2023 Q3 Carrier Earnings - Saia

It’s pretty clear: Saia stands tall as the victor of adding business following Yellow’s closure.?

The announcement of their Q3 earnings release paints a picture of outstanding growth and achievement.

In today’s edition of the Q3 Carrier Earnings series, let’s take a look at what Saia executives said about their performance this quarter.

From Q2 to Q3 alone, they grew more sequentially than any other public LTL carrier; and their growth through October is still impressive.??

In our last carrier analysis, we took a look at the Earnings reports in Q3 from ArcBest Freight and analyzed the findings from ABF management. In the same way, this iteration will dive into the announcements from Saia to find out what’s influencing the achievements or difficulties within Saia LTL operations.

As we work our way through this series, we continue to closely examine 3Q23 reports from eight prominent carriers. The goal is to find what drives their successes or challenges within the industry.

For more information about carrier performance reporting, click here to connect with someone on our team today.

Let’s take a look at what Saia executives said about Q3:

?? Carrier 6: Saia LTL

• Revenue of $775M in 3Q23 wasn’t just up 6.2% over last year - it was a record quarter for Saia.?

This is obviously connected with what happened to Yellow.

• Saia maintained very high service levels as shipment counts rose and new business came on board post-Yellow.

• Pricing has also been strong, with Rev/cwt (excluding fuel) rising 8.4% in the last year.?

Weight/shipment dropped 5%, which could account for around 2.5% of that Rev/cwt growth.

• Saia has incurred additional Purchased Transportation costs, and over time, they added 1,000 new employees to manage the higher shipment counts.

Their 83.4 OR in Q3 was a slight deterioration from the 82.7 in Q2 and the 82.4 posted in Q3 of 2022.

• Salary costs outpaced business growth - they rose 15.9% due to overtime, new employees, and a 4.1% wage increase.??

?? Next Steps: Strategic Expansion

• Immediately after Yellow closed, Saia believed that shippers were just looking for capacity.?

Now, they’ve reached the point where their focus is on evaluating service and value.??

• Saia will continue to be opportunistic with terminal expansion, to serve new customers and to get closer to existing customers.

The pending sale of Yellow properties sure seems to be an “opportunistic” event…

• Customers will support their recent 7.5% GRI as it allows Saia to continue to invest so they can offer higher service levels.??

Saia's recent Mastio results showed they scored very high in terms of value, which could be an indication that there’s more room for them to raise prices.

• Shipment counts continue to rise - up 16.3% in September and 18.6% in October.?

Along with that, weight/shipment continues to fall.??

Some of the recent gains in shipment count can be attributed to the Estes cyber-attack, though.

• The target is an OR improvement of 1 to 2 points per year, but Saia actually stepped backward with the business that they added post-Yellow.?

Leadership believes they can do that by continuing to push pricing while maintaining high service, assuming the LTL environment improves.??

They also see no impediment to hitting an OR in the 70s.

?? Balancing Growth and Service Excellence?

• The double-digit growth in shipment count is helping Saia build density for the long term… but rapidly scaling up while maintaining high service levels is a challenge.?

More costs are being added now, which should come down as Saia optimizes their cost structure.??

In the short term, their whole “1-2 point OR improvement per year” plan may get a bit derailed to help ensure it takes place long-term.

• From what they said, Saia currently has 15%-10% in available capacity right now.

That's an impressive figure, considering how they seem to have absorbed the most Yellow business when compared to their peers.

• They reported a claims ratio of 0.58%, as well as 98% on-time performance.

• Saia sees 2024 CAPEX of possibly $500M or more.

• Contractual renewals were at 5.6% and were growing higher at the end of the quarter… coupled with their 7.5% GRI? announcement (effective in December), it’s fairly obvious that Saia is focused on raising prices.

?? Terminal Count for 2024 Preparations

• Saia sees a future terminal count of 240-250 terminals to provide "apples to apples" best-in-class service.? They are obviously looking at Old Dominion as that basis for comparison.??

This implies that, in order to achieve their long-term goals, Saia needs to incorporate an additional 45-50 terminals.?

The sale of Yellow terminals would seem to be a great opportunity to lay that groundwork.

• 6 new terminals have been opened so far in 2023 -? they also have one opening next week and several more in the works to open sometime in 2023 or early 2024.

• With Yellow terminals being redeployed and reopened across the industry, Saia currently isn’t concerned about any softening in pricing.

The costs of re-deployment have to be covered, and Saia still predicts tailwinds to arise from nearshoring and an improved industrial environment.

?? Leverage for Long Term Growth?

Saia is very focused on growing their pricing power and growing their market share.?

To them, Yellow business and the available terminals are both possible means of fast-forwarding their goals to grow freight density and size. ?

It really is a one-time event, and Saia is looking to maximize the benefit - retaining their new Yellow business at the right pricing will be key. ?

They absorbed a good bit of additional cost while taking on a major stake of Yellow business, and their OR suffered a bit in the short run…

but if Saia can absorb this business and dial in their cost structure, their management of the Yellow Corp closure could be a major lever for pushing forward their long-term goals.

?? Up Next: Either Forward Air or XPO...wait and see!

To wrap up this week, we’ll be taking a look at the Q3 metrics from both Forward Air and XPO Logistics. Their announcements bring our series to an end…

and they also enable us to see how carrier performance should REALLY look QoQ.

Looking to diversify your LTL carrier portfolio? Rising LTL carrier profits like we see here mean it's time to test the field to ensure you're getting a fair rate. Click here to connect with someone on our team today.

This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.

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