even if it's not your base case expectation for how the year goes thank you.

Speaker Change: Listen I'm not in a position where I feel comfortable of giving a sort of a long term view or three and four quarter view on this.

Speaker Change: What I will tell you is that I'm gonna folks, we're going to focus on maintaining very high levels of service maintaining a what we have right now on the sort of runway that we're on right now and making sure that we have.

Speaker Change: The appropriate organization cost structure to match this and continue to drive what productivity, we can in the business.

Speaker Change: And be in a position most significantly that.

Speaker Change: When the recovery or strengthening macro happens that we can take advantage of it that's where the values created value isn't going to be created about what happens next month or the month after that or frankly.

Third quarter in all likelihood, it's going to be all about what we can do the scale out of this and I think that's we can't lose sight of that so I think about that.

Speaker Change: And I know that I I don't know what the catalyst will be for the macro one way or the other.

Speaker Change: We lived through the first quarter into April and we know what that is so we're going to manage around that sort of level and then if things get better from here great we'll be in a position to take advantage of it.

Speaker Change: Okay I appreciate that in the long term focus.

Speaker Change: Just a housekeeping Matt you had talked about last quarter about interest expense or any way to frame maybe some of the fixed costs you have visibility into whether you know where you're shaking out on.

Speaker Change: On interest for the year, and maybe depreciation as well so we can level set that piece. Thanks.

Speaker Change: Yeah.

Depreciation obviously.

Speaker Change: Pretty substantially in Q1, I would expect that showed a year over year run rates to continue we got the equipment in service earlier than what we typically wouldn't you asked a billion dollars worth of investments is going to continue to flow through the P&L.

Speaker Change: I continue to run that out and then on the interest side that we had talked about that we'd be into our credit facilities and we are.

Speaker Change: And I would expect that to continue through the year and maybe it peaks in the queue.

Speaker Change: Q2, Q3 ish timeframe and then starts to come back down a lot of that really just depends on timing of real estate transactions and things like that but those are.

Speaker Change: Those fixed items will stay relatively consistent in terms of the impact.

Speaker Change: Thank you both.

Ken <unk>: And your next question comes from Ken <unk> with Bank of America. Please go ahead.

Hey, great. Good morning, I know you've run over our pricing a lot, but the stocks down now I guess almost 30% right now Barry on fire like 91 O R.

Speaker Change: But I want to talk maybe a bit more on pricing you mentioned customers have choices something we haven't heard from you before versus kind of normal discipline pricing when you talk about pricing.

Speaker Change: I noted that Theyre lowering G R ice to keep some customers aren't capacity is taking some transactional business.

Speaker Change: How about to understand if you've got 30% excess capacity in the industry.

Speaker Change: How are we not seeing the beginning of us chasing on price certainly at the lower end. It seems like that you've been asked about customers at the bottom and top end moving to different modes. So.

Speaker Change: How are we not seeing that.

Speaker Change: It's being kind of an example of a really pricing competition kicking in yet.

Speaker Change: And just to be very clear when we say that customers have options. It doesn't necessarily mean that someone is coming in and using rate to grow the business or anything like that it means that there is cut shippers in an environment. Like this are willing to try things that they may not have tried before maybe theyre moving it and splitting it into a regional moving the cost structure.

Speaker Change: And density of our regional carrier spits out a different price than what a national carrier can provide it's.

Speaker Change: It's not that someone's coming in necessarily and driving it with rates. Its just theres different cost structures out there different densities different places like that in.

Speaker Change: In an environment, where people have capacity and shippers are challenged and they're trying to save money, they're just more willing to take that chance on a on something different so.

Speaker Change: Doesn't change the fundamentals of this business that is very inflationary capacity has come out of this industry continuously over the past number of years and that's not changing from that regard.

Speaker Change: The National network to US is really an opportunity as we continue to build share with customers and when the market turns we're going to benefit even more from that so there's just you see it and you hear it from shippers and their supply chains, there in an environment, where their crafts, they're willing to try something different that's our comment around that.

Speaker Change: Okay, and then can you talk a bit about service levels I don't think we've heard I dunno claims ratio on time performance have you given those numbers and then.

Speaker Change: I think just in response to the last answer you cut capex, but you pick up more debt.

Speaker Change: Yeah.

Speaker Change: Actually after your massive Capex program was done so maybe what drove that is there something going on in working cap or anything else, we need to know about mine.

Speaker Change: From a claims ratio standpoint claims ratio for the quarter <unk> five zero percent, which is.

And improvement and we've still got room to work on that but <unk>, 5% from our claims ratio standpoint.

Speaker Change: On a capex standpoint, I mean keep in mind that the timing we had a.

Speaker Change: Lot of deliveries and in service and equipment in Q1 so.

Speaker Change: A big chunk of Capex in Q1 that drove the need for the revolver.

Speaker Change: Okay. Thank.

Speaker Change: Thank you.

Speaker Change: And your next question comes from Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore: Hi, good morning.

Speaker Change: To.

Speaker Change: Continue on the last call. The last question in conversation. So high level question here, Yeah look whether it's due to whatever reason, it's increased technology or better inventory management, our ability to use a broker in multiple modes of transportation is there potential overarching industry dynamic that simply less volume we need to do yes.

Speaker Change: And LPL network to.

Speaker Change: To the point, where you know when this environment doesn't actually turn.

Speaker Change: Is there potential for less volumes to return to the alteon industry versus maybe prior recoveries.

Speaker Change: Yeah.

Speaker Change: Stephanie.

Speaker Change: Thanks for the question.

Speaker Change: Or is there some set of facts that.

Speaker Change: You could see some of that but I think that what you see though potentially I mean you.

Speaker Change: Consider that potentially re shoring near shoring in the <unk> or the sort of broader industrial space I think that plays well for <unk>.

Speaker Change: I think the characteristics of freight may change overtime, but the fundamentals of it still where we fit in the supply chain are pretty important right. So the fact that characteristics.

Speaker Change: Characteristics of.

Speaker Change: The freight that goes into a home improvement store a car.

Speaker Change: Coffee shop, our residential delivery to a manufacturer those characteristics over time may change, but the fundamentals might say that each one of those destinations. They don't require a truckload of anything right they require pallets or whatever it might be it maybe lower weight. It may have different profile, but that's.

Speaker Change: The unique part about LTE L. Right, we were servicing all of those at those customers with the same assets.

Speaker Change: And I think that that's an important characteristic of it and I think the other thing about it is that those assets underlying assets and that people will do it that's inflationary. So I think that that's not something that's easily replaced by other things what our business and what the freight we handle the characteristics of it certainly may change over time, but I do think the industry.

Speaker Change: Broadly in sight.

Speaker Change: In particular, I think we have a unique place in the supply chain that I think that it has a sort of a permanent place to just may look different over time much like it looked different 20 years ago.

Speaker Change: Great I appreciate the time thank.

Speaker Change: Thank you.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: Our next question comes from Christopher <unk> with benchmark. Please go ahead.

Speaker Change: Yeah, Hey, Chris Hey, Matt Thanks for taking my question.

Speaker Change: How are you feeling about the long term profitability of some of these new facilities is there something structural we should think about in terms of.

Speaker Change: The long term or what are some of the new facilities, you know I know each one is different but.

Speaker Change: Some of them smaller and just arent going to get to the owner level that some of the legacy ones aren't where maybe just help me out with a long term.

Speaker Change: Or that we should be thinking about.

Speaker Change: Yes, Chris that's a great question, because I think it speaks to the long term potential of site and while we have the last couple of years. We've spent a lot of time talking about how important the and what the opportunities for the organic sort of growth story of our company and I haven't seen any.

Speaker Change: Thing that would tell me that the organic growth story has changed it maybe has slowed because of what we just saw in the quarter, but I still remain very very adequately.

Speaker Change: We.

Speaker Change: I believe in the potential is still there. It's just it's delayed unfortunately, but what we see the facilities that we've opened I haven't seen anything that would suggest that theyre not value or contributors to our sort of drive to get the business into the seventy's or am I still see that I think it's the potential absolutely is there.

Speaker Change: Yeah, some of those facilities and we know this we've long there. There's some of those facilities are not going to get to the company average or that's okay. Because what it's going to do is it can facilitate some of our leading facilities getting well below the company average you are and that's important in a network business the value of the network is every single point.

Speaker Change: In that network and I think that there I haven't seen anything.

Speaker Change: In this quarter or in a recent time that would suggest that there our ability to get there in time has been impacted it's just it's been drawn out of it.

Speaker Change: Okay helpful and then Matt just shorter term.

Speaker Change: I know, our salaries and wages will be a headwind year on year I mean, how should we think about head count as we go forward here.

Speaker Change: Given the hiring you've already done that.

Speaker Change: Facilities, you've already opened and then the fact that they're not going to be that many open this year.

Speaker Change: Yes, I mean, we would expect it to trend down from here we are.

Speaker Change: Again keep in mind, the first quarter were still up in volume, but with the trends, we're seeing right now I wouldn't expect that moving forward and unless something changes.

Speaker Change: We evaluate that closely and we'll be looking at that as we continue to move forward, but I would I would expect it to trend down from here.

Speaker Change: So.

Speaker Change: Just to clarify some of these new facilities that don't I mean, if they'll get the volume went up you would still need to add employees robin fully staffed and they're not fully Scott absolutely not but that right. You know what if I have that we have to add people in Butte, Montana that means we probably are humming in Dallas and you want us to do that.

Speaker Change: Got it.

Speaker Change: You guys I appreciate it.

Speaker Change:

Speaker Change: Okay.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Fritz hold scraped for any closing remarks.

Speaker Change: Thank you operator, and thanks, all that have called in.

Speaker Change: Q1 marked a challenging quarter for <unk>.

Speaker Change: But we remain very very committed to the long term value proposition inside can provide to our customers and to our shareholders and it's not a.

Speaker Change: I would consider a Q1, perhaps as a speed bump or a delay, but ultimately long term the value of the businesses remains to be significant and I think we'll look forward to talking about the success in quarters and years to come. Thank you.

Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].