Good morning. My name is Drew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2025 Saia, Inc. Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Matthew Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Drew. Good morning, everyone. Welcome to Saia's Second 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. 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. Our second quarter operating ratio was 87.8%, compared to our operating ratio of 83.3% in the second quarter of last year, and the results represent a 330 basis point improvement from the first quarter of this year. The sequential operating ratio improvement outperformed the historical average of 250 to 300 basis points despite the lack of typical volume ramp that's usually seen throughout the second quarter. We operate our business with a focus on the customer and managing the things that are within our control. Our efforts to optimize our variable costs and improve our network efficiency contributed to this outperformance, and these results reflect our ongoing efforts to manage the business in the short term with an intense focus on executing our long-term strategy. I'm pleased with the team's ability to focus on the things that we can control during this quarter, taking care of the customer, mix management, core execution, and operational efficiency. Throughout the quarter, we were able to adjust our cost structure to align with volumes that trended below historical seasonality. We typically see significant monthly volume increases throughout the second quarter. And while June trended more in line with historical seasonality on a per workday basis, tonnage for the quarter was only up 0.4% from the first quarter. Our second quarter revenue of $817 million decreased slightly from last year's second quarter by 0.7% due to continued muted volume trends as a result of the macroeconomic landscape. Overall, shipments per workday were down 2.8% year-over-year. Customer acceptance in our newer markets remained strong, which continues to demonstrate the value of our long-term strategy of getting closer to the customer and providing unique solutions to meet their needs. Terminals that opened less than three years ago saw about a 4% sequential improvement in shipments per workday in the second quarter of 2025 compared to the first quarter. In aggregate, these facilities operated in the mid-90s in the second quarter, improving from breakeven in the first quarter. In our legacy facilities, or those opened longer than three years, shipments were up about 2% sequentially in the second quarter of '25 compared to the first, but down about 3.5% compared to the second quarter of 2024. While we continue to see strong results in our newer markets, the overall shipment trends reflect the continued cautious approach from customers amidst an ever-changing economic landscape. That said, we remain pleased with the opportunities we're seeing with both new and existing customers, which is reinforced by the volume trends seen in our newer facilities. Revenue per shipment, excluding fuel surcharge, increased 2.7% compared to the second quarter of last year, while revenue per shipment, including the fuel surcharge, increased 1.8% in the quarter. For the second quarter, we saw tons per workday increase 1.1% compared to the second quarter of 2024, weight per shipment increased 4%, and the length of haul increased slightly compared to the second quarter of last year. However, both of these components of mix decreased sequentially from the first quarter, creating a revenue headwind of approximately $4.5 million to $5.5 million compared to the first quarter. Our pricing and mix optimization initiatives remain an intense focus. Sequentially, our mix of business shifted to handling slightly more national and retail customers, which partially led to a lower weight per shipment compared to the first quarter. Additionally, we saw muted trends out of our Los Angeles region, partially contributed to the shorter length of haul compared to the first quarter, which is a headwind to sequential revenue per shipment. Throughout the quarter, we were able to continue to provide unique solutions for our customers in both new and existing markets, which further validates our value proposition. Contractual renewals averaged 5.1% in the quarter, reflecting our customers' confidence in the high-quality service that we continue to provide. We remain steadfast in our approach to providing industry-leading service levels while also managing controllable costs and productivity. While we cannot control the external factors, our focus remains intently on what we can control, and taking care of our customers is at the forefront. Customers value certainty and reliability in their supply chain; we believe that we are well-positioned to provide that service in every market. This hyper-focus on the customer remained on display in Q2 as we achieved a cargo claims ratio of 0.5% this quarter. From an operating expense standpoint, we drove a 4% sequential decrease in cost per shipment compared to the first quarter despite headwinds associated with investments in our fleet and network expansion. We continue to focus on adjusting our resources to the shifting volume levels, and we reduced headcount by about 4.2% from March to the end of June. We continued our focus on optimizing our maturing network, as the 2024 network investments and related growth while beneficial for the long term, created unique short-term challenges and inefficiencies in our network, particularly in the slower Q1 operating environment. We accelerated our network optimization efforts in Q1 and saw the benefit emerging in Q2 as we leveraged density in our larger network and our efforts to drive greater efficiencies began to materialize. These results reinforce our commitment to expanding the geography and nationwide footprint, which increasingly allows us to compete on a more even playing field with peers. As we look forward, we'll continue to execute our long-term strategy and keep an eye on the macro environment, maintaining discipline around our cost structure and adapting to the changing landscape across our network. I'll now turn the call over to Matt for more details from our second quarter results.

Thanks, Fritz. Second quarter revenue decreased year-over-year by 0.7% to $817.1 million while revenue per shipment, excluding fuel surcharge, increased 2.7% to $298.71 compared to $290.72 in the second quarter of 2024. Revenue per shipment, including fuel surcharge, increased 1.8% to $351.36 compared to $345.7 last year. Fuel surcharge revenue declined by 5.8% and was 14.6% of total revenue compared to 15.4% a year ago. Yield excluding fuel surcharge decreased by 1.2%, while yield including fuel surcharge decreased by 2.1% compared to the second quarter of last year. Tonnage increased 1.1% compared to the second quarter last year attributable to a 4% increase in our average weight per shipment, partially offset by a 2.8% shipment decline. Our length of haul increased year-over-year by 0.6% to 893 miles. Shifting to the expense side for a few items to note in the quarter. Total operating expenses increased by 4.7% in the quarter compared to the second quarter last year. Salaries, wages, and benefits increased 5%, which is primarily driven by our July 2024 wage increase, which averaged approximately 4.1% for all employees, excluding executives, as well as increased employee costs, including group insurance as the inflationary pressures continue to drive this line item to elevated levels. Purchase transportation expense, including both non-asset, truckload volume, and LTL purchased transportation miles decreased by 5.5% compared to the second quarter last year and was 7.1% of total revenue compared to 7.4% in the second quarter of 2024 and 7.6% in the first quarter of 2025. Truck and rail PT miles combined were 12% of our total line haul miles in the quarter. Fuel expense decreased by 4.3% in the quarter compared to the second quarter last year while company line haul miles increased 2.1%. The decrease in fuel expense was primarily the result of a decrease in national average diesel prices by over 7.8% on a year-over-year basis, partially offset by the increase in line haul miles run. Claims and insurance expense increased by 21.2% year-over-year. The increase compared to the second quarter of 2024 was primarily due to the development of open claims, increased claim activity, and increased cost per claim. Depreciation expense of $62.5 million in the quarter was 19.1% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate, and technology. We believe the investments we have made and continue to make in our network, technology, and our people during this down-cycle position us well for the future. We are constantly evaluating investments to ensure they meet the return profile we expect, and we plan to spend approximately $600 million to $650 million in capital expenditures this year, consistently investing in our network expansion, equipment, and our people aligned with our long-term strategy. Compared to the second quarter of 2024, cost per shipment increased 7.7%, primarily due to increased salaries, wages, and benefits to support a broader network of terminals and increased depreciation expense associated with the record investments made in the network in 2024. As Fritz mentioned, our cost per shipment decreased 4% sequentially from the first quarter in spite of the lack of typical volume uplift that would allow us to better leverage our fixed costs. The decreased headcount of 4.2% compared to the first quarter of 2025 was a contributing factor to the sequential improvement. Additionally, we were able to manage our costs in the second quarter while maintaining a claims ratio that was largely flat sequentially, reflecting our ability to make these adjustments while preserving core execution and customer service. Our tax rate for the second quarter was 25.3%, compared to 24.4% in the second quarter of last year, and our diluted earnings per share were $2.67, compared to $3.83 in the second quarter a year ago. I'll now turn the call back over to Fritz for some closing comments.

Thanks, Matt. As I mentioned in the opening, I'm pleased with our team's focus on things that we can control. The operating performance of our team continues to be among the best in the industry, and we remain focused on our customers' needs. While volume did not step up as traditionally seen in the second quarter, margins outperformed the normal sequential progression, representing our team's ability to adapt to a dynamic environment. In Q2, we relocated our centralized customer service function to our field locations. We reduced our overhead costs in this process, but more significantly moved our customer service capabilities closer to the customer. Our customer-first focus is yielding tangible results, especially in our new markets as our facilities that opened for less than three years continue to lead the charge in volume and revenue growth, performing in line with seasonality in these markets. We're excited about the early success of these locations, and we see considerable runway as we continue to penetrate those markets. With our talented and engaged workforce, the value proposition to our customers continues to expand to match our national network of facilities. A key component of our long-term strategy is to get closer to the customer and give them a chance to choose Saia for their LTL needs more often. At Saia, we've emphasized the importance of the customer and focusing on things that we can control. As our industry adapts to the evolving economic landscape over the coming months, my conviction about the long-term prospects of Saia remains steadfast. Great employees, great service, and a national footprint are all key to securing our position as a long-term leader in the industry. Our network planning tools, continually refined and honed from our original deployment several years ago, are foundational to our resilience and our ability to operate and monetize in our complex national network. At the same time, these tools are keystones to continue to find cost-optimal solutions to meet customer expectations. Over the coming quarters, we'll be further investing to continue and enhance these robust capabilities, which we believe will continue to generate returns in the business. Although these network planning tools provide a framework for the company to operate fundamentally, core execution remains in the hands of a highly engaged team focused on supporting our customers' success and delivering returns on the substantial investment in creating a national network. We remain in the early innings of tapping the potential of this business. With that said, we're now ready to open the line for questions, operator.

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

Fritz and Matt, excellent job on the pricing. I think that's really a great flow-through. Given the usual seasonality, should we expect volumes to stay the same or can they turn positive? Will they remain negative in the third quarter considering seasonality? With the strong pricing in mid-single-digit renewals, do you anticipate pricing will continue to rise? This leads me to inquire about your outlook on operating results. Normally, seasonality is relatively flat from Q2 to Q3. I would appreciate your thoughts on this.

Yes. Just on the tonnage piece, well, keep in mind that we opened six terminals in Q2 last year, many of those in the back part of the quarter, and then we opened 11 terminals in Q3. So the comps get tougher on the shipments and tonnage line as we start to lap those new openings. And then on the pricing side, we're focused on what we've been focused on. We're making sure that the business meets the returns that we expect and that we're evaluating what we're handling for customers throughout each bid, each renewal. That's core to what we do over the years, and it continues to be a focus. If you look at history on the OR line, typically, Q2 to Q3 OR degrades between 100 to 200 basis points sequentially. And we think we can keep it around 100 basis points of degradation sequentially from Q2 to Q3 this year.

I think that, just to add to that, Ken, the important part is that we have made significant through the quarter optimization efforts in Q2 to better match our national line haul network and overall network to meet what the now national network looks like. I think that part of the efficiencies that we drove through Q2 will continue into Q3. So I think that's part of how we can get to the bottom end of that range that Matt described.

So Fritz, I don't mean to do another follow-up, but is that just because of the optimization on a national network? Or was that because you were talking about seeing a slowing volume, so you moved to pull costs and cut employees?

No, it's both, right? In this business, you always have to match cost to what the available business is. But at this time last year, we didn't have 21 facilities. We have 21 facilities maturing from last year that we opened last year. And the opportunity that we have, part of that opportunity is that as you build densities across that network now, we described in the first quarter some of the challenges we had managing through facilities that hadn't been opened that long. And now we're starting to see some of the benefits of that. We continue to look for opportunities to redesign our line haul network. As you know, that's the biggest cost bucket in this business. And that's an area that, as you develop maturity, becomes a sustainable cost advantage over time.

The next question comes from Richa Harnain with Deutsche Bank.

So I wanted to ask a little bit about the labor reductions that you've done and sort of what you did with wages this year. I just wanted to clarify, was there a wage increase this year? And then in terms of the labor force, what type of cuts were made? And as we look out going forward, as you try to balance your customer-centric focus and building out the network with sort of where we are in the cycle and trying to manage costs, like what's further runway for that? What should we expect?

Yes. Our wage increase program typically occurs in the second half of the year, so we haven't made any changes yet. It's crucial to match available hours to volume levels in an environment like this when there are fluctuations. Managing headcount by location or hours is key; for instance, someone who worked a lot of overtime last year may not be working overtime now, leading to a reduction in hours and increased efficiency. The line haul network is also significant for us. With a national network, we've added facilities like Youngstown, Ohio, which allows us to achieve line haul cost savings in the eastern region. Our ability to run triples in Ohio results in a 30% cost reduction compared to a standard two parts connected system. These cost savings can be implemented across the network, independent of external factors, leveraging our national presence. We also reposition line haul drivers to align better with volume movements and customer needs, contributing to efficiencies. In some markets, this leads to lower usage of PT, and our cost structure from Q1 to Q2 reflects these changes.

Okay. Great. So as we think about Q3 then, should we continue to see that momentum in the cost per shipment line to better some seasonal performance?

We'll have to see what the market has in store for us. But I think we've got some additional opportunities through the quarter that I think we'll see materialize. We're still not 100% certain around what the top line looks like, but I do know that we'll continue to look for cost optimization opportunities and deploy our tools to do that. And that's built into why we think we're going to beat our historical trend from Q2 to Q3.

The next question comes from Jordan Alliger with Goldman Sachs.

There has been a lot of discussion regarding industry capacity, and I'm curious about your perspective on this. As we approach the next upcycle, do you believe that overall LTL capacity will be lower than the levels seen before the Yellow bankruptcy due to various unsold terminals, despite some larger players having excess capacity currently? Additionally, what implications could this have for pricing during a recovery?

Yes, I believe the long-term trend regarding LTL capacity will remain unchanged. It has been decreasing over time. While there is available capacity among some competitors now, what is truly important is that this industry continues to face inflationary pressures. Stakeholders expect a return on significant capital investments, and we're no different in that regard. This expectation will help maintain the industry's health. For us, we are excited about the chance to capitalize on our resources. Saia is well-positioned to benefit from the market returns, and we have experience operating during positive market conditions. This is the moment we've been preparing for, and we view it as a unique opportunity.

And keep in mind, too, Jordan, terminals and doors are absolutely important, but capacity also comes in equipment and it comes in drivers. And the next upcycle, it's drivers that are critically important. You need the terminals, the doors, but if you don't have drivers and equipment, that's a capacity constraint. And like Fritz said, we feel great about the investments that we've made. We've never been better positioned, but capacity comes in all three of those.

The next question comes from Chris Wetherbee with Wells Fargo.

Maybe can you give us a sense of how things are going from a volume perspective, maybe some insight into what July tonnage looks like and maybe your sort of overall view on what you're seeing from your customers in the end markets?

Chris, could you repeat? I think you got garbled there a little bit on the question.

Apologies. Hopefully, you can hear me a little bit clearer now. Sorry about that. Just curious if you can give us an update on what you're seeing from a tonnage perspective in July and sort of how the third quarter is starting, what you're hearing from customers in the market from the end markets that you're serving?

Sure. I will provide the monthly information for Q2 as well. In April, shipments per day decreased by 1.9%, while tonnage per day increased by 4.4%. In May, shipments per day dropped by 3.2%, and tonnage per day fell by 0.4%. In June, shipments per day decreased by 3.4%, and tonnage per day declined by about 0.8%. Looking at July so far, shipments per day are down by approximately 2.25%, and tonnage is remaining fairly stable. As I mentioned earlier, we are comparing against last year’s figures in Q3 with new terminals added. However, from an end market perspective and in terms of customer feedback, we haven't noticed anything significantly different from what we've been experiencing. We continue to engage closely with our customers to understand their businesses and trends, and there's nothing specific that stands out in the past few weeks compared to what we saw in June.

Yes, we have noted that our L.A. region has been a bit softer. Some of this is due to our actions to ensure appropriate compensation. Additionally, there has been some softness in that area for us, but other markets have performed quite well.

Okay. That's helpful. And just a follow-up on the comment about normal wage increases for the third quarter. I was just kind of curious, are you suggesting that you haven't done it yet or that it may not happen in the third quarter? Just want to get a sense of how you're thinking about that normal process?

Yes. And if you look at it, Chris, over time is that we would typically do that in the third or fourth quarter. We haven't made a formal call on that yet. So it could still happen in this quarter, or it could be in the fourth quarter. But we'll let you know as we figure out where the market is and what we need to do.

The next question comes from Jon Chappell with Evercore ISI.

I know contract renewals are just a small piece of the portfolio, but the 5.1% that you mentioned is much lower than a lot of the 8% to 9% we've seen recently. Is that just a function of more difficult comparisons? Or should we read that into a more competitive pricing environment overall?

Jon, we heard you clearly in the first half, but then it broke up a little bit. Would you mind repeating?

Yes, the 5.1% contractual renewals in the quarter are a bit lower than the recent 8% to 9%. Does this reflect tougher comparisons, or does it indicate a more competitive market environment?

Well, just to provide a little clarity on the first part of that, about 60% to 70% of our business is subject to a contract. Those renew pretty ratably throughout the year. So it's the majority of our business. The renewal number gives us an indication of how the customers are viewing our service and what they're willing to pay for the quality and service that we provide. But what's most important that we track very diligently is what happens after that goes into place. Are we handling the volume that we expect? Are we growing in the lanes that we expect? That's where we look really closely to understand what's happening afterward and be able to talk with our customers to better understand their freight flows and where we should be handling business and making sure that it's at our rate. So the pricing environment remains rational. We haven't seen anything different than that. We remain really focused on making sure that we get compensated fairly for what we do and provide for customers. So no change from that perspective. And where we get really excited is we continue to see great opportunities with both new and existing customers throughout the network. We've never had 213 facilities like we do right now to sell to our customers. And getting more and more of that than we have in prior periods. So that gives us more opportunities.

I think it's important to note, Jonathan, that our renewal number reflects the portion of our business that was renewed during the quarter. This can vary from quarter to quarter, and it is based solely on that group of customers.

Yes, that makes sense. And just a quick follow-up. The move in the new terminal OR from breakeven to mid-90s, you're doing that in an environment where freight demand is still somewhat compressed. Is that strictly a function of just getting experienced repetitions, a little bit of scale there? Or are you making some of the big cost changes in the new terminals that you're doing in the legacy?

Well, the first thing that has to happen in a new terminal is you better be doing a good job, right? So claims have got to be good, on time has got to be good. Customers care about that, right? So if you do that, you get a shot at more business. And the great thing about those facilities is because they are well positioned, we've got a good team in place. The opportunity to scale those, meaning the incrementals on them can be pretty good. And that's kind of what you saw Q1 to Q2. So good execution, actually, some of the great execution, customer satisfaction, and that leads to profitability improvement because you're basically leveraging your investment at that point.

The next question comes from Ravi Shanker with Morgan Stanley.

Hopefully, you can hear me okay. I have a question regarding the cost side. You mentioned that you're implementing cost actions in response to the current volume environment, which makes sense. However, how much of these cost actions would you consider short-term tactical due to the downturn, as opposed to long-term structural improvements? Additionally, if you're taking cost actions now, especially related to headcount, could there be a risk that this might constrain your operating leverage when the economy improves?

That's a valid question. You've been in this long enough to understand that the fundamental aspect of our business is that as our volume fluctuates, our short-term labor costs also tend to fluctuate. While a significant portion of the impacted headcount and hours could return if volume increases, what’s particularly important for us—unlike a traditional model—is that as we enhance our line haul network, we are creating density as we grow. The density aspect is crucial, leading to potentially favorable incrementals without needing to significantly increase headcount. In our legacy facilities, where most of the affected hours occurred, some of those hours may come back naturally; however, I don't anticipate a proportional increase in line haul hours or network costs, as we have opportunities for scaling. This is the rationale behind our recent changes and investments.

The next question comes from Stephanie Moore with Jefferies.

I wanted to discuss the pricing environment briefly. Could you provide an update on the progress made in repricing some legacy freight as well as new terminals? While the mix is always a consideration, have you identified any opportunities for winning heavier freight?

I think it's important to recognize that pricing actions can be a journey. As we acquire new customers, we aim to be competitive in the market. However, we occasionally discover that our pricing may not align or that customer requirements are more complex than anticipated, necessitating adjustments. In evaluating our performance, we analyze public data comparing our revenue per shipment to that of our peers and continue to identify opportunities for improvement. While we are pleased with the progress made in recent quarters, there is still significant room for growth. Observing public data and our national footprint, which increasingly resembles that of others, emphasizes the need to persist in enhancing our market presence. This can only be achieved by maintaining the high level of service we provide. We are in the early stages, so there is definitely potential ahead, but I am encouraged by our progress.

And just a follow-up to some comments you made previously in terms of optimizing your business or your network, given now being a national carrier and making pretty solid actions in the second quarter. Could you just give us a couple of maybe the key areas that changed in the second quarter? What specific actions were put into place that really optimized your network for the national footprint?

Sure. The main point here is that our network, which has been established over several years, previously lacked full national coverage, causing our freight to follow various routes. Recently, we’ve created a direct line haul route from Minnesota to Seattle, which was previously unavailable, allowing us to enhance density in that area. This will enable us to introduce triple trailers on those lanes in the coming months, which is crucial for efficiency. I used the Ohio example earlier, where we are optimizing line haul at a newly acquired facility by implementing a triple sort operation. In the first quarter, we faced challenges with new facilities that required us to route freight through major break operations. However, by increasing density in the originating market, we can now create direct routes that may skip break operations, reducing handling in our network. In the second quarter, we realigned our hub and routing strategies, enabling us to build density in important lanes. This improvement has resulted in cost savings that are evident in our line haul network. I encourage you to take a closer look at the salary and wages alongside the performance transportation line, as both are key indicators of our wage structure, with much of the performance improvements coming from line haul cost savings.

The next question comes from Brian Ossenbeck with JPMorgan.

First, just a clarification. I got a couple of questions already, but just so I'm clear, is the quarter-to-quarter guidance you're talking about, is that assuming you put the wage increase through in the third quarter or not, just to be clear? And then one thing I thought was pretty interesting. We've seen this NMFTA shift coming for a little while now, but the largest carrier earlier this week pushed it out for, I guess, 150 days or so to early December. Just wanted to see if that had any implications for your business, for the broader industry. I say that shippers are having a hard time getting there with the new codes. So just some thoughts on those two?

Yes. In terms of the guide and the wage increase, like Fritz mentioned, we are evaluating our timeline. Our guide includes what our forecast is on that. So it's inclusive of where we stand right now, and we'll provide some information on that as time moves on. But in terms of the NMFTA changes, look, we're not backing down on the implementation of that. It's good for the industry. Long term, we feel like this is a trend in the right direction. We sell space on our trailers, and this aligns more of the book to be density-based, which we feel is important for us, important for our shippers. So from our standpoint, we dimension 75% of our freight every day. We get a view of what that looks like. We've invested heavily in dimensioners over the years for that exact reason. We leverage that technology. So we're working closely with our shippers, and we feel like we had a good opportunity to get in front of that and get ahead with them and talk about what the impact could look like. That's all about the partnership with our customers. So we don't have any plans to back that off. I guess it remains to be seen what that does for others. But in our view, these changes from the NMFTA are good for the industry, and we're here to support it.

Just to be clear, it's been a long week. So the current guide for the sequential was based on what you think right now, which is to be determined. So I guess we'll have to stay tuned for an update. Is that right?

Yes.

Yes.

The next question comes from Eric Morgan with Barclays.

I wanted to ask about the mix management initiatives you referenced. Just looking at second quarter shipments, I think you had the smallest sequential improvement in maybe at least 20 years outside the pandemic. So just curious how much of that is action you took to manage the book relative to underlying demand softness? And looking ahead, is there more work to do on that? Or should we be thinking about sequentials from here as more reflective of the underlying demand you're seeing?

Just to confirm, Eric, you're talking about the sequential change Q1 to Q2?

Correct.

We're starting to compare to terminals we opened last year, with six being opened in the second quarter. These were some of our larger facilities. Despite the challenging freight environment over the last three years and less-than-stellar industrial production, we have managed to grow and are finding more opportunities with customers. Our legacy markets are adapting similarly to others, but we are seeing better prospects. This reflects the current industrial landscape. Additionally, we now have 213 facilities available to serve our customers, which positions us very favorably.

So I mean I think just to add to that, Eric, our focus is on what we can control, right? So we've got to perform for the customer. We got to do that in a cost-optimal way. That was a big part of what we achieved in the second quarter. But at the same time, we spent $1 billion in capital last year, and we're providing a very high level of service. So we have an expectation that we'll get a return on that. So we are going to continue to focus on finding the customers that value that sort of strategic and long-term investment in them. And so the pricing is part of that as well, and mix management is part of that. In an environment we're in right now, maybe it's a little bit muted. Certainly, as you look at our trends through the quarter, I mean, we've have not been on seasonality, the historical seasonality that, to be quite honest in the business, that's a little bit of life in the big city. So you've got to focus then on what can we handle inside our four walls, and that's what we do.

Appreciate that. And maybe just a quick one on the balance sheet, if I could. I think your CapEx should be coming down in the back half. Do you think you'll be able to start reducing your leverage and interest costs in the back half? Or how should we be thinking about how to manage our expectations for cash on the balance sheet?

Yes. We'll still be into the line. We've got some spend in the back half of the year. $600 million to $650 million is probably where we land in terms of the full year on the CapEx line. But I'd expect it to start to taper down on line usage in the back part of the year in Q4. But a lot of that depends on timing with some of the real estate opportunities that are in our pipeline. But we'll still be into the line, but I expect that will start to trend down in the back quarter of the year.

The next question comes from Tyler Brown with Raymond James.

Can you all hear me?

Loud and clear.

Fritz, you've given some really good operational color, but I just kind of want to hammer this home. So what are you guys seeing from a network balance perspective? So have you guys started to see that those new markets have built on the outbound side? Just any color maybe on that inbound/outbound ratio in those newer terminals? Because I would assume that if that balance has started to improve, that's been maybe a driver to that mid-90s outcome?

Tyler, it's encouraging to see improvements. Is it at the desired level? No. However, that's where our opportunity lies, not just this year but also into next year as we enhance those facilities. Our goal isn't just to maximize volume; we need to approach it strategically and ensure we're choosing the right freight. I truly believe there’s significant potential to scale those facilities, which reflects in the costs of our line haul network as we transport freight. Direct shipments from Trenton West are clearly more efficient compared to routing through Harrisburg or other locations. We recognize these efficiencies are increasing as we develop these markets, and we’re very excited about this trend.

I think you see that in the cost per shipment, Tyler, too. It's down 4% sequentially. And usually, if you're on seasonality, Q2 typically is the best volume ramp and volume quarter for us. So you get even more leverage on those fixed cost lines like depreciation that we got a little bit of, but not all of. So that balance and that execution you see in our cost per shipment line despite that lack of typical ramp that helps you leverage the fixed cost. And that's where when this thing ramps back up, great incremental margin opportunity for us because you're able to leverage that even more over a network that's becoming more balanced that you got more in and out opportunities. These terminals have really been opened less than a year that we opened last year. So each month that passes, we continue to work on that.

Right. So the message is, it's improved, but there's still plenty of work to do?

Yes. We don't see a reason why it shouldn't operate in the 70s and part of getting there is building densities in those markets.

Right. And then this kind of goes hand-in-hand with that last question. But one of the key side effects of a greenfield strategy in LTL is that you need more brakes. You just can't run a lot of directs without that outbound density, right? So I don't know how you measure it. But if you look at something like brakes per bill or your direct percentage, do you feel like you've seen peak pain on those metrics at this point and basically on a downward slope?

Well, freight flows change. But if we look at our productivity metrics very closely, and one of the things that we monitor is handling and handling or touches. And touches improved sequentially from Q1 to Q2, and we saw that continue into June. So you always have to continue that work because freight flows change and customer patterns change, but we were really pleased with the execution, and we saw that come through in the productivity metrics and the handles. We also gave that example before about how things have to route differently, and Fritz talked about it. When you can route direct and you eliminate a handle, that's a big deal. Not only is it service to a customer that could be different, but you eliminate the cost that's associated with the handle. And we saw that improvement, but we are always working on that because every day is a little bit different in the business.

Right. I mean if you run more direct, you run more triples, I would assume that would have a profound impact on line haul?

Listen, like-for-like triples versus a set is a 30% reduction, right? So that's a big deal.

The next question comes from Ari Rosa with Citi Group.

Fritz, you mentioned in your prepared comments just conviction around the long-term prospects remain intact. I was hoping you could speak a bit more to that. Just what's the progression to getting a sub-80 OR and really growing the revenue in a meaningful way from here?

Well, I think that one of the things that would help broadly, right? I think that if we saw a little bit stronger macro backdrop, I think you'd see a little more conviction from our customers, and there's probably a little bit more growth. We've been dealing with this sort of freight economy for a number of years now. But with that said, I think there is an opportunity for us to continue to methodically grow our business, winning in the marketplace, taking share, frankly, because we're performing at a high level. And we may not get the outsized growth that you might see in a stronger backdrop, but I think we have an opportunity to continue to drive improvements. Now do I know what that's going to look like into next year? I think to be fair, I think we all need to figure out what exactly that macro looks like. But what I would say, though, is if I look across our operation and we look at our reference benchmark facilities where we have the most maturity, the most established, well-known brand efficiencies, all those things, this business operates in the 70s. So in those markets. We don't see a potential that says the newer markets or newer regions of the country for us couldn't approach those levels. So the long-term opportunity is certainly there. I think I'm still open as to what the timing of that would be. I think we need to get a little more clarity around what that looks like. But I think the fundamentals for us are good. And as we're pointing out in the last question, the ability to develop maturity in a national network is an important scaling opportunity for the overall cost structure of the business.

That's encouraging to hear. I wanted to clarify that you mentioned a shift in mix towards more national customers and retail accounts. I'm a bit surprised by that because some of your peers indicate a focus on regional accounts being more profitable. Could you address what is driving that strategy and the factors influencing the revenue mix?

Yes. And just to clarify that a little bit, Ari. It's not necessarily new customers that are coming in that are more national retailers. It's more business with customers that we already work with and have worked with for a long time. If you look back in our history, that's not uncommon. In Q2, maybe late Q1, but more so Q2, that trend to a little bit more seasonal retail type freight is not uncommon for us. And when you get an opportunity to serve more markets for customers that you already work with and have worked with for a long time, you get more opportunity to freight in some of these newer markets and even legacy markets because you can just do more for them. So that shift is not something that's uncommon for us in our history.

And that's not necessarily a bad thing. You have situations like pickup economies. When you further engage with a national account and gain more business there, it gives you the chance to increase your pickups or even your deliveries. Some of the national accounts are utilizing a national network, which presents us with opportunities. Additionally, in some of these new markets, the regional accounts or field accounts that aren't familiar with Saia represent opportunities for us. This provides us with potential for growth. I see this as a win-win situation. We are growing our business with longstanding partnerships, which is positive. We also have opportunities in new markets that may shift the mix of business in the future.

The next question comes from Daniel Imbro with Stephens.

Fritz, maybe a follow-up just on the service. I think you mentioned claims ratio was flat at 0.5% from the first quarter. I guess, what about other service metrics, on-time deliveries, missed pickups? And then continuing that discussion on legacy versus new markets, I mean, how different are the service metrics that you're getting from the field between the legacy and the new markets?

Well, the good on time, and we're pleased with the results there. On time as well as pickup completion, those are all trending at high levels, which are key service metrics for our team, very, very competitive. We think probably as good as anybody in the industry. What's really exciting is that the service metrics generally between the new facilities and the old facilities are pretty consistent. And that matters to those national account customers because they know they can count on the same service everywhere they go. That's how you win share in new markets.

The next question comes from Matt with Barclays.

A couple of housekeeping item. I think last year, you said normal margin seasonality in the fourth quarter was about 250 bps of degradation. Without commenting on where you might come in versus that, is that still a decent measure of a seasonal bogey? Yes. We're really focused on Q3 for now, but that's probably the right long-term average. Q4 always varies depending on where the holidays fall and calendar and things like that, especially now where holidays tend to be a little bit more stretched out in some of the business environment and demand and things like that, but that's where we stand right now.

But I'd caution you a little bit about that, Bascome, because this will be the first time that we've had 21 facilities that we didn't have before. So we don't know exactly what that history looks like yet. We're intently focused on Q3, and we'll have a better view of what we think Q4 will look like down the road.

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

Are you coming back to me. Fritz, I guess the stock has moved from up maybe 12% to up 2.5%. So I think there's some confusion. Just want to give you maybe a chance to kind of talk through the message here. So maybe it was on the 100 to 200 basis points normal OR. You said you could do 100. But if you do add wages, whether it's in Q3 or Q4, it would be another 75 basis point hit. So it sounds like you'd still be within your range on the OR normal seasonality. I don't know maybe if it's on the volumes that Jason just ran over, if given you started off flat and it's going to get tougher. Maybe just hit on the messaging again because it seems like there's some confusion. And obviously, you don't give pricing thoughts that Matt highlighted. So I don't know if you just want to dig into that for a minute?

Yes, to clarify, the decline of 100 to 200 basis points from Q2 to Q3 is something we've experienced in the past. We mentioned we would consider all available factors, such as wage increases and volume, and we are targeting around 100 for the quarter. As we all know, there are many variables in this business. We are managing those variables closely, so when we provide guidance, it reflects our best assessment of the options and the various factors we need to consider. I hope that explains our approach clearly.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe for any closing remarks.

Thank you for joining us to discuss Saia's second quarter. We are very pleased with our execution during this period, especially in terms of our customer service. Our operating performance in managing costs also stands out. Looking from Q2 to Q3, we believe we can exceed our usual expectation of a 100 to 200 basis point decline. There are many variables in this business, and we will handle them within this range. More importantly, for long-term investors, Saia's outlook is very strong, and we are enthusiastic about the potential of our new national network. Thank you for listening to our results, and I look forward to future discussions.

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