March 18, 2025 • 40 mins
Saia’s expansion plans are helping it mitigate weak less-than-truckload (LTL) demand, but that also comes with higher costs and margin pressures as new facilities build density. The company added 21 new facilities with plans to open up to six in 2025. Tonnage has increased 12-13% during the first two months of the year, while its competitors are experiencing mid- to high-single-digit declines. In this episode of the Talking Transports podcast, Saia’s President and CEO Fritz Holzgrefe joins Lee Klaskow, Bloomberg Intelligence’s senior transportation and logistics analyst, to discuss the outlook for the LTL market and the company’s network build-out. Capital spending will remain elevated this year even after declining 28% from 2024, as Saia continues to expand. Holzgrefe also talks about the driver market, the competitive landscape and how he went from peanuts to trucking.
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Episode Transcript
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Speaker 1 (00:07):
Hi everyone, this is Lee Klaskow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Klaskaw, Senior Freight Transportation Logistics AANDLES at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
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Bloomberg terminal, on LinkedIn or on Twitter at Logistics Lee.
Now onto our episode. We're delighted to have today a
(00:48):
return guests. Fritz holdgref Sia's president and chief executive Officer.
He joined the company as chief financial officer in twenty
fourteen and transition to the role of president and Chief
Operating Officer and John twenty nineteen. He's also a member
of the board of directors. He holds a master's degree
in business from Washington University. In Saint Louis and a
(01:08):
Batchelor's degree in economics from the University of Notre Dame.
Speaker 2 (01:12):
Fritz.
Speaker 1 (01:12):
Welcome back to the podcast. Thanks for joining us.
Speaker 2 (01:14):
Great to be here, Lee, Thanks for the opportunity.
Speaker 1 (01:16):
All right, So, I don't know if everyone heard our
first episode together, So why don't you let people know
a little bit about SIA.
Speaker 2 (01:23):
Sure? So, SIA is a now forty eight state national
LTL provider. We're based down in a suburb of Atlanta.
We embarked two decades ago on a national expansion and
it slowed for a bit, but then began in earnest
in twenty seventeen, and we have added sixty nine new
(01:43):
facilities in that period of time and now are proud
to say that we operate in all forty eight states.
So big year for us in twenty twenty four.
Speaker 1 (01:51):
Okay, let's break this down just a little further. LTL
lesson truckload. What exactly is that?
Speaker 2 (01:56):
So our customers are any number of shippers. It could
be any large big box retailers, to manufacturers, to consumer
package goods companies. Our shipments typically weigh fourteen hundred pounds.
They usually go nine hundred miles and they go through
a networks set up that we currently operate two hundred
and thirteen facilities, so that that freight will get routed
(02:17):
through that network, much like an airline going through airline hubs.
Speaker 1 (02:21):
Great, and so you mentioned you are growing and that
growth is coming organically through an expansion plan. Can you
talk about, you know, February business, because I know you
recently came out with tonnage and shipping information for the month.
Speaker 2 (02:35):
Yeah, so we're really excited. Last year we opened twenty
one facilities across the network and expanding that. If you
look at our tonnage update for both January and February,
two thirds of the growth are reported roughly twelve percent
in February and thirteen or so in January those tons
came from two thirds of that came from facilities we
(02:55):
opened in the last year. So we're really excited to
see customers are accepting our service and respect our service,
look to continue to grow with us. And that's been
a big part of what you've seen from our growth
here in the last not only last year, but into
the first couple of months of this year.
Speaker 1 (03:12):
So if two thirds of the growth is coming from
these new facilities, that mean a third of the growth
is coming from somewhere else, which is still very good
because a lot of your competitors are experiencing down tonnage
in the month of January and February. What's driving the
market share gains well.
Speaker 2 (03:28):
What we're excited about is that customers now have an
option that they can do business with that provides them
full forty eight state coverage. So now we're easier to
do business with So in the markets in which we've
long been in, we can now approach a customer and
offer the service to places that we couldn't do before,
and those customers are responding to us by saying, while
(03:48):
the service is fantastic, here's some additional opportunities for you
and the rest of the network that we hadn't been
able to touch before. And what's key to this is
that customers see this Our service levels at some of
the best in the industry, and that's provided us the
opportunity to provide that sort of forty eight state coverage
for them in both old and new facilities. We're solving
(04:11):
problems for customers and we're excited about that. Right.
Speaker 1 (04:14):
So, earnings expectations for the first quarter according to consensus.
The consensus is expecting two dollars and seventy nine cents
a share at the time we're recording this, which is
down about eighteen percent. A lot of that has to
do with looks looks of margin compression. Can you talk about,
you know, the higher costs that you're facing year of
a year.
Speaker 2 (04:32):
Sure, we were very proud of the twenty one facilities
that we've opened in the last year. We opened close
to thirty in the last two years. And you know
that those facilities in order to staff them appropriately and
provide the level of service that customers expect, we're probably
our cost structure reflects that expectation and leading to service
(04:52):
making sure we have ample headcount to meet expectations. Those
facilities don't operate as efficiently as our legacy facilities do,
so that it's a bit of a drag. You know.
We think this is a matter of time though, as
we grow out of this, and we think that's the
compelling long term story for Size, the opportunity to really
grow into this footprint.
Speaker 1 (05:12):
Yeah, because it's worth noting that, you know, we mentioned
the tonnage growth, but also consensus expecting in the first
quarter revenue to increase seven percent a year every year,
so you know, more revenue, a little less earnings, and
again because of that the high higher cost. So outside
of the growth that you're doing, which is which is
obviously you know, part of the story for SAYA, could
(05:34):
you talk about the the overarching demand backdrop for LTL.
Speaker 2 (05:38):
Because it hasn't been great, you know, And what I
would add is it hasn't changed much. So if I
if I go back for US and I look back
just a year, I think we would say that the
market was kind of tepid, you know, not a lot
of growth in any particular sector regionally, pretty consistent performance,
you know, for the last number of months. You know,
(06:00):
I don't know that it's necessarily changed much. I think
we're you know, I think after the election there was
some optimism. As I look at our results, I saw
pretty much the same environment. I think people were maybe
more favorable, but you know, that was more of a
sort of expectations looking forward. I don't know that we've
(06:20):
necessarily seen a change the macro backdrop up to the
last few days for sure. I mean, it's been pretty
consistent for US.
Speaker 1 (06:27):
Right, And could you talk about you know, you said
that the demand has been pretty consistent across industries. Roughly
what percentage of your business is retail versus industrial slash manufacturing.
Speaker 2 (06:37):
Historically we've had roughly two thirds of the book of
business has been industrial, a third retail or sort of
more consumer facing. About this time a year ago, we
saw a bit of a shift in the sense that
the industrial economy did not see the seasonal change that
you typically would see from Q one into Q two.
(07:00):
Our mix of business has thus changed actually more to
sixty forty, so sixty percent of the business industrial, more
waiting to retail. That's been a little bit of a
change that was a bit more challenging for us through
last year. Industrial customers really value the service. They really
value on time, damage free, and the result you'd see
(07:23):
margin structures that go along with that a little bit
more favorable for us anyway, not that the retail clients
aren't valued and important, but that industrial freight is really
what LTL is all about. So that changed last year,
was a bit of a drag through the year, and
it's remained pretty consistent up till today.
Speaker 1 (07:40):
So when you guys are all up in terms of
you know, ramping up these new facilities. Do you expect
that sixty forty split to continue or do you think
you're going to drift back more towards the industrial manufacturing
part of the economy.
Speaker 2 (07:53):
I would expect that it'll stay consistent with where we
are until we see the industrial economy get stronger. Which
interesting the growth that we've seen in the last year
is it really is very similar to what we said
I have seen in our legacy business, so that the
new openings haven't created a change of mix of business.
It's actually been very consistent with legacy business. So I
(08:14):
would expect as the industrial economy strengthens over time, we
would see that reflected in our results, and I think
you'll see the more traditional two thirds one third industrial
to retail sort of focus.
Speaker 1 (08:24):
Right I think all bets are off in terms of
trying to predict a future right now with noise from
tariffs out of Washington. But the ISM has been in
expansion territory for the last two months. How closely do
you follow ISM? Does it really track LTL demand for
you guys? Is there a lag that you usually see
with the ISM index?
Speaker 2 (08:44):
I would say that over time, it's a it's a
pretty reasonable proxy there's a good strong correlation between LTL
and ISM data. I would say I would caution though
that January and February typically are the eleventh and twelfth
most important months of the year for US, right, So
although we like favorable trends, I think it's early to
(09:05):
say that we're out of the woods there or that
there's been a fundamental change.
Speaker 1 (09:09):
And then March is usually significantly a better month.
Speaker 2 (09:12):
Absolutely in the first quarter, it's all about March. Yeah,
you know January and February, and this year definitely has
been the case. Your weather impacted for sure. Interestingly enough,
the weather patterns this year impacted more of our legacy
networks than it did the new northern facilities that we've added.
So so a little different challenge for us this year.
(09:34):
But you know LTL every year, particularly in the first quarter,
you generally have to deal with weather. That's part of the.
Speaker 1 (09:40):
Game, right, And so you know, we are in March.
We're kind of in early March now, and I know
you're not going to give exact numbers, but is what
you saw in February kind of rolling into to March
in terms of demand?
Speaker 2 (09:52):
You know, I think the macro is pretty similar I
don't know that there's much of a change there. It's
still early in March, though.
Speaker 1 (09:57):
Yeah, when do comparisons get more difficult for you guys
when it comes to a ton of growth.
Speaker 2 (10:02):
You know it'll continue through this year. I mean, if
you look at the twenty one facilities that we added,
they were weighted to sort of the second half of
the year, so we'll be comping against those openings from
last year for a while. I think it's more important.
What's interesting for us is that because of the change
in footprint, our legacy sort of comps are changing. We're
(10:24):
different business than we were just two years ago. Right.
Speaker 1 (10:27):
So one of the good things about the LTL market
is how consolidated it is, and that probably helps with
keeping pricing relatively rational compared to the truckload market, and
it usually means that you guys get higher multiples than
other transportation companies. Can you talk about the pricing environment
what it's been like so far in the first quarter.
Speaker 2 (10:49):
Listen, I think the pricing environment continues to be very
stable and practical. Frankly, this is an inflationary business. Capital
intensative business and business customer have high expectations in order
to meet those You have to be able to make
investments in the business, not only most significantly in people,
but real estate, technology, equipment, all those things that's all inflationary.
(11:14):
I think the industry realizes that, and I think what
you see in the pricing environment's reflective of that. People
need to be able to get a return on significant
capital outlays to support this level of type of business.
Speaker 1 (11:26):
Right And it's worth noting that one of your competitors,
when they came out with the February market update, you know,
they mentioned that pricing excluding fuels are charges at mid
single digits, and so, you know, you mentioned that you're
winning more share from your current customers, and is that
are you able to charge more for that additional share
(11:47):
because you're either offering more services or maybe you're on
time services has improved. Are you able to kind of
increase pricing on current customers.
Speaker 2 (12:00):
We continue to focus on pricing for all customers. You know,
as I pointed out, the inflation under inflationary elements of
this business are significant. As we expand the network, though,
and we have opportunities to better serve customers, we earned
that higher price. We're providing high levels of service into
these new markets and we're solving more problems for customers
(12:22):
those solutions. Did we deserve to get paid for that?
And I think we are able to do that. I
think you see customers looking for high quality of service.
Those customers typically realize they make money because the freight
gets delivered on time, not damaged when they need it.
That usually commands a higher price and or a more
(12:42):
market price, and I think that's what we're seeing.
Speaker 1 (12:46):
So pricing is a bedrock of the l tail industry,
and there were some concerns over the last couple of
weeks about pricing because of either you know, reports that
Amazon might be entering the ltail market or fed X
is you know, spinning off this lt L business. We'll
maybe talk about Amazon a little later, but what do
(13:06):
you think the impact of FedEx freight, which is FedEx
is less than truckload business, being an independent company. How
do you think that's going to impact competition? Because you know,
they said they are going out and looking for you know,
more sales people, so that just means that they're going
to be trying to get more business.
Speaker 2 (13:21):
I'm assuming sure. So when I think about it, I
start always start with kind of what what SAIA doing
for our customers, and we've got to continue to maintain
very high levels of service. We need to make sure
that we're easy to do business with. You know, as
competitors maybe you know FedEx Freight or others are going
through change that creates a disruption for a customer. Customers
(13:43):
are in business to sell their products, build their products,
move their products, not to solve the LTL providers problems.
So for us, it's a focus on what can we
do for our customers, and I think that's a differentiator.
I think with respect to you know, competitive environment for
great employees, we focus on keeping our team engaged, providing
(14:05):
opportunities for career development, making sure we're competitively paid and opportunity.
Part of a company is growing quickly. The great product.
That's frankly, if you've got a great product, if you're
in sales, that's something you want to sell, and if
you're easy to do business with for the customer, that's
something our folks can sell. That creates a good opportunity
for us. So we like the landscape that the opportunity
(14:26):
presents us. I think that frankly, if you're going to
be any LTL business, because of the nature the capital
required and the inflationary structure that's there. You need competitors
that are focused on returns in that business, and I
think that makes for a healthy, healthy environment. So to
the extent that the landscape are that the competitors are
ones that are focused on being in an LTL space,
(14:48):
I think that's that's a good thing.
Speaker 1 (14:49):
Overall, right, And so I guess on that note again,
there was like some press reports that Amazon may be
entering the LTL market. Do you have any thoughts about that?
Speaker 2 (14:59):
Yeah, I know, I can't really speak to Amazon. I mean,
that's less than a half a percent of our business
that is kind of influenced by Amazon. It's a very
very small part. People that have followed SAIA, I know
that we've been focused on an organic expansion since twenty seventeen,
and since that time, we have been involved in probably
one hundred and twenty or so real estate transactions, either
(15:22):
to support the openings of sixty nine new facilities since
seventeen or the thirty nine new locations that we have
relocated to over that intervening period. There have been a
handful of transactions that we didn't participate in, but we
were aware of LTL properties being traded, and I can
think of a single time once that we encountered Amazon
(15:43):
in any of those transactions, and they were I think
looking at a warehouse property. So I can't speak to
what they're doing. I can speak to what we're doing
and kind of what of our experience has been in
the marketplace. So that's what we've seen.
Speaker 1 (15:59):
I'm all skeptical of them going in and going head
to head with the legacy players. You think they would
have bought maybe some of those yellow facilities.
Speaker 2 (16:07):
I don't think they participate a transaction now.
Speaker 1 (16:10):
And you know you talk about service, how do you
benchmark service? What is service in LTL?
Speaker 2 (16:16):
Well, for us at Saya, we have a customer first
dashboard that we start to day with that every terminal
manager measures all the key elements of what matter to
a customer. We measure that on a daily basis. We
track the performance. It's everything from on time to deliveries
before exceptions, to any sort of element that would customer values.
(16:38):
We track that every day in our dashboards and we
follow up on that. We share that with our customers,
who share our employees. We all kind of worked the
same sheet of music so to speak. We realize that
we're in business to work for the customer, and so
it behooves us that everybody in our organization is aligned
to those dashboard metrics or all the KPIs that support
(17:00):
what customers need from us. That's how we measure ourselves,
and that's how customers measures us.
Speaker 1 (17:06):
Can you talk about just what a couple of KPIs are.
Speaker 2 (17:10):
On time service? Did you pick up the freight when
you said you were going to pick it up? Did
you deliver it when you said the customer expected to
be delivered?
Speaker 1 (17:18):
I feel like you're asking me the question, yes, we
did deliver.
Speaker 2 (17:20):
Yeah though. That's that's exactly how we think about it, though,
and that's how we measure ourselves. I phrase it in
those terms because that's how we talk about, right, what
are deliveries before exceptions? How many deliveries do we make
before there may have been a problem, not damage, but
may have been a problem. We measure those things, and
then I think we get customer verbatims on a daily basis,
(17:41):
and we follow up with the customer how do we do?
What can we do better? Those are all key elements
what customers expect from us.
Speaker 1 (17:49):
Obviously, you have goals and targets that you want everyone
to reach, you know, to improve upon, to build upon.
Can you share any like near term or aspirational targets
that you guys have from from a service standpoint.
Speaker 2 (18:02):
Listen, we measure ourselves in the Mastio scorecard comes out
every fall. We look at that and we want to
be the best. So our long term goal is to
be the best in that and not to be the biggest,
but be perceived as the best LTL provider. We think
when we have the opportunity where we have the full
network coverage, we stack up really really well. That's our
(18:25):
goal because we think that what comes to us then
is we have a lot of value that we create
for our customers and we create for the shareholders of
the company.
Speaker 1 (18:33):
Gotcha. You know, we couldn't have a conversation unfortunately without
talking about tariffs. So I'm going to ask the question,
how are all this talk of tariffs? How's that going
to impact sy, your network, your customers, and your bottom line?
Speaker 2 (18:47):
Well, I think there are a couple of things. I
think that the biggest at the highest level, you know,
I think people have to make a judgment as to
what the impact of tariffs may or may not have
on the industrial economy, right, and I think that you know,
if you have a thesis that says that will help
motivate facilitate reshoring or near shoring, that probably helps LTL.
(19:09):
I think in the short term, it creates a fair
amount of uncertainty. I think that makes it challenging for
customers to organize and run their business not knowing what
the cost structure is going to look like as teriffs
come and go. I do think that to the extent that,
you know, if we've had some certainty around that and
customers importing raw materials or goods into their facilities there,
(19:32):
tariff would indicate that they're that much more expensive. Right
for them to handle that, right, they're going to need
an LTL provider that does a good job delivering the
product on time, not damaged.
Speaker 1 (19:41):
Do you guys have any crossborder expecise.
Speaker 2 (19:44):
It's a little bit round three percent of our revenue.
Speaker 1 (19:46):
ABUSS and that's both on the north and the South.
Speaker 2 (19:48):
Yeah, most of it's north, okay.
Speaker 1 (19:52):
And then you know, I just a kind of a
network question. You know, what percentage of the linehul movements
are done by third party or and and and kind
of do you guys have plans to bringing more of
that in house? And is that just a function also
that percentage of the fact that you're bringing on these
new facilities and before you want to bring up in
(20:13):
your own assets, you want to have the density to do.
Speaker 2 (20:15):
So, we don't really have internal goals around how what
percentage of our miles are run are outsourced, So we're
load double digits in the fourth quarter as to what
the outsourced miles were. What we focus on primarily. Number one, however,
whatever form we use to run our line haul network,
number one thing it has to happen is we have
(20:36):
to meet customer expectations. Well the goods, will the freight
make it to where the customer needs it to be
delivered on time? First and foremost, can we make sure
we do that in a way that's not damage or
creating any kind of issue for the customer. We achieve that,
then we go find what's the cost optimal solution, so
we may keep our line haul miles outsourced at the
(20:56):
same level if we feel like over time that's cost effective.
But most importantly, it's got to take care of the
customer first. If we do that, we'll continue to use it,
but I think as you'll see over time, as we
continue to scale this network, naturally, I think that number
probably comes down. But we don't necessarily have a target
of you know, load single digits or something like that.
(21:17):
We just want to have a cost effective model that
meets service requirements for the customer. Right.
Speaker 1 (21:21):
I know drivers are important to SAIA, They're obviously also
important to the overall economy. Can you talk about like
a driver that comes to Saiya do they do they
start in the pick up and delivery and go to
line haul? Do they start in line haul and then
they want to be pick up and delivery?
Speaker 2 (21:36):
Like?
Speaker 1 (21:37):
And also I don't know if you can talk about it,
but like does one pay better than the other?
Speaker 2 (21:42):
Like? What? What? What? What? What?
Speaker 1 (21:43):
Has it worked with drivers for Siya?
Speaker 2 (21:45):
And there's a third opportunity for someone come and work
in our doc We put you through a doctor driver
program and we'll train drivers internally as well, so we'll
recruit drivers that have experience from the outside. The come
inies either city drive line drivers, and over an individual's
career you might see them move back and forth between
city or in the line roles. They can go back
(22:09):
and forth. Typically the line drivers, it's in over the
road driving at night, they're at home most often, not
every day, but you know many are every day, some
are every other day or every couple of days. That's
usually the highest paying job. But you'll find is we'll
have some city drivers to do really well that drive
in the city and then also volunteer to maybe drive
(22:30):
in the line over the weekend or on alternate between roles.
That's one of the great things about having a successful
company like Saya is that our drivers are like taking
on many different roles. So it's been we've been able
to provide those kind of career opportunities for them. So typically,
you know, there's some variation, but traditionally a historic that
(22:51):
people will focus on either line or city. But we're
really proud of the folks. We also train up through
the ranks. Right.
Speaker 1 (22:57):
You know, we mentioned in the beginning of the conversation
that one was up real double digits so far through February,
and shipment's probably up mid single digits. So obviously the
weight per shipment has changed. Can you talk about, you know,
what is driving that change and what does that do
to you know, revenue per one hundred weight, which is
a measurement for pricing for the company.
Speaker 2 (23:20):
Yeah, Traditionally cost kind of follow shipments, right, So if
you have a shipment, higher weighted shipment, you typically have
the similar cost structure as a lower weighted shipment. Typically
higher weighted shipment give you a higher revenue per bill.
So for us, as we look at more attractive freight,
we want to have freight that will economically more viable.
(23:42):
And that's not to say the lighter weighted shipments can't
be if they're priced appropriately, can't be can't be successful
with that as well. So I think in the short
term that has provided a little bit of margin tailwind
as we've added more freight that is conducive to matching
cost and getting paid appropriately. But you typically would see
(24:02):
higher weighted shipment gets you higher revenue per bill.
Speaker 1 (24:05):
And is that going to still be the case because
I know the industry is moving the way they price
their freight. Can you talk about that change?
Speaker 2 (24:14):
Yeah, I think what's going to be important over time,
and I think what you're talking about is the more
of a dimension based strategy or program. I think what's
critical about that is if you look at our trailers
typically they cube out before they weigh out, right, So
you're we're really selling airspace on a trailer. So it's
critically important that we optimize the capacity we do have.
(24:36):
And I think to the extent that the industry evolves
to more of a dimension based process, I think that
only makes sense, and that's economically makes sense, and I
think it'll be good for customers as well.
Speaker 1 (24:47):
Okay, great, So you know, we talked a lot about
the LTL market, but that's not all you guys do, right,
Can you talk about your other businesses.
Speaker 2 (24:54):
Yeah, We've got a smaller about three four percent of
our revenue base as a company called link X, which
does everything from logistics, warehousing, brokerage. It has been a
fantastic add on to our core LTL business. We actually
(25:14):
have added last mile work within that group as well.
It's just all about providing a solution to the customer.
We want to be in a position that we can
solve a customer's problem, and we found that that business
is a nice add on that will look to grow
over time. Great.
Speaker 1 (25:30):
I know you're not necessarily in the truckload market, but
obviously the truckload market is going to impact you. Whether
it's costs because of doing line haul. But can you
talk about, you know, what a tightening truckload market can
do for LTL demand.
Speaker 2 (25:43):
Yeah, I think that in a tightening truckload market, that's
probably a macro backdrop that's a little bit more positive
than it is right now. I think what you'll see
is more freight go back to the traditional modes, you know, LTL.
To the extent that some LTL is ended up in
sort of the truckload sort of market, that'll kind of
gravitates it way back, you know. I think in a
(26:05):
market like that, you probably have a greater demand for
drivers in the truckload space, so that'll create a related
demand in LTL. So I think that'll disappoint to more
inflationary costs, and we've got to make sure that we
provide a great place for people to work and we
charge for the service we provide. I think is where
that ultimately leads SIA. But I think overall that probably
(26:27):
is good for the overall economy because it speaks to
the health of the economy more than anything else.
Speaker 1 (26:31):
Right, I've been to a bunch of transportation conferences lately.
Outside of tariffs, everyone wants to talk about AI. So
I'll ask the question, is saia, what are you guys
doing with machine learning and AI to become a more
productive organization?
Speaker 2 (26:47):
Listen, SAIA has been we call it often before AI
became the term, we were calling a machine learning. So
how we optimize and route our line hauled network, how
we run our city operations, those are all forms of AI. Right,
that's machine learning. It is about data. This is a
(27:08):
massively data intensive business. So every opportunity that you have
to more effectively priced use data around pricing to more
effectively cost the services you provide, you have an opportunity
to create value in it. So I think there's a
lot of opportunity for maybe not the gen AI but
in the early stages, but I think you'll see more
and more utilization of tools that help us facilitate and
(27:32):
optimize all the data that's in this business.
Speaker 1 (27:35):
And when you're talking about LTL services, do you have
one service or do you have like a premium service
or an economy type service or is it just like
one service, Like if you need to go to New
York to LA, it's going to take three days and
it's going to take or maybe four days. I don't know.
Speaker 2 (27:50):
Yeah, listen, we'll have expedited service we have you know,
we'll provide whatever the customer might need to specialize their
LTL delivery can do that. It may require using our
link link X last mile offering. It may be appointment windows,
it could be retail assurance sort of products. Those are
(28:12):
all essentially the fundamental LTL business of moving a pallet
of freight, and the variations are meeting whatever the customer's
expectations or needs might be.
Speaker 1 (28:21):
And you know, you mentioned final mile in the logistics business,
but is Saiah delivering like stuff to people's house like
white glove service, like installing washing machines or furniture.
Speaker 2 (28:33):
Now we have we partner with folks on some of
those sort of offerings and it's very limited basis. We're
sort of sticking our toe in the water, if you will.
Speaker 1 (28:41):
Okay, hope the water's warm for you. Yeah. You know
you mentioned I guess a couple of months ago that
you know your capax outlook for seven hundred million and
twenty twenty five. That's down from about a billion last year.
A can you talk about, you know, what's driving the
decline and also maybe break out, you know, how you
spend your money on equipment, technology, and all that sort
(29:03):
of stuff.
Speaker 2 (29:04):
Yeah, So last year the billion dollar number included about
almost two hundred and fifty million dollars of real estate
that we purchased through the Yellow auction. This year the
number of seven hundred and twenty million includes about fifty
million dollars of technology, and then the balance is split
fifty to fifty between real estate and equipment, with most
(29:24):
of the equipment by this year being power. Last year,
we've actually invested six and purchased six thousand trailers to
help support the upsized fleet. So it's part of the
investment required to support the business. So you know, our
fleet were very pleased with the kind of the average age,
one of the newest fleets in the industry, and we
(29:47):
continue to invest in that reliability for customers. Those are
all things that are important to the customer. And the
real estate investment is that's continued to upsize that the
facilities that we have and relocate into new ones and
add some new ones along the way.
Speaker 1 (30:03):
And in terms of like maintenance CAPBAC because you're still growing.
So I'm assuming the seven that you say, seven hundred
and seven and fifty seven hundred and twenty seven hundred
and twenty Okay, let'll split the difference. Seven hundred and
twenty million is still considered growth cap backs. What is
kind of more of a maintenance number.
Speaker 2 (30:18):
Maintenance is probably be somewhere between two and three hundred
million dollars. We're still trying to find what that home
is going to be for us, you know, when we're
growing like we are right now, I don't know exactly
what steady state is right we're What I would say though,
is that the under the fundamentals to be able to
put a class state tractor on a road with a
(30:40):
set of pups, you know, you're looking at well over
two hundred thousand dollars and that's not getting any cheaper.
So that maintenance capital number keeps growing. And if you
add in the you know, two hundred and thirteen facilities today,
we intend to keep those to be some of the
best in the business. That's going to retire require ongoing
investment as well. So you know, I think that number
(31:01):
of the two to three hundred million dollar maintenance number
is that's current for today. I think it's probably goes
up from here.
Speaker 1 (31:07):
And for those that aren't familiar with trucking. Pups are
not dogs. They're small trailers.
Speaker 2 (31:11):
What are they?
Speaker 1 (31:11):
Twenty twenty foot.
Speaker 2 (31:12):
Trailers, twenty eight We operate twenty foot.
Speaker 1 (31:15):
Trailer twenty eight foot trailers. So if you see the
two trailers next to each other in tandem, that those
are the two pups that are that are going along.
You know, you mentioned equipment and you know the new fleet.
Is there a make of trucks that you kind of
like focus on. Do you just buy like one brand or.
Speaker 2 (31:31):
Do you know, we we spread it around a little bit.
We like to see what the technology is it's out there,
see what the reliability. You know, we're primarily freightliner buyers.
We also have some Volvos and some pack our products,
and we have a couple of Tesla trucks, so we've
we've kind of got the full footprint there, right.
Speaker 1 (31:53):
And do you care about the engine, like do you like,
oh we want a Commons engine or it doesn't really?
Speaker 2 (31:59):
We want reliable first and foremost and cost of ownership.
So we we like all the products where we've got
the freight liner products, the Cummins product, we're learning about
the Tesla platform, so all those those are all. It's
important for us to not put all of our eggs
in one basket, so to speak.
Speaker 1 (32:17):
Sure, you mentioned you have a couple of Tesla trucks,
So what other alternative trucks are you testing out besides electric?
Speaker 2 (32:25):
You know, we continue to look through LNG in the
orange sort of opportunities today that there aren't many options
out there. There aren't hydrogen options to really study at scale.
The battery electrics we have is that's not at scale,
but it's an opportunity. It's important for us to understand
(32:46):
what's available.
Speaker 1 (32:47):
And would the electric be for your pickup and delivery
network or your linehole network.
Speaker 2 (32:51):
It could be for either, you know, depending on what
the future looks like. We better make sure we understand
where we need to be.
Speaker 1 (32:58):
Okay, So the ones that you you have are actually
in service?
Speaker 2 (33:02):
Are they? Yeah? We've got two in service?
Speaker 1 (33:04):
Okay, and have you been what what have is? I
guess the feedback on those performances.
Speaker 2 (33:10):
A lot of great technology ranges not comparable to diesel right. Performance,
Driver satisfactions high right. That's important. Of course, when you're
driving one, you're aren't many others on the road, so
your your stand out A bit, particularly into Siah Red,
which is good. But what we've seen early on the
(33:30):
performance has been good. You know, we're still trying to
figure out what the long term business case will be.
Speaker 1 (33:36):
Okay, so let's talk about stocks a little bit. Your
public company tick our S A I A, you know,
the your your peer group. So we look at all
the publicly traded uh, folks, So the B I L
t L peer group is down. I guess when I
wrote this was twenty percent year to date, so underperforming
the S and P. Can you talk about what's driving
(33:57):
that that underperformance from your vantage point.
Speaker 2 (34:01):
Because when I look at it, I tend to focus
really on the things that we can control. I think
that our you know, we're pleased with our execution and
result from twenty four into twenty five, So I think
that's positive. I think when people see how that develops
for US into twenty five, they'll be pleased what they
see with these with what they see in the market
(34:22):
from US. I think if you look at the group
in general, I think that the impact is probably reflective
what people's view of the macro economy is. The uncertainty
that kind of comes along with that. I don't think
that the underlying LTL business has fundamentally changed. I think
this is more of more of a macro sort of situation,
(34:43):
and I think that's probably reflected in the share price
for the whole group. So that's why in this stage
our focus is, let's focus on taking care of the customer,
and that focus is where we need to be.
Speaker 1 (34:56):
And when you're trying to increase margins, what has a
bigger influence one hundred basis points of like tonnage growth
or one hundred basis points of pricing.
Speaker 2 (35:04):
Oh, pricing pricing. I mean, listen, the if you're providing
high level of service and you can do the same
level of service and just simply charge more for it
or find customers, it's value that more that's going to
be beneficial far beyond any growth and shipments and tonnage.
Speaker 1 (35:23):
You know, we were talking about truckers earlier in this market.
You know, it seems like the economy. I'm not going
to say it's it's it's decelerating. I guess we could
say that. You know, according to Bloomberg terminal consensuses that
there could be a recession with a twenty five percent probability.
That's up from a low of twenty percent in December,
(35:44):
so you know, people are getting a little more pessimistic.
I'm just curious, you know, how is it to how
is it for you guys to attract and retain drivers
in today's market.
Speaker 2 (35:54):
We've got to be a great place to work first
and foremost. If you get that, solve that problem, then
position where you can recruit drivers of this market. You
got to be very competitive on paying benefits. We think
we are the overall. If you look at the driver population,
it is aging. I don't think as many people are
coming into the profession as they have historically, so it
(36:15):
makes it competitive. At this stage, we've been able to
compete on the points that I highlighted, but you know,
I think in a more robust macro backdrop that might
be a bit more challenging to compete. And I think
then it comes down to what can you offer the driver? Right?
Speaker 1 (36:35):
And I guess you know because coming into transportation views
with somewhat of a different career, you did a little
career change. When I was looking at your LinkedIn profile,
you worked for it was it the peanut company? Yeah,
so how did you go from peanuts to trucks?
Speaker 2 (36:51):
Well, what's interesting about peanuts or or any of the
other businesses I've ever worked in. Logistics a really really
important part of the supply chain in the business, right,
So if you look at big AG commodities, picking up
the crop from the farmer, how you handle it, how
you process it, and you end up getting it to
the customer. When you think about those things, the elements
(37:13):
that you use to manage and optimize that business, that's
kind of like an LTL business in many regards. So
for me, it wasn't that big of a step to
go from an asset intensive AG business that to an
LTL business because it's asset intensive, a lot of data
here business that you've really got to be focused on
(37:34):
the market and the customers. Those things are similar across
every company I've ever worked for, so I think those
are sometimes you can benefit the new company by bringing
some of the experiences from other industries.
Speaker 1 (37:45):
And I'm just curious, just so just talking about maybe
the history of SAYA, you know what change from you
guys to be like, Okay, we're in this network now
we want to go national.
Speaker 2 (37:56):
Like what was that change?
Speaker 1 (37:57):
Like? Was that a boardroom change? Was that the c suite?
Speaker 2 (38:01):
How did that come about, Well, listen, it was actually
if you think about sia's history, it's one hundred years now.
It's always been the plan, particularly after the after deregulation,
and it was a slow churn for a number of years.
We were actually at one point part of the yellow
sort of portfolio. We were spun out as a public company.
(38:22):
We went through sort of the two thousand to twenty
ten period looking for bolton acquisitions, and that was an
arduous process, particularly leading into the financial crisis, but that
was the first steps in expanding that national network. So
we get through that, we survived the financial crisis, We
began to make the business investable again sort of in
(38:44):
the early sort of twenty thirteen fourteen, had to look
focused on providing a better product of our customers, started
adding the data analytics tools and the people needed to
be able to start in twenty seventeen an organic expansion
from there's a business that sort of bolt on acquisitions
are pretty challenging, so we saw that and we saw
(39:06):
the experience of that in our earlier history, so we
had the opportunity to expand again in the position, in
the financial position to do it. We developed a competency
around organic expansion, and that's really what we've done for
the last you know, since twenty seventeen. So it's been
part of the long term plan for Siah for all
the way back to the beginning, just taking time right.
Speaker 1 (39:30):
Great, well, I wish you continued success in building and
growing and I really want to thank you again for
coming into our studios and to do this again once
again with Bloomberg Intelligence Talking transports.
Speaker 2 (39:42):
Great, thank you for the opportunity and share the story
about Sia.
Speaker 1 (39:47):
And I want to thank you for tuning in. If
you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to here conversations with C suite executives, shippers, regulators,
decision makers within the freight markets. Also, if you want
to learn more about the freight transportation markets, please check
out our work on the Bloomberg terminal at Bigo and
(40:08):
on social media. That's about it all the time we
have Thank you and take care.
Hi everyone, this is Lee Klaskow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Klaskaw, Senior Freight Transportation Logistics AANDLES at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
great guests onto the podcast like the one we have today,
and we need your support. So please, if you enjoy
this podcast, share it, like it, and leave a comment. Also,
if you have any ideas for future episodes you just
want to talk transports, please hit me up on the
Bloomberg terminal, on LinkedIn or on Twitter at Logistics Lee.
Now onto our episode. We're delighted to have today a
(00:48):
return guests. Fritz holdgref Sia's president and chief executive Officer.
He joined the company as chief financial officer in twenty
fourteen and transition to the role of president and Chief
Operating Officer and John twenty nineteen. He's also a member
of the board of directors. He holds a master's degree
in business from Washington University. In Saint Louis and a
(01:08):
Batchelor's degree in economics from the University of Notre Dame.
Speaker 2 (01:12):
Fritz.
Speaker 1 (01:12):
Welcome back to the podcast. Thanks for joining us.
Speaker 2 (01:14):
Great to be here, Lee, Thanks for the opportunity.
Speaker 1 (01:16):
All right, So, I don't know if everyone heard our
first episode together, So why don't you let people know
a little bit about SIA.
Speaker 2 (01:23):
Sure? So, SIA is a now forty eight state national
LTL provider. We're based down in a suburb of Atlanta.
We embarked two decades ago on a national expansion and
it slowed for a bit, but then began in earnest
in twenty seventeen, and we have added sixty nine new
(01:43):
facilities in that period of time and now are proud
to say that we operate in all forty eight states.
So big year for us in twenty twenty four.
Speaker 1 (01:51):
Okay, let's break this down just a little further. LTL
lesson truckload. What exactly is that?
Speaker 2 (01:56):
So our customers are any number of shippers. It could
be any large big box retailers, to manufacturers, to consumer
package goods companies. Our shipments typically weigh fourteen hundred pounds.
They usually go nine hundred miles and they go through
a networks set up that we currently operate two hundred
and thirteen facilities, so that that freight will get routed
(02:17):
through that network, much like an airline going through airline hubs.
Speaker 1 (02:21):
Great, and so you mentioned you are growing and that
growth is coming organically through an expansion plan. Can you
talk about, you know, February business, because I know you
recently came out with tonnage and shipping information for the month.
Speaker 2 (02:35):
Yeah, so we're really excited. Last year we opened twenty
one facilities across the network and expanding that. If you
look at our tonnage update for both January and February,
two thirds of the growth are reported roughly twelve percent
in February and thirteen or so in January those tons
came from two thirds of that came from facilities we
(02:55):
opened in the last year. So we're really excited to
see customers are accepting our service and respect our service,
look to continue to grow with us. And that's been
a big part of what you've seen from our growth
here in the last not only last year, but into
the first couple of months of this year.
Speaker 1 (03:12):
So if two thirds of the growth is coming from
these new facilities, that mean a third of the growth
is coming from somewhere else, which is still very good
because a lot of your competitors are experiencing down tonnage
in the month of January and February. What's driving the
market share gains well.
Speaker 2 (03:28):
What we're excited about is that customers now have an
option that they can do business with that provides them
full forty eight state coverage. So now we're easier to
do business with So in the markets in which we've
long been in, we can now approach a customer and
offer the service to places that we couldn't do before,
and those customers are responding to us by saying, while
(03:48):
the service is fantastic, here's some additional opportunities for you
and the rest of the network that we hadn't been
able to touch before. And what's key to this is
that customers see this Our service levels at some of
the best in the industry, and that's provided us the
opportunity to provide that sort of forty eight state coverage
for them in both old and new facilities. We're solving
(04:11):
problems for customers and we're excited about that. Right.
Speaker 1 (04:14):
So, earnings expectations for the first quarter according to consensus.
The consensus is expecting two dollars and seventy nine cents
a share at the time we're recording this, which is
down about eighteen percent. A lot of that has to
do with looks looks of margin compression. Can you talk about,
you know, the higher costs that you're facing year of
a year.
Speaker 2 (04:32):
Sure, we were very proud of the twenty one facilities
that we've opened in the last year. We opened close
to thirty in the last two years. And you know
that those facilities in order to staff them appropriately and
provide the level of service that customers expect, we're probably
our cost structure reflects that expectation and leading to service
(04:52):
making sure we have ample headcount to meet expectations. Those
facilities don't operate as efficiently as our legacy facilities do,
so that it's a bit of a drag. You know.
We think this is a matter of time though, as
we grow out of this, and we think that's the
compelling long term story for Size, the opportunity to really
grow into this footprint.
Speaker 1 (05:12):
Yeah, because it's worth noting that, you know, we mentioned
the tonnage growth, but also consensus expecting in the first
quarter revenue to increase seven percent a year every year,
so you know, more revenue, a little less earnings, and
again because of that the high higher cost. So outside
of the growth that you're doing, which is which is
obviously you know, part of the story for SAYA, could
(05:34):
you talk about the the overarching demand backdrop for LTL.
Speaker 2 (05:38):
Because it hasn't been great, you know, And what I
would add is it hasn't changed much. So if I
if I go back for US and I look back
just a year, I think we would say that the
market was kind of tepid, you know, not a lot
of growth in any particular sector regionally, pretty consistent performance,
you know, for the last number of months. You know,
(06:00):
I don't know that it's necessarily changed much. I think
we're you know, I think after the election there was
some optimism. As I look at our results, I saw
pretty much the same environment. I think people were maybe
more favorable, but you know, that was more of a
sort of expectations looking forward. I don't know that we've
(06:20):
necessarily seen a change the macro backdrop up to the
last few days for sure. I mean, it's been pretty
consistent for US.
Speaker 1 (06:27):
Right, And could you talk about you know, you said
that the demand has been pretty consistent across industries. Roughly
what percentage of your business is retail versus industrial slash manufacturing.
Speaker 2 (06:37):
Historically we've had roughly two thirds of the book of
business has been industrial, a third retail or sort of
more consumer facing. About this time a year ago, we
saw a bit of a shift in the sense that
the industrial economy did not see the seasonal change that
you typically would see from Q one into Q two.
(07:00):
Our mix of business has thus changed actually more to
sixty forty, so sixty percent of the business industrial, more
waiting to retail. That's been a little bit of a
change that was a bit more challenging for us through
last year. Industrial customers really value the service. They really
value on time, damage free, and the result you'd see
(07:23):
margin structures that go along with that a little bit
more favorable for us anyway, not that the retail clients
aren't valued and important, but that industrial freight is really
what LTL is all about. So that changed last year,
was a bit of a drag through the year, and
it's remained pretty consistent up till today.
Speaker 1 (07:40):
So when you guys are all up in terms of
you know, ramping up these new facilities. Do you expect
that sixty forty split to continue or do you think
you're going to drift back more towards the industrial manufacturing
part of the economy.
Speaker 2 (07:53):
I would expect that it'll stay consistent with where we
are until we see the industrial economy get stronger. Which
interesting the growth that we've seen in the last year
is it really is very similar to what we said
I have seen in our legacy business, so that the
new openings haven't created a change of mix of business.
It's actually been very consistent with legacy business. So I
(08:14):
would expect as the industrial economy strengthens over time, we
would see that reflected in our results, and I think
you'll see the more traditional two thirds one third industrial
to retail sort of focus.
Speaker 1 (08:24):
Right I think all bets are off in terms of
trying to predict a future right now with noise from
tariffs out of Washington. But the ISM has been in
expansion territory for the last two months. How closely do
you follow ISM? Does it really track LTL demand for
you guys? Is there a lag that you usually see
with the ISM index?
Speaker 2 (08:44):
I would say that over time, it's a it's a
pretty reasonable proxy there's a good strong correlation between LTL
and ISM data. I would say I would caution though
that January and February typically are the eleventh and twelfth
most important months of the year for US, right, So
although we like favorable trends, I think it's early to
(09:05):
say that we're out of the woods there or that
there's been a fundamental change.
Speaker 1 (09:09):
And then March is usually significantly a better month.
Speaker 2 (09:12):
Absolutely in the first quarter, it's all about March. Yeah,
you know January and February, and this year definitely has
been the case. Your weather impacted for sure. Interestingly enough,
the weather patterns this year impacted more of our legacy
networks than it did the new northern facilities that we've added.
So so a little different challenge for us this year.
(09:34):
But you know LTL every year, particularly in the first quarter,
you generally have to deal with weather. That's part of the.
Speaker 1 (09:40):
Game, right, And so you know, we are in March.
We're kind of in early March now, and I know
you're not going to give exact numbers, but is what
you saw in February kind of rolling into to March
in terms of demand?
Speaker 2 (09:52):
You know, I think the macro is pretty similar I
don't know that there's much of a change there. It's
still early in March, though.
Speaker 1 (09:57):
Yeah, when do comparisons get more difficult for you guys
when it comes to a ton of growth.
Speaker 2 (10:02):
You know it'll continue through this year. I mean, if
you look at the twenty one facilities that we added,
they were weighted to sort of the second half of
the year, so we'll be comping against those openings from
last year for a while. I think it's more important.
What's interesting for us is that because of the change
in footprint, our legacy sort of comps are changing. We're
(10:24):
different business than we were just two years ago. Right.
Speaker 1 (10:27):
So one of the good things about the LTL market
is how consolidated it is, and that probably helps with
keeping pricing relatively rational compared to the truckload market, and
it usually means that you guys get higher multiples than
other transportation companies. Can you talk about the pricing environment
what it's been like so far in the first quarter.
Speaker 2 (10:49):
Listen, I think the pricing environment continues to be very
stable and practical. Frankly, this is an inflationary business. Capital
intensative business and business customer have high expectations in order
to meet those You have to be able to make
investments in the business, not only most significantly in people,
but real estate, technology, equipment, all those things that's all inflationary.
(11:14):
I think the industry realizes that, and I think what
you see in the pricing environment's reflective of that. People
need to be able to get a return on significant
capital outlays to support this level of type of business.
Speaker 1 (11:26):
Right And it's worth noting that one of your competitors,
when they came out with the February market update, you know,
they mentioned that pricing excluding fuels are charges at mid
single digits, and so, you know, you mentioned that you're
winning more share from your current customers, and is that
are you able to charge more for that additional share
(11:47):
because you're either offering more services or maybe you're on
time services has improved. Are you able to kind of
increase pricing on current customers.
Speaker 2 (12:00):
We continue to focus on pricing for all customers. You know,
as I pointed out, the inflation under inflationary elements of
this business are significant. As we expand the network, though,
and we have opportunities to better serve customers, we earned
that higher price. We're providing high levels of service into
these new markets and we're solving more problems for customers
(12:22):
those solutions. Did we deserve to get paid for that?
And I think we are able to do that. I
think you see customers looking for high quality of service.
Those customers typically realize they make money because the freight
gets delivered on time, not damaged when they need it.
That usually commands a higher price and or a more
(12:42):
market price, and I think that's what we're seeing.
Speaker 1 (12:46):
So pricing is a bedrock of the l tail industry,
and there were some concerns over the last couple of
weeks about pricing because of either you know, reports that
Amazon might be entering the ltail market or fed X
is you know, spinning off this lt L business. We'll
maybe talk about Amazon a little later, but what do
(13:06):
you think the impact of FedEx freight, which is FedEx
is less than truckload business, being an independent company. How
do you think that's going to impact competition? Because you know,
they said they are going out and looking for you know,
more sales people, so that just means that they're going
to be trying to get more business.
Speaker 2 (13:21):
I'm assuming sure. So when I think about it, I
start always start with kind of what what SAIA doing
for our customers, and we've got to continue to maintain
very high levels of service. We need to make sure
that we're easy to do business with. You know, as
competitors maybe you know FedEx Freight or others are going
through change that creates a disruption for a customer. Customers
(13:43):
are in business to sell their products, build their products,
move their products, not to solve the LTL providers problems.
So for us, it's a focus on what can we
do for our customers, and I think that's a differentiator.
I think with respect to you know, competitive environment for
great employees, we focus on keeping our team engaged, providing
(14:05):
opportunities for career development, making sure we're competitively paid and opportunity.
Part of a company is growing quickly. The great product.
That's frankly, if you've got a great product, if you're
in sales, that's something you want to sell, and if
you're easy to do business with for the customer, that's
something our folks can sell. That creates a good opportunity
for us. So we like the landscape that the opportunity
(14:26):
presents us. I think that frankly, if you're going to
be any LTL business, because of the nature the capital
required and the inflationary structure that's there. You need competitors
that are focused on returns in that business, and I
think that makes for a healthy, healthy environment. So to
the extent that the landscape are that the competitors are
ones that are focused on being in an LTL space,
(14:48):
I think that's that's a good thing.
Speaker 1 (14:49):
Overall, right, And so I guess on that note again,
there was like some press reports that Amazon may be
entering the LTL market. Do you have any thoughts about that?
Speaker 2 (14:59):
Yeah, I know, I can't really speak to Amazon. I mean,
that's less than a half a percent of our business
that is kind of influenced by Amazon. It's a very
very small part. People that have followed SAIA, I know
that we've been focused on an organic expansion since twenty seventeen,
and since that time, we have been involved in probably
one hundred and twenty or so real estate transactions, either
(15:22):
to support the openings of sixty nine new facilities since
seventeen or the thirty nine new locations that we have
relocated to over that intervening period. There have been a
handful of transactions that we didn't participate in, but we
were aware of LTL properties being traded, and I can
think of a single time once that we encountered Amazon
(15:43):
in any of those transactions, and they were I think
looking at a warehouse property. So I can't speak to
what they're doing. I can speak to what we're doing
and kind of what of our experience has been in
the marketplace. So that's what we've seen.
Speaker 1 (15:59):
I'm all skeptical of them going in and going head
to head with the legacy players. You think they would
have bought maybe some of those yellow facilities.
Speaker 2 (16:07):
I don't think they participate a transaction now.
Speaker 1 (16:10):
And you know you talk about service, how do you
benchmark service? What is service in LTL?
Speaker 2 (16:16):
Well, for us at Saya, we have a customer first
dashboard that we start to day with that every terminal
manager measures all the key elements of what matter to
a customer. We measure that on a daily basis. We
track the performance. It's everything from on time to deliveries
before exceptions, to any sort of element that would customer values.
(16:38):
We track that every day in our dashboards and we
follow up on that. We share that with our customers,
who share our employees. We all kind of worked the
same sheet of music so to speak. We realize that
we're in business to work for the customer, and so
it behooves us that everybody in our organization is aligned
to those dashboard metrics or all the KPIs that support
(17:00):
what customers need from us. That's how we measure ourselves,
and that's how customers measures us.
Speaker 1 (17:06):
Can you talk about just what a couple of KPIs are.
Speaker 2 (17:10):
On time service? Did you pick up the freight when
you said you were going to pick it up? Did
you deliver it when you said the customer expected to
be delivered?
Speaker 1 (17:18):
I feel like you're asking me the question, yes, we
did deliver.
Speaker 2 (17:20):
Yeah though. That's that's exactly how we think about it, though,
and that's how we measure ourselves. I phrase it in
those terms because that's how we talk about, right, what
are deliveries before exceptions? How many deliveries do we make
before there may have been a problem, not damage, but
may have been a problem. We measure those things, and
then I think we get customer verbatims on a daily basis,
(17:41):
and we follow up with the customer how do we do?
What can we do better? Those are all key elements
what customers expect from us.
Speaker 1 (17:49):
Obviously, you have goals and targets that you want everyone
to reach, you know, to improve upon, to build upon.
Can you share any like near term or aspirational targets
that you guys have from from a service standpoint.
Speaker 2 (18:02):
Listen, we measure ourselves in the Mastio scorecard comes out
every fall. We look at that and we want to
be the best. So our long term goal is to
be the best in that and not to be the biggest,
but be perceived as the best LTL provider. We think
when we have the opportunity where we have the full
network coverage, we stack up really really well. That's our
(18:25):
goal because we think that what comes to us then
is we have a lot of value that we create
for our customers and we create for the shareholders of
the company.
Speaker 1 (18:33):
Gotcha. You know, we couldn't have a conversation unfortunately without
talking about tariffs. So I'm going to ask the question,
how are all this talk of tariffs? How's that going
to impact sy, your network, your customers, and your bottom line?
Speaker 2 (18:47):
Well, I think there are a couple of things. I
think that the biggest at the highest level, you know,
I think people have to make a judgment as to
what the impact of tariffs may or may not have
on the industrial economy, right, and I think that you know,
if you have a thesis that says that will help
motivate facilitate reshoring or near shoring, that probably helps LTL.
(19:09):
I think in the short term, it creates a fair
amount of uncertainty. I think that makes it challenging for
customers to organize and run their business not knowing what
the cost structure is going to look like as teriffs
come and go. I do think that to the extent that,
you know, if we've had some certainty around that and
customers importing raw materials or goods into their facilities there,
(19:32):
tariff would indicate that they're that much more expensive. Right
for them to handle that, right, they're going to need
an LTL provider that does a good job delivering the
product on time, not damaged.
Speaker 1 (19:41):
Do you guys have any crossborder expecise.
Speaker 2 (19:44):
It's a little bit round three percent of our revenue.
Speaker 1 (19:46):
ABUSS and that's both on the north and the South.
Speaker 2 (19:48):
Yeah, most of it's north, okay.
Speaker 1 (19:52):
And then you know, I just a kind of a
network question. You know, what percentage of the linehul movements
are done by third party or and and and kind
of do you guys have plans to bringing more of
that in house? And is that just a function also
that percentage of the fact that you're bringing on these
new facilities and before you want to bring up in
(20:13):
your own assets, you want to have the density to do.
Speaker 2 (20:15):
So, we don't really have internal goals around how what
percentage of our miles are run are outsourced, So we're
load double digits in the fourth quarter as to what
the outsourced miles were. What we focus on primarily. Number one, however,
whatever form we use to run our line haul network,
number one thing it has to happen is we have
(20:36):
to meet customer expectations. Well the goods, will the freight
make it to where the customer needs it to be
delivered on time? First and foremost, can we make sure
we do that in a way that's not damage or
creating any kind of issue for the customer. We achieve that,
then we go find what's the cost optimal solution, so
we may keep our line haul miles outsourced at the
(20:56):
same level if we feel like over time that's cost effective.
But most importantly, it's got to take care of the
customer first. If we do that, we'll continue to use it,
but I think as you'll see over time, as we
continue to scale this network, naturally, I think that number
probably comes down. But we don't necessarily have a target
of you know, load single digits or something like that.
(21:17):
We just want to have a cost effective model that
meets service requirements for the customer. Right.
Speaker 1 (21:21):
I know drivers are important to SAIA, They're obviously also
important to the overall economy. Can you talk about like
a driver that comes to Saiya do they do they
start in the pick up and delivery and go to
line haul? Do they start in line haul and then
they want to be pick up and delivery?
Speaker 2 (21:36):
Like?
Speaker 1 (21:37):
And also I don't know if you can talk about it,
but like does one pay better than the other?
Speaker 2 (21:42):
Like? What? What? What? What? What?
Speaker 1 (21:43):
Has it worked with drivers for Siya?
Speaker 2 (21:45):
And there's a third opportunity for someone come and work
in our doc We put you through a doctor driver
program and we'll train drivers internally as well, so we'll
recruit drivers that have experience from the outside. The come
inies either city drive line drivers, and over an individual's
career you might see them move back and forth between
city or in the line roles. They can go back
(22:09):
and forth. Typically the line drivers, it's in over the
road driving at night, they're at home most often, not
every day, but you know many are every day, some
are every other day or every couple of days. That's
usually the highest paying job. But you'll find is we'll
have some city drivers to do really well that drive
in the city and then also volunteer to maybe drive
(22:30):
in the line over the weekend or on alternate between roles.
That's one of the great things about having a successful
company like Saya is that our drivers are like taking
on many different roles. So it's been we've been able
to provide those kind of career opportunities for them. So typically,
you know, there's some variation, but traditionally a historic that
(22:51):
people will focus on either line or city. But we're
really proud of the folks. We also train up through
the ranks. Right.
Speaker 1 (22:57):
You know, we mentioned in the beginning of the conversation
that one was up real double digits so far through February,
and shipment's probably up mid single digits. So obviously the
weight per shipment has changed. Can you talk about, you know,
what is driving that change and what does that do
to you know, revenue per one hundred weight, which is
a measurement for pricing for the company.
Speaker 2 (23:20):
Yeah, Traditionally cost kind of follow shipments, right, So if
you have a shipment, higher weighted shipment, you typically have
the similar cost structure as a lower weighted shipment. Typically
higher weighted shipment give you a higher revenue per bill.
So for us, as we look at more attractive freight,
we want to have freight that will economically more viable.
(23:42):
And that's not to say the lighter weighted shipments can't
be if they're priced appropriately, can't be can't be successful
with that as well. So I think in the short
term that has provided a little bit of margin tailwind
as we've added more freight that is conducive to matching
cost and getting paid appropriately. But you typically would see
(24:02):
higher weighted shipment gets you higher revenue per bill.
Speaker 1 (24:05):
And is that going to still be the case because
I know the industry is moving the way they price
their freight. Can you talk about that change?
Speaker 2 (24:14):
Yeah, I think what's going to be important over time,
and I think what you're talking about is the more
of a dimension based strategy or program. I think what's
critical about that is if you look at our trailers
typically they cube out before they weigh out, right, So
you're we're really selling airspace on a trailer. So it's
critically important that we optimize the capacity we do have.
(24:36):
And I think to the extent that the industry evolves
to more of a dimension based process, I think that
only makes sense, and that's economically makes sense, and I
think it'll be good for customers as well.
Speaker 1 (24:47):
Okay, great, So you know, we talked a lot about
the LTL market, but that's not all you guys do, right,
Can you talk about your other businesses.
Speaker 2 (24:54):
Yeah, We've got a smaller about three four percent of
our revenue base as a company called link X, which
does everything from logistics, warehousing, brokerage. It has been a
fantastic add on to our core LTL business. We actually
(25:14):
have added last mile work within that group as well.
It's just all about providing a solution to the customer.
We want to be in a position that we can
solve a customer's problem, and we found that that business
is a nice add on that will look to grow
over time. Great.
Speaker 1 (25:30):
I know you're not necessarily in the truckload market, but
obviously the truckload market is going to impact you. Whether
it's costs because of doing line haul. But can you
talk about, you know, what a tightening truckload market can
do for LTL demand.
Speaker 2 (25:43):
Yeah, I think that in a tightening truckload market, that's
probably a macro backdrop that's a little bit more positive
than it is right now. I think what you'll see
is more freight go back to the traditional modes, you know, LTL.
To the extent that some LTL is ended up in
sort of the truckload sort of market, that'll kind of
gravitates it way back, you know. I think in a
(26:05):
market like that, you probably have a greater demand for
drivers in the truckload space, so that'll create a related
demand in LTL. So I think that'll disappoint to more
inflationary costs, and we've got to make sure that we
provide a great place for people to work and we
charge for the service we provide. I think is where
that ultimately leads SIA. But I think overall that probably
(26:27):
is good for the overall economy because it speaks to
the health of the economy more than anything else.
Speaker 1 (26:31):
Right, I've been to a bunch of transportation conferences lately.
Outside of tariffs, everyone wants to talk about AI. So
I'll ask the question, is saia, what are you guys
doing with machine learning and AI to become a more
productive organization?
Speaker 2 (26:47):
Listen, SAIA has been we call it often before AI
became the term, we were calling a machine learning. So
how we optimize and route our line hauled network, how
we run our city operations, those are all forms of AI. Right,
that's machine learning. It is about data. This is a
(27:08):
massively data intensive business. So every opportunity that you have
to more effectively priced use data around pricing to more
effectively cost the services you provide, you have an opportunity
to create value in it. So I think there's a
lot of opportunity for maybe not the gen AI but
in the early stages, but I think you'll see more
and more utilization of tools that help us facilitate and
(27:32):
optimize all the data that's in this business.
Speaker 1 (27:35):
And when you're talking about LTL services, do you have
one service or do you have like a premium service
or an economy type service or is it just like
one service, Like if you need to go to New
York to LA, it's going to take three days and
it's going to take or maybe four days. I don't know.
Speaker 2 (27:50):
Yeah, listen, we'll have expedited service we have you know,
we'll provide whatever the customer might need to specialize their
LTL delivery can do that. It may require using our
link link X last mile offering. It may be appointment windows,
it could be retail assurance sort of products. Those are
(28:12):
all essentially the fundamental LTL business of moving a pallet
of freight, and the variations are meeting whatever the customer's
expectations or needs might be.
Speaker 1 (28:21):
And you know, you mentioned final mile in the logistics business,
but is Saiah delivering like stuff to people's house like
white glove service, like installing washing machines or furniture.
Speaker 2 (28:33):
Now we have we partner with folks on some of
those sort of offerings and it's very limited basis. We're
sort of sticking our toe in the water, if you will.
Speaker 1 (28:41):
Okay, hope the water's warm for you. Yeah. You know
you mentioned I guess a couple of months ago that
you know your capax outlook for seven hundred million and
twenty twenty five. That's down from about a billion last year.
A can you talk about, you know, what's driving the
decline and also maybe break out, you know, how you
spend your money on equipment, technology, and all that sort
(29:03):
of stuff.
Speaker 2 (29:04):
Yeah, So last year the billion dollar number included about
almost two hundred and fifty million dollars of real estate
that we purchased through the Yellow auction. This year the
number of seven hundred and twenty million includes about fifty
million dollars of technology, and then the balance is split
fifty to fifty between real estate and equipment, with most
(29:24):
of the equipment by this year being power. Last year,
we've actually invested six and purchased six thousand trailers to
help support the upsized fleet. So it's part of the
investment required to support the business. So you know, our
fleet were very pleased with the kind of the average age,
one of the newest fleets in the industry, and we
(29:47):
continue to invest in that reliability for customers. Those are
all things that are important to the customer. And the
real estate investment is that's continued to upsize that the
facilities that we have and relocate into new ones and
add some new ones along the way.
Speaker 1 (30:03):
And in terms of like maintenance CAPBAC because you're still growing.
So I'm assuming the seven that you say, seven hundred
and seven and fifty seven hundred and twenty seven hundred
and twenty Okay, let'll split the difference. Seven hundred and
twenty million is still considered growth cap backs. What is
kind of more of a maintenance number.
Speaker 2 (30:18):
Maintenance is probably be somewhere between two and three hundred
million dollars. We're still trying to find what that home
is going to be for us, you know, when we're
growing like we are right now, I don't know exactly
what steady state is right we're What I would say though,
is that the under the fundamentals to be able to
put a class state tractor on a road with a
(30:40):
set of pups, you know, you're looking at well over
two hundred thousand dollars and that's not getting any cheaper.
So that maintenance capital number keeps growing. And if you
add in the you know, two hundred and thirteen facilities today,
we intend to keep those to be some of the
best in the business. That's going to retire require ongoing
investment as well. So you know, I think that number
(31:01):
of the two to three hundred million dollar maintenance number
is that's current for today. I think it's probably goes
up from here.
Speaker 1 (31:07):
And for those that aren't familiar with trucking. Pups are
not dogs. They're small trailers.
Speaker 2 (31:11):
What are they?
Speaker 1 (31:11):
Twenty twenty foot.
Speaker 2 (31:12):
Trailers, twenty eight We operate twenty foot.
Speaker 1 (31:15):
Trailer twenty eight foot trailers. So if you see the
two trailers next to each other in tandem, that those
are the two pups that are that are going along.
You know, you mentioned equipment and you know the new fleet.
Is there a make of trucks that you kind of
like focus on. Do you just buy like one brand or.
Speaker 2 (31:31):
Do you know, we we spread it around a little bit.
We like to see what the technology is it's out there,
see what the reliability. You know, we're primarily freightliner buyers.
We also have some Volvos and some pack our products,
and we have a couple of Tesla trucks, so we've
we've kind of got the full footprint there, right.
Speaker 1 (31:53):
And do you care about the engine, like do you like,
oh we want a Commons engine or it doesn't really?
Speaker 2 (31:59):
We want reliable first and foremost and cost of ownership.
So we we like all the products where we've got
the freight liner products, the Cummins product, we're learning about
the Tesla platform, so all those those are all. It's
important for us to not put all of our eggs
in one basket, so to speak.
Speaker 1 (32:17):
Sure, you mentioned you have a couple of Tesla trucks,
So what other alternative trucks are you testing out besides electric?
Speaker 2 (32:25):
You know, we continue to look through LNG in the
orange sort of opportunities today that there aren't many options
out there. There aren't hydrogen options to really study at scale.
The battery electrics we have is that's not at scale,
but it's an opportunity. It's important for us to understand
(32:46):
what's available.
Speaker 1 (32:47):
And would the electric be for your pickup and delivery
network or your linehole network.
Speaker 2 (32:51):
It could be for either, you know, depending on what
the future looks like. We better make sure we understand
where we need to be.
Speaker 1 (32:58):
Okay, So the ones that you you have are actually
in service?
Speaker 2 (33:02):
Are they? Yeah? We've got two in service?
Speaker 1 (33:04):
Okay, and have you been what what have is? I
guess the feedback on those performances.
Speaker 2 (33:10):
A lot of great technology ranges not comparable to diesel right. Performance,
Driver satisfactions high right. That's important. Of course, when you're
driving one, you're aren't many others on the road, so
your your stand out A bit, particularly into Siah Red,
which is good. But what we've seen early on the
(33:30):
performance has been good. You know, we're still trying to
figure out what the long term business case will be.
Speaker 1 (33:36):
Okay, so let's talk about stocks a little bit. Your
public company tick our S A I A, you know,
the your your peer group. So we look at all
the publicly traded uh, folks, So the B I L
t L peer group is down. I guess when I
wrote this was twenty percent year to date, so underperforming
the S and P. Can you talk about what's driving
(33:57):
that that underperformance from your vantage point.
Speaker 2 (34:01):
Because when I look at it, I tend to focus
really on the things that we can control. I think
that our you know, we're pleased with our execution and
result from twenty four into twenty five, So I think
that's positive. I think when people see how that develops
for US into twenty five, they'll be pleased what they
see with these with what they see in the market
(34:22):
from US. I think if you look at the group
in general, I think that the impact is probably reflective
what people's view of the macro economy is. The uncertainty
that kind of comes along with that. I don't think
that the underlying LTL business has fundamentally changed. I think
this is more of more of a macro sort of situation,
(34:43):
and I think that's probably reflected in the share price
for the whole group. So that's why in this stage
our focus is, let's focus on taking care of the customer,
and that focus is where we need to be.
Speaker 1 (34:56):
And when you're trying to increase margins, what has a
bigger influence one hundred basis points of like tonnage growth
or one hundred basis points of pricing.
Speaker 2 (35:04):
Oh, pricing pricing. I mean, listen, the if you're providing
high level of service and you can do the same
level of service and just simply charge more for it
or find customers, it's value that more that's going to
be beneficial far beyond any growth and shipments and tonnage.
Speaker 1 (35:23):
You know, we were talking about truckers earlier in this market.
You know, it seems like the economy. I'm not going
to say it's it's it's decelerating. I guess we could
say that. You know, according to Bloomberg terminal consensuses that
there could be a recession with a twenty five percent probability.
That's up from a low of twenty percent in December,
(35:44):
so you know, people are getting a little more pessimistic.
I'm just curious, you know, how is it to how
is it for you guys to attract and retain drivers
in today's market.
Speaker 2 (35:54):
We've got to be a great place to work first
and foremost. If you get that, solve that problem, then
position where you can recruit drivers of this market. You
got to be very competitive on paying benefits. We think
we are the overall. If you look at the driver population,
it is aging. I don't think as many people are
coming into the profession as they have historically, so it
(36:15):
makes it competitive. At this stage, we've been able to
compete on the points that I highlighted, but you know,
I think in a more robust macro backdrop that might
be a bit more challenging to compete. And I think
then it comes down to what can you offer the driver? Right?
Speaker 1 (36:35):
And I guess you know because coming into transportation views
with somewhat of a different career, you did a little
career change. When I was looking at your LinkedIn profile,
you worked for it was it the peanut company? Yeah,
so how did you go from peanuts to trucks?
Speaker 2 (36:51):
Well, what's interesting about peanuts or or any of the
other businesses I've ever worked in. Logistics a really really
important part of the supply chain in the business, right,
So if you look at big AG commodities, picking up
the crop from the farmer, how you handle it, how
you process it, and you end up getting it to
the customer. When you think about those things, the elements
(37:13):
that you use to manage and optimize that business, that's
kind of like an LTL business in many regards. So
for me, it wasn't that big of a step to
go from an asset intensive AG business that to an
LTL business because it's asset intensive, a lot of data
here business that you've really got to be focused on
(37:34):
the market and the customers. Those things are similar across
every company I've ever worked for, so I think those
are sometimes you can benefit the new company by bringing
some of the experiences from other industries.
Speaker 1 (37:45):
And I'm just curious, just so just talking about maybe
the history of SAYA, you know what change from you
guys to be like, Okay, we're in this network now
we want to go national.
Speaker 2 (37:56):
Like what was that change?
Speaker 1 (37:57):
Like? Was that a boardroom change? Was that the c suite?
Speaker 2 (38:01):
How did that come about, Well, listen, it was actually
if you think about sia's history, it's one hundred years now.
It's always been the plan, particularly after the after deregulation,
and it was a slow churn for a number of years.
We were actually at one point part of the yellow
sort of portfolio. We were spun out as a public company.
(38:22):
We went through sort of the two thousand to twenty
ten period looking for bolton acquisitions, and that was an
arduous process, particularly leading into the financial crisis, but that
was the first steps in expanding that national network. So
we get through that, we survived the financial crisis, We
began to make the business investable again sort of in
(38:44):
the early sort of twenty thirteen fourteen, had to look
focused on providing a better product of our customers, started
adding the data analytics tools and the people needed to
be able to start in twenty seventeen an organic expansion
from there's a business that sort of bolt on acquisitions
are pretty challenging, so we saw that and we saw
(39:06):
the experience of that in our earlier history, so we
had the opportunity to expand again in the position, in
the financial position to do it. We developed a competency
around organic expansion, and that's really what we've done for
the last you know, since twenty seventeen. So it's been
part of the long term plan for Siah for all
the way back to the beginning, just taking time right.
Speaker 1 (39:30):
Great, well, I wish you continued success in building and
growing and I really want to thank you again for
coming into our studios and to do this again once
again with Bloomberg Intelligence Talking transports.
Speaker 2 (39:42):
Great, thank you for the opportunity and share the story
about Sia.
Speaker 1 (39:47):
And I want to thank you for tuning in. If
you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to here conversations with C suite executives, shippers, regulators,
decision makers within the freight markets. Also, if you want
to learn more about the freight transportation markets, please check
out our work on the Bloomberg terminal at Bigo and
(40:08):
on social media. That's about it all the time we
have Thank you and take care.
Host
Lee Klaskow
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