Good day, 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. Douglas 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, all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties, 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, our own initiatives to grow share and improve yield all contributed to revenue growth of nearly 18% in the quarter, 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, 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, we'll continue to target shippers who recognize our value proposition. Despite being increasingly selective, revenue in the quarter was strong, 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%, LTL revenue per 100 weight increased 9.6%. 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 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 21st. 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 line haul miles, compared with 12% in the quarter last year.
The truckload environment remains tight, we continue to optimize our line haul 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, 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 line haul 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 line haul 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 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%-25%. At June 30th, 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 30th, 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 three terminals open 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?
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question comes from Brad Delco with Stephens Inc.
Morning, Rick. Morning, Fritz.
Morning, Brad.
Hey, Brad.
Rick or Fritz, can you talk about margin performance across the regions of your business? It seems like the Northeast expansion is going well. 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 a sub 90 OR?
I would tell you, the Northeast, I think is contributing to a network efficiency. The Saia's more legacy networks are showing some meaningful OR improvements in our internal measurements. While the Northeast has a contribution margin, it's not a contribution margin at this point of 10% plus some overhead contribution, right? I think incremental margins were probably a little bit disappointing from our perspective, given the progress we made in business mix and yield improvement. We're very conscious of investing in the capacity for the future and maintaining the quality of our service. We had some cost headwinds with increases in purchase transportation as well as some very significant hiring and recruiting costs as well.
Got you. I guess essentially what you're saying, there's nothing structural that you think is preventing you from sort of breaking through that sub 90 OR, and maybe there are a couple expense items that worked against you. Anything that we could focus on going forward that would give us some more confidence in being able to break through that sub 90 OR target?
The yield environment is very good. The demand environment appears very strong. 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 market. I think we're kind of in that we've targeted 150 to 200 basis points, I think in a good environment, depending upon yield and the pace of some of the investments that we make, I would still stick with that certainly as a target for us that's going to get us there pretty quickly.
Okay. Maybe Fritz, some just quick nitpick items. D&A was higher this year or this quarter. Is this sort of the new run rate going forward, or what's your expectation for D&A the rest of the year?
Yeah, I think it'll tick up as we continue to in-service new equipment that was in-serviced in the second quarter.
You'll start experiencing the depreciation expense associated with that going forward in the third quarter and onward. It's reflective of this elevated investment level.
Yep. 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?
Yeah. Of the 265, 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. We won't use capital leases likely for the balance of this spend this year.
Okay, great. That's it for me. I'll turn it over and get back in queue. Thanks, guys.
Thanks, Brad.
Thank you. Our next question comes from Todd Fowler with KeyBanc Capital Markets.
Great. Thanks. Good morning. Rick, with the contract renewals here in the quarter, can you talk to how much of your book has repriced at more of a market price? Is it that you're going through it on a ratable, about a quarter of the book every quarter, or you're pulling forward some pricing and kind of your thoughts on just the contract market as you move into the back half of the year?
Yeah. Most of it is 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 a legacy that's been mispriced given today's cost structure. The majority of it is in conjunction with contract renewals and occurs ratably basically through the quarters.
Okay. I was going to ask going forward, I know that the comparisons become a little bit more difficult, this high single-digit contract market, is that something you see as sustainable right now?
Yeah. 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. The environment is very good, so we're executing our strategy and plan both in terms of mix management on segments that operate better, there's some corrective action pricing that's going on as well. I think, if you can't get the yield in today's environment or get accounts probably corrected, then I don't know that you never will or something, right? 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.
Quite frankly, we've also made a lot of investments in analytics to ensure that going forward, we make fewer mistakes and project forward some of the cost increases that we're seeing. Let's say if someone's taking a big increase in a purchased transportation lane, we're going to have a regular shipper there, if it's coming up for renewal, instead of looking at historical costs, you better be looking at the run rate that you have today and what you expect to happen going forward. Again, it's not a material step change in our analytics and our efforts, but it is a step change. It's kind of ordinary course of business. Let's always work on getting better, right?
Okay. Yeah, no, I think I understand. That makes sense. Just to come back to the comments around purchased transportation, obviously we understand that cost of hires moving up in the market, with the combination of the growth. Should we think about PT as a % 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?
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. To the extent that we're doing that gives us an opportunity to bring that PT number down.
The challenge right now, we pointed out, is that it's a highly inflationary truckload market, that impacts that line. It's incumbent upon us to continue to optimize and bring that internally, or as much as we can internally, it's clearly an inflationary number. I'd like to see us bring it down from here. That's in the face of changing market dynamics, too.
Strong demand. You have some of the purchased transportation we use is optimal. We're always kind of analyzing where we have to use suboptimal purchased transportation to service the customer and provide some capacity, then you try to reoptimize that over a period of time with putting your own drivers on those runs. Got it. Yep. Okay. Just a couple of housekeeping ones, I apologize if I missed it, did you give the June and the July tonnage, tons per day numbers? I was on a little bit late on the call, if you have those, that would be helpful.
No worries. The June tonnage increase was 5.8% year-over-year, shipments year-over-year were +1.4%. If you look at July, this is through yesterday, tonnage is up
10.3%, shipments are up 6.7%.
Okay. Then just last one for my housekeeping. I think that you typically give some thoughts around the OR sequentially. Is there anything we should think about into the third quarter from the second quarter this year versus the normal sequential progressions that we see from an OR standpoint? Thanks.
Yeah. I think if you adjust for unusual items, our historical Q2 to Q3, we have a deterioration in the operating ratio. It is a little over 150 basis points. Due to seasonality and our July 1st salary and wage increase, with our current tonnage and yield trends in July, both trending 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.
Okay. Hey, thanks a lot for the time today, guys. Appreciate it.
Thank you. Our next question comes from Scott Group with Wolfe Research.
Hey, thanks. Morning, guys.
Morning, Scott.
Morning, Scott.
I want to just follow up on that double-digit tonnage for July. Obviously, a pretty big re-acceleration. If I remember last July, you saw a sudden deceleration in tonnage as you did some more meaningful pricing actions, and then tonnage sort of picked up throughout the rest of third quarter last year. Are we thinking about that right? Maybe don't count on double-digit tonnage for the full quarter for Q3?
Yes. Mid-June of last year, we made some pretty meaningful adjustments to some of our transactional 3PLs, which tend to have immediate near-term impact from a volume perspective. That was because the rates that we had weren't compensatory, and we'd made some, particularly to and from the Northeast, we'd been given some targets and provided some opportunities for get some volumes during the startup. Our startup volumes were much higher than anticipated. We kind of went back to the transactional people and said, "Let's take some corrections on some of this business that we priced." We went through that process, and as I think we'd indicated, that had a pretty meaningful impact.
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. You're correct that the comps get a little more difficult as you go into August and September. I guess what I would say is if you more maybe take the where we are and the July run rate, and then take more normal seasonality from there as opposed to just using last year's probably not a very good comp.
Okay, that's helpful. Did you share a shipment for July? I'm just trying to figure out what weight per shipment is doing in July.
Yeah. The July tonnage was +10.3%, and the shipments number was +6.7%.
Okay, helpful. 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 that it's just stepped up. We comment on where our contract renewals are and some of our efforts with business mix. Yeah, in spite of the increase in weight per shipment, from a sequential standpoint the yield stepped up a bit.
Okay, just last one for me on the wage side. 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?
Sure thing, Scott. We took our wage increase July 1st. That was on average across the workforce was +3.6%. That includes the driver wage increases, which were in the 4% range and the sort of staff wages around three. That's a little bit higher than what we did last year, and we tend to be very market-based with that. Last year was on average right a little around three, it's a little bit higher this year. Similarly last year, we took it on July 1st.
Perfect. Thank you, guys.
Thank you. Our next question comes from David Ross with Stifel.
Yes, good morning, gentlemen.
Morning, David.
To follow up on the labor issues, is it harder in the Northeast as you're expanding to recruit labor up there, easier? 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 in a high, strong demand environment, we've actually seen where you 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. 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. There are some very difficult markets from a recruiting standpoint.
Is that Midwest, West Coast?
Yes. I mean, I'll just give examples. Chicago's always tough. Colorado's particularly tough. California, Seattle. Part of our wage increases, we made some adjustments in some markets, and we're investing a lot of money in recruiting. I mean, we had to 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.
Because turnover is pretty low. I guess driver turnover, I'm guessing is less than 20%.
Yeah. It is about that number, a little bit less.
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 line haul dock P&D? Any update there?
Always. We do have a couple bigger projects that are going on to look at some optimization technologies in 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 roll-outs that should be some enhancements to our line haul network that'll happen over the next two and a half years. Our city dispatch system will probably be replaced in the next 24-month timeframe as well. It's a good system, with mapping and optimization suggestions and route order deliveries, et cetera. It's not unsophisticated, but it was probably developed seven, eight years ago. There's opportunity for us to upgrade and move to a modern technology and more sophisticated, potentially, regression analysis on miles optimizations in a route, et cetera.
That would certainly be a positive thing. Last question is just around the growth. Of the 7%-8% tonnage growth that you're seeing or saw in the second quarter, how would 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, I would tell you 8 of our 12 regions, which the Northeast would obviously be in that category, right? 8 of our 12 regions grew double digit from a revenue standpoint. The 4 that didn't kind of had some mix changes where, for the most part, national accounts is flat to down and the field business is growing the most. We've got some efforts to work on minimum shipments that may not be compensatory with a customer or within a customer segment of business that we're working with. I guess we're not going to give a specific number on the Northeast because we had some targeted market share gain things when we opened the Northeast. I guess I would tell you, we're exceeding that.
As you might imagine, most of that business goes to and from our existing network, and it's kind of part of our targeted growth opportunity and our value proposition going forward.
Excellent. Thank you.
Thank you. Our next question comes from Jason Seidl with Cowen and Company.
Thank you, operator. Morning, guys.
Morning.
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 to like a percent and a half 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?
Yeah, 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 from that is if we get into some of our pricing initiatives. I think the demand environment's good, and we should see the opportunity for that. We're committed to getting the margins improved and if rate's not compensatory. I mean, as you've seen from some other people managing their networks, the balance between volume and price is very important. 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. Well, that's good. What are you hearing from your customers on sort of the peak season? What we were hearing was that a lot of the customers after last year started planning earlier this year.
You want to kind of
Yeah. I don't know that we necessarily see. It's been a seasonal business and
If you look at what we see in the marketplace right now, The ISM data is all positive. We see GDP accelerating 4.1% in Q2. Consumers in pretty good shape. 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 would point out that the fourth quarter does have 62 workdays this year as compared to 61 last year, there'll be a little bit of a variance there. Yeah. 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.
Hey, Jason.
Okay. That's good to know. Yep.
Jason, Doug wanted to add something.
I would just add too that on the LTL side, our freight mix has more of an industrial bent, as you know. Some of that seasonality that you speak of really relates more to retail type freight flows. I will say, with the GDP number that was out on Friday, I think it was, up 4.1%, that could have been a little better actually, right? Inventories will work down. The fact that I think inventories on average, whether we're talking about business or retail inventories, I think the drawdown was maybe 1%. That bodes well for the second half, right? If business trends are still strong and inventories will work down, those will be replenished. That would be positive for people.
I hope you're right. A question relating to that. 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?
Yeah, I wouldn't disagree with that, but I'm not sure our customers know exactly what's going to happen, right? I don't disagree with that.
None of us know that.
Right.
All right. Fantastic, gentlemen. I appreciate the time.
Great.
Thank you. Our next question comes from Ravi Shanker with Morgan Stanley.
Thanks. Good morning, gentlemen. A couple of questions on the pricing initiatives here. Clearly with this push for yield, is this something that's opportunistic given the current tightness and the strength 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. We just need to make sure that all of our customers are paying their way. 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. The national account business actually within our company from an operating ratio standpoint has never been better. 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 network. I guess I would say we'll always have to have a balance between volumes and yield.
I think when you look at the inflationary costs and the demand environment that we have, and what it takes to recruit, train, and retain a qualified driver to provide good service to the customer, I personally feel like our current returns are inadequate. 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. Just on that same topic, when you first gave us the plan to expand to 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 what it is right now? I'm just wondering if you've had to or you plan on fine-tuning that plan in any way going forward, just given the market we're in right now.
Yeah. I think we thought the environment would be good. It's actually been better than that. What that forces you to do is to reevaluate your opportunities. On the one side, the costs are probably a little bit higher, and some of the facilities and capacity that we need to procure up there is at a bit of a higher cost. We have to manage through that. The reception to our expansion up there was greater than we thought initially. We had to ramp up rapidly. You also have to re-rationalize the pricing that you put in to make sure you're being compensated properly for that. I think 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.
The Northeast probably been certainly better than we would have expected as we went through the opening. We're just working on that pipeline of opportunities that we have in our historical geography as well as in our expanded opportunities
Got it. Just lastly, when you first opened the new terminal 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 % of your Northeast volumes actually come from new customers versus national customers expanding into the Northeast?
I don't have that specifically. I can get some of that.
Yeah. 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. That number is tracking down, which means we're picking up new accounts in the Northeast. I would say it's approaching sort of lower 60% now coming from existing customers. That's evidence of growth in the Northeastern market.
Great. Very helpful. Thank you.
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.
Makes sense. Thanks, guys.
Okay, great.
Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press *1 on your telephone keypad. Our next question comes from Willard Milby with Seaport Global.
Hey, good morning, guys. 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 do you deem suboptimal? I know you were talking about trying to reduce those miles out of the system. What % of your current usage is suboptimal? Is that broadly across the network? Is that tied to the Northeast, where maybe you build more density, those miles become easier to put on your own trucks as density builds? Can you talk a little bit about that?
It's a constant process, and it's kind of evolving depending upon what you're seeing with volume. It probably would be hard, difficult for us. 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'll work on those internally to achieve our operating ratio improvements.
All right. On pricing, obviously continued strength in the contract renewals. When we look at that, is that more broadly across the network, or is it possible to 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?
Yeah. It's pretty broad across our network, some of our initiatives. It kind of runs the gamut between some customers, maybe their minimums aren't compensatory. Some customers maybe have an inadequate lift gate charge. There's just a bunch of detail work to be done on an account-by-account basis as you work through that. Our efforts are broad, and we're very focused on working through that and making sure we're going to earn an appropriate return on invested capital over time.
All right. Fair enough. Thanks for the time, guys.
Thank you. Our next question comes from Brad Delco with Stephens Inc.
Hey, guys. Just a quick follow-up, if that's okay.
Sure.
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? Maybe also too, as you think about 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.
Yeah. We definitely are. We have 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 more flattish with a pretty meaningful yield improvement. The 3PL business is up and kind of in the middle. I guess in terms of weight per shipment, you're seeing industrial activity to be strong. I guess we would focus through some of our benchmarking, and part of it's growing up as more of a regional player. You had a lot of regional business that may move in a short-haul environment and has too low of a minimum and just doesn't work anymore in today's cost structure.
We've migrated away from some of that or making sure that we're being better compensated. That's probably having some impact in size mix as well.
Okay. Maybe to sort of tie that into yield, weight per shipment was up 3.2%, which kind of depresses that yield metric. I think length of haul was up about 3.8%. When you think about those two, I guess, sort of competing metrics on yield, do you feel like they kind of net each other out, or does one have a greater impact on yield than the other?
They almost net each other out based on kind of some of our regression analysis with a correlation coefficient. The only other issue you have, because if you look at the amount of the yield improvement, now obviously we're making investments in our product offering technology and capacity that's causing us to have some cost increases. Also, while field business has a meaningful different yield on average than 3PL and national account business. It also, at least versus a national account type business, sometimes you don't have as much synergies doing a drop trailer versus going by and picking up two freight bills, right?
Yeah.
That's one reason that you don't see all of your yields go to the bottom line. Again, generally, the field business operates 10 points or so better than national account/3PL type stuff. As 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 a drop trailer, right?
I think you have historically provided kind of a ballpark range where contract was 100 to 105, and 3PL was sort of 93, and field was like 85. Was that directionally right, and has that changed?
It's changed. Our national accounts, actually, this last quarter have never operated better, and it's a 92-ish type of number.
Wow.
We're really bringing them kind of more in line with the company, again, we're always addressing and frequently adapting our transactional 3PL business. We consider contractual 3PL business for a customer where they just manage the account. That's really a national account. Transactional is more where we give blanket pricing, then they resell it. That business is actually some of the worst operating business that we have today. We continue to kind of work through that and make sure we're being compensated properly. It periodically has some impacts on your volumes near term, then it comes back.
Okay. Apologize, one of my real quick follow-ups that have 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?
Yep. Dollars, yes.
$48 million?
No. 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.
Okay, perfect. Thanks, guys, for the time.
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.