Q1 2024 Canadian Pacific Kansas City Ltd Earnings Call

Uh huh.

James: Good morning, my name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to CPKC's first quarter 2024 earnings conference call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise.

James: Good morning, My name is James now will be a conference operator today.

James: At this time like to welcome everyone to see Ptc's first quarter 2024 earnings conference call.

James: The slides accompanying today's call are available at Investor <unk>, PK CR Dot com.

Speaker Change: Lines have been placed on mute to prevent any background noise.

James: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press the star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press star 2. And now, I'd like to introduce Chris De Bruyn, Vice President, Capital Markets, to begin the conference.

Speaker Change: The Speakers' remarks, there'll be a question and answer session.

Speaker Change: If you'd like to ask a question simply press Star then the number one on your telephone keypad if.

Speaker Change: If you'd like to withdraw your question Press Star two.

Speaker Change: I would now like to introduce Christopher Glynn, Vice President capital markets to begin the conference.

Chris de Bruyn: Good morning, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide 2 in the press release and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAD measures, outlined on slide 3.

Christopher Glynn: Thank you James Good morning, everyone and thank you for joining us today before we begin I want to remind you. This presentation contains forward looking information.

Christopher Glynn: Actual results may differ materially.

Christopher Glynn: Uncertainties and other factors that could influence actual results are described on slide two in the press release and in the MD&A filed with Canadian and U S regulators.

Christopher Glynn: This presentation also contains non-GAAP measures outlined on slide three.

Chris de Bruyn: Please note, in addition to our regular quarterly financials, there is supplemental Q1 combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on. With me here today is Keith Creel, our President and Chief Executive Officer, Nadeem Velani, our Executive Vice President and Chief Financial Officer, John Brooks, our Executive Vice President and Chief Marketing Officer, and Mark Redd, our Executive Vice President The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate it if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Christopher Glynn: Please note in addition to our regular quarterly financials. They are supplemental Q1, combined revenue and operating performance.

Christopher Glynn: Hello at Investor about CPG, ACR Dot com, which some of today's discussion will focus on with me here.

Christopher Glynn: <unk>, our president and Chief Executive Officer, Bill <unk>, Our executive Vice President and Chief Financial Officer, John Brooks, Our executive Vice President and Chief Marketing Officer, and Mark <unk>, Our executive Vice President and Chief operating officer. The formal remarks will be followed by Q&A.

In the interest of time, we would appreciate if you limit your questions to one.

Christopher Glynn: It is now my pleasure to introduce our president and CEO, Mr. Keith Creel.

Keith E. Creel: Good morning. Thanks, Chris. Listen, before we get to the results, I think it's only appropriate on behalf of our CPKC family to extend our heartfelt prayers and condolences to Jim Foote's family and friends. As many of you know, we lost him last week.

Keith E. Creel: Thanks, Chris.

Speaker Change: Listen before we get to the results.

Speaker Change: I think it's only appropriate on behalf of our CPE Casey family to extend our heartfelt.

Speaker Change: Prayers and condolences to Jim Foote family and friends.

Speaker Change: As many of you know we lost him last week.

Keith E. Creel: Many of us in this industry have had the honor to serve with Jim during his multiple decades of service to this industry. I can tell you personally that I'm going to cherish the memories and the experiences. He's a wonderful man, a dedicated man, dedicated to this industry, dedicated to the railroads that he worked for and the people that he served with. If you knew him, there are a couple of things that are undeniable about him.

Speaker Change: Many of US in this industry I've had the honor to serve the gym during his.

Speaker Change: Multiple decades of service to this industry.

Speaker Change: I can tell you myself personally I'm.

Speaker Change: I am going to cherish the memories and experiences.

Speaker Change: A wonderful man dedicated man.

Speaker Change: Dedicated is the same street dedicated to the railroads that he worked for and the people that we serve with if you knew him.

Speaker Change: Couple of things that are under novel that Ian.

Keith E. Creel: He loved his friends. He loved his family, and he loved the companies that he served in. He loved this industry. It's a man lost too soon; I can tell you he left it better.

Speaker Change: You'll have this frenzy led to Stanley.

Speaker Change: And it allowed the company to that he served as lead this industry.

Speaker Change: And last two soon and I can tell you.

Speaker Change: He left it better.

Keith E. Creel: The memories and experiences will not be forgotten or will not fade, nor will his impact on this industry. So all the best again to his family, prayers, and condolences. So with that said, I want to thank you for joining us on the call today, so we get to share our results. As I always will, I want to start my comments by thanking... The 20,000 strong family of railroaders that enabled the results that we get to share today.

Speaker Change: Memory and the experiences will not be forgotten oral Jim no impact on this industry.

Speaker Change: Yes.

Speaker Change: So all the best again to his family prayers and condolences.

Speaker Change: So with that said, let's I want to thank you for joining us on the call today as we get to share our results.

Speaker Change: Well I want to start my comments thinking.

Speaker Change: The 20th out the strong family of railroad or has that enabled the results that we get to share today.

Keith E. Creel: As you're all aware, we just celebrated our one-year anniversary just last week of this historic combination. We're here to celebrate, actually, today in Calgary, another historic event. We're going to launch our final spike. Steam Tour, Probably 35-40 days.

Speaker Change: As Youre all aware, we just celebrated our one year anniversary just last week. This historic combination.

Speaker Change: We're here to celebrate actually today in Calgary Another historic event, we're going to launch our final spike.

Speaker Change: Steam tour. This afternoon, so super exciting data in Calgary, and we get to share these results and Dr. AGM, we get to celebrate.

Keith E. Creel: I want to get to spend time and thank the communities that we're operating in, all the way from Calgary down to Mexico City, so I thank the employees again that have been specifically involved in enabling this creation, this vision we created two years ago with the culmination of the launch today. So, thank you for that, and I hope any of you across this network will have a chance to participate in that. So looking back, you know, on this last year of our Fairbanks story, I tell you, I can't be more pleased with the progress.

Speaker Change: With our employees and start this historic and iconic trip across all three nations. So for the next topic.

Speaker Change: <unk> 35 40 days.

Speaker Change: Let me get to spend time in the communities that we're operating in through all the way from Calgary down to Mexico City. So I think the employees again that had been specifically involved in enabling.

Speaker Change: This creation of this vision, we created two years ago with the culmination of the launch today. So thank you for that.

Speaker Change: I hope many of you across this network will have a chance to participate in that.

Speaker Change: So looking back at this last year of our fair of the story I tell you I can't be more pleased with the progress we are delivering on the commitments we've made to create competition will.

Keith E. Creel: We're delivering on the commitments we made to create competition. We're delivering safe and efficient service, and we're expanding our service continually. We're creating new and expanded customer relationships. In the new markets that we're creating, collaborating, that is only enabled because of this historic combination.

Speaker Change: We are delivering a safe and efficient.

Speaker Change: Service Sim or expanding our service continually we're creating new and expanded customer relationships.

Speaker Change: But with the new markets that were creating collaborating.

Speaker Change: It has only enabled because of this historic combination I'm pleased with the results. We produced in the quarter. It's been a strong start to the year from an <unk> and an operational perspective, yes. It was a tough January but I can tell you Marc and the operations team recovered quickly and the bonds have exceeded the expectations that we provided during our Q4 earnings call.

Keith E. Creel: I'm pleased with the results we produced in the quarter. It's been a strong start to the year from an R&D and an operational perspective. Yes, it was a tough January, but I can tell you Mark and the operations team recovered quickly, and the volumes have exceeded the expectations that we provided during our Q4 earnings call. So specific to the results, the first quarter produced revenues of $3.5 billion, which is an increase of 2%.

Speaker Change: So specific to the results of the first quarter, we produced revenues of $3 5 billion, which is an increase of 2%.

Keith E. Creel: Operating Ratio 64, which is about 50 percent deeper, increased versus last year. Core EPS of 93 cents, an increase of three percent. Despite a challenging start to the year, the volume forced up one percent for the quarter.

Speaker Change: An operating ratio of 64, which is about 50 bps.

Speaker Change: Increased versus last year core EPS of <unk> 93, an increase of 3%. Despite a challenging start from the year the volumes step 1% for the quarter.

Keith E. Creel: On operating performance, I'm extremely pleased with how the network bounced back from the January challenges and the resiliency that the team displayed, the momentum that we created and carried into the quarter with strong gains across the network, and speed, dwell, and locomotive productivity. The improvements were pronounced in Mexico, where we continue to see large improvements across our operating metrics. Several of the key metrics that we follow internally have improved significantly in Mexico this quarter. Car miles per car day, locomotive productivity both up over 20% year-over-year, and active cars online down 15%, well down. Productivity improvement

Speaker Change: On the operating performance I am extremely pleased with how the network bounce back from the January challenges, the Brazil, let's see that the team displayed the momentum that we created and carried it into the quarter with strong gains across the network and speed dwell our locomotive productivity.

Speaker Change: The improvements were pronounced in Mexico, where we continue to see large improvements across our operating metrics. Several of the key metrics that we follow internally have improved significantly from Mexico. This quarter car miles per car day locomotive productivity, both up over 20% year over year.

Speaker Change: Active cars online down 15% dwell down.

Speaker Change: Productivity improving the gains we have made in Mexico to improve velocity, they've allowed us to optimize our asset base.

Keith E. Creel: The gains we've made in Mexico, the improved velocity, they've allowed us to optimize our asset base, we've been able to park assets, and we've been able to redeploy as many as 60 locomotives, in fact, during the quarter, to other parts of the network to address winter weather and serve stronger than expected demand. It's a huge credit to the operating team demonstrating the power of a true precision scheduled railroading In fact, I think it's better said at CPKC as PSR Prime, and importantly, these improvements continue to come at a time when, in Mexico, we're delivering an all-time high GTM performance.

Speaker Change: April to park assets, we've been able to redeploy as many as 60 locomotives in fact during the quarter.

Speaker Change: The other parts of the network to address winter weather and serve stronger than expected demand.

Speaker Change: The huge credit to the operating team demonstrating the power of a true precision scheduled.

Speaker Change: Already operating model in fact, I think it's better said it.

Speaker Change: <unk> Prime.

Speaker Change: And importantly, these improvements continue to come at a time when in Mexico, We're delivering an all time highly GTS performance.

Speaker Change: So the management change.

Speaker Change: You would have seen in March we made a change to our leadership team and releasing John or from his commitment to CP Casey.

Speaker Change: Again, I'd like to thank John for his contributions and the impact of the leadership that he had as a leader I believe that you are challenged to lead to better <unk> did that did that in the service to the <unk>.

Keith E. Creel: [inaudible] while the company was in trust, as well as to CPKC until its departure just last month. We're fortunate to have an extremely talented and deep bench of PSR Railroaders on our team, so the decision to release John was not an easy one, but it was made possible by the strength and the depth of the teams we actually have at CPKC. The plan was always for the Mexican operations to eventually report into MARC as our COO, and with the strong performance in Mexico that I've mentioned, and the experienced team that we have in place, it just simply made sense to accelerate that plan.

Speaker Change: While the company was entrust as well as to CP Casey.

Speaker Change: His departure just last month.

Speaker Change: We're fortunate to have an extremely talented and deep bench of <unk> on.

Speaker Change: On our team so the decision to release John was not an easy one but it was made possible by the strength and the depth of the teams we actually have at CP Casey.

Speaker Change: <unk> was always for the Mexican operations da Vinci reporting to Mark as our CEO and with a strong performance in Mexico that I've mentioned the experienced team that we have in place and just simply makes sense to accelerate that plan.

Keith E. Creel: So credit to the entire operation team. Since John's departure, they haven't missed a beat. We're continuing to execute, drive improvements, and provide great customer service to our customers. So in closing, I'm happy to start. I'm happy with the start that we've had to the year and our performance so far in the second quarter as well. We're poised to be the most relevant rail network in North America, uniting a continent, adding competition to the industry, and delivering new options along with safe and efficient service to our customers.

Speaker Change: So credit to the entire operation team since Jon's departure, they haven't missed the beat we're continuing to execute and drive improvements and provide great customer service to our customers.

So in closing.

I'm happy to start I am happy with the start that we've had to the year our performance so far in the second quarter as well we are poised to be the most relevant rail network in North America uniting a continent, adding competition of the industry in delivering new options, along with safe and efficient service to our customers.

Keith E. Creel: So with that said, I'm gonna hand it over to Mark to speak to the operating performance, John's gonna bring some color to the markets, and then Nadeem will close by elaborating on the numbers before we open it up to questions. All right, so thank you, Keith.

Speaker Change: That said I'm going to hand, it over mark to speak to the operating performance John is going to bring some color to the markets and the Nadeem will closed elaborating of the numbers before we open it up to questions over to you Mark all right. So thank you Keith and good morning, I'm extremely proud of the operating team produced this quarter.

Mark A. Redd: Alright, so thank you, Keith, and good morning. I'm extremely proud of what the operating team produced this quarter. I'd like to thank them for their continued hard work delivering safe, reliable service. Throughout the quarter, I spent a great deal of time on the network, and I'm pleased with the level of talent and dedication here at CPKC. I'd like to recognize the three port terminal as well; they were named CPKC 2023 Terminal of the Year. This terminal has been executing at an extremely high level, and having spent time earlier in my career at this terminal, I'm very pleased to recognize this team for their outstanding performance. I also spent time in New Mexico this quarter.

Mark: And for their continued work hard work delivering safe reliable service throughout the quarter I spent a great deal.

Mark: Tom on the network and I am pleased with the level of talent and dedication USB Casey I'd like to recognize the Shreveport terminal as well they were named <unk> 2023 terminal of the year. This terminal has been executing an extremely high level and haven't spent time early in my career at this terminal Im very pleased to recognize his team for their outstanding cheap.

Mark: Also spent time in Mexico. This quarter, we have had a strong dedicated team experienced railroad.

Mark: Keith noted, we're continuing to drive strong sustainable improvements.

Mark: Now looking at the quarter. Thanks to the team's collective efforts, we made a quick full recovery of the extended cold weather in January serving very strong volumes in the Western corridor corridor and also an extreme high level a record <unk> in Mexico.

Mark A. Redd: We have had a strong, dedicated team, experienced railroads, and as Keith noted, we're continuing to drive strong, sustainable, and proof. Now looking at the quarter, thanks to the team's collective efforts, we made a quick, full recovery from extended cold weather in January, serving very strong volumes in the western corridor and also extremely high-level record GTMs in Mexico by posting strong year-over-year operating metrics. And looking at the metrics this morning, locomotive productivity up 8 percent, average train speed up 13 percent, our dwell time is 10 percent down, all demonstrates a fluid network.

Mark: Posted strong year over year operating metrics.

Mark: And looking at the metrics. This morning locomotive productivity up 8% average train speed up 13%, our dwell is 10% down.

Mark: Demonstrates a fluid network.

Mark: Our fuel efficiency declined 2% largely due to the weather earlier in the corner in the quarter, but I expect this to improve throughout the year.

Mark: So looking at safety. This morning, the FRE personal injuries up 3% year over year at a 115 FAA train accident still leading the industry yet.

Mark: Aro <unk>.

Mark: 89 up from zero point.

Mark: 71, a year ago while.

Mark A. Redd: Field efficiency declined 2% largely due to the weather earlier in the quarter, but I expect this to improve throughout the year. So looking at safety this morning, the FRA personal injury is up 3% year-over-year at 1.15, and FRA train accidents are still leading the industry at 0.89, up from 0.99. 71 a year ago.

Mark: While we strive for expected improvement each quarter. Thank you the never ending journey.

Mark: Our focus remains on building in the last safety culture, which is key to maintaining CP cases industry leading safety.

Mark: Our record.

Mark: Notably we brought out home safe across the Casey's that work and we continue to do so in Mexico as well.

Mark: As I look at Mexico, we're advancing some of the key initiatives that are identified last year to improve productivity and capacity.

Mark: We're finding opportunities to streamline our operations during the quarter, we were able to see.

Mark A. Redd: We strive for expected improvement each quarter. Our focus remains on building a live safety culture, which is key to maintaining CPK's industry-leading safety record. Notably, we've rolled out HomeSafe across the KCS network, and we continue to do so in Mexico as well. So as I look at Mexico, we're advancing some of the key initiatives that were identified last year to improve productivity and capacity. We're finding opportunities to streamline our operations during the corner. For example, we were able to shut down switching operations at the Venegas Yard.

Mark: Now switching operations at the Navy yard.

Mark: We're also focused on improving cycle times streamlining operations for bulk commodities and customers.

Mark: This is an area, where we've seen success so far but we're also freeing up locomotives and equipment and we can use in other parts of the network. So we can create more synergies and how mortgage.

Mark: Looking at capital.

Mark: Plasma levels remains focused on growth and safety in the quarter. We in service three more new sites as part of our $275 million capital merger capital commitment. We've also in service too.

Mark A. Redd: We're also focused on improving cycle time, streamlining operations for all commodities, and This is an area where we've seen success so far, but we're also freeing up locomotive equipment that we can use in other parts of the network so we can create more synergies and handle more work. Looking at capital, Flammable Loans remains focused on growth and safety.

Mark: Sidings in Mexico to help with that capacity and fluidity.

Mark: We're looking at El Dorado brands, 65% complete at this point, we remain on target to be in.

Mark: Closed out by the end of the year.

Mark: All of these projects will support growth.

Mark: And further improvement in the network and.

Mark: In summary, Q3 starts to the year in entire network is in great shape.

Mark A. Redd: In the quarter, we put in service three more new sidings as part of our $275 million merger capital commitment. We've also put in service two sidings in Mexico to help with capacity and fluidity. We look at the Laredo bridge, 65% complete at this point, remain on target to be closed out by the end of the year. All of these projects will support growth and Further Improvement in the Network.

Mark: We're in a good place from an asset and resource perspective, and the team is lateral focusing providing service excellence to generate industry leading growth.

Mark: That I will pass it over to John Alright, Thank you Mark and good morning, everyone. So with a full year as a combined company under our belt I'm extremely pleased with the progress we've made so far and all of the opportunities I still see ahead of us.

John Kenneth Brooks: <unk> built on our momentum from Q4 and despite some of the early weather challenges we had to start the year. We have started the year strong and we are gaining momentum.

Mark A. Redd: In summer, we've had a great start to the year, and the entire network is in great shape. We're in a good place from an asset and resource perspective, and the team at Lionel focuses on providing the service excellence to generate industry-leading growth. And with that, I'll pass it over.

John Kenneth Brooks: Now looking at the results on a combined basis, we delivered freight revenue growth of 1% and 1% RPM growth. This was slightly ahead of the flat to slightly down outlook for our Tms that we provided to the market in January.

John Kenneth Brooks: Per our team was flat year over year with strong pricing offset by a 3% fuel headwind along with negative mix.

John Kenneth Brooks: All right. Thank you, Mark. And good morning, everyone.

John Kenneth Brooks: So, with a full year as a combined company under our belts, I'm extremely pleased with the progress we've made so far and all the opportunities I still see ahead of us. We've built on our momentum from Q4, and despite some of the early weather challenges we had to start the year, we have started the year strong, and we are gaining momentum. Now, looking at the results on a combined basis, we delivered freight revenue growth of 1% on 1% RTM growth.

John Kenneth Brooks: Carloads on the quarter were down 3% and I fully expect carloads to continued to lag our Tms.

John Kenneth Brooks: This is a result of our network unlocking longer length of haul as shippers take advantage of our seamless three country franchise, delivering RPM growth and average length of haul on the quarter up 8% versus last year.

John Kenneth Brooks: In addition, we've also seen lower margin short haul intermodal business running between Mexico, and the border shift off our network opening up further capacity for growth and our strategic long haul lanes.

John Kenneth Brooks: This is slightly ahead of the flat to slightly down outlook for RTMs that we provided to the market in January. Cents per RTM were flat year-over-year with strong pricing offset by a 3% fuel headwind along with negative mix.

John Kenneth Brooks: Now taking a closer look at our first quarter revenue performance I will speak to the FX adjusted results on a comparison versus CP Casey had the combination occurred in 2023.

John Kenneth Brooks: Carloads for the quarter were down 3%, and I fully expect carloads to continue to lag RTMs. This is a result of our network unlocking longer lengths of haul as shippers take advantage of our seamless three-country franchise, delivering RTM growth in average length of haul for the quarter up 8% versus last year. In addition, we've also seen lower-margin, short-haul intermodal business running between Mexico and the border shift off our network, opening up further capacity for growth in our strategic long-haul lanes.

John Kenneth Brooks: Starting with bulk grain revenues were up 2% on 1% RPM growth.

John Kenneth Brooks: U S grain volumes grew 19% over prior year, our franchises benefiting from strong export corn shipments to the PNW and Alberta, along with more shipments of wheat, and soybeans to Mexico, which is a new area of growth for <unk>.

John Kenneth Brooks: Radian grain volumes were down 15% year over year volumes decreased as a result of a weaker 2023 harvest in our draw territory. However, they still came in better than anticipated is on farm supplies remained stronger given softer shipping in the fall peak.

John Kenneth Brooks: Now taking a closer look at our first quarter revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2023. Starting with bulk, grain revenues were up 2% on 1% RTM growth. U.S. grain volumes grew 19% over the prior year, our franchises benefiting from strong export corn shipments to the PMW and Alberta, along with more shipments of wheat and soybeans to Mexico, which is a new area of growth for CPKC. Canadian grain volumes were down 15% year-over-year.

John Kenneth Brooks: So while we may see better than expected volumes. This summer we still expect overall year over year compares in Canadian grain to be a headwind until we get to the new crop.

John Kenneth Brooks: I also should note that the strong performance in our U S grain franchise, essentially offset the Canadian grain headwind and this is a great example of how this combined network is adding resiliency within our book of business.

John Kenneth Brooks: Moving on to potash revenues were up 4% on a 2% volume growth. Despite a very slow start in January rebounded quickly and ended the quarter with growth driven by solid export and domestic shipments.

John Kenneth Brooks: Volumes decreased as a result of a weaker 2023 harvest in our draw territory. However, they still came in better than anticipated as on-farm supplies remained stronger, giving softer shipping during the fall peak. So while we may see better-than-expected volumes this summer, we still expect overall year-over-year comparisons in Canadian grain to be a headwind until we get to the new crop. I also should note that the strong performance in our U.S. grain franchise essentially offsets the Canadian grain headwind, and this is a great example of how this combined network is adding resiliency within our book of business.

John Kenneth Brooks: We are well positioned for solid potash growth in 2024 as demand remained steady and we lap the comps from Canpotex outage at our Portland terminal that occurred from April to December of last year.

John Kenneth Brooks: Coal revenue and volume declined 7% colder.

John Kenneth Brooks: Cold weather in January negatively impacted <unk> production and exports, while lower natural gas prices weakened demand for U S. Coal, we expect a good run with Tac as we look to Clawback tonnage that didn't move in Q1.

John Kenneth Brooks: Now moving on to merchandise energy chemicals plastics revenue and volume grew 2%.

John Kenneth Brooks: Moving on to Potash, revenues were up 4% on 2% volume growth. Despite a very slow start in January, we rebounded quickly and ended the quarter with growth driven by solid export and domestic shipment. We are well positioned for solid potash growth in 2024 as demand remains steady and we lap the comps from Campitex's outage at their Portland terminal that occurred from April to December of last year. Coal Revenue in Volume Declined 7% Cold weather in January negatively impacted coal production and exports, while lower natural gas prices weakened demand for U.S. coal.

Volume growth in the quarter was driven by higher fuel oil tru shipments in plastics.

John Kenneth Brooks: This strength was partially offset by multiple customer outages, we faced resulting from the cold weather.

John Kenneth Brooks: Looking at this portfolio. We are excited about the synergies that we're capturing particularly with new wins and plastics renewable diesel and refined fuels as we connect the markets between Alberta, the Gulf Coast and Mexico.

John Kenneth Brooks: Looking forward with customer production now stabilized at our facilities on our network and the ongoing ramp up of synergy gains we are set up for a solid year in ECP.

John Kenneth Brooks: Forest products revenues were down 4% on flat volumes forest products volumes were flat despite the broader economic headwinds, we all face and softening in the paper space, We had a record quarter in lumber driven by strong synergy convergence with new line haul solutions connecting Canadian producer.

John Kenneth Brooks: We expect a good run with tech as we look to claw back tonnage that didn't move in Q1. And moving on to merchandise, energy, chemicals, and plastics, revenue and volume grew 2%. Volume growth in the quarter was driven by higher fuel oil, ERU shipments, and plastics. This strength is partially offset by multiple customer outages we faced resulting from the cold weather.

John Kenneth Brooks: With the strong demand in the Texas market.

John Kenneth Brooks: The metals minerals and consumer products revenue was down 1% on a 5% volume decline.

Volumes in the quarter were largely impacted by weakness in frac sand to the Bakken and Permian Basin. This was partially offset by ongoing strong demand from our steel production.

John Kenneth Brooks: Looking at this portfolio, we are excited about the synergies that we are capturing, particularly with new wind and plastics, renewable diesel, and refined fuels as we connect the markets between Alberta, the Gulf Coast, and Mexico. Looking forward, with customer production now stabilized at our facilities on our network and the ongoing ramp-up of synergy gains, we are set up for a solid year in ECP. Forest Products revenues were down 4% on flat volumes.

John Kenneth Brooks: Automotive produced another record quarter with volumes up 8% and revenues up 10%. Despite this record performance I was not pleased results came in well below our expectations.

John Kenneth Brooks: Numerous production holds for quality and parts availability.

John Kenneth Brooks: With those issues largely resolved, we expect to see growth in automotive continued to accelerate through Q3 and the rest of the year.

John Kenneth Brooks: Forest Products volumes are flat, despite the broader economic headwinds we all face and softening in the paper space. We had a record quarter in lumber driven by strong synergy conversions with new line haul solutions connecting Canadian producers with strong demand in the Texas market. Metals, minerals, and consumer products revenue was down 1% on a 5% volume decline.

John Kenneth Brooks: I'm also very excited to have our new Dallas auto compound opening in June located at our Wylie terminal.

John Kenneth Brooks: This compound is part of our playbook that unlocks an entirely new supply chain model for the Oems, giving them the service reliability and capacity certainty like they've never seen before.

I'm proud to report that this new compound is largely sold out.

John Kenneth Brooks: And we will handle many of the top selling vehicles within the Texas market, including the vehicles built by our anchor tenant General Motors.

John Kenneth Brooks: Volumes in the corridor were largely impacted by weakness in frac sand supply to the Bakken and Permian basins, although this was partially offset by ongoing strong demand from our steel production. Automotive produced another record quarter with volumes up 8% and revenues up 10%. Despite this record performance, I was not pleased.

John Kenneth Brooks: On the intermodal side.

John Kenneth Brooks: Revenue was down 1% on 7% volume growth starting with the international intermodal volumes were up 14% on strong growth through both the ports of Vancouver, and Lazar Roe.

John Kenneth Brooks: The results came in well below our expectations due to numerous production holds for quality and parts availability. With those issues largely resolved, we expect to see growth in automotives continue to accelerate through Q3 and the rest of the year. I'm also very excited about our new Dallas auto compound opening in June, located at our Wiley Terminal. This compound is part of our playbook that unlocks an entirely new supply chain model for the OEMs, giving them service, reliability, and capacity certainty like they've never seen before.

John Kenneth Brooks: Strained through Vancouver was driven by a return of volumes. After the work stoppage last summer and some impacts from the red fee and potential looming East coast Labor disruptions.

John Kenneth Brooks: Although the stronger than forecasted volumes did drive some temporary temporary congestion at the port we successfully worked with our customers and the port to manage this excess volume.

John Kenneth Brooks: We are also encouraged by the ongoing trends at the Port of Lazar Oak hardness through February <unk> through this terminal grew by over 40% year over year.

John Kenneth Brooks: In domestic intermodal volumes were flat this quarter.

John Kenneth Brooks: I'm proud to report that this new compound is largely sold out and will handle many of the top-selling vehicles within the Texas market, including the vehicles built by our anchor tenant, General Motors. On the intermodal side, revenue was down 1% on 7% volume growth. Starting with international intermodal, volumes were up 14% on strong growth through both the ports of Vancouver and Lazaro. Strain through Vancouver was driven by a return of volumes after the work stoppage last summer and some impacts from the Red Sea and potential looming East Coast labor disruptions.

John Kenneth Brooks: Our Mexico Midwest Express Cross border service continues to perform extremely well with truck like service across a safe reliable border and Laredo.

John Kenneth Brooks: Growth on this flagship service has helped to offset the shift in the short haul business and since February we have seen weekly volumes grow by over 24%.

John Kenneth Brooks: We expect our density on this product to build through the year as we grow our volumes of reefer traffic between the U S and Mexico.

John Kenneth Brooks: And pending STB approval, we startup operations with the FX and Schneider from Texas, and Mexico into the Southeast U S.

John Kenneth Brooks: Although the stronger-than-forecasted volumes did drive some temporary congestion at the port, we successfully worked with our customers and the port to manage this excess volume. We are also encouraged by the ongoing trends at the Port of Lazaro Cardenas. Through February, keys through this terminal grew by over 40% year over year. In domestic intermodal, volumes are flat this quarter.

Speaker Change: So in closing Q.

Speaker Change: One volumes came in better than expected and we're off to a good start in Q2.

Speaker Change: Looking at the past seven months, we've seen year over year volume growth in each month.

Speaker Change: Excluding January.

John Kenneth Brooks: Our Mexico Midwest Express cross-border service continues to perform extremely well with truck-like service across a safe, reliable border in Laredo. Growth on this flagship service has helped offset the shift in the short-haul business, and since February, we have seen weekly volumes grow by over 24%. We expect our density on this product to build through the year as we grow our volumes of reefer traffic between the U.S. and Mexico, and, pending STB approval, we start up operations with CSX and Schneider from Texas and Mexico into the southeast U.S.

While we still have a headwind from Canadian grain and we continue to be very cautious on the macro environment. Our line of sight the synergies self help opportunities and a disciplined pricing approach remains a unique opportunity for CP Casey.

Speaker Change: Im pleased what we accomplish for our first year as a combined company and I look forward to sharing continued progress with you as we go forward with that I'll pass it to 90, alright, Thanks, John and good morning.

90: So looking at looking at the numbers our reported operating ratio was 67, 4% and the core adjusted combined operating ratio came in at 64%.

The earnings per share was <unk> 83, and core adjusted combined earnings per share was <unk> 93.

John Kenneth Brooks: So in closing, Q1 volumes came in better than expected, and we're off to a good start in Q2. Looking at the past seven months, we've seen year-over-year volume growth in each month, except January. Well, we still have a headwind from Canadian Grain, and we continue to be very cautious in the macro environment. However, our line of sight to synergies, self-help opportunities, and a disciplined pricing approach remains a unique opportunity for CPKC. I'm pleased with what we have accomplished for our first year as a combined company, and I look forward to sharing continued progress with you as we go forward. With that, I'll pass this to Nadeem.

90: Up 3% year over year.

90: As a reminder, these core adjusted earnings exclude the noncash impact of purchase accounting for the <unk> merger primarily related to DNA.

90: Along with interest expense and acquisition related costs, which continue to gradually decline.

90: Similar similar to what we shared last quarter, our combined operating expenses illustrate the effects of the acquisition for the first quarter is that the acquisition closed on January one 2022.

90: I will speak to FX adjusted combined operating results in these prepared remarks.

90: Now taking a closer look at our income statement reported operating expenses provided on slide 13 in combined operating expenses on slide 14, where I will focus my comments.

Nadeem S. Velani: and Canadian. All right. Thanks, John, and good morning. So looking at the numbers, our reported operating ratio was 67.4%, and the core adjusted combined operating ratio came in at 64%. Earnings per share was $0.83, and core adjusted combined earnings per share was $0.93, up 3% year-over-year. As a reminder, these core adjusted earnings exclude the non-cash impact of purchase accounting for the KCS merger, primarily related to DNA, along with interest expense and acquisition-related costs, which continue to gradually decline.

90: Excluding adjustments comp and benefits expense was $676 million.

The increase was driven by wage and benefit inflation, along with a $23 million headwind from stock based compensation driven by the increase in share price over the course of the quarter.

90: Stock comp amounted to a 70 basis point or one cent headwind.

90: We also saw higher current service costs from our DB pension plan, a $4 million due to a lower discount rate at year end 2023.

Looking to the rest of 2024, we continue to expect average head count to be roughly flat on a year over year basis.

Nadeem S. Velani: Similar to what we shared last quarter, our combined operating expenses illustrate the effects of the acquisition for the first quarter since the acquisition closed on January 1st, 2022. I will speak to FX-adjusted combined operating results in these prepared remarks.

Fuel expense was $458 million down 5%. The decline was primarily driven by a $28 million or 6% decline in fuel price.

90: Overall net fuel price was 61 million dollar drag to operating income in the quarter or about 80 basis point impact to the LR <unk>.

Nadeem S. Velani: Now taking a closer look at our income statement, reported operating expenses provided on slide 13 and combined operating expenses on slide 14, where I will focus my comments. Including adjustments, comp, and benefits, total expense was $676 million. The increase was driven by wage and benefit inflation, along with a $23 million headwind from stock-based compensation, driven by the increase in share price over the course of the quarter. Stock Comp amounted to a 70 basis points, or one set headwind on the lead.

90: This amounted to a <unk> <unk> headwind as well to core adjusted combined earnings on the quarter.

90: Materials expense was down 5% the decline in the quarter was driven primarily by timing of track and locomotive maintenance as activity schedules across the legacy CP and legacy Caseous network are aligned.

90: Equipment rents were up $12 million or 17%. The increase was due to a 2023 receivable along with higher intermodal car hire.

90: PKC lanes shift to longer length of haul.

90: This increase was partially offset by higher efficiency from improved cycle times and increased network velocity.

90: Depreciation expense was up 6%, resulting from a higher asset base.

Nadeem S. Velani: We also saw higher current service costs from our DB pension plan of $4 million due to a lower discount rate at year-end 2023. Looking to the rest of 2024, we continue to expect average headcount to be roughly flat on a year-over-year basis.

90: Purchased services and other was up 2% year over year higher terminal service costs, an increase in bad debt expense and cost inflation, partially offset by cost synergy savings from our combined insurance premiums and the recognition of a one time non competition waiver fee payment of $34 million Canadian.

Nadeem S. Velani: Fuel expense was $458 million, down 5%. The decline was primarily driven by a $28 million, or 6%, decline in fuel price. Overall, net fuel price was a $61 million drag to operating income in the quarter, or about an 80 basis point impact on the OR. This amounted to a 5 cent headwind as well as to core adjusted combined earnings for the quarter. Materials expense was down 5%.

90: Moving below the line on slide 15, other income was $2 million.

90: Reflecting the impact of.

90: Settled foreign currency hedges and higher equity earnings from increased container volumes through the Panama Canal railway.

90: Other components of net periodic benefit recovery was $88 million in Q1.

90: Selecting the.

90: Lower discount rate compared to 2023, and partially offsetting the headwind to comp and benefits.

90: Net interest expense was $206 million or $201 million on an adjusted basis. The decline was driven by reduced debt balance.

90: Income tax expense was $259 million or $289 million on our core adjusted combined basis.

Nadeem S. Velani: The decline in the quarter is driven primarily by timing of track and locomotive maintenance as activity schedules across the Legacy CP and Legacy KCS networks are aligned. However, equipment rents were up $12 million for 17%. The increase was due to a 2023 receivable, along with higher intermodal car hire as CPKC lanes shift to longer lengths of haul. This increase was partially offset by higher efficiency from improved cycle times and increased network velocity. Depreciation expense was up 6%, resulting from a higher asset base.

90: We'll expect to see PKC core adjusted effective tax rate to be approximately 25% for the year.

90: Turning to slide 16.

90: We are generating strong cash flow with cash provided by operating activities of.

90: $1 billion 15 billion.

90: In Q1.

90: Capital investments in safety and growth remain our priority and this quarter, we reinvested $527 million in line with our plan to invest approximately $2 75 billion in 2024.

90: As Mark discussed, we're making strategic investments in safety and capacity positioning our network to continue efficiently absorbing the growth that this merger is enabled.

Nadeem S. Velani: Purchase services and other was up 2% year-over-year. Higher terminal service costs, an increase in bad debt expense, and cost inflation are partially offset by cost-energy savings from the combined insurance premiums and the recognition of a one-time non-competition waiver fee payment of CAD$34 million. Moving below the line on slide 15, other income was $2 million, reflecting the impact of Settled Foreign Currency Hedges and Higher Equity Earnings from Increased Container Volumes through the Panama Canal Railway.

90: We generated $555 million and adjusted combined free cash flow in the quarter and continue to repay debt.

90: We'll expect to reach target leverage in late 2024, or early 2025 at which point, we will evaluate shareholder returns with our board.

90: I'm also very pleased to report that during the quarter Moodys upgraded <unk> credit rating outlook from stable to positive.

90: And review of the quarter. Our teams came in ahead of ahead of expectations that we communicated on our fourth quarter call.

Nadeem S. Velani: Other Components of Net Periodic Benefit Recovery was $88 million, collecting the lower discount rate compared to 2023 and partially offsetting the headwind to Compton-Bethel. Net interest expense was $206 million or $201 million on an adjusted basis. The decline was driven by a reduced debt balance.

90: <unk> weather challenges earlier in the year.

90: Our operations were resilient and we made progress on key growth investments across our network.

90: We're also seeing the benefit of a lower inflation environment and disciplined pricing on our cost structure.

90: It's us up well for margin improvement as we move through the rest of the year.

90: I am pleased with the start to the year and we expect to continue gaining momentum from here with that let me pass it over to Keith.

Keith E. Creel: Sky, Let's open it up operator for questions.

Keith E. Creel: Thank you if you'd like to ask a question simply press Star then the number one on your telephone keypad.

Nadeem S. Velani: Income tax expense was $259 million or $289 million on a core adjusted combined basis. We still expect the CPKC core adjusted effective tax rate to be approximately 25% for the year. Turning to slide 16.

Speaker Change: If you'd like to withdraw your question Press Star two.

Speaker Change: As previously highlighted please limit yourself to one question.

Speaker Change: Your first question comes from Ravi Shanker with Morgan Stanley.

Nadeem S. Velani: We are generating strong cash flow with cash provided by operating activities of $1,015,000,000 in Q1. Capital investments in safety and growth remain our priority, and this quarter, we reinvested $527 million in line with our plan to invest approximately $2.75 billion in 2024. As Mark discussed, we are making strategic investments in safety and capacity, positioning our network to continue efficiently absorbing the growth that this merger has enabled. We generated $555 million in adjusted combined pre-cash flow in the quarter and continue to repay debt.

Speaker Change: Ravi.

Speaker Change: Alright, operator go to the next.

Ravi Shanker: Appreciate it.

Thank you Ian.

Yes.

Ravi Shanker: Go to the next question operator please.

Ravi Shanker: Yes.

Jonathan B. Chappell: Mr. Chappell your line is open.

Chappell: Thank you I guess that's me.

Chappell: Jon Chapelle from Evercore, Mark or John we've seen a real acceleration of Chinese imports into Mexico of late.

Jonathan B. Chappell: The reasons, I guess, very and we won't get into that but as it relates to what it means to Lazar Roe.

Jonathan B. Chappell: What it means to the new services that you've created are you seeing any impact.

Nadeem S. Velani: We still expect to reach target leverage in late 2024 or early 2025, at which point we will evaluate shareholder returns with our board. I'm also very pleased to report that during the quarter, Moody's upgraded CPKC's credit rating outlook from stable to positive. In review of the quarter, our TAMs came in ahead of expectation, as we communicated on the fourth quarter call, despite weather challenges earlier in the year. Our operations were resilient, and we made progress on key growth investments across our network.

Jonathan B. Chappell: From those yet.

Jonathan B. Chappell: It will be mostly on truck and I guess is that a real big opportunity for you.

Jonathan B. Chappell: Continue to see that new trade Lane open up.

Speaker Change: Thanks, John.

John Kenneth Brooks: John Yes.

John Kenneth Brooks: Yeah. So.

John Kenneth Brooks: We saw steady growth platform allows ROE really starting the back half of last year and that trend has continued I think I said were up 40% that was through February but that's continued here in March and April.

John Kenneth Brooks: It is a pretty good mix John.

John Kenneth Brooks: Truck and rail and principally that.

Nadeem S. Velani: We are also seeing the benefit of a lower inflation environment and disciplined pricing on our cost structure. This sets us up well for margin improvement as we move through the rest of the year. I'm pleased with the start to the year, and we expect to continue gaining momentum from here.

John Kenneth Brooks: That volume is well at least primarily right now more intra Mexico been cross border.

John Kenneth Brooks: But I can tell you we do and we have a continued improving product of Elisa Roe.

Keith E. Creel: Thanks, guys. Let's open it up, operator, for questions.

Speaker Change: I appreciate all the efforts of.

Operator: Thank you. If you'd like to ask a question, simply press star and the number one on your telephone keypad. If you would like to withdraw your question, press star 2. As previously highlighted, please limit yourself to one question. Your first question comes from Ravi Shankar on behalf of Morgan Stanley.

Speaker Change: The state of <unk> and the efforts that support between Mark and the team down there to provide a good safe product up into Mexico. So I do believe you'll continue to see sort of that volume build on itself and then we'll get into the exciting part of this chapter is as.

Operator: Operator, you should go to the next one. [inaudible] Hi, can you hear me? Yes.

As we begin to see that density build into our cross border business.

Operator: Go to the next question, operator, please.

Speaker Change: Up into that Texas, and golf market, which again I believe.

Jonathan B. Chappell: Mr. Chappell, your line is open, the acceleration of Chinese imports into Mexico of late. The reasons, I guess, vary, and we won't get into that. But as it relates to what it means for Lazaro, what it means for the new services that you've created, are you seeing any impact from those yet?

Speaker Change: We see it.

Speaker Change: A good opportunity there as we move into the second half of the year and into 2025 to grow that volume.

Speaker Change: John I would just add I mean, we stay pretty close to each other.

Speaker Change: And we've got capacity, we've got room to move locomotives and people in place. So we can move whatever business would be <unk>.

John Kenneth Brooks: Thanks, John. This is John.

Speaker Change: Certainly communication with each other.

John Kenneth Brooks: Yeah, so, you know, we saw a steady growth platform at Lazaro really starting the back half of last year. And that trend has continued. I think I said we were up 40% through February, but that's continued here in March and April.

John Kenneth Brooks: Thanks Mark.

John Kenneth Brooks: Your next question comes from Brian <unk> with Jpmorgan.

Brian: Hey, good morning, Thanks for taking the question.

Keith I just wanted to get your thoughts on the latest with the <unk> Union negotiation. There were some comments made by CN last night, just wanted to get your perspective on it because at least from our standpoint, it sounds like there's quite a few moving parts in terms of.

John Kenneth Brooks: It is a pretty good mix, John, of truck and rail. Principally, that volume is, well, at least primarily right now, more intra-Mexico than cross-border. But I can tell you that we do, and we have a continued improving product in Lazaro. I appreciate all the efforts of the state of Michoacan and the efforts at the port between Mark and the team down there to provide a good, safe. I would just add that we stay pretty close to each other, me and John, and we've got capacity; we've got room to move locomotives and people in place, so we can move whatever.

Brian: Changing potentially to a or at least offering an hourly agreements and the unions.

Speaker Change: Obviously, our I think pushing back on that at least from time being so wanted to get your thoughts on that and then John If you could just clarify what you meant about Texas.

John Kenneth Brooks: Texas, Mexico into the southeast pending STB approval is that related to the <unk> and through the speedway. Thank you.

Speaker Change: So I'll start with that and Thats exactly what it is mine.

Mark A. Redd: Attila Lazzaro, with certainly communication with each other. Thanks, Mark.

Speaker Change: Yes.

Speaker Change: As far as the application of the STB.

Speaker Change: We expect totally of the anticipated favorable ruling based on the.

Brian Ossenbeck: Your next question comes from Brian Ossenbeck with JPMorgan.

Speaker Change: The facts of the competition. It represents it creates hopefully and if there are any feature I don't know if that happened.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. Keith, I just want to get your thoughts on the latest with the TCRC union negotiation. There were some comments made by Cian last night.

Speaker Change: Note that the following months, but when it does come in the decision comes we are prepared and ready.

Speaker Change: Within a month's time of the notice to take over operation.

Speaker Change: Of that piece of railway and to start the work suggests the partnership with <unk> to create.

Keith E. Creel: Just want to get your perspective on it, because, at least from our standpoint, it sounds like there's quite a few moving parts in terms of changing, you know, potentially to, or at least offering an hourly agreement. And the unions obviously are, I think, pushing back on that, at least for the time being. So wanted to get your thoughts on that. And then, John, if you could just clarify what you meant about the Texas, Mexico, and the Southeast pending STB approvals that are related to the MB&R and through the Speedway. Thank you.

Speaker Change: New class one.

Speaker Change: Alternative to the Speedway did it yesterday to complement the service that we provide VNS over the speedway today, so very very excited about the future of that.

Speaker Change: <unk> maybe.

Speaker Change: I'll say tempered excitement our expectations Im a realist I'm an optimist.

Speaker Change: I can tell you know that.

Speaker Change: We've been negotiating with the <unk> four months, we were forced to file for conciliation with the TCR see this week, we were with them not long ago.

Keith E. Creel: I'll start with that, and that's exactly what it is, Juan, and, you know, as far as the application of the SDB. We expect, hopefully, we anticipate a favorable ruling based on... The facts and the competition it represents and creates, hopefully, in the very near future. I don't know if it'll happen next month or the following month, but when it does come, when the decision comes, we are prepared and ready within a month's time of the notice to take over operation of that piece of railway and start the work and just the partnership with CSX to create a new Class I, Alternative to the Speedway that exists today So, I am very, very excited about the future of that.

Speaker Change: The way I see it the positions have not changed a lot and we have two options on the table.

Speaker Change: What I call a status quo deal with only one but I would call a PE realm.

Speaker Change: Relative to change that'll work rule change tied to held away from.

Speaker Change: Home terminal pay that's the only concession that we're asking for in exchange for fair and equitable wage increases, which further employees and other unions have realized the benefit of.

Speaker Change: The second is a progressive hourly deal and I can tell you that that progressive <unk> deal and my assessment addresses what.

Speaker Change: What our employees want and need they want a better quality of life. They want higher wages, which certainly is understandable those expectations and in turn our ability to be able to provide that is found in the terms and conditions of that hourly agreement the customer wins, the employee wins employee retention wins truly.

Keith E. Creel: The TCRC may be a, I'll say tempered excitement or expectations. I'm a realist. I'm an optimist.

Speaker Change: As a win win scenario, but it takes change it takes leaders that are willing to see the wisdom minute the benefit in it and at this point that has not happened now again I'm going to be optimistic, but realistic so where does that leave us that leads us to a place.

Keith E. Creel: I can tell you now that we've been negotiating with the TCRC for months. We were forced to file for conciliation. We were with the TCRC this week. We were with them not long ago.

Speaker Change: The third weekend of May in fact kind of the drop dead time is going to be made of the 19th a triple O one and at that point. If we don't have an agreement with John Im optimistic and hopeful we'll be able to reach one but if we dealt.

Keith E. Creel: The way I see it, the positions have not changed a lot. We have two options on the table. We have what I call a status quo deal with only one, what I would call a pay relative change, not a work rule change, tied to held away from home terminal pay. That's the only concession that we're asking for in exchange for fair and equitable wage increases, which other employees and other unions have realized the benefit of. The second is a progressive hourly deal.

Speaker Change: Which is what we're obviously hope for the hope for the best but you have to make sure you're planning for the worst as well if that were to occur the strike notice or a lockout notice in within.

Speaker Change: Within 72 hours, so may 22nd a triple O. One would be the earliest that the strike could actually come into existence and the unique thing about this as well as.

Speaker Change: <unk> is facing the same deadline that we're facing uniquely to our network.

Keith E. Creel: I can tell you that that progressive hourly deal, in my assessment, addresses what our employees want and need. They want a better quality of life. They want higher wages, which is certainly understandable. Those expectations. And, in turn, our ability to be able to provide that is found in the terms and conditions of that hourly agreement.

Speaker Change: Not only would it be our running trades employees that operate.

Speaker Change: The trains move across the network. It's also our dispatchers to dispatch not only the freight trains, but also dispatched the passenger trains in Vancouver, they get to get folks in and Vancouver from from their homes too.

Speaker Change: The Sydney downtown core to go to work same situation in Toronto with Metro lengths, we dispatch those trains on our rail line same situations in Montreal with those passengers. So this is truly something that I hope can be avoided it certainly not going to.

Keith E. Creel: The customer wins, the employee wins, employee retention wins. It truly is a win-win scenario, but it takes change. It takes leaders that are willing to see the wisdom in it, the benefit in it. And at this point, that has not happened. And again, I'm going to be optimistic, but realistic. So where does that lead us if that leads us to a place?

Speaker Change: Come at a good time for the country of Canada, but as I've told our customers that have asked has told the government and I told our employees, if we're going to have a strike.

Speaker Change: This uncertainty of that in and of itself is damaging.

Speaker Change: For it to be prolonged for it to occur if it must occur later in the year. When we have a harvest coming in wind in advance for our service and the needs of the country have never been greater that is the absolute worst time first occur. So it's unfortunate as it is I believe from a very realistic view given my experience having been at.

Keith E. Creel: A strike could actually come into existence and the unique thing about this as well as you know CN is facing the same deadline that we're facing uniquely to our network. Not only would it be our running traits employers that operate, the city downtown core to go to work same situation in Toronto with Metrolinx we dispatch those trains on our rail line same situation in Montreal with those passengers so this is truly something that I hope can be avoided it's certainly not going to come at a good time for the country of Canada but as I've told our customers and as I've told the government and I've told our employees if we're going to have a strike the uncertainty of that in and of itself is damaging for it to be prolonged for it to occur if it must occur later in the year when we have a harvest coming in when the demands for our service and the needs of the country have never been greater that is the absolute worst time for it to occur so as unfortunate as it is I believe from a very realistic view given my experience having been at that negotiating table many many times and I'll be at it again this time that's how serious this is I'm hopeful and I hope that we can avoid it but this railroad will be prepared in the in the event that we can't.

Speaker Change: That negotiating table, many many times and I'll be at it again. This time, that's how serious this is I'm hopeful and I hope that we can avoid it but this railroad will be prepared any.

Speaker Change: In the event that we can't because we will not do a bad deal we've got to balance the needs of our shareholders the balance of our customers and the balance of our fellow employees not just the <unk> that we have negotiated with and came to negotiated agreements. Historically, just unfortunately, we havent been able to get there with with this group and <unk>.

I'm, hoping with strong leadership that can change I'll remain optimistic, but it just hasn't happened yet.

Speaker Change: Thanks, very much Keith.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Walter <unk> with RBC capital markets.

Walter: Okay. Thanks, very much good morning, everyone I wanted to go back to your volume guidance.

Walter: When I look at.

Walter: What's happening in Vancouver, obviously, a surge of containers coming into that port.

Keith E. Creel: Because we will not do a bad deal. We've got to balance the needs of our shareholders, the balance of our customers, and the balance of our fellow employees, not just the TCRC that we have negotiated with and come to negotiated agreements with historically. Just unfortunately, we haven't been able to get there with this group. And again, I'm hoping with strong leadership that can change. I'll remain optimistic, but it just hasn

Walter: Poised to benefit significantly from that John.

Walter: John You mentioned, Mexico, Lazaro Cardenas up 40%, that's not a small number.

John Kenneth Brooks: It's catching stride macro trends.

John Kenneth Brooks: Your prepared remarks, you indicated Q1 came in better than you expected and I think many would say perhaps in from a macro perspective, and a little bit better outlook here.

Walter Spracklin: Your next question comes from Walter Spracklin with RBC Capital Markets.

John Kenneth Brooks: Pro going into May than we were in January. So just curious when you look at your low single digit volume guidance and so many kind of inflect the positive macro but also more importantly company specific opportunity.

Walter Spracklin: Yeah, thanks very much. Good morning, everyone. I want to go back to your volume guidance.

Walter Spracklin: When I look at what's happening in Vancouver,

Walter Spracklin: University of California, California Institute of Technology

John Kenneth Brooks: Curious as to where you frame that low single digit is it just kind of just being overly conservative.

Walter Spracklin: and so many kind of inflecting positive macros.

Keith E. Creel: [inaudible] You know, Walter, you've made some very good observations, and I think I would frame it up as being responsibly conservative.

John Kenneth Brooks: Or do you see upside to that to that guidance here for 2024.

John Kenneth Brooks: Walter you've made some very good observations and.

Keith E. Creel: You know, there are some uncertainties out there. Certainly, we're in a good place. The network's running well. The demand is there. The synergies are coming. New markets are being developed. We have a very unique story and a very unique opportunity, but we also have a responsibility to look ahead. We've got a potential wind strike. I don't yet know what the macro is going to do in the second half.

John Kenneth Brooks: I think I'd frame it up as being <unk>.

John Kenneth Brooks: Sponsored really conservative.

John Kenneth Brooks: There are some uncertainties out there certainly we're in a good place.

John Kenneth Brooks: The network's running well the demand is there the synergies are coming the new markets are being developed and we have a very unique story in a very unique opportunity.

John Kenneth Brooks: But we also have a responsibility to look.

John Kenneth Brooks: Ahead, we've got a potential winning strike.

John Kenneth Brooks: Don't yet know what the macro is going to do the second half we got some assumptions in that which are conservative assumptions. So if it does better than what we assume and ensure there is some upside if the strike.

Keith E. Creel: We've got some assumptions in that, which are conservative assumptions. So, you know, if it does better than what we assume, then sure, there's some upside. If the strike isn't as long as we might think it'd be, or if we don't have a strike at all, then sure, we've got some upside. But will we have a normal grain harvest? Is it a bumper crop, or do we have, again, a situation where we're facing potential drought? Those are the levers that we're really looking at.

John Kenneth Brooks: Is it as long as what we might think of there. If we don't have a strike at all to ensure we've got some upside do.

John Kenneth Brooks: So we have a <unk>.

Normal grain harvest is it a bumper crop or do we have again, a situation where we face the potential drought. Those are the levers that we're really looking at and once those become clear then I'd be in a position of responsibly tell you, yes, we have upside and I guess I'll disclose saying we're in a good place.

Keith E. Creel: And once those become clear, then I'd be in a position to responsibly tell you, yes, we have upside. And I guess I'll just close by saying we're in a good place. We've worked hard to get to this place. This team is prepared for any of those outcomes we've talked about, and in the end, come this summer, come the end of the second quarter, I think we'll be in a better position to tell you, yes, Walter, what you're seeing, the potential of that is true.

John Kenneth Brooks: We've worked hard to get to this place. This team is prepared for any of those outcomes we've talked about.

John Kenneth Brooks: And in the end.

John Kenneth Brooks: Some this summer come the end of the second quarter I think we'll be in a better position to tell you, yes, Walter what you are seeing the potential of that is true.

Speaker Change: It's exciting.

Keith E. Creel: It's exciting. And until then, we're going to stay responsibly conservative and make sure we do our jobs and prepare for these challenges we have ahead of us and come out in a very, very strong position on the other side.

Speaker Change: Until then we're going to stay responsibly conservative and make sure we do our jobs and prepare for these challenges. We have ahead of us and come out in a very very strong position on the other side.

Speaker Change: Responsibly Conservatives good appreciate it thank you.

Walter Spracklin: Responsibly Conservative is good. I appreciate it. Thank you.

Amun Faddish: Your next question comes from Faddish, Amun with BMO capital markets.

Fadi Chamoun: Your next question comes from Fadi Chamoun with BMO Capital Markets.

Fadi Chamoun: Yes, good morning. You know, maybe just one follow-up question on the volume. In the second quarter, I mean, we're starting off strong. I'm thinking grain potentially could wind down a little bit as we move into the third quarter. Is there a way for you to kind of give us some gauge on what the second quarter kind of, you know, the right framework for Q2 volume? And, and really, my main question on the pricing side, I mean, the pricing environment is quite good, maybe unless you're competing with stock in some markets.

Amun Faddish: Yes, good morning.

Amun Faddish: Maybe just one follow up question on the volume in the second quarter I mean, we are starting off strong.

Amun Faddish: I'm thinking grain potentially could wind down a little bit as we move into the quarter is there a way for you to kind of give us some gauge on what second quarter.

Amun Faddish: Sure.

Speaker Change: That's the right framework.

Speaker Change: Q2 volume.

Speaker Change: Really my main question on the pricing side.

Speaker Change: I mean pricing environment is quite good maybe unless you are competing with substance on market, but.

Fadi Chamoun: But what are you thinking now, with a year into this merger, about the service-related pricing opportunity for CP? And is this something that will take time to kind of realize? Or are there triggers in terms of contract changes, renewals that you can kind of use to kind of, you know, drive a price improvement on the basis of the service level that you're in?

Speaker Change: What do you thinking now a year into this merger a.

Speaker Change: Both the service and related pricing opportunity for CP and is this something that will take time kind of reliable autograph signaled in terms of contract changing renewals that you can.

Speaker Change: Kind of used to.

Speaker Change: Got it.

Drive.

Speaker Change: Price improvement.

Speaker Change: On the basis of the service level.

Keith E. Creel: Let me, Fadi, I'm going to let John get into the core of the pricing, but let me tell you conceptually when it comes to price in this company. We're selling a valued service. It's not a commodity.

Speaker Change: Let me <unk>.

Speaker Change: <unk> I'm going to let John get into the color of the pricing, but let me tell you conceptually when it comes to price at this company.

Speaker Change: We're selling a valued service, it's not a commodity there's value in it as a value proposition for the customer.

Keith E. Creel: There's value in it. There is a value proposition for the customer. The level of service, the capacity we have on our railroad, the way we run the railroad, it's worth something in markets because it allows reliability for our customers to win in their marketplace. So that's always going to be our story. It's a value proposition, and as long as we do our job well, we never have to apologize for providing a very unique and valuable service.

The level of service the capacity, we have on our railroad the way we run the railroad it's worth something in markets because it allows the reliability for our customers to win in their marketplace. So that's always going to be our story, it's a value proposition and as long as we do our job well, we never had to apologise, providing a very unique and valuable service on the volume side.

Keith E. Creel: On the volume side, we're starting strong. This morning, I looked at it. We're up over 9% on an RTM basis, and that's really what matters the most, not car loads, it's RTMs. But again, looking at what's ahead, a potential strike, we're modeling, again, in a very responsible, conservative way for the quarter. I think we're somewhere around 3%, 2% to 3% for the quarter. And again, I've already talked about if some of those things don't happen, then that will change. But right now, that's where we're sticking to our guidance, and we're well on track to be able to achieve that. So, John, do you want to provide a little color on the price? Yeah,

Speaker Change: Good.

Speaker Change: We're starting strong.

Speaker Change: This morning, I looked at it.

Speaker Change: Up nine over 9% on an archaean basis, and Thats really what matters. The most not carloads, it's our Tms.

Speaker Change: But again looking at what's ahead of potential strike, we're modeling again in a very responsible conservative way for the quarter I think were somewhere around 3% to 2% to 3% for the quarter and again I've already talked about some of those things don't happen then that will change, but right now that's that's where we're sticking our guidance too.

Speaker Change: We're well on track to be able to achieve that so John you want to provide a little color on the price yes.

John Kenneth Brooks: It's exactly fatty yet in terms of I'm looking at the quarter in terms of volume.

John Kenneth Brooks: So that's exactly it in terms of how I'm looking at the quarter in terms of volume. Certainly hopeful there's upside in May and June, but with the strike and other things looming, we're going to stay responsibly cautious on that front. You know, the grain business, you're right, it definitely has been a little better the last 30 days or so. But we're going to get into feeding here in May and certainly expect that to fall off.

John Kenneth Brooks: Certainly hopeful there is upside in in May and June, but with the strike and other things looming, we'll we're going to stay responsibly cautious on that front.

The grain business Youre right.

John Kenneth Brooks: Definitely has been a little better the last laugh.

John Kenneth Brooks: <unk> 30 days or so.

John Kenneth Brooks: But we're going to get into feeding here in may and certainly expect that to fall off.

John Kenneth Brooks: I just met with all the grain companies the last couple weeks, and they're pretty optimistic that we might see, particularly if we get some rains here in May and early June, that we might actually see a pretty decent push this summer. So we're watching that closely, and certainly that could provide some upside there. You asked about the pricing. I'm super pleased with the execution and discipline that the team performed with in Q1. I saw it coming.

John Kenneth Brooks: I just met with all the green companies.

John Kenneth Brooks: Last couple of weeks and they are pretty optimistic that we might see particularly if we get some some rains here in may and early June that we might actually see a pretty decent pushed this summer so.

John Kenneth Brooks: We're watching that closely and certainly that could provide some upside there you asked about the pricing I'm Super pleased with the execution and discipline.

John Kenneth Brooks: Performed lift in Q1 saw it coming.

John Kenneth Brooks: We held in there and we we delivered on the very top end of our efforts.

John Kenneth Brooks: We held in there, and we delivered on the very top end of our efforts the last half of 23. It's carried into the quarter in 24, and we'll continue to be disciplined as we move forward. I had previously said there were a number of legacy KCS agreements that hadn't been repriced, and we're coming up for renewal this first half of the year. So we've been focused on those, and we've been focused on those in the context of what Keith said, making sure we're getting the value for the service and capacity that we provide.

John Kenneth Brooks: The last half of 'twenty, three it's carried into the quarter and 24.

John Kenneth Brooks: And we will we will continue to be disciplined as we move forward.

John Kenneth Brooks: You had previously said there are a number of.

John Kenneth Brooks: Maybe legacy kcl agreements that that hadn't been repriced and were coming up for renewal. This first half of the year. So we've been focused on those and we've been focused on those in the context of what Keith said, making sure we're getting the value for the service and capacity that we provide.

John Kenneth Brooks: So I expect that to continue here in Q2. If I were to call out one area where we've seen maybe softness versus others, it would be on the domestic intermodal front. I think that's pretty obvious, though, relative to some of the overcapacity challenges in the truck market out there. But there also might be some signs of life there as we push towards the second half of the year. I'm really pleased with how we've seen our volumes grow on our Mexico Midwest Express train.

John Kenneth Brooks: I expect that to.

John Kenneth Brooks: To continue here in Q2, if I were to call out one area.

John Kenneth Brooks: Where we've seen maybe softness versus others that would be in the domestic intermodal front I think that's pretty obvious though.

John Kenneth Brooks: Relative to some of the capacity over capacity challenges in the truck market out there.

John Kenneth Brooks: But.

John Kenneth Brooks: There also might be some signs of life there.

John Kenneth Brooks: As we push towards the second half of the year.

John Kenneth Brooks: Yeah.

John Kenneth Brooks: I'm really pleased with how we've seen our volumes grow on our Mexico Midwest Express train.

John Kenneth Brooks: I fully expected a, you know, a flood fest here to start the year in terms of building that volume, and we've had some really nice wins. So if we can keep that trajectory going, again, there might be upside as we look to Q2, or the second half of the year. Sorry.

John Kenneth Brooks: Pay fully expected.

John Kenneth Brooks: A.

John Kenneth Brooks: The slug slugfest here to start the year in terms of building that volume and we've had some really nice wins. So if we can keep that trajectory going again, there might be upside as we as we look to Q2.

John Kenneth Brooks: The second half of the year sorry.

Scott H. Group: But thank you; I appreciate the call. Your next question comes from Scott Group with Wolf Research.

Speaker Change: Thank you I appreciate the color.

Speaker Change: Your next question comes from Scott Group with Wolfe Research.

Scott H. Group: Please go ahead.

Operator: Operator, please go to the next question.

Speaker Change: Operator, Please next question.

Kenneth Scott Hoexter: So now your next question will come from Ken Hoexter with Bank of America.

Scott H. Group: Certainly the next question will come from Ken <unk> with Bank of America.

Kenneth Scott Hoexter: Great. I'll take Scott's question as well. Keith and team, great thoughts on Jim. I always enjoyed our discussion. So thoughts there as well. John, you talked out there real quick; the intermodal noted some short haul lanes left. Is that from increased competition? And then, perhaps Keith or Nadeem, can you talk about the progress on the synergy targets? Are there, can you talk about the dollars at this point? And does that set you up, I guess, normal sequential operating ratio performance would put you under 60 in the second quarter? Can you talk at that level? Thanks.

Great I'll take Scott's question as well.

Ken: Keith and team great thoughts on Jim always enjoyed our discussion so.

Ken: Thoughts there as well.

Ken: John you talked out there real quick the intermodal noted some short haul lanes lastly is that from increased competition and then perhaps Keith or Nadeem can you talk about the progress on synergy targets are there.

Ken: Can you talk about the dollars at this point and does that set you up I guess normal sequential operating ratio performance would put your sub 60.

Ken: Into the second quarter can you talk to that level. Thanks.

John Kenneth Brooks: On the synergy question, Ken, we're exactly where we said we would be. You know, we exited at $350,000. We said we were going to double it on the revenue side, so we're certainly on track and in a good position. Same for the cost synergy side, so synergies are moving in line with what we said, if not a little bit ahead, so we're very pleased in that

Speaker Change: And on the synergy.

Speaker Change: The synergy question Kandler, we're exactly where we said we would be.

Speaker Change: At $3 50, we said, we're going to double that on the revenue side.

So we're certainly on track in a good position, saying for the cost synergy side. So synergies are now moving in.

Speaker Change: In line with what we said if not a little bit ahead. So we're very pleased in that space.

John Kenneth Brooks: On the short haul stuff, Ken, honestly, it's stuff that we're completely fine with it exiting our railroad. To be quite candid with you, it's business that principally ran between stations in Mexico and the border. It consumed a lot of capacity at our terminals in Mexico and certainly our border crossing.

Speaker Change: On the short haul stuff can honestly it stops debt.

Speaker Change: We're completely fine with it exiting our railroad.

Speaker Change: And to be quite candid with you it's business that that principally ran between.

Speaker Change: Patients in Mexico.

Speaker Change: And the border.

Speaker Change: It consumed a lot of capacity at our at our terminals in Mexico, and certainly our border crossing.

John Kenneth Brooks: So the fact that a lot of that traffic has moved over to the FXC has, frankly, just opened up the ability for us to grow the long haul. I talked about our average length of haul being up, I think, 8% year over year. Our intermodal average length of haul is up 12%, and that's because we're utilizing the capacity with our customers that want the premium ride and a seamless connection at the border up into the upper midwest into Canada. So I expect that trend to continue.

Speaker Change: So the fact that a lot of that traffic has moved over.

Speaker Change: To the FX fee.

Speaker Change: He is frankly, just opened up the ability for us to grow the long haul.

Speaker Change: I talked about our average length of haul being up.

Speaker Change: I think 8% year over year, our intermodal average length of haul is up 12%.

Speaker Change: And Thats, we are utilizing the capacity with our customers that want the premium ride.

Speaker Change: And a seamless connection at the border up into the upper Midwest and into Canada. So I expect that trend to continue.

Nadeem S. Velani: It feeds right into that value proposition model, can't it? It's a good thing, not a bad thing.

Speaker Change: Right into that value proposition model candidates.

Speaker Change: It's a good thing not a bad thing.

Kenneth Scott Hoexter: And Ken, we'll obviously see sequential improvement in OR and year-over-year improvements. But giving you a Q2 number, I'd say that, you know, it's going to be somewhat dependent on what happens with the labor situation. You know, we talked about some of the grain impacts in Q2 that we might see grain volumes start to decline in Canada as seeding takes place, and we start running out of grain in Canada.

Speaker Change: And Ken we will obviously see sequential improvement in the or and year over year improvement.

Speaker Change: Given the Q2 number I would say that it's going to be somewhat depends depending on what happens with the labor situation.

Speaker Change: Tuition.

Speaker Change: We've talked about some of the grain impact in Q2 that we might see that.

Speaker Change: The grain volumes started to decline in Canada is seeding takes place and we start running out of of grain in Canada, but so it depends I am not going to give you a number at this say that we'll continue to see improvements in year over year improvement.

Steven P. Hansen: So it depends. I'm not going to give you a number. I'd just say that we'll continue to see improvements in year-over-year. Great. Thanks for your time, guys. Appreciate it. Your next question comes from Steve Hansen with Raven Jean. Yeah, good morning, guys. I wanted to circle back on the length of haul issue because it's been quite

Speaker Change: Alright, thanks for the time guys I appreciate it.

Yes.

Speaker Change: Your next question comes from Steve Hansen with Raymond James.

Steven P. Hansen: Hey, good morning, guys I wanted to circle back on the length of haul issue because it's been quite market of an increase not just in intermodal, but in ECP as well and John do you want to maybe just comment on the longevity of that trend I presume. It's evidence of the Gulf volumes are helping extend that that length, but just maybe any broader commentary around the durability.

Steven P. Hansen: Your next question comes from Steve Hansen with Raymond James.

John Kenneth Brooks: Yes, so the mix was quite interesting in Q1. You know, I spoke about the, certainly the short haul, the Mexican Immortal that shifted away from the railroad.

Steven P. Hansen: Many of these.

Steven P. Hansen: This broader microscopy and thanks.

John Kenneth Brooks: So the mix was quite interesting.

John Kenneth Brooks: In Q1.

Spoke about the certainly the the short haul domestic intermodal that.

John Kenneth Brooks: Shifted away from the from the railroad.

John Kenneth Brooks: You know, we definitely saw volumes decline in our U.S. coal business, which is also a very short haul business. But on top of that, we layered on, you know, strength in international, strength in grain, strength in potash, some of those longer hauls, plus the synergies, the growth in the MMX and in the ECP area that you alluded to, which is largely Alberta down to the Gulf and even into I do believe this is, we're just seeing a natural progression of what this railroad looks like in the future. It just maybe got a little accentuated in Q1 more than we anticipated.

We definitely saw volumes decline in our U S coal business with also very short haul business.

John Kenneth Brooks: But on top of that we layered on.

John Kenneth Brooks: Strength in international strength in grain strength in potash some of those longer haul plus the synergies.

John Kenneth Brooks: And the <unk> and in the ECP area that you alluded to which is largely at Alberta down to the Gulf and even into Mexico.

John Kenneth Brooks: I do believe this is Jim.

John Kenneth Brooks: Seeing a natural progression of what this railroad looks like in the future.

John Kenneth Brooks: Just maybe got a little accented in Q1 more than than we anticipated I expect that to moderate.

John Kenneth Brooks: I expect that to moderate and normalize. You know, the other thing I will point out, because I think it's important if you guys think about mix, is that we have really forecasted a strong automotive Q1 with all the business wins and some of the pent-up demand. And certainly, we outperformed, and we set a record in that quarter. But I'll just remind you, it did fall very short of our expectations. So there was a lot of good length of haul there and high sense for RTM traffic that didn't materialize in Q1 that we're certainly seeing ramp up here in Q2.

John Kenneth Brooks: And normalized.

John Kenneth Brooks: Sure.

John Kenneth Brooks: The other thing I will point out because I think it's important as you guys think about mix is.

John Kenneth Brooks: We haven't really forecasted a strong automotive Q1 with with all the business wins than in some of the pent up demand and certainly we outperformed and we set a record in that quarter, but I'll just remind you. It did fall very short of our expectations.

John Kenneth Brooks: So there was a lot of good length of haul there and high <unk> for our TM traffic that didn't materialize in Q1 that certainly we're seeing ramp up here in Q2.

Keith E. Creel: I think I'll add a little bit of color to that, John, because I...

Speaker Change: I think I'll add a little bit of color, John because I see it a little bit differently.

Keith E. Creel: I think I'll add a little bit of color to that, John, because I see it a little bit differently. When you say normalize, I don't think we're going to normalize until we've... We've fully built out our closed-loop automotive supply chain. We've got Wiley Terminal opening up at the end of the quarter in June. That's going to allow vehicles that are produced and shipped out of Ontario today that currently Link the Haul ends in Chicago.

Speaker Change: Let me say normalize I don't think were going to normalize until we've.

Speaker Change: Fully built out our closed loop automotive supply chain.

Speaker Change: We've got wildly terminal opening up ended the quarter June June that's going to allow vehicles that are produced and shipped out of Ontario today that currently linked to haul into Chicago.

Keith E. Creel: That Link the Haul is going to end in Dallas, Texas for CPKC. It's going to create an empty supply to go down to Mexico, and Link the Haul that today perhaps stops at Laredo or Robstown are going to be going to Minneapolis, St. Paul, or you'll be going to Canada. So again, this thing's a multiple-chapter story. We're not going to get it built out overnight. It's a two, three, four, five-year plan. And, in and of itself, that one business unit offers significant, I think, accretive incremental improvements to driving that Link the Haul.

Speaker Change: Length of haul is going to end in Dallas, Texas for CP Casey.

Speaker Change: It's going to create ample supply to go down in Mexico and lengths of haul that to date, perhaps stop at Laredo Robstown are going to be going that Minneapolis, St. Paul or anybody go into Canada. So again. These things are multiple chapter story, we're not going to get it built out overnight.

Speaker Change: 2345 year plan.

Speaker Change: That in and of itself that one business unit offers significantly I think accretive incremental.

Speaker Change: Improvements to driving that length of haul.

Speaker Change: Great color. Thanks.

Speaker Change: Sure.

Speaker Change: Yeah.

Scott H. Group: Your next question comes from Scott Group with Wolf Research.

Speaker Change: Your next question comes from Scott Group with Wolfe Research.

Scott H. Group: Hey, thanks. Sorry about that earlier. Can you guys hear me?

Scott H. Group: Hey, Thanks, sorry about that earlier can you guys hear me.

Scott H. Group: Absolutely. Good morning, Scott. Fantastic. So you guys keep referring to a potential strike. It almost feels as if your guidance assumes that we are going to have a strike. Or to put it differently, if we do have sort of a normal short-lived strike, do you still feel confident about doing double-digit earnings growth this year? And then maybe just the bigger picture, Keith, you know, when I look at Q1, revenues up 2%, operating incomes flat, like, do you think, you know, I guess, I didn't know, we get some strike uncertainty, but going forward, like, It feels like we're at the point now where the story's gonna really start showing up in the model in terms of

Absolutely Scott.

Scott H. Group: So you guys referring.

Scott H. Group: Through a potential strike.

Scott H. Group: Most wells those looks like your guidance assumes that we are going to have a strike or said differently.

Speaker Change: If we do have sort of a normal short lived strike do you still feel confident about doing double digit earnings growth. This year and then maybe just bigger picture Keith when I look at Q1 revenues up 2% operating income flat.

Speaker Change: Do you think I guess I don't know if we get some strike uncertainty going forward like.

Speaker Change: It feels like we're at the point now where like the story is going to really start showing up in the model in terms of better revenue growth meaningful margin improvement and significant earnings growth.

Keith E. Creel: Is that the right way to think about it, that we're sort of, we're there now, and it's going to all start showing up in the model? I think we're at an inflection point. So as this thing starts to play out, Scott, I think you've got that captured accurately. And Scott, if we have kind of a strike, that's

Speaker Change: Is that the right way to think about it but we're sort of where they are now and it's going to start showing up in the model.

Speaker Change: I think we are at an inflection point. So as this thing starts to play out Scott I think you've got that captured.

Speaker Change: Currently and Scott.

Speaker Change: Kind of a strike.

Keith E. Creel: And Scott, if we have kind of a strike that's not extended, I'm comfortable that we can still hit our double-digit EPS guidance for the year.

Scott H. Group: Not a not extended.

Scott H. Group: Right.

Scott H. Group: I'm comfortable that we can still hit our double digit EPS guidance for the year.

Tom Wadewitz: Your next question comes from Tom Wadewitz with UBS.

Speaker Change: Okay. Thank you guys.

Speaker Change: Scott.

Speaker Change: Your next question comes from Tom Water-witch with UBS.

Tom Wadewitz: Yeah, good morning. You there, I guess there are a lot of things you can ask about the growth drivers. You've got a lot going on. How do you think about, you mentioned kind of a new service that we get the approval from STD with Schneider? Would you think of that as being, you know, kind of new origination points or kind of new connectivity that gives you new volume? Or do you think some of it is, you know, service goes from, you know, Norfolk to Seattle?

Thomas Richard Wadewitz: Yes, good morning.

Tom Water-witch: <unk>.

Thomas Richard Wadewitz: A lot of things too.

Thomas Richard Wadewitz: You can ask about on the growth drivers, we've got a lot of things going on how do you think about.

Thomas Richard Wadewitz: You mentioned on kind of new service that we get the approval from that TD with Schneider would you think of that as being.

Thomas Richard Wadewitz: Kind of.

Thomas Richard Wadewitz: New origination point, there kind of new connectivity to the new volume or do you think some of it is.

Thomas Richard Wadewitz: This goes from Norfolk to see at that or I guess, how do we think about and obviously there is some noise going on with the <unk>.

Tom Wadewitz: Or, I guess, how do we think about, obviously, there's some noise going on with the agreement you have or the concessions that you got related to John or leaving? So I don't know if you could give some broader comments and the kind of opportunity and how much is new business and how much do you think might end up being shifting on that kind of Mexico and Meridian Speedway opportunity? Thank you.

Thomas Richard Wadewitz: <unk> you have or the concessions that you got related to John or leaving so.

Thomas Richard Wadewitz: Don't know if you could give some broader comments on kind of the opportunity and how much is new business and how much do you think might end up being shifting on that kind of Mexico and Meridian Speedway opportunity. Thank you.

Okay. Thanks, So let me let me say this.

Keith E. Creel: Okay, thanks. Let me say this. All this noise about the agreement over Meridian Speedway is just that. It's much to do about nothing. At the end of the day... All we've done is take issues that were ripe for dispute off the table. We're going to have an unfettered opportunity to compete in partnership with NSF, and to compete in partnership with CSX. This isn't about share shift, but if there's any, it might be nominal.

Speaker Change: Bob It's noise about the agreement over the Meridian Speedway is just that its much to do about nothing.

Speaker Change: At the end of the day.

Speaker Change: Yeah.

Speaker Change: While we have done is take it.

Speaker Change: Issues that were referred to speed off the table, we're going to have unfettered opportunity to compete in partnership with NFS to compete in partnership with <unk>. This isn't about share shift if there is anything it might be nominal there's some overlapping markets in the southeast that perhaps they both serve but what this is about growth it opens up comp.

Keith E. Creel: You know, there's some overlapping markets in the southeast that perhaps they both serve, but what this is about is growth. It opens up competition in new markets for CSX's customers and lanes that NS can't offer them that opportunity. And conversely, with NS, they're no worse off.

Speaker Change: Petition in new markets for <unk> customers and lanes that <unk> can offer them that opportunity and Conversely within asked there no worse off.

Keith E. Creel: You know, we've got two situations here where we can uniquely partner with both railroads. It's enabling investment to create an alternative route. The customer has a choice; competition wins, and service wins. The only true threat in this, Unless you're afraid to compete, is truly the truck. That's where the competition is. That's, that's where the growth is going to come from. It's that I-20 that runs parallel to Viridian Speedway that we're going to be competing against. This is a truck-competitive business.

Speaker Change: We've got two situations here, where we can uniquely partner with both railroads, it's enabling investment to create an alternative route for the customer has a choice competition wins service Lance the only true threat in this.

Speaker Change: Unless youre afraid to compete.

Speaker Change: Truly the truck, that's where the competition is that.

Speaker Change: That's where the growth is going to come from <unk> that runs parallel to that verdean steeply.

Speaker Change: Going to be competing against this is truck competitive business.

Keith E. Creel: So in the end, again, it's much to do about nothing. I think this is a win-win situation. And again, I'll close saying the only other loser in this, perhaps, are the lawyers that would have been fighting on our behalf and the disputes within us over some of those very rightful disputes. Considerations that were eliminated with our agreement. And listen, if anybody wants to see the truth and see the facts, we filed the agreement with the SDB.

Speaker Change: So any and again its much to do about nothing I think this is a win win situation and again I'll close saying the only of the loser in this perhaps of the lawyers that would've been.

Fighting on RV half and the dispute with NSS over some of those very right for.

Dispute.

Speaker Change: Considerations that were eliminated.

Speaker Change: With our agreement and listen if anybody wants to see the truth and see that the facts, we filed with the STB. The agreement go look at it you'll see for yourself that exactly what we're seeing in and in fact exactly with NSS. It is exactly what the truth is as much to do about nothing let's get over there and lets get the competing and being great partners within SMB.

Keith E. Creel: Go look at it. You'll see for yourself that exactly what we're saying and, in fact, exactly what NS has said is exactly what the truth is. It's too much to do about nothing. Let's get over this and let's get to competing and being great partners with NS and being great partners with CSX. That's what our intention is to be.

Speaker Change: Great partners with the <unk>, that's what our intention is to be.

Speaker Change: Tom I, just would add to keith's comment.

John Kenneth Brooks: Tom, I just would add to Keith's comment. I don't see a shift. It's a truck lane, either out of Mexico or Texas, that we're focused on. And frankly, there is a significant, with the terminal development we've got going on at Wiley, that is a non-intermodal focus, the automotive, the transload development we've got going on in the Dallas market, the car load business opportunity in that lane that I think is untapped is a great growth story.

Speaker Change: C shift.

Speaker Change: It's a truck lane.

Speaker Change: Either out of Mexico, or Texas that were focused on and frankly, there is a significant with the terminal development. We've got going on at widely that is non intermodal focus the automotive the trans load development, we've got going on in the Dallas market the carload business.

Speaker Change: Opportunity in that lane that I think is untapped is a great growth story and that those markets are open up to devote NSA and Mcs sacks.

John Kenneth Brooks: And those markets are open to both MS and CSX. There's just never been, for whatever reason, the intense level that we will bring to the sales approach of growing that lane. And frankly, we've had so many other irons in the fire and areas of focus. We're now kind of shifting to how we grow that as part of this portfolio. And I see it all as additives.

Speaker Change: It's just never been.

Speaker Change: For whatever reason the intense level that we will bring to the sales approach of growing that that lane.

Speaker Change: And frankly that we've had so many other irons in the fire.

Speaker Change: And areas of focus.

Speaker Change: We're now kind of shifting to how we how we grow that as part of this portfolio and I see it all as additive.

John Kenneth Brooks: And I would say we're partnering with the right folks too. We're super excited about the partnership with Schneider; the same partnership that's allowing us to grow that great MMX service is, I think, going to meet or exceed this opportunity when we talk about this new gateway we're creating.

Speaker Change: And I would say that we're partnering with <unk>, we're super excited about the partnership with Schneider. The same partnership that's allowing us to grow that great MMX services, I think going to meet or exceed this opportunity. When we talk about this new gateway we are creating.

Speaker Change: Maybe just just one brief follow is the do you think it's more volume is Dallas origination our techniques originates or is more of the new business, we see it that going to be Mexico origination.

Tom Wadewitz: Maybe just one brief follow-up. Do you think more volume is Dallas origination or Texas origination, or is more of the new business with CSX going to be Mexico origination?

Speaker Change: Well there is a there is a lot of certainly, Texas Atlanta type traffic, Tom its truck and as you know that market is extremely tough right now with the truck capacity inspire right. So.

John Kenneth Brooks: Well, I think there is a lot of certainly Texas, Atlanta-type traffic, Tom, it's truck traffic. And as you know, that market is extremely tough right now, with truck capacity and spot rates. So it's hard for me to put a percentage on it. I would say, you know, maybe, broadly speaking, that might be a slightly bigger intermodal type market, but it's highly competitive. And we're gonna have to find those customers in those commodities that fit our model and are willing to pay for that servicing capacity.

Speaker Change: It's hard for me to put a percentage on it I would say.

Speaker Change: Maybe broadly speaking that might be a slightly bigger intermodal type market, but it is highly competitive and we're going to have to find those customers and those those commodities that that fit our model and are willing to pay for that servicing capacity I can tell you my team's focus and my focus within <unk>.

John Kenneth Brooks: I can tell you my team's focus and my focus with NF and CSX is going to be on Mexico. That's where we can generate a length of haul, and we can leverage the great service Mark and his team are providing down in that marketplace. And with all the industrial development going on down in Mexico, we've got over 40 projects kind of active right now that will represent significant volume growth opportunities in intermodal over the next two to two to three years that will sort of fit right into that wheelhouse of that service into the southeast US. I think the other complementary piece of that book is this.

Speaker Change: The FX is going to be on Mexico.

Speaker Change: That's where we can generate a length of haul we can leverage the great service Mark and team are providing down in that marketplace and and with all the industrial development going on down in Mexico. We've got over 40 projects kind of active right now.

Speaker Change: That will represent significant volume growth opportunities in intermodal over the next two to two to three years that will sort of fit right into that wheelhouse of that service into the southeast U S and I think the other complementary piece of that book and as all the automotive development the plants that are being <unk>.

Keith E. Creel: Now I think the other complementary piece of that bookend is all the automotive development plans that are being developed and that will soon open up to them, specifically in this case the CSX. So as those supply chains get established, those parts that get moved from Mexico to the southeast and parts from the southeast to Mexico, that ecosystem for us to be able to have a competitive lane, it takes right now the finished vehicles that are being produced today. There are thousands of car loads, potential rail car loads of finished vehicles that are on that highway, that are moving between the southeast markets where they're produced for Globus, perhaps, going into the Dallas markets. These are ripe for opportunities. Rail wins, the environment wins, and competition wins. This is all a good story.

Speaker Change: Developed and that will soon open a specifically in this case the <unk>. So as those supply chains get established this parts that get moved from Mexico to the southeast and parts from the southeast of Mexico.

Speaker Change: That ecosystem for us to be able to have a competitive lane that takes right. Now the finished vehicles that are being produced today there are thousands of carloads.

Speaker Change: <unk> railcar loads of finished vehicles that are on that highway that are moving between the southeast markets, where they are produced for globus, perhaps going into the Dallas markets those are ripe for opportunities.

Speaker Change: Rail wins the environment lands competition land. This is all a good story.

Denmark: Your next question will come from Denmark.

Benoit Poirier: Your next question will come from Benoit Poirier with Desjardins Bank Security.

Speaker Change: <unk> with <unk> Securities.

Speaker Change: For months just to come back on the previous question with respect to all of you see there is a lot of momentum at lesser role with a 40% increase in volume.

Benoit Poirier: There's a lot of momentum at Lazaro with the 40% increase in volume. It looks like there's China that is also bypassing the US, so it's sending stuff to Mexico. I'm just wondering how much it is the driver with respect to the overall volume increase? We saw not too long ago that the Mexican government announced that it would apply some tariffs on some imported goods, so they want to protect the Mexican and the US economy. Just wondering whether it's the kind of thing to keep in mind.

Speaker Change: Like that.

Speaker Change: China is also bypassing the U S. So sending stuff in Mexico I'm just wondering.

Speaker Change: How much is that the driver with respect to the overall volume increase we've seen not too long ago that the Mexican government announced that it would imply some charts.

Speaker Change: On imported goods, so they want to protect kind of the Mexican and the U S economy, just wondering what are the.

Speaker Change: Something to keep in mind and just in terms of cargo diversion you've seen some on the back of the labor issues and if you could give an update on St. John.

John Kenneth Brooks: And just in terms of cargo diversion, have you seen any on the back of the labor issues? And if you could give an update on St. John, that would be great. Thank you.

Speaker Change: That would be great. Thank you.

John Kenneth Brooks: Benoit, I'm not going to speculate on whether or not the Mexican government does something in terms of managing Chinese imports versus their own production. But I do believe we have seen some of the surge relative to some of that business coming into Mexico today. But the fact of the matter is Lazaro has capacity, has low on-dock dwell time, and frankly, I think the steamship lines, and beyond just maybe Trans-Pacific Freight, South American Freight, are recognizing Lazaro as an alternative. And is that because the looming east coast is looking at that as an alternative to going through the Panama Canal? I think all that's part of the story.

Speaker Change: Yeah. So.

Speaker Change: I'm not going to speculate on on whether or not.

Speaker Change: The Mexican government does something in terms of managing.

Speaker Change: Chinese <unk>.

Speaker Change: Imports versus their own production I do believe we have seen.

Speaker Change: Some of the surge relative to to some of that business coming into in the Mexico today.

Speaker Change: But the fact of the matter is allowed ROE has has capacity has low amdocs, well and frankly I think the steamship lines.

Speaker Change: <unk>.

Speaker Change: And beyond just the.

Speaker Change: Maybe trans Pacific freight.

Speaker Change: South American freight.

Speaker Change: Are recognizing <unk> as an alternative.

Speaker Change: Is that because of looming east coast and looking at that as an alternative to going through the Panama Canal I think all of that's part of the story and frankly.

John Kenneth Brooks: And frankly, Benoit, we're outselling it hard. We believe it can become a complement to Vancouver and the west coast of California and give shippers another option. And frankly... Our partner, Hapag-Lloyd, and their announcement with Maersk and the formation of Gemini as you look to 2025 with Maersk's relationship and doubling the capacity at Lazaro, I think presents, again, CPKC a tremendous opportunity with those companies. I take our St. John volumes and have sort of settled in and actually moderated here lately.

Speaker Change: We're out selling it hard we believe it can become a complement to to Vancouver, and the west coast in California.

And give shippers another another option.

And frankly.

Partner, <unk> Lloyd and their announcement with Maersk in and the formation of Gemini as you look to 2025 with Maersk relationship and doubling the capacity at <unk>.

Speaker Change: I think presents again, CP Casey a tremendous opportunity with those companies.

Speaker Change: I would say are things on volumes.

Speaker Change: And sort of settled in.

Speaker Change: And then actually moderated here lately I think we are seeing some impacts.

John Kenneth Brooks: I think we are seeing some impacts in East Coast imports relative to some of the trade challenges, I guess that the world's facing in that port. Now, that being said, we're watching closely what's going to take place at the Port of Montreal in terms of, you know, a potential strike there, and if, in fact, we get a fall labor disruption on the U.S. East Coast, I think both of those stories are topical with the steamship lines as St. John being an alternative if, in fact, we do have disruptions in that area. Okay, that's fine.

Speaker Change: In East coast imports relative to some of the trade challenges.

Speaker Change: I guess that the world facing in that port.

Speaker Change: Now that being said.

Speaker Change: We're watching closely what's going to take place at the port of Montreal and.

Speaker Change: And in terms of potential.

Speaker Change: Potential strike, there and and if in fact, we get a fall labor disruption on the U S. East Coast I think both of those we're keeping both of those stories topical with us being ship lines as St. John being an alternative if in fact, we do have disruptions in that in that area.

Speaker Change: Okay. That's very good color John Thank you very much.

John Kenneth Brooks: Okay, that's a very good color, John. Thank you very much.

Speaker Change: Yes. Thank you.

Speaker Change: Your next question comes from Ravi Shanker with Morgan Stanley.

Robby Schenker: Your next question comes from Robby Schenker with Morgan Stanley.

Speaker Change: Hi, This is Christina on for Ravi parties for all yes can you guys hear me now.

Christine Amparavi: Hi, this is Christine Amparavi. Apologies for earlier. Can you guys hear me now? the macro backdrop to be more supportive in terms of unlocking the full potential of that pipeline.

Christina: Thanks again.

Christina: Great.

Speaker Change: Thanks for going back to that.

Speaker Change: Taking a step back I want to.

Speaker Change: Talk about the longer term guidance, and particularly kind of conversion of the $5 billion pipeline you guys have outlined.

Speaker Change: The Investor day, it definitely felt very handsome chronic.

Speaker Change: It does feel like the macro maybe equal sizing.

As you guys are having around converting.

John Kenneth Brooks: Maybe just a couple comments on that. In terms of what we laid out yesterday, I would say we're ahead of plan in terms of my expectations for delivering, you know, in frankly all those categories. You know, certainly some maybe a little quicker than others. As a primary example, just talking about Lazaro, I do see that being maybe a little bit more of a back story in terms of the story of this year and 2025 in terms of cross-border opportunities.

Speaker Change: So maybe you can just remind us or parse out kind of.

Speaker Change: The long term guidance how much.

Speaker Change: And maybe some product versus maybe meeting that the macro backdrop to be more supportive in terms of our marketing.

Speaker Change: That's all fine.

Speaker Change: Maybe just a couple of comments on there in terms of what we laid out in Investor Day, I would say were.

Speaker Change: Ahead of plan in terms of my expectations on delivering.

Speaker Change: And frankly all of those categories.

Speaker Change: Certainly some maybe a little quicker than others.

Speaker Change: A primary example of just talking about <unk> I do see that being.

Maybe a little bit more back half of this year and 2025 story in terms of cross border opportunities, but that being said I would say the area of automotive is is really may be presented itself is more of a pull ahead the opportunity for this network in the development of that closed loop model that that.

John Kenneth Brooks: But that being said, I would say, you know, the area of automotive has really maybe presented itself as more of a pull-ahead opportunity for this network in the development of that closed-loop model that Keith spoke about and the benefits that the franchise provides the OEMs in that area. You know, I would say we were pretty adamant and clear around finishing 2023 at a $350 million revenue run rate. I remain very confident that we'll double that by exiting 2024.

Speaker Change: Keith spoke about and the benefits that the franchise provides the Oems in that area.

Speaker Change: I would say, we were pretty adamant and clear around finishing 2023 out of $350 million.

Our revenue run rate.

Speaker Change: I remain very confident in and that that will double that exiting 2024.

John Kenneth Brooks: And frankly, that'll put us right in line or maybe even a little ahead of what we laid out at Investor Day with those areas. I think your call out around the macro not being very supportive, particularly if you think about some of the intermodal and truck-conducive type products, is right. But we're trying not to worry about that and control what we can control. And if we get a macro tailwind, it's just going to provide more upside to the story.

Speaker Change: And frankly that will put us right in line or maybe even a little ahead of what we laid out at Investor day with those with those areas I think you call out around the macro not being very supportive.

Speaker Change: Particularly maybe as you think about some of the intermodal.

Speaker Change: <unk> truck conducive type products is right.

Speaker Change: But.

Speaker Change: We're trying not to worry about that control what we can control.

Speaker Change: <unk> the product and if we get a macro tailwind is just going to provide more upside to the story.

Speaker Change: I appreciate it thank you.

Keith E. Creel: We have reached our allotted time for Q&A. I would now like to turn the call back over to Mr. Keith Creel.

Speaker Change: Uh-huh.

We have reached our allotted time for Q&A I would now like to turn the call back over to Mr. Keith Creel.

Keith E. Creel: I'll give you an update, and I hope what you take away from this is that this company is in a strong position. We are in a strong position to achieve the guidance that we laid out in our multi-year plan. We've got to get through this potential work outage that's ahead of us. We've got to see what the macro does.

Keith E. Creel: Okay. Thank you Alex and thank you for joining US again today and gives us a chance to.

Keith E. Creel: So just give you an update and I hope what you take away from this is this company has had a strong position we're in a strong position to achieve the guidance that we laid out in our multiyear plan, we're in a strong position to achieve.

Keith E. Creel: The guidance that we've laid out for this year.

Keith E. Creel: Got to get through this.

Keith E. Creel: <unk> work outage Thats ahead of US we've got to see what the macro does but I can tell you. This is a very unique story. It's unique network. That's been created that's unparalleled in this industry. We're one year old on a journey of our forever store and creating the most relevant rail network in North America, I couldnt be more proud to work here and serve these.

Keith E. Creel: But I can tell you this is a very unique story. It's a unique network that has been created that's unparalleled in this industry. We're one year old on a journey of our forever story, creating the most relevant rail network in North America. I couldn't be more proud to work here and serve with these fine men and women to make this happen day in and day out. And we'll continue to work hard to meet and exceed our investors' expectations, our employees' commitments we've made to them, as well as our customers' commitments. I think that's a recipe for success, and I'm confident this team will achieve that, if not exceed that. Have a great day, and we'll talk to everyone soon.

Keith E. Creel: Men and women to make this happen day in and day out and we will continue to work hard to meet and exceed our investors' expectations. Our employees commitments, we've made to them as well as our customers commitments I think thats the recipe for success and I'm confident this team will achieve if not exceed that.

Speaker Change: Have a great day, and we'll talk to everyone soon.

Operator: This concludes today's conference call. You may now disconnect.

Speaker Change: Yes.

Speaker Change: This concludes today's conference call you may now disconnect.

[music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Hum.

Speaker Change: Yes.

Speaker Change: [music].