Saia, Inc (NASDAQ: SAIA) Q4 2025 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Matthew Batteh — Executive Vice President, Chief Financial Officer & Secretary
Fritz Holzgrefe — VP & CFO
Analysts:
Jordan Alger — Analyst
Jonathan Chappelle — Analyst
Chris Weatherby — Analyst
Stephanie Moore — Analyst
Scott Group — Analyst
Harvey — Analyst
Ken Hexter — Analyst
Tom Wadowicz — Analyst
Brian Ossenbeck — Analyst
Ravi Shankar — Analyst
Ben Moore — Analyst
Reed CA — Analyst
Jason Seidel — Analyst
Eric Morgan — Analyst
Harrison Bauer — Analyst
Tyler Brown — Analyst
Presentation:
operator
Good day and welcome to the CyIe Inc. Fourth quarter 2025 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on a touchtone phone. To withdraw your questions, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Batei, SIA’s executive vice president Chief Financial Officer.
Please go ahead.
Matthew Batteh — Executive Vice President, Chief Financial Officer & Secretary
Thank you Betsy Good morning everyone. Welcome to SIA’s fourth quarter 2025 conference call. With me for today’s call is SIA’s President and Chief Executive Officer Fritz Hullscreen. Before we begin, you should know that during this call we may make some forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. These forward looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We refer you to our press release and our SEC filing for more information on the exact risk factors that could cause actual results to differ.
Also, in the third quarter of 2025 we recorded $14.5 million in net operating expense impact from a gain on real estate disposal and impairment of real estate. When we discuss adjusted operating expenses, adjusted cost per shipment, adjusted operating ratio or adjusted diluted earnings per share for the third quarter 2025 or full year 2025 in our comments it refers to adjusted results that exclude the gain from that sale an impairment on that property. See our press release announcing fourth quarter results for a reconciliation of non GAAP financial measures. That press release is available on the Financial Releases page of Size Investor Relations website as well as I will now turn the call over to Fritz for some opening comments.
Fritz Holzgrefe — VP & CFO
Good morning and thank you for joining us to discuss sia’s fourth quarter and full year results as we look back on 2025. I am proud of our team’s resilience and focus delivering strong execution for our customers even as volume patterns shifted day to day amid constant change. Having now completed our first full year at the national network, I’m more excited than ever before about the future of sia. Throughout the year, our now national footprint provided opportunities with both new and existing customers as our expanded reach enabled us to provide our industry leading service in more markets.
Having a national presence provides us with the opportunity to solve more problems for more customers, which we believe has resulted in increased market share. Our record capital investments of more than $2 billion over the last three years have allowed us to rapidly expand our footprint in a short period of time, and I believe we’re still in the stages of capitalizing on the opportunity that National Network provides. Of course, our achievements would not be possible without a best in class team. While the demand environment remained dynamic throughout the year, our team responded to our customers needs every day.
Our core operations performed as we expected for the fourth quarter. However, reported results were impacted by self insurance costs late in the quarter. Our fourth quarter operating ratio of 91.9% reflects these increased self insurance costs. The sequential deterioration from third quarter’s adjusted operating ratio was impacted by unexpected adverse developments on a few cases arising from accidents that occurred in prior years which required reserve increases in the approximately in the period of approximately 5 point or $4.7 million. As we well know, accident related costs continue to rise due to increased litigation costs and saddlebug values as well as general inflation, and could develop, sometimes unexpectedly, over several years.
Regrettably, this unexpected need for reserve increases was related to the accidents that happened years ago. However, we continue to invest in industry leading training and safety technology. We’re seeing positive trends in our safety statistics during 2025. Despite having the largest fleet in company history and internal miles increasing by 2.4% year over year, we saw a 21% reduction in our preventable accident frequency and a 10% decline in lost time injuries, reflecting the benefits of these ongoing investments in safety. Focusing on the fourth quarter volumes continue to reflect the muted demand environment the industry experienced throughout the year.
Shipments per day were down 0.5% compared to the fourth quarter of 2024, while tonnage per day was down 1.5% compared to the same period last year. As is typical, we experienced some volume shifts in the weeks after the GRI, which was implemented on October 1, and we remain extremely on ensuring that we are compensated appropriately for the quality and service that we provide to customers. When we analyze the results of the GRI closely, we’re pleased to see customer acceptance trends slightly above historic levels. Similarly, contractual renewals remained strong in the quarter, averaging 4.9% of the book of business contracted in the quarter.
We continue our efforts to ensure that we are fully compensated for quality and service we provide and have seen a 6.6% contractual renewal increase in in the month of January 2026. Despite the volume decline, our fourth quarter revenue of 790 million is a record for any quarter in our company’s history. Mix headwinds continue to impact our results with slight decreases in wafer shipment and length of haul compared to the fourth quarter of 2024. Additionally, revenue per shipment excluding fuel surcharge decreased 0.5% compared to last year. As we’ve discussed in our prior quarters, the volume decline in our Southern California region continued as vol volume in the region in the fourth quarter was down about 18% compared to the prior year.
This region is typically our highest revenue per built market and the volume decline caused an estimated $4 million revenue reduction for the quarter. While the Southern California region continues to play a factor in our mix dynamics, we’re seeing growth with customers in both legacy and ramping markets as our expanded footprints allows us to get closer to our customers and handle segments of their business that we may not have had access to prior to the network expansion, reflecting our ability to provide industry leading service. In more geographies, we’re able to drive revenue per shipment excluding fuel surcharge up 1.1% sequentially from the third quarter.
Our nationwide network has now been fully operational for one year, giving us clear perspective on the impact of our generational opportunity to expand the network over a very short period of time. Over the past year we strengthened relationships with existing customers while bringing our high quality service to many new customers, contributing what we believe is a record record level of market share gain. These customer relationships will continue to develop reflecting the long term value of the strategic investments we’ve made over the past few years. With our network expansion, we’re able to achieve cargo claims ratio of 0.47% in the fourth quarter which is a company record for any quarter.
Considering the size and scope of our national network, with newer locations still in early stages of their life cycle and employing newer SIA employees, this customer centric metric is a test to the culture instilled at each location in our organic expansion and our team’s ability to perform at the highest level. This level of service reflects our team’s consistent effort and attention to detail core strengths that have helped establish SIA as a leading national LTL carrier. I’ll now turn the call over to Matt for more details from our fourth quarter results.
Matthew Batteh — Executive Vice President, Chief Financial Officer & Secretary
Thanks Fritz. Fourth quarter revenue was largely flat compared to the prior year increasing by 0.1% to $790 million while revenue per shipment excluding fuel surcharge decreased 0.5% to $297.57 compared to $299.17 in the fourth quarter of 2024. Fuel surcharge revenue increased by 6.1% and was 15% of total revenue compared to 14.1% a year ago. Yield excluding fuel surcharge increased by 0.5% while yield increased by 1.6% including fuel surcharge. Tonnage decreased 1.5% attributable to a 0.5% percent shipment decline. In addition to a 1% decrease in our average weight per shipment, our length of haul decreased 0.1% to 897 miles.
Shifting to the expense side for a few key items to note in the quarter, salaries, wages and benefits increased 6.1% compared to the fourth quarter of 2024. This increase was primarily driven by increased employee related costs which include a company wide wage increase of approximately 3% on October 1, partially offset by a 5.1% reduction in headcount compared to prior year. As we continue to improve efficiency and match hours to volume, excluding line haul drivers headcount decreased 6.4% compared to the prior year. The year over year increase in salaries, wages and benefits also reflects the rising costs of self insurance which continues to be inflationary.
Our network expansion and continued investments in technology have positioned us to in source miles, a trend that has continued over the past few years. As a result, purchased transportation expense including both non asset truckload volume and LTL purchase transportation miles decreased by 0.8% compared to the fourth quarter last year and with 7.3% of total revenue compared to 7.4% in the fourth quarter of 2024. Truck and rail PT miles combined were 12% of our total line hauls in the quarter down from 13.1% in the fourth quarter of 2024. Fuel expense for the quarter increased by 0.2% compared to the prior year while company line haul miles decreased 2%.
The increase in fuel expense was primarily the result of a 4.8% increase in national average diesel prices. On a year over year basis, claims and insurance expense for the quarter increased by 12.3% year over year. As Fritz noted, this increase was primarily due to adverse claim development on a few accident cases late in the fourth quarter of 2025 related to accidents that happened in prior years. In 2025 we were pleased to see a decrease in the number of preventable accidents year over year. However, the cost per claim continued to rise due to increased cost of litigation and increases in settlement values.
Depreciation and amortization expense of 62.9 million in the quarter was 16.4% higher year over year primarily due to ongoing investments in revenue, equipment, real estate and technology. Compared to the fourth quarter of 2024, cost per shipment increased 6.1% largely due to increases in self insurance related costs and depreciation. Group health insurance alone accounts for more than 30% of the year over year cost per shipment increase due to continued inflation and healthcare related costs. We continue to believe that we provide best in class benefits to support our employees who drive increased customer satisfaction and while a headwind, we have absorbed the majority of the market rate increases that we have seen over time.
Total operating expenses increased by 5.6% in the quarter and with the year over year revenue increase of 0.1%, our operating ratio increased to 91.9% compared to 87.1% a year ago. Our tax rate for the fourth quarter was 22.7% compared to 23% in the fourth quarter last year and our diluted earnings per share were $1.77 compared to $2.84 in the fourth quarter a year ago. Moving on to our full year 2025 results, revenue was a record for SIA increasing 0.8% compared to 2024 while operating income was $352.2 million. Adjusting for one time real estate transactions, our operating income was 337.7 million for 2025.
Our operating ratio for the year deteriorated by 410 basis points to 89.1% while our adjusted operating ratio was 89.6% for 2025. Focusing on the balance sheet, we finished the year with just under 20 million of cash on hand and 63 million drawn on the revolving credit facility to bring US to approximately 164 million in total debt outstanding at the end of the year, which is down from 200 million at the end of 2024. Looking back on 2025, I was pleased with our team’s core execution. Despite a challenging macroeconomic environment, we in sourced more miles compared to the prior year cost, optimally scaling and leveraging our fleet’s national network and technology investments driving our optimization efforts.
Further evidence of our network optimization efforts shows in our handling metrics, which improve sequentially every quarter through the year and and exited the year 1.5% below their first quarter peak. From a quality standpoint, our cargo claims ratio of 0.5% for the full year was a company record and improved year over year in every quarter compared to 2024. We continue to see the benefit of our investments in safety, training and technology. Lost time injuries in 2025 declined 10% year over year and preventable accident frequency declined 21% year over year. While the underlying nature of self insurance remains inflationary, our reduced incidences help mitigate the rising costs.
Importantly, our record investments have enabled us to drive increased customer satisfaction in more markets. Our ramping terminals, or Those open since 2022, operated profitably for the year despite the relative inefficiencies that come with opening 39 terminals in such a short period of time. The 21 terminals that we open throughout 2024 continue to mature and and we estimate that those terminals increased revenue market share by approximately 80 basis points in 2025. In aggregate, our ramping terminals, while weighing on the company’s operating ratio, contributed incremental operating income for the year. We are seeing tangible results with our customers through our expanded service offerings and I believe we are just beginning to unlock the full potential of our national network and technology investments.
I will now turn the call back over to Fritz for some closing comments. Thanks Matt.
Fritz Holzgrefe — VP & CFO
Despite uncertainty surrounding volumes in the broader macroeconomic environment in 2025, I’m proud of how our team adapted each day to meet our customers needs. Every day represents new variables that our ability to consistently deliver strong service and quality metrics reflects the strength of our SIA culture across both our legacy and ramping terminals. While the inflationary costs associated with our industry continue to be more pronounced in certain areas, we’re actively working to manage these costs through the use of network optimization technology. We accelerated our network optimization efforts that began in the first quarter of 2025 and are already seeing cost savings as a result.
Fueled by our ongoing investments in technology, these initiatives improve density and efficiency across our national footprint, which handles declining steadily from the first quarter peak. As our network continues to scale, adding density, enhancing and enhancing our ability to service customers, our value proposition continues to become increasingly clear. These investments we have made over the past three years more than $2 billion have strategically allocated capital toward real estate, revenue, equipment and technology to support our long term profitable growth. In addition to the investments we made in our network expansion, investments in revenue, equipment and fleet modernization have improved operating efficiency and safety while also position us to improve the customer experience.
We’ve also invested heavily in technology to optimize network performance and drive operating leverage, including advanced analytics for operational and profitability insights, customer facing capabilities, employee training and process automation. We believe that the combination of these investments strengthen our competitive position and supports sustainable value creation for shareholders. As we look to 2026, our focus remains on strengthening core execution by continuing to invest in both and our people. Our national network provides a complete LTL solution for our customers and our success is defined by consistently meeting and exceeding customer expectations while generating an appropriate return for these significant investments.
We believe strongly that our national network is poised to scale as macroeconomic conditions improve. By leveraging these investments, combined with our team’s commitment to excellence, we expect to drive incremental improvements to our performance in 2026, even if the macro environment remains so as it was in 2025. The network investment over the past few years reflects a considerable deployment of capital which requires a return. Our emphasis through 2026 will be on intense focus on ensuring that we see a return on these investments. We expect to be fairly compensated for these investments as our customers benefit from the increasing scale and quality that we provide over time.
We’ll need to continue to reinvest in the inflationary and capital intensive network and find ways to continue to deploy technology to operate more effic. Ongoing investment will require that we are appropriately compensated to provide a return to our shareholders. With that said, we feel very strongly that our business has never been in a better position to drive value for our customers and return to our shareholders. With that said, we’re now ready to open the line for questions. Operator.
Questions and Answers:
operator
We will now begin the question and answer session. To ask the question, you may press stars and ones on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, we ask that you please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question comes from Jordan Alger with Goldman Sachs. Please go ahead.
Jordan Alger
Yeah, hi. Morning. I was just wondering, can you perhaps in the context of how your monthly tonnage data has been going through the quarter, and then October. Sorry, and then January, how that may tie into your thoughts around sequential margin seasonality for Q1. Q. Thank you.
Matthew Batteh
Sure. Hey Jordan, I’ll give the monthlies just so that everyone has that. So October shipments per day were down 3.4%. Tonnage per day down 3.3%. November shipments per day up 2.6%, tonnage up 1.8%. December shipments up 0.6%, tonnage down 2.2% and then when I look at January, obviously we had some of the weather impacts that passed through, so stability.
We’re comping some pretty heavy weighted shipment periods in the first quarter last year, so keep that in mind from a weight per shipment standpoint if you remove the impacts of the storm or normalize them, shipments in January would have been slightly positive, which continues the trends that we’ve been seeing so relatively in line there. And from the margin standpoint, look, if you look at history, Q4 to Q1 sequentially is typically a degradation of about 30 to 50 basis points. Worse. If we get a normal February, normal March, we think we can outperform that and beat that.
And if we get a stronger than normal March and see some of that come to fruition, we think we can even further outperform that and get below where we were last year, which really feels like we set up for a pretty good backdrop from that point.
Fritz Holzgrefe
Yeah, and I think that’s a really important point, is that. And you know, we get through Q1, you know, we’ve seen the macro data that’s out there that’s come up, and it’s been positive there. Trends out there that would appear to be positive. I mean, I think this is our time, right. So this is the time where we’ve invested and positioned ourselves for this opportunity. And I think that you build off of what we could see in the first quarter, as Matt outlined, and I think you’re looking at a full year kind of or improvement 100 to 200 basis points.
And if the market, if macro is, you know, kind of at the upper end of the kind of the trends, then I think that’s only better for us. Right. So this is the scaling point. This is why we did this is the time, why we made the investments we have over the last number of years.
Matthew Batteh
And just one point, Jordan, to clarify the sequential margin, we’re viewing that off of a normalized Q4. Right. If you remove the one off impacts that we called out. Just want to make that clear.
Jordan Alger
So that excludes that 4.7 million of insurance.
Matthew Batteh
That’s right.
Jordan Alger
Y eah. Okay, thanks very much.
operator
The next question comes from Jonathan Chappelle with Evercore. IFI please go ahead.
Jonathan Chappelle
Thank you. One super quick clarification, Fritz. That 100 to 200 that you just mentioned, just what’s the tonnage backdrop behind that? I know it’s like the macro is not getting better, but is it positive, is it flat, et cetera? And then go ahead.
Fritz Holzgrefe
Yeah, I would just say that I’m looking at the ISM data, so I’m expecting that there’ll be some positive backdrop there. Right. So in a positive backdrop, that’s good for sia. I think that if, you know, we’ve seen some other macro data out there that would be positive. I think that would lead to a market in which we’d see some potential tonnage growth. And if that’s the case, then I think that’s an opportunity for us. So I think it’s more about if those things come together. This is why this is such a compelling opportunity for us.
If those things don’t come together, then I think we’re in a position where we could still improve or, but clearly would be at the lower end of the range I described, but in a favorable backdrop. I like the opportunity.
Jonathan Chappelle
All right. And you said several times getting compensated appropriately. You mentioned the gri or maybe Matt said the GRI acceptance was a little better than usual. Is this a year where if you Get a little bit of volume tailwind and the weight seems to be relatively consistent. Consistent, you know, what type of range are we looking at for pricing yield? How do we want to measure rev per shipment type of growth this year?
Matthew Batteh
Well, look, we’re. Obviously we haven’t been netting the renewals that we’ve been taking. Part of that’s just volume shift in the period. But we. Core inflation in this business is going up. We’ve got to be able to push and take rate. And part of that’s been the ability to close the network gap and to provide more equal service in these markets with, with the national scale.
So that’s how we think about it. The wait for shipment obviously is a headwind to year over year in Q1, but after that, you start to normalize it a little bit. More revenue per shipment improved 1.1% sequentially from Q3 to Q4. So we’re. You see it in the renewal number. We’re focused on it and. Well, we’re not. We’re not taking a day off from that. Even though the environment’s a little bit light, we’ve got to get paid for it.
Fritz Holzgrefe
I mean, this is year two of a national network and we should expect to price ahead of inflation and develop a margin on that 2 billion of investments over the last three years. Last three years deserves a return and we’re focused on getting that return and being in a position to reinvest in the business over time.
Jonathan Chappelle
Got it. Thanks, Matt Fritz.
operator
The next question comes from Chris Weatherby with Wells Fargo. Please go ahead.
Chris Weatherby
Yeah, hey, thanks. Good morning, guys. I guess I wanted to ask about the new terminals open and kind of relative profitability. It sounds like they did contribute positively to operating profit for the year. Can you give us a sense of where maybe the OR for those are? And then you know, Fritz, in the context of the 100 to 200 basis point, how do we think about the contribution of the new terminals is that where if you can get some incremental volume, you could see much more material improvement in the. Or there to drive, you know, towards the top end of that one to 200.
Matthew Batteh
Yeah, from the first part, Chris, they’re, you know, obviously they’re a drag on. On the company wide there. So they range right. We’ve got some that are sub 95. We’ve got some that are higher than that in aggregate. They’re sort of mid to upper 90s. But a lot of these, if you think about it, they’re still within. And when we Open them in 24 for the biggest batch, those weren’t all opened early in the year. So throughout the course of last year, we just eclipsed a year of these operationally, which is really something that we’re pleased with and proud of.
We’ve got room to go and obviously work to do. But they’re in that range.
Fritz Holzgrefe
And I would add that the margin improvement is going to come from the new. They’re not going to be a drag over time. I point you back to when we did the Northeast expansion, right. We saw that those develops sort of maturity. We can drive incrementals in those. I think what’s different this go around in the Northeast is that the incremental opportunities across the business. If you study our network cost stats that we described earlier, where we’re able to in source and scale more of our line haul network, that’s all about building densities across a national network.
Part of that is the contributions of the new facility. So I think that this is why this was such a compelling investment to make. And if we get the environment, we can accelerate that sort of performance. But I think it’s great because it’s going to come from both new and old, but it’s going to benefit the national network.
Chris Weatherby
Okay, helpful. Thank you.
Matthew Batteh
We’re seeing real opportunities with that, Chris, Just in customer conversations, you don’t always get turned on overnight to some of that business. But the level of discussions that we can have with customers or even frankly customers that we didn’t have the opportunity to get in the door with because they want simplicity, they want ease of doing business. When you’ve got a full national network, you get that opportunity. So to Fritz’s point, it’s not just the scale in the new ones, but even though we covered some of these markets before, we’re getting new opportunities because we can have those discussions at a better level of detail and do more for customers.
Chris Weatherby
Helpful color. Thanks, guys. Appreciate it.
operator
The next question comes from Stephanie Moore with Jeffries. Please go ahead.
Stephanie Moore
Great. Thank you so much. Maybe returning to the pricing commentary, maybe you could discuss a little bit on what you’re seeing in the overall pricing environment. And also as you think about your higher pricing capture, would you say this is more so customers starting to recognize the investments that you’ve made? Or. Or maybe it’s both. Are you being a bit more tactful with your own pricing actions? Thanks.
Matthew Batteh
From the environment, I’d say it’s we continue our own initiatives. We don’t ever take a day off from that. As a business is inflationary, we have to go get rates. We’re continuing those efforts and really pushing the envelope harder in a lot of instances. So no change from us there. Obviously, with capacity where it is for everybody, shippers have options and they may be more willing to move to a more regional carrier or something for a time being, but that’s just a product. Of where we are. I wouldn’t say that’s new. We’ve been seeing that for the past couple years at this point with the capacity environment the way it is. But our view is that if you look at history, when the environment gets a little bit tighter from a capacity standpoint, there’s a flight back to quality and a flight back to national carriers. So we’re not taking a day off from the pricing aspect of it. In terms of our higher capture rate, we track that very closely. We study the results of the GRI and all pricing actions really closely. I think it’s a combination of two things.
We’re getting more granular than we have before and we’re using our analytical tools to focus on key opportunity areas for us. But I think importantly, the opening of these terminals that’s given us national scale has made it harder for customers to change out. And when you’ve got a better value proposition and you’ve got the opportunity to go and talk to them about what you can do for them in every market, which we haven’t always had the ability to do, you get more conversation points. So I think it’s a combination of both.
Fritz Holzgrefe
Yeah. I would just add, and I would emphasize Matt’s last point, national network, high level, consistent service that makes that pricing discussion more palatable. Right. If you’re doing a great job, you come and say, look, this is the value I’m creating for your supply chain and this is what we need to do to be Able to continue to support our customers success and continue our business. That is an opportunity, continued opportunity for us and only heightens now because of the success of the national network.
Stephanie Moore
Thank you. That’s important context and maybe just to follow up on the volume trends and the sequential improvement we’ve seen for the last couple months. As you kind of look at what your customers are telling you or what you’re seeing, do you think that it’s generally more optimism, kind of like what we’ve seen maybe in some of the macro data points? Or is this, you know, truckload capacity? How does this compare to maybe what we saw at the start of 2025? Any context on the overall demand environment would be helpful. Thanks.
Fritz Holzgrefe
I think it’s a little bit of everything. I think it’s a little bit of maybe a little bit more positive end of the year, which is good. I think there’s maybe some structural market sort of influences here. But I think in total the tenor might be just a bit more positive. Right. And I think that’s good. Now I will caution just by saying, look, we’re seeing it and hearing it a bit in customer conversations. I’d like to see it more in volumes too. Right. So that’s. Some of that will develop through the quarter, we think it will. But it’s, you know, that’s still, you know, until we actually see it in the results, there is a, you know, potential that things could change. But overall, I would say year over year that the factors are, would appear to be more positive.
Stephanie Moore
Thank you.
operator
The next question comes from Scott Group with Wolf Research. Please go ahead.
Scott Group
Hey, thanks. Good morning. So can you just. Matt, you were going pretty quick. What was the comment about Q1? Maybe it’s going to improve, maybe it’s not going to improve on a year over year basis. I just wasn’t sure, like the two different sort of environments you were talking about. Just if you can just add a little bit more color. And then I have a follow up.
Matthew Batteh
Yeah, yeah. So if you normalize for the Q4 item that we called out and use that as the anchor point, history says that Q4 to Q1 typically deteriorates 30 to 50bps. You know, in that range there’s different years. Obviously we think we can beat that. Just thinking about if we get a normal rest of the February, a normal March, but if March comes in a little bit more strong and we’re starting to see some of this ISM data come through, whatever it may be, we think we can further outperform that and potentially get it below where Q1 operated last year.
Obviously a long way to go between here and there, but that’s the distinction between the two. Would be more about March coming in a little bit stronger than what we would typically see in history.
Scott Group
Okay. And then just, you know, just a couple of other just things. The when do you think we start to see like the yield or revenue per shipment trends catch up to the renewal trends. And then it sounds like you’re talking a little bit more about insourcing line haul. Like when do you think we start to see like that purchase transportation line start to more meaningfully decline as a percentage of revenue. Thanks.
Matthew Batteh
On the revenue per shipment side, I mean, keep in mind how weight per shipment impacts yield weight per shipment. You get a read from how that looks just with January numbers.
So a headwind there from a revenue per shipment standpoint, that helps yield, but then it starts to normalize a little bit more. In Q2, Q3, weight per shipment has been relatively steady for us over the past five or six months, which has been good to see. So once you start lapping some of the Q1 weight per shipment headwinds, I think we start to see that in the Q2, 3 period. And obviously if the environment tightens up a little bit more, we’re going to see that run further and we’re going to, we’re going to press the gas even harder on that.
If you look at from a PT standpoint, I mean one of the things that we’ve talked about for a long time is just the ability to run more balance. When you’ve got a full nationwide network sell in and out of more geographies. All of that PT as a percent of total miles for the full year of 2025 was 12.1%. If you go back to 21 period, that number was over 18% of miles. So we’ve reduced it pretty dramatically over time. Cost optimally. We still feel really good about how we use pt. But when you have a nationwide network, you’re able to balance the network more, run more efficiently as you get more balance between your terminals.
So it’s come down a good bit over the years, but we still feel really good about how we use it. As the network continues to scale and certainly as volume comes back, we’re going to have further opportunities around that. But we feel good about how we use it.
Fritz Holzgrefe
Yeah, I think Scott too, just to add, we look at that, we study more cost per shipment total or network cost per shipment. So there the PT align unto itself. You know, that Certainly is one line. But our salary, wages and benefits also has internal costs in there. So we kind of look at those two combined. And so over time we like that trend. And I think as the business scales, I think we’ll continue to see that improve meaningfully.
Scott Group
Appreciate the time guys, thank you.
operator
The next question comes from Deutsche bank, please. Go ahead.
Harvey
Thanks operator. Hello. Good morning gentlemen. Just quick clarification on the January information. Matt, you said that Ex Weather shipments were up a little bit. Could you tell us what tonnage was doing Ex Weather. Sorry if I missed that. And then my main question is. Oh, go ahead, you can go first and then I’ll ask the second one.
Matthew Batteh
Yeah, shipments would have been up a little bit and tonnage down about 4%, 4.5%.
Harvey
Got it. Okay, thank you. And then, you know, you both have been talking about how the network is very poised to scale. I wanted to ask about like trends in cost per shipment, you know, X those self insurance costs bumping higher. It still felt like it was higher than what we usually see sequentially per year. 10 year average. I think cost per shipment was up 5.7%. Usually we see a 4% increase Q3 to Q4. I know Q3 was a very solid cost out quarter for you and that’s part of it, the base being lower. But how should we think about cost going forward? Are you carrying just extra cost as a result of your network expansion and it’s going to take a more pronounced upturn to absorb all that? Maybe just talk about that.
And along those lines you can mention how much excess capacity or slack you feel like you have in your system today to absorb extra volume should it come in. Thanks.
Matthew Batteh
Yeah, so if I look at the cost side of it, so we don’t typically look 10 years back, our business has changed so much over that period. So if you look at a little bit more of a shorter period of time, Q3 to Q4 cost per shipment generally is up in a sort of 5 ish 5 to 5 and a half percent range. And keep in mind too, that includes historically where you have a wage increase impact both in Q3 and Q4. We didn’t have the wage increase in Q3 this year. We had it on October 1st.
So that’s an automatic headwind of an increase in cost compared to what you would see in a historical number. So that’s one piece of it. You’ve got volume that’s down 4.3% Q3 to Q4 on just a calendar period and you’ve got two fewer work days in the period. So you’ve got fixed costs that are just over a shorter amount of days. And I would say even all those work days aren’t real revenue days. A day after Christmas is a workday, but it’s not a full volume day. So you just don’t get that leverage. But if you think about that, that piece is important on the wage increase where it wouldn’t have been in that historical number.
So obviously we. We’re going to always work on that. We’ve got room to improve, but we feel like we managed it pretty effectively. If you look in line with some of those historical trends and we called out the headcount portion too, headcount year over year in Q4, excluding line haul drivers, is down 6.4%. If you look at that sequentially from Q3, that’s down about 2%. So we continue to match hours with volume and feel good about how we’re managing it, but we can’t take a day off from that. We have to work through that all the time.
And on the network standpoint, obviously, we’ve got excess capacity. Like Chris said, we opened all these terminals for a reason. It was a generational opportunity for us to expand the network we have. You know, it’s going to vary by market, but I’d say on a broad base, 20, 25% excess capacity, we’re prepared for an inflection. But important to note, capacity in LTL comes in a lot of different ways. It’s terminal, certainly, but it’s also doors, it’s yard space, it’s people. You’re really the lowest common denominator of all of those pieces when you think about capacity.
But this is why we did this. We expanded in what’s turned out to be a prolonged freight cycle. But if we had it to do all over again, we’d do the same thing. Because we feel really good about what. The opportunity is for us over the long term of the business. But we feel really poised to scale when the environment gets a little bit of an uplift.
Harvey
Thank you.
operator
The next question comes from Ken Hexter with Bank of America. Please go ahead.
Ken Hexter
Hey, great. Good morning. Just want to clarify, you were down 7% in tons in January. One of your peers was flat. So I just want to understand what’s going on in the market maybe a little bit. Were you more impacted by weather as a national carrier as they are? Is it there a difference in end markets, SMB ads? Just want to understand if somebody is being more aggressive in pricing versus that, that that differential. And then in the past I just want to take this another level. You’ve noted revenue per shipment ex fuel is a good indicator for price.
So a lot of discussion here on on rev per shipment given that it was down year over year. And I get the weight Matt, but you noted contracts were up six and a half percent in January accelerating from just shy of 5% in the fourth quarter. So is that demand picking up and so thoughts on pricing is accelerating Just maybe one on tonnage, one on pricing if you can.
Matthew Batteh
Yeah I encourage you to look through. I mean first of all we’re not seeing anybody on the pricing side act differently. So environment continues to remain rational. Nothing different from what we’ve continued to see there. The tonnage comp for us. If you look at just where weight per shipment was the first three or four months of last year year that’s the biggest component of this weight for shipments been relatively steady. Call it sort of May, June of 2025 to where we are now. We’re just lapping some weight for shipment comps that are much higher than that.
So that’s why the tonnage number is what it is for us. I would say from the peer set that you’re talking about, I think weight per shipment’s relatively consistent. Have to go back and look but that’s really what the driver of that is the higher weight per shipment comp which we continues to be a headwind in the, you know, through March, April time frame and then it starts to flatten out compared to where we are now.
Fritz Holzgrefe
I think the only thing I would add just on January discrete we’ve incorporated the impact of this in our in Matt’s discussion around what we think about Q1 in total. But you know that weather system and I listen this is outdoor sport. You got to deal with weather every year. But when Dallas gets shut down or Texas market is impacted that’s our from a relative that’s the biggest portion of our company. So that’s going to have a relative large impact on us versus maybe some of our peers. But our guys did a heck of a job rallying getting us back in position.
But what Dallas through Memphis is frozen and Texas is frozen and we’re not operating and we track that on our website. That’s tough for us. But because of the great work by those teams, we recovered from that. We’re back full scale operation now. So feel good about what the trends are for the full quarter for January. There are a few days there that was pretty tough.
Ken Hexter
And Fred, if I could Just get one clarification. Just because I’ve gotten some questions on the assumption for the first quarter. The OR commentary. I know you tried to answer this before, but I just want to get clarification.
The tonnage that you’re now assuming, I know you said it could get better. What’s the base case for that? 100, 200, maybe midpoint in your tonnage assumption.
Matthew Batteh
I mean, obviously the Q1 headwind from a wafer shipment standpoint, then it flattens out. But I think for the top end of that range, like Fritz talked about for the full year, a little bit of a shipments and tonnage lift would be embedded in that. But importantly, we still feel like we can drive improvements even if the macro environment doesn’t give a lot of uplift. Just stay similar to what it was last year.
Fritz Holzgrefe
And we look at historic seasonality through the quarter from here. Right. So January’s tough. We had the weather, but Feb and March would be look like our normal typical seasonality.
Ken Hexter
All right, thanks guys.
operator
The next question comes from Tom Wadowicz with ubs. Please go ahead.
Tom Wadowicz
Yeah, good morning. So wanted to understand a little bit more your thoughts about, you know, flat market, flat freight market, just how you would think SIA will perform if that’s the case. Like, be great if ISM is right and you see a better backdrop. But you know, what if you don’t see that cyclical improvement? So in particular, do you think you’ll transition to shipment growth if that’s the backdrop? Or would you say you just kind of. Because it kind of seems like the December and January, it’s hard to see outperformance versus the market or it’s not as clear maybe versus what you’ve been going at.
So how do you think about when you get beyond the tonnage headwind in 1Q, you get beyond weather. What does shipment growth look like for SIA against a flat freight market?
Fritz Holzgrefe
Well, I think I’d look back to last year and how we performed in the markets, you know, however you want to describe it, flat, soft, recessionary, whatever the growth for us came in our developing new markets, ramping markets. I think that would that’s going to consist can continue into the year, into this year. I don’t see any reason why that sort of level of customer acceptance wouldn’t continue. I think in our legacy markets. I think what you’d see that is sort of normalized, flatten out there compared to what we saw on 25. And then it’s a focus on core execution.
Probably see in a Flat market from here you probably would see, you know, kind of us grinding out some share primarily because customers look at us and say, hey, that’s a great product. This is a national network. This is working. We take share in that way and you know, we price accordingly to try to continue to get those returns. So I think it’s, you know, it’s the last. It’s the 2025 playbook in a flat market in to 26. But you know, if the ISM develops like it would sort of indicate, I mean, I think that’s, that’s what’s exciting, right? That’s where I think you could accelerate that.
You know, do I look at December and January volume trends? You know, I always comment or note that over the course of the year, I don’t know if Feb, January or December are the, you know, 9, 10 or 10, 11, 12 most important months of the year. I don’t know. I don’t know. There’s a huge trend in there. But I think it’s, you know, I think the underlying execution for us has been good despite sort of the macro conditions.
Tom Wadowicz
So. Okay, well, I appreciate that. So how do we think about the low end of that 100 to 200 basis points? Do you think that, does that assume some growth in revenue per hundredweight? Do you kind of get. I know you’ve had questions on it, but does that assume you get to two points of growth in revenue per hundredweight? Something like that. And then also a little bit of shipment growth or what kind of revenue growth backdrop do you need to get that low end of your. Or comment?
Fritz Holzgrefe
Listen, I think that if we get sort of a macro freight market that is growing a bit, you know, I don’t know, 1, 2%? Yeah, that’d be great. But at the end of the day, I’m not necessarily interested and we’re not interested in leading the league in shipment growth. This is more about focusing on generating a return. So if the market were stronger than that, you might see more of us, more of our return coming from evolving or developing revenue per shipment. That probably accelerates in that kind of environment And we will get some growth and our new markets will continue to grow. So the combination of that would take us up and that revenue piece is really going to drive the incrementals. So I would say that in that range that we’ve given, we’ve assumed that when we talked last, back in last quarter, we said 50 basis points of improvement into this year, just in a steady state grinder environment, if we get A little bit of growth into the year. Can we get to 100? Absolutely. And if you get more growth and a little bit more pricing as well, then you’re going to go to the upper end of that range.
And if you’re, if you’re investing and looking at sia, what you’re focused on is you say, wow, when these guys know how to monetize the capital that they’ve deployed in the business, that’s where the incrementals really look good. And I’d encourage you to consider that over time. And we can point to history. We know we’ve done it before.
Tom Wadowicz
Okay. So you probably get some revenue to get to the low end of that hundred to two hundred. And obviously if the market’s stronger, you can do a lot more. Is that sounds like that?
Fritz Holzgrefe
Absolutely. Absolutely.
Tom Wadowicz
Yeah. Okay, thank you. Appreciate it.
Tom Wadowicz
The next question comes from Brian Ossenbeck with JP Morgan. Please go ahead.
Brian Ossenbeck
Hey, good morning. Thanks for taking the question first. Just to follow up on the insourcing line haul, it sounds like the network is helping with that from a density perspective, but I thought you also mentioned some technology. So is there more of a structural benefit you’re getting here from an investment? And then maybe I just wanted to hear an update on the mix of the portfolio. You mentioned the weight per shipment, rather headwind, west coast exposure. You had one to two lane growth previously, so maybe just an update in terms of where we are in that.
Is that still going to be part of a tougher comp from a mix perspective here? Maybe in the first couple quarters?
Fritz Holzgrefe
Yeah, Brian. So what I would point to, and I think one of the things that’s always important when you consider our cost structure is kind of reference us or compare us to our competitors. All the public guys are all larger than we are. And you know, by and large, I think that if, you know, on an apples to apples basis, we’ve got a pretty good cost structure and that is largely dependent on the deployment of technologies over the last few years around how we plan, schedule and run our line haul network. So we have never been necessarily concerned with using PT if it’s cost optimal.
Right. So as we have modeled the network over time, we have to use PT freely when it made sense to match our cost structure and most importantly, match customer expectations. So that same we deploy that technology, that optimization technology on a larger scale as we grow the business. And as you add 39 ramping points across the network, which you can do, then as you take that same technology and you figure out, all right, so what’s a better way to schedule and manage that? Our sort of network cost, which is our line haul and pt. And that’s why the cost structure is we feel like pretty competitive.
And you know, although it’s challenged in a seasonally soft fourth quarter, it’s still pretty good overall compared to much larger competitive. So that’s kind of a key skill set technology based solution that we deploy. We’ll continue, like any technology, you continue to invest in it because over time you want to continue to improve whatever it is, the logic or algorithm that’s driving those sort of decision points. You want to continue to refine and improve that. So that’s something we’ll continue to focus on going forward. And I think it’s a competitive skill Set that we have.
Matthew Batteh
from a mix standpoint, Brian. I mean the LA headwind wait per shipment headwind, those late April, excuse me, late March, April ish timeframe are when those start to lap in the, obviously shipments were down, but in the areas that are growing it is typically a little bit more in those shorter haul segments right now. But I think part of that is just the expansion of the network. You get opportunities with customers to solve more problems. But from a larger standpoint, really that la wait for shipment part, that recedes a little bit after the late Q1, early Q2 time period.
But importantly, we’re focused on driving returns on the investments and focusing on price. We’ve got to get paid for the service that we provide. We’ve got more conversation points than we ever have with a wider network. But those are, those are the key points on the mix portion of it.
Brian Ossenbeck
All right, thanks. Just to clarify, Fritz, the optimization is just more doing more with the same technology? Nothing really new, incremental, just a broader base with better density, Is that correct?
Fritz Holzgrefe
Yeah, I mean, that is. But I think, Brian, what’s important to underscore here is that we continue to invest in that technology. Right. So further refine the algorithms we use for that and the tools that we deploy with that around how we plan the network going forward. So it’s not a static investment where we say, hey, you know, last, you know, two years ago we deployed this technology. We’re not making changes to it, we continue to invest that, but that’s really key for us.
Brian Ossenbeck
Right. Okay, thanks for your time.
operator
The next question comes from Ravi Shankar with Morgan Stanley. Please go ahead.
Ravi Shankar
Great, thanks Maureen. Guys, just one follow up to start. Just to confirm on this insurance, should we treat this as a one time item? What happened in the fourth quarter or is this the new baseline going forward? And also you mentioned you’ve seen some volume shifts after you push through the gri. Can you unpack that a little bit more? Who did that go to? Was that entirely price driven? Kind of. Was that a new customer or an old one? Any further detail there would be great. Thank you.
Fritz Holzgrefe
Yeah, I’ll take the self insurance or the accident expense. That’s from a few years ago, unfortunately that is it was an unexpected adverse development. So you know it’s appropriate to record a reserve for that. I don’t so I don’t expect that to be the new run rate. Certainly you don’t want things coming from prior periods like that. But the reality of it is is that underlying this business, you know, accident expense is part of the business. Right. So you’ve got to make sure further explanation of why you got to focus on pricing and make sure you understand those things.
But I wouldn’t consider that number as a run rate item. We highlighted it simply because it was unexpected adverse from prior periods.
Matthew Batteh
On the GRI aspect of it, you always see a little bit of volume move when you take the GRI and part of that’s temporary where customers are trying to shift things around, try to save some dollars. That’s we did it in what’s typically a seasonally weaker period of the year. But there’s always a little bit of movement around that. We feel pretty strongly that we’re really well positioned as that starts to flow back. But that’s not out of the norm. We’re typically we talk about sort of keeping 80 to 85% of that. We’re on that segment of business we’re seeing a flow through rate just in excess of 90%.
So we feel like we’re getting a better hang on to that and we feel like it’s partly the network. We’ve got more opportunities where customers are saying hey, size doing a great job for me in more locations than they ever have. But you always see a little bit of volume trend. But importantly the acceptance rates really where we’re focused and where we’re going to continue to press on.
Ravi Shankar
Sounds good, thank you.
operator
The next question comes from Ariel Rosa with Citigroup. Please go ahead.
Ben Moore
Hi, good morning, this is Ben Moore at Citi for Re. Hey Fritz. Matt, good to hear from you and. Thanks for taking our question. You previously noted not seeing meaningful restocking. At retailers and curious to here as. You’Re having your conversations with customers. What’s the sense on restocking? Is it starting to happen if not what’s your sense on kind of throughout. The, throughout the year when that might inflect?
Fritz Holzgrefe
Yeah, I don’t know that we’ve got a specific call out for that, Ben. I think that it’s what we would expect from here based on, at least with the sentiment you say is it kind of maybe more normal, if you will. So I don’t know that it’s accelerated level of restocking or just more of a normalized supply chain management. So I don’t know that we’re in the, how would I say, the sort of up and down time with that. I think it seems to be stabilizing a bit. So we don’t see quite the volatility that we might have seen even, you know, six months ago as people were addressing changes in their supply chain.
We don’t see as much as that now as we did then.
Ben Moore
Great. Really appreciate that. And maybe just as an add on or clarification on your 20 to 25% excess capacity, you mentioned earlier, you’ve in the past talked about maybe anticipating as much as 35 to 40% incremental margins on the excess capacity on an inflection and kind of reaching gradually your sub 80 or long term target. What’s your sense on that right now? Are those numbers still kind of what you have in mind? Targeting? Perhaps maybe not 26, but 27 and beyond.
Fritz Holzgrefe
Listen, a $2 billion capital investment like what we’ve deployed in this business, the returns that we’re expecting are sub 80 or right. So now when does that happen? You know, I think the market is going to influence that, but I don’t see any reason why we don’t drive the performance of the business in the low 80s and into the 70s. Parts of the network even today that have some level of maturity, we actually operate in the upper 70s now. We use that as a guidepost. We say look, we ought to be able to do that everywhere and that’s why we made the investment.
So I don’t think there’s any hesitation on our side to say that that can’t be achieved.
Ben Moore
Great, thanks so much.
operator
The next question comes from Reed CA with Stevens. Please go ahead.
Reed CA
Hey guys, thanks for taking my question. I wanted to touch on salaries, wages and benefits here in the fourth quarter. You talked about headcount being down, I. Think above 5% year over year. Obviously you had the wage increase here in October, but you would think that maybe like the headcount coming out and. The wage increase on a year over year basis would offset each other. Can you talk about maybe or just dig into the expenses and salaries, wages and benefits line a little more. Is there anything in the fourth quarter that maybe won’t repeat going forward or is there any reason that that could. Potentially be elevated or just add more Color there would be helpful.
Matthew Batteh
Yeah. I mean you’ve always got. We talked about the health insurance inflationary environment. We talked a little bit about that in the prescriptive comments. If I look at headcount excluding line haul drivers, it’s down 6.4% compared to Q4 last year and down about 2% sequentially from Q3 to Q4, but in a cost per shipment basis, which I think is where you’re getting at, Reid, if you look sequentially and you’ve got two fewer work days, so your fixed costs are spread out over fewer days, fewer shipments, you’ve got a shipment deterioration that you see in the sequential Q3, Q4 numbers.
And then the days that you have shipments, they’re not all full revenue days, but the fixed cost of headcount of salaries. You know, in a way, some of the insurance items, those are all embedded in there. But we’re pleased with the pace that we continue to match hours with volume. We’re never going to be. That’s just part of our business. You’ve got to match hours with volume. So I think more than anything, it’s just you didn’t have the wage increase in Q3, so we did it in Q4. So that’s an automatic increase compared to. You were just kind of looking and modeling historically.
But we feel like we managed it pretty effectively. And what’s a challenging period of the year plus with a more challenging environment. We knew what October shipments were on the last call and that was a 23 workday month, which is the most important month. November was 18 days. So just some of those nuances and headwinds on how the calendar lines up. But we feel like we manage costs what we typically do on a headwind from a wage increase that was only in one period versus the combination of the two.
Reed CA
And then if I could just follow up on the previous question on capacity.
Can you talk about the capacity difference in your new markets versus your legacy markets? I would assume you have a little excess, a little more access in your new markets as you try to build. Density in those, but just kind of. Get a feel for where the legacy markets are as well.
Fritz Holzgrefe
Yeah, I think Matt walked through this pretty well earlier, but I think you got to remember that capacity is measured by not only door count, it’s yard space, its drivers, its equipment. You know, in the new markets we can continue to have and would expect to at this stage, ample capacity. You know, we can, you know, if things grew in those markets at a rate faster, you could easily add drivers or we could recruit drivers, add equipment, that sort of thing. In the legacy markets, we feel pretty well positioned there. When we say 20, 25%, we’re taking a whole range of assumptions and locations.
Unlike maybe some of our larger, more established, mature peers. Our number is a whole range of variations. So there’s not a lot of insight there that I can give you beyond to say look, but new markets, plenty of capacity, probably, you know, upwards of 50% newer market, legacy, a little bit less, you know, probably around 20ish. You know, you got to wait, you know, how big are the new versus old? I don’t spend a lot of time worrying about it, to be honest.
Reed CA
Got it. Well, thanks for squeezing me in guys.
operator
The next question comes from Jason Seidel with TD Cowan. Please go ahead.
Jason Seidel
Thank you, operator. Hey Fritz. Hey Matt. If we look at these 39 terminals and by the way, it’s great to see them turning profit now, how should. We think about the walk to sort of an average legacy profitability? So if we assume normalized economic environment and a rational ltl pricing environment, you know, how many years so these terminals walk up to the average?
Matthew Batteh
Well, there’s a wide range of these Obviously in that 39 you’ve got a Garland, Texas facility that’s more meaningful than some of the smaller ones. Just in terms of freight environment and magnitude. Historically we think about these on sort of a 3ish year time horizon to get towards company average. Now the comment that you made was on a better, better macro and a better macro backdrop. Yeah, normal. We think about it in a three year time horizon we’ve got some of these that are already operating below the company number. I mean it’s not all of them, it’s, it’s the minority, certainly only a couple of them, but that’s good to see in the scale impacts of it.
But typically we think about them on a, on a three year time horizon. And if the macro gives us a little bit of an uplift and it’s a bit of a recovery scenario, you think about that. What Fritz just said in the previous question around excess capacity. Well, you have fixed costs that are just associated with running these terminals and obviously you’ve got variable costs in there as well, but the fixed costs are going to scale even more. So in an uplift environment. That’s what gets us so excited about this. In a volume uplift environment you’re not having to add costs at a one for one level.
We can scale. The investments that we’ve made are not for the results in these terminals in the next three months or six. It’s a three, five, ten year investment that we’re making these. But that means that there are fixed costs embedded in those and inefficiencies that aren’t in some of the markets that have been open for much longer. So we get really excited about the opportunity to scale just because we’re the only one that’s open this many new terminals in a short period of time. It’s a right long term move but it really sets us up to take advantage in a bit of a better macro
Jason Seidel
Right now that makes sense.Just a quick follow up on the insurance side. You know, given sort of the rise that we’ve seen, sort of the mini nuclear verdicts that’s been more recently, any thought given to maybe upping your self. Insurance level going forward?
Matthew Batteh
We’re always looking at unique ways and conversations around our insurance tower. We factor in a lot of different things as we’re going through those negotiations and the renewals. I think very important we invest and we’ve said this for a long period of time, we invest and will continue to invest in every piece of safety technology, best in class equipment with all safety technology on it. So we’re never going to take a break from that. But the environment is inflationary. I mean you hear everybody talk about that. So the best way to prevent that is to have fewer incidences and we were pleased with the progress we’ve made this year.
So we have a pretty wide ranging discussion every time on the insurance renewal side. So we take it. There’s no stone unturned when we’re talking.
Fritz Holzgrefe
About those items and I would challenge that. We would SIAT likely has, if not the top safety feature set fleet as anybody in the business. I mean we have never cut corners on that driver facing forward facing cameras, all the accident mitigation technology on board training to support that. That’s important to us. The most important thing we can do around safety is keep our drivers safe, get them home safely. That’s how you save on insurance, get people back home safe, back to work tomorrow safe.
Jason Seidel
Appreciate the time as always guys.
operator
The next question comes from Eric Morgan with Barclays. Please go ahead.
Eric Morgan
Hey, good morning. Thanks for taking my question. I just wanted to follow up on the last one on insurance. I know you said you don’t think we should be including the prior period developments in the run rate. So just want to clarify if we, I mean if we back out the 4.7 from the quarter, I think insurance costs would have come down sequentially a healthy amount to like 20 million. So just want to double check if that 20 million or so is the run rate you’re thinking going forward and if so what’s kind of driving that sequential improvement.
I know you’ve mentioned claims ratio improved there. So not sure if that’s a factor as well. Thanks.
Matthew Batteh
Yeah, the math you did, Eric, is right on the impact of that. So that would point to us. We’re having what was embedded in our guide, obviously a pretty good quarter from an experience standpoint. I think you’ve got to use a longer term average. Certainly when you’re thinking about it from a modeling standpoint, you’ve got, you’ll look in our history and you’ll see pluses and minuses and just how that moves throughout the year. Environment’s going to continue to be inflationary. But I think importantly, as Fritz noted a second ago, we spent a lot of time and will continue to on the training and we were seeing it in our results and we continue to preventable accidents down 21% compared to the prior year.
And that was embedded in some of that Q4 look. But I think you’ve got to use a longer term average. These discrete ones aren’t part of the the run rate moving forward. But that line continues to be inflationary. I think it’s fair to use more of a longer term average with some inflation on top of it.
Fritz Holzgrefe
And then when we build in our guides, you know, we think about what or improvements are. That’s assuming what we understand to be about sort of normal case development. Right. These, the handful that we described, we called out here were extraordinary in a sense that you know, the tail on them. But when we think about the guide, we appreciate that that is an inflationary line. So we try to include that in that analysis. And that would include some development of cases that have happened over time. So Matt’s description around looking at that over time is important.
Eric Morgan
Thanks for the time.
operator
The next next question comes from Harrison Bauer with Susquehanna. Please go ahead. Great.
Harrison Bauer
Thanks for taking my question and squeezing. Me in here, Matt. Building off some of your thoughts on fixed versus variable cost, you know, some of your peers have offered what their view is on incremental margins in the. Early stages of a growing tonnage environment considering you’ve similarly invested heavily into your network with ample capacity. You know, as you get this network. Running, can you share what your views. Are for incremental margins in your business? Before you’d have to invest materially in more capacity. And if that’s drastically different from the. 40% plus that your peers have described. Thank you
Matthew Batteh
No, I mean, look, this is. To Fritz’s earlier point, this is why we did this. And we do have these costs that are associated with opening 39 terminals over the past three or so years, but we feel really poised to scale out of that. There is no reason. I mean, we think about those same types of numbers in a slight uptick environment, and then certainly if it escalates further, a 30, 40% incremental margin number. And you’ll see that probably in excess of that in some of these markets that are relatively new, because you’re not.
You’re not adding costs at the same pace as what the volume and the revenues coming in, which is part of having a national network and part of why we scaled. And history proves that point. If you go look at the execution and the incremental margins post the Northeast expansion, and that’s exactly what we saw. And there’s nothing that stops us from getting to that point. So that’s exactly how we think about it. And if the environment runs a little bit further or faster and the capacity environment tightens, we feel like we can outperform that. But that’s absolutely the types of numbers that we think about.
Harrison Bauer
Thanks.
operator
This concludes our question and answer session. I would like to turn the conference back over to Fritz Holtzgrave, SAI’s president and chief executive officer, for any closing remarks.
Matthew Batteh
Betsy, can we. It looks like one more person popped in the queue. Could we answer? Can we get Tyler.
operator
My apologies. The next question comes from Tyler Brown with Raymond James. Please go ahead.
Tyler Brown
Hey, thanks, guys. Thanks for squeezing me in. I just had a couple quick ones. So, Fritz, I think you talked about your $2 billion investment that was obviously largely on real estate. I think you just gave capex guide of 350 to 400. But Matt, where would you peg maintenance capex? And is this year’s capex largely just. Fleet and fleet catch up?
Matthew Batteh
There was a lot obviously in real estate over that past period, but there’s also a big investment in equipment over the past couple years. If you look at past couple years, the biggest tractor investment in company history, the biggest trailer investment in company history, a lot of that was to catch up with all the volume growth over the past several years. So it is a lot real estate but it’s also a lot of equipment as well in that, that period. From a maintenance capex standpoint, I mean that’s, that’s really what this year is from an equipment standpoint is maintenance capex.
Obviously volumes are a little bit down compared to where we expected them to be when we walked into 2025. So we feel really good about the equipment pool that is inflationary, just like every other line of our business. But that’s from an equipment side. It’s really a maintenance ish buy this year for sure.
Tyler Brown
Okay, so it feels that you guys will be still cash generative. You should, you should have solid free cash. Your leverage is very manageable. M and A probably isn’t a story. And clearly Fritz, you see a ton of upside. So does there come a point that you guys will contemplate additional shareholder returns, I mean, maybe through a buyback, or will you guys hold capital back for another capex cycle down the road? But how do you guys think about that over the next couple of years? Thanks.
Fritz Holzgrefe
So I would say all those things are in play. Right? So first of all, we understand and respect the fact we are stewards of the shareholders capital. So as this business generates returns, we’ll consider buybacks, dividend, whatever that might be. But that’s important, right, because this is a business that we expect to generate a return. At the same time, I think that we’re going to have to balance that with opportunities will be presented to us as the market adjusts, as term rolls become available in markets that we don’t necessarily service as well as we would like to. You know, we’ve got 212, 213 facilities right now nationwide.
And I think that that potentially goes to 230. And I think that potentially there’s some markets where we may have to build. There can be other markets where I think we’re going to be able to, you know, find available real estate. So we’re going to have to balance the deployment of capital in that way. I think the way to think about that though is obviously we’re going to be stewards first. First and foremost, to the extent the investment opportunities present themselves, those are going to be accretive from a return on invested capital as well. So that would further fund shareholder returns in future years because I think there’s a lot of growth potential in this business still.
So we’re excited about that opportunity.
Matthew Batteh
I think important to add to that. Tyler too, the point you made at the beginning of being free cash flow generative this year is a big deal. That’s what we expect to be.
Tyler Brown
Yep. Perfect. Okay, thanks, guys.
operator
This concludes our question and answer session. I would like to turn the conference back over to Fritz Holtzgrave, SIA’s president and chief executive officer, for any closing remarks.
Fritz Holzgrefe
Thank you, operator, and thanks to all that have called in at tsio. We believe that our value proposition of the customer continues to be significant, and we look forward to talking about the success we will achieve in the quarters and years to come. Thanks all for the time.
operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.