Saia, Inc. Stock

Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2026 Saia, Inc. Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I will now turn the call over to Matthew Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Gary. Good morning, everyone. Welcome to Saia's Second Quarter 2026 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe.

Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

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

Good morning, and thank you for joining us to discuss Saia's second quarter results. We're pleased to report a strong quarter that reflects the dedication of our team, the consistency of our service offering and the continued progress we're making on our long-term strategy. Our results demonstrate the benefits of our disciplined execution, ongoing investments in our network and people and our commitment to delivering high-quality service for our customers.

Our second quarter revenue of $956 million surpassed last year's second quarter by 17.1% and is a record for any quarter in our company's history. Shipments per workday, which were a record for a second quarter, increased by 4.4%, and pricing and mix management efforts drove an increase in revenue per shipment, excluding fuel surcharge of 1.5% compared to prior year.

Our mix management efforts as well as improving freight backdrop contributed to a 3.9% year-over-year increase in weight per shipment. Notably, weight per shipment improved 4.9% sequentially from the first quarter of 2026 and improved for the seventh consecutive month exiting the second quarter. Importantly, our mix management efforts and pricing actions are taking hold. And as revenue per shipment excluding fuel surcharge improved throughout the quarter, with June improving 4% from April and about 4% compared to June of last year.

Operating income increased 26% year-over-year to $125 million. Operating ratio for the quarter was 86.9%, an improvement from 87.8% in the second quarter of 2025, and a 480 basis point improvement sequentially from the first quarter, far outpacing historical seasonality of 250 to 300 basis points of improvement.

Service levels continue to improve across key performance indicators during the quarter, reflecting our ongoing focus on putting the customer first in our daily operations. Despite lower head count and increased shipments compared to prior year, we achieved a record cargo claims ratio of 0.3%, demonstrating our ability to deliver high-quality service across our now national footprint. We also continue to see the benefits of decentralizing our customer service operation. One year after that transition, an average customer inquiry handling time has improved by 50%, strengthening customer relations improving responsiveness and enhancing the overall customer experience across our expanded network.

Even as we have expanded our footprint, equipment base and team, we continue to see the benefits of our investments in our driver training and safety programs, miles between preventable accidents improved by more than 45% compared to the second quarter of 2025 and hours between lost time injuries improved by 17% year-over-year.

With our value proposition increasingly clear, we continue to see strong customer recognition of the service and reliability we provide. Contractual renewals were 10.7% for both June and for the quarter, reflecting our continued focus on pricing discipline and the value we deliver to customers. In addition, our GRI of 7.1% was implemented in early July, it's consistent with the quality of service we deliver and our expectation that pricing appropriately reflects that value.

Customers expect high-quality service and our record level of investment over the last few years reflects our dedication to providing unique solutions in every market. While customers always have options for managing their freight needs, our value proposition is becoming more apparent than ever as demonstrated by continued investments in the customer experience. More than ever before, customers are choosing Saia and our expanded footprint is providing more opportunities with both new and existing customers.

We recently announced the launch of Saia REV, a company-wide initiative. REV or rapid, expanded and visible reflects our commitment to the customer. The customer will see our faster transit times, expanded logistics capabilities and enhanced shipment visibility for them. This initiative demonstrates the value of our national network and continued commitment to improving the customer experience.

As part of Saia REV, we were able to offer our customers faster and more consistent transit times, including more than 2,000 transit time improvements across our network. The initiative will also automate our guaranteed 10:00 a.m. delivery service, the earliest guarantee delivery of any nationwide LTL carrier. In addition, the initiative will provide customers with dynamic real-time shipment tracking, updated ETAs and predictive insights to help anticipate special service needs. The announcement of Saia REV is yet another example of our best-in-class technology. We'll continue to drive improvements in our operation and enhance the customer experience.

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

Thanks, Fritz. Second quarter revenue was a record for any quarter in the company's history, increasing to $956.5 million, which is a 17.1% improvement over the prior year, while shipments per workday increased 4.4% and tonnage per workday increased 8.4%. Fuel surcharge represented 22.3% of total revenue for the quarter compared to 14.6% in the prior year. Revenue per shipment, excluding fuel surcharge, increased 1.5% to $303.12 compared to $298.71 in the second quarter of 2025, reflecting continued execution on pricing and mix management initiatives.

While our mix headwinds eased throughout the quarter, our Los Angeles region business, which is generally our highest revenue per shipment, was still down about 2.5% in shipments per workday year-over-year. Despite those mix headwinds, our pricing actions continue to take hold throughout the quarter, and June revenue per shipment, excluding fuel surcharge, increased about 4% from June 2025. Revenue per shipment, including fuel surcharge, increased 12% compared to the second quarter of 2025. Yield, excluding fuel surcharge, decreased by 2.2%, primarily reflecting a 3.9% increase in weight per shipment during the quarter, while yield including fuel surcharge increased by 7.9%.

Adjusting for the impact of the 3.9% increase in weight per shipment and the 0.6% decrease in length of haul as well as delivering headwinds from declining shipments relative to the total in the Los Angeles region, all of which have negative impacts to yield, core yield, excluding fuel surcharge, was up about 3% compared to prior year.

We continue to see traction in our recently opened terminals. Our terminals opened in 2023 and 2024 operated in the low 90s and improved nearly 300 basis points compared to the second quarter last year. We successfully opened 5 new terminals in the second quarter, and we are excited about the opportunity to provide solutions for customers in these new markets. Length of haul decreased 0.6% to 888 miles compared to 893 miles in the second quarter of 2025.

Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased [ $43.4 million ] or 11.1% compared to the second quarter of 2025. This increase was primarily driven by higher employee hours in response to increased volumes and higher compensation levels associated with improved company performance in addition to a company-wide wage increase in October 2025. Group insurance costs increased $7 million and workers' compensation costs increased $2.2 million, reflecting inflationary claims costs. These increases were partially offset by a 1% decrease in head count at quarter end versus the prior year. Excluding linehaul drivers, head count decreased 1.7% compared to the second quarter of 2025, reflecting our continued focus on cost management and maximizing workforce efficiency.

Purchased transportation expense, which includes both non-asset truckload volume and LTL purchased transportation miles, increased by 47.3% year-over-year and represented 8.9% of total revenue compared to 7.1% in the second quarter of 2025. This increase was primarily driven by higher volumes, our disciplined approach to head count and significantly higher diesel fuel costs embedded in purchase transportation rates. Purchased transportation includes fuel and higher diesel prices contributed to the year-over-year increase.

Truck and rail PT miles represented 15.4% of total linehaul miles in the quarter, up from 12% in the prior year. The year-over-year increase in miles was largely driven by greater rail utilization as we continue to optimize our national network.

Fuel expense for the quarter increased by 49.6% compared to the prior year, while company linehaul miles increased 3.2%. The increase in fuel expense was primarily the result of a 50.3% increase in national average diesel prices on a year-over-year basis.

Claims and insurance expense increased by 6.9% year-over-year, primarily driven by the development of open cases and increased claim activity. Depreciation expense of $64.2 million in the quarter was 2.6% higher year-over-year, primarily due to ongoing investments in revenue equipment, our terminal network and technology.

Compared to the second quarter of 2025, cost per shipment increased 10.9%, primarily due to higher fuel costs in the quarter. Salaries, wages and employee benefits also increased on a per shipment basis, reflecting higher compensation costs associated with improved operating performance as well as the 3% company-wide wage increase implemented in October 2025.

Purchased transportation cost on a per shipment basis were also higher, driven by increased usage compared to the prior year and higher fuel costs. Total operating expenses increased by 15.8% in the quarter compared to Q2 '25, and with the year-over-year revenue increase of 17.1%, our operating ratio improved to 86.9% compared to 87.8% a year ago. Our tax rate for the second quarter was 24.9% compared to 25.3% in the second quarter last year, and our diluted earnings per share were $3.51, which is a 31.5% increase compared to the second quarter a year ago.

Turning to the balance sheet. We ended the quarter with $84 million of cash on hand. After paying down our revolver balance during the quarter, total debt outstanding at period end was $100 million, further strengthening our financial flexibility.

I will now turn the call back over to Fritz for some closing comments.

Thanks, Matt. While 2026 has included periods of volatility, volumes appear to be stabilizing and several external economic indicators suggest the operating environment is improving. Fuel costs remain elevated from pre-March levels and continue to fluctuate meaningfully on a day-to-day basis. Demand improved into the second quarter as is typical, and I was pleased with our team's ability to handle the increased volume while achieving a record cargo claims ratio.

While external metrics continue to point to an improving demand environment, the macro landscape continues to be dynamic. Importantly, we remain focused on driving returns on the investments we have made over the past several years, and it is clear that shippers are choosing Saia more than ever before.

At Saia, we have positioned the company to support customers to the next phase of market recovery by expanding our terminal footprint, [indiscernible] our growing fleet and maintaining a disciplined focus on driver training and development.

Since 2022, we've deployed approximately $1 billion in real estate investments, adding 33 terminals to our operations and relocating or expanding more than 25 others. This network investment has increased our operational door count by approximately 25% since 2022. In addition, since 2022, we've deployed $1 billion in expanding and enhancing our fleet, resulting in a 20% increase in tractor and trailer counts.

While we have carefully managed head count to align with current volumes, we ended the second quarter of 2026 with 26% more linehaul drivers than we had at the end of the second quarter of 2022. In LTL, capacity is created through more than just physical footprint, our investments in our network fleet and most importantly, our people set us up for a continuing improvement in the freight backdrop.

As we have highlighted over the last several years, we've been very intentional about making investments that support our value proposition. Q2 results were gratifying in the sense that we began to see the returns for the substantial investments that we've made in our company as evidenced from the free cash flow returns. Our customers benefited from our ability to scale, meet and exceed their expectations quickly and efficiently. Our strong execution has allowed us to be the organic growth story in the industry and a strong steward of shareholder capital. At the same time, we're also acutely aware that we are in the very early innings of reaching our company's full potential. As we look forward, we continue to see opportunities to invest in our maturing network, and we'll be able to support these investments with continuing operating cash flow improvement.

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

[Operator Instructions] Our first question today comes from Jonathan Chappell with Evercore ISI.

Let's start with the obvious one. Matt, to the extent you can give July shipments and tonnage, how that looks relative to seasonality. It sounds like your exit rate in June on certain metrics was much improved from April. So just that July trend and what that portends for potential seasonality in the OR in the current quarter?

Sure, Jon. I'll go ahead and give the full quarter for Q2 details. For April, shipments per day were up 5.6%, tonnage per day up 6.9%. May shipments per day up 3.7%, tonnage per day, up 8.4%. June, shipments up 3.9%, tonnage up 9.9% And July month to date, obviously, we still got a couple of days left, but shipments are tracking up about 1%, tonnage, up about 7.5% on a per day basis. Keep in mind, we, as Fritz talked about in the commentary, we put a GRI in at the beginning of the month of 7.1%. Anytime you do that, and we've seen this in history, there's always some shipment volatility embedded in there. That continues for a period of time. So that's included in the results, but that's where we're tracking right now on a shipment to tonnage basis with a couple of days left.

From an OR standpoint, if you look at history and when we talk about history, we removed the COVID years and some of those ones that have one-off items to try to give a more realistic view. Typically, what you see is about a 150 to 200 basis point degradation in Q2 to Q3, there's a range in there. Where we are now and assuming kind of fuel hanging in around where it is now, our quarterly shipments getting a seasonal typical performance, we think we can be around 100 basis points of sequential degradation. So ahead of the typical 150 to 200.

The next question is from Jordan Alliger with Goldman Sachs.

Just sort of curious if you could give a little more color around your demand comment. I mean weight per shipment has been pretty positive. I know you're doing a bunch of stuff with mix. But would some portion of that be ascribed perhaps to sort of better economic or volume-related prospects?

Thanks, Jordan. Good question. We pride ourselves and stay pretty close to the customer. So we typically are communicating with customers on a daily basis. We actually survey customers. And if you look at their sort of sentiment right now, if you go back to April, people were expecting in the second half or through the second quarter and the balance of the year improvements. What I think is exciting to see right now is as we survey again, people are -- continue to confirm that, meaning that they are. They see the trends are for their respective businesses that they are positive about the back half of the year.

Matt and I and the team, we are, at the same time, we're cautious because we're kind of a show us sort of thing. And the results so far have been -- we've been pleased with what we've seen. So I think that it's a positive trend. I like the sentiment that's out there. Now we got to keep executing and deliver the results.

The next question is from Tom Wadewitz with UBS.

Yes. Nice to see momentum in the business. You provided some color, I think, on June revenue per shipment year-over-year, I think you said like 4% ex fuel. How do you think that progresses? I mean it sounds like your contractual renewals 10%. GRI, I think you said 7%. So that's a bit stronger. Do you think that if you look out a quarter or 2 or I don't know if it's longer, you would see that growth in base revenue per shipment move up from that 4% in June? Would you expect that to move higher and kind of converge with some of the headline pricing numbers that you're talking about? Yes, that would be the first question.

Yes. Thanks, Tom. If you -- one of the things that we've been talking about pretty consistently over the past year was just some of the mixed nuances that are different in our business than maybe some others. The L.A. region that we've been talking about consistently, that was down double digits last year, it shrunk, still down about 2.5% year-over-year.

But what we talked about is as we started to get past those and lap those, especially with our continued efforts on the pricing front and mix, and we'd expect to get back towards what we're typically seeing from ourselves in that revenue per shipment. So we were pleased with the progress year-over-year throughout the quarter. Revenue per shipment from April to June, this is ex fuel, was up about 4%. So that's good traction, good progress for us inside the quarter, which we really like. But we've got to keep pressing the gas pedal on that.

The growth from Q1 to Q2 continued to come in these 1- and 2-day lanes. Again, we've got a national footprint. We're able to solve more problems for customers. Typically, those that aren't going as far the pricing is a little bit different. But even with that, we improved revenue per shipment pretty substantially within the quarter.

So a lot depends on what the world looks like, right? But our good view and what we've been working on is that continued improvement. Like we said, once we started to get past this mix headwind and mix abating a bit late through the quarter where we're seeing numbers that are more consistent with what we're accustomed to on our side.

Yes, Tom, I would just add that you only get to do that when service execution is at a high level, and it has been. And I think that as we see that sort of that mix impact normalize a bit here, we feel very confident that we'll continue to drive the results and drive the appropriate returns for the significant capital we've deployed there. Our result, I think, speaks to that. And we highlighted in both the revenue per shipment and yield improvements once you reflect some of the headwinds on yield, that's certainly -- that looked pretty good for us.

Okay. Yes, great. And then I guess, for the follow-up. Question, just on labor productivity, I mean, I think you've had some good optimism on the ability to drive labor productivity when you see growth. But I think there's also inflation in that line. So maybe if you could just give some thoughts about how should we think about the kind of growth in your comp and benefits line? Just, I guess the 2 pieces kind of productivity versus just the inflation impact?

Yes. Tom, we don't take a break on cost. We manage that pretty closely. I think we put together in the quarter or this quarter, we actually, first of the month, had a wage increase company-wide. That's reflected in our guide for the quarter. Yes, I think we'll do a good job of offsetting a fair amount of that with continued productivity improvements.

The technology we deploy in this business allows us to not only to improve transit times, but also the implications of that, if you can run your network more efficiently, you share that benefit by offering a transit time to a customer that we couldn't before, but that's also the read-through for that on the cost side that, that's a more efficient way for us to run a network. So it's a win-win. That helps us drive productivity improvements on one side. On the flip side, most importantly, customers got an incremental service out of that. And so we're excited about that kind of rollout.

The next question is from Ken Hoexter with Bank of America.

Maybe can you walk us through the fuel contribution to results in second quarter? And then maybe thoughts on impact to the operating ratio and what's built into expectations? So Matt, you noted kind of seasonal outperformance 2Q to 3Q. Maybe talk about what is fuel, what's pure pricing?

Well, we don't break out the impact of fuel. But keep in mind, in LTL, fuel surcharge as a percentage of the base rates. And if I look at our base rates, it's cheaper than everybody else out there, and that's our pricing opportunity. But when we think about pricing, we think about everything that goes into the work that we do for our customer, but we're focused on core pricing increase. Obviously, fuel can move around a little bit. But we have investments in the fleet and fuel tanks and everything that we do to provide service to our customers.

So when I look at the results for Q2, even if I normalize, we still would have outperformed what's normal sequential Q1 to Q2 from a seasonality standpoint. And that's been our commentary all along. We've made these investments in order to outperform. So fuel is going to move around a little bit. What's embedded into our guide is fuel hanging on and national average around what it is right now. Your guess is as good as ours as to what that probably looks like. We track that relatively closely. But we're focused on driving core price, again, to reiterate that when you get more on the base revenue per [ billion, ] you get more on fuel because that's just a component of the base rate ex fuel.

Yes. So Matt, I guess the stock is down 8%. I guess we've seen this a couple of times on earnings days, but maybe it's just an AI transport trade today. But maybe delve into should we be seeing more in rate from you? If you're catching up? I mean, the rev per shipment down 2.2%. I know that's tied to weight per shipment and then your revenue per shipment up 1.5%.

How do you think you're tracking versus peers in kind of catching up given you're now nationwide coverage and trying to grow into that? Or is it more a focus on still maybe filling the network into some of the new service centers?

Well, I'll start, and then Fritz will come on the top of this. But I think you had said 10 revenue per shipment down 2%. Revenue per shipment is up in the quarter. You may have meant the yield. But if I normalize for all the things that we talked about. So if I just look at April to June, revenue per shipment ex fuel is up about 4%. And if I normalize for the -- actually, this is all in. Revenue per shipment up about 4%, yield up 2%, and that's on weight per shipment that increased throughout the quarter. So typically, a heavier-weighted shipment is going to have a lower yield. We've talked about how we track it on a revenue per shipment basis.

But one of the things that we've talked about is the mix headwinds for us of expanded network, more things than a 1- and 2-day land that are typically shorter, our Los Angeles region business is a big chunk of our business. We've got a good business model out there. That's been down consistently. It's starting to become more even, which hopefully, we see a little bit of a bounce back. But importantly, our June progress showed where we expect to be, and we're pushing even harder on that. The reality is as a national player, we're able to command a higher price point. We're able to say yes to more things. Customers have more opportunities to use us for all of their services, that's going to help us drive more and more price.

Yes. And I think that the most important thing is I kind of think about how the customer -- what customers think about that, and customers think Saia is doing a great job. They see the service. They see the national reach. We see that in our shipments and tonnage numbers. That is the most emphatic endorsement that we're doing a good job for the customers when you get more business.

So that's kind of the simple measurement there. And then I look behind that. I look at the specific service claims ratios are record low. I look at all the on-time performance. They have pickup completion, every metric that we have, we see strong performance there, and that's reflective in supportive of what you're seeing in the top line result. I look at the kind of underlying performance in a still challenging operating environment. And I look at from Q1 to Q2, we outperformed historic OR performance in that period significantly.

So I can't speak to, and I don't spend a lot of time focusing on daily trading activity, but I do focus on what value we're creating, both for Saia shareholders and for our customers. And when you create value for the customer, there's an opportunity for us to create value for Saia shareholders. And I like what we're doing there.

Fritz, can I just squeeze in one more thought here. I guess if you're targeting 100 basis points deterioration in OR, does that mean you're looking at a worse OR year-over-year? Or am I misreading the performance from last year?

Keep in mind, Ken, we have two wage increases embedded in that number. So we did our wage increase last year in October, and we did one early July, the 1st of July this year. So that comp has two wage increases in it, the timing difference.

Next question is from Brian Ossenbeck with JPMorgan.

So maybe just to help understand a little bit more of the incremental margins and the operating leverage with tonnage starting to inflect pretty significantly and maybe putting some of the mix headwinds behind you. Adjusting the yield for all those mixed things you talk about now, you're still tracking fairly behind where the renewals are just looking at the leverage in the quarter. Just was there additional costs that are still not fully absorbed in sort of the new network? Do you have new areas you're trying to still fill in from a density perspective? So I just want to see how to interpret all that for this quarter in particular.

Costs embedded in which part, Brian? Can you just make sure -- I want to make sure I understand it.

Yes, just the new terminals. So like are they still ramping up? Are there still areas in pocket of density you still need to fill in? Are you shifting the mix? Like I guess, why are we seeing better incrementals on this sort of tonnage as you expand here?

Yes. I mean the 2023 and 2024 openings improved about 300 basis points. They're operating in the low 90s. That's great progress. We're pleased with that, but they've got room to go. And one of the things that we track very closely is that some of these get up to speed a lot faster, some take a little bit more time. Our sales team is hitting the street, talking with customers. And we're getting more [ advanced ] with customers and not just the new markets but in our legacy markets as well because we can solve more problems, easier to do business with, that gets us price. So yes, there's certainly opportunity that we see to continue to push those forward. Pleased with the progress. But by no means do we think those are at maturity.

Yes. Brian, I'd just add on. I mean I think that's early innings on the whole network value here, right? So as we take advantage of all the 33 new openings in the last number of years, all the relocations and all the enhancements that we've made, the opportunity to generate additional returns out of that, that's still there. We made a little bit of progress in the second quarter. Is there more to go? Absolutely. And I think we're well on our way and just got to keep focused on taking care of the customer, and that will get it done.

All right. Just sort of a follow-up, just thinking about labor availability in this new network of expanded terminals, some of -- you're still adding a few more here and there. How do you think about visibility into the pockets that might be a little bit tighter or you might have to manage a little bit closer now that you're covering a bigger and broader network? Are you managing that through different sort of tools? Like do you feel confident that, that's not going to be a problem. Maybe you can just walk through managing the network, assuming we get a better upturn here, given it's going to be quite a bit larger, and I would assume a bit more complicated than what you've done in prior up cycles.

Yes. Sure, Brian. Listen, labor, the driver population nationally we all know is tightening up, and it's certainly competitive. And the average driver is a bit older and continues to age over time.

What we find, we, like most in the LTL business, have the opportunity to get drivers home every day, right? So you have a competitive advantage versus other sort of modes in the transport sector around recruiting jobs, so we know that's there. Now I think what's specific to Saia, and I think this is important is that where we differentiate. We're very pleased with our driver academy program. We've done a great job of seeding drivers to that, and I think that continues to scale. As we build out that national network, it gives us an opportunity to continue to build out our driver academy program. Adding additional locations for training and training our drivers. And that's a great opportunity as part of recruiting new employees to the company and say, "Look, we can provide a career track in a company that's growing." And I think you get that, that second part is a Saia unique story.

Look, this is a business that's growing. It's a growth story in the industry. You have an opportunity to come work for us to be part of something that's pretty successful. We're very proud of the culture that we've developed, and I think that sort of culture leads to employee engagement. And those are all -- I get it, those are, in many ways, soft, but those are how you recruit and retain drivers. And that's kind of our mission. We feel pretty good about it. We always have markets in which you got to be challenged, and you're going to be challenged as you double down on recruiting. That's just the nature of it. But we feel like our recruiting machine is pretty good. Our driver academy is really good. And that culture is excellent to be able to pull that all together.

Next question is from Stephanie Moore with Jefferies.

So maybe to continue on the compensation around labor, I wanted to touch a bit about where your capacity specifically in your labor stands as volumes were to continue to improve throughout the year. So any incremental hiring activity we would need to see? And then I have a follow up.

Stephanie, I'm going to repeat your question because you're echoing a bit. It sounds like you want to know how much capacity we have on our labor line.

I'm sorry. Yes, I'm sorry. This is probably better. Yes, maybe just yes, incremental capacity on the labor side, particularly if we continue to see volumes improve from here. So any incremental hiring activity we would need to see.

I think we feel pretty good right now where we are from a recruiting perspective. There are some markets certainly where we'll have to add people. We do -- we're pretty diligent about matching sort of our labor, yes, the available hours, both drivers and dock workers to the current freight environment.

As the network develops, and we pointed it out in the notes at the beginning, we'll probably add linehaul drivers as we look for -- as the network scales and we have the opportunity to build some efficiencies around that. So what you would see there is you'd see a trade between our PT line and salary wages and benefits. So I would recommend studying those lines to some extent together simply because that -- it's a trade one way or the other.

But I think that we feel pretty good about the head count. I think it probably has got a little bit of flex in there still around additional utilization, maybe a few overtime hours. But we're also mindful that the business, you don't want to add the head such that you -- as it becomes seasonal into the fourth quarter, you're in a position where you maybe over hired. But we feel pretty good where we are. There are going to be a handful here and there that we add, but I don't think it's going to be a meaningful change.

And then just one follow-up to the pricing commentary earlier. So very good GRI and contract renewals that we can obviously see here. But maybe just talk a bit about your customer acceptance. Are they starting to maybe realize your size and the service benefits that you've made as of late? And is it starting to kind of come through on the pricing side? Or do you think these pricing numbers are more so a reflection of the tightening market?

I look around, Stephanie, and it's like, I know our customers have options, and we've been very, very focused on making sure we get the right pricing in place. As you look at our -- the realization numbers that Matt highlighted for us in the second quarter, sort of the improvement, 4% revenue per shipment improvement from June versus April just in the quarter. And I think what you're seeing there is that, yes, certainly, the market is tightening up. But customers also, knowing they have choices, they're going to go somewhere that although we're pushing rates, they're going to go somewhere, they're going to get great service.

And actually, I'm excited about here. I think we'll see the realization. I think, yes, there's some structural change out there. But at the same time, I think customers are also intently focused on if they're going to operate the national carrier, they expect consistency, and that's something we can deliver. So the opportunity for us to continue to see realization of both the contractual renewals and the GRI, I feel pretty good about. The early indications on the GRI from July is that we see pretty good acceptance there. Now sometimes, you'll lose a little bit of business in there, but your total mix of revenue and profitability is better. So you don't necessarily see -- keep all that volume, but you keep the volume you want.

The next question is from Scott Group with Wolfe Research.

So I understand sort of the impact of the double wage. But I guess the other side is we have an early GRI. So arguably, we have like a double GRI. I guess I'm struggling a little bit with like we got good tonnage growth, fuel tailwind like why is margin flat to down a little bit in Q3 and everyone else sort of was guiding 200 to 300 basis points of improvement. I totally get like we had this big network build-out in a down cycle like why the margin gap widened. But it felt like when the cycle started to turn positive, the margin gap would start to narrow, and it feels like it's still widening. So I don't know. Just any thoughts there? And then maybe just along that, like any thought on like the full year margin, Matt?

Well, A couple of things, Scott. I mean, the two wage increases are impactful, right, because you've got the second wage increase that's off of a higher starting point than the first one was. So that's a compounding effect. The shipments and tonnage numbers that I gave, obviously reflect a little bit of volume volatility as part of the GRI. We have not historically done a GRI in July.

So yes, it certainly helps offset that, but you do have a little bit of volume volatility. It sounded like you're comparing a little bit to peers across the space and what they gave. When we do that, you get some near-term volume volatility that obviously plays into how that goes from a sequential basis. But we're full steam ahead on our pricing actions, and we're not going to slow down. We monitor what we attract, what we get from customers very closely.

Fritz alluded to it, we're seeing good acceptance on the pricing side from the GRI. But again, there's a little bit of volume volatility as you see that. But the wage increase portion of it is impactful when you've got 2 of those in there off of a higher starting point, those dollars are real. But that to us is just a timing difference, right? It was October last year. We pulled it up and did it on the normal cadence of July this year.

From a full year standpoint, one of the comments that we've made earlier, we had given the 100 to 200, and we said getting to 200 probably included some pretty solid mid-single-digit shipment growth for the full year. It was positive in Q2. We've still got a long way to go. It's not as robust as we may be -- we're hoping when we heard all the ISM numbers. There's definitely some positivity out there. Fritz talked about the customer sentiment survey remaining pretty rational, feeling good about their business. But we still feel like we can get to the 100 basis points of OR improvement. We'll see what the back half deals is, but we're pushing towards that. If we really see volume ramp in the back half and things are super seasonal, that could likely tick up a bit, but we still feel like we can get to that point. We obviously -- if you just do the math, we have to outperform what we do normal seasonality certainly in Q4, but we're pushing towards that.

I think it's important to know that, to point out for us is that our normal Q2 to Q3 OR typically gets 150 to 200 basis points worse. This year, we're highlighting 100. So it is incrementally improved kind of our historic trend. So do we want to -- are we pushing to get it better? Yes, absolutely.

Okay. And then I know that this has been touched on a little bit already. But I just wanted to come back to the realized price discussion, like I totally get the mix things. And so if you just look at revenue per shipment and revenue per hundredweight, just take an average, try to normalize for some of the mix, it's been flat to down like the last 4 or 5 quarters. You go back 10 years, it was never -- you never had a single negative quarter. It was average 5%, 6%, I don't know. When do we get back to that? And like, I don't know, I know you don't like to give yield updates, but I don't -- it feels like maybe it would be really helpful if you start doing that, just to help us with our modeling. I don't know, just any thoughts there?

I'll start, and then Fritz can go, but revenue per shipment was up sequentially from Q1 to Q2. I mean, we're -- we highlighted the increase of 4% revenue per shipment growth inside the quarter, right? So from April to June, revenue per shipment up about 4%. That's progress. I mean we've meaningfully expanded the network and you've got growth in these 1- and 2-day lanes that are going shorter. You see that. From a yield basis, it's up in the quarter as well despite what is a headwind from weight per shipment on yield, weight per shipment from April to June is up 1.5% and yield during that period is up [ 2% ]. So despite the headwind from weight per shipment, yield inside the quarter is up.

So we've had the mix impact. Hopefully, the Los Angeles region continues to come back. That gap has shrunk. But we are seeing that progress. I mean for us inside the quarter, again, 4% is good traction. We're continuing to push on it, but when you opened as many terminals as we have over the past several years, you do get a little bit of different mix. But importantly, at 218 terminals now, we're able to solve more problems for customers. There are more reasons for them to choose Saia. Over time, that helps us get more pricing. But we feel like we're making progress as exemplified in the quarter.

The next question is from Chris Wetherbee with Wells Fargo.

I guess maybe I just wanted to touch a bit on that weight per shipment comment that you were making, Matt. I guess as we think forward, it seems like every month of 2Q and then into July, we're seeing a bit of an acceleration on weight per shipment. I guess, can you give us just a sense of how you may sort of think about that as you go through the third quarter and can you talk to some of the specific mix dynamics that are pushing them? I guess where are you seeing that opportunity coming into the network, what specific verticals or just these company initiatives? That would be great.

Good chunk of it is our initiatives. So when we talk about the GRI, that does not impact all customers equally. We look at that business as well as all of our business. But when we take that GRI, we take it granularly based on lanes and weight per shipment mix. And we've put a heavy emphasis on making sure that we're getting paid correctly on some of those lighter weighted shipments. And we pushed hard on all segments, but that one in particular.

A component of it likely is a little bit of strengthening in the backdrop. We aren't seeing any huge TL spillover by any means or anything like that. But typically, when you see ISM get a little bit more positive, you get some of that on weight per shipment. But we focus very critically on getting the right mix of business with our customers. And with the national footprint, we have the opportunity to pursue different verticals like we've talked about in the past that gives us a better chance to solve that for customers.

Yes. And Chris, I would add. I don't -- I think what is positive, and it's a bit nuanced here, but positive in the sense that if I look at customer sentiment, I think it's pretty consistent. So I don't know that there's necessarily a sector of the economy or something that we see anyway that is underperforming and outperforming. We do continue to highlight the L.A. region broadly. But in terms of if I matrix this to more sort of industry verticals, I think that we don't really see a call out there. So it's pretty broad-based.

And as Matt pointed out, we tend to -- we're very focused, intently focused on customers that value the service and the network that we're providing, ones that maybe don't or more of a commodity, looking more of a commodity that we've been pushing the rates, and that's pushed out some things. And so I think that the positive trend here is that it's 2, right, sort of across the board, it's pretty uniformly kind of positive, I'd say. And then exciting about it is that the customer acceptance is important, and I think we're seeing that.

Okay. That's helpful. And I guess maybe that sort of leads into the next question, which is just I know there's a lot of focus on 3Q and maybe this year from an OR perspective. But I guess, bigger picture, you guys seem to be doing a lot of work on customer mix and network dynamics, making sure you're kind of in a better position. I think it's obviously early to be talking about 2027. But if you can maybe give us a sense of what you think sort of the margin algorithm is, if you will, bigger picture beyond what we're seeing this year as you guys are putting in this work. And it does sound like you have some building confidence, maybe cautious confidence that we're going to see maybe more of a sustained up trend. So like, I guess, how do we think about sort of what the network can provide in a normalized growth environment beyond this year?

Now I get excited. I think this is -- we're just scratching the surface of the potential of our network, right? So 218 facilities, national footprint. We've proven that we can provide high levels of service to customers. We can scale our metrics, service metrics are getting better.

I mean, as you -- there were anecdotes out there in the second quarter around embargoes and then competitors and dealing with volume challenges and all that sort of thing. And we thought, well, you know what, while everybody else is trying to figure it out, just do business with Saia because we've got -- we're getting it done for our customers.

So most important, that is a key element of what we have to do. Then when I look into the longer-term opportunity for this business, we can operate this business below 80 OR, no question. It should start with a 7. This pace at which we get there, it's going to be -- the backdrop is going to have an influence on that, right? So a stronger economic backdrop, the opportunity for us to accelerate that OR improvement year-over-year is absolutely there. The opportunity for us to take those. Matt highlights the terminals that have been opened in the last few years, they operate in the low [ 9s. ] Well, you know what, we have terminals today that operate with a 7 handle, regions of the company that are operating in the low 8s.

So I look at that as we mature those facilities, there is a unique opportunity to really drive returns in this business. And we're in a position right now where we're generating strong cash flow. So to the extent that we might supplement our network and make additional investments, we're going to be able to do that from operating cash flow. That's a really big deal. And that's an opportunity for us to really drive, not only our OR, but drive the operating returns for the company just in total.

The next question is from Ravi Shanker with Morgan Stanley.

Just to piggyback on the previous response, what exactly is the issue in the L.A. region? Forgive me if I missed this, but is that a Saia specific issue because of maturity of terminals? Or is it a regional issue with customers? Or what's going on there?

We've just seen in that region of the country, we had some customers that were pretty major for us, and this is going back almost a little over a year at this point. We've lapped this, but it was part of our Q2 result year-over-year that we were pleased with the sort of kind of operating performance of those. So we exited those customers. We did not see other sort of business in that market come back to fill that. So that has been a challenge just from the total metrics that you see.

So the revenue per shipment coming out of the L.A. region would be the highest in our company. And when you have sort of double-digit volume declines year-over-year in the second quarter, early parts of the second quarter, that's a headline, top line headwind. So that's been what we've called out. And listen, we think we probably got to a steady state there. And I think we should be in a position we feel like we can grow from here.

Got it. So just to clarify, did the bulk of that happened this quarter, so that will be a drag that continues for the next [indiscernible]?

No. So as we pointed out for the last 5 quarters, going back to Q2 or Q1 of last year. The headwind from the L.A. region has been there throughout the year, and we finally lapped that, and I think we're past it in June of this year. So it's been a challenge for us, and it's influenced or impacted our top line revenue metrics for over a year.

Okay. Understood. And just maybe as a little bit -- there's been a lot of focus on autonomous trucking recently kind of as we push towards commercialization of this potentially in '27. You guys are pretty keen on kind of being in the forefront of technology or especially with EV trucks. I'm wondering kind of what the latest update is on kind of how much you're looking at this.

Listen, we're always going to look at available technology across either diesel, gas or [ LP ] or electric. The electric, we've been a Tesla customer for quite a while, so we stay pretty close to the development pipeline. So I think that we've seen the announcements. We're working with them on that. And listen, if it's viable, that would be something we'd consider for sure.

Most important though, I think the near-term technology in the business for us is really about safety sort of focus, collision avoidance. Some of the technology deployed in an autonomous application would be fantastic even if it wasn't -- if you had a driver enabled or a driver on board, that autonomous sort of technology would be fantastic as the collision avoidance technology at the same time. So if we can -- maybe it's not autonomous right away, but if it's an opportunity for us to improve our safety profile even more, we're an investor. So that makes sense to us.

The next question is from Eric Morgan with Barclays.

I wanted to ask one on purchase transportation. I know you have contracts in place there, so you should be insulated from the spot market volatility and I know fuel is a big driver in the quarter, but I guess just curious if you have a sense for where you're landing or expect to land on core contract renewals with your carriers in that line, just given what's happening in the freight market. And maybe if you could speak to the opportunity to in-source more. Fritz, I think you referenced adding more linehaul drivers. So I don't know if you have like a target that you'd like to see that 15% move towards.

I'll do the rate part, Eric, and then I'll hand it to Fritz. So you're right. I mean the vast majority, 95-plus percent of what we do is contracted. We view PT and we look at it on an optimization basis of whether that should be in-sourced or outsourced. We don't use it if they can't meet service. It's an extension of how we operate. So that's number one, first and foremost. But since the investment of it is contracted, we're relatively insulated as we are right now from the rate.

So if I look at just the blended PT cost per mile, it was up about, ex fuel, up about 3% year-over-year. And now that's a combination of using more rail. Our rail percentage is the total of the mix of PT increase compared to where we were last year. Now at some point, I'm sure we're going to have some conversations with those providers that are going to want to increase rates. But we -- the vast majority of that increase was usage in general, but also driven largely by fuel. But just from the base blended rate increase, rate inflation year-over-year is about 3%.

Yes. I would just add that the way we think about this, I think both if we run our own linehaul network or we use PT, in both cases, we're going to have fuel expense, right? So that's kind of part of it, that's sort of a given. So then the equation is going to be all right. So what is cost optimal for us. So our game plan is identical to what it always would be. And if there are times that we've got an opportunity to better balance our network and utilize a company driver, we absolutely will.

And if there are times that a PT option makes sense to optimize that, we've pointed out over time that if rail service is good, long cross-country rail is pretty good and cost effective. And if we make customer expectations mission accomplished and we got cost optimal on the way, that's even better.

The PT line, obviously, is up right now because we include PT fuel there, but that doesn't go to 0 if -- from a cost perspective, if we add a driver that's actually, as we know, incremental salary and wages and it would also be incremental fuel expense. So the underlying core dynamic, how we manage that doesn't change. Now if the rates in the truckload market are such that it makes more sense for us to hire more drivers to do that, we will. And that's just part of the cost optimization. And the good news is we've got tools and technology, we model that pretty well. And so that's how we're operating going forward.

The next question is from Bascome Majors with Stephens.

To follow up on part of [ Chris' ] question earlier, I mean it did sound in the prepared remarks that, Fritz, you're seeing this quarter in some ways as an inflection point. And the path from investing in the network to earning a return on that investment in the network. Can you walk us through maybe in a little more granular detail like what is giving you that feeling? Why is now the time where it feels like that inflection is happening? And just are you of the confidence that longer term, we'll see more periods where you're able to get price and volume at the same time to really drive that return and margin higher versus one or the other?

Yes. It's a fair question. What I would tell you is what I'm positive about is you're looking at the last several months, we're now talking about positive sort of sentiment, good volume performance for us. And you string a few of those together and you're like, okay, that feels like a pattern. This feels pretty firm. The dynamics in the marketplace are -- would appear to be firm like that, like our core execution. I think the incrementals for us are all about as we continue to mature facilities that operate in the sort of low 90s OR and make them look more like our best performing facilities, that's an opportunity there that's going to help drive incremental margins.

So I think that there's probably -- and in our sentiment survey that we talked about earlier, I think you see customers are net positive. So that is, as long as they continue to be net positive, I continue to see good core volume performance on our side and core execution, that makes you feel a little bit more confident that the results are on their way. And I looked at Q2 and it looked pretty good. And I look at the kind of performance intra-quarter, I was really pleased with that. So I think that, that bodes well for us. And I think that longer term, the potential of the business, we're just scratching the surface. I think that's exciting.

The next question is from Bruce Chan with Stifel.

Good to see the progress in some of the newer terminals. And I know, Fritz, you talked about leaning a bit more into the local account density is the kind of next leg of improvement there. Maybe you could just talk about any changes that you're making to the sales force structure or incentive structure to drive that. And then lastly, any thoughts around time line for those terminals to kind of come up to parity with the rest of the network.

Yes. So Bruce, I think what we're seeing, and it's continued to be as we mature those facilities, we've made the investments in the sales force in those markets. We think that they are -- the incentive plans are in place that make sense. In some cases, you're developing a market where somebody doesn't know who we are, right? So our team's got to get in there and sell that, sell the value proposition. Selling the value proposition is all about letting them know that we've got a national network. We do a great job picking things up on time, delivering on time, no damage, right? Those are all important.

You could -- one strategy one could take is you could say, look, let's go give them an introductory low price and do something like that. We're absolutely not going to do that because we've deployed way too much capital for this to not generate a return from the outset. So it's a methodical process to do that. It doesn't happen right away.

And one of the exciting things that you hear about periodically, last week, I found out about a new win we got in the market that we opened 2 years ago, and it was a long sales cycle, but our folks stayed in front of the customer. We got our shot, we want it, and we took it from a national carrier that everybody has heard of.

So that customer now realizes that, hey, you know what, Saia's got a great value or great service. We perform. And that's been pretty -- that's been exciting to see. It's a methodical process. The environment hasn't been the best, and I think we performed well. But as the environment continues to improve, I think we'll see the impact of that sort of -- those sorts of investments.

Next question is from Richa Harnain with Deutsche Bank.

So first, just to ease some of the consternation, I guess, around the margin guide on 3Q and the wage increase. Matt, are you willing to they kind of -- or have you triangulated just like if it wasn't for this wage increase, I guess, in July, what would the OR progression have looked like, i.e., what's like the impact of it? And then just like July trending up 7.5% [indiscernible], is that in line better than seasonality? And what are you assuming for the remainder of the quarter like in August and September, more in line with seasonality, better? Just curious on those 2 items before I ask maybe a more bigger picture thoughtful one.

Sure. Well, we don't typically give a whole lot. I mean, the wage increase is just part of our total strategy around labor and how we attract and retain employees among many other things. But if I look at the impact of that, I mean, it's generally about a point on the OR. We've talked about that at various intervals throughout history, that's a bigger number than what it used to be on a just total dollars basis because of size of the company has changed. The starting point continues to be higher because the average wages moved up over time.

But again, there's 2 in this quarter compared to Q2, and this Q3 compared to Q3 of last year. So that impacts that. From a volume standpoint, on a shipment basis, we're trailing seasonality a little bit in July. But again, we did a 7.1% GRI in July. You always have volatility on a shipment standpoint when you do a GRI, whether we do that in October, like we did last year in July. We're seeing good realization, good flow through on the price. We expect the chunk of that business to come back to us over time. That's typically what you usually see.

For the quarter, what we're seeing in terms of the embedded guide is that we get back to a shipment seasonality for the quarter. So if you look in some of our history, even like last quarter, May was a little [indiscernible] seasonal back up. Some of the months nuances with the pricing actions and GRI, and things like that can move around. But for the quarter, we're projecting normal shipment seasonality Q2 to Q3.

Okay. And then if I could just ask one more. Just these product upgrades you guys have initiated. Fritz, you talked about improving transit times on [ 2,000 ] lanes. Your 10 a.m. guaranteed time being somewhat differentiated in industry, claims ratio, et cetera, that shows service improvement. Just like if I look at your yield growth, that is performing better than normal seasonality, I guess, or outperforming what we've seen usually in 2Q. Just should we see some -- a continuation of that as I think about Q3 and Q4? Or should the acceleration pick up? Just trying to think through as customer acceptance and all of these good service sort of improvements kind of go into your pricing, what we should expect for that line item?

Yes. Thanks. Good question. I think what -- our expectation is this is going to continue to support both the contractual renewals and the GRI. So customers are -- those are pretty big numbers, right? And so the enhancements that we're offering, that's just additional value to the customer. And I think that, that's going to help us with stickiness around that.

I think the mix things that Matt highlighted that were impacting us in Q2, and you look at that sort of core, take the mix impacts out of our yield number, it was 3%. That was pretty good. So we're pretty pleased with that. And I think what you see going forward with the sort of service enhancements, I think that the opportunity for us to continue to earn those kinds of improvements and maybe even accelerating. I think that's totally plausible and reasonable. And that'sthe reason why we did that is to be able to hopefully make that happen, make that realized because it's that -- those are important investments that we've made, technology investments that we've made to be able to support the customer.

So absolutely expect to continue to see both revenue per shipment improvement and yield improvement over time. And that was part of why we offered those sorts of things that we think we can be rewarded for those kinds of investments.

The next question is from Jason Seidl with TD Cowen.

I want to go back to the GRI. You guys mentioned that there's noise around sort of your tonnage when you guys implement them. So how should we look at this in terms of as a historical basis? Is this sort of at the higher end of noise, at the lower end of noise, what you've seen thus far?

Well, the magnitude of our GRI has increased over the years. Part of that has been our ability to close the footprint gap and do more for customers. But importantly, we are cheaper than everybody else, and we need to push harder to close that gap. It is enhanced by the opportunity to provide service in every market.

I would say that this is normal of what we're seeing. We're doing it in a different time now, July compared to October, some years it's been in January, the GRI in the past. But we're seeing better-than-normal acceptance rate on the price. The shipment volatility and the shipment noise that you see in the 30- to 45-day period after, I wouldn't say it's any different than what we would typically see.

Okay. That's good color. And then if I can go to sort of like a long-standing theme here about freight coming back from the truckload sector to LTL, sort of maybe you can give us a little bit of color on that? And maybe what's the longer-term opportunity in terms of aiding tonnage growth? Is this like you get at a percent? Can we get up to like 3% over time? How do you guys look at that?

Yes. I think that's -- I think we're still waiting to see with that kind of a number, what that could be over time. I don't know that it was necessarily a huge impact, maybe it was 2% to 3%, maybe at a high point, maybe it was 5% sort of impact on the industry in total.

I think we still need to see, settle out to say before we conclude what exactly the impact was. But I think that what you do see right now is that there's certainly a heightened focus around freight [indiscernible] going to the -- its traditional historic modes, right? So you don't necessarily see that kind of crossover, spillover described as much, if at all. So it will be interesting to see how that plays out over time.

Most importantly, the thing that we need to do in these kinds of environment, if it flips the other way, meaning that there is a spillover into our space as truckload volumes come here, it's -- we're an LTL business. Our assets are set up for that, and we need to make sure that we've got the appropriate pricing in place and service in place that we handle the freight that we should handle in our sort of part of the market. So I think that will be -- remains to be seen how that's going to shake out over time.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer, for closing remarks.

Thanks to all for -- who called in and hear about our record second quarter, which we're excited about and how it sets us up for continued long-term value creation for our shareholders. We're excited about the opportunity and certainly just scratching the surface as to what the potential of the business is and look forward to giving you an update next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Saia, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Chad. Good morning, everyone. Welcome to Saia's First Quarter 2026 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. 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 of the statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

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

Good morning, and thank you for joining us to discuss Saia's first quarter results. As we moved into 2026, we remain focused on serving our customers enhancing operational efficiency and integrating our newer terminals into our national network. Q1 2026 was no different than history with weather impacting operational results. This year was pronounced as we saw weather patterns impacting our core and profitable Texas and Mid-South regions. However, much like history, we saw seasonally -- seasonality increase in March and particularly in the second half of the month as our customers began to tap our national network.

Our teams, fleet and footprint are well positioned to take advantage of this opportunity to support our customers' seasonal demands. Service metrics continue to improve through the quarter. During the quarter, our team remained focused on what matters most, serving the customer. We achieved a cargo claims ratio of 0.5%, which is our sixth straight quarter of claims ratio below 0.6%, a record of consecutive quarters achieving this milestone.

Customers also value our ability to reliably pick up and deliver freight in the time frames that meet their requirements and expectations. Across our KPIs, we continue to meet and exceed expectations throughout the network. Despite the dynamic environment this quarter, we improved operationally. Most notably, we saw a significant increase in miles between preventable accidents and a significant improvement in hours between lost time injuries. Miles between preventable accidents were a first quarter record, while hours between lost time injuries were at the highest first quarter level since 2020. Both metrics are a testament to our ongoing commitment to safety, training and technology.

Our operational execution is driven by our continued investments in our network and optimization technology. Although we're still in the early stages of realizing the full long-term benefits of a national network, execution remains strong across the organization, improving upon trends seen in the back half of last year. Increasingly, customers value consistency and reliability and our performance in these areas is enabled by the longer-term investments that are core to our strategy. As a result, productivity continued to improve in the quarter, with making their strongest performance since the third quarter of 2024, improving more than 2.5% compared to the first quarter of 2025 and improving approximately 1% sequentially from the fourth quarter.

These metrics demonstrate the impact of our ongoing investments in optimization technology. As the freight backdrop improves and we continue to build density on our national network, we anticipate additional network leverage and asset utilization. With service levels among the best in the industry and our increasing value proposition to our customers, we continue to make progress on pricing and mix management. Revenue per shipment excluding fuel ramped throughout the quarter in part due to our efforts around contractual renewals, which were 6.7% for the quarter. While there's still movement among shipments with ever-changing backdrop, our renewal rates reflect our value proposition to the customers and our ability to provide solutions that meet their needs.

First quarter results were largely in line with our expectations as volumes in late March were strong, offsetting, to some extent, a weather impact to January and February. Revenue for the quarter was $806 million, a record for the first quarter and a 2.4% improvement over prior year. While trends in the first couple of months of the year can always be volatile, I was pleased to see the volume acceleration in the back half of March, resulting in a shipment increase of 1% for the quarter. As customers continue to value our expanded presence in our now national network, we saw shipment growth in both our legacy and ramping markets.

Weight per shipment, while still down compared to prior year, improved sequentially each month of the quarter, a result of our targeted actions around mix management and improving shipper sentiment throughout the quarter.

Now I'll provide additional detail as it relates to cost. However, it's important to note, we were negatively impacted in March by the 30% increase in diesel costs in a matter of a few days. This rapid increase in cost created a meaningful short-term impact on profitability, given the timing difference of our surcharge program, which is based on weekly national average diesel prices.

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

Thanks, Fritz. Revenue was a record for any first quarter, increasing by 2.4% to $806.2 million, partially as a result of an increase in fuel surcharge revenue as well as a 1% increase in shipments for workday. Revenue per shipment, excluding fuel surcharge, decreased 1.2% to $297.11 compared to $300.76 in the first quarter of 2025, largely as a result of lower weight per shipment and shorter length of haul compared to the prior year. However, I was pleased to see revenue per shipment, excluding fuel surcharge, increased throughout the quarter.

Revenue per shipment, including fuel, increased 0.7% compared to the first quarter of 2025. Fuel surcharge revenue increased by 12.3% and was 16.5% of total revenue compared to 15.1% a year ago. Tonnage decreased 2.1% compared to the prior year, attributable to a 3.1% decrease in our average weight per shipment. Our average length of haul decreased 1.7% to 890 miles compared to 905 miles in the first quarter of 2025. Yield, excluding fuel, increased by 1.9%, while yield increased by 3.8%, including fuel surcharge compared to the first quarter of 2025.

Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased $4 million or 1% compared to the first quarter of 2025. This increase was primarily driven by a $7.9 million increase in health insurance costs as well as a $1.4 million increase in workers' compensation costs, both of which are primarily the result of escalating cost of claims. These increases were partially offset by a $5.1 million or 1.8% decrease in salaries and wages combined compared to the first quarter of 2025, as head count at the end of the quarter was 6.3% lower than the first quarter of '25 and was 0.7% lower than the fourth quarter of 2025.

Excluding linehaul drivers, head count decreased 7.9% compared to the first quarter of 2025. These reductions were a result of our continued focus on operational efficiency and network cost management. Purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles increased by 7.5% compared to the first quarter last year, and was 8% of total revenue compared to 7.6% in the first quarter of 2025. Truck and rail PT miles combined were 13.4% of our total linehaul miles in the quarter compared to 12.4% in the prior year.

The increase in purchased transportation usage was driven entirely by rail that match customer service expectations, as we leverage the most cost-effective mode. Fuel expense for the quarter increased by 3.6% compared to the prior year, while company linehaul miles decreased 4%. The increase in fuel expense was primarily the result of a 13.6% increase in national average diesel prices on a year-over-year basis, as national average price per gallon increased more than 30% from February to March. Due to the rapid rise in diesel cost in March, our costs were elevated in real time while the fuel surcharge table updates the followup week.

This period of quickly rising diesel costs resulted in an approximately $3.5 million margin headwind. Claims and insurance expense increased by 6.3% year-over-year. This increase was primarily due to rising insurance premium costs in addition to inflationary costs associated with the claims expense. While claims costs continue to escalate at a rapid pace, our efforts to remain focused around safety and training, resulting in a significant decrease in preventable accidents compared to the first quarter of 2025. Depreciation expense of $62.2 million in the quarter was 5.3% higher year-over-year primarily due to ongoing investments in revenue equipment, real estate and technology.

Moving to costs on a per shipment basis. Cost per shipment increased 2% compared to the first quarter of 2025, largely due to increases in self-insurance related costs. Health insurance alone accounted for more than 50% of the year-over-year cost per shipment increase due to cost inflation and claims mix trending more towards -- towards more high-cost claims. Compared to the first quarter of 2025, salaries, wages and purchase transportation combined were down 1.2% on a per shipment basis as a result of our actions around cost control and network optimization. Meanwhile, higher fuel costs contributed to the increase in cost per shipment compared to the prior year, as fuel prices surged during March due to external factors.

As a reminder, while our fuel surcharge program helps mitigate rising fuel costs, our fuel surcharge table updates weekly, whereas fuel costs are incurred in real time. The impact of this timing is more pronounced in a rapidly increasing fuel environment.

Total operating expenses increased by 3.1% in the quarter and with the year-over-year revenue increase of 2.4%, our operating ratio increased to 91.7% compared to 91.1% a year ago. Our tax rate for the first quarter was 23.3% compared to 24% in the first quarter last year, and our diluted earnings per share were $1.86, which is flat compared to the first quarter a year ago.

Focusing on the balance sheet. We finished the quarter with $39 million of cash on hand, $12 million drawn on the revolving credit facility and $113 million in total debt outstanding.

I'll now turn the call back over to Fritz for some closing comments.

Thanks, Matt. While 2026 has shown some positive demand signals, the ever-changing macroeconomic environment continues to create uncertainty from a customer perspective. One constant, however, is our team's ability to adapt to change and deliver solutions for our customers. As we remain focused on serving our customers while driving efficiency across our operations, I'm increasingly excited about the opportunity ahead.

Our disciplined approach to cost management is reflected in our cost structure. We remain vigilant about managing cost. We noted in Q1 that employee-related costs associated running the business continue to be inflationary. It's critically important that we invest in what we feel is the best team in the freight business. At the same time, we continue to invest in the technologies that allow us to best manage and deploy the industry-leading team. Dating back to 2017 since we began our journey to becoming a national network, we've opened 70 facilities. Throughout, we've maintained a competitive cost structure or deployment of data analytics and optimization tools that have served us well. We'll continue to invest in those capabilities and expand the use of those tools, which remains core to our strategy.

Looking forward, we remain committed to executing our long-term strategy of getting closer to the customer, providing a high level of service and being appropriately compensated for the quality and service provided. As the industry is perhaps emerging from a 4-year free recession, we see size upside as significant. We've invested with keen focus on supporting success, which has required a best-in-class team, a national terminal network, a flexible modern fleet and a technology stack to bring all these elements together.

Over the last 36 months, we've invested approximately $1.8 billion in our network and fleet alone, representing more than 19% of total revenue during that time. This investment is a clear signal of our commitment to customers, and we believe we're still in the early stages of fully realizing the benefits of these investments, which we expect will generate substantial long-term value for our shareholders.

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

[Operator Instructions] And the first question will be from Jordan Alliger from Goldman Sachs.

Great. So maybe, I guess, in the context of perhaps underlying demand feeling maybe a bit better. Can you talk or give your thoughts on margin progression as we go Q1 to Q2 and perhaps some of the specific levers that underpin that, whether it be volume yield cost?

Jordan, sure. So I'll go ahead and give the shipments and tonnage stats monthly just so everyone has those and then get into the margin commentary. So Obviously, January and February, we're already out there, but just to reaffirm those and reiterate January shipments per day were down 2.1%, tonnage per day was down 7%. February shipments per day up 0.3% and tonnage per day down 2.7%. March shipments per day up 4.3%, tonnage per day up 2.8%. And April to date, shipments are tracking up about 5.5%, tonnage up about 6.5%.

And as we think about what the Q1 looked like, I mean, we saw some nice acceleration in the back half of March, which was good to see that didn't come to fruition last year, so it was good to see that back around this year. But strong back half of March. And obviously, you see the April-to-date number. So when we think about what margin progression looks like, if I look back in history, Q1 to Q2, typically about 250 to 300 basis points of improvement sequentially from Q1 to Q2. This year, we think with what we've got going, the momentum we see, we think we can do about 400 to 450 basis points of improvement, which would be obviously a significant step-up from where we are.

Now with that, obviously, there's a lot going on in the backdrop. We're projecting, as we stand now, May and June to be seasonal. A lot of factors out there with demand and what the diesel environment looks like and everything like that. But where we sit right now, if we we see May and June come together a normal seasonality. We feel like we can hit that. And if things really get better and the environment is really improving dramatically that we can outperform that, but that's where we stand right now.

And the next question will be from Ken Hoexter from Bank of America.

So if you dig into the revenue per shipment ex fuel down 1.2%, Matt, you mentioned lower weight, shorter length of haul, but but it also decreased sequentially. But then you noted an acceleration in the quarter. Maybe, I don't know if you want to do that by month over month? Or how do you see that accelerating? I don't know if you want to talk about maybe core pricing or contract pricing within that, so we can kind of understand what is really going on there? And I guess with that, the weight per shipment, you're going to lap the Southern Cal issues in April, and I don't know if you get in the truckload spillover maybe in that same thing, how does it work with weight per shipment shifting as well?

Yes, we'll unpack those pieces a bit. So if I -- obviously, from a year-over-year standpoint, the Los Angeles region headwinds that we've talked about we're still there. They have made it a touch, but that region shipments were still down about 14.5% on a year-over-year basis. That's typically our highest revenue per bill region longer length of haul. But also included in that on a year-over-year basis, we're still winning in these 1- and 2-day land markets. And that's not a bad business. But generally, it's not going as far -- the price is a little bit less compared to something that's going more on our company average length of haul. That's not a bad business.

And what we're seeing is more and more opportunities with customers as we're putting dots on the map. We're getting it back with them, and they're routing as different freight that we may not have had access to before. So that's a good business for us. That mix shifts around a little bit Q4 to Q1 as you start to get it more seasonal. But I mean we're pleased to see the weight per shipment improved throughout the quarter, along with our revenue per shipment month by month.

Part of that's our actions on contractual renewals. You heard for it to get the 6.7%. That was the highest number that we've seen in quite a while, and that was capped by a March number that was north of 7%. We feel good about that. But there are shippers that are still moving around. The environment is still a little bit dynamic around some of that. So we continue to manage the mix. There is nothing that's changed from our efforts and focus on pricing. But we're getting more of that in some of these shorter-haul markets.

And the next question will come from Jonathan Chappell from Evercore ISI.

I understand there's a lot going on, and we don't want to get ahead of our skis here, but those numbers that you just noted for 2Q, especially, Matt, as we think about the rest of the year, the full year OR improvement guide from February of 100 to 200 basis points with the high end assuming some volume tailwinds, with what you think you have line of sight on with 1Q being done, the acceleration of tonnage through April and that 2Q bogey you just laid out there, does the high end become the low end? Or are we still I don't know, kind of questioning the pace of demand in the back half?

I think it's -- John, you bring up good points. I think I'll start with what we're hearing from customers. We -- as you might expect, we spend a fair amount of time connected to customers, we survey, we communicate, try to understand where their business is. And I think the 1 thing that I would say is that we like to hear right now are 2 things.

Number one, they track and give us feedback on our performance all the time in our Net Promoter Scores and our customer set have never been higher. They continue to improve, and we're excited about that. The second part of that, which I think is more tied to your question, is their sentiment is they're getting -- it's more positive. They see a better second half. Now Matt and I are -- and I talked to you about before, we tend to be a little bit more, let's show me, right? So those are positive tones. We like that.

I'd like to see it in the results. I think right now, what we're excited about was what's in front of us for Q2. And I think the ranges that we've talked about earlier in the year, the $100 million to $200 million is certainly within range, but there's still a lot to go on. And the macro is still -- diesel costs are at high levels. Overall, transportation structure costs are high. Does that have an impact on demand down the road? I don't know yet. But I do know that short term, customers think we're doing a great job. It's showing up in the April results in second half of March, like all that. The feedback from customers is great. So we feel good about what we've talked about for Q2. And I think the trends would indicate that the second half of the year could be pretty good.

And the next question is from Tom Wadewitz from UBS.

Yes. Let's see, I wanted to see if you could talk a little bit about the, I guess, weight per shipment, what that's doing and what it kind of did in kind of March to April? I guess also if you could just kind of help us understand, you're assuming normal seasonality in May, June. What does that mean in terms of like what your year-over-year tons per day, shipments per day look like? So I think just some more about kind of both how you see shipments developing and also what doing and how much that kind of matters to how you're looking at things?

Sure, Tom. Yes. I mean, we saw weight per shipment increase throughout Q1, which was good to see. As Fritz noted in the prescripted comments, that's what we feel is partly driven by our actions around core pricing increases and how we're targeting business and mix management. We also feel like it's a little bit to do with the backdrop improving and we've seen some positive signals, customer conversations, as you talked about. But you get into some of the spring periods and that you have some rollout at times or different mix with customers, but it increased pretty steadily throughout Q1, which was good to see.

As we go into April, it's up a touch. You saw that in the tonnage numbers that we've talked about from a shipments and tonnage standpoint in April. Remains to be seen what that does in the back half of the quarter. Obviously, there's a lot going on. Shippers are still trying to figure everything out. So we feel good about where the trends are now. But we've got a couple of important months to go through and what is generally the peak quarter of freight.

In terms of what seasonality does, typically, you'd see a step up of 1% to 2%-or-so in the March to April time frame. Somewhere in the middle is generally where that lands. And then what you'd also see is a step up April to May and May to June as well. So typically, what you're getting through Q2, which again is the most seasonal -- most typically strong period in the quarter, you're getting step-ups throughout the quarter. So that's what we're assuming right now as we stand. And as we're talking to our customers and getting demand signals from them, that's how we're forecasting right now.

What about -- and Fritz, I apologize if you might have said this in your remarks, but what about the growth in the kind of new terminals versus growth in the legacy terminals? Is that kind of similar? Or are you seeing meaningfully higher shipment growth in the kind of the terminals from the last 2 years? .

I'll give the number, Tom, and then Fritz will comment on it. But we -- one of the things we were really excited about in this quarter is we saw shipment growth in both the legacy and the ramping facilities. We've seen it for a while on the ramping facilities, obviously, but this was the first time in 5-or-so quarters that we've seen it in the legacy. So that was good. But the ramping is still outperforming legacy, but those grew for the first time in a while.

Yes. I think it's -- what's exciting about this is having the legacy facilities grow at the same time in the new facilities are growing at a faster rate as we'd expect. And what's fantastic about that is that customers are considering us more for their complete solution. And they said, look, you can do a great job for us in markets you've always been in and now you've got these new points. So this is kind of the plan coming together. We're kind of getting to the point where growth in a legacy market is often tied to the fact that we can provide service in a ramping market at the same time.

So you're now becoming a more important part of the customer's supply chain. So the percentages matter perhaps a little bit less now because the customer is looking at us as a solution rather than kind of in the legacy market.

The next question is from Scott Group from Wolfe Research.

So the pricing renewal numbers sound good, but if I just look at like a blended average of the pricing metrics you're actually reporting in the quarter, they're basically flat. So I guess, when do you think we should start to see sort of those yields and rev per shipment numbers actually improve and get closer to some of the renewal numbers? Or do we start to see some of that in Q2? And just I don't know, any thoughts there?

Yes, I think we'll start to see some of that in the back half of Q2. Obviously, we're right now just lapping some of that big change in the Los Angeles region business from last year. And there's still volume moving around with shippers and you don't always know what you take, and they move around a bit. But as the environment hopefully continues to tighten, we should see some of that come. I think we'll get closer to that as we get into the back half of the year. But I'd also expect us to see some of that improve in the back half of this quarter as well.

Yes. I think the top part of the SoCal market for us, I think we start exiting out of that kind of in May, where it's more kind of we start lapping that we're past those tough months.

Maybe just to that point, like we've got some moving parts there are obviously, like fuel is a big factor right now on yield trends, like within that margin guide that you gave us, like any way to like sort of like bracket, what sort of the revenue assumptions are?

We don't give that level of detail, Scott. But I mean, from a volume perspective, we talked about seasonality. Fuel plays a factor in that. But as we talked about, I mean, we're paying fuel costs in real time during that run up in March, they've stabilized a little bit. I think anyone's guess is as good as ours in terms of what that market is going to do. It doesn't seem like it's changing real time right now. So I would say that it's more just about the guide that we gave is underpinned by seasonal May and June is what I would say.

And we're not assuming a change in fuel. It's like whatever it is presently, we're going to -- it could go up or down, diesel can go up or down from here through the end of the quarter.

The next question will come from Ravi Shanker from Morgan Stanley.

If you can just unpack what you're seeing in terms of end markets, particularly retail versus industrial? And what's the typical lag between retail kind of end markets picking up versus industrial going into a cycle?

Yes. I don't necessarily have a call out for retail and industrial. What I would tell you is that what we see the feedback we're getting from customers is kind of across the board. So it's across all the markets. So there is a one that's necessarily outpacing another for us presently. The -- so that I think is overall is probably positive, maybe it's more broad-based. I think that in some of the end markets, we participate and have pretty good line of sight to markets that are attractive will be grocery here that your data center businesses, all those sorts of things, we represent pretty well in there. And I think that those -- it's pretty across the universe. I think it's pretty consistent feedback both from we're doing a good job, and they feel maybe a little bit positive about the balance of the year.

Got it. And maybe I can squeeze in a quick follow-up here. Just on the tech side, kind of you mentioned a number of new investments on productivity. Are there any kind of big tech products or packages that you're dropping in that you think should see like a step function improvement in your optimization efforts here?

I don't think that there is a -- we're quite ready to talk about any step-function changes. But what we continuously have been investing in the core optimization tools that we've had that are really critical to the cost structure that we have. I mean if you consider you benchmark us against the other public national carriers, not only are we the smallest of the public national carriers, but we're also -- our cost structure is very, very competitive. And what I would say is I point that specifically to how we run our linehaul network and how we plan our city operation.

Those are all large -- our models or AI -- early stage AI models that we've been working on for a number of years, and there'll be continued enhancements around that. Now certainly, from here, how we interact with customers. We can deploy AI around customer service things, around track and trace as an example. Customers really value that. It's a cost-effective way for us to provide data to customers. Those are kind of things that we've launched, but they don't necessarily change the cost structure.

If you got down the road and looked at things like Vision AI or things in that area, we're investing, those are things that are potentially operationally significant. I think that the big thing for us is that I think as we continue to focus on this national network, technology deployed and where we can optimize -- continue to optimize our pricing will be the real opportunity over time. So that -- our technology investment and focus is across the board. The cost things you have to do to stay ahead of inflation. And certainly, there are opportunities to continue to improve that. But I don't know that there's a step function out there yet for that. but we'll continue to focus our investments around optimization tools.

And you see that in our numbers, Ravi. If you look at the commentary around our touch is improving best since they've been in the third quarter of '24, you see it in the per shipment cost of salaries, wages and PT, that's how we always think about it in terms of what it takes to run a network to run an operation that on a per shipment basis is down. That's all a product of optimization, technology of cost management. And keep in mind, over that period, there's 20-plus new terminals in our network.

So those are by no means are mature yet or fully efficient. So it's not new for us. We're going to continue improving that. But that's been the root of where our focus has been for a long period of time. And then to Fritz's point, the opportunity around pricing for us, the customer conversations that we now have are more equal on a footprint than they've ever been. We've got a national network. We can do more for them, and we're seeing more of that in these 1- and 2-day wins, but that's just a product of us being able to say yes to more things.

The next question will be from Eric Morgan from Barclays.

I was wondering if you could give us some thoughts on what we're seeing in the truckload market. Just curious if any of this tightness is driving some incremental volume onto your network? And maybe I'm not sure if that's the reason -- or 1 reason for the weight per shipment upward trend. And then my follow-up, just on your answer to the 2Q touch question, you said that you usually see that improvement from April to May and May to June. Is there any way to just translate that into what it would equate to on a year-on-year basis for the quarter?

We don't give the year-over-year base, Eric, and that was in shipments that I was referring to just for clarity on shipment type.

Yes. So on your market question, I think what I would say is that I think you're -- over time now, you're starting to see freight moving, it's through its more historic moats and customers in a supply chain that is seeing increasing costs, what you're seeing is it may be a flight to quality, right? You're in an environment where you need to move freight inventory through your supply chain. It's expensive. You want to make sure it's delivered on time because you can't afford in a higher cost environment. So I think you're starting to see the reliability of our network starting to shine.

And I think more broadly across all modes of transport. I think as you see the truckload market tighten up a bit, you see LTL freight returning the LTL market. That's probably a help in there somewhere, but I think, specifically, as it relates to us, I think it's reflective of our performance for our customers.

And the next question is from Chris Wetherbee from Wells Fargo.

I guess, I wanted to ask about sort of the density or the building density and the newer more newly open parts of the network. And I think in the past, you guys have given us sort of operating ratio for facilities that have been open a couple of years. Just maybe get a sense of how that's progressing, particularly in March and April where it seems like the volume performance is looking a little stronger.

Yes. We're pleased with this. I mean they're still above company average, right? I mean there's a group of facilities are still relatively immature. We saw them improve. If I look at just those batch facilities, compared to where they were in the prior year. So the way we're thinking about this now is the '23 and '24 openings now we're past the 22%. So we're considering those kind of just part of the whole -- but the way that we look at those, I mean, that actually facilities year-over-year, they improved margins by over 2 points on the OR side, which is good. I mean there's still in the upper 90s, and we -- they are a drag on the overall. But we're going to continue working those down. They're still relatively new, but good performance from those on a year-over-year basis.

Chris, I think part of the OR guide into Q2 is reflective of growth not only in our legacy markets, which we like, but it's continued sort of leverage in the ramping new markets, which is really, really key to the whole value story here. And I think that's what we're excited about.

And then just on sort of that -- the legacy versus the new, I guess, just getting a sense of how you're feeling the demand potential improvement? I guess, I don't know if you can measure that by thinking about how much is growth in legacy versus new in terms of what's kind of core demand and maybe what Saia initiatives, i.e., you're getting the opportunity freight for existing customers in the new network or vice versa. I just want to get a sense if there's anything you can tell from that sort of broadening out of this demand dynamic?

Well, I think the big thing that I would point out, right, is we've highlighted that our legacy facilities are back -- first quarter reflected the first quarter and a number of quarters, we actually saw growth in those markets. And I think what that is indicative of it, I think this is an important piece. We're now in a bigger part of the customer supply chain in these new facilities. We're doing a great job for those customers in the facilities. And now when you're in that -- a little bit of a synergy that's coming out of this, it simply says when you're a national player and you could do more for a customer, you're hacking a lot easier to do business with. So now it's like, all right, well, let's give them more freight from Dallas to Atlanta because that makes sense because I know that they can cover.

When they do the pickups for everything that's going into Montana, that matters too, right? So the combination of all that, I think we're starting to see the building of value of having that footprint because you're able to solve all those upper Midwest problems or markets where we haven't covered well historically. Now you're able to do that. So now the customer can say, look, let's lean into it in businesses that we've long done business with you, but now you're moving up to the top of the stack in our supply chain. So that -- I think that's exciting for us. And that's really what I think is going to drive the growth Q2 and [Audio Gap] citing force. I don't see an impediment short of a broader economic slowdown that would say that we can't continue to drive margin performance in this business and in the long term real value-creating goals that I think that we have, which are sub-80 OR is -- that's out there for us, and I think we can get there. I don't see an impediment to that.

And then just 1 follow-up on my end. Free cash flow, no 1 touched on it yet, but it was very strong in the quarter. Could this market inflection here? Or is there some other considerations we need to be thinking about?

Well, we've long talked about our plan this year was to be free cash flow positive. Obviously, we understand our duties to the shareholder, and we've feel good about how we've returned the investments in the business, but a lot of that build-out is done now. We still have some terminal opportunities here and there. So we understand that we're stewards of the shareholders' capital, and -- but absolutely, if this market continues to tighten our plans around that could escalate further. I think there's still some of the unknown out there in this near term. But based on the indicators that we're seeing from the demand side from customer conversations, we feel like this could be a really great inflection point for us.

And the next question will be from Jason Seidl with TD Cowen.

This is day on for Jason Seidl. Maybe just 1 for me on circling back on pricing. So on your last call, I think you spoke to some better-than-expected capture on GI since then freight markets generally have tightened up, your core pricing is sounding robust. Have you seen any changes or improvements on the capture side there as the year has progressed? And does that telegraph anything further for momentum on core pricing as you move through those annular fees?

I would say that it's been relatively steady. No major difference there. Some of the movement we see is generally around the national accounts or the larger customers a bit more who typically are -- they're using more carriers or they've got a more sophisticated TMS, things like that. So there's always some movement with that. But I would say it's been relatively similar to what we've been seeing on the capture side. And I think a big component of that is our ability to do more for our customer. It's harder to make a change when we can do everything before. Just you're thinking about it twice when you have to make that decision now.

And now that we've got 214 facilities in the national network, we feel like our value prop to our customer is better than it's ever been. So relatively in line with where it's been, but I think every time that we can say yes to a customer and do more, then we get that chance to hold on to that at a higher price.

And the next question is from Richa Harnain from Deutsche Bank.

It's Richa here. Yes, maybe I can revisit how you manage purchase transportation. I know you look at it holistically with size, wages and benefits and optimize that in totality. Matt, you said it a couple of times your siren benefits plus PT per shipment, was impressively down in Q1. But just as truck rates rise, do you plan to enforce more or do you think your pass-through mechanisms with purchase transportation give you enough protection?

And then just to clarify, I know Fritz, we talked about like the upside scenario. It seems like the macro is providing some help right now, which is nice. But if that doesn't materialize, given all the uncertainty out there, do you still think you can improve OR by at least 50 bps this year? Or could it actually be higher than that with all the momentum and productivity initiatives that we're hearing about in earnest today?

No problem. Good question. On the PT side, one of the things that when we go through our decision-making process around PT, we always focus on, all right, number one, how does that match what customers need? Like what's the service schedule? Does it meet the quality standard that we need. What we found in Q1, particularly in the second half of March, we saw opportunities to really lean into rail.

And the rail -- the entire increase of our PT year-over-year, I mean there's certainly some rate underneath, but the real piece is we really leaned into using rail, which on a cost per shipment base or cost per mile basis is upwards of $0.50 cheaper than our internal model. So in that case, because we could meet the customer need, the cost decision became sort of straightforward and we made that call.

Now over time, I think one of the things that's important, and I think you've got to on track with this and that is as we build density in this network and scale, the opportunity for us to run more balanced schedules across the network, which allows us to use -- potentially use a Saia driver for the linehaul move, in that case, we've got freight for them to go from if he's traveling east, when he comes back west, you'll have a full load, and that's cost optimal and that makes a lot of sense.

As the maturity of the network grows, there'll be opportunities to do that. But at the same time, we're going to take advantage of when PT works for us, starting with service, then we'll get to dealing with the cost side. If the cost side is better, where it makes sense for us to better utilize our resources maybe on another part of the network.

With respect to kind of the momentum we're seeing in the business, I think there is certainly in a flattish kind of softening macro environment, can we get OR improvement in the business? I think we can. I think we've got some underlying efficiency goals that we have in place that we're achieving. I think that there -- as we get new volume in those facilities that are ramping that automatically gets us a bit of a cost leverage there. So I think we're in the process right now of really shoring up what I would say is the lower end of the range, right? So if macro softens up, can we still get better? I think we can.

Is it 50 bps sort of idea, is that out there in a tough flattish market, I think we can achieve that, particularly as we continue to have success with customers in those new markets. So all in, I think what's exciting about this because of where we are, we've got line of sight to things that we can improve on and are improving and optimizing as we go.

Okay. And can I just ask 1 quick follow-up? The good demand that you're seeing, I think legacy facility is seeing growth after like 5 quarters. Any sense of that being pulled forward or any concern around that based on your customer feedback?

I don't think so. I think that what we see is it's more of a sort of broader sort of sentiment in the marketplace. So meaning, I don't see anybody making the decision to let's move the freight quickly now before things become more inflationary. I think it jumped up. The inflationary diesel cost jumped up pretty rapidly. And as a result of that, I don't think someone could necessarily foresaw kind of those cost increases that maybe move that forward. So I conclude that I don't think that we see any real pull forward there.

[Operator Instructions] The next question is from Brian Ossenbeck from JPMorgan.

Just wanted to ask about the capacity and, I guess, ability to make service if you do have a more significant inflection in demand and volume, I don't know if you're ramping up for that probability already? Or if you have more productivity, you think you can leverage in that scenario? So maybe you can talk through that a little bit in terms of how you were planning for it right now? And if it were to actually materialize, how you would handle that, would you maybe even trim down some of the volume coming in to your that service is met in that type of scenario?

It's a good question, Brian. Thank you for that. A couple of things. We feel like we -- because of our ability to manage PT efficiently and effectively, I think that's always going to be a bit of a natural leverage for us. So if you -- if we had unexpected short-term or shorter-term volume variation, we've got that sort of safety valve that we know how to manage. So I think we can handle that in the short term.

I also think that as we scale the business, we have certainly continued efficiency opportunities. So I think that that's kind of within our framework. And then I think the other thing is, quite frankly, is that these are scarce assets, meaning the -- our fleet -- we're doing a good job with the fleet, with the real estate terminal network, the technology that's all inflationary. So in an environment, as it strengthens and firms up, we're going to expect to not only provide great service to our customer, we're also going to expect that we would be compensated for that significant investment we've made.

So that may help manage sort of volume inflections and changes in terms of in a stronger backdrop, we probably focus more on making sure we're compensated for all of that investment that we've made. Because when you do business with Saia, you're going to get -- you get best-in-class service. So we expect to get paid for that investment. So that probably becomes a bit more of kind of our focus in that sort of the backdrop.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Sias President and Chief Executive Officer, for closing remarks.

Thank you, operator, and thanks to all that have called in. At Saia, we believe that our value proposition to the customer continues to be significant and we look forward to talking about the success we will achieve in the quarters and years to come. Thank you, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day and welcome to the Saia Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President, Chief Financial Officer. Please go ahead.

Thank you, Betsy. Good morning, everyone. Welcome to Saia's Fourth Quarter 2025 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties and actual results may differ materially.

We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ. Also, in the third quarter of 2025, we recorded $14.5 million in net operating expense impact from a gain on real estate disposal and impairment of real estate. When we discuss adjusted operating expenses, adjusted cost per shipment adjusted operating ratio or adjusted diluted earnings per share for the third quarter 2025 or full year 2025 in our comments, it refers to adjusted results that exclude the gain from that sale and impairment on that property.

See our press release announcing fourth quarter results for a reconciliation of non-GAAP financial measures. That press release is available on the Financial Releases page of size Investor Relations website as well.

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

Good morning, and thank you for joining us to discuss Saia's fourth quarter and full year results. As we look back on 2025, I am proud of our team's resilience and focus, delivering strong execution for our customers even as volume patterns shifted day-to-day a bit constant change.

Having now completed our first full year of the national network, I'm more excited than ever before about the future of Saia. Throughout the year, our now national footprint provided opportunities with both new and existing customers as our expanded reach enabled us to provide our industry-leading service in more markets. Having a national presence provides us with the opportunity to solve more problems for more customers, which we believe has resulted in increased market share.

Our record capital investments of more than $2 billion over the last 3 years have allowed us to rapidly expand our footprint in a short period of time, and I believe we're still in the early stages of capitalizing on the opportunity that a national network provides. Of course, our achievements would not be possible without a best-in-class team. While the demand environment remained dynamic throughout the year, our team responded to our customers' needs every day.

Our core operations performed as we expected for the fourth quarter. However, reported results were impacted by self-insurance costs late in the quarter. Our fourth quarter operating ratio of 91.9% reflects these increased self-insurance costs. The sequential deterioration from third quarter's adjusted operating ratio was impacted by unexpected adverse developments on a few cases arising from accidents that occurred in prior years, which required reserve increases in the approximately -- in the period of approximately $4.7 billion.

As we well know, accident-related costs continue to rise due to increased litigation costs and settlement values as well as general inflation and can develop sometimes unexpectedly over several years. Regrettably, this unexpected need for reserve increases was related to the accidents that happened years ago. However, we continue to invest in industry-leading training and safety technology. We're seeing positive trends in our safety statistics. During 2025 despite having the largest fleet in company history and internal miles increasing by 2.4% year-over-year. We saw a 21% reduction in our preventable accident frequency and a 10% decline in lost time injuries, reflecting the benefits of these ongoing investments in safety. Focusing on the fourth quarter, volumes continue to reflect the muted demand environment the industry experienced throughout the year.

Shipments per day were down 0.5% compared to the fourth quarter of while tons per day was down 1.5% compared to the same period last year. As is typical, we experienced some volume shifts in the weeks after the GRI, which was implemented on October 1, and we remain extremely focused on ensuring that we are compensated appropriately for the quality of service provide to customers.

When we analyze the results of the GRI closely, we're pleased to see customer acceptance trends slightly above historic levels. Similarly, contractual renewals remained strong in the quarter averaging 4.9% of the book of business contracted in the quarter. We continue our efforts to ensure that we are fully compensated for quality and service we provide and have seen a 6.6% contractual renewal increase in the month of January 2026.

Despite the volume decline, our fourth quarter revenue of $790 million is a record for any quarter in our company's history. Mix headwinds continue to impact our results with slight decreases in weight per shipment and length of haul compared to the fourth quarter of 2024. Additionally, revenue per shipment, excluding fuel surcharge, decreased 0.5% and compared to last year. As we've discussed in our prior quarters, the volume decline in our Southern California region continued as volume in the region in the fourth quarter was down about 18% compared to the prior year. This region is typically our highest revenue per bill market and the volume decline caused an estimated $4 million revenue reduction for the quarter.

While the Southern California region continues to play a factor in our mix dynamics, we're seeing growth with customers at both legacy and rampant markets as our expanded footprint allows us to get closer to our customers and handle segments of their business that we may not have had access to prior to the network expansion, reflecting our ability to provide industry-leading service in more geographies, we're able to drive revenue per shipment, excluding fuel surcharge, up 1.1% sequentially from the third quarter.

Our nationwide network has now been fully operational for 1 year, giving us clear perspective on the impact of our generational opportunity to expand the network over a very short period of time. Over the past year, we strengthened relationships with existing customers while bringing our high-quality service to many new customers, contributing to what we believe is a record level of market share gain. These customer relationships will continue to develop, reflecting the long-term value of the strategic investments we've made over the past few years.

With our network expansion, we're able to achieve cargo claims ratio of 0.47% in the fourth quarter, which is a company record for any quarter. Considering the size and scope of our national network with newer locations still in early stages of their life cycle and employing newer SI employees, this customer-centric metric is a testament to the culture instilled at each location in our organic expansion and our team's ability to perform at the highest level. This level of service reflects our team's consistent effort and attention to detail. Core strengths that have helped establish Saia as a leading national LTL carrier.

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

Thanks, Fritz. Fourth quarter revenue was largely flat compared to the prior year, increasing by 0.1% to $790 million. While revenue per shipment, excluding fuel surcharge, decreased 0.5% to $297.57 compared to $299.17 in the fourth quarter of 2024.

Fuel surcharge revenue increased by 6.1% and was 15% of total revenue compared to 14.1% a year ago. Yield, excluding fuel surcharge, increased by 0.5% and while yield increased by 1.6%, including fuel surcharge. Tonnage decreased 1.5% attributable to a 0.5% shipment decline in addition to a 1% decrease in our average weight per shipment.

Our length of haul decreased 0.1% to 897 months. Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased 6.1% compared to the fourth quarter of 2024. This increase was primarily driven by increased employee-related costs, which include a company-wide wage increase of approximately 3% on October 1, partially offset by a 5.1% reduction in head count compared to prior year as we continue to improve efficiency and match hours to volume. Excluding linehaul drivers, head count decreased 6.4% compared to the prior year. The year-over-year increase in salaries, wages and benefits also reflects the rising cost of self-insurance which continues to be inflationary.

Our network expansion and continued investments in technology have positioned us to in-source miles, a trend that has continued over the past few years. As a result, purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles decreased by 0.8% compared to the fourth quarter last year and was 7.3% of total revenue compared to 7.4% in the fourth quarter of 2024.

Truck and rail PT miles combined were 12% of our total line hauls in the quarter, down from 13.1% in the fourth quarter of 2024. Fuel expense for the quarter increased by 0.2% compared to the prior year, while company line haul miles decreased 2%. And -- the increase in fuel expense was primarily the result of a 4.8% increase in national average diesel prices on a year-over-year basis. Claims and insurance expense for the quarter increased by 12.3% year-over-year.

As Fritz noted, this increase was primarily due to adverse claim development on a few accident cases late in the fourth quarter of 2025 related to accidents that happened in prior years. In 2025, we are pleased to see a decrease in the number of preventable accidents year-over-year. However, the cost per claim continued to rise due to increased cost of litigation and increases in settlement values. Depreciation and amortization expense of $62.9 million in the quarter was 16.4% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate and technology.

Compared to the fourth quarter of 2024, cost per shipment increased 6.1%, largely due to increases in self-insurance related costs and depreciation. Group health insurance alone accounts for more than 30% of the year-over-year cost per shipment increase due to continued inflection in health care-related costs. We continue to believe that we provide best-in-class benefits to support our employees who drive increased customer satisfaction and while a headwind, we have absorbed the majority of the market rate increases that we have seen over time.

Total operating expenses increased by 5.6% in the quarter and with the year-over-year revenue increase of 0.1%. Our operating ratio increased to 91.9% compared to 87.1% a year ago. Our tax rate for the fourth quarter was 22.7% compared to 23% in the fourth quarter last year, and our diluted earnings per share were $1.77 compared to $2.84 in the fourth quarter a year ago.

Moving on to our full year 2025 results. Revenue was a record for Saia, increasing 0.8% compared to 2024, while operating income was $352.2 million. Adjusting for onetime real estate transactions, our operating income was $337.7 million for 2025. Our operating ratio for the year deteriorated by 410 basis points to 89.1% and while our adjusted operating ratio was 89.6% for 2025. Focusing on the balance sheet, we finished the year with just under $20 million of cash on hand and $63 million, [indiscernible], on the revolving credit facility to bring us to approximately $164 million in total debt outstanding at the end of the year, which is down from $200 million at the end of 2024.

Looking back on 2025. I was pleased with our team's core execution despite a challenging macroeconomic environment. We insourced more miles compared to the prior year, cost optimally scaling and leveraging our fleet's national network and technology investments, driving our optimization efforts. Further evidence of our network optimization efforts shows in our handling metrics, which improved sequentially every quarter through the year and exited the year 1.5% below their first quarter peak. From a quality standpoint, our cargo claims ratio of 0.5% for the full year was a company record and improved year-over-year in every quarter compared to 2024.

We continue to see the benefit of our investments in safety, training and technology, lost time injuries in 2025 declined 10% year-over-year, and preventable accident frequency declined 21% year-over-year. While the underlying nature of self-insurance remains inflationary, our reduced incidence has helped mitigate the rising costs. Importantly, our record investments have enabled us to drive increased customer satisfaction in more markets.

Our ramping terminals or those opened since 2022, operated profitably for the year despite the relative inefficiencies that come with opening 39 terminals in such a short period of time. the 21 terminals that we opened throughout 2024 continue to mature, and we estimate that those terminals increased revenue market share by approximately 80 basis points in 2025.

In aggregate, our ramping terminals while weighing on the company's operating ratio contributed incremental operating income for the year. We are seeing tangible results with our customers through our expanded service offerings and I believe we are just beginning to unlock the full potential of our national network and technology investments.

I will now turn the call back over to Fritz for some closing comments.

Thanks, Matt. Despite uncertainty surrounding volumes in the broader macroeconomic environment in 2025, I'm proud of how our team adapted to each day to meet our customers' needs every day represents new variables that our ability to consistently deliver strong service and quality metrics reflects the strength of our siculture across both our legacy and ramping terminals.

While the inflationary costs associated with our industry continue to be more pronounced in certain areas, we're actively working to manage these costs through the use of network optimization technology. We accelerated our network optimization efforts that began in the first quarter of 2025 and are already seeing cost savings as a result.

Fueled by our ongoing investments in technology. These initiatives improved density and efficiency across our national footprint, which handles declining steadily from the first quarter peak. As our network continues to scale, adding density enhancing and enhancing our ability to service customers, our value proposition continues to become increasingly clear. These investments we have made over the past 3 years, more than $2 billion, has strategically allocated capital to our real estate revenue equipment and technology to support our long-term profitable growth. In addition to the investments we've made in our network expansion, investments in revenue equipment and fleet modernization have improved operating efficiency and safety while also positioning us to improve the customer experience.

We've also invested heavily in technology to optimize network performance and drive operating leverage, including advanced analytics for operational and profitability in sites. Customer-facing capabilities, employee training and process automation. We believe that the combination of these investments strengthen our competitive position and support sustainable value creation for shareholders. As we look to 2026, our focus remains on strengthening core execution by continuing to invest in both technology and our people.

Our national network provides a complete LTL solution for our customers, and our success is defined by consistently meeting and exceeding customer expectations while generating an appropriate return for these significant investments. we believe strongly that our national network is poised to scale as macroeconomic conditions improve. By leveraging these investments, combined with our team's commitment to excellence, we expect to drive incremental improvements to our performance in 2026 even if the macro environment remains soft as it was in 2025. The network investment over the past few years reflects a considerable deployment of capital, which requires a return.

Our emphasis through 2026 will be an intense focus on ensuring that we see a return on these investments. We expect to be fairly compensated for these investments as our customers benefit from the increasing scale and quality that we provide. Over time, we'll need to continue to reinvest in the inflationary and capital-intensive network and find ways to continue to deploy technology and operate more efficiently. Ongoing investment will require that we are appropriately compensated to provide a return to our shareholders. With that said, we feel very strongly that our business has never been in a better position to drive value for our customers and returns for our shareholders.

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

[Operator Instructions] The first question comes from Jordan Alliger with Goldman Sachs.

I was just wondering, can you perhaps in the context of how you're monthly tonnage data has been going through the quarter and then October -- sorry, and in January, how that may tie into your thoughts around sequential margin seasonality, 4Q to 1Q?

I'll give the monthly so that everyone has that. So October shipments per day were down 3.4%, tonnage per day, down 3.3%. November shipments per day up 2.6%, tonnage, up 1.8%. December shipments up 0.6%, tonnage, down 2.2% and then when I look at January, obviously, we had some of the weather impacts that passed through.

So shipments per day down 2.1%, tonnage per day down 7%. But keep in mind, we've seen consistent weight per shipment for the past 5 or 6 months now, which is good to see that stability. We're comping some pretty heavy-weighted shipment periods in the first quarter last year. So keep that in mind from a weight per shipment standpoint, if you remove the impact of the storm or normalize them, shipments in January would have been slightly positive, which continues the trends that we've been seeing. So relatively in line there. And from the margin standpoint, look, if you look at history, Q4 to Q1 sequentially is typically a degradation of about 30 to 50 basis points worse.

If we get a normal February, normal March, we think we can outperform that and beat that and if we get a stronger than normal March and see some of that come to fruition, and we think we can even further outperform that and get below where we were last year, which really feels like we had for a pretty good backdrop from that point.

Yes. And I think that's really important point is that we get through Q1, we've seen the macro data that's out there that has come up, but it's been positive. There are trends out there that would appear to be positive. I think this is our top, right? So this is the time where we've invested and positioned ourselves for this opportunity. And I think that you build off of what we could see in the first quarter, as Matt outlined, and I think you're looking at a full year kind of OR improvement, 100 to 200 basis points. And if the market -- if macro is kind of at the upper end of the kind of the trends that I think that's only better for us, right? So -- this is the scaling point. This is why we did. This is the time why we made the investments we have over the last number of years.

And just one point, Jordan, to clarify the sequential margin, we're viewing that off of a normalized right, if you remove the one-off impacts that we called out. I just want to make that clear.

And so that excludes that $4.7 million of insurance.

That's right.

The next question comes from Jonathan Chappell with Evercore ISI.

Just one super quick clarification. Fritz, that $100 million to $200 million that you just mentioned. Just what's the tonnage backdrop behind that? I know it's like the macro is not getting better, but is it positive? Is it [indiscernible] et cetera...

Yes. I would just say that I'm looking at the ISM data, the -- so I'm expecting that there'll be some positive backdrop there, right? So in a positive backdrop -- that's good for Saia. I think that we've seen some other macro data out there that would be positive.

I think that would lead to a market in which we'd see some potential tonnage growth. And if that's the case, then I think that's an opportunity for us. So I think it's more about if those things come together, this is why this is such a compelling opportunity for us. If those things don't come together that I think we're in a position where we could still improve OR, but clearly would be at the lower end of the range I described. But in a favorable backdrop, I like the opportunity.

All right. And you said several times getting compensated appropriately. You mentioned the GRI. I maybe Matt said the GRI acceptance was a little better than usual. Is this a year where if you get a little bit of volume tailwind and like the weight seems to be relatively consistent, what type of range are we looking at for pricing yield? How do we want to measure rev for shipment type of growth this year?

I mean look, we're -- obviously, we haven't been netting the renewals that we've been taking part of that is just volume shift in the period.

But we -- core inflation in this business is going up. We've got to be able to push and take rate. And part of that's been the ability to close the network gap and to provide more equal service in these markets with the national scale. So that's how we think about it. The weight per shipment, obviously, is a headwind to year-over-year in Q1. But after that, you start to normalize a little bit more. Revenue per shipment improved 1.1% sequentially from Q3 to Q4. So we're -- you see it in the renewal number. We're focused on it, and we'll we're not taking a day off from that, even though the environment is a little bit light. We've got to get paid for it.

I mean this is year 2 of a national network, and we would -- should expect to price ahead of inflation. And develop a margin on that. $2 billion of investments over the last 3 years, last 3 years in terms of return, and we're focused on getting that return and being in a position to reinvest in the business over time.

The next question comes from Chris Wetherbee with Wells Fargo.

I guess I wanted to ask about the new terminals open and kind of relative profitability. It sounds like they did contribute positively to operating profit for the year. Can you give us a sense of where maybe the OR for those are? And then Fritz in the context of the 100 to 200 basis points, how do we think about the contribution of the new terminals -- is that where if you can get some incremental volume, you could see much more material improvement in the OR there to drive towards the top end of that 100 to 200?

Yes. From the first part, Chris, the -- obviously, they are a drag on the company-wide -- there -- so they range, right? We've got some that are sub 95%. We've got some that are higher than that in aggregate. They're sort of mid to upper 90s. But a lot of these, if you think about it, they're still within -- then when we open them in '24 for the biggest batch, those weren't all opened early in the year.

So throughout the course of last year, we just closed a year of these operationally, which is really something that we're pleased with and proud of. We've got room to go, and obviously, work to do, but they're in that region.

And I would add that the margin improvement is going to come from the new -- they're not going to be a drag over time. And I'd point you back to when we did the Northeast expansion, right? We saw that in those developed sort of maturity, we can drive incrementals in those. I think what's different this go around in the Northeast is that the incremental opportunities across the business -- if you study our network cost stats that we described earlier, we were able to in-source and scale more of our line haul network.

That's all about building densities across a national network. Part of that is the contributions of the new facility. So I think that this is the -- why this is such -- was such a compelling investment to make. And if we get the environment, we can accelerate that sort of performance, -- but I think it's great because it's going to come for both new and old, but it's going to benefit the national network.

We're seeing real opportunities with that, Chris, just in customer conversations. You always get turned on overnight to some of that business, but the level of discussions that we can have with customers or even frankly, customers that we didn't have the opportunity to get in the door with because they want simplicity, they want to ease of doing business. When you've got a full national network, you get that opportunity.

So to Fritz's point, it's not just the scale and the new ones, but even though we covered some of these markets before, we're getting new opportunities because we can have those discussions at a better level of detail and do more for the customers.

The next question comes from Stephanie Moore with Jefferies.

Maybe returning to the pricing commentary. Maybe you could discuss a little bit on what you're seeing in the overall pricing environment. And also, as you think about your higher pricing capture, would you say this is more so customers starting to recognize the investments that you've made? Or maybe it's both? Or are you being a bit more tactful with your own pricing actions?

From the environment, I'd say it's -- we continue our own initiatives. We don't ever take a day off from that as a business is inflationary. We have to go get rates. So we're continuing those efforts. And and really pushing the envelope harder and a lot of instances. So no change from us there. Obviously, with capacity where it is for everybody, shippers have options, and they maybe were willing to move to a more regional carrier or something for a time being, but that's just a product of where we are. I wouldn't say that's new.

We've been seeing that for the past couple of years at this point with the capacity environment the way it is. But our view is that if you look at history, when the environment gets a little bit tighter from a capacity standpoint, there's a flight back to quality and a flight back to national carriers. So we're not taking a day off from the pricing aspect of it. In terms of our higher capture rate, we track that very closely. We study the results of the GRI and all pricing actions really closely. I think it's a combination of 2 things. We're getting more granular than we have before, and we're using our analytical tools to focus on key opportunity areas for us. But I think importantly, the opening of these terminals that's given us national scale has made it harder for customers to change out. And when you've got a better value proposition and you've got the opportunity to go and talk to them about what you can do for them in every market, which we haven't always had the ability to do. You get more conversation point. So I think it's a combination of both.

Yes. I would just add, and I would emphasize Matt's last point, national network, high level consistent service that makes that pricing discussion more palatable, right? If you're doing a great job, you come and say, "Look, this is the value I'm creating for your supply chain. And this is what we need to do to be able to continue to support our customers' success and continue to invest in our business, that is an opportunity -- continued opportunity for us and only heightens now because of the success of the national network.

Now that's important context. And maybe just a follow-up on the volume trends and the sequential improvement we've seen for the last couple of months, as you kind of look at what your customers are telling you or what you're seeing, do you think that it's generally more optimism kind of like what we've seen maybe in some of the macro data points? Or is this truckload capacity how does this compare to maybe what we saw at the start of 2025? Any context on the overall demand environment would be helpful.

I think it's a little bit of everything. I think it's a little bit of -- maybe a little bit more positive into the year, which is good. I think there's maybe some structural market sort of influences here. But I think in total, the tenor might be just a bit more positive, right? And I think that's good.

Now I will caution just by saying, look, we're seeing it and hearing it a bit in customer conversations I'd like to see it more in volumes, too, right? So that's -- some of that will develop through the quarter. We think it will, but it's -- that's still -- so we actually see it in the results. There is a potential that things could change. But Overall, I would say year-over-year, that the factors are -- would appear to be more positive.

The next question comes from Scott Group with Wolfe Research.

So can you just not -- you were going pretty quick. What was the comment about Q1? Maybe it's going to improve, maybe it's not going to improve on a year-over-year basis. I just want to ensure like the 2 different sort of environments you were talking about? Just if you can just add a little bit more color and then I have a follow-up.

Yes. So if you normalize for the Q4 item that we called out and use that as the anchor point. history says that Q4 to Q1 typically deteriorate 30 to 50 bps in that range. There's different years, obviously. We think we can beat that and just thinking about if we get a normal rest of the February and normal March. But if March comes in a little bit more strong, and we're starting to see some of the ISM data come through whatever it may be.

We think we can further outperform that and potentially get it below where Q1 operated last year. Obviously, a long way to go between here and there, but that's the distinction between the 2 would be more about March coming in a little bit stronger than what we would typically see in history.

Okay. And then just a couple of other just things. The -- when do you think we start to see like the yield or revenue per shipment trends catch up to the renewal trends? And then it sounds like you're talking a little bit more about in-sourcing linehaul. Like when do you think we start to see like that purchased transportation line start to more meaningfully decline as a percentage of revenue.

On the revenue per shipment side, I mean, keep in mind how weight per shipment impacts yield, weight per shipment, you get a read from how that looks just with January numbers. So a headwind there from a revenue per shipment standpoint, that helps yield but then it starts to normalize a little bit more in Q2, Q3. Weight per shipment has been relatively steady for us over the past 5 or 6 months, which has been good to see. So once you start lapping some of the Q1 weight per shipment headwinds. But I think we start to see that in the Q2, 3 period. And obviously, if the environment tightens up a little bit more, we're going to see that run further and we're going to press the gas even harder on that.

If you look at from a PT standpoint, I mean, one of the things that we've talked about for a long time is just the ability to run more balance when you've got a whole nationwide network selling and out of more geographies, all of that PT as a percent of total miles over -- for the full year of 2025 was 12.1%. If you go back to '21 period, that number was over 18% of miles.

So we've reduced it pretty dramatically over time, cost optimally, we still feel really good about how we use PT. But when you have a nationwide network, you're able to balance the network more, run more efficiently as you get more balance between your terminals. So it's come down a good bit over the years, but we still feel really good about how we use it. As the network continues to scale and certainly, as volume comes back, we're going to have further opportunities around that. But we feel good about how we use it.

Yes. I think, Scott, too, just to add, we look at that kind of we stay more cost per shipment and total network cost per shipment. So there the PT line unto itself, that certainly is one line, but our salary, wages and benefits also as internal costs in there. So that we kind of look at those 2 combined. And so over time, we like that trend. And I think as the business scales, I think we'll continue to see that improve meaningfully.

The next question comes from Richa Harnain with Deutsche Bank.

See, just quick clarification on the January information, Matt. You said that ex weather shipments were up a little bit. Could you tell us what tonnage was doing ex weather? Sorry if I missed that. And then my main question is.

Oh, go ahead. You can go first and then I'll ask the second one.

Yes, shipments would have been up a little bit and tonnage down about 4%, 4.5%.

Got it. Okay. And then you both have been talking about how the network is very poised to scale. I wanted to ask about like trends in cost per shipment. Ex those self-insurance costs bumping higher, it still felt like it was it was higher than what we usually see sequentially per your 10-year average, I think cost per shipment was up 5.7%.

Usually, we see a 4% increase Q3 to Q4. I know Q3 was a very solid cost out quarter for you, and that's part of it, the base being lower, but how should we think about like cost going forward? Are you carrying just extra cost as a result of your network expansion and it's going to take a more pronounced upturn to absorb all that. Maybe just talk about that. And along those lines, you can mention how much excess capacity or slack you feel like you have in your system today to absorb extra volume to come in.

Yes. So if I look at the cost side of it, so we don't typically look 10 years back, our business has changed so much over that period. So if you look at a little bit more of a shorter period of time, Q3 to Q4, cost per shipment generally is up in a sort of 5-ish, 5% to 5.5% range. And keep in mind, too, that includes historically where you have a wage increase impact both in Q3 and Q4. We didn't have the wage increase in Q3 this year, we had it on October 1.

So that's an automatic headwind of an increase in costs compared to what you would see in a historical number. So that's 1 piece of it. You've got volume that's down 0.3% Q3 to Q4 on just a calendar period. And you've got 2 fewer work days in the period. So you've got fixed costs that are just over a shorter amount of days. And I would say even all those workdays aren't real revenue days a day after Christmas is a workday, but it's not a full volume day. So you just don't get that leverage. But if you think about that, there's just -- that piece is important on the wage increase where it wouldn't have been in that historical number. So obviously, we're going to always work on that. We've got room to improve, but we feel like we managed it pretty effectively if you look in line with some of those historical trends. And we called out the head count portion, to head count year-over-year in Q4, excluding linehaul drivers, is down 6.4% and if you look at that sequentially from Q3, that's down about 2%.

So we continue to match ours with volume and feel good about how we're managing it, but we can't take a day off from that. We have to work through that all the time. And -- on the network standpoint, obviously, we've got excess capacity, like Fritz said, we opened all these terminals for a reason. It was a generational opportunity for us to expand the network. We have -- it's going to vary by market, but I'd say on a broad base, excess capacity. We're prepared for an inflection. But important to note, capacity in LTL comes in a lot of different ways. It's terminals, certainly, but it's also doors, it's yard space, it's people. you're really the lowest common denominator of all of those pieces when you think about capacity. But this is why we did this. We expanded and what's turned out to be a prolonged freight cycle. But if we had it to do all over again, we do the same thing because we feel really good about what the opportunity is for us over the long term of the business. But we feel really poised to scale when the environment gets a little bit of an uplift.

The next question comes from Ken Hoexter with Bank of America.

Just want to clarify, you were down 7% in tons in January, 1 of your peers was flat. So I just want to understand what's going on in the market maybe a little bit. Were you more impacted by weather as a national carrier as they are? Is there a difference in end markets, SMB adds? Just want to understand if somebody is being more aggressive in pricing versus that differential? And then in the past, I just want to take this another level, you've noted revenue per shipment ex fuel is a good indicator for price. So a lot of discussion here on rev per shipment given that it was down year-over-year. And I get the weight, Matt, but you noted contracts were up 6.5% in January, accelerating from just shy of 5% in the fourth quarter.

So is that demand picking up? And so thoughts on pricing is accelerating. Just maybe one on tonnage, one on pricing, if you can.

Yes, I encourage you to look through -- I mean, first of all, we're not seeing anybody on the pricing side act differently. So environment continues to remain rational, nothing different from what we've continued to see there. The tonnage comp for us, if you look at just where weight per shipment was the first 3 or 4 months of last year, that's the biggest component of this. Weight per shipment has been relatively steady call it, sort of May, June of 2025 to where we are now. We're just lapping some weight per shipment comps that are much higher than that.

So that's why the tonnage number is what it is for us, I would say from the peer set that you're talking about, I think wage per shipment is relatively consistent. I have to go back and look. But that's really what the driver of that is the higher weight per shipment comp, which we continues to be a headwind in the -- through March, April time frame and then it starts to flatten out compared to where we are now.

I think the only thing I would add just on January discrete, we've incorporated the impact of this in our -- in that discussion around when we think about Q1 in total. But that weather system, but I this outdoor support, you got to deal with weather every year. But when Dallas gets shut down, our Texas market is impacted, that's our -- from a relative -- that's the biggest portion of our company.

So that's going to have a relative large impact on us versus maybe some of our peers. But our guys did a heck with job rallying getting us back in position. But what Dallas through Memphis is frozen and Texas is frozen and we're not operating, and we track that on our website. That's tough for us. But because of the great work by those teams, recovered from that. We're back full-scale operation now. So I feel good about what the trends are for the fourth quarter. But January, there are a few days there and that was pretty tough.

And if I could just get 1 clarification just because I've gotten some questions on the assumption for the first quarter, the OR commentary. I know you tried to answer this before but I just want to get a clarification. The tonnage that you're now assuming, I know you said it could get better what's the base case for that $100 million, $200 million, maybe midpoint in your tonnage assumption?

I mean Obviously, the Q1 headwind from a weight per shipment standpoint, then it flattens out. But I think for the top end of that range, like Fritz talked about for the full year, A little bit of a shipment and tonnage lift would be embedded in that. But importantly, we still feel like we can drive improvement even if the macro environment doesn't give a lot of uplift and it just stays similar to what it was last year. And we look at historic slough the quarter from here, right? So January is tough. We had the weather. But Feb and March should be like our normal typical seasonality.

The next question comes from Tom Wadewitz with UBS.

So wanted to understand a little bit more your thoughts about flat market, flat freight market, just how you would think Saia will perform if that's the case, like be great if ISM is right and you see a better backdrop. But what if you don't see that cyclical improvement. So in particular, do you think you'll transition to shipment growth, if that's the backdrop, or would you say you just kind of -- it kind of seems like the December and January, it's hard to see outperformance versus the market or it's not as clear maybe versus what you've been going at. So how do you think about when you get beyond the tonnage headwind in 1Q you get beyond weather, what does shipment growth look like for Saia against a flat freight market?

Well, I think I'd look back to last year and how we performed in the market, how everyone describe it, flat, soft, recessionary, whatever. Growth for us came in our developing new markets, ramping markets, I think that would -- that's going to continue into the year into this year. I don't see any reason why that sort of level of customer acceptance would continue. I think in our legacy markets, I think what you'd see that is sort of normalized, flatten out there compared to what we saw in '25 and then it's a focus on core execution, probably see in a flat market from here, you probably would see kind of us grinding out some share primarily because customers look at us and say, "Hey, that's a great product. This is a national network. This is working.

We take share in that way. and we price accordingly to try to continue to get those returns. So I think it's the last -- it's the 2025 playbook in a flat market into '26. But if the ISM develops like you would sort of indicate, I mean, I think that's what's exciting, right? That's where I think you could accelerate that. Do I look at December and January volume trends I always comment or not over the course of the year, I don't know if Feb, January or December are the 9, 10 or 10, 11, 12 most important months of the year, I don't know. I don't know if there's a huge trend in there. But I think it's -- I think the underlying execution for us has been good despite sort of the macro conditions.

So okay. Well, I appreciate that. So how do we think about the low end of that 100 to 200 basis points? Do you think that -- does that assume some growth in revenue per hundredweight, do you kind of get -- I know you've got questions on it, but does that assume you get to 2 points of growth in revenue per hundredweight, something like that? And then also a little bit of shipment growth? Or what kind of revenue growth backdrop do you need to get that low end of your OR comment?

Listen, I think that if we get sort of a macro freight market that is growing a bit. I don't know, 1%, 2%, yes, that would be great. But at the end of the day, I'm not necessarily interested in we're not interested in leading the league in shipment growth. This is more about focusing on generating returns.

So if the market were stronger than that, you might see more of more of our return coming from evolving or developing revenue per shipment. That probably accelerates in that kind of environment. And we'll get some growth in our new markets will continue to grow. So the combination of that would take us up and that revenue piece is really going to drive the incrementals. So I would say that in that range that we've given, we've assumed that when we talked last back in last quarter, we said 50 basis points of improvement into this year, just on a steady-state grind environment. If we had a little bit of growth in the year, can we get to 100 absolutely. And if you get more growth and a little bit more pricing as well, then you're going to go to the upper end of that range. And if you're investing and looking at Saia, which you're focused on, as you say, wow, these guys know how to monetize the capital that they've deployed in the business, that's where the incrementals really look good. And I'd encourage you to consider that over time. And we can point to history. We know we've done it before.

Okay. So you probably get some revenue to get to the low end of that 100 to 200. And obviously, if the market is stronger, you can do a lot more. Is that -- it sounds like...

Absolutely, absolutely.

The next question comes from Brian Ossenbeck with JPMorgan.

First, just a follow-up on the in-sourcing line haul. It sounds like the network is helping with that from a density perspective. But you also mentioned some technology. So is there more of a structural benefit you're getting here from an investment -- and then maybe just wanted to hear an update on the mix of the portfolio. You mentioned the weight per shipment rather headwind. West Coast exposure, you had 1 to 2 lien growth previously. So maybe just an update in terms of where we are in that? Is that still going to be part of a tougher comp from a mix perspective here maybe in the first couple of quarters?

Yes, Brian. So what I would point to, and I think 1 of the things that's always important when you consider our cost structure is kind of reference or compare us to our competitors, all the public guys are all larger than we are. And by and large, on an apples-to-apples basis, we've got a pretty good cost structure -- and that is largely dependent on the deployment of technologies over the last few years around how we plan, schedule and run our line haul network.

So we have never been necessarily concerned with using PT if it's cost optimal, right? So as we have modeled the network over time, we have to use PT freely would have made sense to match our cost structure and most importantly, match customer expectations. So that same -- we deploy that technology, that optimization technology on a larger scale as we grow the business. And as you add 39 ramping points across the network, which you can do that is you take that same technology and you figure out, all right, so what's the better way to schedule and manage that our sort of network cost, which is our line haul and PT and that's why the cost structure is, we feel like pretty competitive. And although it's challenged in a seasonally soft fourth quarter, it's still pretty good overall compared to much larger competitors.

So that's kind of a key skill set, a technology-based solution that we deploy. We'll continue to -- like any technology, you continue to invest in it because over time, you want to continue to improve whatever it is, a logic or algorithm that's driving those sort of decision points you want to continue to refine and improvement.

So that's something we'll continue to focus on going forward. And I think that's a competitive skill set that we have.

From a mix standpoint, Brian, I mean the L.A. headwind, weight per shipment headwind, those late April -- excuse me, late March, April-ish time frame or when those start to lap. In the -- obviously, shipments were down. But in the areas that are growing, it is typically a little bit more on those the shorter-haul segments right now. But I think part of that is just the expansion of the network. You get opportunities with customers to solve more problems. But from a larger standpoint, really that LA weight per shipment part that received a little bit after the late Q1, early Q2 time period. But importantly, we're focused on driving returns on the investments and focusing on price. We've got to get paid for the service that we provide. And we've got more conversation points than we ever have with the wider network. But those are the key points on the mix portion of it.

All right. So just to clarify for the optimization? Is it just more -- doing more with the same technology, nothing really new incremental, just a broader base with better density. Is that correct?

Yes. I mean that is. But I think, Brian, what's important to underscore here is that we continue to invest in that technology, right? So further refine the algorithms we use for that. And the tools that we deploy was that around how we plan the network going forward. So it's not a static investment where we say, "Hey, last -- 2 years ago, we deployed this technology, we're not making changes to it. We continue to invest there. But that's really key for us.

The next question comes from Ravi Shanker with Morgan Stanley.

Just 1 follow-up to start. Just to confirm on this insurance, like is this -- like should we treat this as a onetime item what happened in the fourth quarter? Or is this the new baseline going forward -- and also, you mentioned you've seen some volume shifts after you pushed through the GRI. Can you unpack a little bit more kind of who did that go to? Was that entirely price-driven kind of was that a new customer an old one? Any further detail there would be great.

Yes, on the -- I'll take the self-insurance on the accident expense, that's a few years ago. Unfortunately, that is -- it was an unexpected adverse development. So it's appropriate to recorded reserve for that. I don't I don't expect that to be the new run rate. Certainly, you don't want things coming from prior periods like that. But the reality of it is that underlying this business accident expense as part of the business, right? So you've got to make sure further explanation why you're going to focus on pricing and make sure you understand those things. But I don't -- I wouldn't consider that number as a run rate item. We we highlighted it simply because it was unexpected adverse from prior periods.

On the GRI aspect of it, you always see a little bit of volume move when you take the -- and part of that is temporary, where customers are trying to shift things around, try to save some dollars. That's -- we did it in what's typically a seasonally weaker period of the year. But there's always a little bit of movement around that. We feel pretty strongly that we're really well positioned as that starts to flow back, but that's not out of the norm. We're -- typically, we talk about sort of keeping 80% to 85% of that we're on that segment of business. we're seeing a flow-through rate just in excess of 90%. So we feel like we're getting a better hang on to that. And we feel like it's partly the network. We've got more opportunities where customers are saying, "Hey, side doing a great job for me and more locations than they ever have. But you always see a little bit of volume trend. But importantly, the acceptance rates where we're focused and where we're going to continue to press on.

Next question comes from Ariel Rosa with Citigroup.

This is Ben Moore at Citi for Ari. -- it's Matt, good to hear from you. You've previously noted not seeing meaningful restocking at retailers. And curious to here, as you're having your conversations with customers, what's the sense on restocking? Is it starting to happen? If not, what's your sense on kind of throughout the year when that might inflect?

Yes. I don't know that we've got a specific call out for that, Ben. I think that it's what we would expect from here based on at least what the sentiment you say is that kind of maybe more normal, if you will. So I don't know that it's accelerated level of restocking or just more of a normalized supply chain management.

So I don't know that we're in the how would I say the sort of up and down time with that. I think it seems to be stabilizing a bit. So we don't see quite the volatility that we might have seen even 6 months ago, again as people were addressing the changes in their supply chain. We don't see as much of that now as we did then.

Great. Really appreciate that. And maybe just as an add-on or a clarification on your 20% to 25% excess capacity you mentioned earlier, you've in the past talked about may be anticipating as much as 35% to 40% incremental margins on the excess capacity on an inflection. And kind of reaching gradually your sub-80 OR long-term target. What's your sense on that right now? Are those numbers still kind of what you have in mind, targeting perhaps maybe not '26, but '27 and beyond?

Listen, a $2 billion capital investment -- like what we've deployed in this business, the returns that we're expecting are sub-80 of , right? So now when does that happen I think the market is going to influence that. But I don't see any reason why we don't drive the performance of the business in the low 80s and into the 70s.

So parts of the network even today that have some level of maturity, we actually operate in the upper 70s now. We use that as a guidepost. We say, look, we ought to be able to do that everywhere. And that's why we made the investment. So I don't think there's any hesitation on our side to say that, that can't be achieved.

The next question comes from Reed Seay with Stephens.

I wanted to touch on salaries, wages and benefits here in the fourth quarter. You talked about head count being down, I think, above 5% year-over-year. Obviously, you had the wage increase here in October. But you would think that maybe like the head count coming out on the wage increase on a year-over-year basis would offset each other. Can you talk about maybe -- or just dig into the expenses in the salaries, wages and benefits line a little more. Is there anything in the fourth quarter that maybe won't repeat going forward? Or is there any reason that, that could potentially be elevated? Or just more color there would be helpful.

Yes. I mean you've always got -- we talked about the health insurance inflationary environment. We talked a little bit about that in the pre-scripted comments. If I look at headcount, excluding linehaul drivers, that's down 6.4% compared to Q4 last year and down about 2% sequentially from Q3 to Q4. But on a cost per shipment basis, which I think is where you're getting at, Reed, look sequentially -- and you've got 2 fewer work days. So your fixed costs are spread out over fewer days, fewer shipments. You've got a shipment deterioration that you see in the sequential Q3 to Q4 numbers. And then the days that you have shipments, they're not all full revenue days, but the fixed cost of head count of salaries in a way, some of the insurance items those are all embedded in there. But we're pleased with the pace that we continue to match ours with volume. We're never going to be -- that's just part of our business. You've got to match ours with volume. So I think more than anything, it's just -- you didn't have the wage increase in Q3.

So we did it in Q4. So that's an automatic increase compared to you were just kind of looking and modeling historically. But we feel like we manage it pretty effectively in what's a challenging period of the year, plus with a more challenging environment. We knew that October shipments were on the last call, and that was a 23 workday month, which is the most important month. November was 18 days. So just some of those nuances and headwinds on how the calendar lines up, but we feel like we manage costs what we typically do on a headwind from a wage increase that was only in 1 period versus the combination of the two.

And then if I could just follow up on the previous question on capacity. Can you talk about the capacity difference in your new markets versus your legacy markets? I would assume you have a little excess -- a little more access in your new markets as you try to build density in those. But just kind of get a feel for where the legacy markets are as well.

Yes. I think Matt walked through this pretty well at. But I think you got to remember that capacity is measured by not only door count, it's yard space, it's drivers, it's equipment into new markets, we continue to have and would expect to this stage ample capacity. We can -- if things grew in those markets at a rate faster, you could easily add drivers or recruit drivers and equipment, that sort of thing. In the legacy markets, we feel pretty well positioned there. When we say 20%, 25% -- we're taking a whole range of assumptions and locations, unlike maybe some of our larger more established mature peers.

Our number is a whole range of variations. So there's not a lot of insight there that I can give you beyond to say, look, new markets, plenty of capacity, probably upwards of 50% Newmark legacy a little bit less, probably around 20-ish -- you got to wait how big are the new versus old, I don't spend a lot of time worrying about it, to be honest.

Next question comes from Jason Seidl with CD Cowen.

If we look at these 39 terminals, it's -- and by the way, it's great to see them turning a profit now. How should we think about the walk to sort of an average legacy profitability? So if we assume normalized economic environment and a rational LTL pricing environment? How many years till these terminals walk up to the average?

Well, there's a wide range in these. Obviously, in that 39 in, you've got a Garland, Texas facility that's more meaningful than some of the smaller ones just in terms of freight environment and magnitude. Historically, we think about these on sort of a 3-ish year time horizon to get towards company average. Now the comment that you made was on a better macro.

And a better macro backdrop. Yes, normal, we think about it in a 3-year time horizon. We've got some of these that are already operating below the company number. I mean it's not all of them. It's a minority, certainly, only a couple of them, but that's good to see in the scale impact of it. But typically, we think about them on a 3-year time horizon. And if the macro gives us a little bit of an uplift and it's a bit of a recovery scenario, if you think about that, what Fritz just said in the prior previous question around excess capacity, will you have fixed costs that are just associated with running these terminals. And obviously, you've got variable costs in there as well. But the fixed costs are going to scale even more so in an uplift environment. That's what gets us so excited about this. in a volume uplift environment, you're not having to add cost at a 1-for-1 level.

We can scale -- the investments that we've made are not for the results in these terminals in the next 3 months or 6, it's a 3-, 5-, 10-year investments that we're making these in. But that means that there are fixed costs embedded in those and then efficiencies that aren't in some of the markets that have been open for much longer. So we get really excited about the opportunity to scale just because we're really in the top of this many new terminals in a short period of time. it's the right long-term move, but it really sets us up to take advantage in a bit of a better macro.

Right. No, that makes sense. Just a quick follow-up on the insurance side. given sort of the rise that we've seen in sort of the mini nuclear verdicts that's been more recently, any thought given to maybe upping your self-insurance level going forward?

We -- we're always looking at unique ways and conversations around our insurance tower. We factor in a lot of different things as we're going through those negotiations and the renewals. I think very important we invest and we've said this for a long period of time. We invest and we'll continue to invest in every piece of safety technology. best-in-class equipment with all safety technology on it. So we're never going to take a break from that, but the environment is inflationary. I mean you hear everybody talk about that. So -- the best way to prevent that is to have fewer incidents, and we are pleased with the progress we've made this year. So we have a pretty wide ranging discussion every time on the insurance renewal side, so we take -- there's no still in turn when we're talking about on the same.

I would challenge that we would say likely has, if not the top from a safety feature set fleet as anybody in the business. I mean we have never kept corners on that driver facing, forward-facing cameras, all the acmitigation technology onboard training to support that -- that's important to us. We have -- the most important thing we can do around safety is to keep our drivers safe, get them home safely. That's how you save on insurance, get people back Homesafe back to work tomorrow is safe.

The next question comes from Eric Morgan with Barclays.

I just wanted to follow up on the last one on insurance. I know you said you don't think we should be including the prior period developments in the run rate. So -- just want to clarify, I mean, if we back out the 4.7% from the quarter, I think insurance costs would have come down sequentially a healthy amount to like $20 million. So I just want to double check if that $20 million or so is the run rate you're thinking going forward? And -- if so, what's kind of driving that sequential improvement? I know you mentioned claims ratio improved there. So I'm not sure if that's a factor as well.

Yes. The math you did Eric, is right on the impact of that. So that would point to us. We're having what was embedded in our guide. Obviously, a pretty good quarter from an experience standpoint. No, I think you've got to use a longer-term average, certainly, when you're thinking about it from a modeling standpoint. It's -- you look in our history, and you'll see pluses and minuses and just how that moves throughout the year. Environment is going to continue to be inflationary. But I think importantly, as Fritz noted a second ago, we've spent a lot of time and will continue to on the training the -- and we were seeing it in our results, and we continue to preventable accidents down 21% compared to the prior year, and that was embedded in some of that Q4 look. But I think you've got to use a longer-term average. These discrete ones are part of the run rate moving forward. But that line continues to be inflationary. I think it's fair to use more of a longer-term average with some inflation on top of it.

And then when we build in our guides, we think about what OR improvements are, that's assuming what we understand to be about sort of a normal case development, right? These -- the handful that we described, we called out here were extraordinary in a sense that the tail on them. But what we think about the guide, we appreciate that, that is an inflationary line.

So we try to include that in that analysis, and that would include some development of cases that have happened over time. So Matt's description around looking at that over time to port.

The next question comes from Harrison Bauer with Susquehanna.

Squeezing in here. Matt, building off your -- some of your thoughts on fixed versus variable cost. Some of your peers have offered what their view is on incremental margins in the early stages of a growing tonnage environment, considering you've similarly invested heavily into your network with ample capacity. As you get this network running, can you share what your views are for incremental margins in your business before you'd have to invest materially in more capacity and if that's drastically different from the 40% plus that your peers have described.

No. I mean, look, this is -- to Chris' earlier point, this is why we did this. And -- we do have these costs that are associated with opening 39 terminals over the past 3 or so years, but we feel really poised to scale out of that. There is no reason -- I mean, we think about those same types of numbers in a slight uptick environment. And then certainly, if it escalates further a 30%, 40% incremental margin number, and you'll see that probably in excess of that in some of these markets that are relatively new because you're not -- you're not adding costs at the same pace as what the volume and the revenue is coming in, which is part of having a national network and part of why we scaled. And history proves that point. If you go look at the execution and the incremental margins post the Northeast expansion, that's exactly what we saw.

And there's nothing that stops us from getting to that point. So that's exactly how we think about it. And if the environment runs a little bit further or faster the capacity environment tightens, we feel like we can outperform that, but that's absolutely the types of numbers that we think about.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer, for any closing remarks.

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The next question comes from Tyler Brown with Raymond James.

I just had a couple of quick ones. So Fritz, I think you talked about your $2 billion investment. That was obviously largely on real estate. I think you just gave CapEx guide of $350 million to $400 million. But Matt, where would you peg maintenance CapEx? And is this year's CapEx largely just fleet and fleet catch-up?

There was a lot, obviously, in real estate over that past period. But there's also a big investment in equipment over the past couple of years. If you look at past couple of years, the biggest tractor investment in company history, the biggest trailer investment in company history.

A lot of that was to catch up with all the volume growth over the past several years. So it is a lot of real estate, but it's also a lot of equipment as well in that period. From a maintenance CapEx standpoint, I mean, that's really what this year is from an equipment standpoint is maintenance CapEx. Obviously, volumes are a little bit down compared to where we expected them to be when we walked into 2025. So we feel really good about the equipment pool. That is inflationary, just like every other line of our business. But that's -- from an equipment side, it's really a maintenance is by this year, for sure.

Okay. So it feels that you guys will be still cash generative. You should have solid free cash. Your leverage is very manageable. M&A probably isn't a story -- and clearly, Fritz, you see a ton of upside. So does there come a point that you guys will contemplate additional shareholder returns? I mean maybe through a buyback or will you guys hold capital back for another CapEx cycle down the road, but how do you guys think about that over the next couple of years?

So I would say all those things are in play, right? So first of all, we understand and respect the fact we're stewards of shareholders' capital. So as this business generates returns, we'll consider buybacks, dividend, whatever that might be, but that's important, right? Because this is a business that we expect to generate a return. At the same time, I think that we're going to have to balance that with opportunities will present -- be presented to us as the market adjusts as terminals become available in markets that we don't necessarily service as well as we would like to.

We've got 212, 213 facilities right now nationwide. And I think that, that potentially goes to 230. And I think that potentially there's some markets where we may have to build -- there could be other markets where I think we're going to be able to find available real estate. So we're going to have to balance the deployment of capital in that way. I think the way to think about that though is obviously, we're going to be stewards first, first and foremost, to the extent the investment opportunities present themselves, those are going to be accretive from a return on invested capital as well. So that would further fund shareholder returns in future years because I think there's a lot of growth potential in this business still. So we're excited about that opportunity.

I think important to add to that, Tyler, to the point you made at the beginning of being free cash flow generative this year is a big deal. That's what we expect to be.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer, for any closing remarks.

Thank you, operator, and thanks to all that have called in. At Saia, we believe that our value proposition of the customer continues to be significant, and we look forward to talking about the success we will achieve in the quarters and years to come. Thanks all for the time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Saia, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Clay. Good morning, everyone. Welcome to Saia's Third Quarter 2025 Conference Call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. 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 release and our SEC filings for more information on the exact risk factors that could cause actual results to differ.

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. 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 debt sale and impairment on that property.

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 Saia's Investor Relations website. I will now turn the call over to Fritz for some opening comments.

Good morning, and thank you for joining us to discuss Saia's third quarter results. 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.

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 continue to provide opportunities to service customers in both our legacy and ramping markets.

Our ramping markets, which are made up of the 39 terminals opened since the beginning of 2022, grew sequentially in 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.

Our nationwide footprint allows us to build deeper relationships with customers, and we're seeing the benefit of the investments made in our network over the past several years. Compared to the second quarter, we experienced revenue growth in both legacy and ramping markets. Customers value ease of doing business and with our now national network, we are better positioned to provide solutions than we ever have been.

Our third quarter revenue of $839.6 million was relatively flat compared to last year's third quarter, reflective of the macroeconomic landscape. While our third quarter operating ratio was 85.9%, adjusting for the onetime real estate transactions, our adjusted operating ratio was 87.6%.

Adjusting operating ratio -- adjusted operating ratio increased by 250 basis points compared to our operating ratio of 85.1% in the third quarter last year, but improved by 20 basis points compared to the second quarter of 2025 outperforming historical seasonality.

The improvement from the second quarter was achieved primarily due to our focused cost control efforts resulting in a decrease in sequential adjusted cost per shipment despite headwinds from increases in self-insurance and related costs. Excluding the net impact of the real estate transactions, our adjusted cost per shipment improved sequentially from the second quarter by 70 basis points.

The sequential improvement reflects our continued focus on operational execution and efficiency while still maintaining our focus -- our performance standards. For the quarter, our cargo claims ratio was 0.54%, which is our fourth straight quarter of sub 0.6 cargo claims ratio, a notable company record. Additionally, reflective of our expanded offering and continued service performance for customers, our contractual renewal rate for the quarter was 5.1%.

Volumes for the quarter were in line with our expectations based on how the overall freight market has trended in 2025. Compared to the third quarter of 2024, shipments per workday increased -- decreased 1.9%, while sequentially, shipments per workday improved 3.2%. We continue to experience outsized growth in our newer markets where our expanded footprint and service offering provides more opportunities as customers come to understand and see the value in our expanding service capabilities.

Our ramping facility saw a 4.2% sequential improvement in shipments per workday in the third quarter of 2025. And facilities opened prior to 2022, shipments increased 3% sequentially and decreased 4.8% compared to the third quarter of 2024. We are pleased to see both legacy and ramping facilities grow sequentially reinforcing the value of a national network through our expanded service offering despite a softer overall LTL freight market.

In Q3, we saw continued benefits from our accelerated network optimization efforts that began in the first quarter of the year, enabled by our ongoing investments in technology, these initiatives improved efficiency across our national footprint as handles or the number of times the shipment is touched as it's routed through our network continued to be lower than their first quarter peak.

We expect our national footprint to continue to scale moving forward, aligning with our long-term strategy of getting closer to this customer, improving service levels and providing solutions that meet customers' needs. We're already seeing the benefit of our investments in our results and conversations with customers reinforce our value proposition.

Optimization of mix remains an intense focus for us, and our ongoing efforts around pricing remains one of our biggest opportunities. As noted earlier, our expansion strategy is yielding tangible results as we get closer to customers and can provide more solutions to meet their needs. Sequentially, over 70% of our volume growth came in 1- and 2-day lanes across our network, with over 2/3 of that growth coming from customers that we already do business with. Growth in these lanes helped drive an increase in operating income and profitability compared to the second quarter. This growth driven largely by our National Accounts segment demonstrates the impact of our expansion and ability to grow existing customers and build relationships with new customers.

We implemented a GRI on October 1 at a rate of 5.9%. As a reminder, this increase will impact approximately 25% of our operating revenue and varies by mix of business and lane. Ensuring that we drive returns on our substantial network and service investments remains a focus and this GRI is another step in the right direction in obtaining the compensation we expect from our customers for the service we provide in this inflationary business. I'll now turn the call over to Matt for more details from our third quarter results.

Thanks, Fritz. Third quarter revenue was relatively flat compared to prior year, decreasing 0.3% to $839.6 million, while revenue per shipment, excluding fuel surcharge, increased 0.3% to $294.35 compared to $293.39 in the third quarter of 2024.

Fuel surcharge revenue increased by 2.1% and was 15.2% of total revenue compared to 14.8% a year ago. Yield, excluding fuel surcharge, decreased by 0.1% while yield increased by 0.5%, including fuel surcharge. 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 ours to volume. Compared to the third quarter of 2024, head count was down 3%.

Purchase transportation expense, including both non-asset truckload volume and LTL purchased 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.

The increase 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 was 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%, our 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. And our diluted earnings per share were $3.22 compared to $3.46 in 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. I'm pleased with our team's ability to focus on what we can control at this point in the cycle. Each state brings new variables and the ability to improve operating ratio sequentially from the second quarter despite headwinds from increased fixed costs in addition to elevated insurance-related expenses, speaks 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 of 3% effective October 1 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 participation rate remains among the strongest in the industry and most significantly, our overall employee engagement remains high and actually improved compared to last year. The results of the engagement survey continue to reflect an engaged 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.

Saia has 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 the network over the last few years into an opportunity to turn Saia into one of the largest players in the LTL industry.

Given the ongoing market conditions, the 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.

[Operator Instructions] The first question comes from Chris Wetherbee with Wells Fargo.

Maybe 2 quick questions here. Just kind of curious how things have been trending in October from a tonnage perspective or a shipments perspective. And then Fritz, I noted you put the wage increase in October 1.

Maybe you could give us a little bit of 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 volumes. So a couple of questions there would be great.

Sure. Thanks, Chris. I'll go ahead and give 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% -- 2.5% on shipments and 3.3% on tonnage.

In October so far, shipments are down around 3.5%, tonnage down about 4%. If we look at October so far, we've seen trends be a little bit depending on the day, up and down a little bit. I think there's maybe a few things that, that could be attributable to, 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. We think about the OR portion, and I'll hand it over to Fritz to for some commentary as well. But if we think about the OR, if you look back in history, the average sequential Q3 to Q4 is about a 250 to 300 basis point degradation usually, assuming years it's a little bit better. There's 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, probably in the 300 to 400 basis point degradation range. A lot of that's going to be volume dependent, just seeing where we are so far in October. October is a big month, 23 workday month, followed by an 18-day November, which has its own challenges and just 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.

Yes. I think just to add, Chris, I mean, I think that the overall environment that's kind of leading the trends that we see, it's been pretty muted throughout the year. I think if you look at the month of October, I mean, certainly, we don't have a direct exposure to sort of the government per se, in terms of business with various different departments. We're downstream from that.

And I think to assume that, that doesn't -- hasn't had some impact on kind of the overall environment is probably a bit naive. But I think there's something to that. But at the same time, I'm pleased with what we're doing at Saia around kind of driving the results. So could we get to more the history we could for sure. And I think it depends on how November develops and into December.

The next question comes from Jonathan Chappell with Evercore ISI.

Fritz, updates on the, we'll call them the new terminals, the 39 open since the start of '22, went from breakeven to high 90s OR now you said less than 95. And I assume you're doing that without the volume that you had anticipated when you open that up. Is this all strictly 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?

Good question, Jonathan. The -- our focus as you get developed maturity in those facilities, what's exciting about them is that the incrementals can be pretty positive, and you start to see a bit of that. So I think that as we get -- continue to grow in those markets, both inbound and outbound, that's a benefit to us.

Now we're going to run into bit of challenges around seasonality for sure now, right? It is just -- Q4 is typically a slower time of the year. But the opportunities there are -- it's about maturity in those facilities. I mean you -- we're just now lapping, getting full year behind us on '17 last year. So we're really pleased with what we're seeing around operating efficiencies as we build density across not only in those facilities, but across the line haul network, right? So as you build those opportunities out, that's what's exciting about where we are at Saia.

The next question comes from Scott Group with Wolfe Research.

I want to talk about the pricing environment. If you look at yield and rev per shipment ex fuel, both kind of flat. What are you seeing with the pricing environment? Do we -- I know you don't tend to give updates, but maybe it would be helpful if you did, right? And do you think that we should be expecting those yield metrics to turn positive in Q4? Just sort of any color there?

Yes. Listen, I think broadly, Scott, the environment is around pricing is disciplined and focused. I mean, I think that this -- the underlying nature of the business is inflationary. And 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 think it's also important when you study the metrics at Saia that you understand a few elements of that, right?

So this is a emerging the mix of business in our -- for us is changing as we go. Right now, we highlighted for you that the growth in the business from Q2 to Q3, a good chunk of that came in 1 and 2-day lanes which we're really excited about because that's -- those are opportunities to grow share of wallet with customers.

But those are also, by definition, 1- and 2-day lane pricing, that tends to be relative pricing versus 3 and 4-day lanes are -- it's going to be less, right? That's just the market, but that's not a bad thing. So you're going to have a mix of businesses in there. And I think the other element to consider too in -- we look at year-over-year third quarter, that's down high double digits, 18-or-so percent shipment wise.

So that's a negative mix headwind for us from -- on the revenue line. But we look at that holistically, what we've been able to do in the ramping terminals. And in the others, I think that's been pretty good performance. So there's a lot moving in and -- I'd point all this out because there's a lot moving in and out of our revenue lines.

Okay. And then again, if you have any thoughts on the Q4 yield, I know you don't do it, but I think it would be helpful. And then just when I look at the margin progression, right, Q1 was top down 700 basis points in Q2 was down a little bit better down 450, Q3 down 250, so more progress.

But it sounds like Q4 takes a step back and it's down 300 to 400 basis points again. So just curious your thoughts on why it's getting worse again. And it's -- maybe it's just too early, but any sort of early thoughts you have about -- how to think about margins next year?

Yes. So we just did a GRI of 5.9%. So that kind of gives you a feeling of what we think about pricing in the environment. We're continuing to push contractual renewals. So that's part of what the opportunity is for us. So we'll continue to focus on pricing and yield management. So that's critical to us. That hasn't changed.

I think we need to recognize that 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 workdays, the fixed costs remain the same. You don't have the opportunity to reduce those in a month short month like that. So could we over outperform the thoughts around Sequential, we could. And -- but we're trying to be realistic around what we're seeing trend-wise right now and that's reflective in the guide.

Want to add to the pricing environment, Scott. Fritz talked a lot about mix. And obviously, we're getting a lot of great opportunities with customers that were 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 great opportunities that we're going to continue to take advantage of. So there is some mix shifts in there. But if we look at just the contracts that we renewed Q3 of last year and how they performed Q3 of this year, on like-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's part of the environment we're in now. But importantly, there's mix 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.

The next question comes from Jordan Alliger with Goldman Sachs.

You mentioned in your opening remarks, your network optimization efforts continue. Can you provide a little more or remind some of the things you're specifically doing, whether it be on the legacy side, the total network side? And where are you in that process? I mean, is it still relatively early in the improvement front on that side of things?

Yes. The -- I think the way we studied this or I've described it before. So one of the key things, key initiatives that we have as you build out a network and you -- it changes. There was a time -- a year ago at this time, we had several -- 17 fewer terminals, right? And as you add those to the terminal, how you schedule and manage freight through connecting all of the dots, how you design that network is critical to how you optimize cost.

So when we deploy our AI models around 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, we had what we call peak handles, which meant as freight was routed through our networks, particularly our largest brake facilities the amount of work that was being -- the number of touches of freight going through those facilities was an all-time high for us.

So we've been continuing to work that down over time. And the way you do that is you're building efficiencies around how do you build out loads and build density in a market, say, like a threaten or a new market like that and handle that freight and not have it touch any other dock worker facility through the network. And it's part of its maturity, part of it's scheduling. Part of it is really taking the data that we have and figuring out ways that we can better optimize that.

So it's an ongoing effort. I'd 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. I think from the beginning, we have said pretty clearly that the idea wasn't to fill the terminals up 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 quicker. But the great thing about it is it's set up for really significant incrementals going forward if -- as the market improves.

The next question comes from Ken Hoeter with Bank of America.

Fritz and Matt, maybe parse a little bit of the 300, 400 basis point sequential margin change. Maybe how much of that 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 think, when you were debating 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 the 3% down, is that a good read on the full quarter? 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 OR guide, Ken, if -- so the GRI and the wage increase went into place on the same day, October 1 for both of those, that -- you can consider that to just wash out amongst each other in terms of the guide in terms of the impact. So net neutral from the combination of 2 of those.

I mean, Fritz commented on the fixed cost impact. If you look at the holiday months, they're just overall challenged from a demand standpoint. But when you've got fewer workdays, there's some workdays that are workdays and they're 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 OR 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 is 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 walls in our business. There's an externality component on demand that we can't always control. But when we look at the bridge between that is just where we're seeing things in October so far, versus what's ahead of us in those couple of holiday months.

But it's -- I would view that as -- October is an important month in the quarter, right? So it's 23 workdays without holidays, and then you get into November and December and those have them. So that's kind of the [indiscernible] for it.

But Matt, are you saying that we're subseasonal and 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 October is more meaningful, but I'm just trying to understand if your commentary, is that something got noticeably worse and it's accelerating on the downside on the volume here as 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 we look at our -- at the reports every day and see what's coming through.

So not a great readout. I mean 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.

Okay. And then any thoughts on excess capacity? I know that's a number that the industry gives a lot in terms of your capacity. And I don't know if you want to throw in a thought on AI and technology, everybody 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?

Yes, I'll jump in there. I mean I think the capacity, there are many, as you know, Ken, there are many ways to measure capacity, be it drivers, be it doors, be it acreage, all those sort of things. I think we've got ample capacity across our network. Maybe because of where we are in the maturity of the network, we're going to have facilities that are 20% capacity, and we're going to have some that are 85%.

So I think it's a relative number depending on where you are. As far as technology initiatives and AI, I mean, we've for a number of years, we've been investing in network optimization tools, which are AI tools. That's how we've been able to drive our efficiencies around network redesign, all the things that we've done around our line haul network, the initiatives that we have around route planning around our city operations to what we're doing to manage our staffing model. All those things are optimization tools which are AI-based.

Our view on that, quite frankly, it's not new. These are things that we've been investing in for a number of years. And I think I'd point back to kind of our successes over time, that's been based on those tools. And the way we think about those tools is that there is always a new version. There is always a new feature. There's always a new analytic that comes into that. So we're continuously investing in that.

The next question comes from Tom Wadewitz with UBS.

Yes. What do you see if you could give us some thoughts about -- I know there are a lot of moving parts in the business, right, and mix and new terminals and legacy terminals and weak freight market and kind of less rate out of L.A. So a lot of moving parts, but if we get to a more kind of normalized backdrop where there isn't so much mix, I just want to try to contemplate when that could be, right? Like is that possible as you go into '26?

And if so, then do you think it's reasonable for us to see what you're talking about, we call it, 4% contract pricing, something like that actually come through in the revenue per underweight or revenue per shipment because it just seems like that's been something where market discipline, what you're doing, your services, you've got more capacity, all the good things, but it just doesn't seem to show up in the numbers we see. So that's -- yes, I guess, that's kind of the first element. I have a follow-up too.

Yes, it's a good question, Tom. I mean I think the underpinning of what we're doing, the organic expansion is quite candidly, is unlike anybody else in the LTL business. So when you do that, not everything -- unfortunately, not everything moves in a straight line or kind of on a continuous slope.

So we're -- we have to manage through challenges around differences in mix of business as that changes in the environment. You see new competitors in some spots or some parts of the network. Those are all part -- that's part of the challenge. I think what's really, really compelling about Saia is that the network is poised for real opportunity, both for our customer and for the shareholder and for the company, right? 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 great plains where they say, you know what, you can solve that problem. I don't have to deal with anybody else. Now I can do more business with you because of that. And that's an important value that we contribute to the customer.

I think in a more normalized freight environment where maybe there's a bit more in the industrial sector, industrial production improves a bit. I think we're poised to really take advantage and see the incrementals that we saw in the last freight cycles, right? And I think they actually could probably see what we've seen before, simply because we have a footprint that allows us to not only drive value in the local customer market for the customer.

But then it's also one that where you have a national footprint, you can drive line haul efficiencies well. And you're seeing we're getting efficiencies right now through network redesign efforts, and we don't have the volume that we expect to get. And if we leverage and get the volume, I think the incrementals could really be compelling.

We're getting cost efficiencies in a challenged environment. And that's a big deal in this business. And with facilities that quite candidly are, in many cases, immature. So I think that longer term, there is a compelling opportunity for Saia. And I think we're going to continue to grind on generate value in the short term. And when the market does and the freight market does change, I think we're poised to win.

One of the things we're really pleased with, I mean, cost per shipment was down 0.7%, and that's -- it's sequential. 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, 17 of those, like Fritz said, just crossed over a year. So there's naturally and efficiencies 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 incrementals 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 best because we can solve more problems.

So it's not about 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 the freight environment gets better, too. But we're seeing the fruits of that labor now.

Yes. That's great. And the quick follow-up is, I think it's better in this type of market to be a low price point than to be a high price point. another LTL that reported this morning talked about 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. to deliver service and maybe kind of improve price more than the market, right? So how do you think of your gap versus whether it's OD or XPO or just kind of broader LTL market, your gap on price point?

Listen, Tom, that's an ongoing opportunity. We make no mistake, we pay really close attention to that. We think that is -- continues to be an opportunity for us. And I would encourage anybody to study what -- sort of whatever their view of revenue per bill across the public sector and compare that to what we -- where Saia is, and we feel like we got to continue to close that gap.

I think what's really compelling is with that analysis, you take that and look at our cost per shipment and see how that stacks up, and you see a really compelling OR that gets spit out at the bottom, right? And that's really what the value is in the business. And for those who understand that, I think they understand that, that's what we're focused on.

But do you have -- I mean, do 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?

Yes, it's going to be a number like that. I have to be honest, I haven't studied the results that were published by others today. So I'm sure it's probably at a discount to that. I think that our service stacks up as well, if not better than others. And I think that warrants pricing.

And 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 lets us compete on an equal footing and an equal footing major in an equal market, that means you get the opportunity to continue to push pricing.

What 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 stickier. The reality over the years is we've been doing a great job without a like-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 a customer, you're harder to replace. That's a great value of the national network.

The next question comes from Ravi Shanker with Morgan Stanley.

Would love to just expand on your initial comments on the Mastio survey and kind of how the results they have received. Are you guys happy with your spot? Do you think it's worth investing more to get further up? Or is it the sweet work for you right now?

We need to continue to invest in service regardless of what the Mastio result says, right? Because we know that our -- the value that we generate in the business for our customers is all about service. So we're hyper focused on driving that. Are we satisfied with the Mastio results?

We would have preferred to be a different position there. But I think there's some pretty interesting data if people look underneath the covers. You look into that, you see that we over-index based on where we are in terms of our relative share relative to the market. 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 know us and that turns into value both for them and for us. So listen, I -- regardless of where we are today in Mastio, we're focused on investing behind our customers, and that's critically important to driving value in the business.

Understood. That's pretty helpful. And maybe as a quick follow-up, apologies I missed this. Just on the 4Q OR walk, I'm assuming the starting point in 3Q is adjusted for the gain this quarter.

That's right. Yes, that's right. .

The next question comes from Bascome Majors with Susquehanna.

If we exit this year in the kind of down year-over-year tonnage, 3%, 4% range that you're trending in October. Do you think that there's an opportunity to grow tonnage next year without a meaningful improvement in the industrial economy?

I think we'll continue to have the opportunity to develop share of wallet opportunities with our customers. So as we continue to solve problems, there will be accounts that we grow with. And I think those accounts will understand and appreciate and value the service they get from us.

And I think it's going to be that kind of -- that's where the growth is going to come from. If I think about the overall shipments and tonnage growth, I have to be honest with you. We like the idea of continuing to grow share, but what we really like the idea is generating a return for the network investments that we've had.

So it's -- for us, it's really not about how quickly we can grow shipment count 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 grow that into next year. Now what the market makes available. I don't know yet. But I think our idiosyncratic story continues. And I think that opportunity certainly is right in front of us and we'll continue to work through that into next year.

And maybe expanding on that, it sounds like from your commentary on the fourth quarter, the margin pressure is really about volume operating leverage and absorption on that than necessarily anything, you have some grade the wage increase timing or anything like that. If we're in a more flattish tonnage environment next year?

And kind of noticing that you have headcount now and you've done a very good job of controlling costs in the last couple of quarters here. Is there an opportunity to expand margin without growth in tonnage?

I think so. 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.

Keep in mind, to the extent that we do get a little bit of growth, in a network that is underutilized because we invested for the long term, the incrementals are going to be pretty good, right? So it's not going to take a whole lot. And -- so 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.

The next question comes from Bruce Chan with Stifel.

Maybe just a follow-up on the customer mix comments as you round out the network. You've talked about wallet share expansion with existing customers, which is certainly very encouraging to see -- maybe you can just talk about where else you're targeting growth and how that process is going.

I don't know if you can parse what field account penetration looks like versus enterprise, for example, and maybe whether there are any new end markets that you think are big opportunities. Some others have talked about, events business, grocery consolidation. So any color there would be great.

I think the growth opportunities are all the above for us, right? So -- but I think that let's break those apart specifically. So if you look at the facilities that have been open since 2022, the -- what we call the ramping facilities. Those -- the opportunities in those markets is to date, one of the things we've been able to do is we've grown national account business into those markets, in part because we already had established relationships with those customers.

So it's 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 think that is underappreciated is in some of these places, we haven't done business before. And so getting that Saia brand name out there, the next legs of growth in those markets are going to probably come from the field accounts or the accounts that who's this company with the red and white trucks? That remains to be opportunity for us, right?

So I think as you mature in markets, you start with the relationships you have, you grow that business. And then the secondary opportunities come from finding that customer doesn't know us. And for people that have follow us, 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 a meaningful part of 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 business, as we call it, as those facilities mature. We like verticals and that particularly in spaces that value service, that value our on time and value our investment in technology. Those are customers that are in business to deliver whatever product or service that they offer, 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 win, be it trade show or grocery or whatever it might be. Those are markets that value our level of service. They're getting to know us in some cases and in some markets, because we're new, they're finding out about us in there. So I think the growth is for us, and this is the really exciting part about the company is across all markets all verticals because we're just now getting to maturity.

That's super helpful. Maybe just a quick follow-up. I imagine there is a margin uplift opportunity as that mix changes. Any thoughts on what that differential with those new field accounts looks like versus the legacy national?

Listen, the margin uplift, like if you just get the average sort of pick up 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 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 margin opportunity. We know, despite our inefficiencies, we got a pretty good cost structure that we can leverage and scale from here. So I think the opportunity comes in a couple of places, right? It comes with growth around good pricing, but then it's also scaling a very, very competitive cost structure.

The next question comes from Brian Ossenbeck with JPMorgan.

So maybe first, just to follow up on that line of question. When you get those new field accounts, does that -- is that incremental to the volume you have already there with the nationals and just drop straight in and help balance it out the mix? Or does that -- you shift those ramping facilities to have more of a percentage mix of some of that national might churn and go away. Maybe you can help provide some thoughts around that and what that -- where that would show up if it's more on the rev per piece side or if it's more on the cost per shipment side rather?

It's going to end up in both places, Brian. So if I just go back at our Northeast experience, right? So look at as we expanded in that network, you find customers that are willing to pay for the value that you're providing, right? So that's the top line.

And that may require that you find a piece of business that you picked up and you realize that, geez, the pricing is not right, or this isn't working, you exit that business and then you bring in something that's maybe a little bit more appropriately priced. You get all the accessorials 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, that's an opportunity for us to win on both accounts. We're not necessarily targeting, hey, is it field? Is it national account? Is it different segments of the business. We're more focused on customers that say, let's look at the value that Saia provides, and we're willing to pay for it, right, and understand what that investment is.

And those are customers that fit best for us. Sometimes that's a national account. Sometimes that's a field account. Sometimes it's a combination of both, and it could be across industries. So it's more of that profile that we're pursuing that makes the most sense for us.

All right. And then a quick follow-up for Matt, can you just give us 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 that's set a good place as you exit the year? And maybe some early thoughts on next year as well. .

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 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. We'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 what -- a couple of things that may flow through. But I think that's probably a pretty good range. And then it's still early. We're looking at next year.

But I'd say early read is probably more in a $400 million to $500 million range from a CapEx standpoint. So obviously, way down from last year will be down again from this year. And again, the network build out, we still have opportunities and dots that we need to put on the map. But we've made big strides in that, that shows in the CapEx line over the past couple of years.

So still some finalization to be done for 2026, but I'd say probably a $400 million to $500 million number is probably a fair range.

The next question comes from Tyler Brown with Raymond James.

I missed the first part of the call, so I apologize if you addressed it. But 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 redesign line haul to basically take touches out regardless of volume.

I think your cost per shipment fell sequentially for the second straight quarter. So can you just kind of talk about where we're at on that touches or brakes per shipment journey? And do you feel at this point that you're basically past peak pain?

Yes, Tyler, I think we're past peak pain. I think we're continuing every -- as we pass into the next few months into next year, we continue to have steps around our network redesign, line-haul optimization efforts. As we continue to refine and deploy 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 still immature. So when I say that we have the opportunity to monetize that. I think the cost structure is very effective.

And as we continue to grow in markets that have been open less than 3 years, you're going to be doing that and further leveraging those sort of cost savings initiatives. So I think the incrementals, that's going to help drive the incrementals into the future. So I -- it's early innings on what the opportunity is.

Now it's challenged into the fourth quarter, right? Because you've got this is a notoriously this time of the year, inefficient time of the year in the first quarter. But I would tell you that I think that the scaling opportunity is really interesting we haven't run through a full year of leveraging that redesigned network.

Yes, agreed. And so what about balance as well because is the outbound inbound mix starting to balance out. And I would assume that as you build that outbound side, particularly on the new terminals, that's going to help with this touch issue as well because you're going to be able to build more direct. Is that right?

Tyler, great point. I mean, we're early innings on that stuff, right? So if you think about just in the simplest form, these are not huge markets. But if you just took the -- great Plains 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 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 the extent there's available freight, that's a balancing opportunity, right? So those are the smaller markets. Then you take a big market like a Triton or Loredo. Man, we're early innings there, too. So those facilities had just cross over a year, there -- the opportunity to grow both the inbound and outbound is very, very meaningful.

And that is all a scaling, leverage the network build directs, take touches out, 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 also getting the volume back from those best legacy networks, right, the Newarks, Dallas, Houston, all those. When you get that volume back to, 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 and the opportunity to service customers.

You're right, Tyler. It's the direction really matters in this business, too, where the freight is coming from. So length of haul and weight per shipment are important metrics, but direction really matters, too.

If you take a handle out, you have the opportunity to improve service to a customer. You might be able [Audio Gap]

The next question comes from Eric Morgan with Barclays.

I guess just one for me. Could you give us an update on 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 potential green shoots or just broadly how your customers are positioning into next year?

So I think right now, the way I would characterize this, people are -- they're incrementally maybe a little bit more confident, positive than they were at the beginning of the year, right?

So you think through, we've kind of got 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. All that is incrementally positive, right? I'm waiting to see it in the numbers.

And I think that, that's -- we haven't seen that yet, but I think customers, we're kind of ticking off the uncertainties, which is good. Now we just need the next step, I think, is for customers to have the confidence to say, now is the time to build my -- launch the new product or build a new facility or whatever it might be, ramp up production, that sort of thing.

The next question comes from Richa Harnain with Deutsche Bank.

So just a few quick clarification one for me. First, the 300 to 400 bps of OR deterioration, I know, Matt, you talked about how October being lower than you expect is contemplated in that outlook. But what are you assuming for November, December? Do we assume an in-line seasonality type results for those months? Or do we assume that things continue to be subnormal.

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, i.e., you can still maybe expand margins next year even if the environment remains lackluster. And then lastly, contract renewals. Can you remind us what those were in Q3?

Yes, I'll start and then hand it back over to Fritz. So I'll hit the contractual renewals number on 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 that's different plus or minus, it could impact where we land from what we're projecting and thinking through right now. If there's a bounce back in November, could we do 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 are usually declines from October. Usually, what you'd see 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 get from the October exit rate.

Yes. And with respect to 2026, we haven't given you a number around. But I think in a sort of steady state environment, I think we could be in a position where we could see some incremental improvement around OR and operating income. .

The next question comes from Ari Rosa

I think that -- I'm sorry.

Pardon me. Go ahead.

Okay. Sorry, I may get garbled there for a second. So I'm not sure what you missed, but I think could we have operating income and OR improvement next year versus -- 2026 versus 2025. So we haven't quoted a number around that yet, but I think there's an opportunity for us to drive some performance in the next year. and which we're excited about.

I think the maturity of the facilities that have been opened since '22 is going to be a key catalyst for that. And then I think that as we continue to develop that share of wallet with our customers, I think that will be continue to be a positive for us. And those will all be contributors for us next year.

Are we ready for the next question?

We are.

Wonderful. The next question comes from RE Rosa with Citigroup.

So Fritz, you mentioned the cargo claims ratio. And with all due respect, I'm aware it's a little bit higher than kind of the best-in-class player. 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 better pricing?

So just to kind of level set a bit. So our cargo claims ratio is a GAAP 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 because with market. So that's a way to drive improved cargo claim ratio right away. 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 picking up on time, delivering on time, meeting the promises being able to meet their expectations. So there's not a singular limiter that says, "I'm not going to do business with you because you got a 0.54 cargo claims ratio.

We haven't lost business with that. We've had opportunities around that. I think it's not a discernible difference from other numbers. I think where we win though is that alongside of all the other things our team does for customers, and that's where we win. And then we continue to focus on driving pricing and that obviously, is in the denominator. So that would improve cargo claims ratio, too.

Got it. That's helpful. And then I wanted to shift gears a little bit just on my follow-up. It sounds like potentially CapEx coming down a little bit. I got to say, Fritz, I've heard you sound more confident, I think this call in terms of the 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 over the next couple of years.

How are you thinking about the opportunity maybe to initiate a buyback here or get a little bit aggressive in terms of driving shareholder returns for kind of long-term holders?

So I'm excited about and have been incredibly excited about the Saia opportunity. And this is entirely why we invested in our network is to generate value not only for our customers but for the shareholders of Saia. We did it on an organic basis. We did it with the idea of creating long-term value for our customers and for the shareholders.

I think that we are on the right on the cusp of really taking advantage of -- when we have an improving market, better macro backdrop, I want to put the work 213 facilities and drive the incrementals out of that. Customers will see what service they get and a business that we know how to scale. We've got a record history of being able to do that. And I think that gives us confidence.

I'm confident because I watch every day to see what our team is doing 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, Matt, 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 and always have been stewards of the shareholders' capital.

So the opportunity to drive value is going to generate returns for Saia that will give us investment opportunities to further expand this 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 capital to our shareholders in any number of forms. But I think that those are things that are front and center for us.

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, we see slow growth. And as a steward of shareholders' capital, we're slowing capital investment as it relates to that and making sure we're in a position -- position the company to take advantage of the opportunities that will inevitably be there for us.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Si's President and Chief Executive Officer. Please go ahead.

Thank you, everyone, for taking the time to listen and learn about Saia's results. We're very pleased with the outcome of Q3. Q4 in the current environment continues to present challenges. But I think what's critically important is the underlying value that Saia is creating for customers ultimately is underlying value for our shareholders, and it's really about the story from here how we drive incremental improvements in margins in the business that we've invested in over the last number of years.

Company is built for the long term and long term is long-term value-creating for the shareholder. So thank you for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.