Q3 2025 Saia Inc Earnings Call
Speaker #3: Good day , and welcome to the Sire Inc. . Third quarter 2020 Earnings Conference Call . All participants will be in listen only mode should you need assistance , please signal a conference specialist by pressing the star key , followed by zero .
Speaker #3: After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on a touch tone phone .
Speaker #3: To withdraw your question , please press star . Then two . Please note this event is being recorded . I would now like to turn the conference over to Matt Beatty .
Speaker #3: Sears Executive Vice President and Chief Financial Officer . Please go ahead .
Speaker #4: Thank you . Chloe . Good morning , everyone . Welcome to Sears Third quarter 2020 earnings conference call . With me for today's call is Sears president and Chief Executive Officer Fritz Holzgrabe .
Speaker #4: 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 .
Speaker #4: 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 .
Speaker #4: 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 #4: Also , in the third quarter , we recorded $14.5 million in net operating expense reduction from a gain on real estate disposal and impairment of real estate .
Speaker #4: When we discuss adjusted operating expenses , adjusted cost per shipment , adjusted operating ratio , or adjusted diluted earnings per share in our comments , it refers to our adjusted results that exclude the gain from that real , that sale , and impairment on that property .
Speaker #4: See our press release announcing third quarter results for a reconciliation of non-GAAP Financial Measures . That press release is available on the Financial releases page of Investor Relations website .
Speaker #4: I will now turn the call over to Fritz for some opening comments . Good morning , and thank you for joining us to discuss third quarter results .
Speaker #4: We are very pleased to share that our results for the third quarter reflect our continued focus on customer service , network optimization and cost control efforts .
Speaker #4: Our customer first focus remains paramount as we continue to mature in our newer markets . Although the economic backdrop continued to exhibit the trends seen throughout 2025 , with customers awaiting a more certain environment , we are pleased that our expanded footprint continued to provide opportunities to service customers in both our legacy and ramping markets .
Speaker #4: ramping markets , which are made up of the 39 terminals opened since the beginning of 2022 , grew sequentially and improving their operating ratio by over 100 basis points compared to the second quarter , and are now operating at a sub 95 or 17 of these terminals have just completed their first year of operations , making the overall improvement in performance even more impressive .
Fuel search charge Revenue, increased by 2.1% and was 15.2% of total revenue compared to 14.8% a year ago. Yield excluding fuel search charge decreased by 0.1% while yield increased by 0.5% including fuel search charge.
For the third quarter shipments per workday, decreased 1.9% while weight per shipment and length of haul increased. Slightly compared to the third quarter of 2024, with this change tonnage per workday for the quarter, decreased 1.5% to approximately 24,700 tons compared to approximately 25,000 tons in the third quarter of 2024.
Shifting to the expense side for a few key items to note in the quarter.
Salaries, wages and benefits, increased 0.7% compared to the third quarter of 2024.
This increase is primarily driven by increased employee related costs including group, health insurance and workers, compensation costs due to cost inflation and experience.
These increased costs were partially offset by reduced wages compared to Prior year as we continue to match hours to volume compared to the third quarter of 2024 headcount was down 3%.
Purchase Transportation expense, including both non-asset truckload volume and LTL purchase Transportation miles decreased by 9.5% compared to the third quarter last year and was 7.1% of total revenue. Compared to 7.8% in the third quarter of 2024 truck and rail. PT miles combined, were 12% of our total line, haul miles in the quarter.
Fuel expense for the quarter increased by 0.9% compared to Prior year, while company line, haul miles increased. 1% the increase in fuel expense was primarily the result of an increase in national average diesel prices by over 1.8% on a year-over-year basis.
Accident claims and insurance expense increased by 22.5% year-over-year.
Compared to the third quarter of 2024 was primarily due to development of existing accident related claims and inflationary increases in cost per claim.
Depreciation expense of $64 million in the quarter is 17.2% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate, and technology totaling over $600 million over the last 12 months.
Compared to the third quarter of 2024 adjusted cost per shipment increased 4.6%. Largely due to the increases in depreciation and Self Insurance related costs. On a sequential basis though, adjusted cost per shipment improved 0.7% from the second quarter of 2025 as cost management and core execution, remained a heavy Focus
This sequential Improvement was achieved despite the headwinds from sequentially Rising fuel costs and Self Insurance related costs.
Total operating expenses increased by 0.6% year-over-year. But after backing out the net gain on real estate in the third quarter, total adjusted operating expenses increased by 2.6% for the quarter.
When combined with the year-over-year revenue, decrease of 0.3% are adjusted operating ratio increased to 87.6% compared to 85.1% a year ago.
Our tax rate. For the third quarter was 24.8% compared to 24.4% in the third quarter. Last year in our diluted earnings per share were 322 compared to 346 and the third quarter a year ago.
Our adjusted diluted earnings per share for the third quarter of 2025 were $2.81.
I will now turn the call back over to Fritz for some final comments.
Thanks Matt.
Expenses speak to our team's ability to remain steadfast in our focus on core execution and cost management. This quarter is yet another example of our team's operating performance being the best in the industry.
In addition to the gri, we also implemented a wage increase to 3%, effective, October 1st for all employees. We recently completed our annual engagement survey and for the third year in a row, had a participation rate over 6 or over 80%, this partition participation rate remains among the strongest in the industry and most significantly overall Employee Engagement remains high and actually improved compared to last year. The results of the engagement survey continue to reflect and engage Workforce despite the economic Trends seen throughout the year while we always have areas in which we can improve. I'm very pleased with the results of the survey and the ongoing commitment of our teams throughout the network. SI is expanded footprint is supported by our best-in-class team and the commitment of the team shows in the results seen in Q3.
In a down freight cycle, we continue to focus on the customer by providing a high level of service. While at the same time maintaining cost management and improving core execution, we have remained resilient amid customer shifts. That seem to transpire on a day-to-day basis and are well positioned to leverage our investments in network. Over the last few years into an opportunity to turn Sia into 1 of the largest players in the LTL industry. Given the ongoing market conditions, the results
Results we're seeing from the investments in our Network and our ability to adapt to uncertain environment. We believe that we're still in the very early stages of realizing, our full potential,
With that said, we're now ready to open the line for questions. Operator.
We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone, if you're using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then 2. Please limit yourself to 1 question and 1 follow-up. At this time we will pause momentarily to assemble our roster.
The first question comes from Chris Weatherbee with Wells. Fargo, please go ahead.
Yeah. Hey, thanks. Good morning, guys. I appreciate the time. Um, you know, maybe a couple of questions. I'm just kind of curious how things have been trending in October from a tonnage perspective or shipments perspective. And then, you know, Frederick, I noted you put the wage increase in on October 1st. Maybe you could give us a little bit of, um, color or framework around how you think about the fourth quarter operating ratio in the context of the improvement you're making on the cost per shipment, but also, obviously, some changing dynamics with seasonality and volume. So, a couple of questions there would be great. Thank you.
Sure, thanks, Chris. I'll go ahead and give the the monthly for Q3 as well, just so everyone has it. So in July shipments were down 1.2% tonnage down 0.9%, excuse me, up 0.9%.
August shipments down, 2.2% tonnage down, 2.2%.
September down, 2.2% 2.5% on shipments and 3.3% on tonnage.
And October so far shipments are down around 3 and a half percent tonnage down about 4%.
If we look at October so far we've seen, you know, Trends be a little bit uh depending on the day up and down a little bit, I think.
You know, there are maybe a few things that could be attributable to that, but the first couple of weeks were a little bit lighter than we anticipated. We still have a couple of days to go, but that's where we're tracking as we stand right now. If we think about the O portion, I'll hand it over to First 2 for some commentary as well. But if we think about the O, if you look back in history, the average sequential Q3 to Q4 is about a 250 to 300 basis point degradation. Usually, I'm assuming yours is a little bit better; there are obviously tails on either side of that.
With October trending a little bit lower this year than what we've expected so far, I think a fair range is probably in the 300 to 400 basis point degradation range. A lot of that is going to be volume dependent. Just seeing where we are so far in October—October is a big month, a 23 workday month, followed by an 18-day November, which has its own challenges, especially around the holidays in general. So, with what we see now, that's where we stand. It's going to be volume dependent as we look forward.
Departments, um, you know, we're Downstream from that and um, you know, I think to assume that that doesn't have hasn't had some impact on. Kind of the overall environment is probably a bit naive but, um, yeah. I think there's there's something to that but at the same time I, you know, I I'm pleased with what we're doing at at sire around kind of driving the results. So you know, could we get to more the history? Um, we could for sure and um, you know, I think it depends on how November develops and, and into December.
Got it. Thank you very much. Appreciate it.
The next question comes from Jonathan Chapel with evercore isi. Please go ahead.
Morning everyone. Um, Fritz updates on the
new terminals that they're
To, you know, learn from Break, Even to high 90s oard. And now you said less than 95. And I get I assume you're doing that without the volume that you had anticipated. When you open that up, is this all strictly a, a productivity cost efficiency, and given what you just laid out for October, is it possible for those new terminals to continue to edge better on a margin front? Without any volume through, or an accelerated volume, throughput in the near term.
Yeah, good question, Jonathan. Uh, the our Focus, you know, as you get develop maturity in those facilities. What's, uh, exciting about them is that the incremental can be pretty positive and you're starting to see a bit of that. So I think that, you know, as we get, um, uh, continue to grow in those markets, both inbound and outbound. That's a benefit to us. Um, now we're going to run into a bit of a challenges around seasonality, for sure. Now, right. It is, this Q4 is typically a co, uh, slower time of the year. Um, but the the opportunities there are it's about maturity in those facilities. I mean, you're, we're just now lapping, um, you know, getting full year behind us on on 17th. Um, so we're, we're really pleased with what we're seeing around operating efficiencies, uh, as we build density across, not only in those facilities but across the line haul Network, right? So as you as you build those opportunities out, that's what's exciting about the, uh, where we are at Sia.
Great. Thanks rats.
The next question comes from Scott group with
Hey, thanks. Um, I want to talk about the pricing environment if you look at yield and refer shipment xfuel, both kind of flat. Um what what are you seeing with?
The, the pricing environment. Do we? I know you don't tend to give updates, but maybe it would be helpful if you did. Right. Um, I'm do you think that we should be expecting those?
Yield metrics are expected to turn positive in Q4, just sort of any color there.
Yeah, you know, listen, I think broadly Scott, uh, the environment is is around pricing, is is disciplined and uh and focused. I mean, I think that this the underlying nature of the business is inflationary. We've talked about that and I know others have talked about that as well, and so it's important to get the pricing, right? I, I think it's also important to when you study the metrics at Sia that, you understand, a few elements of that, right? So this is a emerging the mix of business in our in, uh, for us is changing as we go. Um, you know, right now, uh uh, we highlighted for you that you know, the growth in uh, the business from Q2 to Q3 a good chunk of that came in 1, 1 and 2 day Lanes, which were really excited about because that's um, those are, uh, opportunities to grow share a lot with customers. But those are also by definition 1 and 2 day Lane pricing. That tends to be relative pricing versus, uh, 3 and 4 day lanes are. It's going to be less.
Right? That's just the market and, um, but that's not a bad thing. So you're going to have mix of businesses in there and I think the other other element to consider too, um, and we've highlighted a bit year to date. Um, we're impacted by, you know, we had a very we have a very strong or have had a very strong franchise in Southern California. And we look at, um, year-over-year, uh, third quarter that's down. Uh, hi, uh, double digits, you know, 18 or so percent um, uh, shipment wise. So that's that's a negative mix headwind for us, uh, from on the revenue line. But, you know, we look at that, um, in the holistically what we've been able to do in the uh, ramping Terminals and then the others, I think that that's been pretty good performance. So there's a lot moving in and I I point all this out because there's a lot moving in and out of our Revenue lines.
And then again, if you have any thoughts on the, the Q4 yield, I know you don't do it, but I think it would be helpful. Um, and then just when I look at the margin progression, write q1 was top down. 700 base points in Q2 was got a little bit better down 450 Q3 down. 250, so more progress, but sounds like Q4 takes a step back and it's down, you know, 3 to 400 base points again. Um, so just curious your thoughts. Um, why it's getting worse again? And it's maybe it's just too early. But any, any sort of early thoughts you have about how to think about margins next year. Yeah, so we just did a gri of 5.9%, so that's kind of gives you a feeling of what we think about pricing in the environment. Um, we're continuing to push contractual renewals so um, that's part of what the opportunity is for us. So we'll continue to, to focus on pricing and and yield management. So that's
Critical to us that that hasn't changed. Um you know, I think we need to recognize that we we saw that in October so far. It was a bit soft, it's 1 month in the fourth quarter, 23 workday month, we have November coming up which is 18 work days. Uh, the fixed costs remain the same, you don't have the opportunity to reduce those in a, you know, in a, in a month's short month like that. So, um, you know, could we over outperform the
Um thoughts around sequential, we could and um you know, but we're trying to be realistic around what we're seeing trend-wise right now and um, that's reflective in the guide.
1 add to the pricing environment. It's got Chris talked, a lot about mix. And obviously, we're getting a lot of great opportunities with customers that we're really exciting about. It's this is why we put those dots on the map and we get a chance to talk to them about an expanded offering. And we've had several customers, tell us that we're getting awarded this, because we can just now solve more problems for them. And we get excited about that. It's a great opportunity that we're going to continue to take advantage of. So there is some mixed shifts in there. But if if we look at just the contracts that we renewed Q3 of last year and how they performed Q3 of this year, unlike for like business, we're netting a little over 4%, Revenue per bill on those specific contracts. So, we're seeing good flow through on those. We would like it to be more but that that's part of the environment we're in now. Uh, but importantly, there's mixed shifts in some of these new businesses, but we underlying pricing environment, we feel remains very rational. This is an inflationary business, we have to get price.
Okay, thank you guys.
The next question comes from Jordan alliger, with Goldman Sachs. Please go ahead.
Yeah, hi morning. Um,
Question you mentioned in your opening remarks, your network optimization efforts continue? Can you provide a little more or remind us of some of the things you're specifically doing, whether it be on the Legacy side, the Total Network side, and where you are in that process? I mean, is it still relatively early in the improvement front on that side of things? Thank you.
yeah, the uh, I think, the way we studied this or described it before, so 1 of the the, uh, key things key initiatives, that we have, as you build out a network and you it, it changes, you know, there was a time, you know, a year ago, at this time, we had, um, you know,
Several at 17 fewer terminals, right? And as you add those to the terminal, how you schedule a managed Freight through a connecting, all of the dots, how you've designed that network, is critical to how you optimize costs. So what we deploy our AI models around is how do we reroute Freight? You want to do it in a way that you synchronize the system such that you have fewer handles through the system. So if you went back to Q1 of this year, as we were challenged in that environment, one of the things that we were really focused on was that.
In that period. Uh we had what we call Peak candles which meant as Freight was routed through our networks, particularly our largest Opera largest brake facilities
Taking the data that we have and figuring out ways that we can better optimize that. So it's uh, an ongoing effort. I tell you, I think we're in the early Innings because it's what's critical to that is I think we're in the early Innings of monetizing this network expansion. Um, you know, I I think from the beginning we have said pretty clearly that the idea wasn't to fill the terminals up, uh, as quickly as possible to do it in a way that people customers understood the value paid for that service and at the same time, we have to continue to optimize the cost structure behind it. It's been a bit of a challenging environment had. We had more sort of growth in those markets. I think we'd have been in a position to take advantage of that, uh, quicker. But the great thing about it is it, it's set up for really significant incremental, going forward, if as the market improves
Thank you.
The next question comes from Ken Hoster with Bank of America. Please go ahead.
Hey, great. Good morning. Um, Fritz and and Matt maybe, um,
Excuse me, parse a little bit of the, the 3 400 basis point, uh, sequential margin change. Maybe how much of that is, is what you're talking about volume? How much is it of the timing of the 3% wage increase, that was a big issue. I I think when you were debating the the the timing of the wage increase last time. So I just want to see how much of that is affecting that sequential change and then thoughts on October if seasonality holds that that
3% down. Is that a good read on the full quarter or, or is it normally just given the holidays? Does it normally get worse as we go through? Just want to understand where we are on that?
in terms of the O Sky 10,
If so, the ghee and the wage increase went into place on the same day, October 1st, for both of those that you can consider that to just wash out amongst amongst each other in terms of the guide in terms of the, the impact. So,
Net neutral from the combination of 2 of those. I mean Fricks fris commented on the fixed cost impact. If you look at the Holiday months, they're just overall Challenge from a demand standpoint but when you've got fewer work days, there's some work days that are work days and their revenue days, but they're not really full Revenue days but you get all the fixed cost aspect of it. So if you look back in our history, I mean, we've had some quarters where there's an, oh, that's higher than our average. And a lot of that you've got weather in there, you've got demand Trends. So with what we're seeing in October and trending a little bit worse than what we would typically see, I wish we had a crystal ball and read into what November and December would look like, it's just generally those holiday months have their own impacts and challenges. So we're focused on core execution, we're focused on the 4.
but it's
I would, I would view that as, you know, October is an important month in the quarter, right? So it's 23 work days, without holidays and then you get into November and December and those have them. So,
That that's kind of the burden for it.
But but Matt, are you saying that? We're we're subseasonal and it's this holiday season or something is getting worse than normal or just because you always have the same fewer days in November December, right? So, it October is more meaningful, but I'm I'm just trying to understand. If your commentary is that something got noticeably worse, and it's accelerating on the, the downside
On on the volume here. As we we enter the fourth quarter.
Well, October to date is a little bit softer than where we expected to be. I don't know how that reads out fully from November to December, but we're just taking what we see so far in October and our daily trends that, uh, we look at our at the reports every day and see what's coming through. So, not a great read out. I mean, we have we have thoughts that it sort of bounces back a little bit towards more normal seasonality, but what we're seeing so far in October is below that
Then any thoughts on excess capacity? I know that's a number that the industry gives a lot in terms of your Your Capacity and and I don't know if you want to throw in a thought on AI and Technology everybody, uh, seems to be talking about what they're adding on. I don't know if that's something you want to. If that's something you're adapting in any way to accelerate the productivity gains.
Capacity, and we're going to have some that are 85. So, you know, I think it's a relative number depending on where you are as far as technology initiatives and AI. I mean, we've um...
You know, for a number of years we've been investing in, uh, Network opposed optimization tools which are, uh, AI tools. Um, that's how we've been able to drive. Um, our efficiencies around Network, redesign all the things that we've done around, uh, our line haul Network, the the, um,
Uh, initiatives that we have around, uh, route planning, around our city operations, uh, to what we're doing to manage our staffing model. All those things are are uh, optimization tools which are AI based, um, uh, you know, our view on that quite frankly, I, you know, I
It's not new. These are things that we've been investing in for a number of years. And I, I think I'd point back to count our successes over time that that's been based on those tools. And, you know, the way we think about those tools is that there is always a new version. There is always a new, uh, feature. There is always a new analytic that comes into that, so we're continuously investing in that.
Kristoff: I appreciate the time, guys. Thanks.
The next question.
Uh, yeah. Good morning, Fritz. And Matt, um,
Wanted to see if you could give us some thoughts about. And I know there are a lot of, uh,
Moving Parts in the business, right? And, you know, mix and new terminals and Legacy Terminals, and we create market, and, you know, kind of, uh, less right out of La. So, a lot of moving Parts. But, you know, if we get to a more kind of normalized backdrop, where there isn't so much mix,
Um I just want to, you know, try to contemplate when that could be right, like is that possible as you go into 26. Um and if so, then do you think it's reasonable for us to see what you're talking about? What's called 4%, contract, pricing, something like that. Actually come through in the revenue per 100 weight or Revenue per shipment. Because it just seems like, that's been something where, you know, Market discipline, what you're doing, your services is, uh, you know, you got more capacity, all the good things, but it just doesn't seem to show up in the numbers. We see. Uh, so that's yeah, I guess that's the kind of the first element. I have a follow-up to thanks.
Yeah, it's a good question. Tom. I I mean, I think the underpinning of what we're doing, the organic expansion is quite candidly is is unlike anybody else in the LTL business. So, when you do that, um, you know, not everything on unfortunately, not everything moves in a straight line or, or, you know, kind of on a continuous slope. Um, so we we're, you know, we have to manage through challenges around, uh, differences and mix of business as that changes in the environment. You know, you see new competitors in some spots or some parts of the network. Um, those are all part that's part of the challenge. I think, what's really really compelling about Sia is that the network is poised for real opportunity, both for our customer, and for the shareholder and for the company, right? Um, the national footprint gives us reach to markets that we haven't been able to do. I mean we get anecdotes on a daily basis about how we've won a new
Piece of business simply because we've been able to solve somebody's problem into the uh Great Plains. Um where they say, you know what, you can solve that problem. I don't have to deal with anybody else.
Uh now I can do more business with you because of that and that that's a important uh value that we contribute to the customer. Um you know I think in a more normalized
Facilities at quite, candidly are in many cases, immature. Um, so I I think that longer term, there is a compelling opportunity for for Saia. And, you know, I I think we're going to, you know, continue to grind on generate value in the short term. Um, and when the market does and the Freight Market does change, I think we're we're poised to win 1 of the things. We're really pleased with and cost per shipment was down 0.7% and that's
Its sequentially. And if you think about what Fritz just said, too, it's we've got terminals. That are not mature yet. I mean, we've opened 39 terminals since 2022, 170. Inefficiencies, with those, there's fixed costs that are associated with them. So we're very pleased with the cost performance and the execution of the team on a day-to-day, but we don't open these for 1 year, time Horizon. These are long-term Investments for us, very proud of the execution that we have in the near term. But when that comes back, the incremental are going to be strong because we have that opportunity to leverage it in the new markets. But also the existing markets, where we're getting more of, that's because we can solve more problems. So it's not about just just about growth in these ramping markets, when we can solve more problems. We also get business in our existing markets, we're seeing that now and that just gets better when a freight environment gets better too, but we're seeing the fruits of that labor. Now
Yeah, that that's great. And the the quick follow-up is you know I think it's better in this type of Market to be a low price point than to be a high price point.
Um, you know, another uh, LTL that reported this morning, uh, talked about, you know, kind of Gap versus the high price point in the market and how they're closing that Gap. So I just to kind of level set, I think there is opportunity for you over time, uh, to deliver service and and maybe, you know, kind of improve price more than the market, right? So how do you think of your Gap versus whether it's odd, or, or XPO, or just kind of broader LTL Market, your gap on, you know, price point
Thank you.
Listen, Tom, that's an ongoing opportunity. We we make no mistake. We pay really close attention to that. Um, we think that is an continues to be an opportunity for us. And I would encourage anybody to study, what sort of, whatever their view of uh Revenue per Bill, across the public sector. And compare that to what where Psy is, and we feel like we got to continue to close that Gap. I think what's really compelling. If the was that analysis, you take that, and look at our cost per shipment and see how that Stacks up. And you see a really compelling, oh, that gets spit, spit out at the, at the bottom, right. And that's really what the value is in the business. And for those that understand that, I think they'd understand that, that that's what we're focused on.
But but do you have it? I mean you think it's 15 points or how wide do you think the Gap is between say you and OD or whatever Benchmark you want to look at?
Uh, yeah, it it's going to be a number like that. I I have, I have to be honest, I haven't studied the results that were published by others today. Uh, so I'm sure it's probably at a discount to that. I think that our stirs Stacks up as well, uh, if not better than others. Uh, and I think that warrants, uh, pricing and, you know, now that we have a national network that is matches up with some of those guys. I think that it's a different game, right? And that, that lets us compete on an equal footing and an equal. Footing means you're in an equal Market. That means you get the opportunity to continue to push pricing. Would a national network allows us to do Tom is to have those conversations at a different level when you're able to solve more problems and then you're having a conversation about the value you're providing, you're harder to replace. You're sticky or the reality. Over the years is we've been doing a great job without a lake for like footprint. We have a national network now for the first time that we've opened all these facilities. So we get to have that conversation more and more that helps pricing become stickier
When you're doing more for our customer, your harder to replace, that's a great value of the national network.
All right. Thank you.
The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.
Uh, great morning, everyone. Uh would love. If you could just expand on uh your initial comments on the Matthew survey and kind of uh how the results they have received. Are you guys happy with your spot? Uh, do you think it's worth, uh, investing more to get further up? Or is it a sweet spot for you right now?
Uh you know, we would have preferred that be different position there but I think there's some pretty interesting data if if people look underneath the covers. Um you look into that and you see that, you know we over-index based on where we are, in terms of our relative uh uh share relative to the market. Um I think that says that people are giving us a shot. We got to continue to focus on.
Completely satisfying those customers as they get to get to know us, um, and uh, that turns into value both for them and for us. Um, so listen, I I, regardless of where we are today in mastio, uh, we're focused on investing in behind our customers and um, that's critically important to driving value in the business.
I understand that's really helpful. And maybe as a quick follow-up, uh, probably, if I missed this, uh, just on the, uh, 4q or walk. Uh, I'm assuming the, the starting point in 3Q is adjusted for the game, this quarter.
That's right. Yeah, that's right.
Great. Thank you.
The next question comes from Bascom. Majors with sqa Hannah, please go ahead.
Yeah, thanks for taking my questions. If we exit this year and the kind of down year-over-year, tonnage 3 4% range that
You know, you're trending in October. Um,
Do you think that there's an opportunity to grow tonnage next year without a meaningful Improvement in the industrial economy?
you know, I think we'll, um,
continue to have the opportunity to, to develop share wallet opportunities with our customers. So, as we continue to solve problems, they'll be accounts that we grow with. And I think those accounts will understand, uh, and appreciate and value the service, they get from us, and I think it's going to be that kind of a, that's where the growth is going to come from. Um, if I think about the overall shipments and tonnage growth, um, I have to be honest with you, I, we like the idea of continuing to grow share, but what we really like the idea is, is generating a return for the network Investments that we've had. So it it's for us, it's really not, uh, about how quickly we can grow, uh, shipment out for the sake of shipment count. It's going to be about growing the our share of wallet with customers that value the service they get from us. So I think there is an opportunity to to grow that in the next year. Now, what what the market, you know, makes available? I, I, I don't know yet. Um, but I think our uh,
And I think that opportunity certainly is right in front of us, and we'll continue to work through that into next year.
And you know maybe expanding on that. It sounds like from your commentary on the fourth quarter. You know the margin pressure is really about
Volume operating leverage and absorption on that the necessarily anything idiosyncratic to the wage increase timing or anything like that. You know, if we're in a more flattish tonnage, environment next year.
Um, and and kind of noticing that you have had count down and you've done a very good job of controlling costs, uh, in the last couple of quarters here. But is there an opportunity to expand margin without growth in tonnage?
I I I think so not not meaningful like big growth in tonnage. I think we can continue to drive efficiencies and continue to focus on pricing continue to make sure that we get paid for all the services. We provide. That's certainly an opportunity. Um, keep in mind to the extent that we do, get a little bit of growth, um, in a network that is underutilized, um, because we invested for the long term, the incremental is going to be pretty good, right? So, um, it it's not going to take a whole lot um, and uh, so we'll we'll continue to be focused on that. I think there are incremental returns that we'll get in the business and I think we'll continue to drive that value into next year.
thank you for its
The next question comes from Bruce Chan with stifel, please go ahead.
Good morning, thanks for your question, guys. Um, maybe just a follow-up on the customer mix comments as you round out the network. Um, you've talked about, you know, wallet share expansion with existing customers which is, you know, certainly very encouraging to see. Um, maybe you can just talk about where else you're targeting growth and how that process is going, I don't you know if you can parse what sealed account penetration looks like versus Enterprise for example and you know maybe whether there are any new end markets that you think are big opportunities um you know some others have talked about you know events business, you know, grocery consolidation. So any color there would be great.
Above for us, right? So but I think that let's break those apart, uh, specifically. Um, so if you look at the facilities have been open, you know, since 2022 the what we call the ramping facilities,
Those the opportunities in those markets um, is to date, you know, 1 of the things we've been able to do is we've grown national account business into those markets in part because, you know, we already had established relationships with those customers. So as an opportunity for us to kind of Leverage in those markets and that was really part of the growth thesis, but the second part of that, that I I think that is under under underappreciated is in some of these places. We haven't done business before and so getting that sigh of brand name out there. The next legs of growth in those markets are going to probably come from, you know, the field accounts or the accounts that. Yeah, who is this, you know, who's this company with the red and white trucks? That's remains to be a, uh, growth opportunity for us, right? So, I think as you mature in markets, um, you you start with the relationships, you have you grow that business and in the secondary opportunities come from, uh, you know, in finding that customer doesn't know us. And, you know, for people that
That follows Bruce like you have you know, that we know how to do this. So if you go back to our Northeast expansion, that's exactly how we've grown that business to be the meaningful part of the, our total portfolio. We started at those national accounts because they knew who we were and we've done a great job of developing that the local business or field businesses, we call it um you know as those those facilities mature, we like um verticals and you know that particularly in spaces that value service that value our on time and value our investment in technology. Um, those are customers that are in business to deliver whatever product or service that they offer. Um, they need a good LTL partner that can achieve at a very high level. That's where we come in and those markets that you described are all ones where we can, we can win be a trade show or a grocery or, you know, whatever it might be those are c. Those are uh markets that value. Our level of service, they're getting to know.
Know us in some cases and in some markets because we're new uh they're they're finding out about us in there. So I think the growth is for us and this is the the the really exciting part about the company is across uh, all markets, all verticals. Because we're we're just now getting to maturity.
That's super helpful. Maybe just a quick follow-up. I imagine, you know, there is a margin uplift opportunity is that mix changes. Any thoughts on what that differential with those new? You Know, Field accounts looks like versus the Legacy National
Listen the the the margin uplift like if you just get the average you know sort of pick a market pricing opportunity, right? So if we get the pricing, we come in and get the business at Market. The first uplift is going to happen is you have a very underutilized facility be it a a a city driver equipment, line, haul Network.
That are already in place. And if you get market pricing on that new business, put it on that underutilized piece of equipment. That is a really interesting compelling incremental. Mark, uh, margin opportunity. Um, we, we know despite our inefficiencies,
We got a pretty good cost structure that that we can uh that we can leverage and scale from here. So I think the opportunity comes in a couple places, right? It comes from growth around, good pricing but then it's also scaling a very very competitive cost structure.
Great, super helpful. Thank you.
The next question comes from Brian, Austin Beck with JP Morgan. Please go ahead.
Thanks, good morning. So maybe first just to follow up on that line of question. Um, when you get those new field accounts, does that does that incremental to the volume? Uh, you have already there with with the Nationals and it just dropped straight in and help bounces out the mix. Or does that, do you do you shift those uh ramping facilities to have more of a percentage mix? So some of that National might churn and go away, uh, maybe you can help provide some thoughts around that and what that, where that would show up if it's more on the The Rev rev per piece side, or if it's more on the cost per shipment. So I'd rather
Business, and then you bring in something that's maybe a little bit more appropriately priced. You get all the accessories and that's an incremental, right? In terms of the pricing line.
And regardless, the volume is going to be incremental to leveraging the cost structure. So if I have a facility that is underutilized um you know that that's an opportunity for us to to win on both accounts. Um, we're not necessarily targeting. Hey is it field? Is it, you know, national account, is it, you know, different segments of the business. We're more focused on customers that say,
Let's look at the value that Sia provides and we're willing to pay for it. Right? And understand what that what that investment is um and those are customers that that fit best for us, sometimes that's a national account. Um, sometimes that's a field account sometimes as a combination of both and it could be a cross Industries. Um, so it it's more of that profile that we're pursuing, um, that that makes the most sense for us.
All right, thanks. And then, quick follow-up for Matt: can you just give some more details around the capex continuing to come down? I think for the third straight quarter here. Where is that trim coming from, and do you think you have said a good place as you exit the year? And maybe some early thoughts on next year as well? Thank you. Sure. Sure, Brian.
We have a pretty robust real estate pipeline that we look at, and from an equipment standpoint, pretty much all the equipment for this year has been delivered and is in service. So that's more on the real estate front. When we go through and look at projects, we're going through diligence on these, having conversations about what the market opportunity is going to be, serviced by different locations. So that's just looking at projects that we've got in flight and being a little more discerning on those. And it's not that we're never going to do them; it may just be that we're delaying a little bit. They've seen us push a little bit of that out as we stand. I think that's probably in a good range for this year depending on a couple of things that may flow through, but I think that's probably a pretty good range. And then, if it's still early, we're looking at next year, but I'd say an early read is probably more in a $400 to $500 million range for a CapEx standpoint. So, obviously, way down from last year, be down again from this year. And then again, the network buildout, we still have opportunities and dots that we need to put on.
On the map, but we've made big strides in that that shows in the capex line of the past couple years. So still, some finalization to be done for 2026, but I'd say, probably a 4 to 500 million dollar. Number is probably a fair range.
Okay, very good. Thank you.
The next question comes.
Hey, good morning, guys.
Morning.
Hey, I missed the first part of the call, so I apologize if you addressed it. But um, I think last quarter, we talked about Peak touches in line, haul maybe in q1 or Q2 and I think Patrick's got a number of initiatives to kind of, let's call it fundamentally redesigned line, haul to basically take touches out regardless of volume, I think your cost per shipment itself sequentially for the second straight quarter. So can you just kind of talk about where we're at on that touches or breaks per shipment journey? And do you feel at this point that you're you're basically passed Peak pain?
Yeah, Tyler. I I think we're past, uh, Peak pain. Uh, I think we're continuing every, you know, as we've passed, uh, into, you know, the next few months. And the next year, we continue to have steps around our Network redesign line, haul optimization EF efforts, uh, as we continue to refine and deploy our, you know, our AI based routing Tools around that I think there continues to be opportunity around that. And I think it's
I think what's really, really interesting is the value of that we haven't necessarily monetized yet because I think there's still a lot of growth to come in facilities that are you know, still immature. So where I say that we have the opportunity to monetize that, I think that cost structure is very effective and as we, uh, continue to grow in markets that have been open Less Than 3 years, you're going to be doing that in further leveraging, those sort of cost savings initiatives. So I think the incremental that's going to help Drive the income incremental into the future. So I I it's early Innings on on what the opportunity is. Now. It's challenged into the fourth quarter, right? Because you've got um you know, this is a notoriously this time of the year inefficient time of the year and the and the first quarter. But I would tell you that, I think that these scaling opportunities really interesting, we haven't we haven't run through a full year of leveraging, that redesigned Network.
As well because is the is the outbound inbound. Mix starting to balance out.
And I would assume that as you build that outbound side, particularly on the new, the new terminals that's going to help with this touch issue issue as well because you're going to be able to build more directs. Is that right? Oh oh Tyler great point. I mean we're early Innings on that stuff, right? So you think about just in the simplest form and now these are not huge markets, but if you just took you know, a great plain states. So the immediate value we can provide to a customer.
We can go to those points now. So you have a customer, say, that's in Dallas that says, "Hey, I need to go to Montana." Well, Saia can now go to Montana? We solved the problem. So that's an opportunity. Now the challenge for us is that immediately makes us sort of out of balance, right? So you have those Montana markets. We don't have the freight coming out of there yet. The opportunity for us is to grow out of those markets to accept that available freight; that's a balancing opportunity, right? So those are the smaller markets. Then you take a big market, like Trenton or Laredo, man. We're in the early innings there too. So those facilities have just crossed over a year. They are the opportunity to grow both the inbound and outbound.
Is is very, very meaningful. And that is all a scaling leverage, the network build, directs, take touches out. Um, and we've already got a good cost structure to start with. So I think there's an opportunity to keep getting better from where we are. That part doesn't even factor in the value that you get when
A little bit of uplift from the environment. You're you're also getting the volume back from those dense Legacy networks, right? The new works Dallas, Houston's, all those, when you get that volume back too, it's an opportunity to continue to leverage that density, that's been built over the years. So it's going to be a combination of both in the opportunity to service customers. Your right. Tyler, it's a direction, really matters in this business, too, where the freight is coming from. So length of all and wait for shipment are important metrics, but Direction really matters too. A lot of times, if you take, if you if you take a handle of you have the opportunity to improve service to a customer, you might be able
Hi.
We have our next question from Eric Morgan with Berkeley.
Hey, good morning. Um thanks for taking my question. Um I I guess just 1 for me. Um could you give us an update on uh you know conversations with customers heading into 26? I know that real time, volume picture, sounds pretty sluggish, but I guess just curious, if you're getting any early reads on uh you know, potential green shoots or just broadly how your customers are positioning, um, uh into next year. Thanks.
So, I think right now, the way I would characterize this is...
people are you? They're incrementally, maybe a little bit more confident, positive than they were at the beginning of the year, right? So if you think through, we've kind of got a, a view of what the Tariff landscape is, we've got a view of what tax policy is. We've got a view around interest rates, um,
All that is incrementally positive, right? Um, I'm, I'm waiting to see it in the numbers and I think, I think that that's um, we haven't seen that yet, but I think customers. We're, we're kind of ticking off the uncertainties which is good. Now we just need the, the next step I think is the for customers that have the confidence to say, Now's the Time to, you know, build my, you know, launch the new product or build a new facility or whatever it might be, uh, ramp up production, that sort of thing.
Appreciate it.
The next question comes from Risha, Harren with Deutsche Bank, please go ahead.
Is 300 to 400 bits of, um, oh, deterioration. I know. Matt, you talked about how October being lower than you expected contemplated and that outlook. But what are you assuming for November, December? Do we assume an inline seasonality type result for those months, or do we assume that things continue to be sub, you know, normal? Um, and then, Fritz, did you say when you were talking about margin expansion opportunity next year? I just want to clarify. That was a year-over-year comment. Um, i.e., you can still maybe expand margins next year, even if the environment remains lackluster. Uh, and then lastly, um, contract renewals. Um, can you remind us what those were in Q3? Thank you.
Yeah, I'll start. And then, uh, hand it back over to Fritz. So, I'll hit the contractual renewals number 1 quickly. So 5.1% for that piece, in terms of the margin progression, like you referenced October, what we're seeing so far, is contemplated what we've got. Our thoughts around for November and December, is that it gets back a little bit more towards seasonality. So if that's a different plus or minus it could impact where we land, uh, from what we're, what we're projecting and thinking through right now, if there's a bounce back in November, um, could we do a on the lower end of that? We certainly could but I think a lot remains to be seen in those holiday periods. But our assumption is that we're getting sort of back towards what normal seasonality would be which would
Which are usually declines from October, usually what you'd see in in October to November would be a decline in shipments and then November to December would be another decline in shipments. So that's what we're forecasting now but we'll see what we, what we get from the October exit rate.
Yeah, and is with respect to uh, uh 2026. We have it, giving you a number around. But I think, you know, if in a sort of steady state, uh, uh, environment, I think we could be in a position where we could
see some incremental Improvement around, oh, and operating income.
But I I think that
I'm sorry, pardon me.
Go ahead.
Uh okay sorry it may garbled there for a second. Um so I'm not sure what you missed but um I I think could we have operating income and oh, Improvement next year, versus 2026 versus 2025.
Environments. So we haven't quoted a number around that yet, but I think there's an opportunity for us to drive. Um, you know, some performance in the next year. Um, and uh, which we're excited about, I think the maturity and the facilities that, you know, have been open since 22 is going to be a key Catalyst for that. And then, you know, I think that as we continue to develop
Adult that share a wallet with our customers. I think that'll be a continued to um uh be a positive for us now. Those will all be contributors for us next year.
Are we ready for the next question?
We are. Thank you, wonderful. The next question comes from Ari Rosa with Citigroup. Please go ahead.
Hey, good morning. Um so Fritz. You mentioned the uh cargo claims ratio and you know with all due respect it it I'm aware. It's a little bit higher than kind of the best-in-class uh player. Uh, how do you think about your service kind of in context and to what extent is that holding back? Some of the pricing opportunity or kind of the ability to realize, um, better pricing.
So, uh, just to kind of level set a bit. Our cargo claims ratio is a gap number. So, I'm not exactly sure how everybody else calculates it. I think the best thing we can do to improve our cargo claims ratio is to get our pricing in line with the market. Um, so that's a way to drive improved cargo claims ratio right away. Um, I don't think that there is a situation where we lose business because of the cargo claims. I think that a customer looks holistically at doing business with us around everything from...
Numbers. Um, I think where we win though. Uh is that alongside of all the other things, our team does for customers and that. That's where we win. Um and then we continue to focus on driving pricing and that obviously is in the uh, denominator. So that would improve cargo claims ratio too.
Got it. That's uh, helpful. And then I wanted to shift, gears a little bit, uh, just on my follow-up. Uh, it sounds like potentially capex coming down a little bit. Uh, I I, you know, I got to say Fritz, I've heard you sound more confident, and I think this call in terms of the uh, incremental opportunity from expanding the network and into 2026 and yet the stock is obviously down quite a lot and it sounds like maybe the free cash flow is going to be pretty robust, uh, over the next couple of years. How do you think about the opportunity, maybe to initiate a buyback here or get a little bit of aggressive, uh, in terms of driving shareholder? Returns for kind of long-term holders. Thanks.
so I, um,
I'm excited about and have been incredibly excited about the Sai opportunity, and this is entirely why we invested in our network. Uh, is to generate value, not only for our customers, but for the shareholders of SIA, uh, we did it on an organic basis. We did it with the idea of creating long-term value, uh, for our customers, and for the shareholders, um, I think that we are on the
Uh, right on the cusp of really taking advantage of in a, when we have an improving Market, uh, better macro backdrop, I want to put the work 213 facilities and drive the incremental out of that. Customers will see what service they get in a business that we know how to scale. We've got a record, a history of being able to do that. Um, and I think that gives us confidence. I'm confident it because I watch every day to see what our teams doing for the, for our customers, seeing the performance there, seeing what response we're getting in a lackluster market. So I think about if there's a big Market or a positive Market, man, what the potential is? I've always known. It's there. I'm just excited about it right now because I think that longer term people need to understand that. Now we are also uh and always have been stewards of the shareholders Capital um so the opportunity to drive value is going to generate returns uh for sale.
Give us investment opportunities. The further expand this Me Network because I think there are opportunities to do that, but at the same time, I think there's going to be an opportunity. And I just don't know when to return, uh, Capital to our shareholders, uh, and any number of forms. Um, but I think that those are things that are front and center for us. Um, but the biggest thing all that happens. If we drive value out of the network, we've just we've invested in and so as we look into next year,
And frankly the capital numbers even this year. Um, you know we see slow, we see slow growth and as a uh Steward of the shareholders Capital we're slowing capital investment uh as it relates to that and uh making sure we're in a position position, the company to take advantage of the opportunities that will inevitably be there for us.
Helpful, thank you for the time Fritz.
This concludes our question and answer session, I would like to turn the conference back over to Fritz. Holes, grief size, president and chief executive officer. Please go ahead.
Uh, thank you everyone for taking the time to listen and learn about size results. We’re very pleased with the outcome of Q3. Q4 and the current environment continue to present challenges, but I think what's critically important is the underlying value that Saia is creating for customers. Ultimately, this is underlying value for our shareholders, and it's really about the story from here. How we drive incremental improvements and margins in the business that we’ve invested in over the last number of years. The company is built for the long term, and long term is long-term value trading for the shareholder. So, thank you for your time.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.