Lyft Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2024

There are 16 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Saia Incorporated Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. And I would now like to turn the conference over to Matthew Bittay, Saia's Executive Vice President and Chief Financial Officer. You may begin.

Speaker 1

Thank you, Abby. Good morning, everyone. Welcome to Tsai's Q3 2024 conference call. With me for today's call is Tsai's President and Chief Executive Officer, Fritz Hulshkraef. 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.

Speaker 1

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

Speaker 2

and thank you for joining us to discuss Tsai's 3rd quarter results. While the underlying macro trends remain tepid in our view, our year over year results in the Q3 continue to reflect the growth experienced since last summer. In the quarter, we averaged approximately 37,200 shipments per day compared to approximately 34,300 per day last year or an increase of 8.5%. Our 3rd quarter revenue of $842,000,000 increased from last year's Q3 by 8.6% and is a record for any Q3 in our company's history. Yield or revenue per hundredweight excluding fuel surcharge increased 1.7%, reflecting a constructive pricing backdrop and the impact of changes in our mix of business.

Speaker 2

Revenue per shipment excluding fuel surcharge increased 0.9% despite a headwind from weight per shipment, which was down 0.8% in the quarter and length of haul, which decreased modestly. Our 3rd quarter operating ratio of 85.1 percent deteriorated 170 basis points compared to our operating ratio of 83.4% posted in the Q3 last year. While wafer shipment stabilized into the Q3, we continue to see some mix headwinds from the softer industrial backdrop and the growth in retail business since last year's industry disruption. We remain intently focused on mix management and pricing initiatives as seen in our contractual renewals, which remained strong at 7.9%. During the quarter, we opened 11 new terminals and relocated one other, continue to execute our long term strategy of improving our service and value proposition to the customer.

Speaker 2

11 new terminals in the quarter is a record for any quarter in the company history

Speaker 3

and I'm proud of the execution

Speaker 2

from our team. Each new opening represents its own unique challenges, especially those in new geographies. Most of the terminals opened in the quarter were in the Great Plains, a new Most of the terminals opened in the quarter were in the Great Plains, a new geography for Saia and in these locations enable us to extend our addressable market and provide direct service to customers in this area of the country. With these recent terminal openings, we're now able to provide direct service to all the contiguous 48 states, which significantly enhances our value proposition to our customers and confirms our position as a leading national LTL carrier. As with every new opening, these new terminals required investments in people, equipment and technology, while entering a completely new geography requires additional investments in the customer experience.

Speaker 2

We're encouraged by early customer acceptance and we're excited to expand our addressable market to better serve both new and existing customers. We are very pleased with the progress of our new terminal openings, especially those that opened in the Q2. During the Q3, these terminals continue to grow and become more efficient, while still having been open for less than 6 months. This group of terminals improved their operating ratio by more than 10 points sequentially, further supporting the long term strategy of increasing our addressable market and investing in the customer experience. While these terminals are not at a company market share or operating margin, they are profitable.

Speaker 2

Each terminal is a long term investment that enables us to provide a solution to our customer in each market. The terminals opened in the Great Plains in the Q3 allow us to directly service a new geography and we're proud to bring the Saia name to new and existing customers in these communities. We remain committed to our training requirements for our team members in both new and existing markets, which is critical to building a Saia culture and enhancing the customer experience. Our teams are committed to accomplishing our growth strategy with an eye on always putting the customer first. Our customer first initiatives have been the cornerstone of our success over our 100 year journey and we've seen our customer focus on display throughout each new terminal opening in the quarter.

Speaker 2

I'll now turn the call over to Matt for more details from our Q3 results.

Speaker 1

Thanks, Fritz. As mentioned, 3rd quarter revenue increased by $67,000,000 to $842,100,000 Yield excluding fuel surcharge improved by 1.7% and yield decreased by 0.9% including fuel surcharge. Fuel surcharge revenue per workday decreased by 6.3% and was 14.8% of total revenue compared to 16.9% a year ago. Revenue per shipment excluding fuel surcharge increased 0.9% to 29339 compared to 29,079 in the Q3 of 2023 and increased 0.9% sequentially from the Q2 of 2024. Tonnage per workday increased 7.7%, attributable to an 8.5% shipment per workday increase, partially offset by a 0.8% decrease in our average weight per shipment.

Speaker 1

Length of haul decreased modestly. Shifting to the expense side for a few key items to note in the quarter. Salaries, wages and benefits increased 15.5%, which is primarily driven by a combination of our employee headcount growth of approximately 13% year over year and the results of our July 2024 wage increase, which averaged approximately 4.1%. The growth in headcount is related to the increase in volume compared to prior year, as well as the opening of 18 new facilities opened in the past 12 months. In addition, other employee related costs increased, including additional training for onboarded team members and unfavorable development of workers' compensation claims.

Speaker 1

Purchase transportation expense, including both non asset truckload volume and LTL purchase transportation miles, decreased by 14.5% compared to the Q3 last year and was 7.8% of total revenue compared to 9.9% in the Q3 of 2023. Truck and Rail PT Miles combined were 14.2% of our total line haul miles in the quarter. Fuel expense decreased by 1.3% in the quarter, while company line haul miles increased 12.1%. The decrease in fuel expense was primarily the result of national average diesel prices decreasing by over 13% on a year over year basis. Claims and insurance expense increased by 6.9% year over year and was up 2% or $400,000 sequentially from the Q2 of 2024.

Speaker 1

The increase compared to the Q3 of 2023 was primarily due to increased claims activity and development of open cases. Depreciation expense of $54,700,000 in the quarter was 19.8% higher year over year, primarily due to ongoing investments in revenue equipment, real estate and technology. Compared to the Q3 of 2023, cost per shipment increased 0.6%, despite the headwinds from the wage increase and the costs associated with new terminal openings. We are pleased with the continued cost management and execution from our team in the challenging environment. Total operating expenses increased by 10.9% in the quarter.

Speaker 1

And with the year over year revenue increase of 8.6%, our operating ratio deteriorated to 85.1% compared to 83.4% a year ago. Our tax rate for the quarter was 24.4% compared to 24.6% in the Q3 last year. And our diluted earnings per share were $3.46 compared to $3.67 in the Q3 a year ago. I will now turn the call back over to Fritz for some closing comments.

Speaker 2

Thanks, Matt. As we continue to celebrate our 100th year in business, I'm pleased with our ability to demonstrate our customer first approach to both new and existing customers in our recently opened terminals across our network. Every new terminal opening is an opportunity to better position ourselves to provide additional value to our customers. While opening 11 new terminals in a quarter is a large undertaking, these investments are critical to creating long term value for both our customers and shareholders. Having a comparable footprint to our peers is critical to our value proposition and full national coverage allows us to offer solutions in every market.

Speaker 2

While the macroeconomic backdrop remains uncertain, we believe our operating trends support the continued execution of our long term growth strategy. Earlier this week, we opened we welcomed our team members in Akron, Ohio and we plan to open 3 additional terminals the remainder of the year. These openings will result in 21 new openings for the year by far a record in our company's history. As we continue to invest in our network and expand our footprint to better serve our customers, we still anticipate capital expenditures for 2024 to be approximately $1,000,000,000 We remain focused on measuring our performance for customers and onboarding team members that will reinforce our 100 year culture as we continue to execute our growth strategy. The last year, we've been intently focused on building our national platform.

Speaker 2

With the culmination of 2024 investments and openings, we believe that we'll position the company for long term growth across all geographies. And we have stressed from the outset of this process, we approach these opportunities with a singular focus on the long term prospects of this business. These investments were never about the current quarter, the next quarter or frankly next year, but an opportunity to transform our footprint and market positioning into the future. In the next year, we will focus on continuing to develop our new markets by introducing new customers to our service and continue to expand and support the success of current customers. We'll continue to invest in equipment, technology and facility enhancements or relocations to support this value proposition.

Speaker 2

Because we've opened these facilities with a focus on the long term, we only have we've only begun to start capturing the value of these investments. As the LTL market develops, there will be opportunities for us to supplement our network with additional facilities. In the near term, we see great value and potential in the footprint that we have developed. We're now ready to open the line for questions, operator.

Operator

Thank you. And we will now begin the question and answer session. And your first question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Speaker 4

Hey, great. And great to see the contract renewals over 7%. So great quarter. So Fritz or Matt, can you talk about the sequential growth in October? It looked like maybe tons and even weight per shipment revenue crunch rate looked like based on the numbers started to accelerate at the end of the quarter.

Speaker 4

Can you talk a little bit about how September, October are shape or October shaping up? And then Matt, did you mention a one timer in workers' comp? Is that something you can put a scale on?

Speaker 1

Hey, Ken. I'll go ahead and give the monthly numbers just so you have them. So in July, shipments per workday up 10.6 percent, tonnage per day up 5%, August shipments up 7%, tonnage up 8.2%. September shipments up 8.6%, tonnage up 10.1%. And October to date shipments up about 4%, tonnage up about 6 point 5%.

Speaker 1

And keep in mind, in October, I mean, we're comping a period where a peer had a cyber issue, plus there was a hurricane in the early part of October as well. So comps are a little bit strange month to date, just in that number as well. But in terms of September, I mean, it's we're starting to lap the yellow period at this point in the industry disruption. So it moves around a little bit in Q3 based on when that really started happening in the back half of July. So that plays into it.

Speaker 1

But we're also opening a lot of new facilities and we are expanding our addressable market and should be seeing that. So we feel good about our progress there. And then in terms of work comp, nothing one off, just part of the business development of those open claims and things like that. So nothing to call out there. Greater headcount.

Speaker 1

That's right.

Speaker 4

And just to wrap that up, the funds weight per shipment, sorry, that also accelerated in September, right?

Speaker 1

Yes, just with those shipments and tonnage numbers, a little bit at the back. But I mean, it's modest, right? Those we've talked about it before, mix can move around a little bit. So at any given period based on what you're handling for customers, it can move around a little bit.

Speaker 4

All right. Appreciate that. And then I guess my follow-up would just be on the environment. You talked about, Fritz, you mentioned the mix. You kind of felt like it was done last quarter.

Speaker 4

How do you feel, I guess, at this stage now that you've got all these new facilities ramped up? Are you you mentioned last quarter you thought it was done, but now you're talking about a little industrial overhang. Is the market stabilizing out there in terms of if you look outside of the new facility development?

Speaker 2

Ken, the way I would think about it is it's probably somewhat comparable Q2 to Q3. It's bouncing around a little bit. I don't think it's markedly better or worse. So it's just there's a little bit of noise in there. I think as you open up new facilities, you do have typically that the new volume typically looks like the rest of the portfolio, if you will.

Speaker 2

So we haven't really seen an impact one way or another there.

Speaker 4

Wonderful. Appreciate the thought. Thanks, guys.

Speaker 1

Thanks.

Operator

And your next question comes from the line of Jordan Alger with Goldman Sachs. Your line is open.

Speaker 5

Yes. Hi. I was wondering if you

Speaker 6

could talk a little bit more about the revenue per 100weight ex fuel. It was up the 1.7%. I know you touched a little bit on mix and price, but maybe talk a little bit more about that and perhaps how that yield trended through the quarter and how we could think about it looking into the next quarter or Q4? Thank you.

Speaker 1

Well, again, mix impacts that a little bit. So we typically look more at revenue per bill rather than the yield just because the mix has an impact on that. But we feel good about where we stand. I mean, our contractual renewals number where it is continues to remain strong and freight moves around a little bit when you take the rate increase at times. And with the macro backdrop where it is, there's customers that may go find other options.

Speaker 1

And we're willing to let that walk. We're not going to go chase that. So it's going to come back to us. So we feel when the environment needs it and when the customer needs good quality of service. So we feel good about that.

Speaker 1

And the other thing is we've put a GRI in earlier this week at a rate of 7.9 percent. So we continue to remain focused on mix management and making sure that we're getting the margins on what we expect from customers. So our focus has not changed on that. It's heightened the GRIs earlier this year than it was last year. And we feel really good about our marketing position our market position and our addressable market that we put that into place a little bit earlier than in the past.

Speaker 6

And I guess just sort of is there a way to think about how the yields, however way you look at it could shape up as we go from the Q3 to the Q4? Thanks.

Speaker 1

Well, again, mix is going to impact that a little bit depending on what happens. Our view of the industrial backdrop, we're not seeing anything on our crystal ball that tells us that Q4 is going to all of a sudden turn and get better. If it does, great. But we really remain focused on the same thing. We put the like I said, we put the GRI in place.

Speaker 1

Whenever we do that, there's a little bit of shipment shifting in the period that follows. So we'll experience a little bit of that. But we remain focused on making sure that your contractual renewals or discussions with customers were focused and committed to driving price. We know that's our opportunity.

Speaker 7

Thank you.

Operator

And your next question comes from the line of Daniel Imbro with Stephens. Your line is open.

Speaker 8

Yes. Hey, good morning guys. Thanks for taking

Speaker 9

our questions.

Speaker 8

Good morning, Matt. Maybe I'll start on a shorter focus one. Just following up on the October discussion, can you remind us what maybe normal seasonality is from an OR standpoint from 3Q to 4Q? And then maybe given the improving wafer shipment, just the tonnage growth, how do you see this year shaping up versus that normal range?

Speaker 1

Sure. So what we try to do with this is look back at recent history and do our best to find some comparable periods. So if you look at that over the past handful of years, the sequential degradation is right around 2 50 basis points on average. There's obviously some years on either side of that, but that's the average if you look at some of the more recent periods. But with the momentum we have now and what we feel like from a customer acceptance standpoint with our new markets and our expansion, we feel like we should be able to beat that.

Speaker 1

And that's kind of where we're targeting at this point.

Speaker 8

Super helpful. And then maybe first stepping back a little bit, thinking about 2025, so this year has clearly been pressured by startup costs. It sounds like execution is going well there with the new terminals. How should we think about or should we think about expense growth moderating in 2025 as terminal growth moderates so that these actually become good guys for incremental margins? Or what's the right way to think about incremental margins into 2025 as we start to lap really a couple of years of elevated investments across the network?

Speaker 9

Yes. I mean, there are

Speaker 2

a couple of elements to that. So we're not going to open have an opening year of 21 facilities like we are this year anytime in my too distant future. I just that was a lot for us to take on, but we also looked at it and said, this is significant opportunity. We've got to take advantage of it, and we have. I think as we look into next year, what you'll see is now we're a much materially bigger company than we were a few years ago.

Speaker 2

So the level of ongoing sort of maintenance capital and sort of thing is going to have to get the fleet's bigger, the bigger facility footprint, that sort of thing to maintain those assets. You won't see the openings next year. I mean maybe there's a small handful, 5, 6, something like that depending on what the environment looks like. You'll see us relocate facilities next year. Those we view those as sort of negligible costs because you generally the ones you have to relocate are ones that maybe you've stretched capacity or filled capacity, so you're moving to something that's got a little bit more operating flexibility.

Speaker 2

So, what we really, really like is we're going to exit this year with 214 well positioned facilities across the country that are positioned to really drive value for our customers. And when that happens, that gives us the opportunity to really drive value in our business. And I think that that's we made the investments this year with an eye to long term value creation. And I think that that's we kind of spend more of a value creating mindset, not that the investments weren't value creating, they absolutely were. But in the short term, investments require that there's a cost.

Speaker 2

Those things aren't free. Opening 21 terminals are not free. Now, when you monetize those, you expect to provide great service to a customer. And when you do that, you look to get paid for it. And that's where the return comes.

Speaker 2

And we're really excited about what the ones that we opened the facilities we opened just in the Q2. I mean they're profitable already. Now they're not at the company average, which says they've got runway and those are great assets and it's great that we opened those. So I think as we look into next year, it becomes more of a kind of let's capture the value of the facilities. Now if we get a stronger freight backdrop next year, I think we can really accelerate as well.

Speaker 2

So I'm excited about the prospects. We did these things we made these investments with a purpose. And now is the time to really capture the value of that.

Speaker 7

Thanks so much.

Operator

And your next question comes from the line of Tom Wadewitz with UBS. Your line is open.

Speaker 3

Yes, good morning. I wanted to I know you offered some maybe high level, I guess, thinking about now 25 or kind of the with new terminals, what you're going to do, focus on value or maybe focus on margin, it sounds like a little bit. How do you think about, Fritz, the potential for margin improvement if the macro in 2025, if the macro is stable, right? Like it'd be great to have some cycle help, but it seems like with your traction with customers, you'll improve utilization of terminals that were open Q2, Q3. Your contractual renewals sound quite strong, maybe mix is stable.

Speaker 3

So just any thoughts about can you get the normal 100 to 150 bps of improvement if you don't get help from macro in 2025?

Speaker 2

So, yes, thanks, Tom. Listen, this is opportunity for us to get back on our sort of normal cadences. And I want to be really clear, I think I used the word value. I think a 2 14 terminal network across the country that's providing a very high level of service shouldn't be a value. There's a pay for, there's a people are paying for service in that case.

Speaker 2

And I think we're in a position we can do that. And I think in a kind of an environment that is sort of tepid neutral, however you want to call it, I think we're in a position we can expand OR into next year. I think what's really exciting is if you got in a more positive stronger environment, I think the business scales. I love the idea of scaling some of these facilities that we have just opened. We have never been about growth for growth sake.

Speaker 2

We have been about let's get the addressable market right because we think we can provide something to customers and when we do that, we have the opportunity to drive returns in the business. And I think next year is the beginning of that, right? And I don't see an impediment for us in the next year. If we get a reasonable environment, I think we're in a position we can grow the OR. And I think the range you provided, they're $100,000,000 to $150,000,000 I mean, that's in scope for sure.

Speaker 2

Could it be better than that? We know how I mean, if you look back in history, when the tighter environment or an environment where there's more macroeconomic growth, you know what Sial do. And I think that that's we execute that playbook. That's how we operate.

Speaker 3

Okay. And then for the second question, how do we think about the levers on mix? I guess if I go pre your big expansion of the terminals, it seemed like you pretty consistently focused on improving weight per shipment and mix and that was part of the margin improvement equation. Is that something you can fairly quickly address and kind of go back to that in say Q1, Q2 next year or does that take longer? Just because recognizing that the mix has changed a lot as you brought on more retail freight and more terminals.

Speaker 2

Tom, what I would say is 1st and foremost, we've got to really continue to focus on pricing in which we have been. You look at our contractual renewals, you look at the GRI we had on Monday, we're not giving up on pricing. There's it all has got to get if we get the business to where we want it to be, everything the rates have got to go up across the board in all elements of the business. I think that what we continue to do though is that we continue to look for customers, market opportunities where somebody says, hey, we really we appreciate the value we get from Saia in terms of high level of service, the reach of this national network now. We can now ship more of our wallet with Saia because we don't have to worry about them handing off freight in markets.

Speaker 2

We can look at it and say Saia can go to all these 2 14 facilities. So I think that that's an opportunity for us to continue to reinforce that with customers. And I think that you get into the equation where we get the appropriate pricing in place. And that will find customers that find great value or opportunity in the assets that we have and that's a way for us to improve mix over time.

Speaker 3

How much of the freight were you handing off just to understand that part of that comment previously?

Speaker 1

We haven't given a percent out. I mean, in those markets aren't necessarily the largest ones, but it's I mean, it's impactful, right? We think about it as an opportunity to improve that portion of it certainly, but more importantly, we can offer direct service in those markets. And we know that our customers want us to handle it all the way through. And that's very important to us and making sure that we can address that.

Speaker 1

And that's big. That's why we push those facilities and open them in the period. So and then I think in terms of the mix too, keep in mind, every new terminal opening is an opportunity to speak with our existing customers about what we do for them. So it's an opportunity to talk about business that we may not have had an opportunity to get a shot at in the past, because we couldn't handle it direct in and out of those markets. And now we can at full nationwide coverage.

Speaker 1

So you may not necessarily get that the next day when you open, but when we get the opportunity to share with our customers that we can provide a solution for everything, that's impactful.

Speaker 3

Okay. Makes sense. Thank you.

Operator

And your next question comes from Fadi Chamoun with BMO Capital Markets. Your line is open.

Speaker 10

Yes. Good morning. Thank you for taking my question. So in the last couple of quarters, you've outperformed your kind of 5, 10 year average in terms of shipment per day by maybe 200, 250 bps that's quarter over quarter just looking at it. I mean, if we apply the same principle going into Q4 that would put you in the high single digit kind of shipment per day, just want to kind of test this assumption, How do you feel about it?

Speaker 2

Yes. I think Fadi, it's what I would offer is that we know we get a little bit of shipment disruption that comes with anytime we do a GRI, you see a little bit of movement around there. This quarter, we started the quarter, the comp the last year, we mentioned that we saw

Speaker 1

a bit of a little bit of

Speaker 2

a challenging comp because of what we saw happen with the peer a year ago. So that's kind of another sort of factor in there. And then we started the quarter kind of dealing with the remnants of a hurricane and another hurricane. So I think all those things create a fair amount of noise around sort of shipments into the quarter, not to mention that it's a seasonal quarter, meaning that holidays come into play. I think what's important though is that over time, and I think you start to see it with our shipment growth, our revenue bigger part of the pie.

Speaker 2

And so our history is it's changing, if you will. So we've got a different sort of baseline. And so I'm excited about it. I think we continue to grow through this.

Speaker 1

Okay.

Speaker 10

Okay. Just going back to the OR seasonality question.

Speaker 2

Bonnie, are you still on the call? Yes. We are dropping it. Hello, operator?

Operator

Yes. We are still connected. Can you hear me?

Speaker 2

Jesus Christ.

Speaker 10

I'm on the line. Can you hear me?

Operator

And ladies and gentlemen, we will pause for just a moment while we try to reconnect our

Speaker 10

speakers.

Operator

Ladies and gentlemen, thank you for standing by. We are now reconnected with our speakers.

Speaker 10

Hi. Can you hear me now?

Speaker 2

Hey, Fai. We can hear you loud and clear. Can you hear us?

Speaker 7

Okay.

Speaker 10

Yes, yes, we can. Thanks.

Speaker 2

So All right. What part of the question did we drop off?

Speaker 10

I heard your entire answer. So I think we're fine from at least our perspective. So my follow-up would

Speaker 2

Did you hear the part about how disappointed we were that the phone wasn't working?

Speaker 10

Yes, we heard that too. All

Speaker 2

right, perfect. So that'll go down in history as kind of a great moment there. All right, got it.

Speaker 10

So yes, you're going to give us perspective on the volume side, but I mean, I think it feels like there's no reason for you to continue to kind of build that momentum with the new terminal opening, which could put your shipments kind of quarter over quarter at a pretty solid pace. And with that perspective, I'm just wondering like why wouldn't the operating ratio seasonality kind of follow a little bit closer to the shipment seasonality given that your start up cost is kind of in the rearview mirror at this point and we should start to see that in leverage beginning in Q4. I'm just wanted to see if we can narrow this the range or this thinking about what OR could look like in the Q1?

Speaker 1

Well, hey, Paddy. Sorry for the connectivity issues. I mean, look, you always it's Q4, right? It's a seasonally slower period. There's always the challenges associated with that.

Speaker 1

But we're not we still have openings in this quarter, right? I mean, they're not as in terms of magnitude, they're not as big as what was the count that was done in Q3, but we still have openings associated with the Q4. So those aren't 0. Now, like Fritz said earlier in his commentary, we've got as we continue to move past further from the openings like we did from Q2 to Q3, those get better. So, we still have the Q4 challenges and customer closures and things like that, that are just normal for the Q4, but we do have openings that are still going to be embedded into the costs in Q4.

Speaker 1

They're still there.

Speaker 10

Okay. Appreciate it. Thank you.

Operator

And your next question comes from the line of Brian Ossenbeck with JPMorgan. Your line is open.

Speaker 9

Hey, good morning guys. Thanks for taking my question.

Speaker 1

Hey, Brian.

Speaker 9

I wanted to ask about the Mastio survey that just came out. Obviously, there's a little bit of a backslide in some of the performance on a relative basis, but I think it was done through June through September time frame. So clearly a lot of startups that were going on there. So it's just one data point. Obviously, you look at service and everything internally pretty well, but it's one that we can all see from the outside.

Speaker 9

So just want to get your perspective on what the most recent results mean from your vantage point.

Speaker 2

So good question, Brian. So a couple of things. I would say that if you look at the Mastio data in total for the industry, so the entire industry got better in terms of kind of performance for the customer, which I think for the customer base, that's a total positive. I think if you look at how what industry growth looked like, kind of across the board, you look at the public competitors and we see declining sort of shipments and tonnage across the space except for Saia. So we've taken on a larger percentage or larger part of the industry.

Speaker 2

We have grown in new markets. As we noted, by the end of the year, we'll have 21 openings. So that means new customers, new experiences, new demands, adjustments to customers. And throughout that, we've had to hire probably somewhere around 1500, 2000 new employees over the last year or so to support all that. So what it says is that we that was a challenging environment in which we operated in.

Speaker 2

I can tell you across the board internally when we look at the data, we go through it and we say, all right, we've got some in here that are positive. And as we further analyze the data, we distill that down to our region and our terminal locations and then we work at it. And we say, listen, it's got to get we're going to keep getting better. We're going to keep our focus on that and not lose sight of the price. Our internal metrics have trended favorably.

Speaker 2

But you know what, listen, the feedback like that says that we just got to keep doubling down. I think that as we continue to develop experience with the customer set in new markets, I think we'll be in a position where they come to expect and understand what the great service they get from Saia.

Speaker 9

I appreciate that perspective, Fritz. Quick follow-up for you, Matt. In terms of it might be difficult to tell, but obviously, the hurricane is pretty disruptive for a lot of transportation networks and some of your customers. So is that part of the noise that you feel like you're seeing in October? Maybe it's a little bit too hard to tell, but do you feel like there's at least maybe a little bit of a catch up that you might see throughout the rest of this month as some of this gets behind and recovery efforts start to pick up speed a little bit?

Speaker 1

Well, I mean, thankfully, we haven't had any impact to our people or terminals or major issues, but there absolutely is an impact in that month to date, right? I mean, you have a pretty big storm that rolls across the Southeast geography. Those are pretty big markets for us and make up a good chunk of our revenue. So there is an impact in there. One of the things that we see is that sometimes that volume doesn't always come back.

Speaker 1

It's you're really dependent on order flow at times. And really we may be operational, but some customers may still be closed. So you face that a little bit. So things are coming back online certainly and we saw that in the week or so after that. So it is in the October month to date numbers, but just part of the challenge in the business, but you don't always get all of that back just based on patterns and different order flow.

Speaker 2

Yes. I think you got to keep in mind that the sort of Florida, Georgia, Carolinas that's becoming a bigger and bigger part of Saia's business, reflecting investments we've made in the last few years. And having lean and land right on the end of the quarter, that certainly had an impact on the Q3 result. Then you have that you start to recover and then you get another hurricane the following week. So yes, that's been part of the noise we deal with and we that's part of the business that we're in and we have to be able to flex and adjust to it, but it certainly did have an impact in the 3rd and early parts of this quarter.

Speaker 9

Okay. Thanks for the time. Appreciate it.

Operator

And your next question comes from the line of Eric Morgan with Barclays. Your line is open.

Speaker 11

Hey, good morning. Thanks for taking the question. I wanted to follow-up on pricing. You've had at least few quarters now with those high single digit contract renewals, obviously, the 7.5% GRI last year, I think almost 8% this year. So if mix doesn't move around too much substantially from here, we start to be seeing some of these types of increases in your realized yields as we get into 2025 at some point?

Speaker 11

Or what are some of the other variables we should be considering as we think about modeling that?

Speaker 1

Well, I appreciate the question, Erica. As you know, the biggest

Speaker 10

one

Speaker 1

of the biggest challenges in our industry is that contracts, there's really no volume commitment. So we have to always make sure that we're getting what we expect from customers. And in the environment where we are now, shippers have options and they may move things around or try someone different in a period like this and we're not going to chase that. But all else equal, we're putting rates in at the level that we expect. And when the macro gets a little bit better, that should certainly help and we expect to push that forward.

Speaker 1

It's not always linear, but it's an opportunity for us to put the rates that we need in front of our customer and our sales team is doing a great job negotiating those and speaking to the customers about the value we provide. The other thing that should continue to help us support that is at a national footprint, we can do more and more for customers than we have ever been able to do. And with the larger addressable market, it should allow us to gain larger share of wallet and mix up with customers where that's the opportunity around that. So we feel good about what we've been putting in. And in a soft backdrop, we're confident that we'll realize some of those gains.

Speaker 11

Appreciate that. And maybe just a quick follow-up on the CapEx discussion. I think you've mentioned some normalization next year after the bigger year this year. Any early thoughts on where that could land in 2025 and kind of what the big buckets would be? Appreciate it.

Speaker 1

Yes. I mean, we're still working to finalize what that number looks like. But if you think about the number this year less the one time transaction at the beginning of the year, I think that's probably a fair range to start with it. The business is bigger now. So that CapEx number is going to stay elevated.

Speaker 1

We've got to support the teams with equipment and there continues to be real estate investments. But I think if you normalize for that big transaction at the beginning of the year, that's a fair range to start with.

Speaker 11

Great. Thanks a lot.

Operator

And your next question comes from the line of Jonathan Chappell with Evercore ISI. Your line is open.

Speaker 7

Thank you. Good morning. Fritz, you called out specifically you were pleased with the terminals you opened in the 2nd quarter. So as we think about the seasoning of these terminals and as you have a full quarter of implementation, is there any way to kind of frame out what the utilization of the terminals that you opened up in the first half of the year look like relative to these 11 that you opened in the Q3 to help us kind of frame out when those can get to a level where you feel is closer to full utilization?

Speaker 2

Yes. It's probably going to be a few years before full utilization because as we've described before is that we don't make an investment with the idea that we got to fill it up on Monday, right? So we make an investment with the idea that we have it's a few year runway to support the market. The facilities we opened up in the Q2 were of much larger scale than the facilities that we opened up in the Q3. So to compare to try to compare what a fantastic facility in Butte, Montana looks like to a facility in Laredo, Texas or Garland, Texas or Trenton is really not sort of apples and oranges.

Speaker 2

They have different roles in our network. So I think what we would point to is that as we continue to focus on further finding the customers that match or are interested in what we have to offer. And we continue to grow in those ways. I think that the big facilities that we opened, where I'm really pleased about and that's shouldn't be overlooked is the fact that within a quarter, we have them all contributing from an operating income perspective. That's a big deal.

Speaker 2

That's why you make investments that in a challenging environment. So we put those in place. I think they'll continue to improve from here. Now you're in the seasonally lower time, so you probably aren't going to see the same level of improvements for those facilities into the Q4. The facilities that we opened in the Great Plains, we're really excited about those because I think that really enhances the value proposition for our customers when they know that when they when Si picks up freight, it's going all the way to the destination.

Speaker 2

So those over time will have an important complementary role of the overall network business and it will be certainly a big part of creating a lot of value for our customers.

Speaker 1

And keep in mind too, John, that's a brand new geography for us, right? Entering a new geography is very different than putting a second facility in a Garland, Texas area where we've been. So, like Fritz said, it's not overnight and we don't design them to be overnight, but that's a different animal in terms of brand recognition and sharing with customers that we're in a completely new geography. So they're all a little bit different.

Speaker 7

Right. Yes, that makes complete sense. Matt, just a quick one for you. I know it's minutiae and I know the fuel is a pass through, but your fuel surcharge revenue was almost flat quarter over quarter despite fuel dropping. You mentioned that diesel prices were down 13% year over year, fuel surcharge revenue is down less than 5% year over year.

Speaker 7

Some of your peers have already reported at much bigger step downs both sequentially and year over year. Do you just have like a better surcharge mechanism? Or is there some lag where this decline in fuel prices that we've seen basically over the last couple of months kind of catches up in 4Q?

Speaker 1

Well, fuel is not a pass through. I mean, we invest every part of this business is inflationary and we expect to make a return on every part of it. So, I mean, the fuel surcharge mechanism is similar to what's out there for other LTLs, but the mix of business has had an impact. And keep in mind, when it's a percentage of revenue, so when we're raising rates on customers, we have an opportunity to get more from a fuel surcharge standpoint. So, I mean, I think one thing to think about in terms of us, our volumes are up, right, compared to some others.

Speaker 1

So that plays into it as well, but nothing to comment on there. We don't we haven't put anything in different on the fuel side.

Speaker 7

Okay. Got it. Thanks, Matt. Thanks, Fritz.

Operator

And your next question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open.

Speaker 4

Hey, thanks. Good morning, guys. Ipswich, I think on

Speaker 12

the last call you mentioned that facilities opened in the last 3 years kind of were operating at about a 95 OR. You talked about 2Q facility openings turning positive in the Q3.

Operator

I guess I'm just kind

Speaker 12

of curious as you think about that metric that you gave last quarter, does it change at all? I know it's only a quarter, but I'm kind of curious if you feel like you're making more or less progress relative to what you have seen in the past just given the sort of density that you're adding to the network, these new regions and creating this sort of 48 state contiguous

Speaker 2

network? Yes. We're real pleased with what we're seeing. I think the key thing in this and why it can vary a little bit, I mentioned in the last question, is that terminal openings can have different sort of roles, right? Some facility might provide a really high level solution for a customer in the end of the line, right?

Speaker 2

So those facilities are going

Speaker 10

to take a much longer

Speaker 1

time to kind of get to

Speaker 2

company average OR or be a big contributor. So those some of those that we've opened historically have been in that sort of met that definition and certainly the ones we opened in the Q3 kind of met that definition. What's really exciting about the Q2 facilities and frankly all of them is they're making progress. The 2nd quarter ones are big ones and those are some of the bigger investments we made around purchasing assets. And it's real nice to see those progress, see them scale in big freight markets and then see them being part of making those end of the line facilities continue to be a value creator as well.

Speaker 2

I mean, if I the great thing is, is that those great plains states, there's a customer that's bringing freight in from Mexico into Laredo and we've got a shot now to go direct from Laredo to all that cover Montana and Dakotas. And those are really nice value enhancing opportunities for the customer. And as you cobble together a network, Laredo is going to scale faster because it's a big facility, but then you're going to get the value out of those smaller facilities because you're in a position you can do a great job for the customer in those markets. We couldn't do that before. I mean, we had customers before that said, hey, Sai, you're fantastic, but we understand you hand off freight into those markets.

Speaker 2

And once you get that solved, we're with you. Well, they're with us now, right? And so I think that that's because of that sort of dynamic, when you look at the trend over time, the ones in the second quarter have a bigger impact now because they're larger. But the great thing is the progress of all of them over time over the last couple of years, it's really exciting to see. And that will play itself out over the next years as we continue to develop the network.

Speaker 12

Okay. That's helpful. And then towards the end of your prepared remarks, you're talking about the network and what you have now and maybe that looks over the course of the next year or 2 as you let that kind of grow and build out. I guess I'm curious, there's still going to be more assets available, presumably most of these, if not all of these, were sort of reviewed during the first process through the yellow auction. Kind of curious how you think about that.

Speaker 12

Is that something that has interest to you or what you have right now for the next 12, 18 months is kind of what you need?

Speaker 2

So I think as I look at the 214 that we have in place right now or by the end of the year we'll have in place, particularly the 21 we opened this year, there was a really compelling business case around all of those. And so we're excited about that. The ones that we'll relocate into next year have similar sort of compelling things. But one of the things that we have to be very mindful of in this business is that over time, there will be places that we have the opportunity to enhance the network that we're in. And as these assets trade in the market, we'll be a participant in that.

Speaker 2

We won't be a participant in it at the level that we just were. But sort of the onesie twosies and 2 or 3 here and there or down a couple of years from now, maybe there's a year that's 5 or 6 or something like that. I think we're positioned to be able to do that. There are markets that even today, we're thrilled with the map we have, but we also see opportunities. But as we think about it as a business today, there's a lot of value to create out of the facilities we're going to exit this year with.

Speaker 2

And then there'll be some that we can add on. We like the idea of participating in a secondary market around these facilities as they may or may not become available. I think that that's a long term opportunity. We've proven if you go back to 2017, we've proven we know how to organically grow. So and we're opportunistic around the real estate.

Speaker 2

Even look at the ones that we've opened up this year, there are ones that we opened up that didn't come through the yellow auction process. They were in our pipeline and there'll be others like that down the road.

Speaker 4

Okay. That's

Speaker 12

helpful. Appreciate the time this morning. Thanks guys.

Operator

And your next question comes from Jason Seidl with TD Cowen. Your line is open.

Speaker 7

Thanks operator. Good morning gentlemen. I want

Speaker 1

to go back a little bit

Speaker 2

to October to sort of

Speaker 7

better understand how we should look at 4Q tonnage. If we push the hurricane impacts aside early on in October and we take away the impacts of the cyber attack at one of your competitors last year, is this 6.5% look closer to double digits?

Speaker 2

I don't know that I would go there. I think, Jason, what I would focus on is kind of our commitment and focus on driving results out of this business. So we're not in it to see to try to lead the league in growth. We're here to we've got a footprint that we're trying to expand. The volume will come.

Speaker 2

We're not chasing volume. So yes, there's disruption that's in there that is had an impact on results. Sometimes it's interesting when you have weather events, sometimes you just don't see the volume again. So it's kind of how it goes. We're focused on continuing to deliver for the customer.

Speaker 2

And we're going to get our share out of that. And the openings that we've got, they're organically going to contribute. I mean, if you look at sort of the growth that we've had this year, more and more of it is coming from facilities we've just opened in the last 3 years. I mean, it's becoming a material part of the business. So we're not in it to chase volume, right?

Speaker 2

It's just, hey, Saia is here. We know what we get from Saia, so we're going to do business with Saia. That's where the growth is coming from. So we're not I'm not in a position to really comment on what it could have been. I just know what it was.

Speaker 7

Fair enough. Also you guys made comments about potentially expanding some of the terminals that you've opened up over the past 12 months, maybe next year. What type of a market would we have to see to make you want to expand one of your recent additions?

Speaker 2

Yes. Sometimes what you do is you like we've got one facility that we've purchased and opened this year. And you know what, we are we see near end runway around that terminal that we just needed to expand it. It's create an efficiency, make sure that we've got the appropriate amount of flexibility in the facility. We're not when we expand the facility, we're not thinking about next week's volume.

Speaker 2

We're thinking about, all right, how do we make sure we provide a very high level of service. And then over the next number of years, we've got ample capacity to maintain a very consistent level of service for the customer. So we'll as we get choke points in the network, we absolutely will add expand capacity or maybe even relocate a facility. But that's kind of how we think about it.

Speaker 7

Appreciate the color, gentlemen.

Operator

And your next question comes from the line of Ari Rosa with Citigroup. Your line is open.

Speaker 12

Hi, great. This is Ben Moore on for Ari at Citi. Fritz and Matt, thanks for taking the question. Your yield growth, maybe going back to pricing discussion has been on a fantastic trend the last several years. And then the mass deal study confirms you're successfully taking pricing increases, especially this year versus last year.

Speaker 12

How much would that be a function, would you say, of your pricing gains catching up to your service that's improved over the last 10 years? That's been something part of your narrative the last couple of years. And then conversely, how much of that is a function of being able to provide a bigger reach of your network that you mentioned from your new terminal openings over the last few quarters?

Speaker 2

Ben, I think it's frankly, it's all of the above, to be honest with you. I wish I could break it out. But what I would tell you is part of the compelling part of why you opened 21 facilities is you're focused on the long term, number 1, and then you're focused on the idea that if you can repeat that level of service for customers that are satisfied with you, you've got a shot to organically grow into that network and continue to repeat service for customers. And our we've proven we know how to do that. And when that happens, we're in a better position to be able to say, listen, in order for us to continue to make the level of investments in this business, we approach the customers and they understand that they're getting a lot of value from Saia and we're in a position where we continue to focus on making sure that we're appropriately compensated for the level of investments.

Speaker 2

I mean, this year we're going to spend $1,000,000,000 on the company, right? And that deserves a return. Customers get a return, we're going to focus on getting a return. So that becomes part of our pricing thesis. That only works if we've got the appropriate reach in the markets for customers and we continue to replicate that service.

Speaker 12

Great. Thanks for the color there. And maybe as a follow-up, sticking with the study going the other direction on your service, you've seen it decline a bit. How much would you say the year over year decline in service, which seems to be from your new terminal openings, how much of that is from not yet building up a large enough customer base? And then how much of that do you think is from just a temporary decline in, say, damage, on time pickups, deliveries, just as normal growing pains and it's temporary and will be out of that phase in the next few quarters?

Speaker 2

Listen, the Saia internally, as we typically what we do with that Mastio data or the survey data is we disaggregate that and we spend a lot of time figuring out how we get that on the trend, which we want to be. We want to be best in the business, right? And that's our focus. That's our commitment. In the last year, we've grown this footprint substantially.

Speaker 2

We know that in a situation where your business is contracting or you're dealing with less volume with a customer, it's an opportunity to really enhance your service. You can certainly deliver high level remarks when your network is not stressed. We've grown faster than anybody else in the business. We've taken on more customers than anyone else in the business, I would guess. Certainly, we're represented in that survey more than we've ever been and that's a reflection of a growing footprint.

Speaker 2

More customers, more touches. We got 1500 to 2000 new employees that we've added over the net add over the last year, year and a half to support that. We got to make sure those folks are all understand that at Saia, this is how we do it. And for the folks that have been here for a longer period of time, it's a recommitment to saying, hey, listen, this is what makes us different. This is why we're outgrowing the industry.

Speaker 2

And we'll disaggregate that data. Our teams across the network will be very, very focused on how do we get that back on a positive track. I'd point out that the industry in total got better. And yes, our marks in some cases relatively got fell a bit. But I also think that I look at this is really a long game.

Speaker 2

This isn't about what's happened here in the last few months or even last year. This is all about the long game.

Speaker 12

Great. I appreciate the time and insights as always.

Operator

And your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Speaker 5

Thanks. Good morning, everyone. Just to follow-up on the math here, kind of seems like you have more details than we do on the data here. Do you have numbers on same store customers ranking versus new customers and that will like make it very clear that it's the new terminals that are the issue here and that will take time to ramp up? And also how much does something like this influence the pricing discussion of the customer?

Speaker 5

Like is this something that just Wall Street is focused on? Or kind of how much of a commercial impact does this have?

Speaker 2

Yes. Sorry, I don't have the level of detail you're looking for. We certainly disaggregate the data and spend a lot of time looking at it. I don't know that we have that specific carve up. Listen, the customer cares about the customer's experience, right?

Speaker 2

So, we have to be intently focused on that because I think it's for us, it is about supporting the long term customer success. Customer has to have a LTL partner that supports that and has the reach and footprint to do that. Now I think that the as I mentioned earlier, the industry in total has gotten better. Saia relative to last year has got stepped back modestly. But I think on the key a lot of the key differentiators that are included in the 30 some that are part of this survey, we actually improved year over year and a couple of them we fell back.

Speaker 2

Some of them we fell back on are areas that are around pricing. So sometimes customers don't like the feedback that Sai is coming in and raising rates consistently or charging for accessorials consistently. Those are things that you sometimes that customers don't like that and you get negative feedback with that. So in some ways, that's actually a good thing for us. But that's not to say what we have to be able to do is be consistently better for the customer and that's our focus.

Speaker 2

When you're in a growth mode like we are and growing versus the rest of the industry, the opportunity you're taking on more customers that have new experience and haven't been with Saia before and they have an experience. So we've got to make sure that we're delivering to meet their expectations. And that's where we'll long term be successful. We like the direction. We like the company's commitment to it.

Speaker 2

We're not doubling we're doubling down on it, that's for sure.

Speaker 5

Understood. That's really helpful. And maybe as a follow-up, just to go back to 4Q OR, I think you said normal seasonality that you have is 250 deterioration kind of our model has something closer to 150. So I think the comparison is a little bit different. So just to level set, do you also have your normal seasonality benchmark for 1Q and 2Q?

Speaker 5

Thanks.

Speaker 1

I mean, what Robbie, maybe yours is going a little bit further back. I mean, one of the pieces for us that we try to do for this is, if you 10 years back, it's just not that valuable for us anymore. The company has changed so much over time. We've opened so many facilities. So some of those sequential trends just aren't really as valuable.

Speaker 1

So we try to look at something more applicable for the recent period and we haven't given anything out for into next year Q1 and Q2 yet, but we'll do that as we get closer to it.

Speaker 2

Yes. We took the COVID year out of the horizon, but we just look back in recent years.

Speaker 3

Understood. Thank you.

Operator

And your next question comes from Stephanie Moore with Jefferies. Your line is open.

Speaker 13

Hi. Good morning. Thank you.

Speaker 7

Good morning.

Speaker 13

Just a quick one for me here. As a follow-up to I think it was Tom's question earlier, we talked a little bit about 2025 and I think clearly gave your view on scenarios in a neutral macro. But in that stronger environment scenario, how are you positioned to kind of take advantage of that inflection? Would we need to see incremental hiring equipment or anything else to position you to handle that inflection? Thanks.

Speaker 2

Yes, it's a good question. I mean, listen, if you scale the business from here, right, we would certainly our variable labor costs would certainly change as well. They likely would go up because and we would have to match driver counts of growth were higher than what we had expected. We feel like we're staffed well right now for kind of the environment that we're in. I think it's a pretty good match.

Speaker 2

But as you get out into the area, you can imagine a scenario in which volumes up maybe it's up materially, just throwing out as an illustration. You'd expect us to we'll scale the business, but we'll still have to add some labor costs and the volume wouldn't be free. So I think it but I think what's really exciting, the big lift, the 21 facilities we're open this year are going to be in position and they will scale. That's why we did this. So in a stronger background, I'd much rather be in a position to start the year with 214 facilities well positioned, ready to go.

Speaker 2

And we know that we know how to operate and we know how to scale up if we have to. And we also know

Speaker 10

how to

Speaker 2

match down as we need to if we got into an environment where maybe the volumes work there, we would make adjustments on that basis. But it's a the opportunity is certainly there in front of us, and that's why we made the investments that we've made.

Operator

Great. Appreciate it. And your next question comes from Bascome Majors with Susquehanna. Your line is open.

Speaker 8

As you think into next year and talking about that CapEx preliminary spend of, call it, this year's $1,000,000,000 or so minus the $250,000,000 or so you spent on the unique transaction, I mean, it looks like that would put you a little above your sort of long term high end of 15% of revenue. Are we tapering back into that range longer term? Just any thoughts on the investment in the business organically? And when we might get to the point where you're inflecting on cash flow to the point where you might want to return some of that to investors in dividends or buybacks? Thank you.

Speaker 1

Hey, Bascome. Yes. So I mean, certainly, if you look at a percent of revenue, it's elevated. Couple of things to note in that. The company is bigger now.

Speaker 1

Start to make sure we have capacity to flex with customers' needs, all of that's a bigger number than what it used to be. So that's in that as well. And for us, when you look at that denominator, pricing is a big player in that. If our pricing gets to market, naturally everything else as a percent of revenue comes back down. So it's we look at that and focus on that as well.

Speaker 1

Now in the long term, it should trend back down as we continue to grow as a business and close the pricing gap and look at it from a percent of revenue standpoint. But it remains elevated into next year just as probably a little bit more heavy on the tractor side versus trailers this year. So, but longer term that should continue to come down. And then to the second part of that question, we're probably not too far out from having that discussion. The big transaction at the beginning of the year, first of all, was the right move for us as a business, but that impacts that timing a little bit.

Speaker 1

But we're not too far out from that. We've proved that the return on capital for our approach has been very valuable so far, and it was important to continue to get the network built out. But we remain focused on making sure that the returns are there.

Speaker 8

As a brief follow-up to your point about getting your pricing to market, I mean, we can compare reported yields for you guys and peers, but there's obviously a huge mix component there. What's your assessment of how far you might be below market as we think about closing that gap over a multiyear period? Thank you.

Speaker 2

Yes. Good question. I think what I would this is kind of how we focus on it. We look at public data and what revenue per shipment is and compare our revenue per shipment to others. And certainly, we know there's some that have a mix of business that may or may not be the same as ours.

Speaker 2

But fundamentally, we look at those and say, well, maybe we ought to adjust our mix of business or can pursue a more optimal mix of business that allows us to get the pricing that we see others getting. That is fundamentally the opportunity, right? And part of this network expansion is about making sure that we have the addressable market to be able to do that and the opportunity to get the at bats with customers, get their freight, do a great job for them and get us to market more. The network is more and more comparable now. It's a national network comparable to any of those.

Speaker 2

So now it's just we got to keep focus and that's a big opportunity.

Speaker 10

Thank you.

Operator

And your next question comes from Chris Coon with The Benchmark Company. Your line is open.

Speaker 10

Yes. Hi, Chris. Hi, Matt. Thanks for the question. Just I know in

Speaker 14

the Q2, the terminals were larger and some of the costs you called out on the call. And as

Speaker 5

we think about the terminals for next year, anything to

Speaker 14

think about in terms of the size or the cost of the relocations? Or are they going to be kind of like the Q3, a little bit smaller, a little bit more manageable?

Speaker 2

Yes. The relocations are candidly pretty straightforward. I know some would say they're incredibly complicated. They're really not. Basically, what you do is you get the new facility set up and ready to go, have the drivers report team report to a different location Monday morning and that kind of gets you started.

Speaker 2

So the typically, you don't see much in a way of overlap costs, those sorts of things. It's kind of game on. In many cases, you have immediate efficiencies. So relocations really don't have a meaningful impact on the cost structure. Typically, they offer some efficiencies or sort of those kinds of enhancements.

Speaker 2

To the extent that we see opportunistic openings next year, they're going to be the scale of them, they may be it could be a range of sizes, but the impact on a business that is if you add a handful, 4 or 5 to a footprint of 214 with the run rate of revenue that we have, those are sort of more de minimis impacts. When you add 11 in the quarter like we just did or 6 big ones like we did in the Q2, they have a meaningful impact. So I think as we go from here, I think they will have a smaller and smaller impact.

Speaker 10

Yes, that's helpful. Thank you. Thanks, Chris.

Speaker 2

No problem.

Operator

And your final question comes from Tyler Brown with Raymond James. Your line is open.

Speaker 15

Hey, morning. Can you all hear me?

Speaker 2

Absolutely. Can you hear more important than you hear us, Tyler?

Speaker 15

We can hear you. Hey, Fritz, I want to come back to the new employee, ad comment that you made earlier. I'm assuming that the vast majority of those are frontline. So how do you feel about frontline productivity? I mean, could productivity be a really big positive story in 2025, maybe even into 2026 as basically all these guys mature?

Speaker 15

I would assume your productivity metrics are probably considerably off your peak.

Speaker 2

Yes. Listen, they are there's an opportunity to improve that as we as our team matures, new folks on the team really kind of we feel like we've done a great job of onboarding people, but for that to really have that Saia sort of feel, you got to continue getting that experience and understand through thick and thin, this is what we do for the customer. And then I think as that grows, I think you also get efficiencies with that productivity out of that. And then frankly, in a new markets, as you build density around those city pickup operations, that's naturally going to come just because you've got an infrastructure, you don't start out fully utilized. So there's a leverage point there as well.

Speaker 2

So I think that going forward, I think there's a lot of out of that sort of maturity.

Speaker 15

Yes. Okay. And this is maybe a good fitting into the call. It's a big picture question. But culture is obviously huge in LPL.

Speaker 15

You know this. I mean, I know this. I've seen it up close and personal. But how do you hold on to culture? I mean, you've got so many new people coming in.

Speaker 15

How do your internal employee surveys look and are they kind of where you want them to be? Thanks, guys.

Speaker 2

So our employee engagements, we measure that every year. And we have through the changes, we've maintained our employee engagement scores, which have been pretty high for the last 3 years and we've kept that up. So we're thrilled with that, but you can always get better. And so what we do is we break down the employee engagement scores down to all the managers in the company. And our thoughts are is that, listen, you've performed well on your employee engagement this year, what are you going to do next year to get even better?

Speaker 2

And if you've got somebody that's got an engagement opportunity, what are we going to do to train and support that person to be successful? So yes, we're intensely focused on that because as you rightly point out, Tyler, this is a business that is we can talk about capital, we can talk about all those things, but fundamentally it's the people that make this happen. We have an awesome team. We'll continue to invest in our team and we'll continue to drive engagement across this team. So that's an important part of the success.

Speaker 2

That's why we feel pretty good about listen, this Maschio sort of changed this year. This will be an opportunity. We got the team that's going to engage on that because they think it's important. And the customers, the first thing is an important company making that happen. That's part of our culture.

Speaker 2

So we're well positioned for that. We just got to keep it focused.

Speaker 15

Perfect. Thanks, guys.

Operator

And that concludes our question and answer session. I will now turn the conference back over to Mr. Fritz Holzgre for closing remarks.

Speaker 2

Thank you, operator. First, I want to thank everyone on the call for their patience. I know that we have a little bit of technical issue here at least for part of this, and we apologize for that. We know that it's been a couple of quarters of that, but trust us when we say that, that is something that we'll continue to figure out a way to get that right. I know for the 1st 10 years that was with the company, we didn't have any challenges with it, just more of a recent thing.

Speaker 2

But we're on it. So but if there are folks that maybe didn't get all the detail that they were looking for, or feel free to reach out and Matt and I will certainly field any questions that may have fallen through the cracks there. But if you did came in and out or the important thing is that we're really excited about kind of where the company is. We just opened 11 facilities in the Q3. Significantly, we're already starting to see a lot of value generated out of the 6 that we opened in the Q2 and this supports the long term value proposition of the company.

Speaker 2

We're excited about the prospects going forward. Certainly, we've made significant investments in the business this year. Those investments have an eye to the long term success of the business. We're doubling down on focusing on taking care of the customer. That's our intense focus because we see a lot of value that we'll provide to customers from this network, this now national network into the years to come.

Speaker 2

So we're excited about the position and we appreciate your time and interest in Saia. Thank you.

Operator

And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.

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Earnings Conference Call
Lyft Q3 2024
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