Executive Summary / Key Takeaways

• Transformative National Network: Saia has successfully transitioned from a regional to a national Less-Than-Truckload (LTL) carrier, completing a record expansion in 2024 with 21 new terminals and 9 relocations, establishing direct service across all 48 contiguous states.
• Operational Discipline Amidst Headwinds: Despite a muted macroeconomic environment and a slight revenue decrease in Q2 2025, Saia demonstrated strong operational discipline, achieving a 330 basis point sequential operating ratio (OR) improvement from Q1 to Q2, outperforming historical averages.
• Technology as a Core Differentiator: Saia's continually refined network planning tools are foundational to its operational resilience, enabling cost-optimal solutions and driving efficiency across its complex national network, providing a sustainable competitive advantage.
• Long-Term Profitability Trajectory: Management anticipates continued OR improvement in 2025, targeting around 100 basis points of sequential degradation from Q2 to Q3 (better than historical norms), and a full-year OR improvement of 80-100 basis points, driven by network maturity and disciplined cost management.
• Valuation and Future Potential: While short-term profitability has been impacted by significant investments and a challenging freight market, Saia's valuation is seen as attractive relative to its long-term potential to achieve a sub-80 OR by leveraging its expanded national footprint and pricing power.

The National Ambition Unfolds: A Century of Strategic Evolution

Saia, Inc., founded in 1924, has long been a stalwart in the transportation sector, primarily known as a regional Less-Than-Truckload (LTL) carrier. Over decades, the company built a reputation for reliable service, predominantly across the contiguous United States. However, recent years have marked a profound strategic pivot, transforming Saia into a formidable national LTL provider. This ambitious journey, initiated in May 2017 with organic terminal expansion, culminated in a landmark 2024, Saia's centennial year, which saw the opening of a record 21 new terminals and the relocation of nine others, bringing its total footprint to 214 facilities. This aggressive expansion, including strategic acquisitions, now enables direct service across all 48 contiguous states, fundamentally reshaping Saia's competitive landscape and value proposition.

The LTL industry is inherently capital-intensive, labor-intensive, and service-sensitive, operating within a persistently inflationary environment. While the long-term trend points to shrinking overall LTL capacity, the current macroeconomic backdrop remains muted, characterized by cautious customer behavior and volume volatility. In this challenging environment, Saia's strategic shift to a national footprint positions it to compete directly with established national peers such as Old Dominion Freight Lines (ODFL), XPO Logistics (XPO), ArcBest Corporation (ARCB), and J.B. Hunt Transport Services (JBHT).

A critical differentiator underpinning Saia's strategy is its advanced network planning tools. These proprietary technological capabilities, continually refined since their original deployment years ago, are foundational to the company's operational resilience. They enable Saia to identify and implement cost-optimal solutions, such as running "triples" across Ohio, which can yield a 30% cost reduction compared to traditional two-part connections, or establishing direct linehaul routes from regions like Minnesota to Seattle, bypassing intermediate break operations to reduce handling and improve efficiency. These tools are key catalysts for generating sustainable cost advantages and enhancing operational efficiency across Saia's increasingly complex national network. For investors, this technological edge translates into a stronger competitive moat, supporting better margins and market positioning as the network matures.

The Investment Blitz: Building a National Powerhouse

Saia's transformation into a national carrier was underscored by a record year of investment in 2024, with capital expenditures exceeding $1 billion. This included the acquisition of over 6,000 trailers and the onboarding of more than 1,300 new team members, all aimed at supporting the expanded network. The strategic rationale behind this massive outlay was clear: to provide a comprehensive LTL solution with unparalleled reach, enhancing customer value through certainty and reliability.

Operationally, this rapid expansion, particularly the 21 new terminals opened in 2024, presented both opportunities and challenges. While these new facilities, especially those in previously unserved geographies like the Great Plains, initially operated at or around breakeven in Q1 2025, improving to the mid-90s OR in Q2 2025, they did exert a near-term drag on overall company operating margins. Conversely, Saia's legacy terminals, those established for over three years, experienced volume declines in early 2025, reflecting broader macroeconomic softness. To counter these pressures, Saia has intensely focused on network optimization, leveraging the new density to drive efficiencies. This includes the strategic relocation of centralized customer service functions to field locations in Q2 2025, aiming to reduce overhead and bring capabilities closer to the customer.

Performance Under Pressure: Navigating a Muted Macro

Saia's financial performance in Q2 2025 reflected the ongoing tension between its strategic investments and a challenging market. Consolidated operating revenue decreased slightly by 0.7% year-over-year to $817.1 million, primarily due to continued muted volume trends. For the first six months of 2025, operating revenues were $1.60 billion, up 1.7% year-over-year, driven by business mix and pricing actions.

Despite the revenue softness, Saia demonstrated notable operational discipline. Its Q2 2025 operating ratio (OR) was 87.8%, a 330 basis point sequential improvement from Q1 2025's 91.1% OR. This outperformance exceeded the historical average sequential improvement of 250-300 basis points, highlighting management's effective cost optimization efforts. Consolidated operating income for Q2 2025 was $99.4 million, down 27.8% year-over-year, primarily due to lower revenues and increased labor and depreciation expenses associated with the network expansion.

Volume metrics in Q2 2025 showed LTL shipments per workday down 2.8% year-over-year, while LTL tonnage per workday increased 1.1%. Pricing remained a key focus, with LTL revenue per shipment (excluding fuel surcharge) increasing 2.7% to $298.71. Contractual renewals averaged 5.1% in Q2 2025, following 6.1% in Q1 2025 and 7.9% in Q4 2024, reflecting customer confidence in Saia's service quality. A 7.9% General Rate Increase (GRI) was implemented in October 2024, impacting approximately 25% of operating revenue.

Cost management was evident, with a 4% sequential decrease in cost per shipment from Q1 to Q2 2025. This was achieved despite a 5% year-over-year increase in salaries, wages, and benefits (driven by a 4.1% wage increase in July 2024 and elevated group insurance costs) and a 19.1% increase in depreciation and amortization ($62.5 million) due to ongoing investments. Saia also reduced its headcount by 4.2% from March to June 2025 to align with shifting volumes.

From a liquidity standpoint, Saia's working capital increased to $148.3 million at June 30, 2025, from $118.2 million a year prior. Net cash provided by operating activities for the first six months of 2025 was $279.8 million, up from $237.2 million in the prior year period. While net cash used in investing activities decreased significantly due to the completion of the Yellow Corporation terminal acquisitions, Saia continues to utilize its revolving credit facility and private shelf agreement to fund its capital expenditures, maintaining compliance with all debt covenants.

Competitive Crucible: Differentiating in a Crowded Field

Saia's transformation into a national LTL carrier places it in direct competition with industry giants like Old Dominion Freight Lines, XPO Logistics, ArcBest Corporation, and J.B. Hunt Transport Services. While ODFL is often recognized for its superior operating efficiency, boasting TTM Operating Margins of 27% and Net Margins of 20% compared to Saia's 12.25% and 8.96% respectively, Saia's recent heavy capital investments and new terminal ramp-up contribute to its current lower profitability metrics.

Saia's asset turnover (1.01 in 2024) also lags ODFL (1.06), XPO (1.05), ARCB (1.72), and JBHT (1.45), reflecting its ongoing network build-out.

Saia's competitive strategy hinges on its ability to offer a high-quality, comprehensive national service. The company maintains a strong focus on service levels, evidenced by a 0.5% cargo claims ratio in Q2 2025 and robust on-time performance. While a recent industry survey (Mastio) indicated some relative decline in Saia's service marks, management attributes this to the rapid growth and new employee onboarding, emphasizing that internal metrics remain favorable. This commitment to service is a key differentiator, particularly as customers seek reliability in an uncertain supply chain.

On pricing, Saia believes it is "cheaper than our peers that are national coverage" on a revenue per bill basis, indicating significant runway for future price increases as its service and network mature. This perception of being undervalued relative to its service offering provides a strong lever for future margin expansion. In a looser capacity environment, Saia is willing to let freight "walk" if it doesn't meet expected returns, maintaining pricing discipline rather than chasing volume.

However, Saia faces inherent risks. Changes in U.S. trade policy and tariffs have already decreased demand for its services, contributing to market uncertainty. The inflationary nature of the LTL business continues to pressure costs, and volume volatility makes it challenging to perfectly align resources. Localized issues, such as community complaints regarding a trucking hub in Burr Ridge, IL, also highlight the operational complexities of a large network, though management has shown responsiveness in addressing these.

The Road Ahead: Outlook and Investment Thesis

Saia's outlook for 2025 is grounded in a disciplined approach to maturing its expanded network amidst a persistently muted macroeconomic environment. Management projects that the sequential operating ratio degradation from Q2 to Q3 2025 will be limited to approximately 100 basis points, outperforming the historical average range of 100-200 basis points. For the full year 2025, Saia anticipates an OR improvement of 80-100 basis points. This guidance is predicated on the continued maturation and increasing efficiency of the newly opened terminals, which are expected to transition towards company-average profitability, driving better utilization and more efficient line haul operations.

Capital expenditures for 2025 are projected to moderate to approximately $600 million to $650 million, a significant reduction from the over $1 billion invested in 2024. This spend will primarily support normal equipment replacement cycles, technology investments, and strategic real estate initiatives, including the opening of up to five to six additional facilities and further relocations. These investments are consistent with Saia's long-term strategy of building density and leveraging its national footprint.

Management's long-term vision remains steadfast: to achieve a sub-80 OR. They believe the company is in the "early innings of tapping the potential" of its national network. While the substantial capital outlays in 2024 led to increased debt, Saia expects to continue utilizing its credit facilities in the near term, with usage potentially tapering in the latter half of 2025. Management has indicated that discussions about returning cash to investors through dividends or buybacks are "not too far out," implying a prioritization of network investments and debt reduction before significant shareholder returns.

Conclusion

Saia, Inc. stands at a pivotal juncture, having successfully executed a transformative expansion to become a national LTL powerhouse. The strategic investments in its network, fleet, and people, though impacting short-term profitability, are designed to unlock significant long-term value. By leveraging its enhanced national footprint, sophisticated network planning tools, and unwavering commitment to customer service, Saia is poised to drive operational efficiencies, improve its pricing power, and capture greater market share.

While the company operates within a challenging macroeconomic environment, management's disciplined approach to cost optimization and network maturity positions Saia for continued operating ratio improvement. The journey to a sub-80 OR is a multi-year endeavor, but the foundation has been laid. For discerning investors, Saia represents a compelling opportunity to participate in the maturation of a strategically positioned national LTL carrier, where the long-term potential for superior returns outweighs the near-term headwinds.