Executive Summary / Key Takeaways

• Strategic Network Dominance: Saia's aggressive organic expansion, culminating in a national footprint of 214 terminals, is the cornerstone of its long-term investment thesis, enabling superior customer service and significant future operating leverage.
• Operational Resilience Amidst Headwinds: Despite a muted macroeconomic environment and inflationary cost pressures, Saia demonstrated sequential operational improvements in Q3 2025, with adjusted cost per shipment decreasing 0.7% and ramping markets achieving a sub-95% operating ratio.
• Disciplined Capital Allocation & Outlook: The company is moderating capital expenditures to $550-$600 million in 2025 and an estimated $400-$500 million in 2026, focusing on maturing existing assets while projecting incremental operating ratio and income improvement in 2026.
• Technological Differentiators Drive Efficiency: Saia's continuous investment in AI-based network optimization tools is a key competitive advantage, reducing shipment "touches" and enhancing linehaul efficiency, directly contributing to cost management and service reliability.
• Pricing Power and Market Share Capture: With a national network matching larger peers, Saia is strategically closing its "revenue per bill gap" through disciplined pricing actions, including recent general rate increases, and leveraging its enhanced service offering to capture higher-value freight.

Saia's Strategic Blueprint: A National Network for LTL Leadership

Saia, Inc., founded in 1924, has evolved into a prominent transportation provider, primarily offering national less-than-truckload (LTL) services, which historically account for approximately 97% of its revenue. The company also extends its reach with non-asset truckload, expedited, and logistics services across North America. Operating in the highly competitive and capital-intensive LTL industry, Saia's overarching strategy centers on organic expansion to build density, enhance its customer value proposition, and drive profitable growth. This strategy is particularly critical in an industry characterized by inflationary costs and the need for substantial capital investment to generate returns.

The LTL market is a vital component of the broader supply chain, catering to shipments that do not require a full truckload. It serves a diverse customer base across numerous industries, from home improvement stores to manufacturers, where individual destinations often require pallets rather than full truckloads of goods. This unique characteristic ensures the LTL industry's permanent place in the supply chain, even as freight characteristics may evolve over time. Saia competes directly with major players like Old Dominion Freight Line , XPO Logistics , FedEx Freight , and ArcBest Corporation (ARCB), all vying for market share through service quality, network efficiency, and pricing.

Saia's competitive positioning is that of a value-focused, reliable provider, strategically expanding its footprint to compete more directly with larger, national peers. While some competitors may boast greater scale or advanced technological integration, Saia differentiates itself through its extensive, growing network and a strong emphasis on customer-first service. The company's management believes its service quality "stacks up as well, if not better than others," a critical factor in warranting premium pricing.

Technological Edge: Optimizing the Network with AI

A foundational strength and key differentiator for Saia is its continuous investment in technology, particularly in AI-based network optimization tools. These aren't new initiatives but rather an ongoing evolution of capabilities that have been integral to the company's success for years. These tools are deployed across various operational aspects, including network redesign, linehaul optimization, route planning for city operations, and staffing model management.

The tangible benefits of this technology are significant and directly impact operational efficiency and cost control. For instance, AI models are used to reroute freight, aiming to reduce "handles"—the number of times a shipment is touched as it moves through the network. Management noted that "handles" were at a "peak" in Q1 2025 but have been consistently worked down since, improving efficiency. Furthermore, these tools enable the strategic deployment of "triple" operations in certain lanes, such as across Ohio, which can lead to a "30% reduction in cost compared to a traditional two parts connected." This capability to build density and run direct linehauls, bypassing intermediate break operations, is a direct outcome of leveraging advanced analytics.

For investors, this technological differentiation translates into a stronger competitive moat and improved financial performance. By optimizing freight flow and reducing touches, Saia can enhance service reliability and transit times, justifying its pricing strategy. The ability to achieve cost efficiencies, even in a challenging volume environment, underscores the power of these tools. As the network matures, these technological advantages are expected to drive "really significant incrementals" in profitability, contributing to a more competitive cost structure and bolstering Saia's market position.

The Growth Story: Expansion and Operational Maturation

Saia's history is marked by a deliberate organic expansion strategy, which gained significant momentum from 2017 onwards. The year 2024 was particularly transformative, with the company opening 21 new terminals and relocating nine others, bringing its total to 214 facilities and establishing a national footprint across the 48 contiguous states. This aggressive expansion, including the acquisition of terminals from Yellow Corporation (YELL) in January 2024, was complemented by a record investment in over 6,000 trailers and the onboarding of over 1,300 new team members.

This network expansion is central to Saia's growth narrative. The 39 terminals opened since the beginning of 2022, referred to as "ramping markets," are critical to this story. These newer facilities are demonstrating promising operational maturation, with their operating ratio improving by over 100 basis points sequentially from Q2 to Q3 2025, now operating at a sub-95% OR. This improvement is particularly notable given that 17 of these terminals had just completed their first year of operations. The growth in these ramping markets, which saw a 4.2% sequential improvement in shipments per workday in Q3 2025, is primarily driven by existing national account customers leveraging Saia's expanded network.

The company's strategy is not merely to fill these new terminals quickly but to build density and "monetize this network expansion" over the long term. These underutilized facilities offer a "really interesting, compelling incremental margin opportunity" as new business is added at market pricing. This organic growth, unlike that of many competitors, positions Saia to capture a greater "share of wallet" with existing customers and attract new field accounts, reinforcing its value proposition as a comprehensive LTL solution provider.

Financial Performance and Operational Resilience in Q3 2025

Saia's third-quarter 2025 financial results reflect a period of operational resilience amidst a challenging macroeconomic backdrop. Operating revenue for Q3 2025 was $839.6 million, relatively flat compared to the prior year, decreasing by 0.3%. This was influenced by a 1.9% decline in LTL shipments per workday and a 1.5% decrease in LTL tonnage per workday. Despite these volume trends, LTL revenue per shipment, excluding fuel surcharge, saw a modest increase of 0.3% to $294.35, driven by strategic business mix changes and pricing actions.

Consolidated operating income for Q3 2025 stood at $118.6 million, down from $125.2 million in Q3 2024. This figure includes a net positive impact of $14.5 million from real estate transactions (a $16.4 million gain on disposal offset by a $1.9 million impairment loss). Excluding this, the adjusted operating income was $104.1 million. The operating ratio for the quarter was 85.9%, deteriorating from 85.1% in Q3 2024. On an adjusted basis, the operating ratio was 87.6%. Diluted earnings per share were $3.22, compared to $3.46 in the prior year quarter, with adjusted diluted EPS at $2.81.

Cost management remained a key focus. Salaries, wages, and employee benefits increased by $2.9 million, primarily due to higher group health insurance costs (approximately $7 million) and workers' compensation costs (approximately $2 million), reflecting inflationary pressures on claims. These increases were partially offset by reduced wages as the company matched hours to volume, leading to a 3% year-over-year reduction in headcount. Purchased transportation expenses decreased by $6.3 million, driven by fewer miles and lower costs per mile. Depreciation and amortization expense, however, rose by $9.4 million, reflecting ongoing investments in revenue equipment, the expanded terminal network, and technology. Impressively, the adjusted cost per shipment improved sequentially by 0.7% from Q2 2025, underscoring the team's focus on operational execution and efficiency. Saia also maintained a strong cargo claims ratio of 0.54% in Q3 2025, marking its fourth consecutive quarter below 0.6%, a company record for service quality.

Liquidity remains robust, with net cash provided by operating activities reaching $457.7 million for the first nine months of 2025, an increase from $419 million in the same period last year. Working capital significantly improved to $201.1 million at September 30, 2025, from $90.7 million a year prior. The company's debt structure is well-managed, with $118 million in outstanding borrowings under its $600 million Revolving Credit Facility and $100 million in senior notes from a Private Shelf Agreement, all while remaining in compliance with debt covenants.

Strategic Pricing and Competitive Dynamics

Saia's competitive strategy is deeply intertwined with its pricing initiatives and the maturation of its national network. Management views the pricing environment as "disciplined and focused," acknowledging the inherently inflationary nature of the LTL business. The company actively pursues pricing and mix optimization, with approximately 75% of its operating revenue subject to specific customer price negotiations. Saia implemented a 7.9% general rate increase (GRI) on October 21, 2024, and a 5.9% GRI on October 1, 2025, for customers comprising about 25% of its operating revenue. Contractual renewal rates averaged 5.1% in Q3 2025.

A key aspect of Saia's competitive positioning is its deliberate effort to close the "revenue per bill gap" with national peers, which management estimates to be around "15 points." With a national network now comparable in footprint to larger rivals like Old Dominion Freight Line (ODFL), Saia believes it can command higher pricing, as its service quality "stacks up as well, if not better than others." The expanded network allows for "conversations at a different level" with customers, making Saia "harder to replace" and its pricing "stickier" as it solves more of their transportation problems.

While Saia's growth has been strong, particularly in its ramping markets, the company acknowledges that in a looser capacity environment, shippers may explore lower-priced options from regional carriers or other modes. However, Saia's strategy is not to chase volume with unsustainable rates but to secure business that appropriately compensates for its service and capital investments. Its asset-based approach and focus on reliability provide a stable service in volatile markets, contrasting with competitors who might prioritize technological innovation (like XPO Logistics (XPO)) or global reach (like FedEx Freight (FDX)). Saia's ability to leverage its cost structure, even with new, less mature terminals, positions it to capture market share effectively as the industry evolves.

Outlook and Capital Allocation: Building for the Future

Saia's outlook is grounded in its long-term strategic vision, even as it navigates the unpredictable macroeconomic landscape. The company anticipates net capital expenditures for 2025 to be in the range of $550 million to $600 million, a reduction from the initial projection of over $700 million, primarily due to the deferral of certain real estate projects. For 2026, an early estimate for CapEx is between $400 million and $500 million, signaling a continued moderation in investment after the significant expansion in 2024. These investments are crucial for ongoing equipment replacement, technology enhancements, and strategic real estate to support growth initiatives.

Management projects an 80 to 100 basis point improvement in the operating ratio for the full year 2025, assuming a largely unchanged macroeconomic environment. This improvement is expected to be driven by the maturation of the 21 terminals opened in 2024 and continued operational efficiencies. For the fourth quarter of 2025, a sequential OR degradation of 300 to 400 basis points from Q3 is anticipated, primarily due to softer-than-expected October volumes and the impact of fixed costs during holiday-shortened months. However, a 5.9% GRI and a 3% wage increase, both effective October 1, 2025, are expected to be net neutral to the Q4 OR.

Looking ahead to 2026, Saia's management is optimistic, projecting "incremental improvement around OR and operating income." This confidence stems from the continued maturation of facilities opened since 2022 and the ongoing development of "share of wallet" with customers. The company believes that even without significant tonnage growth, it can expand margins by driving efficiencies and focusing on pricing, as the underutilized network offers "pretty good" incremental margins on new business. Saia's leadership emphasizes its role as "stewards of the shareholders' capital," indicating that while investments in the network remain paramount, opportunities to return capital to shareholders will be considered in an improving market backdrop.

Conclusion

Saia, Inc. stands at a pivotal juncture, having successfully executed an ambitious organic expansion to establish a national LTL network. This strategic investment, while creating near-term margin pressures from maturing new terminals and elevated depreciation, is the bedrock of its long-term value proposition. The company's disciplined approach to cost management, evidenced by sequential improvements in adjusted cost per shipment and a record-low cargo claims ratio, demonstrates its operational resilience in a challenging macroeconomic climate.

Saia's technological leadership, particularly its AI-driven network optimization, provides a crucial competitive edge, enhancing efficiency and service quality. This, coupled with a focused pricing strategy aimed at closing the "revenue per bill gap" with national peers, positions Saia for sustained market share gains and improved profitability. As capital expenditures moderate in 2025 and 2026, the company is poised to leverage its expanded, increasingly mature network. While external risks such as economic uncertainty and inflationary pressures persist, Saia's commitment to customer-first service, operational excellence, and strategic capital allocation underpins a compelling investment thesis for long-term growth and value creation in the evolving LTL industry.