Saia, Inc. (NASDAQ:SAIA) Q3 2023 Earnings Call Transcript October 27, 2023
Saia, Inc. beats earnings expectations. Reported EPS is $3.67, expectations were $3.59.
Operator: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time. I would like to welcome everyone to the Q3 2023 Saia Incorporated Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Doug Col, Executive Vice President and CFO.
Doug Col: Please go ahead. Thanks, good morning everyone, welcome to Saia third quarter 2023 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’ll now turn the call over to Fritz, for some opening comments.
A tractor-trailer speeding along a modern highway, showing the power of the transportation solutions.
Fritz Holzgrefe: Good morning, and thank you for joining us to discuss Saia’s third quarter results. Our third quarter revenue of $775 million surpassed last year’s third-quarter revenue by 6.2% and is a record for any quarter in our company’s history. Shipments per workday increased, by 12.2%, compared to last year. Obviously, impacted in a positive way, from the shuttering of operations as a competitor began in late July. The sudden elimination of industry capacities presented challenges for customers and carriers alike. But the transition to other providers it seems to have gone relatively smoothly. At Saia, we monitor our critical service indicators, daily. I was pleased to see that despite the influx of freight in a matter of days, we were able to sustain very-high levels of service.
In our view it was critical to maintain high-service levels this time provided, a unique opportunity to show customers, our differentiated service in the midst of industry disruption. As we’ve been able to maintain high-service levels, pricing has been positive in our yield or revenue per hundredweight, excluding fuel surcharge increased by 8.4%, compared to last year. The reported yields improved in-part due to the 5% decline in average weight per shipment. But despite the lower weight, revenue per shipment, excluding fuel surcharge still increased by 3%. The weeks and months that have followed the major industry disruption has been marked by long days for our employees. We’ve been putting forth a concentrated effort to maintain great customer service and meet the needs of our customers.
We supplemented our growing linehaul network with additional purchase transportation where needed to keep our network fluid and service levels high. At the same time, we’ve also incurred quite a bit of overtime to handle the immediate step-up in volumes we felt. Since the end of June, we’ve hired and onboarded more than a 1,000 new Saia employees. The skill of the hiring effort and the training that is required on-board each associate, has been a necessary cost headwinds that had to be absorbed. Our third quarter operating ratio of 83.4%, compared to 82.7% posted in the second quarter of 2023 and 82.4% posted in the third quarter of last year. I’ll now turn the call over to Doug for more details from our third quarter results.
Doug Col: Thanks, Fritz. Third quarter revenue increased by $45.6 million to $775.1 million, as Fritz mentioned. Yield, excluding fuel surcharge, improved by 8.4%, while yield increased 3.1% including fuel surcharge. Revenue per shipment excluding fuel surcharge, increased 3% to $290.79, compared to $282.41 in the third quarter of 2022. Fuel surcharge revenue decreased by 12.3% and was 16.9% of total revenue, compared to 20.5% a year-ago, as national average diesel prices are lower than in 2022. Tonnage per workday increased 6.7% attributable to a 12.2% increase in shipments per workday, offset by a 5% decrease in our average weight per shipment. Length of haul remained essentially flat, compared to the prior year at 896 miles.
Shifting to the expense side for a few key items of note in the quarter. Salaries, wages and benefits increased 15.9%. This change was primarily driven by an increase in employee hours an 8.9% increase in headcount in response to overall increase volumes, during the quarter. Combined with company-wide wage increase in July of approximately 4.1%. Purchase transportation expense decreased by 10.2%, compared to the third quarter last year, primarily due to a decrease in cost per mile, partially offset by an increase in LTL purchase transportation miles, compared to that same-period in 2022. PT miles were 18% of total linehaul miles in the quarter, compared to 17.1% last year. PT expense was 9.9% of total revenue compared to 11.7% in the third quarter of 2022.
Fuel expense decreased by 9.1% in the quarter in-spite of company miles increasing 5.5% year-over-year. The decrease in fuel expense was primarily, the result of national average diesel prices, decreasing by over 17% on a year-over-year basis. Claims and insurance expense increased by 12.7% year-over-year in the quarter and was up 6.3%, or $1.1 million sequentially from the second quarter of 2023. The increase compared to the third quarter of 2022 is primarily, due to increases in insurance premiums as well as accident related self-insurance costs. Depreciation expense of $45.6 million in the quarter was 12.1% higher year-over-year, primarily due to ongoing investments in revenue equipment, and network expansion. So our total operating expenses increased by 7.6% in the quarter and with the year-over-year revenue increase of 6.2%, our operating ratio deteriorated to 83.4% number, compared to 82.4% a year-ago.
Our tax-rate for the third quarter was 24.6%, compared to 23.3% in the third quarter last year. And our diluted earnings per share were flat at $3.67, compared to the third quarter a year-ago. I’ll now turn the call back over to Fritz for some closing comments.
Fritz Holzgrefe: Thanks, Doug. While the last few months have increased activity been refreshing following a year of negative freight trends. I think it is important to highlight that the macro freight environment outlook remain uncertain. At Saia we’ll continue to put the customer-first and seek to fulfill service commitments for both existing and new customers. Our first-half operating results highlighted an important underlying business trend, as our internal growth initiatives are proving successful. We look to continue to leverage those initiatives along with maintaining new business to grow and growing in the midst of this quarter’s, market disruption. It’s important to note in the early days of the industry consolidation customers often we’re looking for available capacity.
Longer-term, we strongly believe that customers will gravitate to those partners that provides the best service and best supportive, of their customers value proposition. Maintaining those service levels requires continuous reinvestment in the business. As we have a long history of doing, we’re going to make sure that freight rates are commensurate with the quality service we provide. We will continue to be opportunistic, as it relates to terminal expansion – terminal acquisitions it will continue down the path of expanding our network, not only to reach new customers and markets, for may not be currently be serving, but also to get closer to customers in existing markets. Our financial performance positions us to take advantage of investment opportunities.
We continue to manage a pipeline for expansion and will look to match those investments with the economic environment. In some cases, we may accelerate an opportunity prioritizing those that most immediately enhanced our service proposition. Our value proposition is raised in the eyes of our customers as we move closer to them and are able to provide more for them. We’re also intent in developing businesses around the 20 or so terminals opened in the last three years. History shows – that if we have meaningful footprint in the market, we have a service offering that enables us, to have an outsized share, compared to our national average industry share. With this strategy being executed by the best team in the business. I remain excited about our ability to gain market-share and do so with improving profitability over time.
With that said, we’re now ready to open the line for questions, operator.
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