Good day, and welcome to the Saia Inc. First Quarter 2019 Earnings Call. Today's conference is being recorded. Please go ahead, sir.
Thank you, Simon. Good morning, everyone. Welcome to Saia's Q1 2019 conference call. Hosting today's call are Rick O'Dell, Saia's Chief Executive Officer and Fritz Holzgrefe, our President and Chief Operating Officer. Before we begin, you should know that during the call, we may make some forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We
refer you to
our press release and our 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, good morning, and thank you for joining us to discuss Zai's results. I'm pleased to report record Q1 revenue, operating income, net income and diluted earnings per share. While the quarter's results did not meet our expectations, we believe the opportunity for better results is on the horizon and as the difficult winter weather experienced in the Q1 is behind us. 1st quarter revenue was a record $410,600,000 and with our operating ratio flat at 93%. Operating income grew 3.8 percent to a 1st quarter record of $28,600,000 Revenue growth was highlighted by a 10.6% increase in our LTL revenue per hundredweight.
We also had an average increase of 9.8% on contractual rate renewals in the quarter. The Q1 marked the 35th consecutive quarter in which we achieved a year over year improvement in our LTL yield. The Q1 of this year included one less workday versus last year. Net income and diluted earnings per share of $22,300,000 and $0.85 respectively were also 1st quarter records. Both of these comparisons benefited from a lower tax rate than in the previous year.
Some comparisons from the Q1 of this year to the Q1 of 2018 are as follows. LTL shipments per workday decreased by 0.1%. LTL tonnage per workday decreased by 3.5%. LTL weight per shipment was also down 3.5%. LTL revenue per shipment rose 6.8% to $230.43 Purchased transportation miles were 9.3% of total line haul miles compared to 10.9% in 2018, with the improvement coming from more balance across the network when compared to last year's Q1.
Our cargo claims ratio of 0.68 percent showed a nice improvement from 0.88 a year ago as our newer dock employees gain experience and benefit from our continuous training initiatives. Dock productivity measured by bills per hour improved by 3% and despite the more challenging weather we faced versus last year, we also saw a 2.4% improvement in P and D productivity measured by stops per hour. So I was pleased with our execution in our operations group across the network. With that, I'm going to go ahead and turn the call over to Fritz Holzgrefe to review our financial results in more detail.
Thanks, Rick, and good morning, everyone. We generated total revenue of $410,600,000 in the first quarter compared to $392,800,000 in the Q1 of 2018, a 4.5 percent increase. Revenue benefited from a 10.6% increase in LTL yield offset by declines in both shipments and tonnage per day, as Rick mentioned. Fuel surcharge revenue was a modest benefit to the revenue comparison, up 3.8% from the prior year. As Rick mentioned, the period did include 1 less workday versus the prior year 4.
Key a few key expense items, which impacted Q1 results on a year over year basis are as follows. Salaries, wages and benefits rose 4.4 percent to $220,400,000 in the Q1, reflecting the impact of an average wage increase of 3% last July, higher health care benefit costs and an approximate 3% increase in our average employee count throughout the quarter. Salary, wages and benefits were 53.7 percent of revenue in the quarter, flat with last year. Purchased transportation expense fell 5% to $28,400,000 or 6.9 percent of revenue. This compares to purchase transportation expense of $29,900,000 or 7.6 percent of revenue in the Q1 of 2018.
The reduction in purchased transportation is a result of better utilization of Saia capacity and a more stable rate environment in the for hire truckload market. Fuel expense declined by 1.9% in the quarter versus last year, and national average diesel prices were essentially flat year over year. We also continue to benefit from a newer, more efficient fleet. Claims and insurance expense in the quarter decreased by 6.5% to 9,500,000 primarily due to more moderate levels of accident severity versus the prior year. Also on the cargo claims, our cost per claim were down roughly 9% and claims per day were essentially flat with the prior year.
Depreciation and amortization expense of $26,800,000 rose by 16.3% from the prior year quarter and reflects our continued investment in real estate equipment and technology. As a percentage of revenue, depreciation and amortization was 6 0.5% of revenue compared to 5.9% last year. Operating income rose 3.8% to a first quarter record of $28,600,000 from $27,600,000 earned in the Q1 of 2018. The operating ratio of 93% for the quarter was unchanged from the last year. At March 31, 2019, total debt was $148,900,000 Net debt to total capital was 17.2%.
This compares to total debt of $142,600,000 and net debt to total capital of 19% at March 31, 2018. Net capital expenditures in the Q1 were $56,500,000 including equipment acquired with capital leases. This compares to $52,100,000 of net capital expenditures in the Q1 of 2018. In 2019, net capital expenditures are forecast to be somewhere between $275,000,000 $300,000,000 including investments in real estate, terminal infrastructure improvement projects, our fleet and continued investments in technology. Now I'd like to turn the call back to Rick.
Thanks, Fritz.
While on Monday of this week, we opened a new terminal in Newburgh, New York. This facility will enable us to provide SAI customers with full coverage across the Hudson Valley and will serve as our 2nd break bulk terminal in the Northeast. This opening marks our 2nd new Northeast terminal opening of 2019 and our 12th in the region since our expansion got underway on May 1, 2017. We have plans to open another 4 to 6 locations in the Northeast this year. Opening new terminals in markets where we already provide direct service is an ongoing strategy and opportunity.
And to this end, we plan to add at least one additional terminal in our existing coverage area. This initiative is designed to allow us to get closer to the customer, improve service and ultimately attract customers we may not have efficiently reached in the past. Our ability to serve our customers in more markets is a key tenet of our value proposition and gives us the opportunity to become an even more important part of our customer supply chain as we grow. And before we open up for questions, I'd like to make a few comments regarding our outlook for the remainder of the year. Difficult tonnage comps for the past several months have made it difficult to read the underlying freight demand, but we are encouraged so far by the spring shipping season.
In April, shipments per day increased 1.3% and were up 3.2% adjusted for the Good Friday shift to April of this year. Tonnage per day was down by 4.7% and down 2.7% adjusted for Good Friday. While we are clearly disappointed with a flat first quarter operating ratio of 93% and a 1st quarter incremental margin of 5.9%, I'm pleased with our accomplishments over the past several quarters and look forward to being back on track this spring. Investments in our company, including the expansion into the Northeast, which began in 2017, have allowed us to post solid incremental margin gains over the past couple of years. Since our May of 2017 geographic expansion, we've posted consistently expanding incremental margins.
The 1st full quarter after our expansion began, we posted a Q3 2017 incremental margin of 5.8% and the incremental margin expanded each quarter through the Q4 of 2018 as follows: 10.8% in 4Q of 2017, 14.4 percent in Q1 of 2018, 18.5% in Q2 of 2018, 20.6 percent in Q3 of 2018 and 22.4% in Q4 of 2018. Adjusted for Good Friday, again, we saw a nice uptick in shipments and are experiencing good productivity execution across our operation. While we're always subject to self insurance volatility in a given quarter, I look forward to getting the incremental margin story back on track in the Q2. We currently expect 2Q incremental margins to be in the mid-twenty percent range. With that said, I'd like to go ahead and open up the call for questions.
Thank you, We'll now take our first question from Amit Mehrotra from Deutsche Bank. Please go ahead. Your line is open.
Thanks, operator. Hi, everybody. Thanks for taking my question. Obviously, I guess I'll just address the 800 pound gorilla in the room with respect to the pricing environment. The commentary in the release was Rick was obviously positive, but the comments from OD last week were, I would say, incrementally negative and new.
Any color kind of on that? Just the underlying demand environment is obviously a little bit weaker than last year, which is to be expected. So it's just more sort of natural slight moderation in pricing power? Or are we seeing some actors, some competitors kind of chase price to cover some overhead? Thanks.
Yes. I mean, I think the pricing environment is still conducive to generating certainly solid increases above our cost pressures that we have, particularly from a wage perspective. But I think you see this, right? I mean, a lot of businesses are procurement oriented. And when they think things have loosened, they're going to come out and test the market.
When we are having to do corrective action pricing, sometimes there's someone wants to take some certain lanes from here or something. But I mean, I think the environment is still fairly conducive.
Are you guys using, I guess, a little bit of the pricing lever to win some maybe early market share as you expand in the Northeast? I mean, is that kind of a strategy that you guys are pursuing?
No. We use our property management model to do pricing in the Northeast. I think we do have to kind of adjust that a little bit because in some cases, we're not productive up there yet and we do have some excess capacity particularly in our routes and some of our newest terminal openings. You tend to run for coverage as opposed to building an optimal route. So we kind of take that into consideration, but we've been been increasing our pricing in the Northeast market as well.
Okay. Just as a follow-up for me, you framed the Northeast market as kind of the $7,000,000,000 opportunity. And I think within that $7,000,000,000 opportunity, dollars 2,000,000,000 was kind of the regional intra Northeast moves that obviously now that market has opened up a little bit with some supply disruptions in that particular segment of the market. I always thought that that was the last the piece of the market that you're going after last. If you can just talk about maybe how the demand environment for you guys has changed following that disruption?
And are you still thinking you're going to be able to achieve kind of 1% market share in the Northeast of that kind of $7,000,000,000 pie?
Yes. I think our target is a little bit less than 1% per year when we go into a particular market. We would expect over time to 4 to 5 years get our 4% to 5% then, right? So if you look at kind of where we were in March, on a revenue basis, annualized revenue was running about $210,000,000 a year. So I think we've been successful in that.
I think I would tell you that part of the uptick in April was probably due to the disruptive events you're talking about by a Northeast carrier. But I would tell you the impact on us was modest from that because we don't like you said, with our coverage still developing, we don't play in the intra Northeast market that much. There'd be other people that would benefit, I think, I would think materially more. Our benefit, I think, from that opportunity comes probably over time. We've got some good people from their organization to provide some opportunity for some sales and operations resources.
And I think a lot of the kind of improvement from March to April, the Northeast was part of that, but it wasn't really a we just kind of saw that across our network as the weather disruptions were behind us. And then obviously, we expect to take share as our terminals mature up there anyway. And that's probably a bigger factor than the fact we opened a couple of terminals and a couple of terminals in late December. And so as those facilities mature, we tend to gain some volume through that absent the event that occurred up there.
Okay. That makes sense.
Yes. Go ahead, Rick. What were you saying?
That was it, I think.
Okay. Thanks a lot, guys. Appreciate it.
Our next question comes from Scott Group from Wolfe Research. Please go ahead. Your line is open.
Hey, thanks. Good morning, guys.
Good morning, Scott.
Good morning, Scott.
So the April comments suggest that the declines in wafer shipment are getting worse and maybe just some thoughts there if you think that's macro or something. And then the length of haul was down in the Q1. And I guess I would have thought with the Northeast expansion that length of haul would be going up. So maybe just addressing those two things.
Yes. I think the length of haul we kind of go into April is more flattish. I mean part of that probably does reflect that there's some incremental business that we picked up in the Northeast more intra region, but it's not very much. So that would be a partial offset. Overall, our Northeast revenue our Northeast length of haul is higher than our company average.
So that would be correct. And then on, I guess, just the weight per shipment factor, I think as the truckload market softens, there's less truckload spillover. And as truckload capacity loosens, some of our heavier weighted shipments move to a truckload stop op type environment. Some of your more sophisticated customers are able to optimize across modes. And that's what we see from an analytical perspective, probably the biggest impact.
Okay. That makes sense. Can you give us your thoughts on the just the margin seasonality from 1Q to 2Q? And then I think last quarter you thought about or you gave guidance on 150 to 200 basis points of margin improvement. I'm guessing after 1Q that's not the number anymore.
So maybe just some updated thoughts there.
Yes, sure. Okay. So 1Q to 2Q, the historical 3 year average is 2 10 basis points better, Given the Q1 weather impact and some things that the uptick in shipments and our execution, we would currently expect 350 basis points to 400 basis points sequentially. And as always, that's subject to self insurance volatility and other risk factors. I think you're probably right with the increase in a little bit softer environment that we're operating in, I mean that puts 2Q more in the 100 basis point range, right, instead of $150,000,000 to $200,000,000 year over year?
Right, right, right. And is that how you would now think about the full year or the back half of the year closer to our total?
I think it just depends, right? I mean, if this weight per shipment challenge persists and you're at a little bit different revenue per bill run rate than what we've seen. We have some internal initiatives to work on that and what opportunities we see there. So we're really delving into that, particularly with what we saw in April. So I mean, that's part of the question, I guess.
Is that a lever we can pull? Or is that if that's happening across the environment then we'll just have to deal with that, right?
Right. And then just to that point, maybe just last quick thing. So we got the pricing renewals for 1Q. Is 2Q tracking much differently?
I really don't know to be honest with you. We haven't even closed out April yet and looked at where we're trending. So that's really just a function of what comes up for renewal in the quarter and what kinds of increases we need across lanes and key markets to get an account corrected and operating in the range that we're looking for. I would just tell you, I think the market still conducive to getting corrective action pricing where needed.
And do you still think you should be doing better pricing than the market?
I think generally so. I mean, all our data shows that compared to type players, now we're not quite national yet, right? But all of our data would show that the key players we trail them from a yield perspective. So I think that opportunity is out there. I mean the challenge you run into and we've discussed this before is customers do business with you for a reason being that the value that they perceive you as being the coverage that you have and the pricing that you're offering them today.
So when we try to correct pricing, I mean, maybe they move to somebody else who's more of a price player, right? And as we expand our coverage and increase our value proposition, I mean, we have to be compensated for that. So maybe that requires you to change customers, right, or lanes amongst the customer. So it's I mean, I think the environment is still conducive for us to make some headway. And I would guess, probably not guess, educated guess would say we should be able to continue to do better than the market.
Okay. Thanks for the thoughts, guys.
Appreciate it.
Our next question comes from Todd Fowler from KeyBanc Capital Markets. Please go ahead. Your line is open.
Great. Thanks. Good morning. Rick, on the expectation to get to mid-twenty percent incremental margins in the second quarter, is that mostly the operating environment in 1Q and the weather impact there? Or is there something else to think about on the incremental margin improvement, which really would be the highest level in the last several quarters?
Correct. I mean part of it, right, is some execution things that we're doing. I mean the core execution of our operations group, for instance in Q1 was very favorable. We just couldn't overcome the headwinds of the loss of volume and some cost items that you have. And as we've commented, I think when we even said tried to set expectations around Q1 results, was a bit of an investment quarter for us.
So, a reflection, I guess, of the core execution that we have. And as the Northeast matures and we grow share up there, we gain efficiencies and the incremental margin should be positive. And again, we're kind of baselining that off of April results to date. So unless something changes, right, then we're it's just I think the story is still on track. It just got derailed a bit in the Q1.
So I guess maybe to kind of square up the Q1 then, I don't know if you have an estimate of maybe what weather cost you in the quarter. I know that can kind of be some fuzzy math. But then to what you're just commenting on, it also sounds like maybe the timing of opening some facilities in 1Q that that had a greater impact on the incrementals and the results than what we've seen in the quarters when you've opened things later in the year or maybe freight is a little bit seasonally stronger?
It was quite frankly with you. I think it was the weather disruption, the revenue loss that we saw from that, some incremental costs. I think those would be the biggest factors. And as we had commented, not just on the opening thing, we invested in some marketing expenses year over year would have been up pretty significantly. Those are things we'd expect to obviously benefit from over time.
And I mean part of that's what we're seeing continues to drive our key operations execution.
Yes. Todd, I would add that the investments that we made in the Q1 were ones that we knew going into the quarter. And we've talked about what Q1 was going to look like. We knew those investments were there. The weather was certainly an impact, but I mean, Annick, just give you one, we spent $600,000 more in snow removal costs in the Q1 versus last year.
I mean, it's just that kind of expense. And then when you're running a line haul network, you're routing freight around weather to the extent you can and then it gets bottled up and then your maintenance costs run up because you got equipment that you can't run-in multiple subzero kind of situations. So it kind of crept up everywhere in the expense line. But the core operation productivity that Rick pointed out, we were quite pleased with and that probably that could continue into the more seasonally strong parts of the year, so that would be positive. But in the quarter, the weather certainly was a disruption.
Okay, good. That's helpful.
It would be more of an intuitive thing because like you said, it's difficult to quantify when you have both top line revenue loss and cost increases. And you don't really know what your costs would have been if you had not had any weather. You never get none, right?
Exactly.
I mean, but it was clearly an impact. And I guess if I had a ballpark of, I'd say, 0.5 to 0.75 of a point.
Okay. Yes, and that makes sense. I mean, I think when you originally talked about 1Q, the 1Q OR, you said a little bit higher than where you were in the Q4 and you came in higher than that and the difference sounds like basically the weather impact there. So that kind of squares that. So just a follow-up, the growth into the East was timed very well with a pretty strong freight market kind of across the board.
If we get into a slower freight market, do you feel that you've got a big enough toehold in the Northeast where as you continue to build out, you wouldn't see incremental startup costs? And then how do you think about possibly adjusting the cadence of the growth, if the freight markets are slower than what we've seen for the past couple of years?
Yes. That's the great thing about the organic expansion is because you can always slow it down if you want to. What I would say is there is some benefit to having broader coverage across the state otherwise and or region, right? Or maybe the you go through RFQ or a proposal and people say, why bring in another carrier that doesn't go here and there. So but we could always slow it down.
Well, I guess what I would tell you when you look at kind of where we are in incremental margins, you have two factors working. One is the newer terminals, which at this point tend to be smaller. And then you also have the terminals that have been open for a while are improving in their execution as well as gaining some density just because of their maturity, right? So I guess the question is, we really want to balance the strategic opportunity to go ahead and continue to stage the expansion in versus what the opportunity is from a margin perspective. So the way we're executing today and kind of what we currently see from an environment, I really wouldn't I wouldn't necessarily look to slow it down.
And if anything with the event up there with another carrier, we actually have some we may be seeing some opportunities to actually step that up faster
and maybe that makes sense too. So we're kind of working through that facility availability and that opportunity as well. Fritz, do you want to comment on that a little bit more? Sure. I mean, I think certainly the several terminal network or regional terminal network is obviously in play.
And as they go through their bankruptcy proceedings and such, those we've seen some of those assets and certainly it gives us more available locations to consider. The challenge is real estate challenge investments typically are can be complex and then ones that are maybe in a restructuring or bankruptcy situation can be a little bit more complicated. So but I think that the net of it all is it does give us more real estate to potentially target and as Rick described potentially accelerate our own sort of growth initiatives.
Yes. And again, I would just say, if it's working, then we could then we'll continue to proceed and or accelerate, which we've already done. If it's not working because the environment is not conducive, then we could stop, right?
Yes. Yes, good. No, and I know that was the thought process going into it. So okay, thanks so much for the time this morning. We'll talk to you soon.
All right, thanks.
Our next question comes from Brad Delco from Stephens. Please go ahead. Your line is open.
Hey, good morning guys.
Good morning, Brad.
I apologize if this has been addressed, but can you talk a little bit about your expectations on PT for the year? Clearly, truckload rates are coming under pressure. Just sort of curious, maybe even absent any sort of change in volume, what you think on a apples to apples basis your PT cost will look like this year?
Well, I think as a we'll see general in general, Brad, what we're seeing in the truckload market around rates, I mean, you'll see that translates into what we pay. I think as we look over time, as we've made investments in our own hiring and characterized as in sourcing to our own line haul assets, We'll continue to optimize our own asset utilization. So I would expect over time that we would reduce our some reliance on that, but the expense will benefit simply because we won't see the same rate of inflation that we have in last year. Am I ready to give you a percentage? No.
But I think you'll see you saw a little bit of it in the Q1. But I think as the balance of the year kind of unwinds, we'll look to further utilize our own assets and optimize what it is we can use with our own assets.
Yes. And maybe that's kind of what spurred the question, if I could ask it maybe differently. PT being down 5% in the Q1, how much of that do you think just because the absolute price of TL versus your tonnage speed?
That's a smaller contributor. Most of that is a utilization situation, but we use more of our own internal resources there.
Okay. And then maybe just a sort of a broader question. I would sort of categorize Saia as being one of the sort of unique growth names in transport with this geographic expansion story, but tonnage is down. Absent what's happening in the Northeast, is it would it be prudent to think about maybe focusing less on price? Do you feel like you're giving up too much share in some of your established geographies?
Because I would expect your tonnage to sort of be outpacing the industry given sort of your unique growth opportunity. Just high level thoughts on that would be helpful.
Yes. I mean, I think we're pretty committed to the pricing discipline. I mean, if you look at the volumes across the network for the Q1, I mean, there were so much weather impacted in those things that it's kind of hard to look at. We do have some larger customers that are optimizing across modes. So we saw some of that through late last year as well as in the Q1.
I guess, if I look at the outlook for 2Q, I mean, our revisions is not in our 150 to 200 basis points, but if you can get that kind of top line growth and get in the 100 basis point range, still provides a good earnings growth. So we always try to balance the pricing and the volume, but I don't know. I think in this environment with the cost and the recruiting cost for growth and everything else, I mean, I think you got to make sure you're being properly compensated. It comes to the top of the list.
No, that makes sense. Just wanted to get your thoughts on that. So guys, I'll get back in queue and I appreciate the time.
Thanks, Brad. Thanks, Brad.
Our next question comes from David Ross from Stifel. Please go ahead. Your line is open.
Morning, David. Did we lose them?
Sorry, on mute.
Good morning, Haagen. Good morning.
I guess with the comments around increased recruiting costs, maybe some commentary on the current driver market or labor market in general, whether it be dockworkers or drivers?
Yes. I mean, it's I don't think it's as tight as it was last year, but it's still challenging to get highly qualified people. And we're in certain markets, We're continuing to evaluate recruiting alternatives. I would tell you, we tend to be getting more people from a truckload or a dedicated company or something like that than we had in the past in terms of just getting other people that worked in the LTL industry. So it kind of depends on the market, but it's not as tight as it was, but it's still challenging.
I would tell you like some of the Northeast markets, while that sometimes it's a challenge for us to kind of get up and get started, we're actually having good luck there. And I think that makes sense, right? You got people that decide they're going to look for a new opportunity. You come to a company that's new to the market. You can be at the top of the board, so to speak, for run selection and start time selection.
And you get in the beginning of a company that's going to grow. I think it's going to benefit for a period of time. We're getting generally nice facilities up there and a lot of brand new equipment and employees like that as well. So that hasn't been a huge challenge for us to get drivers in the gate when we're opening new terminals, but some other markets have been difficult.
And then on the service side, it's good to see cargo claims continuing to fall. What about the other metrics that you all track, your CSIs, whether it be on time performance or something else? How is that looking from the service side?
Yes, it's been very good. I think our operations execution, I'll kind of talk primarily on this call about productivity, but all of our quality metrics, whether you look at returns or exceptions before delivery or some of those things, we're seeing really good metrics improvements
across the board. And did you get rid of the Saia Extreme Guarantee or has just been renamed the Saia Guarantee?
We have a product offering for the Extreme Guarantee and it was kind of included in the pricing. If you had a certain pricing program, we've kind of gone away for that and then we but we still do offer guaranteed product offerings without charge.
Okay. And then, Fritz, just real quick on the housekeeping because I can't write fast enough. It looks like shipments per day were up 2.3 adjusted for Good Friday in April and tonnage per day was down 2 point 7% adjusted for Good Friday. What are the raw numbers, I guess non adjusted?
All right. So the non adjusted numbers for shipments are plus 1.3% and the tonnage number is minus 4.7% and that's April only. What's the shipments though? Plus 1.3%. Okay.
What was shipments excluding Good Friday, wasn't it 3 something?
3.2. 3.2. Yes.
So it's not 2.3, it's 3.2, I believe, David.
Got it. Yes.
Okay. Thank you.
Let's hold on.
We'll now take our next question from Matt Brooklier from Buckingham Research. Please go ahead. Your line is open.
Hey, thanks and good morning. So just thinking about your commentary on getting back to plus 20% incremental margins in the second quarter, how much of that is contingent on, I guess, directional tonnage improvement? You had some positive commentary that you're feeling a little bit better about spring shipping season, but I'm just trying to get a sense for if that this margin improvement is also baking in some directional improvement on the tonnage side?
No. We're kind of taking normal seasonality from what we see in April adjusted for the Good Friday. And then obviously, we have our market share expectations from our geographic expansion. So those are the 2 key things. I mean, we're not saying, hey, we're going to have another big step up in marketing efforts.
So we're kind of particularly quarter to quarter, we're kind of modified trend line forecasters. So that doesn't always make everything come true, but when you kind of have April in the bag and we're not baking in a lot of tonnage increases and productivity improvements from here to get to those expectations.
Okay. That's what I thought was the case. I just wanted to kind of make sure. Have you guys announced GRI? Is the GRI in the cards for 2Q for Saia?
We actually put one through in February, February 18, I think was the date at 5.9%.
All right. I must have missed that. Okay.
We actually just to clarify for you, we actually don't issue a press release or anything for that. We kind of process that. We tend to not amplify that and part of our historic practice. We just process that with the customers that it applies to. Yes.
And roughly how much of
your freight does that typically cover? Roughly 20% to 25% in that range. We usually get acceptance or realization, I should say, should get somewhere in the 80 plus percent range.
Okay. And again, on expectations wise, when we talk about 2Q, I mean that we're kind of taking our current yield run rate, carrying that out and then looking at our contract renewals. So again, there's not a big there's not a change or a speculation or somewhere a big speculation we're taking on yield to get to those incremental margins. And it's really quite frankly a core execution from here.
Yes. It sounds like it's more on the execution sidemoving further away from the disruption from the weather. And then final question, how should we think about the tax rate for the remaining 3 quarters of the year?
So the way I would characterize it is full year numbers of 23% to 23.5%. And if you that would be kind of my expectation for the full year. What I would as you analyze the 2018 year, you'll see the variation in the tax rate and by quarter and that may be helpful for you as you analyze the full year numbers in 2019.
Yes. Just use something similar to the quarter for last year, I think, is probably the best estimate we would have.
Okay. That's what I think I'll do. Appreciate the time.
Our next question comes from Stephanie Benjamin from SunTrust. Please go ahead. Your line is open.
Hi, good morning. And I apologize if I missed this, but can you provide the monthly tonnage and shipments from the Q1?
Yes. So the tonnage by month, minus 2.8%, minus 3.2%, March was minus 4.4%. And then if you adjust for the holiday in March, it's minus 5.9 percent. So that would have been last year's Good Friday. And if you do shipments, January, February, March, minus 0.1%, minus 1.5%, plus 1.5% in March.
And then if you adjust for the prior year, Good Friday, it's minus 0.1%. In
March.
In March.
Great. And then just a follow-up. Could you provide a little bit of color on just what you're seeing from a margin or density perspective just in the Northeast? I think you've talked a little bit before about it being not quite sub-one hundred or maybe what you're seeing from a production standpoint. Just color there would be helpful.
Generally, we're seeing some improvements up there. Obviously, in 1Q, we didn't see that. That was one of the areas of Midwest and the Northeast were pretty significantly impacted by the weather. But I would just tell you that generally, if you just isolated on the Northeast, absent the weather thing, I mean, it's not that's not generally a drag on our earnings and our incremental margins. It's actually a contributor over time.
So throw Q1 out. If you take Q4 and our 2Q outlook, the Northeast would be improving over where it was historically, growing and improving margins.
Great. That's really helpful.
Our next question comes from Jason Seidl from Cowen and Company. Please go ahead. Your line is open.
Thanks, operator. Good morning, guys. Just some clarification in terms of the numbers that you're using for comparison. So you're using 93 as an OR for 1Q and then 2Q 2018 you're using 90.3?
Percent? For Q2 of 2018?
Yes. Yes.
So the range you guys well, the range you guys gave from a sequential one from an improvement of $350,000,000 to $400,000,000 versus $150,000,000 to $200,000,000 So there's a differential, I think, in those numbers. So the year over year comes up lower than your sequential improvement.
Hey, Jason. You're kind of mixing the comparisons a little bit. We said the historical Q1 to Q2 trend over the past 3 years showed about a 2 10 basis point improvement sequentially from Q1 to Q2.
Right.
So that's the metric that Rick was comparing against when he said this year because of the difficulties in Q1 of this year, the actual trend is It would be more like the 350 to 400.
Right. And that would imply an $89,000,000 to $89,500,000,000 OR. But then you said on a year over year basis, typically $150,000,000 to $200,000,000 and that would imply sub $89,000,000 to
$250,000,000 to $200,000,000 is a number we've used to say. We feel like that's an opportunity when we walk into the year. Given what's going on in the operation, the leverage, we're able to pick up as we grow the Northeast. We felt like walking into the year, if you had dealt us a reasonable tonnage environment with our strong yield activity and that set of revenue expectation, we said we'd like to think we can go get 150 basis points or 200 basis points in a given year.
Okay. So really focus on more of the sequential than those commentaries because that's more indicative of the current market that we're sitting in?
I think that's what we said. And if you look at the number, it's more in the 100 instead of our 150 to 200 is kind of what our current outlook for 2Q would be.
Got you.
And we kind of back it off a little bit. Quite frankly, you have some the weight per shipment is having a little bit of an impact on our total revenue, our revenue per bill and our total revenue outlook. So while we're encouraged by April and that's kind of putting back in, it's a nice step up from where we were in March. I mean, if I were looking back at my plan in December where I thought we were going to be in January, the revenue line is probably a little bit lower than what we would have expected. So and the way per shipment thing is a bit of a burden on margin, right?
Right. No, that makes sense. And just in general, I always get a lot of questions about what's the e commerce market, how does that impact LTL? Where do you see that coming through in your business? And do you foresee grabbing a bigger portion of that going forward?
Yes. I mean we see more we're seeing an increase residential deliveries and those shipments tend to weigh about £500. We're being very diligent in our pricing for accessories. So you're getting paid for the residential and the liftgate that's required at those types of deliveries. We're also exploring some opportunities to further optimize that, whether that be with specialized equipment or outsourcing that to final mile person that has lower cost basis perhaps with some technology, so the customer gets the same experience.
So we're piloting some of those things. I mean, I think it's something that's going to grow. It's a bit of a there's pros and cons of it, right? Because what you need to do is figure out a way to get good at it and be efficient and then we're going to have to only do business with the people that are willing to pay for it as opposed to this free shipping thing. So I have mixed feelings about it because the carrier that has the best margins out there has the highest weight per shipment and all of our experience with this Final Mile residential stuff is it's lower.
While we show it operating okay, it's lower revenue per bill, lower weight per shipment.
Well, listen, if you guys start offering free LTL shipments, I'm going to have to change my model a bit.
I know, right? Yes, me too, right?
I mean, but even if the vendor is offering it free, then he's not charging the customer for it. So then he's more price sensitive, right? You got to make sure you're getting it right. So I mean that's kind of my point about it. So I don't know.
I mean I think it's going to grow and over time it's going to be over time I think it's an opportunity. So we're seeing that segment grow. It was neighborhood ish 5.5% of our shipments. It's almost 7% now. But part of that, quite frankly, is we have better data today on residentials.
We've done some technology work. And so we're identifying those shipments more regularly too. So there's kind of some moving parts in those comparisons, but it's not a huge portion of our business, but it's not small either, right? 7% of your shipments isn't very small.
Right, right. That makes sense. That's good color. Listen, guys, I appreciate the time as always.
Great. Thanks. Thanks, Jason.
Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open.
Just one for me. You said in your release that nearly 70% of your business in or the Northeast coming from customers who are already using Saia and other parts of the country. I think that's very similar to a statistic you gave us very early on in your North East rollout. Is that what you'd expected? I would have expected that number to come down by now as you got more new customers in that mix.
Can you just tell us kind of how you expect that to trend and when you expect to kind of grow that customer base if you will?
Yes. I think the way I would consider that over time is that I think it will look more representative of the sort of the national LTL market, kind of as it goes to and from. The positive is with that, I mean, I think you can interpret that statistic in a couple of ways. One is that our customers that have long had experience with Saia understand what they get and they will continue to expand their book of business with us. I think that's a positive story and it's growing at perhaps a similar rate to what our new acquisition customer acquisition in the Northeast is.
So I think it's just part of it's an affirmation that we've done a good job for folks, but then it also says we continue to have continued growth opportunity in that market. We've identified and continue to invest in our regional sales resources that kind of give us access to some of the accounts that we didn't have.
Very good. Thank you.
Yes.
It appears there are no further questions at this time. Mr. O'Dell, I would like to hand the conference back to you for any additional or closing remarks.
All right. Thank you for your interest in Saia. We look forward to catching up with you guys later.
Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.