Q3 2024 Canadian Pacific Kansas City Ltd Earnings Call
Speaker Change: [music].
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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: 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 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.
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 financial supplemental Q3, combined revenue and operating performance data available at investors thought C. P. R.
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.
Speaker Change: <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 Creel.
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 strong shipper.
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 the marketing tools faced 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 get them back in shape as far as the challenges I'm, telling you would probably say we remain on track to deliver full year guidance of double digit earnings growth.
Okay.
Keith Creel: Which is better than what we had projected earlier.
Keith Creel: Earlier in the year, so specific to the results for the quarter. The safety case gene family delivered revenues of $3 5 billion, which is up 6% strong volume growth and increased 4% and operating ratio of 62.9, earning.
Keith Creel: Earnings per share of <unk>.
Which is an increase of 8% most importantly from a safety perspective, continuing improvement the train accidents decreased 17% personal injuries, increasing 8%.
Keith Creel: Operating close to finish strong performance across the network, which mark will provide a bit of color too, but I'd like to specifically recognize.
Keith Creel: The operating team specific to those challenges with the strike did an exceptional job.
Keith Creel: Foreign bouncing back.
Keith Creel: The artic shipping expense as a result of the strike commercially John as long as well continuing to generate industry best sustainable profitable growth.
Keith Creel: On delivering unique products to the market with strong service offering to our customers as reflected in the results that we're 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 from the STB pardon me direct connects what does she effects local Mexico, Texas in the U S South east or they 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 that were established with the C. 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.
Keith Creel: Trucks off the road. It's another example, again at this unique growth story.
Keith Creel: D. G. H T franchise is deliberate on the hydrogen locomotive brought another milestone reached in the quarter.
Keith Creel: When it comes to our hydrophilic water program in early September I'm very pleased to say that our first high horsepower.
Keith Creel: Come out of a lot with the field center join the cool concepts to three diesel locomotives and following a fully loaded.
Keith Creel: Both training and our western.
Keith Creel: Canada Corridor circle Rhopressa of achievement, the demonstration will get them this company's commitment to leadership in sustainability.
Keith Creel: So let me say in closing I'm proud of the results of tons produced were off to a strong start with the fourth quarter with a great position for a strong finish to 'twenty four.
Even more exciting transition into 2025 and momentum with that.
Keith Creel: I'm going to hit a couple of more provide some comments on their operating performance China provide color on the markets and they gave him a wrap up of libraries enrollment numbers.
Thank you Keith and good afternoon.
Speaker Change: Looking at the quarter I'm extremely.
Got a railroader is probably continued hard work.
Speaker Change: Safe and reliable service in the third quarter, we continued to drive strong year over year operating improvements, but look at the.
Speaker Change: Average terminal dwell.
Speaker Change: <unk> declined 8% average train speed increased by 6% locomotive productivity improved by 8% and just to round off the fuel efficiency improvement of about 2%.
Speaker Change: These results demonstrate again, our fishing fluid resilient network that is delivering strong service to our customers.
Speaker Change: These results are particularly impressive given it would be.
Speaker Change: Challenges, we faced in the quarter I'm proud of the resiliency of the network.
Speaker Change: Right.
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: Pleased to say that we have a quick and efficient.
Speaker Change: Transitioning back to normal operations I'll be Frank It was probably one of the best that 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 and our rail partners to minimize the interchanges and disruptions 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 and strong service to.
Speaker Change: And our customers expect.
Speaker Change: Thank you to all the railroad has contributed to this outcome.
Speaker Change: Looking at the safety for the quarter, if I look at F already train accident frequency of one point to seven 8% an improvement year over year.
Speaker Change: Personal injuries and zero point 85, with 17% year over year improvement I'm pleased with these results safety. It's a journey will always drive for further apartment.
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.
Speaker Change: These inefficiencies significantly reducing slaughters across the network and also train delays.
Part of the the leverage data from them and basketball and autonomous geometry testing cars to help us accurately plant preventative 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 C P or excuse me the legacy Casey's fleet.
Speaker Change: We can lead trains in Canada by end of year, we'll have about 175 upgraded locomotives to be falling interchangeable across North American network looking.
Speaker Change: Looking at capital.
We're executing to our plan to support safe and sustainable growth through the investment other network through the first three quarters, we have been serving six new sidings as part of the 275 million merger commitment capital commitment. So you saw us it'll be targeted by the end of the year, along with the capital projects centered around Kansas City area that won't.
Speaker Change: Come on line this year as well.
Speaker Change: Capacity in Kansas City will further.
Speaker Change: Help us a lot of an extreme amount of connection between the two networks to legacy networks affirming our services as key corridor.
Speaker Change: We've also and service new sidings in Mexico, along with crossovers attract realignment in our estimate Hilliard proving our capacity and fluidity on a key and growing segment of our network.
Speaker Change: Additionally, Saudi is another investments in Mexico capacity are underway scheduled to go in service in Q4.
Speaker Change: 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 line, increasing 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 the year.
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 tests completed in Q4. This is a tremendous accomplishment.
Speaker Change: As a result of a lot of hard work and dedication to 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.
Now looking at our results this quarter, we delivered free revenue growth of 6% on a 4% increase in Rpms. This performance was despite the four day work stoppage that 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: Now taking a closer look at our third quarter revenue performance I'll speak to the FX adjusted results starting with bulk grain.
<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.
John: 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: Now that favorable volume set up coupled with regularity grain pricing of approximately six 5% has us well positioned in Canadian grain. So 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.
John: Well into 2025.
John: In potash revenues were up 7% on a 20% volume growth.
John: Moved higher volumes of potash with Canpotex to the Portland terminal.
John: Demand remained solid and we lap the ship loader outage and the IL W. You strike last year.
John: Since our work stoppage this quarter the potash supply chain has normalized and demand for export potash service is it had 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, and Thunder Bay.
John: As we move into Q4, we've seen both of these supply chain stabilize resulting in increased call volumes on our network.
John: Moving over to merchandise.
John: <unk> chemicals, and plastics revenue grew 10% on 6% volume growth.
John: Volume growth in the quarter was across multiple commodities 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.
Forest products revenues and volumes were both down 1%.
John: 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: Were able to partially offset these impacts with our unique synergy grows and our extended length of haul.
We're focused on what we can control in this area and the unique opportunities that this franchise unlocks.
John: Confidence that we're going to be in a position of strength as the construction and paper markets rebound in the future.
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.
Slowly ramped back up following a labor disruption.
John: 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 key 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.
John: 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 would be marketed late last year.
John: And the work stoppage at 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: Looking forward, we have a strong pipeline of opportunities in this area, including wholesale and 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 MBR transaction.
John: As just one example of the several unique opportunities that we are developing with.
John: We'll continue to offer new optionality in our 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 <unk> 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.
John: We're 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 the 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 we 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 team of Railroader sees continued focus on execution helped deliver.
Speaker Change: To deliver these results despite challenges in the quarter.
Speaker Change: Now looking at our results on slide 12.
Speaker Change: <unk> 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 90% and core adjusted combined diluted earnings per share with 99%.
Speaker Change: 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.
Speaker Change: Comp and benefits expense was $644 million or $640 million on an adjusted basis.
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: Groove 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 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 for running longer heavier trains, which resulted in $8 million in P&L 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 inflation.
Speaker Change: Depreciation and amortization expense was up 4% year over year, resulting from a higher asset base.
Speaker Change: Purchase 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 quarter casualty costs and inflation.
Speaker Change: These increases were partially offset by reduced intermodal services expense efficiencies savings and in 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 with $89 million in Q3, reflecting a lower discount rate compared to 2023 net interest expense was $192 million or $188 million, excluding the impact of purchase accounting the decline was driven by reduced debt balance.
Speaker Change: 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 cash provided by operating activities of $1 272 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 efficiently absorbing the growth versus the merger has enabled.
Speaker Change: We generated $523 million and adjusted combined free cash flow and continue to repay debt.
Speaker Change: 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 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 and supply chain delays.
Speaker Change: That event, along with higher casualty the stock based comp Pi for a 300 basis points or 11.
Speaker Change: Year over year Capex in Q3 operating ratio and EPS, respectively.
As all of these impacts were isolated in the quarter. We believe that we are 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 a strong positive momentum as we head into 2025 and feel good about the opportunities that we have ahead of us with that let me turn things back over to Keith Okay. Thanks, Nadeem, John Mark Operator, let's open it up for questions.
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 railroad formed 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: Okay, Great Great point, Chris I think the best way to.
Keith Creel: I kind of summarize the way I feel about it and encouraged.
Keith Creel: We.
Keith Creel: We have some progress thanks.
Keith Creel: Thanks 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 faster training with 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 to create a dedicated corridor.
Keith Creel: <unk> two passenger tracks in the adjacent right away.
<unk> uniquely complements the other thing I've been encouraged by what's your commitment to the environment.
Keith Creel: In 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 I think with with.
Keith Creel: With the various sovereign country, thats focused on growth and being part of a strong.
Keith Creel: That's an e-commerce.
Speaker Change: Yes, Tim I think you had a good spot so again encouraged.
Speaker Change: Okay. That's helpful and just one point it sort of clarification, just Dave you talked in the short term about some improvement both sequentially and year over year and the operating ratio in the fourth quarter.
Speaker Change: 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 are ramping back up there is great opportunities in the fourth quarter that could be probably accretive from an <unk> perspective or any other incremental thoughts we should thinking about for the fourth quarter specifically.
Speaker Change: So we have that labor disruption.
Speaker Change: 100, 800 basis point headwind to the or in Q3, obviously, we had a very unfortunate derailment or relax North Dakota that was about a.
Speaker Change: 60 million dollar expense hit them and so those are two unique items stock based comp was there was a big headwind in Q3, so when I look at.
Speaker Change: Kind of those onetime items not occurring again in the fourth quarter and I look at the opportunity for operating leverage grain as a.
Speaker Change: Started off quite strong we've got a robust crop ahead of us we've got a strong bulk of look there is a whole. So you factor all of that together and the ability to move it at a low incremental cost setting and Chris.
Speaker Change: I believe that we have the opportunity sequentially to have a 500 basis point improvement in the or stay tuned.
Speaker Change: I appreciate the time thank you.
Thank you and your next question comes from Walter <unk> from RBC capital markets. Please go ahead.
Walter <unk>: Yes, thanks, very much operator, good afternoon, so I'd like to talk a bit about your volume growth here I mean, you you.
Speaker Change: You increased your projection here.
Speaker Change: Expectations for this year just curious.
Speaker Change: This is on a backdrop of still a week.
Speaker Change: 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.
Speaker Change: 28 targets of $1 $5 billion revenue synergy on the upside or even your $5 billion.
Speaker Change: What kind of revenue pipeline.
Speaker Change: As you've seen a little bit more opportunities and what's developing this new network.
Speaker Change: 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 as I already spoke about our bulk franchise is very encouraging.
Speaker Change: Not only do we have a strong Canadian grain crop.
Speaker Change: It's 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 reasons. So so really.
Speaker Change: I'm going to say the perfect storm.
Speaker Change: Related 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 havent 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 May.
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 that that left our network were 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.
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 customers continues to look strong in.
In fact, we're seeing some really good growth.
Speaker Change: Part of St. John.
Speaker Change: With our services out there so I feel pretty decent about the intermodal area.
Speaker Change: As I said, 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: Extended length of haul and new business development opportunities in the ECP space that Leverages franchise, and frankly in the merchandize in forest products space also that we've been able to.
Speaker Change: I would say, maybe outpace the industry, a little bit 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 of that is 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 chain.
Speaker Change: That happened and frankly, I certainly believe alternative.
Speaker Change: <unk> is as bright as I look 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.
Speaker Change: And then in those out years.
Speaker Change: That's great color I appreciate it Joe.
Speaker Change: Yeah.
Speaker Change: Thank you. Your next question comes from Jon Chapelle from Evercore ISI. Please go ahead.
Speaker Change: Okay.
Thank you gentlemen, I'll stick with you from any way, we measure yield whether it's Curt.
Our T M or revenue per carload, the numbers look pretty strong.
Speaker Change: Just generally on kind of core pricing momentum, but also I just wanted to highlight auto and intermodal from a revenue per RPM perspective, a little bit of pressure there or was that a length of haul issue was that a new service.
Speaker Change: Kind of Mark to market or were there any kind of more extreme competitive pressures in those segments that maybe had been lag.
Speaker Change: Core portfolio.
Speaker Change: Yeah. Thanks, John you know that.
Speaker Change: I'll give you the stats are automotive length of haul in the quarter was up 17% and our intermodal length of haul of about 20%.
Speaker Change: So that is exactly what you saw.
Speaker Change: In those numbers.
Speaker Change: As a whole I would say.
Speaker Change: I am confident this team is hitting it out of park in terms of pricing for the value of the service and the capacity of that network has.
Speaker Change: I'm Super pleased with our year to date performance.
Speaker Change: Let's be candid.
Speaker Change: We're actively running north of 5%.
Speaker Change: In.
Speaker Change: A lot of those discussions and outcomes without those contracts again.
Speaker Change: It makes me feel good about that as you know as we do that that gives us a nice tailwind as you think about 2025 and what our same store looks like there's no doubt there's certain areas where we are.
Speaker Change: Feeling more pressure than others.
Speaker Change: 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.
Speaker Change: 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 a catch up opportunity.
Speaker Change: I guess, maybe the last point Guy and I think it's important just to point out is if you look ahead into Q4.
Speaker Change: Now we are looking at a pretty.
Speaker Change: Significant fuel headwind.
Speaker Change: As it relates to that sense for RPM, but maybe just something to keep an eye on.
Speaker Change: Helpful. Thank you Dan.
Speaker Change: Yes.
Speaker Change: Thank you. Your next question comes from body Shimbun 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.
Speaker Change: 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 highlighting.
Speaker Change: Highlighting three thoughts that you serve being part of the loops.
Speaker Change: 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: Life as we go into 2025.
Speaker Change: And.
Speaker Change: Kind of follow up on some of the discussion earlier, if you exclude.
Speaker Change: I'm not prepared at this point too.
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.
Speaker Change: Okay.
Speaker Change: So a few pieces to unpack there Patrick.
Speaker Change: Start off with Gemini.
Speaker Change: Certainly we have had a.
A long standing and and really I would say strategic at the highest levels relationship with half bag Lloyd.
Speaker Change: A tremendous.
Speaker Change: Amount of respect between our companies to grow too.
Speaker Change: To expand our partnerships, where we can be very strategic.
Speaker Change: So certainly we feel very good about their their prominence I missed part of that alliance.
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 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 ships and their assets in a port terminals really matches up philosophically with 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.
Just take for instance, lazaroff.
Speaker Change: And specific to the synergies you were asking about.
Speaker Change: That's an area where.
Speaker Change: It hasnt 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 and making the investments, they're making and I think the commitment Gemini has to grow that business.
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: So again the majority of that is servicing domestic Mexico.
Speaker Change: But again, we are seeing a fair number of I would say singles and doubles.
Speaker Change: As we expand that service.
Speaker Change: Maybe the last piece on Gemini and I think that's worth mentioning is.
Speaker Change: With the investments that DP World is made.
Speaker Change: At the Port of St. John.
Speaker Change: It's really beginning to unlock that next step function of capacity at that terminal.
Speaker Change: From the <unk>.
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.
Yes.
Specific to the synergies and the exit run rate I continue to feel really good obviously, you only got a couple of months ago 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 Dr.
Speaker Change: 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.
Speaker Change: Mental 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: Of our of our control.
Speaker Change: That's great. Thanks.
Speaker Change: Okay.
Thank you and your next question comes from Scott Group with Wolfe Research. Please go ahead.
Scott Group: Hey, Thanks afternoon, guys. So I don't know if this spring nadeem or Keith.
Scott Group: 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: 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.
Speaker Change: Algorithm more or less likely to play out.
Speaker Change: Yes, Scott I mean, obviously, we'll give our formal guidance in January.
Speaker Change: Our Q4 results, but but I think you captured it well nothing is changing as far as.
Speaker Change: Our multiyear outlook.
Speaker Change: 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.
Speaker Change: And as you said.
Speaker Change: We're not getting the benefits of a buyback now.
Speaker Change: But we should start seeing that benefit.
Speaker Change: Yes next year once we agree reinstitute our buyback program.
Speaker Change: So as I look at where we're exiting 2024.
Speaker Change: 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 heated idiosyncratic opportunity to grow and be a industry leader in growth.
Speaker Change: Then next year I would fully expect so.
Speaker Change: You can you can assume that what we guided to is we'll start hitting our stride in 2025.
Speaker Change: And so.
Speaker Change: No reason why we shouldn't be able to take what you just mentioned in terms of our our 2025 lenders.
Speaker Change: Helpful. Thank you guys.
Speaker Change: Yeah.
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 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 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 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 from tailwind there I'm certainly hoping for but we're not counting on it.
Speaker Change: This kind of.
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 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.
Speaker Change: Other with other players and now with our diversity of Cross Vancouver St. John.
Speaker Change: And that allows the ROE I think gives us a strong growth platform.
Ramp up of Max.
Speaker Change: I still get <unk>.
Speaker Change: Our economy quite a bit that we're not running long enough trains on that.
Speaker Change: That that service and so I have a definite opportunity to continue to price into and fill up that that north South service.
Now the good news is I see a strong pipeline of opportunity on 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.
Speaker Change: 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 but I can also tell you we've been very candid about this is about creating an ecosystem.
Speaker Change: About creating a differentiated product in the marketplace.
That really can go after truck.
Speaker Change: Volumes that are moving today.
Speaker Change: So I see the opportunity.
Speaker Change: 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.
Speaker Change: That ecosystem that excites me.
Speaker Change: And maybe one last area and we don't talk about a lot.
Speaker Change: As our carload business Tom.
Speaker Change: It's an area of kind of the world is singles and doubles, but again also really accretive in business to our portfolio and the team. There has done a great job as I think about it.
And our presence in the markets in Texas, particularly Dallas, how do we continue to expand our fuels terminals.
Speaker Change: And the Toronto and.
Speaker Change: 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 as 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 us business on obviously, we still need to work on getting some of these local salsa mainline 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: A 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.
81, 180, amongst all the grain and other products that can 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 Jackie can continue to grow the business, where we could start with customers as they expect us to zero.
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 team that was a great rundown before on the potential for 500 basis points sequential or 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 went through I just want make sure I understand the difference and then my question for John is his thoughts on potential for additional.
Speaker Change: Tariffs, if we get an administrative change here.
Speaker Change: Your 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.
Speaker Change: Yes, Ken the year over year impact stock based comp was.
Speaker Change: 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 the.
Speaker Change: The impact of the work stoppage.
Speaker Change: The full 300 basis points.
Speaker Change: Thanks.
Speaker Change: Yes, Ken look it's a.
A little bit of a wait and see obviously on on how that kind of play out.
Speaker Change: Yeah, I'm I'm really encourage that.
Speaker Change: Basis.
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: Last thing a little bit on the fact that you know.
Whatever administration comes in to play I think commerce for North America is as important then 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.
U S. MCA was obviously created during 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 at least.
Speaker Change: Staying close with our customers.
Speaker Change: On this 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 if those tariffs or may or may not look like.
Speaker Change: We move into the future.
Great. Thanks, Jon Thanks.
Speaker Change: Alright.
Speaker Change: Your next question comes from Brian <unk> with Jpmorgan. Please go ahead.
Speaker Change: Yes. Thanks I appreciate you taking the question so.
Speaker Change: Maybe just a couple of quick follow ups for John there.
Brian: Would you say you've already felt some of the impact of this uncertainty with constitutional reform the passenger rail just to.
Brian: The broader tariff question and the elections.
Brian: And the transition of both administrations in the U S and Mexico, I mean foreign 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 theres been some trouble south of the border with your competitor handling some of the green shoe.
Being over there. So can you talk about a strong grain harvest in the second bridge at Laredo.
Brian: That's an opportunity.
Brian: Guys pick up some additional share given the circumstances.
It's hard to tell.
Brian: In terms of any sort of theme.
The impact.
Brian: We were talking about it actually prior to the call a little bit.
Brian: There's so much activity thats been announced.
Brian: And in Mexico to.
Brian: The auto industry.
Brian: Plastics.
<unk> is white goods.
Brian: That continue we continue to work through with those customers down there that present huge opportunities for our cross border shipments.
Brian: 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 that this fine and actually just most recently I can tell you we are down.
Speaker Change: I know some folks that Justin.
Announced some recent production down in Mexico.
There was no apprehensive nets from them whatsoever in terms of moving forward with with their investments and that was foreign investment coming into Mexico.
Speaker Change: We're going to have to just see how how that plays out.
The fundamentals just continue to support a north American economy continue to make sense.
You mentioned about the grain company green challenges and that yeah, I think we.
Speaker Change: We've certainly seen some opportunities migrate.
Speaker Change: Two two to our network.
But I'll also tell you.
Speaker Change: You know and you've heard this from US a long time, we're not gonna oversubscribed, we're not going to oversell or where 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 we do.
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 because.
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 hotspot hard herself 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.
Speaker Change: That we're going to gain.
Speaker Change: That not only will continue.
Speaker Change: 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 coke VF that presents a.
Speaker Change: Significant opportunity for my team and in the future.
Speaker Change: Very helpful. Thank you John.
Speaker Change: Yep.
Speaker Change: Thank you. Our next question comes from Steve Hansen with Raymond James. Please go ahead.
Steve Hansen: So yes. Thanks for the time guys John I wanted to follow up on your last comments on grain 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 grain and establishing that new north of a quarter, where north of Italy, and they've been trying to work on.
Steve Hansen: Relative to maybe your initial expectations. Thanks.
John: Yeah, I'd say, we're ahead of pace.
Speaker Change: A little bit on that front. If you just think about our makeup of synergies and grain thats coming off of the legacy <unk>.
Speaker Change: Network terminating a legacy case, the ups network or where I would say 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 the grain companies to sell into different markets.
Steve Hansen: They've never had in the past I am.
Speaker Change: 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.
Speaker Change: We've got a really good service product to go into the south and into Mexico.
So I am Super excited about 2025 can bring in that space in terms of not only grain out of out of Canada.
Speaker Change: 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.
Steve Allen: Can't underestimate.
Steve Allen: The power and the value to the customer of a reliable fluid gateway.
Steve Allen: That gateway as a single line gateway only grow stronger with more capacity they alternative to competitive alternatives its very congested gateway.
Steve Allen: Much more complex because you got three row railroads involved as opposed to one it just by nature. They can.
Steve Allen: Flex the adds additional.
Steve Allen: Risk to the supply chain. So in these times when a competitive alternative.
Steve Allen: As challenging 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 so just a follow up.
Ravi Shanker: Surveys have shown a shift by customers.
Ravi Shanker: Or does the <unk> service.
Ravi Shanker: In recent months is that just me.
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.
Speaker Change: It's going through the sales cycle and process that's going through.
Speaker Change: Hum.
Speaker Change: And the 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 have 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.
Speaker Change: The headwinds of all the capacity in that quarter that that's out there now has been.
A little bit of a surprise in more of a challenge than I anticipated I am 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.
Speaker Change: <unk> sales offering with our products such as the Meridian speedway, 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: You'll 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.
Speaker Change: Alright.
Speaker Change: Your line is open.
Speaker Change: [music].
Speaker Change: Quite a lot.
Speaker Change: We'll go next to Ben <unk>.
Speaker Change: From does agendas capital markets.
Speaker Change: Yes, thank you very much and good evening everyone.
Speaker Change: 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 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% jewelry.
Speaker Change: Q3.
Speaker Change: So was just wondering about whether you see unfortunately.
Speaker Change: To recover and maybe are there.
Speaker Change: Latest discussion with shippers retailer about the opportunity to to get back. This volume are on the network.
Speaker Change: And that's work.
Speaker Change: So just a couple of comments there I.
Speaker Change: I do believe we saw a fair amount of pull forward, but maybe not on that and our SaaS product but.
Speaker Change: Ahead of our labor stoppage.
Speaker Change: <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.
Speaker Change: Williams, our trans load 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: <unk>.
Speaker Change: Yeah.
Speaker Change: The 3% Rpms.
Speaker Change: 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 those potash call grain.
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 some some domestic intermodal in that but I think thats kind of washed itself.
Speaker Change: The system already and as I said, we've actually seen a little bit of pickup in that volume.
Speaker Change: I'm not that was the impact over those days are not I don't have any concerns there's plenty plenty of freight out there for us.
Speaker Change: 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 I hope you're well.
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: Outpacing.
Speaker Change: The industry's growth most importantly, bringing it to the bottom line safely and efficiently we've created a premium network unparalleled in our industry with new growth opportunities and this team has and will continue to convert at creating unique.
Speaker Change: Value for our shareholders stay tuned for our fourth quarter results.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you and that concludes today's conference. We appreciate your comfort.
Speaker Change: Dissipation and please have a wonderful day.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Yes.
Speaker Change: [music].