Q3 2024 Canadian Pacific Kansas City Ltd Earnings Call
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Speaker Change: Good afternoon. My name is my name is my Dream and I'll be your conference operator today at this time I would like to welcome everyone to C. P. K C's third quarter 'twenty 'twenty four conference call.
Speaker Change: Slides accompanying today's call are available at Investor Dot C. P. Casey our dotcom all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question press the pound key I would now like to introduce.
Speaker Change: Ashley Thorne AVP Investor relations to begin the conference call.
Thank you Margaret good afternoon, 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.
Speaker Change: Risks 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.
Speaker Change: This presentation also contains non-GAAP measures outlined on slide three please.
Speaker Change: Please note in addition to our regular quarterly financials their supplemental Q3, combined revenue and operating performance data available at Investor <unk>.
Speaker Change: T R W.
Speaker Change: With me here today is Keith Creel, our President and Chief Executive Officer, Dean <unk>, Our executive Vice President and Chief Financial Officer, John <unk>, Our executive Vice President and Chief Marketing Officer, and Mark Rose, Our executive Vice President and Chief operating Officer.
Speaker Change: The formal remarks will be followed by Q&A and the interest of time, we would appreciate it if you limit your questions to one it is now my pleasure to introduce our president and CEO Mr. Keith.
Keith Creel: Good afternoon, and thanks for being with us today to discuss with you.
Keith Creel: Third quarter 24 results I'm pleased to share the results of our 20000 stroke ships.
Keith Creel: C P. Casey family I can tell you that body of work from what was a very challenging operational quarter with it.
Keith Creel: What they can do all of the marketable toothpaste in early July when the strike in August.
Both of which they did an exceptional job dealing with the bounce back in the network for spot as well as a result are falling off and give me back in shape as far as the challenges I'm, telling you would probably say we remain on track to deliver full year guidance double digit earnings growth.
Keith Creel: Which is better than what we had projected.
Earlier in the year, so specific to the results for the quarter shaped vacation family delivered revenues of $3 5 billion, which is up 6% strong volume growth and increase of over 4% and operating ratio of 62.9, earning.
Keith Creel: Earnings per share of <unk>.
Keith Creel: Which is an increase of 8% most importantly from a safety perspective, continuing improvement the trade actions decreasing 17% personal injuries, increasing 8%.
Keith Creel: Going forward continued strong performance across the network.
The culture, but I'd like to specifically recognize.
Keith Creel: The operating team specific to those challenges with the strike it did an exceptional job preparing for and bouncing back.
Hey, Alex City expansion as a result of the strike commercially John as long as well continue to generate industry that sustainable profitable growth.
Keith Creel: Delivering a unique products to the market with strong service offering to our customers as reflected in our results I'm going to share with you today.
Keith Creel: That's another exciting development over the quarter I'm pleased to have received approval last week for the STB pardon me direct connect what does she effects local Mexico, Texas in the U S South east or what it will be in a corridor.
Keith Creel: Specifically again, thank the STB for their thorough review and approval of this product competitive transaction.
Keith Creel: The new interchange of our status with the G. S X is going to provide a new competitive rail service to rapidly grow markets, it's going to bring new solutions to our customers and take trucks off the road. It's another example, again or does she need close stores.
Keith Creel: Each agency franchise is delivering on the hydrogen locomotor brought another mouse.
Keith Creel: <unk> reached in the quarter.
Keith Creel: When it comes to our hydrophilic water program in early September.
Keith Creel: Very pleased to say that our first high horsepower.
Keith Creel: Locomotive along with the fuel tender, Georgia consist of three diesel locomotives and falling a fully loaded.
Keith Creel: Both training and our Western Canada.
Keith Creel: Canada Corridor circle Rhopressa of achievement. So demonstration of this company's commitment to leadership in CIS.
Keith Creel: Bill.
Keith Creel: But let me say in closing I'm proud of the results of phones produce we're off to a strong start in the fourth quarter for in a great position for a strong finish to two four.
Keith Creel: Even more exciting transition into 2025 at the moment.
Keith Creel: I'm going to hit a couple of more.
Keith Creel: Some comments on there I think performance China provide color on the markets. When they gave him a wrap up our library enrollment numbers.
Speaker Change: Thank you Keith and good afternoon, looking at the quarter I'm extremely.
Speaker Change: Got a railroader is probably continued hard work.
Speaker Change: Safe and reliable service in the third quarter, we continue to drive strong year over year operating departments, but look at the average terminal dwell.
Speaker Change: Declining foreseen.
Speaker Change: Average train speed increased by 6% locomotive productivity improved by 8% and just to round off the fuel efficiency improvement of 2%.
Speaker Change: All of these are results demonstrate again our Fisher.
Speaker Change: Lou and resilient network that is delivering strong service to our customers.
Speaker Change: These results are particularly impressive given the challenges we faced in the quarter I'm proud of the resiliency of the network.
Speaker Change: Yeah.
Speaker Change: As Keith mentioned, we navigated through a four day work stoppage right across our Canadian operation and thanks to the hard work and preparation of the team.
Speaker Change: I'm pleased to say that we have a quick transition.
Speaker Change: Transition back to normal operations I'll be Frank It was probably one of the basket I've seen in my career as we started this network back up.
Speaker Change: And you can contribute to the operating team working closely with the customers the rail partners to minimize the interchanges and disruption that we see as the operating team.
Speaker Change: Work stoppage behind us, we're well positioned to deliver to continue to deliver on the growth that we are needed.
Speaker Change: Two strong service.
Customers expect.
Speaker Change: Thank you to all the railroad.
Speaker Change: <unk> to this outcome.
Speaker Change: Looking at the safety for the quarter, if I look at Fr train accident frequency of one point to seven and a 9% improvement year over year.
The personal injuries were zero point 85, with 17% year over year improvement I'm pleased with these results because safety is a journey.
Speaker Change: We always strive for further improvement.
Speaker Change: We also continued to execute on a number of initiatives are improving efficiency and operating performance. The engineering team in coordination with the operations and improve inefficiency significantly reducing slaughters across the network and also train delays.
Speaker Change: Part of the the leverage data from them and basketball trends autonomous geometry testing cars.
Speaker Change: US accurately plan and preventive maintenance and capital investments looking forward. There are additional benefits to realize these investments as we deploy these cards across our network and specifically in the Mexico as well.
Speaker Change: And as we continue to make interoperability upgrades to the CP or excuse me the legacy KC.
Speaker Change: <unk>.
Speaker Change: So we can lead trains in Canada by end of year, we'll have about 175 upgraded locomotives to be fully interchangeable across North American network.
Speaker Change: Looking at capital.
Speaker Change: We're executing to our plan to support safe and sustainable growth through the.
Speaker Change: The investment other network.
Speaker Change: The first three quarters, we have been serving six new sidings as part of a 275 million merger commitment capital commitment.
Speaker Change: <unk> will be targeted by the end of the year, along with the capital projects centered around Kansas City area that will come online this year as well.
Speaker Change: Capacity in Kansas City will further.
Help us a lot in extreme on the connection between the two networks to legacy networks affirming our services as key corner.
Speaker Change: We are also in service new sidings in Mexico, along with crossovers attract realignment in our estimate and we are improving our capacity and fluidity on key and growing segment of our network.
Speaker Change: Definitely Saudi and other investments in Mexico capacity are underway scheduled to go in service in Q4.
Speaker Change: These projects are targeted to improve the efficiency of our local and yard operations. So we can run mainland trades, while we serve customers platinum bank loan accretion I think but.
Speaker Change: Finally, I'm pleased to announce we're still alone on time with the cause on Laredo Bridge second span will be opened by the end of <unk>.
Speaker Change: Before I turn it over to John I'd like to share my enthusiasm for the first phase of our high horsepower hydrogen locomotive test completed in Q4. This is a tremendous accomplishment.
Speaker Change: As a result of a lot of hard work and dedication to.
Speaker Change: We deliver our sustainable objectives in summary, we're operating safely efficiently and the network is in excellent shape, our investments are creating capacity and we have a strong momentum heading into the fourth quarter.
John: With that John.
John: Alright, Thank you Mark and good afternoon, everyone I'm extremely pleased with the top line performance. The team delivered despite the work stoppage in the quarter, we are creating and delivering on the unique opportunities. The strong service product, we have and we're pricing to the value of the capacity of our and our service.
John: Now looking at our results this quarter, we delivered freight revenue growth of 6% on a 4% increase in Rpms. This performance was despite the four day work stoppage and Keith and Mark spoke to and this was a 3% headwind to our teams in the quarter.
John: Our cents per RPM was up 2% with strong pricing, partially offset by mix.
John: Taking a closer look at our third quarter revenue performance I'll speak to the FX adjusted result, starting with bulk grain.
John: <unk> revenues were up 10% on 7% RPM growth.
John: Grain volumes grew 11% over the prior year, our franchise is benefiting from strong production in our growing regions and increasing shipments to Mexico, as we connect new markets and create new opportunities for our grain customers.
Canadian grain volumes grew 3% with increased week to Mexico, and the ramp up of harvest across the Canadian prairies now looking forward.
John: Expect Canadian grain production in line with our five year average and our comps in Q4 and early 2025 are favorable and farmers held on to their crops a year ago.
John: That favorable volume set up coupled with regularity grain pricing of approximately six 5% has us well positioned and Canadian grain.
John: Looking ahead for grain as a whole we are working closely with our customers across all three countries and expect to deliver strong grain results into Q4 and well into 2025.
John: In potash revenues were up 7% on a 20% volume growth.
John: We moved higher volumes of potash with Canpotex to the Portland terminal and demand remains solid and we lap the ship loader outage and the IL W. You strike last year.
John: Since our work stoppage this quarter.
John: Potash supply chain has normalized and demand for export potash service is at an all time high.
John: Coal revenue was up 8% and a 2% decline in volume.
John: Lower natural gas prices weakened demand for U S coal and the strike impacted our Canadian coal shipments to Vancouver in Thunder Bay and the new.
John: Into Q4, we've seen both of these supply chain stabilized, resulting in increased call volumes.
John: At work.
John: Moving over to merchandise energy chemicals, and plastics revenue grew 10% on 6% volume growth.
John: Growth in the quarter was across multiple commodity driven by our self help initiatives synergy wins and more market share gains now looking at Q4 with the ongoing ramp up of these business wins and a growing demand for LPG. We are set up for a solid year end for ECP.
John: Forest products revenues and volumes were both down 1%.
This is an area that continues to be impacted by a soft macro environment and we are experiencing pressure on our base book of business.
John: We were able to partially offset these impacts with our unique synergy grows and our extended length of haul.
John: We're focused on what we can control in this area and the unique opportunities that this franchise unlocks.
John: Confident that we're going to be in a position of strength and the construction and paper markets rebound in the future.
John: Metals minerals and consumer products revenue was down 3% and 8% volume decline that.
John: So much like the forest products area. The softer macro is impacting our base business in this area along with lower volumes of Frac sand and from a steel facility in Mexico as it slowly ramped back up following a labor disruption.
Moving into the automotive area. This business segment produced another record quarter with revenue up 27% on a 37% volume growth.
John: This franchise continues to benefit from our closed loop service solution that we introduced shortly after control the Acs and is developing longer haul volumes across our network.
John: Our new Dallas auto compound along with other investments and auto racks and expanding our Chicago compound have helped us to deliver an entirely new supply chain model for the Oems, giving them new competition service and capacity certainty like they've never had before.
John: Looking forward, we expect our auto business continues to drive differentiated growth as we benefit from these gains and the opportunity to compete for new business in the years ahead.
On the intermodal side revenue was down 5% on a 2% volume growth.
John: Starting with domestic intermodal volumes were down 7% impacted by lower short haul business in Mexico that will be marketed to late last year.
John: And the work stoppage as customers temporarily shifted some of their business to trucks.
John: This decline was partially offset by growth on our MMX 180, 181 Cross border service, which continues to perform extremely well in an otherwise very challenging domestic market.
John: Now looking forward, we have a strong pipeline of opportunities in this area, including wholesale retail shipments and also our temp control service offerings.
John: I would like to also take this opportunity to share my enthusiasm for the Stb's approval of our M N BR transaction.
John: This is just one example of the several unique opportunities that we are developing.
John: Which will continue to offer new optionality in a routing efficiency for many of our customers.
John: On the international intermodal front volumes were up 12%, primarily due to onboarding, our new contract with O N E that started up in June.
John: And lapping the impact of a port strike a year ago.
John: In this space, we are excited as ever about our opportunity to grow our international Cross border service out allowed Roe.
John: More to come as we move into 2025, but we are expanding the scope of our test shipments with a number of key customers, who are interested in creating diversity and adding more resiliency into their supply chains.
John: So to close volumes came in better than expected, excluding the impact of our work stoppage and I'm very pleased we are in position to improve our RPM outlook to mid single digits for the year.
John: And while the macro certainly remains challenging in a few areas. We continue to have line of sight to unique growth opportunities from synergies and self help and strong pricing.
John: Our outlook is supported by the reliable and resilient service that mark spoke to and that our operating team across three countries continues to deliver and I'm very excited of what we've accomplished so far this year and will continue to accomplish in the years ahead with that I'll pass it over to <unk> great.
Speaker Change: Thanks, John and good afternoon. This quarter was marked by strong core performance and the continued execution of our unique strategy that is delivering disciplined growth.
Speaker Change: I'd also like to thank our best in class payment Railroader sees continued focus on execution helped us deliver.
Speaker Change: To deliver these results despite challenges in the quarter.
Speaker Change: Now looking at our results on Slide 12 P. Pkc's reported operating ratio was 66, 1% in the core adjusted combined operating ratio came in at 62, 9%.
Speaker Change: Diluted earnings per share was <unk> 98.
And core adjusted combined diluted earnings per share with 99% up 8% from prior year.
Speaker Change: Taking a closer look at our expenses on slide 13, I will speak to the year over year variances on a FX adjusted basis.
Comp and benefits expense was $644 million or $640 million on an adjusted basis the.
Speaker Change: The year over year increase in comp and benefits was driven by higher stock based compensation, along with inflation and volume driven increases from higher <unk>.
Speaker Change: This increase was partially offset by efficiency gains from reduced overtime.
Speaker Change: Train weight.
Speaker Change: Crew utilization and other productivity gains as we continue to optimize the combined network.
Speaker Change: Looking to Q4, we continue to expect the average head count to be roughly flat on a year over year basis, driving further labor productivity gains as we grow volumes, particularly in bulk.
Speaker Change: Fuel expense was $419 million down 2% year over year. The decline was driven by lower fuel prices and a 2% improvement in fuel efficiency running longer heavier trains, which resulted in $8 million.
Speaker Change: Savings for the quarter.
Speaker Change: These savings were partially offset by volume driven increases from higher GPS.
Speaker Change: Materials expense was $99 million or $98 million on an adjusted basis.
Speaker Change: The year over year increase was driven by higher locomotive maintenance from increased fleet utilization, along with higher GPM and inflation.
Speaker Change: We also in sourced the locomotive maintenance contract in the quarter, which resulted in incremental materials expense, but a favorable offset with purchased services and other for net savings in the quarter.
Speaker Change: Well, then rents for $89 million down 4% year over year. The decline was driven by higher receipts from increased participation in the fleet pool reduced car hire payments along with efficiency gains from improved cycle times and increase network velocity, partially offset by input inflation.
Speaker Change: Depreciation and amortization expense was up 4% year over year, resulting from a higher asset base.
Speaker Change: Purchased services and other expense was $623 million or $599 million on an adjusted basis.
Speaker Change: The line was impacted by lapping insurance proceeds proceeds received in Q3 2023.
Speaker Change: Well, it's higher in the quarter casualty costs and inflation.
Speaker Change: These increases were partially offset by reduced intermodal services expense efficiencies savings and sourcing synergies and savings on insurance renewal.
Speaker Change: I am pleased to see.
Speaker Change: Continued efficiency and synergy gains we expect these gains along with the impact of lower inflation to be sustainable and continue improving our cost structure going forward.
Speaker Change: As we move below the line on slide 14 other.
Speaker Change: Other components of net periodic benefit recovery was $89 million in Q3, reflecting a lower discount rate compared to 2023.
Speaker Change: Interest expense was $192 million or $188 million, excluding the impact of purchase accounting the decline was driven by reduced debt balance.
Tax expense was $262 million or $295 million on our core adjusted combined basis.
Speaker Change: We now expect that <unk> core adjusted effective tax rate to be approximately 24, 75% for the year.
Speaker Change: Turning to slide 15, we are generating strong cash flow with cash provided by operating activities.
Speaker Change: 127 2 million billion in Q3.
Speaker Change: Capital investments in safety and growth remain our priority and this quarter, we reinvested $748 million in line with our continued expectation to invest approximately $2 75 billion in 2024.
Speaker Change: As Mark discussed we continue to make strategic investments in capacity across our network positioning us to continue sufficiently absorbing the growth that this merger has enabled.
Speaker Change: We generated $523 million and adjusted combined free cash flow and continue to repay debt.
Our leverage ratio is three one times and we still expect to reach our target leverage of two five times in early 2025 at which point, we will evaluate shareholder returns with our board.
Speaker Change: And our review of the quarter. The team continued to deliver industry, leading volume growth along with continued discipline on price and cost control.
Speaker Change: The net impact of that work stoppage was a 100 point basis point headwind for the quarter, primarily driven by the loss in revenue from temporary diversion.
Speaker Change: Apply chain delayed.
Speaker Change: That event, along with higher casualty the stock based comp prime for a 300 basis points or 11%.
Speaker Change: Year over year, Q3, operating ratio and EPS, respectively.
Speaker Change: As all of these impacts were isolated in the quarter, we believe that we're well positioned for a sequential and year over year or improvement in Q4.
Speaker Change: Our strong core performance puts us well on track to deliver double digit core adjusted combined earnings growth in 2024, and mid single digit volume growth, which is an improvement from our view at the beginning of the year.
Speaker Change: History, leading.
Speaker Change: This all adds up as strong positive momentum as we head into 2025 and feel good about the opportunities that we have with that let me turn things back over to Keith Okay. Thanks, Nadeem, John Mark Operator, let's open it up for questions.
Speaker Change: Thank you and if you'd like to ask a question simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question Press Star then two as previously highlighted please limit yourself to one question. Your first question comes from Chris Wetherbee from Wells Fargo. Please go ahead.
Chris Wetherbee: Yeah, Hey, thanks, good afternoon, maybe if I could start like kind of higher level level. Keith I was kind of curious if I could get your take on what we've seen coming out of Mexican legislation potentially about some rail reformed down there wanted to get a sense of how you guys are thinking about that is that something we should be concerned about from a risk perspective.
Keith Creel: Yeah, Great Great point, Chris I think the best way.
Keith Creel: I kind of summarize the way I feel about it is encouraged.
Keith Creel: We.
We have some progress.
Keith Creel: Face to face meetings, and clearly understood the mandate from the previous government I would say that at this point everything that's happened with the new President has only reinforced that and in fact expanded upon that I was very encouraged.
Keith Creel: To hear a couple of weeks ago I guess it was on a Sunday at Cattrall, which is where the aspirational pastor training.
Keith Creel: Destiny, two from Mexico City, along all right away, the president announced that not only have been committed to and our platform, but the vision is the tax rate created a dedicated corridor for two passenger tracks in the adjacent right away.
Keith Creel: So I think it uniquely complements the other thing I've been encouraged by it's our commitment to the environment.
Keith Creel: Her comments relative to the need to get trucks off the road to create additional highway capacity he friendly to the environment and bring additional business to the railway. So we are part of the solution and as long as you're part of the solution.
Keith Creel: Think with.
Keith Creel: With a very sovereign countries, it's focused on growth and being part of a strong passionate commerce.
Speaker Change: This is Tim I think you are in a good spot so again encouraged.
Speaker Change: Okay. That's helpful and just one point it sort of clarification just to give you talked in the short term about some improvement both sequentially and year over year and the operating ratio in the fourth quarter I don't know if maybe you could put a little bit of a finer point on some of the opportunity here, because obviously <unk> seem like they're ramping back up there is great opportunities in the fourth quarter that could be probably accrete.
Speaker Change: From an or perspective or any other incremental thoughts we should thinking about for the fourth quarter specifically.
Speaker Change: Yeah. So we added that labor disruption that had a 100 800 basis point.
Speaker Change: Going to the office or in Q3, obviously, we had a very unfortunate derailment and boardwalk North Dakota that was about a 60 million dollar expense hit and.
Speaker Change: So those are two unique items stock based comp was a was a big headwind in Q3, so when I look at it.
Kind of those one time items not occurring again in the fourth quarter and I look at the opportunity for operating leverage grain is has started off quite strong. We've got a robust crop ahead of us we've got a strong book of work here as a whole. So you factor all of that together and the ability to move it at a low incremental cost.
Speaker Change: Chris.
Chris Wetherbee: I believe that we have the opportunity sequentially to have a 500 basis point improvement in the or mistakes here.
Speaker Change: I appreciate the time thank you.
Speaker Change: Thank you and your next question comes from Walter <unk> from RBC capital markets. Please go ahead.
Thanks, very much operator, good afternoon, so I'd like to talk a bit about your volume growth here I mean, you.
Speaker Change: You increased your projection here.
Speaker Change: Our expectation for this year just curious.
This is on a backdrop of still a weak a weak macro environments, you, presumably you're getting a lot of kind of esoteric volumes here can you talk a little bit about those and in particular is it causing you to somewhat rethink your your 28 targets of $1 5 billion or revenue.
Speaker Change: Synergy on the upside or even your $5 billion.
Speaker Change: Kind of revenue pipeline.
Speaker Change: As you as <unk> seen a little bit more opportunities and what's developing this new network or are you seeing upward revisions to that kind of.
Speaker Change: That kind of outlook.
Speaker Change: Well, maybe I'll start Walter Thanks for the question.
Speaker Change: Focusing on the near term as the team is already spoke about our bulk franchise is very encouraging.
Speaker Change: Not only do we have a strong Canadian grain crop.
Speaker Change: Think it's.
Speaker Change: We're in a well known and moving well, but we also have a really strong crop not only in our upper Plains, North Dakota, Minnesota region, but also down in our Missouri legacy Acs region. So so really.
Speaker Change: I'm going to say that the perfect storm as it relates to grain and opportunities to move a lot of freight in that space.
Speaker Change: At low incremental margins.
Speaker Change: Now if you look beyond that in the bulk.
Speaker Change: We've got as I said record potash demand.
Speaker Change: Yeah, you know coming from Canpotex on the export front, but also given some of the struggles.
Speaker Change: Mosaic and others had in Q3 on the domestic front, we have a really strong domestic.
Speaker Change: Paul right now also so I feel really good about.
Speaker Change: The fertilizer and potash space and frankly, we have some catch up to do with.
Speaker Change: Elk Valley and in our coal opportunities not only in Canada, but also a fair amount of maybe stronger demand on our some of our legacy coal franchise in the U S. So the bulk of our setup well, we've seen an uptick in our domestic intermodal.
Speaker Change: Business across Canada, and we continue to perform well.
Speaker Change: Mmm service I think the last time.
Speaker Change: If you kind of neutralize for for some of the headwinds on the business.
Speaker Change: That left our network are up 27% I believe on the year.
Speaker Change: And in growth on that on that training so good.
Speaker Change: Good outlook there international intermodal.
Speaker Change: Frankly since Covid, it's been tough to really tell how those international intermodal volumes.
Speaker Change: <unk> will move up and down but the lineup right now to close out the year with our.
<unk> continues to look strong.
Speaker Change: In fact, we're seeing some really good growth.
Speaker Change: Florida St John.
Speaker Change: With with our services out there so I feel feel pretty decent about the intermodal area.
Speaker Change: We're going to continue to battle and some of the those merchandise in forest products areas for the foreseeable future, but I think what makes us unique and maybe to your part of your question is.
There's so many.
Speaker Change: The extended length of haul and new business development opportunities in the ECP space, the Leverages franchise and frankly in the merchandize in forest products space also that we've been able to I would say maybe outpaced the industry a little bit.
Speaker Change: And in those areas and what gives me comfort as we start to see any sort of rebound and some of those macro areas that I think it's going to be.
Speaker Change: Quite a tailwind so.
Speaker Change: All that to say I feel comfortable with can only fit.
Speaker Change: Roughly around 4% rpms year to date right now.
Speaker Change: I see the demand out there to improve on that.
Speaker Change: As we move through the final couple of months.
Speaker Change: Of the year work hard with our customers and the supply chains.
Speaker Change: To make that happen and frankly.
I certainly believe alter the future is bright as I look into.
Speaker Change: Into the future and what 2025 and beyond looks like but I think I'll leave it at that in terms of what our outlook is.
And those out years.
Speaker Change: That's great color I appreciate it John.
Speaker Change: Yep. Thank.
Speaker Change: Thank you. Your next question comes from Jon Chapelle from Evercore ISI. Please go ahead.
Speaker Change: Okay.
Jon Chapelle: Thank you John I'm going to stick with you from any way, we measure yield whether it's you know Rutherford.
Jon Chapelle: Our T M or revenue per carload, the numbers look pretty strong.
Just generally on kind of core pricing momentum, but also I just wanted to highlight auto and intermodal from a revenue per RPM perspective little bit of pressure. There was that a length of haul issue or was that a new service kind of.
Jon Chapelle: Mark to market or were there any kind of a more extreme competitive pressures in those segments that maybe had been lag the core portfolio.
Speaker Change: Yes, Thanks John.
I get that.
The stats are automotive length of haul in the quarter was up 17% and our intermodal length of haul up 20%.
Speaker Change: That is exactly what you saw in.
Speaker Change: Those numbers.
Speaker Change: And all I would say I am.
Speaker Change: I'm confident Sandler this team is hitting it out of the park in terms of pricing for the value of the service and the capacity that this network has.
Speaker Change: Super pleased with our year to date performance.
Speaker Change: To be candid, we're actively running north of 5%.
Speaker Change: In a lot of those discussions and outcomes without those contracts again.
Speaker Change: Well I think we feel good about that as you know.
Speaker Change: We do that that gives us a nice tailwind as you think about 2025 and what our same store looks like now.
There's certain areas, where we're spending more pressures in and certainly the intermodal space with all the trucking capacity in the cheaper spot rate for trucks.
Speaker Change: That has been a little more challenging.
But I'd love to meet you start to see a little bit of tightening as we move into 2025 in that space.
Speaker Change: Honestly, there may be a little bit of catch up opportunity.
Speaker Change: I guess, maybe the last point Guy and I think.
Speaker Change: And just to point out is if you look ahead into Q4 as you know we are looking at a pretty.
Significant fuel headwind.
Speaker Change: As it relates to that sense for RPM.
Speaker Change: Maybe just something to keep an eye on.
Speaker Change: Helpful. Thank you Dan.
Speaker Change: Thank you. Your next question comes from <unk> from BMO capital markets. Please go ahead.
Speaker Change: Yes, good evening thanks.
Speaker Change: Kind of staying on the commercial side a little bit.
Speaker Change: So the Gemini Alliance type thing and now some some schedules that they start up service in February.
Speaker Change: And we've noticed kind of the highlight.
Speaker Change: Highlighting some reports that you serve being part of that loops.
I was wondering if you have any insight into.
Speaker Change: What this might mean or translate into your network or your share in that kind of.
Speaker Change: You've been a long if as we go into 2025.
Speaker Change: And kind of follow up on some of the discussion earlier.
Speaker Change: If you're not prepared at this point to.
Speaker Change: Talk about volume growth guidance for 2025 can you give us an idea of what.
Speaker Change: You feel the synergy pipeline will look like as we progress into 2025, I think you said in the prior call 800 million exit run rate for 'twenty four what does this look like 12 months from now if you can provide any.
Speaker Change: Kind of insight into that thanks.
Speaker Change: Okay.
Speaker Change: So a few pieces to unpack there Patrick.
Speaker Change: Start off with Gemini.
Certainly we have had.
A long standing and and really I would say strategic at the highest levels relationship with half thank Lloyd.
Speaker Change: Tremendous.
Speaker Change: The amount of respect between our companies to grow.
Speaker Change: To expand our partnerships, where we can be very strategic.
Speaker Change: So certainly we feel very good about their their prominence as a part of that alliance.
Speaker Change: As you know also we have expanded our relationship over the years, most recently with with Maersk in the development of our trans load facility and in Vancouver, where are we.
Speaker Change: We utilized our land assets and built partner with them to built that they'll that facility, but also we've steadily grown our trust in our relationship with their ipi business.
Speaker Change: Not only into Canada and down into the U S. So kind of naturally I think we feel really excited about the the Gemini opportunity frankly, they're precision model that they want to deploy.
Speaker Change: And how they deploy their shifts in their assets and their port terminals really matches up philosophically lift with how mark and Keith drive our rail operation.
Speaker Change: On a daily basis, and I think that could yield a really positive strategic relationship.
Speaker Change: It's in the early days and we're working through what with that to kind of look like.
Speaker Change: Just take for instance, Lazar up you know.
Speaker Change: And specific to the synergies you were asking about that.
Speaker Change: That's an area where.
Speaker Change: It hasn't grown and that opportunity for cross border out allowed throw maybe hasn't grown as much as we initially thought or as fast as we initially thought but with APM terminals.
Speaker Change: And making the investments, they're making and I think the commitment Gemini has to grow that business along.
Speaker Change: Along with the investments that Hudson banking, we see a tremendous opportunity just begin to see that volume grow.
Speaker Change: Through that Lazarus terminal I will mentioned you lateral is still the fastest growing north American port that's out there I think year to date, 32% in the last I saw volumes are up I can tell you our rail volumes were up 27%.
Speaker Change: Now again, the majority of that is servicing domestic Mexico.
Speaker Change: But again, we are seeing.
Speaker Change: Fair number of I would say singles and doubles as we expand that service.
Speaker Change: Maybe the last piece on Gemini and I think that's worth mentioning is.
With the investments that DP World is made at the port of St. John.
Speaker Change: It's really beginning to unlock that next step function of capacity.
Speaker Change: That terminal.
Speaker Change: From the.
Speaker Change: 300000, Teu a year potential to 800000 teus year with with the development and in addition of <unk>.
Speaker Change: Cranes at that at that Port. So again I think just another example of how we potentially beliefs.
Speaker Change: The partnership and an expanded service calling into that port to generate growth in 2025.
Speaker Change: Yes.
Speaker Change: Specific to the synergies and the exit run rate I continue to feel really good obviously you only got a couple of months to go with our exit run rate of $800 million.
Speaker Change: To close out this year.
Speaker Change: Probably not allowed to give you any guidance beyond that into 2025, others that I feel no reason why.
If we keep doing the things we do we execute on these business development opportunities.
Speaker Change: And then B R. The allowed ROE in the Gemini you'll begin to see our Americold project in Kansas City and other locations.
Speaker Change: We continued to gain momentum with our Amex service North South I see no reason why we can't see that that synergy number continue at the pace of growth that you've seen through the first I guess two years.
Speaker Change: Our of our control.
Speaker Change: That's great. Thanks.
Speaker Change: Okay.
Speaker Change: Thank you and your next question comes from Scott Group with Wolfe Research. Please go ahead.
Scott Group: Hey, Thanks afternoon, guys. So.
Scott Group: Don't know if the spring nadeem or Keith as I think back to the analyst day last year, you talked about a sort of a multi year high single digit revenue I guess, probably mid to upper teens earnings growth and I think you told us 24 might be less than that right. Because you don't have the buyback yet.
Scott Group: It sounds like the buyback is going to start next year or so.
Speaker Change: Again, Nadeem, Keith any puts and takes we should be thinking about for next year.
Scott Group: That you know about at this point that Meek.
Scott Group: <unk> algorithm more or less likely to play out.
Scott Group: Yeah, It's Scott I mean, obviously, we will give our formal guidance in January.
Q4 results, but but I think you captured it well nothing is changing as far as.
Scott Group: Our multiyear outlook.
Scott Group: We're holding the line in terms of what we guided to last June which was as you said high single digit revenue growth double digit EPS growth capex of around two six to two eight range.
Scott Group: And as you said.
Scott Group: We're not getting the benefits of a buyback now.
Scott Group: But we should start seeing that.
Scott Group: That benefit.
Speaker Change: Yeah next year once we agree to reinstitute our buyback program.
Speaker Change: So as I look at where we're exiting 2024, yeah. We know we've got a strong crop ahead of US we know some of our key wins in.
Speaker Change: Synergy opportunities are going to give us.
Speaker Change: A very either idiosyncratic opportunity to grow and be a industry leader in growth.
Then next year I would fully expect so you.
Speaker Change: You can you can assume that what we guided to is we'll start hitting our stride in 2025.
Speaker Change: So no.
No reason why we shouldnt be able to take what you just mentioned in terms of our our 2025 lenders.
Speaker Change: Helpful. Thank you guys.
Speaker Change: Yes.
Speaker Change: And your next question comes from Tom <unk> with UBS.
Speaker Change: Yes, good afternoon.
Speaker Change: Wanted to see John if you could give some thoughts on what where you might be more optimistic in 2025, just in terms of which markets do you think can really.
Speaker Change: <unk> continued to go strong and be drivers of growth and then also I guess Mark you know Mark made some comments at the beginning about some capacity investments that are potentially enable you to.
Speaker Change: I don't know if that creates more growth opportunity.
Speaker Change: As you add some capacity, but just some thoughts about where should we be most optimistic in 'twenty five in terms of specific markets.
Speaker Change: Thank you.
Speaker Change: Thank you Tom.
Speaker Change: So.
Speaker Change: 2025 could shape up.
Speaker Change: At least in my mind.
Speaker Change: A little bit how we're closing out this year in terms of.
Speaker Change: I don't know, what we're going to get out of the organic base, but if we're going to see a turnaround in rebound some tailwind there I'm certainly hoping for but we're not counting on it.
Speaker Change: Got it.
Speaker Change: And a rinse and repeat in terms of self help initiatives and over deliver the synergies and in it and it's really that lift that I just spoke to that excites me I I do believe.
Speaker Change: There's opportunity for good growth in international intermodal.
Speaker Change: Not only with with Gemini as I spoke to.
Speaker Change: Quite a bit.
Other with other players and now with our diversity of cross Vancouver, St John and and down in Labs ROE I think gives us a strong growth platform.
Speaker Change: Ramp up of Max.
Speaker Change: I still get Mark.
Speaker Change: Mark on me quite a bit that we're not running long enough trains and that that that service and so I have a definite opportunity to continue to price into and fill up that that north South service.
Speaker Change: Now the good news is I see a strong pipeline of opportunity.
Speaker Change: On dry van on auto parts on a whole variety of different items, and we haven't even really scratched the surface on our refrigerated product I'll remind you that that facility that americold building will be up and running here, let's call. It June July of 'twenty five.
Speaker Change: But I can also tell you we've been very candid about this is about creating an ecosystem.
Speaker Change: It's about creating a differentiated product in the marketplace.
Speaker Change: That really can go after truck.
Speaker Change: Volumes that are moving today.
Speaker Change: I see the opportunity.
As we move into 2025 to expand the number of terminals. We have co located in this area.
Speaker Change: Hi.
Speaker Change: Two or three or four more facilities.
Speaker Change: Which again gives us that ecosystem that excites me.
Speaker Change: And maybe one last area and we don't talk about a lot is our carload business Tom.
Speaker Change: It's an area of kind of the world is singles and doubles.
Speaker Change: But again also really accretive in our.
Speaker Change: Business to our portfolio and and the team there has done a great job as I think about it.
Speaker Change: And our presence in the markets in Texas, particularly Dallas, how do we continue to expand our fuels terminals and <unk>.
Speaker Change: Toronto and Eastern Canadian markets, and then also the <unk>.
Speaker Change: Ongoing demand that we're seeing really as you think about that Gulf region to grow our aggregate business down in there and creating trans loads and solutions.
Speaker Change: To service those markets so.
Speaker Change: Those are those are a few of the key ones that I and I really didn't mention autos, Tom if you think about that area.
Speaker Change: We still have a lot of contracts out there that that will be rolling over that we think we've got a really good service product to offer those Oems.
Speaker Change: Great that's very helpful.
Speaker Change: From a capital side, what I would say John brings this business on obviously, we still need to work on getting some of these local health of mainland where we can't pass trains we talked earlier and that's what we've what we're focused on what makes your yard separations local separations, we could continue to run an operation.
Speaker Change: Parallel with the throat services.
Speaker Change: The biggest.
Speaker Change: The biggest thing you will hit this year is really double the capacity of our Laredo Bridge.
Speaker Change: <unk> made that investment we finished it will bring it across the finish line here soon and that will create a lot of capacity to get across the bridge.
Speaker Change: 81, 180, amongst other grain and other products that could come across as well. Another piece is really just Kansas City, just as we treated it as two railroads years ago as we look at it today as one network, we don't want to drive everything into Kansas City, where when accretive path, where we get bypass Kansas City for for dwell purposes for <unk>.
Speaker Change: <unk> for car miles per car day, so working through those capacity changes as well so Jackie can continue to grow the business, where we could start with customers as they expect us to zero.
Okay.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you and your next question comes from him Kenn Hoekstra with Bank of America. Please go ahead.
Speaker Change: Hey, great. Good afternoon mid team that was a great rundown before on the potential for 500 basis points sequential improvement you talked about the 100 basis point impact can you clarify you just went so quick that the 300 basis point impact you just weren't there I just want make sure I understand the difference and then my question for John is his thoughts on potential for additional.
Speaker Change: Paris, if we get an administrative change here.
Speaker Change: Thoughts on imports to Mexico, Canada, maybe cross border how should we be thinking about that says as we prep over the next few weeks.
Yes, Ken the year over year impact stock based comp was.
Speaker Change: As part of that the 300 basis point and then we had a 50 million dollar increase year over year on an derailment costs.
Speaker Change: $60 million came from one in particular and boardwalk, so that combined with a 100 basis points from.
Speaker Change: The impact of the work stoppage.
Speaker Change: Is the full 300 basis points.
Speaker Change: Thanks.
Speaker Change: Yeah, Ken I look at.
Speaker Change: A little bit of a wait and see obviously on how that that's kind of play out.
Speaker Change: Yeah, I'm really can encourage that basin.
Speaker Change: Comments, Keith made earlier around kind of the administration in Mexico, staying in line or maybe even double down a little bit here, most recently around the desire to grow and to support.
Speaker Change: Commerce in Mexico to support in North America.
Speaker Change: Okay.
Speaker Change: Resting a little bit on the fact that you know.
Speaker Change: Whatever administration comes in to play I think commerce for North America is as important then.
Speaker Change: And ultimately I think whether you look back at the current administration or maybe the one previous to that that that is what won the day.
Speaker Change: You know U S. MCA was obviously created.
Speaker Change: The first the Trump administration.
Speaker Change: And ultimately turned into a I think a good piece of policy for the three countries.
Speaker Change: So we'll navigate it obviously staying close with our customers.
Speaker Change: Harmless file we're gonna be active no doubt with with whatever government in place in the U S and also in Mexico, Mexico and Canada.
Speaker Change: And we will navigate whatever.
Speaker Change: Those tariffs or may or may not look like as we move into the future.
Speaker Change: Great. Thanks, John.
Speaker Change: Alright.
Speaker Change: Your next question comes from Brian <unk> with Jpmorgan. Please go ahead.
Yes. Thanks appreciate you taking the question so.
Speaker Change: Maybe just a couple quick follow ups for John there.
Would you say you've already felt some of the impact of this uncertainty with constitutional reform the passenger rail just to the.
Speaker Change: The broader tariff question can the elections.
Speaker Change: The transition of both administrations in the U S and Mexico.
Direct investment has been pretty soft for a little while so do you think you've already felt and seen some of this and the potential for it to improve when there's some uncertainty in terms of what the rules of the game arm and then just maybe more specific it looks like there.
Speaker Change: There's been some trouble south of the border with your competitor handling some of the green shipping over there. So can you talk about a strong grain harvest in the second bridge at Laredo.
Speaker Change: That's an opportunity for you.
Speaker Change: You guys pick up some additional share given the circumstances.
Thanks.
It's hard to tell.
Speaker Change: In terms of any sort of.
Speaker Change: Impact.
We were talking about it actually prior to the call a little bit.
Speaker Change: Theres, so much activity thats been announced.
Speaker Change: And in Mexico to.
Speaker Change: The auto industry.
Speaker Change: Plastics appliances white goods.
Speaker Change: That continue we continue to work through with those customers down there that presents huge opportunities for our cross border shipments.
It really gets tough for me to see.
Speaker Change: Is there a marked slowdown or not I think my my answer is no I really haven't seen any effect at this point and actually just most recently I can tell you we are down in front of some folks adjusted.
Speaker Change: Announced some recent production down in Mexico, and there was no apprehensive nets from them whatsoever in terms of moving forward with with their investment and that was foreign investment coming into Mexico.
We're going to have to just see how how that plays out I think the fundamentals just continue to spark a north American economy continue to make sense.
Speaker Change: You mentioned about the grain company Green challenges and that yeah, I think we've certainly seen some opportunities migrate to.
Speaker Change: Two to our network.
Speaker Change: But I'll also tell you.
Speaker Change: And you've heard this from US a long time, we're not gonna oversubscribed, we're not going to oversell or we're going to be very disciplined and what those opportunities look like and that's it for me.
Speaker Change: We're not willing to work with our our other class one partners because we certainly we are we are in and we do but.
Speaker Change: But I also want to make sure that if we're going to take on some new business down in those lanes that mark and his team can execute it.
Speaker Change: As we've said a number of times building that trust with the customers is paramount.
Speaker Change: Once you burn them it becomes a lot harder sell to get it back on on your railroad.
Speaker Change: And then I guess lastly, you said that.
Speaker Change: The second bridge, you're darn right I believe it's a huge sales tool.
Speaker Change: It is it is something that myself and my team and our team down in Mexico are making sure our customers understand that additional capacity left.
Speaker Change: That we're going to gain.
That not only will continue.
Promote I think world class fluidity through Laredo.
Speaker Change: But also give us the capacity to grow and grow with certainty with those those opportunities that I'm talking about.
Speaker Change: <unk> presents a.
Speaker Change: Significant opportunity for my team and in the future.
Speaker Change: Very helpful. Thank you John.
Yep.
Speaker Change: Thank you. Your next question comes from Steve Hansen with Raymond James. Please go ahead.
Steve Hansen: Thanks for your time guys John I wanted to follow up on your last comments on Green I think you've spoken pretty positively to the north South Green movement here for the past two or three quarters now, it's obviously somewhat crop dependent but how would you characterize your progress so far in green and establishing that new north South corridor.
Steve Hansen: Hopefully they would be trying to work on relative to maybe your initial expectations. Thanks.
Speaker Change: Yeah, I'd say, we're ahead of pace.
Steve Hansen:
Steve Hansen: A little bit on that front. If you just think about our makeup of synergies.
Steve Hansen: And grain Thats coming off of the legacy CP network.
Steve Hansen: Terminating our legacy KC ups network, or where I would think ahead of ahead of pace, but nowhere, where I want to be on that front Steve.
Steve Hansen: I am.
Steve Hansen: Truly believe we're just scratching the surface in terms of creating optionality for those grain companies to sell into different markets.
They've never had in the past I am.
Steve Hansen: I would always tell me I always can claim that that I didn't have enough grain markets for for my shippers and we don't have that excuse now.
Steve Hansen: We've got a really good service product to go into the south and into Mexico.
Steve Hansen: So I'm Super excited.
Steve Hansen: Cited about 2025 can bring in that space in terms of not only grain out of out of Canada.
Steve Hansen: Down into Mexico, but across all of our upper plains terminals.
Speaker Change: And I think Steve Allen.
Speaker Change: Steve I would add to the.
Speaker Change: You can't underestimate.
Speaker Change: The power and the value to the customer of a reliable fluid gateway.
Speaker Change: That gateway as a single line gateway only grown stronger with more capacity they alternative to competitive alternatives its very congested gateway.
Speaker Change: Much more complex because you got three row railroads involved as opposed to one it just by nature that complexity adds additional.
Speaker Change: Risk to the supply chain. So in these times when a competitive alternative is.
Speaker Change: Challenge as it has been challenged it even makes the value proposition for our route even more compelling.
Speaker Change: Makes sense, okay. Good color.
Speaker Change: Thank you. Your next question comes from Ravi Shanker from Morgan Stanley.
Ravi Shanker: Thanks, everybody one.
Ravi Shanker: So just a follow up.
Ravi Shanker: They've shown a shift by customers towards the <unk> service.
Ravi Shanker: And in recent months is that just maturation of the offering.
Ravi Shanker: Since you launched it or has something changed recently with your commercial and go to market strategy there.
Speaker Change: I think you've called it right. It is a maturation that's it.
Speaker Change: Going through the sales cycle and process that's going through.
Speaker Change: Yes.
Speaker Change: For example, we have one customer that we literally test in one box a day for 45 straight days and every day and measured our performance on a per box basis to see if we can deliver what we said we're going to deal.
Speaker Change: And I'll tell you. The good news is we did exactly what we said we're going to do and they rewarded us with a significant piece of the business.
Speaker Change: That's actually starting up that as we speak so I do believe it's a natural progression I'll tell you doing it in the face of that sort of trucking challenge in that.
The headwinds of all the capacity in that quarter that that's out there now has been.
Speaker Change: A little bit of a surprise in more of a challenge than than I anticipated.
Speaker Change: Pleased with the work our sellers have done Schneider our partner in that corridor has really worked hard and performed quite well and when do you begin to now be able to expand your sales offering with our products such as <unk> and meridian speed.
Speaker Change: Way, either <unk> or the <unk> now.
Speaker Change: With this transaction just kind of continues to open up the portfolio of options. We can we can offer shippers so.
Speaker Change: I continue to be optimistic that you're going to.
Speaker Change: Youll see more of a step function of growth in that train per.
Speaker Change: Very good thank you.
Speaker Change: Your next question comes from Ari Rosa with Citigroup. Please go ahead.
Alright.
Speaker Change: Are your line is open.
Speaker Change: [music].
Speaker Change: Quite a lot.
Speaker Change: We'll go next to <unk>.
Speaker Change: <unk> from does agendas capital markets.
Speaker Change: Thank you very much and good evening everyone.
Obviously labor shoes have been very topical this year.
Speaker Change: When we look at the volume in Mexico, we've seen a great cross border activity levels. So I was wondering whether there was any pull forward in demand.
Speaker Change: With respect to the U S election, and also John you've been able to quantify that labor issues impacted the RPM by about 3%.
Speaker Change: During Q3.
So was just wondering about whether you see unfortunately.
Speaker Change: To recover and maybe.
Speaker Change: Latest discussion with shippers retailer about the opportunity to to get back this volume on the network.
Speaker Change: And that's work.
Speaker Change: So can you.
Speaker Change: Just a couple of comments there.
Speaker Change: I do believe we saw a fair amount of pull forward, but maybe not on it and our SaaS product but.
Speaker Change: Ahead of our labor stoppage.
<unk>.
Speaker Change: Just ahead of that in August July and August.
Speaker Change: Now I think if normalized and as I said actually we've seen now.
Speaker Change: As we move into October on the domestic intermodal front, I think a little bit of an uplift in our volumes our transit volumes and we're optimistic at least the customer feedback seems to be that we're going to see that continue to close out the year.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: The 3% Rpms.
Related to the strike.
Speaker Change: I think the good news is the bulk of that business was our bulk business.
Speaker Change: And all of that potash call grain.
Speaker Change: Opportunities like that that simply will roll forward.
Speaker Change: And it's part of the reason why I when I say, we've got record demand for coal in Q4, we've got record demand for potash in Q4 part of that is that roll forward. So it's not lost now certainly we lost some.
Speaker Change: Domestic intermodal in that but I think thats kind of washed itself out of the system already and as I said, we've actually seen a little bit of pickup in that volume. So.
Speaker Change: I'm not that was the impact over those days are not.
Speaker Change: I don't have any concern.
Speaker Change: Plenty plenty of freight out there for us.
Speaker Change: Both the year strong.
Speaker Change: That's great color John Thank you Yep.
Speaker Change: Thank you and we have run out of time, So I will now turn the call back over to Mr. Keith Creel.
Thank you listen I appreciate the time this afternoon sitting with us and discussing our results.
Speaker Change: Okay.
Definitely agree which you've heard in spite of the macro we continue to be a very unique value creating story at CP Casey.
Speaker Change: Facing.
Speaker Change: The industry's growth most importantly, bringing it to the bottom line safely and efficiently we've created a premium network unparalleled.
Speaker Change: Our industry with new growth opportunities and this team has and will continue to convert at creating unique.
Speaker Change: For our shareholders.
Speaker Change: Stay tuned for our fourth quarter results.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you and that concludes today's conference. We appreciate your.
Speaker Change: Your participation and please have a wonderful day.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.