Acknowledging a leveling of volumes from all-time highs, less-than-truckload carrier Saia Inc. will continue to push its growth initiatives.
“We’re not intending to take a pause,” Fritz Holzgrefe, president and CEO, told analysts on a quarterly call Wednesday. Saia has added five new terminals so far this year and has plans to add another seven to 10 locations by year-end. A new terminal in Binghamton, New York, will open Monday, with another facility in Chicago coming online by the end of August.
The company’s real estate pipeline for onboarding new sites carries well into 2025, management said.
Saia (NASDAQ: SAIA) reported record results for the 2022 second quarter Wednesday before the market opened. Earnings per share of $4.10 was 52 cents better than the consensus estimate and $1.76 higher year over year (y/y).
Revenue was up 31% y/y in the quarter to $746 million as tonnage increased 3% and revenue per hundredweight, or yield, jumped 26%. Excluding fuel, yield was 15% higher y/y. Contracts in the period renewed 11.7% higher compared to the year-ago quarter.
Higher yields and cost synergies resulted in an 80.4% operating ratio, 510 bps better y/y. Salaries, wages and benefits as a percentage of revenue declined 750 bps. The spread between growth in revenue per shipment and cost per shipment was favorable by 700 bps. Approximating for fuel’s impact, the spread was 400 bps better.
“We look at this and we say best in class is below 70s [OR],” Holzgrefe continued. “We look at that and say we can provide great service and we need to be at market around pricing because we’re above market around service and quality.”
He was referring to Old Dominion (NASDAQ: ODFL), which reported an industry record 69.5% OR earlier in the day. Saia’s revenue per shipment excluding fuel trails that of Old Dominion’s by nearly $100. He believes that Saia can continue to raise pricing even on the downside of the cycle.
“The pace may slow but I don’t see an opportunity that this has somehow gone away,” Holzgrefe said. “I think that we still grow through this.”
He noted that in the last few down cycles many carriers have been able to capture rate increases even as tonnage has declined. The capital intensity of the business — real estate, equipment and technology — are the catalysts that will keep industry pricing high and reward those with a top-tier service offering.
“The reality of it is that we’re not where we want to be from a market perspective,” Holzgrefe said. “Our team is delivering that repeatable service and you know what … regardless of the market we need to get paid for it.”
Saia maintained its annual margin improvement outlook of 100 bps to 200 bps.
The carrier’s revenue book doesn’t have much exposure to traditional big-box trends. Roughly 65% to 70% of its freight is tied to industrial markets, with most of its retail exposure at the home improvement stores.
“Our large retail customers are still active with us,” CFO Doug Col said. “We don’t have any callouts there for you in terms of a vertical that is acting differently than our overall mix.”
Saia is forecasting capital expenditures in excess of $500 million in 2022 but said it has only incurred $155 million so far. The company has taken delivery of all of its 2021 tractor purchases and said the manufacturers are beginning to catch up to demand.
Saia’s net cash position improved by $107 million y/y as cash on hand increased to $138 million and debt was reduced to $39 million.
“Our strategy of expanding our footprint is putting us in a position to be closer to customers, in more markets and therefore provide a higher level of service,” Holzgrefe said in a news release.
