Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saia Inc (SAIA, Financial) reported a record second-quarter revenue of $823 million, an 18.5% increase from the previous year.
- The company averaged approximately 36,400 shipments per day, an 18% increase from the same period last year.
- Saia Inc (SAIA) opened six new terminals and relocated two others, enhancing their service and value proposition.
- Yield, excluding fuel surcharge, improved by 8.7%, reflecting a constructive pricing backdrop.
- Operating income increased by 14.4% year-over-year, reaching $137.6 million.
Negative Points
- The operating ratio deteriorated to 83.3 from 82.7 in the previous year, impacted by costs related to new terminal openings.
- The mix of business created a margin headwind of approximately 150 to 200 basis points compared to last year.
- New terminals collectively operated at a higher operating ratio of approximately 95, contributing to a 130-basis-point headwind for the quarter.
- Salaries, wages, and benefits increased by 19.4%, driven by headcount growth and wage increases.
- Purchase transportation expense increased by 22.7%, reflecting higher costs associated with non-asset truckload volume and LTL purchase transportation miles.
Q & A Highlights
Q: Can you talk about your thoughts on how you see sequential operating ratio play out, particularly given the mix shifts?
A: Historically, Q2 to Q3 deteriorates typically 150 basis points or so. For this year, a range of 100 to 200 basis points deterioration probably fits with the two facilities that we opened plus another nine to go in the quarter. We hope it ends on the lower end of that range, given everything going on.
Q: What changed most materially from how you thought 2Q would play out that has changed the back half outlook?
A: Two things: the mix of business deteriorated from Q1 to Q2, which was roughly a 50 to 70 basis points impact. Additionally, the operating loss for the new facilities in Q2 was higher than expected. We have built these factors into our guidance for Q3 and Q4.
Q: Is your expectation that the mix continues to worsen into the back half or stabilizes from a low base?
A: We expect it to stay where it is right now. However, if the industrial economy picks up, that would be a benefit to us. The mix of business is fluid and can change.
Q: Can you reflect on the question of the freight mix entering the network? Is the belief that the current mix can be optimized?
A: Absolutely, it can be optimized. The revenue profile is different, but we are focused on ensuring appropriate pricing that reflects our investments. The freight characteristics are different, but it does not erode our long-term value proposition.
Q: How has the pricing environment been? Are we seeing any competitive intensity in the market?
A: The pricing environment is very rational. Customers may pursue lower-cost options if there is more capacity in the market. However, we remain focused on providing sustained levels of service and appropriate pricing.
Q: Can you give a little more color on the process of terminal openings and how long it typically takes to fully season a terminal?
A: It varies. Some terminals, like Garland, Texas, performed well immediately. Others, like Laredo, Texas, will take time to scale up. Generally, it takes about a year for a new terminal to not be a drag on our overall operating ratio.
Q: How are things trending in July from both volume and revenue per shipment dynamics?
A: In July, shipments are up around 10% and tonnage up about 4%. We have some large comps from last year, so the growth rate may moderate. We are focused on execution and new openings.
Q: Are you still targeting a full-year operating ratio improvement of 100 to 150 basis points?
A: Given the mix challenges, we are not maintaining that full-year guide. We are focused on improving operating income year over year and will reassess as the year progresses.
Q: Is there an element of adding capacity that impacts pricing?
A: We do not lead with price when opening new facilities. The mix of business has a larger weighting of national accounts, which have a lower revenue profile. We focus on providing service and ensuring appropriate pricing.
Q: Can you provide more details on the cost structure and efficiencies at legacy facilities?
A: Legacy facilities operated at an 82.4% operating ratio, which is strong given the mix challenges. We use purchased transportation effectively and continuously optimize our cost structure.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
