SAIA Financial Analysis

Analysis Date: 2/4/2025

Business Model

Saia Inc. generates revenue by providing less-than-truckload (LTL), non-asset truckload, expedited, and logistics services to customers across the United States.

Revenue Sources

• Less-than-Truckload (LTL) services: Core revenue stream from transporting smaller freight shipments for multiple customers.
• Non-asset truckload services: Revenue from arranging full truckload transportation without owning trucks, leveraging partnerships.
• Expedited services: Premium revenue for time-sensitive and urgent freight deliveries.
• Logistics services: Revenue from providing supply chain solutions and value-added services beyond transportation.

Income Statement Analysis

• Operating Revenue increased by 5.0% year-over-year, indicating continued business growth.
• Salaries, wages, and employee benefits increased by 8.7%, reflecting headcount growth and wage increases.
• Purchased transportation decreased by 11.1%, indicating improved efficiency or changes in service mix.
• Depreciation and amortization increased by 18.3% due to significant investments in equipment and real estate.
• Operating Income decreased by 9.9% despite revenue growth, suggesting rising operating expenses outpaced revenue gains.

Balance Sheet Analysis

• Cash and cash equivalents decreased significantly by 93.4% due to large capital expenditures.
• Accounts receivable increased by 3.6%, consistent with revenue growth.
• Net property and equipment increased substantially by 44.9%, reflecting significant investments in terminals and equipment.
• Long-term debt increased dramatically, nearly 3000%, to $194.9 million from $6.3 million, financing capital expenditures.
• Retained earnings increased by 21.8%, driven by net income.
• Total assets and total liabilities and stockholders' equity both increased by 22.6%, reflecting overall business expansion and investment.

Capital Allocation

Saia's capital allocation strategy in 2024 was heavily focused on business reinvestment, primarily through significant capital expenditures in real estate and equipment. This is evident from the $1 billion in capital expenditure in 2024, including $235.7 million for property acquisitions from the Yellow Corporation auction. The company significantly increased its long-term debt to finance these investments, indicating a priority on growth and expansion over immediate shareholder returns like dividends or share repurchases. While no dividends or share repurchases are mentioned, the focus is clearly on expanding the network and service capabilities for long-term value creation. Anticipated CapEx for 2025 remains high at over $700 million, suggesting continued reinvestment focus.

Management Commentary

I am pleased with the progress we made this year, as we opened 21 new terminals and relocated 9 others, further enhancing our service offerings in both new and existing markets.

We are proud to bring our 100th year in operation to a close with 214 terminals and our ability to provide direct service to all 48 contiguous states, positioning us as a leading national carrier.

2024 represented a record level of investment in the business, with over $1 billion in capital expenditures.

Operating ratio of 87.1 deteriorated seasonally by two ten basis points compared to our operating ratio of 85 posted in the [previous quarter].

While these new openings in total remain a drag on the company OR, we're starting to see the new terminals operate more efficiently and we're very pleased with our execution.

Overall Sentiment: Positive. Management expresses satisfaction with record revenue, significant network expansion, and strategic investments made in 2024. While acknowledging a slight operating ratio deterioration in Q4 due to seasonality and expansion costs, the overall tone is optimistic about long-term growth and market positioning. Focus is on customer service and realizing returns from recent investments.

Recommendation

Rating: Hold

Reason for Rating: Hold recommendation based on a mixed outlook. While Saia has demonstrated strong revenue growth and strategic network expansion, significant capital expenditures and increased debt have impacted profitability and cash flow in the short term. The company is investing heavily for long-term growth, but near-term margin pressure is expected due to new terminal ramp-up costs. Market needs to see consistent OR improvement and leveraging of the expanded network before a more positive rating.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/4/2025, 8:43:35 AM