Saia Inc (SAIA) 2018 Q2 法說會逐字稿

Good day, and welcome to the Saia, Inc. Second Quarter 2018 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Doug Col. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to Saia's Second Quarter 2018 Conference Call. Hosting today's call are Rick O'Dell, Saia's President and Chief Executive Officer; and Fritz Holzgrefe, our Executive Vice President and Chief Financial officer.

Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties, and our actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ.

Now I would like to turn the call over to Rick.

Well, thank you for joining us this morning to discuss Saia's results. I'm pleased today to announce record quarterly revenue and earnings for the second quarter of 2018. A strong freight environment, tight supply and our own initiatives to grow share and improve yield all contributed to revenue growth of nearly 18% in the quarter, and operating income grew by 40%.

Diluted earnings per share of $1.15 compares favorably to the $0.68 per diluted share we earned in the second quarter of last year. Demand was steady through the quarter, and the environment was conducive for continued focus on mix management and yield. Our LTL revenue per shipment was a record $225 in the quarter.

We continue to see an opportunity to be more selective with regard to the freight we are choosing to haul in this difficult capacity environment, and we'll continue to target shippers who recognize our value proposition. Despite being increasingly selective, revenue in the quarter was strong, and the relative strength continued through July.

A few of the other key operating metrics that drove our improved year-over-year results in the quarter are as follows: LTL shipments per workday rose 4.3%; LTL tonnage per workday rose 7.7%; and LTL revenue per hundredweight increased 9.6%. And as I mentioned, LTL revenue per shipment was a record as it increased 13.2%, aided by a 3.8% increase in our length of haul and a 3.2% increase in weight per shipment.

The second quarter marked the 32nd consecutive quarter of year-over-year improvement in our reported LTL yield. And contracts renewed in the second quarter included an average price increase of 9%. Our second quarter LTL yield increase also reflects contribution from a general rate increase of 5.9%, which was enacted on May 21.

Just a couple of other items on the quarter I'd like to mention before I turn things over to Fritz. Our cargo claims ratio of 0.82% is up from 0.68% a year ago but improved sequentially from 0.88% in the first quarter. Employee count is up more than 7% year-over-year. And we expect that as our newest associates continue to receive training and gain experience, claims will be reduced.

Purchased transportation miles in the second quarter were 11.4% of total linehaul miles compared with 12% in the quarter last year. The truckload environment remains tight, and we continue to optimize our linehaul network to use our capacity and some rail capacity as much as possible to minimize the impact of higher truckload rates.

With that, I'm going to go ahead and turn the call over to Fritz Holzgrefe to review our financial results.

Thanks, Rick, and good morning, everyone. Second quarter revenue grew 17.7% over the prior year to a record $429 million, benefiting from positive shipments, tonnage and yield improvement, as Rick mentioned, and also from higher fuel surcharge revenue. Fuel surcharge revenue was 48% higher than in the second quarter last year.

Operating income grew 40% to a record $41.6 million compared to $29.7 million earned in the second quarter of 2017. Our operating ratio of 90.3% was 160 basis points better than a year ago. Net income, benefiting from a lower tax rate, increased by 72% to $30.3 million.

I'd like to comment now on the year-over-year change in a few key expense items. Salaries, wages and benefits rose 12.2% compared to $220.4 million in the second quarter, reflecting the year-over-year increase in our workforce, as Rick mentioned, and our wage increase of approximately 3% last July. As a note, we implemented a wage increase last month -- or a July wage increase last month, which averaged approximately 3.6% across the company.

Fuel expense in the quarter rose 55% over last year. National average diesel prices increased 26% compared to second quarter last year, and our miles in the quarter were up 11.3%.

Purchased transportation expense in the second quarter rose by 19.1% to $34.1 million and was 8% of revenue versus 7.9% last year. PT usage as a percentage of linehaul miles was down slightly, as Rick mentioned. But the truckload cost per mile was 12.4% higher year-over-year, and coupled with a 13.4% increase in total linehaul miles, drove the increase in this line.

Claims and insurance expense was down 4.9% in the second quarter compared to the prior year as accident x severity moderated. Depreciation and amortization expense rose 13.8% to $25.2 million compared to $22.2 million in the prior year quarter. The increase reflects our continued investments in tractors, trailers and forklifts.

Our effective tax rate was 24.8% for the quarter compared to 37.4% in the second quarter of 2017. We expect our full year tax rate to be approximately 24% to 25%.

At June 30, 2018, total debt was $155 million. Inclusive of cash on hand, net debt to total capital was 19.4%. This compares to total debt of $148.4 million and net debt to total capital of 22.3% at June 30, 2017.

Net capital expenditures in the first half of 2018 were $140.6 million, including equipment acquired with capital leases. This compares to $155 million of net CapEx in the first half of 2017.

For the full year 2018, we expect net capital expenditures will be approximately $265 million, including investments in terminal infrastructure improvements as well as continued investments made to lower the age of our tractor, trailer and forklift fleets.

Now I'd like to turn the call back to Rick.

Thanks, Fritz. With the record results of the second quarter behind us, I'm really looking forward to all that is planned for Saia over the remainder of this year. Our Northeast expansion continues to progress nicely, though our openings this year are back-half weighted as we've had some recent bottlenecks around real estate in some targeted markets.

Recently, we've seen some real estate opportunities present themselves, and I'm confident that we'll get another 3 terminals opened in new markets in the Northeast before the end of the year. That will bring the total new terminal openings in the Northeast to 10 since we began that initiative in May of last year.

Terminal openings this year in Tacoma and Fort Worth have served to relieve pressure in the network and simultaneously position us closer to the customer. We'll continue to look for opportunities to open additional terminals in existing markets as it allows us to better serve customers and increase capacity for growth.

The freight environment remains strong, and our customers are growing and optimistic with regard to the economy looking ahead. As Fritz mentioned, our total capital expenditures in 2018 are likely to approach $265 million, depending on the timing of some real estate acquisitions.

With these comments, we're now ready to answer your questions. Operator?

(Operator Instructions) Our first question comes from Brad Delco with Stephens Inc.

Rick or Fritz, can you talk about kind of margin performance across the regions of your business? I mean, it seems like the Northeast expansion is going well. But I think what investors are sort of unclear about is, how much of a drag that could be on margins. And if this were the Saia of old in this environment, would we be seeing kind of a sub-90 OR?

Yes. I mean, I would tell you, the Northeast, I think, is contributing to a network efficiency, and the Saia's more legacy networks are selling some meaningful OR improvements in our internal measurements. And while the Northeast has a contribution margin, it's not a contribution margin of, at this point, of 10% plus some overhead contribution, right. So I think incremental margins were kind of -- probably a little bit disappointing from our perspective, given the progress we made in business mix and yield improvement. But we're very conscious of investing in the capacity for the future and maintaining the quality of our service. So we have some cost headwinds with increases in purchased transportation as well as some very significant hiring and recruiting cost as well.

Got you. But I guess, there's -- essentially, what you're saying, there's nothing structural that you think has prevented you from sort of breaking through that sub-90 OR, and maybe there are a couple of expense items that work against you. Anything that we could focus on kind of going forward that would give us some more confidence in being able to break through that sub-90 OR target?

I mean, the yield environment is very good. The demand environment appears very strong. I mean, there's a really good opportunity for us to continue to take share in our existing markets as well as our recently expanded markets. I would say the absolute pace of meaningful improvement is held back a little bit by the investments in our expanded capacity, which enhances our value proposition to the customer. And we're seeing good receipt and interest of our service offerings in the expanded markets. So I mean, I think we're kind of in that -- we've targeted kind of 150 to 200 basis points. And I think in a good environment, depending upon yield and the pace of some of the investments that we make, I mean, I would still stick with that as certainly as a target for us that's going to get us there pretty quickly.

Okay. And then maybe, Fritz, some just quick nitpick items. D&A was higher this year -- or this quarter. What's the -- is this sort of the new run rate going forward? Or what's your expectation for D&A the rest of the year?

Yes, I think it'll tick up as we continue to in-service new equipment that was in-serviced in the second quarter, then you'll start experiencing the depreciation expense associated with that going forward in the third quarter and onward. So it's reflective of this elevated investment level.

Yes. And then of the $265 million of CapEx, I think you mentioned $40 million year-to-date is on capital lease. What's the expectation for that full year number?

For the capital lease or just for the CapEx?

Yes, of the $265 million, what portion of that will be in capital lease?

I would imagine that the balance of what we spend, we'll fund from operating -- through our credit line and our operating cash flow. So we won't use capital leases likely for the balance of this spend this year.

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

Rick, with the contract renewals here in the quarter, can you talk to how much of your book has repriced at what -- kind of like more of a market price? Is it that you're going through it on a ratable about 1/4 of the book every quarter? Or are you pulling forward some pricing and kind of your thoughts on just the contract market as you move into the back half of the year?

Yes -- no, most of it is kind of at a renewal period. There are some accounts that obviously need to be addressed in a difficult demand environment that may be going into markets that are difficult. So we're having to react to that and make those pricing adjustments if we see something that was a new business opportunity or legacy that's been mispriced given today's cost structure. But the majority of it is in conjunction with contract renewals and occurs ratably, basically, through the quarters.

Okay. And then just -- I was going to ask, going forward, I know that comparisons become a little bit more difficult, but kind of this high single-digit contract market, is that something you see as sustainable right now?

Yes. Our data shows that we have an opportunity to improve our yield and be better compensated for our value proposition. This business is capital intensive and needs to provide the adequate cash flow for us to make investments in network and capacity that's obviously valued by customers. And the environment is very good, and so we're executing our strategy and plan, both in terms of mix management on segments that operate better, and there's some corrective action pricing that's going on as well. And I think if you can't get the yield in today's environment or get accounts [properly] corrected, then I don't know that you -- maybe you never will or something, right. But I -- so we are very -- we're actually continuing to step up our efforts from a yield management standpoint and a compensation standpoint for the services that are being provided. And quite frankly, we've also made a lot of investments in analytics to ensure that, going forward, we make fewer mistakes than you anticipate, project forward some of the cost increases that we're seeing. So let's say if someone's taken a big increase and have purchased transportation lane, and we're going to have a regular shipper there, if it's coming up for renewal, instead of looking at historical cost, you'd better be looking at the run rate that you have today and what you expect to happen going forward. So again, it's not a material step-change in our analytics and our efforts, but it is a step-change. It's just -- it's kind of ordinary course of business. Let's keep -- let's all work on getting better, right.

Okay. Yes -- no, I think I understand. That makes sense. And then, Fritz, just to come back to the comments around purchased transportation. Obviously, we understand that cost of hire is moving up in the market. And with the combination of the growth, should we think about PT as a percent of revenue running at this level? I think it was almost 9% here in the quarter. Are there some things that you can do to mitigate that? Is it the new equipment coming on or something that would change as we go through the second half of the year?

Yes, I think that there's always things that you're doing to try to mitigate that as we bring in in-service equipment here. We've been aggressively hiring. So to the extent that we're doing that gives us an opportunity to bring that PT number down. I mean, the challenge right now, and we've pointed out, is that it's a highly inflationary truckload market, so that impacts that line. So it's incumbent upon us to continue to optimize and bring that internally or as much as we can internally, but it's clearly an inflationary number. I think I'd like to see us bring it down from here, but that's in the face of changing market dynamics, too.

And strong demand and you have -- some of the purchased transportation we use is optimal. So we're always kind of analyzing where we have to use suboptimal purchased transportation from a -- to service the customer and provide some capacity, and then you try to re-optimize that over a period of time with putting your own drivers on those runs.

Got it. Yes. Okay. And then just a couple of housekeeping ones, and I apologize if I missed it, but did you give the June and the July tonnage -- tons per day numbers? I was on a little bit late on the call. So if you have those, that would be helpful.

No worries. So the June tonnage increase was 5.8% year-over-year, and shipments year-over-year were plus 1.4%. If you look at July, so this is through yesterday, tonnage is up 10.3%, and shipments are up 6.7%.

Okay. And then just last one from a housekeeping. I think that you typically give some thoughts around the OR sequentially. Is there anything we should think about second quarter or third -- into the third quarter from the second quarter this year versus the normal sequential progressions that we see from an OR standpoint?

Yes. I think if you adjust for unusual items, our historical 2Q to 3Q, we have a deterioration on the operating ratio. It's a little over 150 basis points. It's due to seasonality and our July 1 salary and wage increase. With our current tonnage and yield trends in July both trending kind of up over 10%, we would expect to do better, something more in the 50 basis point neighborhood.

50 basis points of deterioration this year.

Correct.

Our next question comes from Scott Group with Wolfe Research.

So want to just follow up on that double-digit tonnage for July. Obviously, a pretty big reacceleration. So if I remember last July, you saw a sort of a sudden deceleration in tonnage as you did some more meaningful pricing actions, and then tons sort of picked up throughout the rest of third quarter last year. Are we thinking about that right and so maybe don't count on double-digit tonnage for the full quarter for 3Q?

Yes, yes. So mid-June of last year, we've made some pretty meaningful adjustments to some of our transactional 3PLs, which tend to have kind of immediate near-term impact from a volume perspective. And for -- that was because the rates that we had weren't compensatory, and we've made some -- particularly to and from the Northeast, we've been given some targets and provided some opportunities for -- get some volumes during the start-up, and then our start-up volumes were much higher than anticipated. So we kind of went back to the transactional people and said, let's take some corrections on some of this business that we priced. So we went through that process. And as I think we've indicated, that had a pretty meaningful impact. And then what we tend to see when you go through that process is, some of that business moves away for a while. And then, over time, between the growth of the 3PLs plus other people reacting to getting some business that may not be priced properly, it tends to migrate back to you. So you're correct that the comps get a little more difficult as you go into August and September. And I guess, what I would say is if you more maybe take the -- where we are in the July run rate and then kind of take more normal seasonality from there, as opposed to just using -- last year is probably not a very good comp.

Okay, that's helpful. And then did you share a shipment for July? I'm just trying to figure out what weight per shipment is doing in July?

Yes. So the July tonnage was plus 10.3%, and the shipments number was plus 6.7%.

Okay. Helpful. And then I think you also just mentioned that yields are tracking up north of 10% so far in July. Can you give any more specific of a number there?

No, I think that's -- I guess my point was it's just stepped up. So we comment on what our contract renewals are and some of our efforts with business mix. So yes, I mean, in spite of the increase in weight per shipment, from a sequential standpoint, the yields stepped up a bit.

Okay. And then just last one from me on the wage side. Anything -- can you maybe just share what your -- I think you typically do it in third quarter, what the wage increase was this year and what it typically is.

Yes, sure thing, Scott. So we took our second -- our wage increase July 1. So that was, on average across the workforce, was plus 3.6%. So that includes the driver wage increases, which were in the 4% range, and the sort of staff wage was around 3%. That's a little bit higher than what we did last year, and we tend to be very market-based with that. So it, last year, was on average a little around 3%. So it's a little bit higher this year. And that's -- similarly, last year, we took it on July 1.

Our next question comes from David Ross with Stifel.

Just a follow-up on the labor issues. Is it harder in the Northeast that you're expanding to recruit labor up there? Easier? And are there any, I guess, regions where you're having particular challenges staffing appropriately?

David, the Northeast, actually, while it's a challenge to go up there and recruit people on a high -- strong demand environment, but we've actually seen where you kind of go up there and open a new terminal and have a lot of new equipment, and you got employees that have a chance to get on the ground floor with a company that's growing and expanding and know they get good start times and good run selections over a period of time versus being maybe a bottom-tier type person from a tenure standpoint at another company that's been in the market for a while. So we've actually been pretty successful with a lot of effort put into it, obviously, to recruit the right people and get talent up there. And then -- but there are some very difficult markets from a recruiting standpoint.

Is that Midwest? West Coast?

Yes. I mean, I'll just give an example. Chicago is always tough. Colorado is particularly tough. California, Seattle, and part of our wage increases, we made some adjustments in some markets, and we're investing a lot of money in recruiting. I mean, it's -- we head up our budget, and they're trying to work through, making sure we can staff to handle the incremental opportunities that we're seeing across the network.

I guess turnover is pretty low. Like, I guess, driver turnover, I'm guessing is less than 20%?

Yes, it is about that number, a little bit less.

And in terms of using the labor that you have more efficiently, are there any other, I guess, IT programs, upgrades that you guys are working through now on linehaul, dock, P&D? Any updates there?

Always, and then we do have a couple bigger projects that are going on to look at some optimization technologies, our inbound planning for our city operation to get more efficiencies from those opportunities. It's more of a longer-term project, but there are some step rollouts that should be some enhancements to our linehaul network that'll happen over the next 2.5 years. And then our city dispatch system will probably be replaced in the next 24-month time frame as well. It's a good system with mapping and optimization suggestions and route order deliveries, et cetera, so it's not unsophisticated, but it's probably developed 8 years ago -- 7, 8 years ago. So there's opportunity for us to upgrade and move to a modern technology in a more sophisticated, potentially regression analysis on miles optimization in a route, et cetera.

That would certainly be a positive thing. And then last question is just around the growth. Of the 7%, 8% tonnage growth that you're seeing or saw in the second quarter, how will you break that out between legacy Saia system growth and growth coming from the Northeast expansion efforts?

The Northeast is growing the most by far. But I would tell you 8 of our 12 regions, which the Northeast would obviously be in that category, right, but 8 of our 12 regions grew double-digit from a revenue standpoint. And the 4 that didn't kind of had some mix change as we're -- for the most part. National accounts is flat to down, and the field business is growing the most. And we've got some efforts to work on minimum shipments that may not be compensatory with the customer or within a customer's segment of business that we're working with. But the -- I guess, we're not going to give a specific number on the Northeast because it's too -- we had some targeted market share gain things when we opened the Northeast, and I guess that would tell you we're exceeding that. But as you might imagine, most of that businesses goes to and from our existing network, and it's kind of part of our targeted growth opportunity and our value proposition going forward.

Our next question comes from Jason Seidl with Cowen and Company.

I wanted to focus a little bit on 4Q because when I look at your tonnage gains last year -- or excuse me, the sequential decline, it moderated considerably from your historical trends. You were trending before that at about maybe a 7.4% moderation on a sequential basis to maybe like a 1.5% or so last year. What should we expect this year? Are you looking to sort of return to the more normalized levels 3Q to 4Q?

Yes, that's kind -- that's what we -- that's what I would anticipate is more normal seasonality from here on a current run rate basis. The only exception like we would have for that is that we get into some of our pricing initiatives. And I think the demand environment is good, and we should see the opportunity for that. But I've also -- we're committed to getting the margins improved, and if rate's not compensatory -- but I mean, as you've seen from some other people who are managing their networks, the balance between volume and price is very important. And sometimes, maybe even if you don't achieve your volume targets, if you overachieve on price, we've actually found that works pretty well in the network.

Okay. That's good. What are you hearing from your customers on sort of the peak season? Because what we were hearing was that a lot of the customers after last year started planning earlier this year.

Do you want to kind of...

Yes. I don't know that we necessarily see the -- it's been a seasonal business in, clearly, in LTL over time. But if you look at kind of what we see in the marketplace right now, I mean, we're seeing pretty -- the ISM data is all positive. We see GDP accelerating 4.1% in Q2, consumers' in pretty good shape. So I don't know that we would speak to or point to some seasonal change in the fourth quarter or anything like that, other than what we historically would typically see. I mean, I would point out that the fourth quarter does have 62 workdays this year as compared to 61 last year, so there'd be a little bit of a variance there. So yes, I think that's pretty consistent with what we've seen, although I think you need to account for that workday in the fourth quarter.

Jason...

Jason, Doug wanted to add something.

I would just add, too, that I mean, on the LTL side, our freight mix has more industrial bent, as you know. So some of that seasonality that you speak of really relates more to retail-type freight flows. But I will say, with the GDP number that was out on Friday, I think it was up 4.1%, that was -- could have been a little better, actually, right. Inventories were worked down. So the fact that I think inventories, on average, whether we're talking about business or retail inventories, I think the drawdown was maybe 1%. So I mean, that bodes well for the second half, right. If business trends are still strong and inventories were worked down, those will be replenished. So that would be positive for [Q4].

I hope you're right. A question relating to that. I mean, we heard a lot of talk about tariffs. One of your competitors was on earlier, mentioned they don't expect any material impact, but the customers are talking about it. What are your customers saying?

Yes, I wouldn't disagree with that, but I'm not sure our customers know exactly what's going to happen, right. But I don't disagree with that.

None of us know that.

Our next question comes from Ravi Shanker with Morgan Stanley.

So a couple of questions on the pricing initiatives here. I mean, clearly, with this push for yield, again, is this something that's opportunistic given the current tightness and the strain in the marketplace? Or is this your new playbook for the future, meaning if you do see either the market slow down or the market loosen, are you going to continue to prioritize price over volume growth? Or do you think you'd see more of a balance going forward?

It's a difficult and challenging demand environment, mostly constrained by driver availability. So we need -- just need to make sure that all of our customers are paying the appropriate debt their way. And we're in a situation where, from a business mix management, field business is growing the most, and then 3PLs and then nationals are second or third. And the national account business -- actually within our company, from an operating ratio standpoint, has never been better. So we still have segments of that or certain customers that we need to work down to get the types of returns that are compensatory for the networks. So I guess, I would say, we're going to -- I mean, we'll always have to have a balance between volumes and yield. But I think in -- when you look at the inflationary costs and the demand environment that we have and what it takes to recruit and train and retain a qualified driver to provide good service to the customer, I personally feel like our current returns are inadequate. And so we're going to be very focused on making sure that our capacity is made available to customers who recognize our value proposition.

Got it. That's helpful. And just kind of on that same topic. When you first gave us the plan to expand in the Northeast, I think it was end of 2016, what was the volume environment you were envisioning back then? Did you expect the cycle to go on for this long? Did you expect your current balance between tonnage and yield to be where it is right now? I'm just wondering if you've had to -- or are you planning to kind of fine-tuning that plan in any way going forward, just given the market we have right now?

Yes, I mean, I think we thought the environment would be good. It's actually been better than that. And what that kind of forces you to do is to reevaluate your opportunities. I mean, on the one side, the costs are probably a little bit higher at some of the facilities, and capacity that we need to procure up there is at a bit of a higher cost. So we have to kind of manage through that, and then we -- the reception to our expansion up there was greater than we thought initially. So we had to ramp up rapidly, and then you also have to kind of rerationalize the pricing that you put in to make sure you're being compensated properly for that. So it's a -- I think it's -- in this business, when you're managing a network and looking for the return on invested capital that we seek, that you always have to adapt somewhat to what's going on. But the Northeast has probably been better than -- certainly better than we would have expected as we went through the opening. And we're just working on that pipeline of opportunities that we have in our historical geography as well as on our expanded opportunities.

Got it. And just lastly, when you first opened the new terminals in the Northeast, I think you told us that the initial volumes mostly came from existing customers elsewhere in the country, who obviously kind of expanded with you or grew with you in the Northeast. Are you able to now quantify what percentage of your Northeast volumes actually come from new customers versus national customers expanding into the Northeast?

I don't have that specifically. I can kind of get some of that, unless you...

Yes. I think if you look at our customers, the revenue that we've been getting, it's been tracking. Initially, we highlighted about 70% came from existing customers. And so that number is tracking down, which means we're picking up new accounts in the Northeast. So I would say it's approaching sort of lower 60% now coming from existing customers. So that's evidence of growth in the existing -- in the Northeastern market.

And that probably correlates, too, just to incremental sales resources there. And as you're growing field accounts, they tend to be more new accounts that are regional and local as opposed to a national account that's expanding with another location or some inbound freight to the area.

(Operator Instructions) Our next question comes from Willard Milby with Seaport Global.

If I could go back to the purchased transportation, and I guess you're looking at 11.4% of total miles. Can you quantify or ballpark how many of those miles you'd deem suboptimal? I know you're talking about trying to reduce those miles out of the system. What percentage of your current usage is suboptimal? And is that broadly across the network? Is that tied to the Northeast to where maybe you build more density? Do those miles become easier to put on your own trucks as density builds? Can you talk a little bit about that?

I mean, it's a constant process, and it's kind of evolving depending upon what you're seeing with volumes. So it probably would be hard, difficult for us. And if I -- we have some internal reports that we look at every week that we go through to quantify what those opportunities are. And I guess we just -- we'll work on those internally to achieve our operating ratio improvements.

All right. And on pricing, obviously, continued strength in the contract renewals. When we look at that, is that kind of more broadly across the network? Or is it possible to kind of separate out maybe better pricing or more complete pricing as you handle customers more end-to-end with Northeast service versus maybe handing it off to somebody else to complete that product?

Yes. It's pretty broad across our network. Some of our initiatives that -- it kind of runs the gamut, right, between some customers, maybe their minimums aren't compensatory. Some customers maybe have an inadequate liftgate charge. I mean, there's just a bunch of detail work to be done on an account-by-account basis as you work through that. But it's -- our efforts are broad, and we're very focused on working through that and making sure we get our appropriate return on invested capital over time.

Our next question comes from Brad Delco with Stephens Inc.

Just a quick follow-up, if that's okay. Rick, we've been hearing a little bit from some of your competitors that the mix of their business is changing and whether we're seeing more retail exposure with these LTLs, and that's kind of putting a little bit of downward pressure on weight per shipment, it doesn't seem to be the case for you. But can you comment at all about how your mix of business has changed maybe with retail? And then maybe also to -- as you think about your -- how your business is broken out between sort of field account business or national and 3PL and whether or not you're making any adjustments to that mix?

Yes, we definitely are. I mean, we got some specific target market programs with our field sales reps and inside sales partnering with one another to pursue growth in field business, and it's growing materially across our network, like over 20%. National account business is kind of more flattish with a pretty meaningful yield improvement. And then the 3PL business is up and kind of in the middle. And then I guess, in terms of weight per shipment, you're seeing industrial activity to be strong. And I guess, we would focus through some of our benchmarking. We probably -- and part of it's growing up as more of a regional player. You have a lot of regional business that may move in a short-haul environment and has too low of a minimum and, yes, just doesn't work anymore in today's cost structure. So we've migrated away from some of that or making sure that we're being better compensated. So that's probably having some impact in Saia's mix as well.

Okay. And then maybe to sort of tie that into yield. Weight per shipment was up 3.2%, which kind of depresses that yield metric, but I think length of haul was up about 3.8%. So when you think about those 2, I guess, sort of competing metrics on yields, do you feel like they kind of net each other out? Or does one have a greater impact on yield than the other?

Yes, they almost net each other out based on kind of some of our regression analysis with a correlation coefficient. But I mean, the only other -- the other issue you have, because if you look at the amount of the yield improvement, and obviously, we're making investments in our product offering, technology and capacity that's causing us to have some cost increases but also while field business has a meaningful different yield, on average, than 3PL and national account business. It also, at least against -- versus a national account-type business, sometimes, you don't have as much synergies doing a drop trailer versus going by and picking up 2 freight bills, right. So I mean, that's one of the reason that you don't see all of your yield go to the bottom line. But again, generally, the field business operates 10 points or so better than national account/3PL-type stuff. So if you're growing that, it should contribute to your margins, but it's not necessarily like on a bills per hour and P&D operations, for instance. It might actually go backwards versus drop trailer, right?

Yes. So -- and I think you have historically provided kind of a ballpark range, where like contract was 100 to 105 and 3PL was sort of 93 and field was like 85. Is that -- was that directionally right? And has that changed?

Oh, it's changed, yes. So our national accounts, actually, this last quarter, have never operated better, and it's a 92-ish type of number. And we're really bringing them kind of more in line with the company. And again, we're always addressing and frequently adapting our, like, our transactional 3PL business. But we consider contractual 3PL business for a customer where they just manage the account. That's really a national account. But transactional is more where we give blanket pricing and then they resell it. And that business has actually some of the worst operating business that we have today. So we continue to kind of work through that and make sure we're being compensated properly. And it periodically has some impacts on your volumes near term, then it comes back.

Okay. And then apologize, one of my real quick follow-ups made this go longer than expected, sorry, was to Fritz. You made a comment about fuel surcharge revenue, I think, you said up 48% year-over-year. Was that correct?

Yes, dollars, yes.

$48 million?

No. In -- the percentage was related to dollars.

Oh, to dollars. Got you. Does that kind of ballpark you to roughly $60 million in fuel surcharge revenue in the quarter?

If you look at Q2 revenue, 13.8% would have been fuel surcharge revenue of the total.

Thank you. At this time, I would like to turn the conference over to Rick O'Dell. Mr. O'Dell?

Great. Thank you for your interest in Saia today. We look forward to keeping you guys updated on our progress on a number of initiatives. Thanks.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.