Good day, and welcome to the Saia, Inc. Hosted Fourth Quarter and Full Year 2020 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Douglas Col. Please go ahead, sir..

Thank you, Loren. Good morning, everyone. Welcome to Saia’s fourth quarter 2020 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 risk factors that could cause actual results to differ.

Now I’d like to turn the call over to Fritz for some opening comments..

Good morning, everyone. I'm pleased to welcome you to this call to review our fourth quarter and full-year results. I'm also pleased to take this moment to say goodbye to 2020. Well, last year brought all of us plenty of challenges, both professionally and personally. We learned that we were capable of pulling together as a team to deal with the crisis.

Not only do we adapt quickly to changing conditions across our network brought on by COVID-19 but we did so while maintaining a high level of service. In 2020, we delivered 98% of our shipments on time despite experiencing periodic shortages of employees on any given day due to the pandemic.

Protecting customer’s freight remained a priority for our employees and our 2020 cargo claims ratio of 0.66% was a record. I'm very proud of our team for providing the type of service for our customers and pleased that we could do our part and deliver essential goods in these difficult times.

It is exciting today to be able to discuss our record fourth quarter and full-year results. Business volumes really never tracked historical trends after the downturn in mid-March. And then swing rebound in April and that continued into the fourth quarter.

In the fourth quarter daily shipment activity remains steady and shipments per workday for the full quarter rose 3.6% compared to last year. Weight per shipment rose 2.3% for the full quarter and tonnage per workday increased 6% year-over-year. Our operations team executed extremely well in 2020.

And we were well-positioned to handle better than expected late December shipment volumes. Shipments rose 3.5% this December against a difficult year ago comparison, where December 2019 shipments increased by 10%.

The pricing environment remained stable throughout the pandemic and we continue to focus our pricing strategies and identifying the [ample] [ph] mix of business, while ensuring that we were compensated for our strong service execution.

If anything, the continued tightness in the driver market made worse by the pandemic and the increased cost of purchase transportation has made carriers even more focused on pricing in the face of these cost pressures.

I'm extremely pleased to report that revenue per shipment excluding fuel surcharge rose 6.5% in the fourth quarter, and despite fuel surcharge revenue being down 13% year-over-year, we still managed to improve revenue per shipment, including the surcharge by 3.5%. This improvement in revenue per shipment plays a key role in improving margins.

And I'm proud to report that our fourth quarter operating ratio of 89.4% is a record. Our revenue in 2020 was a record $1.8 billion surpassing last year's record revenue by 2%. Operating income also grew by 18% to a record $180 million.

I'm now going to turn the call over to Doug for a few more detailed comments about the fourth quarter and full year results..

Thanks, Fritz. Fourth quarter revenue was $476.5 million, up $33.4 million or 7.5% from last year. The year-over-year revenue increase was the result of 6% growth in tonnage per workday. Our yield excluding fuel surcharge improvement of 4.1% and a 6.1% increase in length of haul. Revenue per shipment grew 3.5% to $246.88.

Offsetting these tailwind fuel surcharge revenue decreased by 12.9% and was 10.5% of total revenue compared to 13% a year ago. Moving now to key expense items in the quarter. Salaries, wages and benefits increased 3.6%. This was largely driven by our employee utilization of paid time off in the quarter compared to the prior year.

You will remember, that we offered our hourly employees an additional five days of paid time off in 2020, to help them deal with the personal and family issues arising from the COVID-19 crisis. Health insurance costs were essentially flat year-over-year, with inflationary costs being offset somewhat by lower usage of benefits by our employees.

Purchase transportation costs increased 42.1% compared to last year. As a percent of total revenue, purchase transportation costs were 9.4% compared to 7.1% in the fourth quarter last year. The increase is primarily tied to an approximate 76% increase in purchased truck and rail miles compared to last year.

In the quarter, we faced pandemic-related driver shortages in some markets, and we’re able to meet the stepped up demand with purchase line haul capacity. Purchase transportation miles were 16.3% of total line haul miles in the fourth quarter. Fuel expense fell by 30.7% in the quarter, while company miles decreased 2% year-over-year.

National average diesel prices were approximately 20% lower throughout the quarter than in the same period a year ago. Claims and insurance expense decreased by 27.3% in the quarter, reflecting decreased frequency and accident severity in that expense line, serving to offset the higher year-over-year premium costs.

To put that in perspective, the $3.4 million expense decrease compared to prior year would have been favorable by another $1.5 million if not for premium increases we experienced. Also to illustrate the volatility in this expense line, I would note that claims and insurance expense was down 24% or $2.8 million sequentially from the third quarter.

Depreciation expense of $34.2 million in the quarter was 7.2% higher year-over-year. This is a continuation of the trend we have seen over the past few years, as we've grown our terminal network, invested in equipment to lower the age of our tractor and trailer fleet and made meaningful investments in technology.

Overall, operating expenses increased by 2.5% in the quarter. With a revenue increase of 7.5%, our operating ratio improved by 440 basis points from a year ago. Our tax rate in the fourth quarter was 19.8% compared to 18.1% last year, and our full year tax rate was 21.5%. Fourth quarter diluted earnings per share were $1.51 compared to $0.81 last year.

Moving on to the financial highlights of our full year results. As Fritz mentioned, revenue was a record $1.8 billion and operating income of $180.3 million was also an annual record. Our operating ratio for the full year improved a 140 basis points to a record 90.1%.

For the full year 2020, our diluted earnings per share were a record $5.20 versus $4.30 in 2019. In 2020, we made capital investments totaling $231.1 million. We reduced our net debt position by $90.5 million in 2020. And we entered 2021 with $25.3 million in cash on hand. In 2021, we anticipate capital expenditures will be approximately $275 million.

Also, at the beginning of 2021, we implemented a wage increase across our workforce, which averaged approximately 3.5%. I will now like to turn the call back to Fritz for some closing comments..

Thanks, Doug. Just a couple more comments before we turn this open - open this up for questions. And 2019 was a year of investment across the company, perhaps most notably in the Northeast. For 2020, our team was focused on operational execution, with an emphasis on integrating the new operations into the broader network.

COVID-19 provided an unexpected challenge, which tested our execution, particularly in Q2, we emerged from the COVID-19 business decline and posted records in both Q3 and Q4. Throughout, our management team stayed focused on the safety of our employees and customers.

While continuing to deliver differentiated service and satisfying our customer’s freight shipping needs. COVID-19 is a continuing daily challenge across our 169 terminals, providing a level of unpredictability for both our customers and our operations. We expect these challenges to continue for the near future.

At the same time, our strategy extends into 2021 with a clear focus on execution and delivering the services that our customers expect. This focus supports the ongoing efforts to optimize our mix of business, while being compensated for all the service that we provide. In 2020, we opened a terminal early in the year near Burlington, Vermont.

And in the fourth quarter, we moved into our new 200 door cross-dock facility in Memphis, Tennessee. The new Memphis terminal was 60% larger than the facility it replaces and should accommodate significant expansion over time.

As we think of our growth in 2021, we plan to open a new terminal this quarter to service customers in the Wilmington, Delaware area and plan to open an additional four to six terminals across the course of the year, including our Northeast, Atlanta terminal targeted for the fourth quarter.

These terminals will enhance our service across the geography, while also providing reach into new markets, as we seek opportunities to build our long-term pipeline of coverage in 2021 and beyond. As 2021 – our 2020 highlights, despite the operational challenges, Saia is positioned to continue to execute our plan into 2021 and beyond.

With that said, we're now ready to open the line for questions operator..

Thank you. [Operator Instructions] Our first question comes from Amit Mehrotra with Deutsche Bank..

Thanks, operator. Hi, Fritz. Hi, Doug. Congrats on the results. I guess, I had one sort of shorter term question and maybe one longer term question. So just on the shorter term side, wondering if you can give us January shipments and weight trends.

You know, just kind of how it feels out there from a demand and customer perspective? And then also, you know, you kind of provide OR trend sequentially. I know it usually deteriorates fourth quarter, first quarter, but if you can give us a little bit of a color there as well. Thanks..

Sure. Hi, Amit. [Indiscernible] should have the October and November trend numbers, but the December shipments were up 3.5% and tonnage was up 5.2%. In January, shipments were up 1.1% and tonnage up 5.6%. So the January numbers are again against a pretty healthy comp like December was. January shipments a year ago were up 8%.

And we also implemented a [GRI] [ph] on January 18th of approximately, averaged approximately 5.9% across our tariffs. So we've seen a little bit of impact of that on the shipment side, but weight per shipment is up nicely and we’re growing tonnage and hopefully improving our mix..

And then the OR comment sequentially?.

Yeah, I mean, historically, like you said, I mean, it's been a pretty tight range historically. It's gone back and forth, sometimes weather dependent, but we'd say historically adjusting for, you know, the accidents and severe weather weekend, it's probably flattish quarter-to-quarter and we would hope to be able to do that again.

You know, this year, we gave the wage increase on January 1st. And we're seeing a little bit of - you know, we're seeing fuel cost trend back up a little bit. But we would hope that we can keep it steady with where we operate it in Q4..

Okay, that's encouraging. And just, I guess more for my longer term question, which I guess is more important anyways. Fritz, if I look at the revenue per shipment, revenue dollars per shipment, it's quite a bit lower than other non-unionized LTLs, I mean, it's over 30% below what OD is doing over 10% below what XPO is doing.

Can you just talk about, I know, that's a focus of you guys from a pricing and mix perspective and a service perspective, I was just wondering if you could talk about what the actual opportunity is to narrow that gap? And, you know, now that you have an expanded or increasing footprint, and then what should be kind of the reasonable expectation there in terms of your ability to continue closing or narrowing that gap over the next couple years?.

Sure, Amit. When we look at that, and we've highlighted in the call comments, you know, we were very, very pleased with our service performance in the second half of the year. Through the pandemic, the claims ratios were record low, operations team did a phenomenal job taking care of the customers.

And what that does, though, is that says that when you look at those national carriers, that you pointed out where we're at a discount, that - we have that sort of level of service, we need to get paid for it, because that is service, that is some of the best in the industry.

We're doing a great job for the customer, and it's expensive to run this business, it's a lot of cost tied up in this. As we point out, none of this should be free. So we've got to charge for it and improve the mix of business to find those customers that really value that outstanding service that we've been able to deliver.

So as I think about it, it's not going to happen overnight. But I think we continue to work pretty hard at closing that gap against those larger national carriers. And, you know, I think you see the performance we had in Q4. And that's the playbook. We got to keep executing that focused on, you know, getting paid for the service that we're providing.

So, I think we're - we've shown that we can do it. And now it's - we've got to continue to execute that plan..

Amit, I would add too that, you see evidence of our work on mix, and also the benefit of expanded geographies, if you just kind of compare our yield performance and our revenue per bill performance. So yield ex-fuel surcharge in the fourth quarter was up 4.1%, we actually grew revenue per shipment ex-fuel 6.5%.

So our length to haul was about 6% longer year-over-year, and the mix opportunities that Fritz mentioned, you know, as that continues to help us grow revenue per bill in excess of our yield growth. That will help too..

Okay. That's helpful, guys. Thanks a lot. Appreciate it..

Thanks, Amit..

Thanks, Amit..

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

Hey, great. Good morning, Fritz. Good morning, Doug. Fritz, in your prepared comments at the end, when you kind of went through the cadence of the last couple of years, you know, the growth and then shifting into execution we obviously see that in the last couple of quarters.

As you think about going into ‘21 and ‘22, you talked historically, about 150 to 200 basis points of margin improvement on an annualized basis. You know is ‘21 a year where you're in that range, is that something better than that range, you know, given the investment that you've made.

You just - how do you think about the cadence of DoR, longer term at this point?.

Yeah, thanks. It’s good question. I mean, you know, one of the things that we focused on, as you rightly point out is execution through the pandemic.

So if we - and we felt like that has gone, we've executed well in that environment and as we get to 2021 and beyond, it's really about how - what's the overall freight environment looks like, that continues to be favorable. You know, I think we can exceed the range that we've talked about historically of 100 to 150, I mean, we should be above that.

Where that goes? How strong the market is? That’s to be determined. But I think what's important right now is that we – we’re in a position where we continue to focus on pricing. That's a favorite, as we know, a flow-through to the bottom line pretty quickly. But we're also proven that we can execute. So I'm excited about the terminal openings we have.

So I think that that we should be able to absorb that without really being a drag on our sort of profile. Now, certainly, if we had to accelerate, because there were opportunities that were out there, we would do that.

But I think, ultimately, I think we're in this nice range where, you know, the markets favorable, we see growth opportunities, the pricing initiatives are critical, I think we can continue to improve and likely be above the range that we have historically talked about..

Yeah. Okay. That's great. That's really helpful.

And then just from my follow-up, you know, can you talk a little bit about, your philosophy and your thoughts on using purchase transportation, you know, structurally, it's a difference between your model and Old Dominion, and obviously, in an environment like we saw in the second half of ‘20, with truckload linehaul ratio moving up, you know, there can be some impact on the margins there.

So, how do you think about, the right mix of purchase transportation in your network, and either bringing that down over time or maintaining at a certain level? Thanks..

Thanks, Todd. So, Doug, and I'll kind of combine on this answer. But I'm going to start with this leading sort of focus that we have, and we're a margin-driven company. So we had to - we utilize more purchase transportation in the fourth quarter, to meet customer expectations, meet service requirements. We price it the right way.

We found the PT that work for us, and was cost optimal. So we built that into an 89 four [ph] OR.

Now over time, certainly you want to look for ways to enhance, leverage our own assets where we can, but ultimately, we're going to make a decision around driving that OR, and if we can achieve our OR targets, and need to use PT, to do that, we will, but certainly, you know, in time, it's important that we find ways to leverage our infrastructure..

Yeah, I mean, I would add, I mean, while the PT on the truck side, I mean, certainly saw a lot of price inflation last year. I mean, the way we buy it, with some committed carriers, we didn't feel the extreme volatility in our rates. I mean, in Q4, our truck pricing year-over-year for truck miles on the PT side was up, you know, low single digit rate.

So, we had some carriers come to us, and we did have to, you know, pay higher rate increases with some, but on average, we weren't that exposed in any way to the spot market. And, you know, our rail pricing year-over-year is now favorable. I mean, we couldn't get as many rail miles as we wanted, probably.

But, that's a very cost-effective way to deal with a longer length of haul that we've got these days..

Okay.

So it sounds like if you're flexing up, and you have to use more PT, and we saw this in the fourth quarter, you're able to get compensated from your customers as a result of that, at least at this point?.

Right. And I mean, normally, you'd see the highest peak usage for us, you know, in the strongest part of the year, historically, second and third quarter. You know, we're using PT historically in those time periods to meet the seasonal demand, and then you have vacations and second and third quarter. So some of your own capacity is not available.

This year that, you know, it, we saw kind of the opposite. I mean, things dipped and our usage dipped in Q2, but then when business came back strong in Q3, we utilized PT to satisfy the demand, and it didn't really tail-off, like historically, you see in the second part of the fourth quarter. So we again, had to use PT.

But to your point, yes, we were able to price effectively and make it work for us. Our service didn't deteriorate because we were using PT..

Got it. Okay. Thanks so much for the time this morning, guys..

Thanks, Todd..

Our next question comes from Scott Group with Wolfe Research..

Hey, thanks. Morning, guys. Can you talk about the renewal trends in the quarter and then maybe just help us out, big increase in weight per shipment? How to think about yield trends either in January or first quarter, however, you want to think about it? Thank you..

Yeah. Thanks, Scott. On the contractual renewal side, I mean, we saw a nice back - bounce back in Q3 and Q4. They were up 6.9% on average in Q3 and 6.6% in Q4. And, you know, to us that's reflecting the shippers mindset, you saw to in some of your survey work.

I mean, the shipper’s expectations for higher rates really, across all modes, you know, bounced back in the second half. And we felt that in our renewals. And you know, so far in January, I'd say, on the yield side, I mean, no continuation of what we've saw in the latter part of Q4.

I mean, I'd say, you know, low to mid single digit yields, or probably a level that we're committed to level we're seeing on a level we need to see and maintain. I mean, our cost inflation is on a per shipment basis, as always, seems to always be 3% or 4%. So we've got a price to get that in order to improve margins..

And Scott, I’d add to that, around weight per shipment. I mean, we're very focused on you know, as we look for the optimal mix of business, we're looking for ways to optimize or take advantage and drive the weight per shipment into better categories of freight. So its all kind of a combination for us.

So its underlying rates, and it's also about driving the mix..

Okay. And just to clarify, when you talk about low to mid, that’s on per hundredweight basis, so obviously a good amount better on a per shipment basis, right..

Yeah, the yield commentaries, yeah, on price and then our work on mix and the labor same way, we hope to grow revenue per shipment at a better rate..

And then can I just ask, the driver pay increase in January, I think you guys typically do it later in the year? Is it just pulled forward? Or do you think that we'll see two driver pay increases this year? Thank you..

So Scott, it's - we always want to be competitively paid, right? So - can be a competitive payer. So we put that in place. We put in - we did not have one, a similar one in 2020.

However, I would stress that we did add additional sorts of compensation either in paid time off, or a one-time bonus to effectively change the compensation mix for drivers last year. So we put it in place. This year, we will continue to focus on competitive pay. So, you know, could we make a change farther into the area? It could, could happen.

But that remains to be seen. Ultimately, we know it's inflationary environment out there. We know it's a competitive driver environment, so we have to pay competitively. So we still - we monitor that pretty closely. And we'll make adjustments as we need to into the year..

Okay. Thank you, guys. Appreciate it..

Thanks, Scott..

Our next question comes from Jack Atkins with Stephens..

Great. Good morning, thanks for taking my questions. So for instance, I guess kind of going back to your commentary around the plants for the network this year, you know, with the one terminal opening in the first quarter, and maybe four to six more over the remainder of the year.

How are you thinking about new versus existing markets with those numbers? And is there a way to kind of think about the expansion that you plan to sort of make to the network this year on a terminal door basis? Just sort of - just trying to get order of magnitude increases in ‘21 versus 2020? If that makes sense..

Yeah. So the way I would think about it, the terminals, and we've got on the docket, if you will, they're going to look sort of like on average, like the rest of the Saia's network, again, an average, right. So Northeast, Atlanta will be a larger facility that will be a existing, obviously an existing market to some extent.

But we're also splitting up Atlanta a little bit. So the idea and why the math makes so much sense for us there is that we actually can probably reach customers in this market that historically, we haven't been able to service appropriately. So, you know, is it new? Yes. And it's also an existing, so it's a little bit of both.

Wilmington, Delaware is effectively a new market, we service as a little bit, but not very well. So that would be a sort of an incremental opportunity. And the other ones that we're considering are going to be sort of give us a mix of new markets and ones that we are servicing, but with, you know, in the outer range of what makes sense, right.

So it - I would think the best way to think about that is, is sort of an average sort of side, a terminal side sort of Northeast, Atlanta will be a larger one, some of the others will likely be smaller..

Okay, okay. Got it….

And also Jack, just to frame it up a little before you, even though we only had, you know one new opening in 2020, our door count was actually up a little more than 4% for the year. So we relocated, you know, there's a press release out, a couple months ago on the Memphis relocation into a bigger facility.

But we also had four other relocations in the year. So, you know, the door count grew a little bit, but it should be in excess of that if we're successful this year..

Okay. That's been that's very helpful, Doug. Thank you for that. And then, I guess from a follow up question, as you guys are thinking about, the different line items from an expense perspective this year, how are you thinking about inflation with regard to cost per shipment in 2021.

Can you maybe help us kind of put some brackets around that as we're sort of thinking about this year, just because there are a lot of moving pieces with PT and labor? Obviously, what you're expanding your network to which should help?.

Yeah, maybe a little color on it. I mean, the cost per shipment wasn't - was a little lower than the normal historical trends in 2020. But if you go back to 2019, cost per shipment was up about 3.5%. And, like I mentioned earlier, that's just kind of the inflation we're seeing out there.

But you're going to continue to see, the claims and insurance line, you know, drift up. You know, like Fritz mentioned, salaries, wages and benefits, not only the wage side of it, but you know, you've got benefit inflation pretty consistently, year in and year out there.

So, you know, I think something in that, you know, 3% to 4% range on a per shipment basis is kind of going to be the trend..

Okay. Okay, that makes sense. Thanks again for the time, guys. Appreciate it..

Thanks, Jack..

Our next question comes from Jason Seidl with Cowen..

Thank you, operator. Fritz, good morning, thanks for taking the time.

I wanted to talk about your business mix, sort of how it's breaking out between consumer and industrial? And if you expect that to change as we move throughout the year, the industrial economy could come back?.

Yeah, I mean, in terms of changing, we saw a little bit of change, really, in the middle of the year with the pandemic, and, you know, we saw residential deliveries, you know, get up into the mid teen range on the percent of our shipments, but that's back down and, you know, high single, low double-digit range now.

In terms of the business, I mean, industrial to us are still 60%, 65% of the freight.

If you consider, you know, if you walk our docks and get a look at the freight we haul, you might see that over time grow a little bit because of the, you know, the increasing willingness of folks to order, heavier weighted goods online, and they need delivery of those items into neighborhoods and such like that.

But I don't see a big shift in the trends other than that..

Okay, fair enough. And I wanted to talk a little bit about TFI and the acquisition with UPS Freight. I would think that it's a good thing for pricing in the LTL market, which has already been favorable over the last decade or so.

I wanted to know, sort of how often Saia ran into UPS Freight in the marketplace? And then just out of curiosity, your agreement, you're in a [indiscernible] with TST Overland, about how large is that? I would assume it's relatively small?.

Yeah. So just a general comment. I mean, we are familiar with TFI. And specifically TST, we've been working with them really well, in the last several years. While we're on company, you know, good, good, solid performer. And certainly, you know, wish them the best in their next steps with their acquisition.

We would see UPS Freight, kind of in the marketplace, right. So you knew that it was a business that maybe didn't have the same level of investment as the rest or focused, that the rest of the LTL carriers had. So, I think that impacted them over time. So we were familiar with them in that that sort of regard.

We don't think at least in the short term that will have any meaningful impact on our TST relationship going forward. So it - you know, remains to be seen what the impact is on the broader marketplace, but TFI is a well-run company focused on the right things and, we wish them every success..

Appreciate the color. Gentlemen, thank you for the time and be safe out there..

Thanks, Jason..

Our next question comes from Jordan Alliger with Goldman Sachs..

Just a follow up on purchase transportation, as you think about gone through the year, especially taking into account the terminal openings, plus the elevated demand.

I mean, it's a thought, though, that you'll be able to handle more of your own staffing, whether it be drivers or what have you, within the year, and maybe the PT starts to end, relative to the rates you’re seeing same now, or do you think that sort of stays at these levels through the course of the year, okay?.

Well, I mean, in terms of the current year, I would expect it to moderate a little bit versus the usage, we saw to deal with the, you know, the ramp up out of the shutdown period last year during the pandemic. But, over time, if you don't - if you're not buying PT, I mean, you're going to pay for it somewhere.

So, it's not like, we avoid the cost, it will shift up into another line, if you run it with more of your own equipment, your own drivers, and there's inflation there.

But, yeah, I mean, naturally, as we build density, and with our load average improvement, which we saw 1% or 2%, load average improvement in the year, you know, we'll be able to run more of it with our capacity over time..

Okay.

I mean, from an overall, I was thinking about the terminals and stuff, the labor market, the ability to access people within your terminal, though you feel pretty good in the markets that you're in? Do you have that availability?.

Well, yeah, to the extent that you can, you know, see the capacity of bring on, and the driver market, you know, it's been a challenge, anyway, and then we had the difficulties, the pandemic fraud, it's a challenge. But if we can hire, you'll see us, you know, using more of our own power over time..

Great. Thanks so much..

Our next question comes from Tom Wadewitz with UBS..

Yeah, good morning, I wanted to see if I could go back to some of your comments on December and January tonnage.

And just see if you could offer some thoughts of whether you think that maybe January is representative of what you would expect or, you know, you did refer to the, I guess, the GRI impact and maybe some difficult comps? Do you think that you know, is January a little bit of a one-off? Or do you think that kind of 5%, 6% tonnage growth is a, you know, realistic way to look at what you might expect in first quarter or 2021?.

Yeah. I mean, it's hard to say, if I look at it sequentially, November to December, historically, we used to see a 6% or so drop off in shipments per day. And this year, it was only a 4% dip. And, you know, in the January we were kind of flattish with December trends. And, you know, that's usually up.

And - but that's, you know, also, we usually don't do a GRI in January, it's been a little later than that over the last few years. So, in terms of growth, the comparisons obviously get easier. February, a year ago, shipments were up a 1.5% and tonnage was essentially flat.

And then after that, when the pandemic hit beginning in March, the comps get easier for a few months. But you know, we'll see, I mean, there was a little weather late January, there's been some weather this - so far in February. So it's a little too early to call on a - you know, give you a whole lot of guidance on February..

Right. Okay, that's - yeah, that makes sense.

One, on other revenue, that was - it look like a strong number in the fourth quarter? Can you just kind of review what might have driven that and kind of how we would look at other revenue? And also, I don't know, is that flow to the bottom line better than LTL? Or is that just kind of, you know, similar flow through?.

Yeah. I’d say it's a similar flow through. I mean, we've had some success and cross-selling. Our Saia sales folks cross-selling some of our LinkEx services, some of the logistics and brokerage services that LinkEx puts together for customers. So we've seen - we've seen some good trends there..

So you'd be optimistic we have - we should expect that to continue?.

Yeah, I mean, I think we also probably experienced some of it, you know, a shipment of some medical supplies and such on you know, COVID related moves. But outside of that, nothing specific to call out, it's a pretty small piece of our revenue..

Yeah. Right. Fair enough. Thank you for your time..

Our next question comes from David Ross at Stifel..

Good morning, gentlemen..

Morning, David..

Most of my questions answered tomorrow at our conference, but just one for you here.

Yeah, a newer service I saw that you guys have is the MABD service, not derived by date, because delivery assurance for clients? How new is this service? How is it helping the volume growth? And then are you able to charge a premium for it? It was one of the premium products..

Yeah, I think David, it's - we've we implemented it through 2020. But I think the big thing for us is, it's an opportunity to differentiate, you know, we're in a position where we feel like we can - we have good control around our network, and we can execute our operations.

So if there's an opportunity to provide sort of that incremental level of surety for a customer, we will, and you know, there's an opportunity to certainly to charge for that. So that's a kind of an over something that we've developed over time.

And you know, those are some of the suite of services that we'll continue to look to offer into the future..

Excellent, thank you..

Our next question comes from Jon Chappell with Evercore ISI..

Thank you. Good morning. First, I think that Northeast, Atlanta examples is a great one, getting closer to customers. And I'm thinking that's going to help you both in productivity and the margin, and also probably in pricing as well.

Are there are other examples of how you can replicate what you're doing in Northeast, Atlanta and some new legacy markets, maybe Texas, for starters, that you can speak to?.

Absolutely. So, that's not the first time we've done something like that with Atlanta and North Atlanta. So we have two facilities in Dallas sort of Metroplex, which we're – if you’d imagine the sort of Dallas - sort of centered east part of the geography, we added Fort Worth a couple years ago, that was immediate impact, positive impact for us.

You know, we've added - in the LA basin, we added Long Beach, we added a second terminal in Seattle a couple of years ago. Those opportunities, if you look across the geography, we have two facilities in Chicago, arguably, I think everybody larger than us has, you know, three, four or five in that market.

That's a great freight market, it's an opportunity for us to add additional coverage there, Houston, it's long been a great Saia market, we have a, a single facility there.

So, you know, as we look at our geographic opportunities, it's as much about, you know, maybe enhancing the Northeast coverage, but it's also, in the legacy markets, finding places that we can move closer to the customer.

And usually, the payback, if you will, comes in multiple sort of legs, on the one leg, you certainly - you're providing a service to customer moving closer to them, your cut times are all improved, because you can actually meet the service requirements that the customer is looking for.

Maybe in the case of North Atlanta, we actually move closer to a part of town where we have a better chance to recruiting drivers. So that could be an opportunity. Or, you know, in the case of Dallas, Fort Worth a couple of years ago, it was taking some of the freight out of the two legacy terminals in Dallas and creating some operational efficiency.

So there are a variety of sort of value drivers that come out of these. And I think all those markets are ones that we could continue to add. We're opportunistic around it, we look for, you know, we look for existing properties are great to transition to, but in some markets, you have to make a Greenfield investment much like we did in North Atlanta..

Yeah, that's great. And then the follow up on that same topic. I know you guys don't give guidance, but there's very few scenarios you can kind of walk through where your cash flow is not going to exceed your CapEx for this year. And I know you don't like to keep a ton of cash on hand and definitely under levered.

Can you keep a bit of dry powder for some inorganic growth, if you will, and I know your four to six terminals this year, but is consolidation or M&A, a part of your growth strategy going forward?.

So you know, for us, we want to own strategic assets. So we've been very focused over time on protecting the balance sheet such that we could make those sort of dry powder investments when they become available. And certainly we would move quickly if there was something that we could find that would be a nice addition to the Saia footprint.

If you go back to ‘19, we added facilities that were leased facilities from a competitor that exited the market, we were in a position that we, you know, arguably would want – had preferred to own some of those.

But you know, the former market participant elected, they want to be industrial real estate investors, so they weren't willing to sell, but we were interested in operating. So we were okay, leasing those.

But if there a similar situation came about, we had the opportunity to buy, absolutely we do it if it you know, obviously, it's in the right location, right price and all that sort of thing. The balance sheet is set up for that. And that's sort of purposeful.

So that, you know, if we can find a way to drive growth beyond four to six terminals this year, we will, but it's going to be - it's dependent a bit on what we can find in marketplace that makes sense to fit into our network..

Got it. Understood. Thank you, Fritz..

Our next question comes from Ari Rosa with Bank of America..

Great, good morning, congratulations on strong results here. So, I want to talk about the operating ratio. And, obviously 2020 was challenging for a number of reasons, but the operating ratio results was obviously very strong.

Maybe you could share thoughts on both, what aspects of 2020 were maybe unique that allowed the operating ratio improvement to be what it was? And then, you know, bigger picture Fritz, it was encouraging to hear you talk about, you know, operating ratio for the next year or two, exceeding the target of 100 to 150 basis points of improvement.

Could you maybe talk about any structural barriers that you see, to get into kind of a low 80s type of operating ratio? Is that something that's doable with the current network? Or is there further expansion of the network or further kind of repricing of contracts that's needed to get there over kind of, you know, 3 to 5 year horizon?.

Yeah, so when think about what the opportunity is for the business, we don't see some - seeing an impediment that says we can't get to those sort of, you know, solidly into the ‘80s OR. When we look at the largest competitors, in the sort of national footprint, they - certainly they have some reach that we don't have.

So that means they can access some customers that we don't have. So perhaps in those cases, it, you know, expanding our footprint will help us drive to those sorts of - drive the OR, because we'll find that mix of business that makes sense. But when we think about the biggest value driver, it's always for us is going to be pricing and mix.

So if we take some of the best in class carriers that are out there, and we compare, you know, just for weight per shipment, the length of haul, the biggest difference is often pricing. So, if we can – and pricing kind of really takes two forms, its rate and it's also mix of business.

So, we see the opportunity, it's out there, it's a matter of about execution, providing that great service to customers. I mean, one of the things that is a real highlight of 2020 is what our ops team was able to do in the midst of a pandemic, they did a great job servicing the customer.

That puts us in a position that when we go have those conversations with the customer, if it's somebody that's new, we're in a position we can say, listen, our key service statistics are as good as anybody's, arguably better than many. So this is what it costs to do business with Saia.

On the flip side, you're in a position where you've gotten to the place where you're competing on an equal footing. So I think that there's really not a structural disadvantage. We just have got to continue to reach new customers, expand the network to support this, all kind of reps [ph] together..

Great. That's really terrific color. And looking forward to seeing you guys get to that level. Just for my second question. One of the things we had heard about from a number of carriers was just about congestion, particularly in the rail network, and maybe service levels not being quite what we would have hoped they might be.

Maybe you could talk about what kind of impact that had on results in fourth quarter.

And you know, if you're seeing any improvement as we now are in the fourth quarter?.

Yeah, no, no change, really. I mean, demands are still strong. So, we weren't like I mentioned earlier, we weren't able to get as much rail capacity as we might have used. Our mix of PT miles was about one third rail in the fourth quarter and two thirds truck and usually it's a little more balanced, maybe 40%, 45% rail.

So we - you know, that had the effect of raising our PT costs, well that because we were no in more interest [ph] than we would like to. So, yeah, I mean, that's, - you know, the service wasn't great. But primarily, I think it's just a factor of the congestion on the rails with all the demand..

Okay. Sounds good. Thanks for the time..

Sure..

Our next question comes from Stephanie Benjamin with Truist..

Hi, good morning..

Hi, good morning..

I know that you gave kind of your net CapEx expectations for the year and had obviously walk through your plans for a terminal expansion standpoint, so maybe you could walk through some other investments you may have, you know, anything behind technology or other productivity initiatives that you're expecting to roll out or enhance this year? Thanks..

Sure. Just in terms of the mix, I mean, we expect to spend more on real estate year-over-year, some of that may very likely be in the form of raw land. On the equipment side, you'll see this year, weighted more towards trailers and tractors.

Our tractor buyer will be down this year, year-over-year, probably a third to half of what it was a year ago, but the trailer purchase will be ramped up. And, you know, part of that’s, you know, more pumps [ph] required with our, you know, expanding network in our length of haul.

We're also seeing some opportunities with national accounts to grow our business and pick up some efficiencies, if we're able to put trailers with a customer, and then swap them, what you know, wait till they're full, and then come pick them up and swap them.

So we're going to have some more trailer buys to be in a position to offer those to customers. So the mix on equipment side look a little different, but, you know, we continue to see benefits from lowering the age of the fleet.

And, of course, all the safety enhancements that come, with our newest tractors, we think we're, getting a benefit of that, you know, and safety and claims expense over time. So we'll continue to invest, to keep the age of the fleet down and to get all those technologies..

Yeah. And I would just add, that we're going to be - we're on the safety equipment side, we're very focused. We're an early adopter of any available technology there. So that's part of our plan.

We'll roll out new ELD device this year, for fleet, handheld device, all those things that I think they add, not a position yet to point out the productivity enhancements, but they certainly will improve our driver experience, and our customer experience along with that. We continue to invest internally around data and analytics.

You know, the pricing themes that we have are really driven about our ability to capture and understand the costs that we have handling customers freight, and being in a position that we know what to charge for it. So, you know, those technology, those investments are ongoing, and they take the form, frankly, of both capital and expense.

But, we'll - those are so critical, we'll continue to invest and reinvest in those areas..

Great. Well, I really, really appreciate the time. Thank you..

Thanks..

Our next question comes from Tyler Brown with Raymond James..

Hey. Good morning, guys..

Hey, Tyler..

Hey, I apologize if this is in the 10-K discount [ph] remember.

But can you refresh us on the tractor and trailer fleet agents?.

Yeah, we've looked at the tractor age, actually a little bit below five years now, you know, coming into 2021. On the trailer side, it's probably sub eight these days..

Yeah..

And like I said, with the expansion on the trailer of this year..

Yeah. And then Doug, you made some interesting comments on that.

So you've seen more drop in hook requests? Is that feel like a trend change? Or is that just a market you weren't participating in quite as much in the past?.

Probably a little bit of both. Probably a little bit of both. I mean, we certainly gain you know, pickup efficiencies, if we have there enough equipment to do that for customers, I'd rather go there and pick up a trailer with 10 shipments on it and then go and pick up a trailer, you know, each day pick up one or two shipments.

So I'd say it's a little of both..

Okay, okay. That’s helpful….

We’re certainly in a position of able to invest, you know, to take advantage of it..

Yeah. Okay, interesting. And then, so Fritz the terminals that you are adding this year, you talked a little bit about this, but - so are those going to be Greenfield? Are they going to be purchases or leases? Just how does that break down? I know Atlanta is a Greenfield.

And then just big picture, what is your long-term philosophy on door ownership? Do you guys have a target there?.

So Tyler, yeah. So the North Atlanta is Greenfield, I would expect the others will be a combination of lease and purchase. They will likely be - because of that will be legacy facilities are in the market are available, I should say.

Ideally, you want to own the strategic assets, right? So, if you're in a position that you can have ownership in key markets, and you've got the key asset with that, we'll do that.

Now, unfortunately, in some cases, as we've seen, you can't get that, hit the – did control the asset, but you can kind of get there pretty closely if you get a good effective market based lease with some tenor to it, tenure to it. So it's in a position where we can effectively have a long-term asset.

So it's, you know, it hasn't changed for us, we prefer to own more. But we need to be in the market. So sometimes we're willing to compromise if we can't own..

Okay. Okay. And then my last one here. So Fritz, you talked a little bit about improved service.

But can you give us any color on kind of what on-time percentages, I had thought that your prior goal was maybe around 97? Could you maybe you can talk just using that as a bogey, if you're better than that these days?.

Yeah, we would say in the fourth quarter we’re at 98%. So we….

Okay….

Continue to push that. And that's critical for the customers. I mean, you think about it like this, if you can do what you say you promise to a customer, you have a better opportunity to charge for it. If you take care of their freight, there's an opportunity to charge for it.

So that's critical mass CEO [ph] survey data came out in Q4, and across the board, we saw improvement. That was exciting to see. So all those things are points of differentiation, and those are an opportunity for us to charge..

Yeah, absolutely. I appreciate the time, guys. Thanks..

Thanks, Tyler..

And we'll take our next question from Amit Mehrotra with Deutsche Bank..

Hey. Thanks for letting me have a couple follow ups here. Fritz, I was just wondering if you can give us an update on the new Memphis facility, I think that's a, you know, pretty big deal for the network from a density and cost perspective.

If you can just help us think about, the impact of those two things from opening that Memphis facility, I think back in October?.

Yeah, no, it's a beautiful facility, well-positioned, we get plenty of capacity, really, is ideal for its position, its location and the ability for us to grow for the foreseeable future of that facility. So that's been fantastic.

You know, I don't really have a carve out for that, I would tell you that it's - that's part of the long-term growth of the company, right? That's sort of a foundational brake facility for us. And, you know, it's all part of supporting our longer range growth..

But, has it allowed you to close smaller break facilities? As maybe you guys have been able to build direct loads between major demand centers? I mean, is there kind of a cost melt-away that occurs by a lot….

That good point, Amit. I mean, there's been some of that, I don't have a number to break out for you. But that's certainly having a well-positioned break facility like that with plenty of capacity.

Certainly, our regional sort of next day brake operations that we had historically, as a regional carrier, as we become a national carrier, we don't need that anymore. And having a Memphis facility position, just sort of absorb that. That fantastic.

And, you know, that's part of the success that you saw in the fourth quarter, and I think it only gets better going forward..

Okay. And then just a couple of very quick ones for me, for Doug, the yield x-fuel ticked down a little bit sequentially, we typically don't see that and length of haul was also up sequentially, I guess weight per shipment was up sequentially. We typically don't see that either third quarter to fourth quarter.

But can you talk about why yield x-fuel actually ticked down sequentially was just the weight dynamics or is there something else?.

Yeah. I mean, you mentioned all the factors that length of haul would help you a little bit and the weight was - you know, weight's been really strong. So sequential down doesn't really bother me though with the kind of revenue per shipment x-fuel we're getting. But yeah, you've got to weigh those factors..

And then D&A [ph] I know you guys are picking up CapEx a little bit, CapEx intensity, what's the headwind on D&A [ph] that we should expect this year?.

Yeah, I mean, I think I think you should still figure you know, low double-digit percentage change year-over-year, but I mean, as a percent of revenue it probably tracks about the same as it in 2020..

Got it. Okay. Thank you very much. Appreciate it..

Thanks, Amit..

And that concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Holz, I'm sorry, Fritz Holzgrefe for any additional or closing remarks..

Thank you to all on the call. We appreciate your interest in long term support at Saia and look forward to an exciting year in 2021, as we continue to execute on our plan. Thank you and have a good day..

And that does conclude today's conference. We thank you for your participation. You may now disconnect..