Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Saia, Inc. Fourth Quarter and Annual Meeting Conference Call. After the speakers’ remarks there will be a question-and-answer session. Thank you for your patience. I will now turn the call over to Doug Col, Saia’s Executive Vice President and Chief Financial Officer. Please go ahead.

Thanks, Devin. This is Doug Col, I'm Saia’s Executive Vice President and Chief Financial Officer. With me for today's call is Fritz Holzgrefe, our President and Chief Executive Officer. Before we begin, you should note that during the 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 our actual results may differ materially. We refer you to our press release and our SEC filings for more information on these 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 fourth quarter and record full-year results. Before I get into the discussion of fourth quarter results, I want to take a minute and express my thanks to the entire team here at Saia for what we achieved together in 2022. The year brought an additional 11 new terminals into our network and our team grew by more than 500 employees during the year. Most importantly, we kept the customer first and continued to provide leading service to our customers in doing so achieved record sales and earnings for the full year. Thanks to all of our Saia associates, who had a hand in these record results. Moving on to our recent results. December brought a continuation of the negative volume trends we experienced across the back half of 2022. In the fourth quarter, we averaged approximately 28,400 shipments per day, about 8.2% fewer shipments per day than in the same quarter last year and down from 30,500 shipments per day averaged in the third quarter. Wafer shipment increased modestly, so overall tonnage was down 7.7%. The slowing industrial environment as evidenced by numerous reports influenced these results across all of our business. On a brighter note though, pricing remains stable and our fourth quarter yield excluding fuel surcharge grew by 6.5% and revenue per shipment excluding fuel surcharge increased by 7.1%. Total fourth quarter revenue rose by 6.3% to $655 million. Our continued strong service performance supported the contractual renewal increase of 7.4% in the fourth quarter. The contractual renewals reflected deceleration from the trend of the past several quarters and should be expected given the softer volume environment, but solid number nonetheless. On a full-year basis in 2022, total revenue of $2.8 billion was a record for Saia, it was up 22% from the prior year. Operating income rose 40% for the year to $470.5 million and our operating ratio of 83.1% was 230 basis points improved from 2021. This was the best year in our nearly 100-year operating history. As we move into 2023, we've continued to see announced general rate increases across the market and that are in the mid-single-digit range. And here at Saia, we implemented a general rate increase this past Monday, which averages approximately 6.5% across impacted customers. At the same time, our service indicators remain very strong across the business. We're committed to providing excellent service to our customers and are invested heavily in the business to expand coverage and it's gratifying to see that our customers see the value in our service offering and GRI allows us to partially offset the rising cost of investing in people, equipment, technology and our growing service footprint. Our fourth quarter operating ratio of 85.9% increased by 170 basis points, compared to our operating ratio of 84.2% posted in the fourth quarter of last year. I'll now turn the call over to Doug for more details from our fourth quarter and full-year financial results.

Thanks, Fritz. As mentioned, fourth quarter revenue increased by $38.6 million to $655.7 million. The components of revenue growth in the quarter versus the fourth quarter a year ago were as follows: our yield excluding fuel surcharge improved by 6.5% and yield increased by 14.3%, including the fuel surcharge. Fuel surcharge revenue increased by 46.4% and was 20.1% of total revenue, compared to 14.6% in last year's fourth quarter. Revenue per shipment excluding fuel surcharge was up 7.1% to $288.34 and including fuel surcharge, revenue per shipment rose 15% to $364.44. Tonnage decreased 7.7% attributable to an 8.2% shipment decline slightly offset by a 0.5% increase in our average weight per shipment. Our length of haul decreased 3.5% to 892 miles. A further breakdown of activity in the quarter is as follows. In October, our shipments were down 4.4% and tonnage was down 3% with a 1.4% increase in weight per shipment. In November, shipments were down 8.1%, tonnage was down 7.1% and weight per shipment rose 1.1%. December shipments were down 12.3% and tonnage was down 13.2% with weight per shipment turning negative down 1% in December. In January, shipments have been down 3.9% and tonnage was down 3.7% with weight per shipment up slightly 0.2%. Shifting to the expense side for a few key items to note in the quarter, and how they moved with the acceleration of negative volume trends we experienced. Salaries, wages and benefits increased by 5.3% from a combination of our July wage increase, which averaged approximately 4.3% across our employee base and also the result of our employee count having grown by approximately 5.7% year-over-year. Purchase transportation expense decreased by 13.8%, compared to last year and was 9.2% of total revenue, compared to 11.3% in the fourth quarter of 2021. Truck and rail purchase transportation miles combined were 12% of our total line haul models in the quarter, compared to 19.5% in the fourth quarter of 2021 and compared sequentially to Q3 miles of 17%. Fuel expense increased by 41.5% in the quarter, while company miles increased 4.3% year-over-year. The increase in fuel expense was primarily the result of national average diesel prices rising more than 38% on a year-over-year basis. Clients and insurance expense decreased by 8% year-over-year in the quarter and was down $0.3 million sequentially from the third quarter. Depreciation expense of $39.6 million in the quarter was 10.3% higher year-over-year, primarily related to investments in real estate and equipment. Total operating expenses increased by 8.3% in the quarter and with a year-over-year revenue increase of 6.3%, our operating ratio increased by 170 basis points to 85.9%, compared to 84.2% a year ago. Our fourth quarter tax rate of 24% compared to 23.9% in the fourth quarter last year and our diluted earnings per share were $2.65, compared to $2.76 in the fourth quarter a year ago. Moving on to financial highlights of our full-year 2022 results. As Fritz mentioned, revenue was a record $2.8 billion and operating income of $470.5 million was also an annual record. Our operating ratio improved 230 basis points in the year to a record 83.1%. For the full-year 2022, our diluted earnings per share were a record $13.40, compared to $9.48 in 2021. I'll now turn the call back over to Fritz for some closing comments.

Thanks, Doug. While the environment certainly feels a bit more tempered to us than it did entering the past couple of years, I feel pretty optimistic about the road ahead. The December volume decline was a bit more pronounced than what we would have expected from a seasonality standpoint. But we do feel like some of that may have been the result of inclement weather that moved across the country over the last week or so in December. The extreme temperatures have resulted in some customers working limited schedules and we saw that reduce pickups. As we turn the calendar, January volumes are catching up a bit better than expected, maybe the result of some catch-up from customers. If history holds, there'll be more weather effects as we move through the next month and get into warmer temperatures in our seasonally busier months of the year. However, as we've learned over the past several years, when the environment is disrupted by weather or other events, the carrier that has the ability to adjust and restore service will continue to be a strategic partner of the customer's supply chain. In terms of expectations, we have plans to open five terminals over the next three to four months and look forward to the expanded service and presence these terminals will give us. At the same time, we continue to develop the markets around the 18 facilities that we have opened over the last two years. Although we're excited by the early success of these locations, we see considerable runway to continue and penetrate those markets. Beyond that, we continue to work through a pipeline of more than 30 real estate projects, which are under review and consideration as potential openings over the next several years. These terminal openings support our strategy of getting closer to the customer and adding value to the supply chain. With that said, we're ready to open the line to questions, operator?

Our first question comes from Todd Fowler with KeyBanc Capital Markets.

Hey, great. Good morning, Fritz. Good morning, Doug. Thanks for taking the question. So Fritz, it sounds like you just covered a little bit of the January trends and it feels like maybe if there's some movement between late December and into January. But I guess, I'm just curious in this environment how you think about managing the staffing levels with kind of the volatility and freight as you think about margin progression either into the first quarter or even on a full-year basis in 2023? What would your expectations be just given kind of where the environment is?

Yes, I think the key point for us is the impact of the weather we experienced in December and the beginning of January. The weather trends in the central part of the country affected our results, as expected. However, it is important for us to manage our labor costs to ensure we can provide excellent service to our customers. Over the past few months, we've adjusted our cost model and increased our focus on sourcing our line haul costs. We are looking for ways to integrate our city drivers into our line haul network to make the most of these essential resources. These drivers are crucial for our success as we recover from weather disruptions or slower economic conditions and meet, or even exceed, customer expectations. We believe we will continue to position ourselves effectively. Analyzing our historical performance from Q4 to Q1, we believe we can keep our operating ratio stable, and it might improve if conditions become more favorable. We are focused on maintaining service while optimizing our labor costs based on current market conditions. As we look ahead to the full year, it will be interesting to see how things evolve, but we are confident that our ability to provide differentiated service will help us in pricing and managing our overall business investments.

Yes, okay. Thanks, Fritz. And maybe just to that last point, and I'll turn it over after this. But on the pricing side and you talked about the contract renewals coming in I think at 7.4% and that's down from what we've seen over the last couple of quarters, which have been very strong. Can you just speak to where you think you're at with your pricing ability based on your service improvements and the network and maybe your ability to kind of continue to close that pricing gap as you've made those investments and improved the service over the last several years? Thanks a lot.

Thank you, Todd. I want to stress that our main priority is to keep the customer at the forefront. In this environment, it remains costly to operate our business, so we need to ensure we are compensated for all the services we provide. The pace of change we've experienced in recent years may slow down a bit, but our current position in delivering differentiated services to our customers remains strong. Looking at what other services are offered and how they are priced, I see a chance for us to continue growing our business and enhancing the margin profile that it deserves.

Hey, thanks. Good morning, guys. Few things. Can you just on the January tenants, do you have a sense on the sequential December to January and how that was trending?

Yes. Historically, we've seen a little bit of step up call it 1.5% to 2% historically as you move into January, that's always influenced by the weather you're exiting and what you're facing. But the step up was closer to 5.5% to 6% this year. But like Fritz said, that last week of December, man, it was tough with that cold front that went across the country and the pickups were really soft. So some of that could have been just catch up, like Fritz said from customers. But it felt better given the first two weeks of January, it felt a lot better than the last two weeks of December for sure.

Okay, good. Doug, could you provide some insight on how to consider the yield trends, gross of fuel and net of fuel, for Q1 of the year?

Yes, as Fritz mentioned, we have observed a significant number of GRI announcements, and our GRI was issued this past Monday, averaging 6.5%. In a softer volume environment, we might need to make some concessions in certain areas or with some key operating customers. Historically, we retain about 80% of our GRI in terms of yield, but this may be slightly lower in a weaker volume context. I noticed a few GRIs that, while generally solidly in the mid-single digits, are lower than what we've experienced over the past couple of years. This seems to align with the shippers' expectations. Nonetheless, the environment remains positive. The contractual yield of 7.4% serves as a forward-looking indicator of what shippers anticipate, especially after several quarters featuring double-digit rate increases. We are now comparing against some of that. Overall, I would say that pricing in January remained positive, but the expectation should be that pricing won't increase at the same pace when volumes are declining as they currently are.

Right. And then just last thing, obviously, based on sequential margin being flat, so margin is down 0.5% year-over-year. Do you think you have the potential to improve margin over the course of the full year?

We can look at past examples for insights. Ultimately, it will depend on the direction of the economy and the volume of shipments. There have been instances where we improved margins even during downturns. For example, in 2015, both our shipments and revenue declined by about 4%, but we managed to improve our margins by 70 basis points due to a significant decrease in fuel expenses, despite a drop in fuel surcharge revenue. The following year was still sluggish, with relatively flat revenue and decreased tonnage, leading to a slight deterioration in our operating ratio. There are many factors at play. If shipments continue to be down, particularly like they were in January, we need to maintain our rate increases at the current General Rate Increase level to preserve margins. If volumes remain negative throughout the year in the low to mid-single-digit range, enhancing margins might be challenging. However, as mentioned earlier, we've opened 18 terminals in recent years. While we are satisfied with their performance and they improve each quarter, they have somewhat impacted our overall operating ratio. As we continue to expand our network, it’s something we need to manage carefully. A reasonable operating ratio range would be within 100 basis points of what we recently experienced.

Thank you, guys. Appreciate the time.

Our next question comes from Chris Wetherbee with Citigroup.

Hey, thanks. Good morning. Maybe picking up on the cost side, so kind of wanted to get a sense of what you think your cost inflation is running, and then maybe a little bit about how you think you're going to manage headcount assuming that we still see a little bit of sluggishness in tons at least for the first part of the year?

Well, I think Fritz covered it pretty well. But I mean, I can give you an idea of how we manage it. I mean, if I think of just sequentially Q3 into Q4, our shipments per day were down almost 75 right, and it was accelerating there at the end as I step through the months, but shipments per day down about 7%. So you go to work on the things you can control out in the network and our dock hours per day for example Q3 into Q4 were down 10%. Our city hours Q3 into Q4 as we're managing down costs to adjust to these declining volumes, our city hours per day were down about 5% in Q3 to Q4. So those are the levers we'll keep to work, unlike Fritz said, I think we're in a position given where we exited December that our capacity in terms of labor and all feels pretty good for where we sit today and we brought a lot of it that we could in-house to make sure we keep our drivers as busy as we can and keep that valuable resource, because our outlook is still a little bit cloudy there's people starting to talk themselves in the idea that we're definitely going to have a soft landing now. So we want to be mindful that it's very fluid and we don't want to be scrambling to find these valuable employee resources when our customers need us. So it's a tight road, but we feel pretty good about how we positioned ourselves this quarter.

And cost inflation as you think about the beginning of 2023, is it mid-single-digits or so?

I mean, it's hard to give you just kind of an average number, right? If I think about it on the wage side, you're still going to have some wage inflation there. This past year, our average wage increase was about 4.3%, so I think something in that range still kind of makes sense and unless things really fall apart in the job market. You moved down the line and depreciation was up 10% in 2022 and it's going to be up again. I mean, we're going to invest in the business again this year. Like Fritz said, we've got terminals to open. We're going to invest in the fleet, work on fleet age, which helps our maintenance cost. So those are a couple of big buckets, but then when you get below that, I mean, it's tough to say, because PT can be down a lot. That's a cost bucket, but it's down, because we're moving some of those costs to other buckets. But I think low to mid-single-digit maybe if I had to think about on average last inflation now.

Thank you. Good morning. Doug, you just touched on PT, I want to ask you about that, I mean, it's been running much higher than historical levels up until this fourth quarter and you’ve pulled it down pretty meaningfully as a percentage of revenue. How much of that is, I mean, obviously, there's a shipment component to it, but do you view that as kind of structural? It sounds like you are going to run headcount thoughtfully throughout a cycle. So PT seems to be a quicker lever. Is this step-down kind of more consistent of the levels we should think about in this type of volume environment you laid out for ‘23?

If I consider our expansion efforts to enhance the network to be more in line with some of our national competitors, we will still require purchased transportation as we emerge from this slowdown. We use it very effectively. Reflecting on the period before 2017, when we were not in expansion mode, we typically operated at about 12% to 14% of miles. If we reduce that percentage during this downtime, it's because we want to keep our drivers engaged, not because we've made significant structural changes. When business picks up again, we will need purchased transportation and utilize it effectively. I don't think the current situation will be the norm if the economy rebounds; we will increase our use of rail and over-the-road truck purchased transportation, especially since rates are expected to be favorable as they reset. While we've significantly reduced miles, sometimes this is done to preserve hours and miles for our drivers, though it may not be efficient in certain routes. For instance, if I'm shipping purchased transportation into a backhaul market, I may be using my own truck to return, which isn't efficient, but I do this to keep drivers active where possible. For those who have followed us, purchased transportation is not a negative factor; it's just variable, and we prefer to use it when it benefits us.

Yes, it’s part of our total line haul cost investment. So at any given point in time, we're going to make a decision around what's cost optimal around the options that we have available via rail, truck or internal fleet. So it will flex and change over time as we meet service obligations. The first step we have in that process is that whatever choice we may make has to be about supporting what the customer requires and then we cost optimization there.

That's good to have that flexibility in this volatile time. Fritz big picture one for you quickly, it feels like the consumer narrative is pretty binary right now, but maybe getting a bit more optimistic. The industrial narrative seems a lot more negative. And you carry more industrial freight, so the last couple months of data you provided notwithstanding what are you thinking and what your customers are saying about the industrial outlook for this year?

I believe we understand the same sentiment you do. Generally, the outlook is cautious. It's essential for us to maintain flexibility and ensure that our network can adapt as needed. If consumer demand increases, we have parts of our business that are more consumer-focused, while others are more industrial. We want to be capable of addressing both aspects and ensure we can adapt, while most importantly meeting service requirements. This is reflected in our management approach. We have concentrated our cost optimization efforts on reducing hours while preserving flexibility and availability in our workforce. So far, this strategy has been effective, and we need to continue focusing on aligning service expectations with the best use of our driver fleet.

Thanks operator. Hi, Fritz. Hi, Doug. Good morning. I just wanted to follow-up on the margin expectation for the first quarter. I guess just given how weak November was or counter-seasonal November was and the relative snapback in January, we just think there may be an opportunity to see some counter seasonal OR improvement. I don't know if you vehemently disagree with that or if there's something in the cost structure that evolves that I'm missing, but it just seems like 4Q was just a lot worse, because it doesn't remember fall off and that's counter seasonal and maybe you get some of that back in the first quarter?

Amit, we could also consider a different perspective. The challenge with forecasting, particularly for the first quarter results in March, is that January and February have historically seen fluctuations. These variations can be influenced by economic conditions or weather, making it difficult to predict whether we will see a rebound. March is crucial for the quarter, and I feel positive about our current position. We’ve made significant adjustments since November and December, allowing us to optimize costs compared to the tonnage declines we experienced then. Our current productivity and service levels are better, and we are working to restore services despite the weather challenges last week. The key to outperforming in Q1 will depend on having a favorable operating environment, including weather conditions. We’ve outlined our thoughts on the margin profile, and from our historical perspective, it aligns with where we expect to be. There is certainly a pathway to improvement.

Okay. Yes, that's helpful. And maybe one more, maybe more important question than like the near-term stuff. So I'm just curious how much of the productive labor force? Did you guys lose through attrition as you guys cut the hours across the board? And really what I'm trying to get a sense of the next, kind of, most important thing is how carriers are able to bounce back efficiently with fluidity as volumes come back in late February and March hopefully. And I just want to know are you properly resourced with respect to dock workers and drivers to kind of meet that opportunity just given kind of the big cut to hours and maybe the attrition that drove?

Yes, we have observed some attrition in recent weeks and months, but it has been relatively small. We have focused diligently on managing this as we reduced hours, ensuring a balance across our workforce. With some attrition, we haven't replaced those positions, which allows for better balance among the remaining staff. We believe we are well positioned to adapt moving forward. Some of our part-time dock staff have chosen to pursue other opportunities, and we've utilized our supervisors and, in some instances, city drivers to cover the dock. These actions help us maintain valuable connections with our key employees, so when the time comes, which we anticipate will be soon, we'll be ready to adjust accordingly. We feel confident in our ability to restore and continue to grow.

Okay, great. Good morning and thanks for taking my question. So I guess, Doug, if we go back to something you mentioned earlier, sort of, we're talking ourselves into this idea of a soft landing. I don't know if that's right or not, but I would just sort of be curious if you and Fritz could maybe comment a bit on what your customers are telling you about maybe how they're expecting their business trends to kind of progress through the year. Just any sort of color or context around that?

It's difficult to draw specific conclusions from individual anecdotes, especially given our diverse customer mix. With 60% to 65% of our revenue coming from industrial exposure, no single customer accounts for more than 3% or 3.5% of our revenue, so it's risky to base our outlook on one story. The data available, particularly from January, didn’t look very positive, but considering the jobs market and other economic indicators, the outlook seems less pessimistic compared to late last year. We are currently in a strong position regarding costs and the volumes we see. We have successfully implemented rate increases, which is crucial for our strategy, as it positions us to better manage pricing. Whatever the future holds, our value proposition remains strong. Even if the overall market declines, we could capture market share while experiencing smaller declines ourselves due to our presence in newer markets and our quality service. Our rates should remain attractive, which might help us mitigate potential downturns. Overall, we don’t have a clear view on our customers’ general outlook, but we do monitor shipper surveys for insights.

Okay. All right. Well, I appreciate that. I appreciate just the intellectual lot to see about that, and it's all good. So I guess maybe for my second question, I just would be curious, just following up on Amit's question earlier, which is a fair point. How are you guys thinking about line capacity in the network today? If I recall, last time you updated us, it was about 20% or so. I know it's a hard number to really get to, but we've also seen tonnage come down a bit. It definitely feels like you're carrying extra costs for when things begin to recover to be prepared for that. But how are you thinking about where that number stands today, roughly?

Yes. Jack, I would say we're operating at around 25% capacity, which we consider to be latent capacity. I want to point out that we've opened 18 facilities in the past two years. We're very pleased with the initial success we've seen, but since we're making a 10-year investment in these facilities, we're planning for the long term. These represent significant opportunities for us, and our sales team is focused on capitalizing on them because that's capacity we can utilize. We do have some pinch points in our network this year where we are adding meaningful capacity. However, we still face challenges, as some facilities have considerable capacity while others require additional investments. What excites me is that across our network, we have a consistent service offering, which allows us to align with customer needs and grow. This flexibility and the ability to provide repeatable service will be crucial for us.

Yes. Following up on the newer terminals mentioned by Doug, I am curious about the last 12 or 18 that you opened. When you launch them, does the gap between existing and new terminals narrow compared to previous experiences? Do you reach profitability more quickly? Just wanted to ask. Thanks.

Certainly. We can return to a quicker company average. When we launched in the Northeast, it took some time to establish. However, we are pleased with its current status. Scaling those operations took time due to the necessary infrastructure development. The last 18 openings, I’d describe as primarily filling in gaps. These might take a bit of time to ramp up, but there's a cost advantage and opportunities to attract new customers or better serve existing ones. I anticipate that we can reach company averages much faster with these. However, I want to highlight that any challenges, like those we faced in the fourth quarter regarding volume trends, do affect newly opened facilities. This can create some drag, as those trends are experienced uniformly across the board.

Yes, good morning. I wanted to see if you could I think offer some thoughts on pricing. I mean it seems like there was debate over the last year about as LTL pricing get a hold or not. And I think generally, people are of the mindset, it will. I think the results are pretty consistent with that. But are you seeing anything in competitor behavior that causes you to be kind of more or less optimistic? I mean, I guess the idea that you said of getting less price in a weaker tonnage environment totally makes sense. But anything on kind of competitive dynamic and conviction on the favorable pricing dynamic for LTL?

Yes, I don't see any changes there. The customer environment is, as you described, a bit softer. It's not what we experienced a few months or a year ago. However, when I specifically consider Saia and our competitive position, along with the quality of service we provide, which is often better, I see an opportunity for us. The investments we have made in our facilities and expansion justify this optimism. I feel confident about our position. While the growth rate may differ, the opportunity still exists. Additionally, the industry is facing inflationary costs, which is a significant factor in what we observe.

It seems there is still a lot of confidence in the competitive landscape. Regarding my second question, you mentioned industrial earlier, could you provide a bit more detail? Have you observed any differences in the degree of weakness being experienced by industrial customers compared to retail customers over the past few months? The thought here is that if retail customers are reducing their inventory, that might extend into the first quarter and show improvements, but it's less clear if you've already noticed weakness with industrial customers or if that is yet to come.

I think, Tom, one of the things we're challenged with is that no one customer is greater than 4% of our revenue base. So it automatically is a pretty diverse base. And I would tell you what we've seen, the trends that we've seen, it's been pretty much across the board. So I don't have a really good call out around industrial or retail there. And particularly, in some cases, as you know, in this business, as a customer's mix of business changes or their plans change, they may choose alternate supply chains and things that we may lose or pick up business. So it's tough to really for us to call a trend there. I would say that the trends that we've seen in our business have been really pretty much across the board. So I don't have a really good intel for you on the retail side or component or the industrial component.

Good morning, Fritz and Doug. Regarding the real estate from last quarter, Doug, you mentioned that you might slow down based on the flows. But with the opening of five terminals, how does that align with your goal of 10 to 15 for this year and your overall annual growth? Are you considering a slowdown based on tonnage, and how do you view that in relation to your real estate projects?

So Ken, let me address that. The five terminals we are opening are confirmed and in our pipeline. As we look at the remainder of the year, we plan to be opportunistic and may consider adding more facilities depending on the macro environment. One advantage of organic expansion is the ability to adjust our pace as needed. Currently, given the subdued environment, we feel good about the next five openings. There might be additional openings later, but I can't speak to them at this point. We know what they would be, but their timing depends on the situation. Right now, our focus is on optimizing the last 18 terminals we've opened and increasing our market share there. We also have a couple of significant openings planned for this quarter and the next, which should positively impact us.

So I know you don't give out the fuel expense specifically. And 1 of the things that I think a lot of investors have been worried about was the amount of profits that were coming off of fuel surcharges. And it seems pretty thin this quarter with your fuel surcharge revenues up, call it, $41 million year-over-year. And I know you don't break out the fuel category, but the whole category was up 37%. So I guess, your thoughts on the ability to sustain those revenues or that gap as fuel starts rolling over. I think any thoughts you can give us to calm some of those nerves out there that as fuel came down, you'd lose that profitability gap.

I think it's important to understand that fuel and specifically the fuel surcharge is a significant part of our cost structure. The fuel surcharge program directly relates to our base pricing and remains a consistent component. We've been making substantial investments in this area. As you review our financials, it's essential to note that as we adjust our mix in linehaul from purchased transportation to our internal fleet, the fuel costs will reflect under our internal fuel line rather than the purchased transportation line. This shift is part of our efforts to optimize our linehaul network.

Thanks, everyone. Just a couple of follow-ups from me on the end markets. One is I know you touched upon the volume like a few times, but just kind of at a high level, I think some of your peers on both the LTL and the TL side have spoken about a potential spring inflection in the cycle. Do you underwrite that view? Or are you saying that it's too uncertain to make that call?

I think I understand the concerns around that. There is certainly some reason for optimism, and the jobs number today was very positive. This suggests potential for growth. As we adjust our business, we aim to be in a position to capitalize on a strengthening economy. We are prepared for that. There is a possibility that the second half of the year could improve. However, we must also be aware of any macroeconomic shocks that could influence this. Nevertheless, we are increasingly seeing signs of optimism for the latter part of the year, which would be encouraging.

Hi, good morning. Just keeping on that industrial side, a lot of our coverage in the industrial space is really talking about the sort of recalibration here as we smooth down the backlogs that have extended here with all the supply chain issues. Is that driving any volatility in some of the trends that you're seeing from some of your industrial customers? Or are you expecting that just given some of that lumpiness potentially?

Allison, I don’t have a clear perspective on that. However, we recognize that an essential aspect of our operational flexibility is the ongoing disruptions with some of our customers regarding order patterns and changing supply chains. These factors are critical to our ability to adapt and meet customer expectations. While I can't pinpoint a specific sector, we have noticed these disruptions over the past year, leading to fluctuations in month-to-month trading across all areas of the business.

Got it. And then just going back to the facilities you had opened; you had talked about it being a drag to the OR. Does that flip now as you start to build out and leverage or is it just the volume moderation a little bit heavier this year than maybe you would have expected in terms of that kind of flipping from a drag or it's more of a tailwind for you?

I believe there is a potential advantage for us. We have been successful in replicating the excellent service we provide to customers across our new openings. As customers become more familiar with us in these markets, we have the chance to expand in those facilities. This could certainly be beneficial to us for the remainder of the year.

So I wanted to ask Fritz and Doug, maybe you could give your thoughts on the ability to get to a sub-80 OR kind of over the longer term? I know you said kind of expectations for ‘23 probably within 100 basis points or so of what we saw for ‘22. But is the sub-80 still kind of the long-term target and kind of what's your confidence level around that? And then should we also have an expectation that Saia can kind of be top quartile among peers in terms of where its OR lands in any given year?

I don't have a reason why not. I have to be honest with you, we are marching on to that. This is the environment that we're in right now, it's a little bit more challenging than it has been, but we don't see any reason why our service, our quality can't be. It is, in many cases, becoming best-in-class or approaching that, and that deserves an appropriate return. And I think that operating in the mid-70s is our expectations or perhaps lower. I mean certainly, the bar has been set. So we're going after it. I don't know why we wouldn't.

That's great. Certainly very encouraging to hear. And then just in terms of the five terminal expansions that you're looking at, maybe you could give a little color on what geographies those are focused on. Historically, you've spoken about kind of the benefits that you see in terms of increasing density in a particular geography. Maybe you could give us some color on kind of what the expectations are for the benefit that you might get from that.

Yes, we've previously discussed the challenges in the real estate sector, but I want to highlight that we will be opening a facility in Northeast Atlanta, which will bring our total to three locations in this market. This area is rapidly growing. We face challenges in delivering the top-tier service we aim to provide in Northeast Atlanta. About a year and a half ago, we added a facility in Northwest Atlanta, and we've been very pleased with the service we've provided to customers there. We anticipate similar success as we expand up the 85 corridor. This addition is significant for us; it will not only enhance our service quality for customers but also help us recruit drivers in that area, thereby increasing flexibility and capacity at our existing facility. Moreover, the advantage of reaching customers without navigating through an hour and a half of traffic in Atlanta is substantial. We are truly excited about this upcoming opening and feel it can’t come soon enough.

Good morning team. This is Andrew Cox filling in for Bruce. I wanted to explore the discussion around cost reductions and the natural attrition you've managed in response to decreased volumes. I'm interested in your thoughts on how you might replenish some of the excess capacity with transactional shipments. You've mentioned changes in enforcing line haul and additional backhaul opportunities, and now that you have 25% latent capacity and your costs are better aligned, I've heard that some of your peers may also be engaging in similar strategies. What are your views on using transactional freight to help fill that capacity?

We are focused on acquiring customers who appreciate our strong service offering. We see opportunities to sell available capacity and have several initiatives in place for that. However, we are not in the business of leading with price. It's important to connect with customers who recognize the value of the great product Saia provides and are willing to pay accordingly. There may be markets where this approach can work, but we won’t engage in a strategy centered around pricing alone. We will pursue customers fitting our proposition as we grow our capacity.

Okay, great. Thanks for the follow-up. Doug, I just wanted to circle back real quick to make sure everybody is on the same page on the operating ratio kind of thoughts for the first quarter. If I heard you guys correctly, you're kind of talking about flat operating ratio quarter-to-quarter sort of fourth quarter to first quarter, which would be in line with seasonality. Is that what you guys said? Or did I misunderstand that?

Yes, that's right. That's what we've seen historically. And then Fritz gave a lot of color on Amit's question about could it be better than that, potentially, but you hate to get out too far over your skis given the weather challenges have come up in February a year ago. I think it was a pretty tough comp for us. So I think it's mid-teens kind of shipment and tonnage growth last February. So we got to get a clean run through there to think that we try to forecast something better. So yes, flat out of Q4 into Q1 would make a lot of sense to us.

Thanks, Jack.

There are no further questions at this time. I'll now turn the call back over to Fritz Holzgrefe.

Thank you for everyone that's called in. You heard the latest update on this Saia performance. We're excited about the opportunities in front of us this coming year and look forward to providing you an update in the next quarter. Thank you.