Good day, and welcome to the Saia, Inc. Third Quarter 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Matt Batteh, Saia's Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Chloe. Good morning, everyone. Welcome to Saia's Third 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 note 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. Also, in the third quarter, we recorded $14.5 million in net operating expense reduction from a gain on real estate disposal and impairment of real estate. When we discuss adjusted operating expenses, adjusted cost per shipment, adjusted operating ratio or adjusted diluted earnings per share in our comments, it refers to our adjusted results that exclude the gain from that sale and impairment on that property. See our press release announcing third quarter results for a reconciliation of non-GAAP financial measures. That press release is available on the Financial Releases page of Saia's Investor Relations website. 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 Third Quarter Results. We are very pleased to share that our results for the third quarter reflect our continued focus on customer service, network optimization, and cost control efforts. Our customer-first focus remains paramount as we continue to mature in our newer markets. Although the economic backdrop continued to exhibit the trends seen throughout 2025, with customers awaiting a more certain environment, we are pleased that our expanded footprint continued to provide opportunities to serve customers in both our legacy and ramping markets. Our ramping markets, which are made up of the 39 terminals that have opened since the beginning of 2022, grew sequentially and improved their operating ratio by over 100 basis points compared to the second quarter and are now operating at a sub-95 OR. 17 of these terminals have just completed their first year of operations, making the overall improvement in performance even more impressive. Our nationwide footprint allows us to build deeper relationships with customers, and we're seeing the benefit of the investments made in our network over the past several years. Compared to the second quarter, we experienced revenue growth in both legacy and ramping markets. Customers value ease of doing business, and with our national network, we are better positioned to provide solutions than we ever have been. Our third quarter revenue of $839.6 million was relatively flat compared to last year's third quarter, reflective of the macroeconomic landscape. While our third quarter operating ratio was 85.9%, adjusting for the one-time real estate transactions, our adjusted operating ratio was 87.6%. Our adjusted operating ratio increased by 250 basis points compared to our operating ratio of 85.1% in the third quarter last year, but improved by 20 basis points compared to the second quarter of 2025, outperforming historical seasonality. The improvement from the second quarter was achieved primarily due to our focused cost control efforts, resulting in a decrease in sequential adjusted cost per shipment despite headwinds from increases in self-insurance and related costs. Excluding the net impact of the real estate transactions, our adjusted cost per shipment improved sequentially from the second quarter by 70 basis points. The sequential improvement reflects our continued focus on operational execution and efficiency while still maintaining our performance standards. For the quarter, our cargo claims ratio was 0.54%, which is our fourth straight quarter of sub 0.6 cargo claims ratio, a notable company record. Additionally, reflective of our expanded offering and continued service performance for customers, our contractual renewal rate for the quarter was 5.1%. Volumes for the quarter were in line with our expectations based on how the overall freight market has trended in 2025. Compared to the third quarter of 2024, shipments per workday decreased 1.9%, while sequentially shipments per workday improved 3.2%. We continue to experience outsized growth in our newer markets where our expanded footprint and service offering provide more opportunities as customers come to understand and see the value in our expanding service capabilities. Our ramping facilities saw a 4.2% sequential improvement in shipments per workday in the third quarter of 2025. In facilities opened prior to 2022, shipments increased 3% sequentially and decreased 4.8% compared to the third quarter of 2024. We are pleased to see both legacy and ramping facilities grow sequentially, reinforcing the value of a national network through our expanded service offering despite a softer overall LTL freight market. In Q3, we saw continued benefits from our accelerated network optimization efforts that began in the first quarter of the year. Enabled by our ongoing investments in technology, these initiatives improved efficiency across our national footprint as handles or the number of times a shipment is touched as it's routed through our network continue to be lower than their first quarter peak. We expect our national footprint to continue to scale moving forward, aligning with our long-term strategy of getting closer to the customer, improving service levels and providing solutions that meet customers' needs. We are already seeing the benefit of our investments in our results and conversations with customers reinforce our value proposition. Optimization of mix remains an intense focus for us, and our ongoing efforts around pricing remain one of our biggest opportunities. As noted earlier, our expansion strategy is yielding tangible results as we get closer to our customers and can provide more solutions to meet their needs. Sequentially, over 70% of our volume growth came in 1- and 2-day lanes across our network, with over two-thirds of that growth coming from customers that we already do business with. Growth in these lanes helped drive an increase in operating income and profitability compared to the second quarter. This growth, driven largely by our National Accounts segment, demonstrates the impact of our expansion and ability to grow with existing customers and build relationships with new customers. We implemented a GRI on October 1 at a rate of 5.9%. As a reminder, this increase will impact approximately 25% of our operating revenue and varies by the mix of business and lane. Ensuring that we drive returns on our substantial network and service investments remains a focus, and this GRI is another step in the right direction in obtaining the compensation we expect from our customers for the service we provide in this inflationary business. I'll now turn the call over to Matt for more details from our third quarter results.

Thanks, Fritz. Third quarter revenue was relatively flat compared to the prior year, decreasing 0.3% to $839.6 million, while revenue per shipment, excluding fuel surcharge, increased 0.3% to $294.35 compared to $293.39 in the third quarter of 2024. Fuel surcharge revenue increased by 2.1% and was 15.2% of total revenue, compared to 14.8% a year ago. Yield, excluding fuel surcharge, decreased by 0.1% while yield increased by 0.5%, including fuel surcharge. For the third quarter, shipments per workday decreased 1.9%, while weight per shipment and length of haul increased slightly compared to the third quarter of 2024. With this change, tonnage per workday for the quarter decreased 1.5% to approximately 24,700 tons compared to approximately 25,000 tons in the third quarter of 2024. Shifting to the expense side for a few key items to note in the quarter. Salaries, wages, and benefits increased 0.7% compared to the third quarter of 2024. This increase is primarily driven by increased employee-related costs, including group health insurance and workers' compensation costs due to cost inflation and experience. These increased costs were partially offset by reduced wages compared to the prior year as we continue to match ours to volume. Compared to the third quarter of 2024, headcount was down 3%. Purchase transportation expense, including both non-asset truckload volume and LTL purchased transportation miles, decreased by 9.5% compared to the third quarter last year and was 7.1% of total revenue compared to 7.8% in the third quarter of 2024. Truck and rail PT miles combined were 12% of our total linehaul miles in the quarter. Fuel expense for the quarter increased by 0.9% compared to the prior year, while company linehaul miles increased 1%. The increase in fuel expense was primarily the result of an increase in national average diesel prices by over 1.8% on a year-over-year basis. Accident claims and insurance expense increased by 22.5% year-over-year. The increase compared to the third quarter of 2024 was primarily due to development of existing accident-related claims and inflationary increases in cost per claim. Depreciation expense of $64 million in the quarter was 17.2% higher year-over-year, primarily due to ongoing investments in revenue equipment, real estate, and technology totaling over $600 million over the last 12 months. Compared to the third quarter of 2024, adjusted cost per shipment increased 4.6%, largely due to the increases in depreciation and self-insurance related costs. On a sequential basis, though, adjusted cost per shipment improved 0.7% from the second quarter of 2025 as cost management and core execution remained a heavy focus. This sequential improvement was achieved despite the headwinds from sequentially rising fuel costs and self-insurance related costs. Total operating expenses increased by 0.6% year-over-year, but after backing out the net gain on real estate in the third quarter, total adjusted operating expenses increased by 2.6% for the quarter. When combined with the year-over-year revenue decrease of 0.3%, our adjusted operating ratio increased to 87.6%, compared to 85.1% a year ago. Our tax rate for the third quarter was 24.8% compared to 24.4% in the third quarter last year, and our diluted earnings per share were $3.22 compared to $3.46 in the third quarter a year ago. Our adjusted diluted earnings per share for the third quarter of 2025 were $2.81. I will now turn the call back over to Fritz for some final comments.

Thanks, Matt. I'm pleased with our team's ability to focus on what we can control at this point in the cycle. Each day brings new variables, and the ability to improve operating ratio sequentially from the second quarter despite headwinds from increased fixed costs in addition to elevated insurance-related expenses speaks to our team's ability to remain steadfast in our focus on core execution and cost management. This quarter is yet another example of our team's operating performance being the best in the industry. In addition to the GRI, we also implemented a wage increase of 3% effective October 1 for all employees. We recently completed our annual engagement survey, and for the third year in a row, had a participation rate of over 80%. This participation rate remains among the strongest in the industry, and most significantly, our overall employee engagement remains high and actually improved compared to last year. The results of the engagement survey continue to reflect an engaged workforce despite the economic trends seen throughout the year. While we always have areas in which we can improve, I'm very pleased with the results of the survey and the ongoing commitment of our teams throughout the network. Saia's expanded footprint is supported by our best-in-class team, and the commitment of the team shows in the results seen in Q3. In a down freight cycle, we continue to focus on the customer by providing a high level of service while at the same time, maintaining cost management and improving core execution. We have remained resilient amid customer shifts that seem to transpire on a day-to-day basis and are well positioned to leverage our investments in the network over the last few years into an opportunity to turn Saia into one of the largest players in the LTL industry. Given the ongoing market conditions, the results we're seeing from the investments in our network, and our ability to adapt to the uncertain environment, we believe that we're still in the very early stages of realizing our full potential. With that said, we're now ready to open the line for questions, operator.

The first question comes from Chris Wetherbee with Wells Fargo.

Maybe 2 quick questions here. Just kind of curious how things have been trending in October from a tonnage perspective or a shipments perspective. And then Fritz, I noted you put the wage increase in October 1. Maybe you could give us a little bit of color or framework around how you think about the fourth quarter operating ratio in the context of the improvement you're making on the cost per shipment but also obviously some changing dynamics with seasonality and volume. So a couple of questions there would be great.

Sure. Thanks, Chris. I'll provide the monthly updates for Q3. In July, shipments decreased by 1.2% and tonnage increased by 0.9%. In August, shipments were down 2.2% along with tonnage. In September, shipments decreased by 2.5% and tonnage by 3.3%. So far in October, shipments are down around 3.5% and tonnage is down about 4%. Trends in October have varied a bit from day to day. The initial weeks were lighter than we expected, but we still have a few days left to track. Regarding the operating ratio, historically, we see an average sequential decline of about 250 to 300 basis points from Q3 to Q4. Considering that October is trending lower than expected this year, a reasonable estimate for degradation might be between 300 to 400 basis points, largely depending on volume. October is significant with 23 workdays, followed by an 18-day November, which poses its own challenges amidst the holiday season. Based on current observations, we anticipate future results to be volume dependent.

Yes. To add to what Chris mentioned, the overall environment influencing the trends we observe has been quite subdued this year. If we consider October specifically, we don't have a direct relationship with government departments, since our business operates downstream. It would be somewhat naive to think that this hasn't affected the overall environment. However, I am satisfied with the efforts we are making at Saia to drive our results. It is certainly possible for us to return to a more historical performance. The outcome will largely depend on how November progresses and transitions into December.

The next question comes from Jonathan Chappell with Evercore ISI.

Fritz, can you provide updates on the new terminals, specifically the 39 that opened since the beginning of '22? They went from breakeven to the high 90s OR and now you mentioned it's less than 95. I assume you achieved this without the anticipated volume at the time of opening. Is this improvement solely due to productivity and cost efficiency? Considering what you outlined for October, is it feasible for those new terminals to continue improving their margins without any increase in volume or an accelerated volume throughput in the near term?

Good question, Jonathan. Our focus, as we develop maturity in those facilities, is exciting because the incremental gains can be quite positive, and we are starting to see some of that. As we continue to grow in those markets, both inbound and outbound, this benefits us. However, we will face some challenges due to seasonality, especially since Q4 is typically a slower time of year. The opportunities are tied to maturity in those facilities. We are just beginning to see the effects of a full year since last year in '17, so we are pleased with the operating efficiencies we are achieving as we increase density not only in those facilities but throughout the linehaul network. Building out those opportunities is what excites us about our current position at Saia.

The next question comes from Scott Group with Wolfe Research.

I want to discuss the pricing environment. When you look at yield and revenue per shipment excluding fuel, both remain relatively flat. What are your observations regarding the pricing environment? I understand you typically don't provide updates, but perhaps it would be beneficial if you did. Do you anticipate that those yield metrics will turn positive in the fourth quarter? Any insights you can share would be appreciated.

Yes. Generally, Scott, the pricing environment is disciplined and focused. The fundamental nature of the business is inflationary, as we've discussed before. It is crucial to get the pricing right. When examining the metrics at Saia, it’s important to understand a few key elements. The mix of business is evolving for us. Notably, the growth from Q2 to Q3 included a significant amount from 1- and 2-day lanes, which we view positively as it allows us to increase our share of wallet with customers. However, pricing for these lanes tends to be relative and usually lower than that for 3- and 4-day lanes, which is just how the market functions, and it's not necessarily negative. Thus, we will have a blend of business types in our operations. Additionally, it's worth mentioning that we've experienced a substantial decline in shipments in our stronghold of Southern California, down about 18 percent year-over-year in the third quarter. This poses a negative mix challenge on the revenue front. Overall, as we assess the performance across our terminals, it has been fairly strong, and there are many dynamics at play affecting our revenue lines.

Okay. And then again, if you have any thoughts on the Q4 yield, I know you don't do it, but I think it would be helpful. And then just when I look at the margin progression, right, Q1 was tough, down 700 basis points and Q2 was a little bit better, down 450, Q3 down 250, so more progress. But it sounds like Q4 takes a step back and it's down 300 to 400 basis points again. So just curious your thoughts on why it's getting worse again. And maybe it's just too early, but any sort of early thoughts you have about how to think about margins next year?

We recently achieved a growth rate of 5.9%, which reflects our outlook on pricing in the current market. We are actively pursuing contractual renewals, which create opportunities for us. Our commitment to pricing and yield management remains a priority, and that approach hasn’t changed. However, we observed that October was somewhat weak, and it's important to note that it's just one month in the fourth quarter, which has 23 workdays. November will have 18 workdays, and our fixed costs will stay the same. In such a short month, there isn't much opportunity to lower those costs. While we might exceed expectations sequentially, we are aiming to be realistic about the current trends we are observing, which is reflected in our guidance.

One addition to the pricing environment is that we're excited about the great opportunities we're having with customers. This is why we outline our strategy and engage with them about expanded offerings. Several customers have mentioned that we are being awarded contracts because we are now able to solve more problems for them, which is encouraging. We are going to continue to take advantage of these opportunities. There have been some shifts in the mix, but if we examine the contracts we renewed in Q3 of last year and compare their performance in Q3 of this year on a like-for-like basis, we're seeing a little over 4% revenue increase per bill on those specific contracts. We’re noticing a positive flow-through there, although we wish it could be higher, which reflects the current environment we're in. Importantly, there are mix shifts in some of these new businesses, but we feel that the underlying pricing environment remains rational. This is an inflationary business, and we need to adjust our prices accordingly.

The next question comes from Jordan Alliger with Goldman Sachs.

Question, you mentioned in your opening remarks, your network optimization efforts continue. Can you provide a little more or remind some of the things you're specifically doing, whether it be on the legacy side, the total network side? And where are you in that process? I mean, is it still relatively early in the improvement front on that side of things?

Yes. The way we approached this, as I've mentioned before, is that one of our main initiatives is to build out a network that evolves over time. About a year ago, we had 17 fewer terminals. As we add terminals, effectively managing freight and connecting all components of the network becomes essential for cost optimization. When we implement our AI models for rerouting freight, it's important to synchronize the system, which minimizes the number of interactions within the network. Back in Q1 of this year, we faced challenges, particularly with peak handles, meaning the amount of freight moving through our largest facilities was unprecedented. We have been working to reduce this over time, focusing on building efficiencies in load management and market density, such as in areas like Trenton, to handle freight without unnecessary dock interactions. This process involves maturity in scheduling and effectively using our data for optimization. It's an ongoing effort, and I believe we're just beginning to monetize our network expansion. From the start, we've communicated that our goal isn't to quickly fill up terminals but to ensure customers recognize and pay for the value of our services while optimizing our underlying cost structure. It's been a challenging environment, and with more growth in those markets, we could have acted more swiftly. However, the positive aspect is that we're positioned for significant improvements as the market recovers.

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

Fritz and Matt, maybe parse a little bit of the 300, 400 basis point sequential margin change. Maybe how much of that is what you're talking about volume? How much is it of the timing of the 3% wage increase? That was a big issue, I think, when you were debating the timing of the wage increase last time. So I just want to see how much of that is affecting that sequential change? And then thoughts on October, if seasonality holds the 3% down, is that a good read on the full quarter? Or is it normally just given the holidays, does it normally get worse as we go through? Just want to understand where we are on that.

Regarding the OR guide, Ken, the GRI and the wage increase both took effect on October 1, so you can view their impacts as balancing each other out. Therefore, there is no net effect from the combination of the two. Fritz mentioned the influence of fixed costs, and the holiday months generally pose challenges in terms of demand. With fewer workdays, some days are considered working days and revenue days, but they don't fully contribute to revenue, while fixed costs still apply. Historically, we've experienced quarters where the OR exceeds our average, which can be influenced by weather and demand trends. October appears to be trending slightly worse than usual, and while we wish we could predict November and December, those holiday months bring their own challenges. Our focus remains on core execution and managing our operations effectively. Although external demand factors are beyond our control, we are currently observing the situation in October compared to what lies ahead in the holiday months. October is significant for the quarter, with 23 workdays, while November and December include holidays. This is the connection we are looking at.

But Matt, are you saying that we're experiencing a decline this holiday season, or is it simply due to the fewer number of days in November and December? October is more significant, but I'm trying to understand if your comments suggest that conditions have noticeably worsened and are worsening further as we approach the fourth quarter in terms of volume.

October so far has been a bit softer than we anticipated. I'm not sure how this will translate into November and December. We're monitoring our daily reports and trends, and the readings aren't very encouraging. We hope for a slight recovery towards more typical seasonal patterns, but the current figures for October are below what we expected.

Do you have any insights on excess capacity? It's a number that the industry often discusses regarding your capacity. Also, could you share your thoughts on AI and technology? Many are talking about their advancements in these areas. Is this something you are adapting to in order to enhance productivity gains?

Yes, I'll jump in there. I mean I think the capacity, there are many, as you know, Ken, there are many ways to measure capacity, be it drivers, be it doors, be it acreage, all those sort of things. I think we've got ample capacity across our network. Maybe because of where we are in the maturity of the network, we're going to have facilities that are 20% capacity, and we're going to have some that are 85%. So I think it's a relative number depending on where you are. As far as technology initiatives and AI, I mean, we've for a number of years, we've been investing in network optimization tools, which are AI tools. That's how we've been able to drive our efficiencies around network redesign, all the things that we've done around our linehaul network, the initiatives that we have around route planning around our city operations to what we're doing to manage our staffing model. All those things are optimization tools that are AI-based. Our view on that, quite frankly, it's not new. These are things that we've been investing in for a number of years. And I think I'd point back to kind of our successes over time, that's been based on those tools. And the way we think about those tools is that there is always a new version. There is always a new feature. There's always a new analytic that comes into that. So we're continuously investing in that.

The next question comes from Tom Wadewitz with UBS.

I would like to hear your thoughts on the various factors impacting the business, including the mix of new and legacy terminals, the weak freight market, and reduced freight from L.A. Considering these elements, when do you anticipate a more normalized situation where these variables stabilize? Is it feasible for this to happen as we approach 2026? If that is the case, do you believe we could see the 4% contract pricing you mentioned reflected in our revenue per hundredweight or revenue per shipment? It seems like despite the market discipline, your improvements, and increased capacity, the results are not appearing in the numbers we observe. That's the first point I wanted to address. I have a follow-up as well.

Yes, that's a great question, Tom. The foundation of our approach to organic expansion is distinctly different from others in the LTL industry. As we pursue this, not everything progresses in a linear manner, and we face various challenges related to changes in our business mix due to the evolving market. We encounter new competitors in certain areas of our network, which adds to the complexity. However, what stands out about Saia is the opportunities our network provides for our customers, shareholders, and the company itself. Our national reach enables us to access markets we previously could not. We frequently receive feedback about winning new contracts because we've effectively addressed customer issues in regions like the Great Plains. Customers appreciate this problem-solving capability, leading them to increase their business with us. In a more stable freight environment, particularly with potential improvements in industrial production, we are positioned to capitalize on opportunities similar to those seen in previous freight cycles. Our extensive footprint not only allows us to add value to local customers but also helps us achieve linehaul efficiencies. Currently, we are realizing efficiencies through our network redesign initiatives, despite not having the expected volume. If we can increase our volume, the incremental benefits could be significant. We are already achieving cost efficiencies in a challenging environment, which is crucial in this sector, especially with facilities that still have room for development. I believe Saia has a promising long-term outlook, and we will continue to focus on creating value in the short term. When the freight market shifts, I am confident we will be well-positioned to succeed.

We are very pleased with our cost per shipment, which decreased by 0.7% sequentially. As Fritz mentioned, we have terminals that are still developing; we opened 39 since 2022, and 17 have just been in operation for over a year. This leads to some inherent inefficiencies and fixed costs. We are proud of our cost performance and the team's daily execution, but we view these terminals as long-term investments rather than short-term gains. In the near term, we are executing well, and as we leverage these new markets, we expect strong incremental benefits. Our ability to address more challenges in both new and existing markets is contributing to our growth. We are currently seeing positive outcomes from our efforts, and the situation should improve as the freight environment stabilizes.

Yes. That's great. And the quick follow-up is I think it's better in this type of market to be a low price point than to be a high price point. Another LTL that reported this morning talked about kind of gap versus the high price point in the market and how they're closing that gap. So I just to kind of level set, I think there is an opportunity for you over time to deliver service and maybe kind of improve price more than the market, right? So how do you think of your gap versus whether it's OD or XPO or just kind of broader LTL market, your gap on price point?

Listen, Tom, that's an ongoing opportunity. We pay close attention to that and believe it continues to be a chance for us. I encourage anyone to analyze revenue per bill in the public sector and compare it to where Saia stands, as we need to keep closing that gap. What's compelling is that if you take that analysis and compare it to our cost per shipment, it shows a very attractive operating ratio at the end. That's the real value in the business, and for those who grasp that, they understand that's where our focus lies.

But do you think it's 15 points, or how wide do you think the gap is between you and OD or whatever benchmark you want to look at?

Yes, it's going to be a number like that. I have to be honest, I haven't studied the results that were published by others today. So I'm sure it's probably at a discount to that. I think our service compares very favorably, if not better than others, which justifies our pricing. Now that we have a national network that aligns with some of those companies, it changes the game. This allows us to compete on an equal level, giving us the chance to continue pushing our pricing.

What a national network allows us to do, Tom, is to have those conversations at a different level. When you're able to solve more problems and then you're having a conversation about the value you're providing, you're harder to replace. You're stickier. The reality over the years is we've been doing a great job without a like-for-like footprint. We have a national network now for the first time that we've opened all these facilities. So we get to have that conversation more and more. That helps pricing become stickier when you're doing more for a customer; you're harder to replace. That's a great value of the national network.

The next question comes from Ravi Shanker with Morgan Stanley.

Would love if you could just expand on your initial comments on the Mastio survey and kind of how the results they were received. Are you guys happy with your spot? Do you think it's worth investing more to get further up? Or is it the sweet spot for you right now?

We need to continue investing in service regardless of what the Mastio results indicate. The value we create for our customers is centered around service, and we are highly focused on driving that. Are we satisfied with the Mastio results? We would have preferred a better outcome. However, there is some intriguing data if you take a closer look. Our relative share versus the market suggests that people are giving us a chance. We must keep concentrating on fully satisfying our customers as they get to know us, which will create value for them and for us. Regardless of our current position in the Mastio rankings, our priority is to invest in our customers, which is vital for driving value in the business.

Understood. That's pretty helpful. And maybe as a quick follow-up, apologies I missed this. Just on the 4Q OR walk, I'm assuming the starting point in 3Q is adjusted for the gain this quarter.

That's right. Yes, that's right.

The next question comes from Bascome Majors with Susquehanna.

If we exit this year in the kind of down year-over-year tonnage, 3%, 4% range that you're trending in October, do you think that there's an opportunity to grow tonnage next year without a meaningful improvement in the industrial economy?

I believe we will continue to find opportunities to increase our share of wallet with our customers. As we address their challenges, we will grow certain accounts that will recognize the value of the services we provide. This is where our growth will originate. When considering overall shipments and tonnage growth, I must honestly say that while we aim to enhance our market share, our primary focus is on achieving a return on our network investments. For us, it's not about rapidly increasing shipment numbers just for the sake of it; rather, it's about expanding our share of wallet with clients who appreciate our services. I believe there is potential for growth in this area next year. However, I am uncertain about what the market will provide. Nevertheless, I think our unique situation presents a clear opportunity that we will continue to pursue into the upcoming year.

And maybe expanding on that, it sounds like from your commentary on the fourth quarter, the margin pressure is really about volume operating leverage and absorption on that than necessarily anything idiosyncratic to the wage increase timing or anything like that. If we're in a more flattish tonnage environment next year? And kind of noticing that you have headcount now, and you've done a very good job of controlling costs in the last couple of quarters here. Is there an opportunity to expand margin without growth in tonnage?

I believe so. It's not about significant growth in tonnage. We can keep driving efficiencies and focusing on pricing, ensuring we are compensated for all the services we provide. That's definitely an opportunity. Remember, if we experience some growth in a network that is not fully utilized due to our long-term investments, the incremental returns will be quite favorable. It won’t require a lot to see that impact. We will maintain our focus on this, and I believe we can achieve incremental returns in the business, continuing to add value into next year.

The next question comes from Bruce Chan with Stifel.

Maybe just a follow-up on the customer mix comments as you round out the network. You've talked about wallet share expansion with existing customers, which is certainly very encouraging to see. Maybe you can just talk about where else you're targeting growth and how that process is going. I don't know if you can parse what field account penetration looks like versus enterprise, for example, and maybe whether there are any new end markets that you think are big opportunities. Some others have talked about events business, grocery consolidation. So any color there would be great.

I believe we have numerous growth opportunities. Let's break those down specifically. Since 2022, with the facilities we've opened, we've been able to expand our national account business in these markets, largely due to our established relationships with customers. This allows us to leverage our position in these areas, which was a key part of our growth strategy. Additionally, there are markets where we haven't previously conducted business, and introducing the Saia brand there is crucial. Our next growth segments will likely come from field accounts or those who are unfamiliar with our company. As we grow within these markets, we start with the relationships we already have and expand from there, finding new customers who don't yet know us. If you consider our expansion in the Northeast, that's precisely how we built significant business in that region—we began with established national accounts. We're also focused on field business as our facilities mature. We particularly favor sectors that appreciate service and our commitment to on-time delivery and technology investment. These customers need a reliable LTL partner to support their product or service delivery. We have competitive advantages in various markets like trade shows and grocery sectors that value our service level. People are beginning to recognize us, and in new markets, we are making ourselves known. The exciting part for us is that we see growth potential across all markets and verticals as we continue to mature.

That's super helpful. Maybe just a quick follow-up. I imagine there is a margin uplift opportunity as that mix changes. Any thoughts on what that differential with those new field accounts looks like versus the legacy national?

Listen, the margin uplift, like if you just get the average sort of pick-up market pricing opportunity, right? So if we get the pricing, we come in and get the business at market. The first uplift is going to happen as you have a very underutilized facility be it a city driver, equipment, linehaul network that are already in place. And if you get market pricing on that new business, put it on that underutilized piece of equipment, that is a really interesting, compelling incremental margin opportunity. We know, despite our inefficiencies, we got a pretty good cost structure that we can leverage and scale from here. So I think the opportunity comes in a couple of places, right? It comes from growth around good pricing, but then it's also scaling a very, very competitive cost structure.

The next question comes from Brian Ossenbeck with JPMorgan.

Could you clarify whether acquiring new field accounts adds to the existing volume with national accounts and helps balance the mix? Or do you adjust those ramping facilities to change the percentage of national accounts that might decrease? It would be helpful to understand where this impact would be seen, whether it's in revenue per piece or cost per shipment.

It's going to end up in both places, Brian. So if I just go back at our Northeast experience, right? So look at as we expanded in that network, you find customers that are willing to pay for the value that you're providing, right? So that's the top line. And that may require that you find a piece of business that you picked up, and you realize that, geez, the pricing is not right, or this isn't working, you exit that business, and then you bring in something that's maybe a little bit more appropriately priced. You get all the accessorials, and that's an incremental, right, in terms on the pricing line. And regardless, the volume is going to be incremental to leveraging the cost structure. So if I have a facility that is underutilized, that's an opportunity for us to win on both accounts. We're not necessarily targeting, hey, is it field? Is it national account? Is it different segments of the business. We're more focused on customers that say, let's look at the value that Saia provides, and we're willing to pay for it, right, and understand what that investment is. And those are customers that fit best for us. Sometimes that's a national account. Sometimes that's a field account; sometimes it's a combination of both, and it could be across industries. So it's more of that profile that we're pursuing that makes the most sense for us.

We have a solid real estate pipeline that we're reviewing. From an equipment perspective, most of this year's equipment has already been delivered and is in service, so the focus is more on real estate. As we assess projects, we're conducting due diligence and discussing market opportunities for various locations. We are being more selective about the projects currently in progress and may delay some of them. You've probably noticed we have pushed some of that timeline out. For this year, I believe we're in a good range, though it will depend on a few factors. Looking ahead to next year, my early estimate for capital expenditures is likely between $400 million and $500 million, which is significantly lower than last year and will also be down from this year. We still have opportunities for network expansion, and we have made considerable progress in that area over the past couple of years, which reflects in our capital expenditures. While there is still some finalization needed for 2026, I think estimating a figure between $400 million and $500 million is reasonable.

The next question comes from Tyler Brown with Raymond James.

I missed the first part of the call, so I apologize if you addressed it. But I think last quarter, we talked about peak touches in linehaul maybe in Q1 or Q2. And I think Patrick's got a number of initiatives to kind of, let's call it, fundamentally redesign linehaul to basically take touches out regardless of volume. I think your cost per shipment fell sequentially for the second straight quarter. So can you just kind of talk about where we're at on that touches or brakes per shipment journey? And do you feel at this point that you're basically past peak pain?

Yes, Tyler, I think we are past the worst of it. As we move into the next few months and into next year, we are continuing to take steps with our network redesign and linehaul optimization efforts. We are refining and implementing our AI-based routing tools, which present ongoing opportunities. What's particularly interesting is the value we have yet to monetize, as there is still significant growth potential in facilities that are still developing. I believe we can capitalize on that, and our cost structure is very effective. As we expand in markets that have been open for less than three years, we will continue to leverage those cost-saving initiatives. I expect this will help drive incremental growth in the future. It's still early in realizing the full potential of these opportunities. However, the fourth quarter presents challenges, as this time of year is typically inefficient, especially in the first quarter. That said, I find the scaling opportunity quite promising since we have not yet completed a full year of utilizing the redesigned network.

Yes, I agree. What about balance as well? Is the outbound/inbound mix starting to balance out? I would assume that as you develop the outbound side, especially with the new terminals, it will help with this touch issue because you'll be able to establish more direct connections. Is that correct?

No. Tyler, great point. I mean, we're early innings on that stuff, right? So if you think about just in the simplest form, these are not huge markets. But if you just took the Great Plains states. So the immediate value we can provide to a customer, we can go to those points now. So you have a customer say that's in Dallas that says, 'Hey, I need to go to Montana.' Well, Saia can now go to Montana. We solved the problem. So that's an opportunity. Now the challenge for us is that immediately makes us sort of out of balance, right? So you have those Montana markets; we don't have the freight coming out of there yet. The opportunity for us is to grow out of those markets to the extent there's available freight, that's a balancing opportunity, right? So those are the smaller markets. Then you take a big market like a Trenton or Laredo. Man, we're early innings there, too. So those facilities had just crossed over a year; the opportunity to grow both the inbound and outbound is very, very meaningful. And that is all a scaling, leverage the network, build directs, take touches out, and we've already got a good cost structure to start with. So I think there's an opportunity to keep getting better from where we are.

That part doesn't even factor in the value that you get when a little bit of uplift from the environment. You're also getting the volume back from those dense legacy networks, right, the Newarks, Dallas, Houston, all those. When you get that volume back too, it's an opportunity to continue to leverage that density that's been built over the years. So it's going to be a combination of both and the opportunity to service customers. You're right, Tyler. It's the direction really matters in this business, too, where the freight is coming from. So length of haul and weight per shipment are important metrics, but direction really matters, too.

If you take a handle out, you have the opportunity to improve service to a customer. You might be able to improve efficiency.

The next question comes from Eric Morgan with Barclays.

I guess just one for me. Could you give us an update on conversations with customers heading into '26? I know that real-time volume picture sounds pretty sluggish. But I guess just curious if you're getting any early reads on potential green shoots or just broadly how your customers are positioning into next year?

I think currently people are slightly more confident and positive than they were at the start of the year. We have a clearer understanding of the tariff landscape, tax policies, and interest rates, all of which is encouraging. However, I am waiting to see this reflected in the numbers. We have not seen that yet, but customers seem to be resolving some uncertainties, which is a positive sign. The next step is for customers to feel confident enough to proceed with launching new products, building new facilities, or ramping up production.

The next question comes from Richa Harnain with Deutsche Bank.

So just a few quick clarification ones for me. First, the 300 to 400 bps of OR deterioration, I know, Matt, you talked about how October being lower than you expect is contemplated in that outlook. But what are you assuming for November, December? Do we assume an in-line seasonality type results for those months? Or do we assume that things continue to be subnormal? And then, Fritz, did you say when you were talking about margin expansion opportunity next year? I just want to clarify, that was a year-over-year comment, i.e., you can still maybe expand margins next year even if the environment remains lackluster. And then lastly, contract renewals. Can you remind us what those were in Q3?

Yes, I'll start and then hand it back over to Fritz. So I'll hit the contractual renewals number one quickly. So 5.1% for that piece. In terms of the margin progression, like you referenced October, what we're seeing so far is contemplated. What we've got our thoughts around for November and December is that it gets back a little bit more towards seasonality. So that's different plus or minus; it could impact where we land from what we're projecting and thinking through right now. If there's a bounce back in November, could we do on the lower end of that? We certainly could. But I think a lot remains to be seen in those holiday periods. But our assumption is that we're getting sort of back towards what normal seasonality would be, which are usually declines from October. Usually, what you'd see in October to November would be a decline in shipments and then November to December would be another decline in shipments. So that's what we're forecasting now, but we'll see what we get from the October exit rate.

Yes. And with respect to 2026, we haven't given you a number around, but I think in a sort of steady-state environment, I think we could be in a position where we could see some incremental improvement around OR and operating income.

The next question comes from Ari Rosa.

So Fritz, you mentioned the cargo claims ratio. And with all due respect, I'm aware it's a little bit higher than kind of the best-in-class player. How do you think about your service kind of in context? And to what extent is that holding back some of the pricing opportunity or kind of the ability to realize better pricing?

So just to kind of level set a bit. So our cargo claims ratio is a GAAP number. So I'm not exactly sure how everybody else calculates it. I think the best thing we can do to improve our cargo claims ratio is to get our pricing in line because with the market. So that's a way to drive improved cargo claim ratio right away. I don't think that there is a situation where we lose business because of the cargo claims. I think that a customer looks holistically at doing business with us around everything from picking up on time, delivering on time, meeting the promises, being able to meet their expectations. So there's not a singular limiter that says, 'I'm not going to do business with you because you got a 0.54 cargo claims ratio. We haven't lost business with that. We've had opportunities around that. I think it's not a discernible difference from other numbers. I think where we win, though, is that alongside of all the other things our team does for customers, and that's where we win. And then we continue to focus on driving pricing, and that obviously, is in the denominator. So that would improve cargo claims ratio, too.

Got it. That's helpful. And then I wanted to shift gears a little bit just on my follow-up. It sounds like potentially CapEx coming down a little bit. I got to say, Fritz, I've heard you sound more confident, I think, this call in terms of the incremental opportunity from expanding the network and into 2026. And yet the stock is obviously down quite a lot. And it sounds like maybe the free cash flow is going to be pretty robust over the next couple of years. How are you thinking about the opportunity maybe to initiate a buyback here or get a little bit aggressive in terms of driving shareholder returns for kind of long-term holders?

I am truly excited about the Saia opportunity, which is the reason we invested in our network. Our goal is to create value for both our customers and Saia's shareholders through organic growth that focuses on long-term value. I believe we are on the brink of capitalizing on an improving market and a better macro environment. We aim to maximize efficiency across our 213 facilities and enhance service delivery, demonstrating our ability to scale effectively—a capability we've consistently shown in our history. This continues to reinforce my confidence, especially as I observe our team's efforts to support our customers and their responses even in a sluggish market. If we encounter a thriving market, the potential is truly significant, and I have always recognized that possibility. It's an exciting time because it's important for people to understand the long-term implications. We have always been responsible stewards of our shareholders' capital, and our drive for value will translate into returns that will allow us to further expand our network. There are definitely opportunities for growth, and while I can't specify when, we will look to return capital to our shareholders in various ways as we find the right moment. Ultimately, our focus remains on extracting value from the network we've built. As we look ahead to next year, we are witnessing slow growth this year and are adjusting our capital investments accordingly to position ourselves for the inevitable opportunities that will arise.

This concludes our question-and-answer session. I would like to turn the conference back over to Fritz Holzgrefe, Saia's President and Chief Executive Officer. Please go ahead.

Thank you, everyone, for taking the time to listen and learn about Saia's results. We're very pleased with the outcome of Q3. Q4 in the current environment continues to present challenges. But I think what's critically important is the underlying value that Saia is creating for customers; ultimately, it is underlying value for our shareholders, and it's really about the story from here how we drive incremental improvements in margins in the business that we've invested in over the last number of years. Company is built for the long term and long term is long-term value-creating for the shareholder. So thank you for your time.

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