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spk16: Thank you for standing by. My name is Eric and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2023 SIA Incorporated Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Doug Cole, SIA's Executive Vice President and Chief Financial Officer. Please go ahead.
spk07: Good morning, everyone. Welcome to SIA's fourth quarter 2023 conference call. With me for today's call is SIA's President and Chief Executive Officer Fritz Holzgrave. Before we begin, you should know that during the call, we may make certain 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 SEC filings for more information on the exact risk factors that could cause actual results to differ. I'll now turn the call over to Fritz for some opening comments.
spk01: Good morning, and thank you for joining us to discuss SIA's fourth quarter and full-year results. I must start my comments today with a word of thanks to the entire SIA team for the dedicated efforts as we work through volatile business trends in 2023. We start our 100th anniversary year with an engaged team that delivered a record number of shipments in 2023, just shy of $8 million in total for the year, and in turn took 2023 revenue of $2.9 billion, was also a record for our company. 2023 was really a tale of two halves. Both shipments and tonnage per workday were down year over year for the first six months of the year, continuing a trend which began in the second half of 2022 as the industrial economy slowed. Turning the calendar to the month of July, our industry experienced a generational type of moment as a large national competitor began limiting service and ultimately ceased operations. At SIA, we saw volumes increase by as much as 10% to 20% on a given day from trends just a month earlier. Our contingency planning in advance of this change put us in a position to handle the increased volumes almost seamlessly while still maintaining excellent service for our customers. In the months that followed that initial surge in business, we increased our staffing levels by adding nearly 1,500 dedicated employees in the second half of the year, 90% of which were drivers, dock workers, and frontline leadership to support growth. We have focused our team on taking care of the customer as we absorb all the growth in the second half. We have continued the painstaking process of investing in our network to maintain our service while also optimizing how we provide the service with our expanding line haul and driving teams. We have plans to open 15 to 20 new terminals in 2024. Our teams are committed to accomplishing this with an eye on always putting the customer first. Those customer-first initiatives have been the cornerstone of our success over the last several years, and included in that is our desire to have more locations through which to serve new and existing customers. In Q4, Mascio released its latest surveys results. The results highlight a couple of significant achievements for SIA. First, the scores highlight our continued improvement and positive feedback from our customers who are recognizing SIA's ongoing investment and service. Second, it's becoming increasingly evident that customers are viewing us as a leading national LTL provider, reflecting not only our investments in service, but the expanding footprint. It is critical to note there have been no drop-off in perceived levels of service. Importantly, we've added nearly 20 new facilities in the last two years. Customers are recognizing our ability to not only improve service, but to replicate that improved service in new locations. So today, what we'll We'll give a recap of 2023 results and provide an update on our plans for 2024. I will now turn it over to Doug for a review of fourth quarter results and full 2024 financial highlights.
spk07: Thanks, Fritz. Fourth quarter revenue increased by $95.4 million to a record $751.1 million. Shipments grew by 18.1%, and with weight per shipment decreasing by 8.3%, tonnage growth for the quarter was 8.2%. Yield excluding fuel surcharge improved by 11.7%, while yield including fuel surcharge increased by 7%. These reported yield results benefit from the lighter average weight per shipment versus the fourth quarter last year. Revenue per shipment excluding fuel surcharge increased 2.4% to $295.22 compared to $288.34 in the fourth quarter of 2022. Fuel surcharge revenue decreased by 3.4% and was 17% of total revenue compared to 20.1% a year ago, primarily the result of lower national average diesel prices, which are used to establish the surcharge rate in our fuel tables. Shifting to the expense side, a few key items to note in the quarter. Salaries, wages, and benefits increased 20.2% from a combination of our increased employee headcount of approximately 14% year-over-year to support our network expansion and volume growth over the last six months, and also our July 2023 wage increase, which averaged 4.1% across our employee base. Purchase transportation expense increased by 8.4% compared to the fourth quarter last year, primarily due to increased purchase transportation miles, partially offset by a decrease in the cost per mile compared to the same period in 2022. PT expense was 8.7% of total revenue compared to 9.2% in the fourth quarter of 2022. Purchased transportation miles were 15.4% of total line haul miles in the fourth quarter compared to 12% in last year's fourth quarter. Fuel expense decreased by 12.1% in the quarter despite company miles increasing 7.6% year over year. The decrease in fuel expense was primarily the result of national average diesel prices decreasing by over 15.9% on a year over year basis. Claims and insurance expense increased by 21% year-over-year in the quarter and was up 5.1% or 0.9 million sequentially from the third quarter of 2023. The increase compared to the fourth quarter of 2022 was primarily due to increase in accident-related self-insurance and claims costs, as well as increases in insurance premiums. Depreciation expense of 45.7 million in the quarter was 15.3% higher year-over-year, primarily due to ongoing investments in revenue equipment and our network expansion. Total operating expenses increased by 13.4% in the quarter, and with the year-over-year revenue increase of 14.5%, our operating ratio improved to 85% compared to 85.9% a year ago. Our tax rate for the fourth quarter was 22.8% compared to 24% in the fourth quarter last year, and our diluted earnings per share increased to $3.33 compared to $2.65 in the fourth quarter a year ago. Moving on to the financial highlights of our full year 2023 results. As Fritz mentioned, revenue was a record $2.9 billion and operating income was $460.5 million. Our operating ratio deteriorated by 90 basis points in 2023 to exactly 84.0%. For the full year 2023, our diluted earnings per share were $13.26 versus $13.40 in 2022. I'll now turn the call back over to Fritz for some closing comments.
spk01: Thanks, Doug. To continue to operate with an OR in the mid-80s, given the activity in the network during the quarter is a testament to the improved operating performance of our team over the last few years. Our customer-first focus is yielding tangible results across our organization. With a talented, growing, and engaged workforce, the value proposition to our customers continues to grow. We initially embarked on our geographic expansion in 2017 with four terminals in the Northeast. Since that time, we've opened 48 facilities and we've covered the Northeast geography while also refining the strategy to enhance our coverage in legacy markets. Throughout, we've actually seen our underlying service offering continue to improve. This success is attributable to our team across the organization who have spent countless hours supporting these initiatives. I'm excited about the terminals acquired in January and believe this to be a once-in-a-lifetime opportunity for us to be able to bring our offerings to more markets, meet new customers, and serve our current customers more efficiently. The last seven years have proven our ability to execute an organic expansion strategy. Critical to our success opening SCIA facilities is an intense focus on maintaining our culture, which starts with the customer. We believe the unique opportunities at hand will allow us to systematically grow over the next couple of years as the facility additions provide an important supplement to our real estate investment pipeline. As seen from our results over the last several years, we've shown that the ability to make substantial investments in our network to benefit our customers while generating improved financial performance over time and efficiently and effectively deploying capital. SAI will approach record levels of capital investment in 2024 but at no time in the company's 100-year history have we had a similar opportunity. The capital is focused on continuing developing our terminal network as well as significant investments in our fleet, providing increased capacity and flexibility for our customers. Key to our success will be delivering the customer-first focus that started in Houma, Louisiana 100 years ago and has been refined over a century. We continue to have significant opportunities to develop the markets around the other nearly 20 terminals that we've opened over the last two years. Although we're excited about the success of these locations to date, we see considerable runway to build density in all these new markets. Finally, before opening the call for questions, I would say there's still a lot of uncertainty around the strength of the economy. At SAI, we've emphasized the importance of the customer and focusing on the things that we can control. So as our industry adjusts and adapts to the evolving economic environment over the coming months, My conviction about the long-term prospects of SCIA remains steadfast. Great employees, great service, and a growing footprint are all key to securing our position as a long-term share gainer in our industry. With that said, we're now ready to open the line for questions, operator.
spk16: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jack Atkins with Stevens. Please go ahead.
spk02: Okay, great. Fritz and Doug, good morning. Thanks for taking my questions. So if we could maybe start here first with the CapEx guide for 24. Doug, I don't know if you want to take this or if it's for Fritz, but the billion dollar CapEx number, I know obviously part of that, a good chunk of that is related to the purchase of the yellow terminals. Can you maybe break down, you know, kind of the rest of that kind of $750 million, how that's going to kind of shake out between real estate versus equipment and just sort of help us think about, you know, what's for 2024 and maybe what's related to CapEx beyond that?
spk07: Sure, Jack. Good morning. Yeah, like you mentioned, I mean, of the kind of billion-ish number that we target, you You're right about about a quarter of it call. It was related to the yellow investment and then we've got to get these terminals ready to get up and opening the ones that were in the purchase that are going to be part of our 15 to 20 openings this year. We've got some investments we want to put into them and then there's a lot of construction going on across the network. I mean, we're upsizing some major terminals in some different markets. So, you know, in addition to the call it 250 or so, that was the initial yellow investment. You know, there's probably another 300 plus in real estate this year. We've got a big equipment investment we're going to make this year. I mean, you know, first of all, I mean, as volume stepped up last summer, you know, meaningful step up 10 to 20% kind of over a matter of a couple weeks of volume increase. Our contingency planning that we put in place had us renting some equipment, bringing in additional tractors and trailers to get ready to serve the customer. But we want to do that with our equipment and get rid of some of those costs. So we've upped our trailer by this year, along with just the needs for connecting the network every night and picking up everything in the city. We've also got an opportunity to grow. A lot of these customers that we're serving value the service. And if we can put more trailers in their hands, they'll fill them up for us. So we've been trying to do that the last several years. And the supply chain has limited some of those efforts. But we're going to catch up on some of that this year. So you could see, you know, kind of call it $400 to $450 million in equipment. And then we've got, you know, ongoing IT investments that will approach probably $50 million. And that's related, a lot of that's related to these new openings and all. You know, you've got to get IT in place, you know, in the terminals and whatever security technology is put in all the terminals. You've got, you know, new driver handhelds that we roll out and things like that. Those are the buckets.
spk02: Okay. No, that's really helpful, Doug. Thanks for breaking it down for us like that. And I guess maybe for my follow-up question, can you maybe give us an update on January trends to start the year and maybe how you're thinking about any sequential changes to operating ratio fourth quarter to first quarter?
spk07: Sure, buddy. I might as well go ahead and I'll give you the December numbers too. The October and November numbers were published in the quarter in our public. In December, our shipments per day grew 16.5%. And our tonnage per day in December per workday grew 6.8%. And then as we move into January, January shipments per workday were up 11.8%. and tonnage was up 3.3%. So, you know, the January number, just for a little commentary, I mean, we had, you know, several days, call it six or seven days where we had literally dozens of terminals impacted in some of those days. So, you know, that's the same for all of us. We always kid about it being an outdoor sport and we got quite a bit of weather in January and, you know, it'll be hard to give any kind of guide. I mean, it's sunny here to start February, In some years, February has been the worst weather month for us. We'll see how that unfolds. And then, you know, Jack, March is the most important month in Q1. And to Fritz's point, that's where maybe we'll start to get a better feel for what's going on with this underlying freight economy. That's a seasonally stronger period for us. So we'll see what things look like in March. But just in terms of the OR guide, You know, usually Q4 to Q1 in the last several years gets a little better. Call it, you know, 50 to 75 basis points better, Q4 to Q1. A lot of that's depending on where the weather falls. But, you know, based on how we got out of January, you know, we think that that's still reasonable to expect. And, again, a lot of it's going to be determined in March. But we're still confident that we can show some OR improvement from Q4 into Q1.
spk02: All right. That's fantastic. Thanks for the time, Doug.
spk16: Your next question comes from the line of Amit Marocha with Deutsche Bank. Please go ahead.
spk17: Thanks, operator. Hi, guys. Just following up on Jack's questions. So obviously this year is a pretty heavy, very heavy investment year. You talked about 1Q, but Fritz, I'd love to get your perspective on you know, what the margin expectations are for the full year more broadly? I mean, there's one angle where it could be a transition year as these investments kind of hit the P&L and the volume follows after that, or maybe there's a little bit more quicker payback from these investors. You could talk about that and just more broadly if you expect margins to get.
spk01: Yeah, thanks a bit. You know, the interesting thing about the opportunity we have here is the facilities that are in our pipeline in the year, they provide a range of opportunities for us. So some of them are moving into markets that are established, and we're going to be able to provide some incremental, you know, benefit to the customer right away. And those, you know, you'd expect to generate, be accretive to us, you know, potentially in the year. You've got other facilities that across the Great Plains states where we have partnered with agents in those markets to provide service. And now we'll be able to go to direct to those customers. And we're really excited about that opportunity and feedback from customers are that they're really excited about it. So we think about all those things and what the opportunities are and what we're doing around focusing on our mix of business. I mean, we're. you know, as we look at the year and if we have a reasonable backdrop, I mean, I think we ought to be able to think about a range of 100 to 200 basis point sort of OR improvement from 23. You know, so on the top end of that range, you know, you probably got a favorable economic sort of backdrop in the second half. But through that, you know, I think there's a tremendous amount of opportunities to capitalize on our investments. And we're excited about those and want to does for the customer. So on the lower end of that range, maybe that's an environment that is not quite as strong or favorable. But I think what we're doing right now is because we've got this customer proposition that is improving over time, that even in a softer environment, we have an opportunity to differentiate and we have an opportunity for our team to execute. And I think we can drive those kinds of returns even while we're making substantial investments in the business.
spk17: Okay. And my follow-up question, I just wanted to ask about pricing. Obviously, you took on a lot of freight in the third quarter. I think you've been trying to optimize that freight. Are we at the point now where you're happy with where we are on that business that you took on? And as you guys expand, you know, you guys have a I guess, a subscale? You have holes in the national network. As you fill in more dots in the network, does it also give you an ability to kind of go back to some of your larger national customers that are maybe giving you discounted pricing because you don't have the full coverage? If you can just talk about the pricing dynamic from that expansion as well.
spk01: Yeah. So, I mean, I think it's an important point. So, we have, as we've taken this freight on, we've we analyze this pretty closely and we pulled forward quite a bit of sort of contract renewals into the end of the fourth quarter. Our renewal rates year over year, I mean, up roughly. Contracts, the number of contracts renewed or renegotiated in the fourth quarter are up about 50% year over year. And our contractual renewal for the quarter in total was 8.7%. So listen, we're very, very focused on that. We're talking about making some pretty substantial investments in service for the customer this year. And when we do that, we've also got to make sure we generate the appropriate level of return to support that level of investment. So we're very, very focused on making sure that we are compensated for the service. But in order to be compensated for the service, you've got to be doing a great job. So that's kind of all together. But we're continuing to work. through and understanding the value that we're providing to the customer and understanding what the impact is of the customer's freight on our network.
spk17: Thanks very much, guys. Appreciate it.
spk16: Your next question comes from the line of Chris Weatherby with Citigroup. Please go ahead.
spk05: Hey, thanks. Good morning, guys. Maybe I want to get your perspective as sort of just piggybacking on what you just noted there around price relative to some of the volume that you brought on. So I guess I'm curious how you're thinking about if you need to make any tradeoffs between the opportunity for volume growth as you continue to expand the network and then the ability to get price on somewhat of a catch-up basis. So I guess I'm just kind of curious how you're balancing those two priorities as we're entering 2024.
spk01: know we we always balance that but i think that what's uh incumbent upon us is that the this this is a very high service level that we're providing so um our our team is very focused focused on making sure that we're fairly compensated for those service levels so um you know we're going to get volume growth simply by uh some of the network coverage we're going to grow add this year that's going to be beneficial at the same time while we're doing that we get that priced in the right way, we'll continue to develop the OR profile over time. So I think it's an important part of our business case. And I think if you look back at the last, you know, four or five years, this is what we do. So, you know, provide high level of service and focus on making sure that we are compensated for it. Okay.
spk05: That's helpful. And then, you know, We've heard some mixed things about 2024 in terms of, you know, pricing being more of a sort of return to normal type year after a bunch of years of pretty elevated levels. We obviously had a significant capacity event in what was a relatively sort of soft market from a freight perspective broadly in 23. So I guess just conceptually, as you think about pricing 24 versus 23 years, there's still sort of more acceleration opportunities. And maybe that's unique to SIA, but bigger picture, or is it maybe more of a normalizing environment? Just kind of get a sense of what you think the sort of direction broadly for the industry is.
spk01: Well, I think broadly for the industry, I mean, the underlying costs for the industry are inflationary, right? And I think that that's an important note. And I think that those that choose to invest in service levels, that's probably doubly inflationary, right? So you have to really... Stay remain focused on balancing that equation. I think that the industry dynamics broadly that those trends don't aren't going to change in the coming year in terms of what the underlying inflationary costs are. So, I think that, you know, you'll consider this continue to see positive pricing in the business. When I think about SIA, I think about what our relative position is, and I look at our relative service, and I look at our relative sort of pricing opportunities. You know, I think that's pretty positive for us.
spk07: I'd say, too, Chris, there's a case to be made that you could see another leg up in industry pricing, right? I mean, you know, the industry event happened, and there was capacity there to handle it, but that's because, you know, tonnage in our industry had been negative for basically a year when it happened. You know, if you give, you know, the players I see operating in our industry today, if you give us a little bit better, you know, macro backdrop in terms of industrial freight, you know, nobody's giving away this service. They've all made investments to provide good service and improving service levels. If the backdrop gets a little better, I'd say there's a case we made that, you know, if we're handling all this extra volume now, that you could see another leg up in industry pricing. So we'll have to see what the macro deals is, especially in the second half.
spk05: Okay. That's helpful, Cole. I appreciate it, guys. Thank you.
spk16: The next question comes from the line of Scott Group with Wolf Research. Please go ahead.
spk15: Hey, thanks. Good morning. So, Fritz, I think you just said you repriced 50% more of your business in Q4 than Q4 a year ago. I guess I'm wondering how do you do that and then Can you just put some perspective, like what percent of the actual business was repriced in Q4? And then, you know, maybe just Doug, maybe you can help a little bit. We got so many moving parts with, you know, yields were up 12, but rep or shipment was up two or three. Like, how should we think about just overall yield growth going forward?
spk01: Hey, Scott, thank you for bringing up the, let me just clarify my comments around the contractual renewals. So those would be the number of contracts year over year increased by 50%. So it wasn't 50% of the book of business or something like that. It was just the absolute number of contracts. The key thing with that is, as you know, those contracts are effectively pricing agreements. They don't have a volume commitment to it. So what we end up doing we're very pleased with how that process went. Uh, now it's, you know, a matter of making sure that we hang on to the business going forward, but I think it's a directional indication that's pretty positive, um, you know, kind of a trend for us. So we think about it in that context, but it's, it was the number of contracts, um, that we act physically renewed this year versus last.
spk07: Yeah. And then Scott, just in terms of the right environment, I mean, I, you know, you saw our GRI that we put into December, early in December, we pulled it forward. So if you're looking at, you know, December shipments, that early GRI, you know, might have taken a little bit of the top off of shipments, but we're okay with that again because it was the right thing to do. But I'd say, I mean, our revenue per shipment for the full year, 2023, was still up in that low single-digit range, 4%-ish. So, you know, the cost, inflation last year, X fuel was, A little bit less than that. So, I mean, I think pricing, you know, revenue for shipment in the three, you know, mid single, you know, three, three to four percent range probably still makes sense for us. And again, a little bit better backdrop. Maybe you get more than that. But you're right. It's confusing with the way for shipment coming down so much. The yields not really telling the pricing story, but underlying pricing and revenue for shipment growth is still still going to be positive. I think in that low single digit range.
spk15: Okay. And then just want to follow up on the CapEx piece. How should we think about DNA and interest expense this year to fund it? And then should we think about this as, you know, it's a billion this year, but then it sort of normalizes back down in the out years and this was a bit of a pull forward or is this a new run rate in your mind?
spk07: Yeah, I mean, in terms of depreciation, I mean, it's been increasing as we've expanded the footprint over the years. I mean, I'd expect another step up, you know, if we get all this equipment delivered and the timing of some of these, you know, construction investments and things, I'd expect depreciation will be up another, you know, 15 to 20%, I would guess, in 2024. You know, you're right. I mean, we ended the year with a lot of cash, and we've made our yellow investment. We're not... regularly into the line or anything, but we'll be using our line and putting a little bit of debt on throughout the year. So, I mean, you're going to have, you're going to flip from, you know, interest expense or interest income to interest expense. And, you know, somewhere probably, you know, I'd expect probably, you know, five or 10 million probably in interest expense in 2024, depending on timing.
spk15: And then is this a one-year CapEx or a multi-year at this level?
spk01: You know, I think you obviously have the one-off related to the real estate here in the yellow auction. I think what you're going to see over time as we grow the company, you're going to see elevated levels of CapEx investment that are reflective of that growth. So I think you would expect to see it step down. And then I think you'd see it expect to over time normalize. We still won't have all the levels of, or the, all the real estate or all the locations that we think we ultimately want to have. Um, and in underlying all this, I think it's important to understand that that real estate line is that, you know, we've got some pretty nice investments in the legacy network in order to support, uh, growing business. So, um, You know, I think you'll see us continue to invest in real estate over time. The fleet will have to match that. You'll see the OR improve over time. We'll be able to fund a lot of this from operating cash flow.
spk15: Thank you, guys.
spk16: Your next question comes from the line of Jordan Alliger with Goldman Sachs. Please go ahead.
spk09: Yeah, hi, morning. I was wondering if you could discuss the new terminal opening plan, perhaps the expectation for net new doors open, some thoughts around the timing of when this is going to get added, you know, over the quarters, and what sort of additional revenue contribution do you think this could have in your plan? Thanks.
spk01: Thanks for the question. So a couple things as far as the timing of this. it's going to be spread out over the year. You know, some of the facilities that we recently acquired that had, you know, requires some level of investment to meet the standard that we expect out of a facility. So, you know, they'll open in the year. The Great Plains facilities, they'll open in bunch, probably more in the second half of the year. If you studied the what we purchased, you'd know that we bought facilities like Laredo or Trenton, and we acquired rights to facilities in Cheyenne and St. George, Utah. Those terminals are not in any way similar, the comparison there, so some big, some small. So I think you'll see it spread out over the year. I don't really have a comment specifically on what the revenue add is for those facilities, because when we made Those investments and any investment, we're thinking about what the 10-year opportunity is for that and what the market share opportunity is. So, you know, we, based on our history and we looking back, you know, we know that when we enter a market, we have the opportunity in that addressable market. And it's important to understand the zip codes around those markets. And maybe in the first year, we ought to be able to get 1% of revenue in those discrete markets for 1% market share. Um, and we've shown that we can do that. So I think what you'll see over time is that'll be part of our growth for the year. Um, as well as, you know, ongoing initiatives. Don't forget about the last several facilities, actually the last 20 that we've purchased that there's still a lot of opportunity there for us as well. So I think there, you know, we've got some, we're pretty pleased with what the opportunities are for us.
spk07: And then just.
spk01: Oh, sorry. Go ahead. Sorry.
spk07: Yeah. On the door, on the door count, you know, part of your question. We ended the year with about, call it 8,700 operating doors. Based on our 15 to 20 openings plan, we could add another 8 or 9% probability of the door count if we got all those open. Then there's probably, I think we've got another 10 relocations planned during the year and a couple of terminals that we're expanding. The aggregate door additions from those efforts too could be another you know, 4% or 5% of the door count. So, you know, again, that's the plan as we walk into the year and, you know, we'll see where we'll get done. And like all years too, I mean, if things, you know, unfold differently with, you know, versus plan throughout the year, if the macro environment worsens or gets better, you know, you can see us slow it down or speed it up a little bit with these openings. So, there'll always be that kind of factor. where it's hard to put a single point on it. But those are the magnitude of the additions we're planning.
spk09: Great. Thanks so much.
spk16: Your next question comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead.
spk18: Yep. Thank you. Good morning. To that point on relocations and net doors, I mean, it sounds like you're going to be moving out of some of the terminals you're currently in to upsize or go to better geographic locations for these new terminals that you've acquired. Any sense for how many terminals you'll actually be closing? And the reason I ask that, or I should follow up and say, you know, and what's going to happen to those terminals? Do you imagine selling those back to like a regional LTL competitor? Do you think they leave the market? They're just asking in regards to the view that all the yellow capacity is going to come back online. versus the potential for net subtractions as you open some of the newly acquired terminals?
spk01: I don't know that I've got a good view on what the fate is of the facilities that we might exit. I think we're still waiting over time to see how the industry repositions the assets that have been redeployed here. If you look at SIA's growth discreetly over the last number of years, we've made a lot of our footprint expansion has been tied to, you know, adding facilities and opening doors that some of our larger competitors may be exiting. So, as we continue to grow, I mean, theoretically, those that are sort of below us that may, you know, take on some of that. So, I think it's probably still early to call on what, you know, where ours specifically go. But I think that a fair number of the ones that were in the industry likely will exit the industry because as you watch the auction process unfold, you saw that not all of them cleared. So I think there's some number of those that probably leave the market entirely.
spk18: Okay. Thanks, Fritz. And then for the follow-up, you've obviously filled some geographic holes for these acquisitions and your organic growth. As we think about filling out kind of major areas of need, so to speak, How does that kind of filter through with pricing with your national accounts? If you have better geographic coverage, like a massive big box retailer or a massive industrial consumer, does that really push the pricing needle with that major national customer as well?
spk01: You know, it certainly helps and it gets you some at-bats with customers that have very high levels of service requirements. And we've got some incumbent large accounts that that they look at our footprint and they're really excited about what we've just added. Because for them, we help solve a problem. They appreciate the very high level of service that they're getting from SIA right now. And now we can go more points with those customers. They value that. And we like some of the customers that consider us strategic. In those situations, those are people that are paying for service and greatly value service. And for them, they make money and their business is dependent upon a supply chain and LTL partner that is reliable and on time and low damage. So they're not worried about necessarily pricing per se. They're thinking more about value. So in that scenario, having more at-bats for them, that's a win for us. And we like that. And we're seeing that as we deal with a lot of the larger national accounts that have been satisfied with what they've been getting from us.
spk18: Great. Thank you, Fritz.
spk16: Your next question comes from the line of Ken Hexter with Bank of America. Please go ahead.
spk05: Hey, Clay. Good morning, Fitz and Doug. The Groundhog said it's an early spring, so Doug, on your weather concern for February, March, sounds like you're all set. Doug, can you talk a bit about your life cycle of conversion? You brought on a lot of operating expenses ahead of time to handle all the freight that you won early last year. Maybe can you talk about the progress you're making and how we should think about that as we move through 24? Sure.
spk07: I'll take a shot. I like to think it's kind of leveling it out. You've seen a major step up the last six months in terms of our you know, growing the workforce to meet these kind of new normal volume levels. And I was really pleased Q3 to Q4 with how we continued through that process, our headcount numbers growing. So Q3 end to end of the year, the headcount was up, you know, about right around three, a little over 3%, I think. But our FTEs, if I think about how we're managing the use of those folks, our FTEs were only up about a half a percent on average at Q3 compared to Q4. Again, I mean, we do it every year seasonally throughout the business, and this was just kind of exaggerated, but we know we need that trained and well-positioned employee count because soon enough, like you say, we'll be getting into spring, and with these new normal volume levels, just the cost that come on is kind of fixed, dock and driver costs, for example, which is where most of the hires are happening. As we build density, you know, in the business and seasonally as density builds, they become more variable. I've already kind of, you know, absorbed the cost. And now as I make them, you know, I've got more freight for them to handle and all, I get those efficiencies. So, you know, I think we've been pleased with it. And, you know, let's see. You know, we look forward to getting out into the seasonally stronger period and see how it flows through.
spk05: So just to clarify that then, Doug, so you've got the people that you needed. You're getting the equipment, which was your concern. You mentioned the lease stuff. So the added cost now will be the DNA focus and maybe more wage growth or maybe, but you've already got them at the ready. Is that just trying to understand where we should see incremental costs relative to the volume growth leverage you can get from that?
spk07: Yeah, well, you'll just see better utilization or better efficiency across those costs you've added because now you'll start adding volume to them. It's volume because we're opening new markets and can bring in new business, and it's volume because seasonally we expect things to get better. And then the... Kind of tracking margins Q3 into Q4 is kind of tough because Q4 is always the seasonally softer quarter. You've got additional holiday noise in the fourth quarter, so it's always hard to kind of compare how I'm doing in Q3 versus Q4. It's just a different kind of cadence on the seasonal trends, which you have to manage through every year. And this year was exaggerated because, like you said, the workforce was ramping up. You're typically not doing that Q3 to Q4.
spk05: Yeah. Great. Thanks for that. You mentioned the pace of, I guess, the contract renewals or the number of contracts. Can you talk about the percent of book yet to reprice or maybe the pace of renewals? has that accelerated at this point? And then the capacity you have, excess capacity, where are you entering, I guess, as you add the additional doors and service centers?
spk01: Yeah. So we'll, you know, from here, I would expect the contract renewals to be pretty ratable for the balance of the year. But you know what, as the mix of businesses, we continue to assess what we're taking on as part of the sort of industry disruption, right? I mean, freight's moving around a bit from carrier to carrier too. So as we continue to assess what's coming our way, we may push again on those renewals to maybe accelerate some of that, but I think it's important for us to continue to manage that mix. And that's kind of what we started off with in Q4. When you think about capacities here, so I think we feel pretty good at any point in time in the network, and it's all dependent on where that freight comes from. We had a real pinch point in Salt Lake City, as an example, last year, and we've added a facility that's significantly bigger than where we were, and that has freed up capacity in that market. For us, we manage it market to market, and I think in total, you'd say that we probably got 20-ish percent sort of excess capacity, but you're also seeing us make a pretty significant investment here in our fleet, namely to make sure we've got ample capacity to, you know, continue to provide really high levels of service. We want to invest ahead a little bit there so that we're in a position that when that customer's got that extra drop trailer or that that extra opportunity, the new facility that we're in a position to get that business and do a great job for them. So we like the overall position of where we are. We study it market by market. As we grow, we're continuing to invest in those pinch points. But, you know, I think we feel pretty good with where we are.
spk05: Awesome. Appreciate the insight. Congrats. Great, great, great stuff.
spk16: Your next question comes from the line of James Monaghan with Wells Fargo. Please go ahead.
spk03: Hey, guys. Thank you. Great to get a little bit more context around the growth costs and kind of follow up on the prior question a bit. I guess, like, is there a way to sort of think about the utilization headwind on headcount or like in the usage of PT in fourth quarters, like 100 or 200 basis points? Just trying to understand that in the context of that full year OR improvement that you're talking about, is it really just utilization coming through or are you getting a positive cost spread that adds to that too?
spk07: Well, I don't know. I mean, on the PT line, like I think about Q4, I mean, 15.4% of our miles, of our line haul miles were purchased in the fourth quarter. And while that was up year over year, You know, we brought it down from 18% at the end of Q3. So again, that's just something we have to manage. As we get drivers on board in a position to drive for us, that helps us take PT out. You know, as we move into the, you know, 2024, I think we feel a lot better positioned in terms of our ability to handle, you know, our line haul needs with our own, you know, workforce. So that's good. might be an opportunity. If volumes bounce back, you know, really strong and somehow we get, you know, a macro tailwind or something, we effectively utilize PT. So it comes and goes. But, you know, I think in general, having to staff up in a period where seasonally you might not otherwise be doing so was a challenge. And I was pleased to see that, you know, Q4 was better than Q4 a year ago. And we'll try to build on that this year.
spk03: I guess, is better utilization of the workforce the majority of that 100 to 200 basis point improvement year over full year to full year for the OR?
spk01: No. I think that what you have to look at when we study that, we talk about pricing opportunity over time, freight selection opportunity over time. We talk about line haul optimization over time. Not only is that how we utilize PT, but it's also how we utilize our own assets, driving the load averages, those sorts of things. Rather than handing off freight to an agent to make that delivery in the Great Plains states, that's having a SIA flag truck making that delivery, right? That's building scale in that network. So all those things together around providing that value proposition, that's what drives the OR improvement over time. we'll invest in the business to continue to maintain that and improve it as you build scale in the business naturally and we've said this all along when it comes to pt as you build scale in the business you have the opportunity to you know build your own line haul network internally because you have the appropriate scale to do that in some cases as the as the in a smaller company you use maybe a little bit more pt simply because you you don't have the infrastructure or the balance in the network. So you use PT assets to leverage that opportunity to service the customer. Now, as you grow your business, you have the opportunity to further balance lanes across the network and use a little bit relatively less PT because you're using more of your own assets. But important in all of that, the biggest driver of value in Si's business, without a doubt, is getting the pricing right, getting that mix of business right, And that's the most critical thing to OR improvement.
spk03: Got it. And just real quick, you mentioned higher capital to support higher quality service. Should we sort of think about the maintenance capital for the higher quality service? Sort of like for like high quality service, what's sort of the maintenance capex requirement?
spk07: I think it's important probably, you know, to give a kind of longer term outlook. Let's kind of see where, you know, what the network looks like year in and year out. I mean, we've opened 25 terminals in the last three years. We've got plans to open 15 to 20 this year and adding the equipment to support the network expansion as well as our share gains and higher volumes. It's a moving target. The fleet's getting bigger. The footprint's getting bigger. You know, I think the good carriers in our industry on an ongoing basis, you know, have always put, you know, 12 to, you know, low double-digit percent of revenue back into the business. So maybe longer term, that's what you model for. But like Fred said, we've still got an opportunity to make this network more competitive, and that means investing.
spk16: Thank you. Appreciate it. Your next question comes from the line of Tom Weidwitz with UBS. Please go ahead.
spk00: uh yeah good morning um wanted to see if you could offer some kind of broad thoughts on how we might think about uh shipment or tonnage growth uh when you look at second half of this year you know obviously the the big step up in yellow business is uh is driving growth in first half but you know when you think about i guess uh maybe one framework would be if the freight market stays kind of flat you know i think given your capacity expansion and strong service you'd expect to grow Is that like, you know, low single digits? Is it more than that? And then if you actually saw a pickup in the freight market, if you saw a bit of a cycle lift, you know, what kind of growth could you get given stronger freight and given your capacity expansion? I know it's not precision, but just, you know, directionally, how should we think about, you know, kind of those two scenarios?
spk01: Thanks, Tom. You know, the way I think about this is, you know, you got to start with what you think the macro assumption is going to be in the second half. And, you know, that's kind of that whatever that is. And from my perspective, I think it's probably a pretty, it's, I don't see anything that would say that it's going to be a big change, but it could be right in the second half. We could see growth that comes out of that. What I would specifically say though, is I look at SIA's position in the market. I look at this as we open these facilities, we're on an equal footing with some of the other national carriers. And I think from a, quality perspective. I think we're on a leading position versus some of the national carriers. And I think that is if we continue to focus on the right mix of business, there's a share gain for us opportunity, not only in the first half as things continue to settle, but into the second half. So I think it's in a more tepid environment, it's probably at the low end of any sort of range, right, in terms of shipments and tonnage growth. But I think that our focusing on what we can control, there's an opportunity for us to continue to grow through the market. Now, in a more limited sort of economic environment in the second half, you know, it's probably a little bit slower. But the opportunity is there for us, and we're very focused on that.
spk00: Okay. Thank you. And then the other question would just be, like, you know, so you've added people in 4Q. um you know i guess you're you're probably more calibrated to the volume you anticipate on the people side than the terminals right the doors can sit there even if you don't use them but the people you don't want them sitting around so what what would you say given the current headcount level what what are you calibrated for in terms of shipment growth given the 1500 you added is it like mid-single or is it is it different than that in terms of uh shipment growth
spk01: Yeah, I mean, I think it's probably consistent with what we've seen from the trends we've had the last few months that Doug gave us the update on. I think we feel pretty good about our positioning there. We feel pretty good about our ability to further scale from here if we need to. But yeah, I think we're appropriately positioned right now. But as we go into seasonally peak times, I think we continue to scale up from here. And that's our tradition. That's what we've That's kind of how we've operated it, so I feel pretty good about our value proposition to attract people as we need, and I feel pretty good about where we're staffed right now.
spk14: Great. Thanks for the time.
spk16: Your next question comes from the line of Jason Seidel with TD Cowan. Please go ahead.
spk04: Thank you, operator. Good morning, gentlemen. Doug, you talked a little bit about the trends in January on a time basis. Clearly, as you mentioned, weather was a little bit of a hit. If we exclude weather, are you guys in that sort of up 5% to 6% range? Is that how we should think about it?
spk07: Well, I mean, it's probably better to talk about shipments. Shipments per workday up 11.8%. Definitely, a little bit of the shine was taken off that from weather. We've continued to see you know, we'll wait for shipment impact from some of the business we've picked up since, you know, last summer's event. So I'd say the 11.8% shipments per workday would have had some upside. You know, we, as all of our other competitors, had a lot of days impacted in January by weather and your terminals are just either closed or they're limited operations or, you know, they're making a few deliveries, but they're not able to pick up freight, the customers close, that kind of thing. So that's That's not unusual for January or February. It just happened, but I'd say thinking about the 11.8% number, it could have been better.
spk04: Okay, fair enough. And as we think about, you know, you guys obviously took on a bunch of terminals here from the yellow dispositions, but there are still a bunch of other leases that have not been doled out yet. Is there anything on there that you guys could acquire as well?
spk01: So, Jason, we are aware of everything that's still on the market, and we kind of continuously look at those assets as well as others in our pipeline. So, yeah, that's part of potential opportunity for sure, and maybe some of those assets are particularly attractive to a competitor, and maybe that's an opportunity for that competitor to move from their current facility to a new facility, and then maybe that creates an opportunity for us in another facility. So yeah, I think there's potentially some opportunities.
spk04: And do you know the timing of the next round of those assets?
spk01: Good question. We monitor it closely. I'm not aware of anything right now.
spk04: Fair enough. Gentlemen, appreciate the time last quarter.
spk16: Thanks. Your next question comes from the line of Bruce Chan with Stifel. Please go ahead.
spk05: Hey, thanks, Operator. Morning, Fritz. Morning, Doug. Just a couple of cleanups here. You talked about the OR progression a bit, but when you think about the SWB line specifically, is that growing faster than other expenses this year due to that elevated headcount? And if so, by how much? Or is there maybe some offset there because you've got less overtime spent? Maybe just some comments around the potential squeeze on that line item.
spk07: Yeah, I mean, I expect it to go up, right? I mean, as we bring on our own employees and like, you know, just trend-wise have been able to, you know, get folks onboarded and trained and stuff, that'll put upward pressure on that line. And on the driver's side, you'll probably benefit because we remove some PT where we decide to, things like that. And then, you know, you still have wage inflation out there. As we open new terminals, we've got to get them staffed, you know, before the opening so we can get them trained and everything like that. So, you know, the ramped up opening plan, you know, the pre-opening expenses go up and some of that's wages. So, yeah, I think, you know, that line will be, you know, you're going to see wage increase, salaries, wage and benefits increase.
spk05: Okay, that's helpful. And then just on the PT side right now, how much rail are you using of that outsourced percentage? And directionally, if you think about it long term, do you expect that number to go up or down or stay relatively flat?
spk07: Yeah, I mean, it's come down. I mean, when we needed to move the freight, a lot of it was in lanes where we couldn't optimize and use rail when things, you know, really ramped up last July, August, September, even into October. You know, we were heavier there on the truck side for a while, and it's probably in this environment, it's more normalized back at that kind of, you know, low 60, high 30% range truck to rail. And we'll see seasonally what develops, and that's generally how that team manages it, where they can get a chance to. They'd love to use rail. Okay, that's great. Thank you.
spk16: Your next question comes from the line of Robbie Shanker with Morgan Stanley. Please go ahead.
spk14: Thanks, gentlemen. I think you said that you have about 20% excess capacity in the network right now. Just given this CapEx number, are you looking to expand that closer to 25% to 30%? Or what's the normal run rate? Do you expect to stay at 20%?
spk01: Yeah, I mean, I think the CapEx is going to help us expand that, right? you know, more on the equipment side, so particularly a trailer investment. So those are important. It gives you flexibility. The value, the incremental value you can provide to your customer, that's really important. So, you know, we'd look to drive that capacity a bit there, expand that capacity a bit.
spk14: Gardner, maybe as a related follow-up, I think just given, like, post the yellow auctions, kind of given how much the LTL capacity kind of stayed within the LTL space, and given the step up in organic capex we're seeing from you and some of your peers, is there a risk that not as much capacity comes out of the network as we all thought back in June or July? What's the risk that maybe some of the less disciplined players in the space run away with a little bit?
spk01: Well, I mean, yeah, you're going to see natural growth in the industry. You're going to see people are making their investments to support their business model and plans i don't think that you're going to see all that capacity come back to the industry you know what percentage of that remains to be seen but you know as i look at it we're you know the only places that we're adding you know new greenfield facilities is when they're in markets where there isn't anything available so that i don't know that that's a that's not material to the market generally and i think in the others what you're seeing is at least some percentage of that capacity from yellows is being redistributed, but I don't think all of it's coming back. I mean, they weren't operating at its most basic level. They weren't operating in capacity. So they had surplus capacity in that business anyway. So I don't suspect that that would become new capacity in the industry. A lot of it's just going to be redistributed. Understood. Thank you.
spk16: The next question comes from the line of Eric Morgan with Barclays.
spk11: Please go ahead. Hey, good morning. Thanks for taking my question. I wanted to ask another on pricing. You had the above average GRI in December, so I was just wondering if you could talk about how customers responded to that. Did you see more or less volume impact than you were expecting, and does it give you any insight into how you can tackle closing the pricing gap to some of your peers?
spk01: You know, I think that what we would say is that the reaction to the GRIs pretty consistent with what we've seen historically. You know, I don't know that any of that was materially different one way or the other. I think it is important, though, I think we need to highlight that the GRI was in December, right? So it's, you know, that's not a, there are a lot of externalities, you know, it could be holiday, it could be weather in that period of time. So, but from what we've seen so far, you know, it's the typical level of acceptance there. You know, the Good thing is that we're maintaining that high level of service. So it's a little bit harder for somebody to switch. You know, and I think generally speaking over time, you saw the contractual renewal in the fourth quarter plus 8.7. You saw the GRI. I mean, that just speaks to the initiatives around making sure we get the pricing right and the mix of business right.
spk11: Appreciate that. And maybe just a quick follow-up on service. You know, you've been at the, I guess, 0.6% claims ratio for a few years now. Obviously, you know, maintaining that with all the volume you took on is pretty impressive. But I guess just given the CapEx number this year and, you know, talking about capacity and service, do you think this is a year where we can see kind of a step function improvement in that claims ratio, or is it kind of steady improvement over time, a better way to think about it?
spk01: I think you'd see steady improvement over time, but let's be clear, that's a pretty low number as it is right now, and how we calculate and report it, that's a pretty good number. It's a differentiating number, and it's a number that, although it has been a bit steady, it is consistent, and customers really expect consistency. I think the other thing that customers really care about is that you pick up the freight and you deliver it when you say you're going to deliver it. So if you think about the capacity investments that we're making around our fleet, that's all about making sure that you also hit the other service metrics that are critical for the customer. So certainly we don't damage the freight, but we also have to be able to pick up the freight and deliver it when the customer expects. So those are also part of that service equation. So those are all things that we're doing. And then you add in the fact you add terminals and markets close to where the customer needs you to be. That further enhances your ability to deliver service. So service is defined more than just claims.
spk11: Great. Thank you.
spk16: The next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.
spk12: Hi. Good morning. Thank you. You know, maybe it would be helpful if you could just touch a little bit on what you're seeing and maybe some of your end markets here. I think it's, you know, pretty clear that the environment remains pretty weak, but maybe any pockets of strength or commentary that you're hearing either on either end of that, you know, to the positive or to the more negative? Thanks.
spk01: Yeah, thanks for that. You know, what's interesting right now is that I would say that what we see across the business is it's pretty uniform. So I don't really have a good call out either for a region or for a vertical. So which is important, right? So that's actually an insight there in the sense that, you know, we're happy with what we're seeing in the end markets and, you know, but it's, you know, there's not a call out one way or the other.
spk12: Great. Thank you so much.
spk16: Your next question comes from the line of Bascom Majors with Susquehanna. Please go ahead.
spk08: If we go back to three years ago, you were at 170 terminals, talking about adding 10 to 15 a year line of sight to get above 200. And where we sit today with this opportunity to pull that forward a bit, you'll be at 210, 215 by year end if all goes as planned. Can you walk us forward? What does the real estate plan look like in three years, five years, just any sort of vision on where this can go and we get to the point where you think the network is where it needs to be geographically? Thank you.
spk01: Yeah, that's a good question. I think Canada, we're in a little bit of uncharted territory for SIA here, which is a pretty exciting place to be. I think as you look at the national players, the bigger folks in us, they have a bigger footprint than we do. So I think there's some runway beyond the 212, 215 number. You know, I think there's probably, you know, 10 plus, you know, per year for a couple years after that, potentially. But I think what's really important on the investment piece, and we're already kind of getting there, where when you scale the business like we have, some of your important facilities become I don't want to say they're not pinch points, but ones you have to invest and kind of further develop those facilities. I mean, case in point, Harrisburg facility, which we moved into in 2018 or so, and we're basically going to double the capacity of that facility here in the balance of this year. And that is all reflective of Northeastern kind of growth that we've seen and business sort of density we've seen develop over time. So I think you'll see us continue to make those kinds of investments in markets. So I think there's, you know, maybe it's not incremental pins on the map, but it'll be sort of investments in sort of legacy facilities that just have got to scale with a business that's a national level business that's, you know, with growing market share. So I think there, you know, this is an interesting redeployment of capital that remains for this business for some time.
spk08: Thank you for that.
spk16: Your next question comes from the line of Tyler Brown with Raymond James. Please go ahead.
spk06: Hey, good morning, guys. Hey, morning, Tom. Hey, Fritz, just real quick. Is the thought that the leased facilities that you took on will be put into service first I'm assuming those lease payments will kick in fairly immediately. And then will the facilities that you acquired be kind of effectively call it stocked on the balance sheet and will be judiciously leaked out into the market maybe over this year and next?
spk01: Yeah, I think that's a good insight, Tyler. The gating item around opening facilities, one, if there's a lease facility, we're going to make sure that it's a place that meets the size standard in terms of safety and a good place for a colleague to come to work every day. So we're going to make the needed investments there. We'll make sure that if it remains to be leased, that it's got the appropriate sort of term and such. So yeah, those would probably move closer to the front of the list. The other element you look at is in some cases you have a facility that maybe has got some sort of local zoning requirement that says You know, you've got to be active in business to be able to maintain zoning. So those would be next in line. And then there are also ones that just have a real meaningful market opportunity, which we've moved those in line. Now, some of the others, all the ones we've purchased have significant value to us longer term. Some of them may just simply be an upsize or a lease replacement. The ones that we don't open this year,
spk06: uh would be sort of available uh and and we make the important upgrades and then put into service at a later time so that that would be how we manage that yeah that is extremely helpful um but doug i want to come back to a prior question so it takes me a second to get it all straight but there's obviously a ton going on with the network super exciting but did you say that there's maybe eight to nine percent door growth from acquired and leased facilities and then another four to five from expansion. So an aggregate, call it 12 to 14 on the door side net in 24.
spk07: If we ended up opening all 20, for example, Tyler, and then we relocate what we've got planned to relocate and the expansions, Fritz mentioned, your numbers are right. So if we did everything, that's what it could be this year.
spk01: Okay, perfect. Tyler, you know when we think about it,
spk06: network expansion we don't think about this year we're looking at a 10 or 12 year horizon so those doors that's all about runway sure no absolutely get it this is a bit of an esoteric question so you know maybe you'll entertain me or not but i think it will help maybe conceptualize the power of the footprint so do you have any idea what your inner line mix of p d is today versus say five to ten years ago because i assume it's way down But it still likely has an opportunity to go to virtually zero, which I would assume internalizes margin and it gives you control over service.
spk01: Tyler, you broke up just a little bit at the beginning. I want to make sure I got this right. You were referring to, you said interline?
spk06: Yeah, sorry about that. What is your interline mix of P&D today versus five to ten years ago? Because I assume it's way down, but there's still an opportunity to go to zero. and that just gives you control over your service.
spk01: Oh, yeah, great. I don't have the number, Tyler, but you're right. That's a tremendous opportunity for us, right, in terms of certainly there's the cost element in building the density around that network, but from a customer perspective, that customer experience is so critical, and in those markets, absolutely, that'll be a positive.
spk07: And then along with that, I mean... Not splitting the revenue, right? Yes.
spk06: Exactly. Yep. Okay, cool. Thank you, guys.
spk07: Okay.
spk06: See you, Tyler.
spk16: I'll now turn the call back over to Fritz Holzgrieve for closing remarks. Please go ahead.
spk01: Thank you for taking the time to join us to talk about the compelling opportunities for SIA. We're excited to start the 100th year of our company with a really, really exciting investment opportunity and growth opportunity, and we look forward to talking about those success at the end of the next quarter. Thank you.
spk16: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect your lines. Ladies and gentlemen, that concludes today's
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