Q1 2025 Norfolk Southern Corp Earnings Call

Also note that this call is being recorded on Wednesday April 23rd 2025 at this time I would like to turn the conference over to Luc Nichols. Please go ahead Sir.

Unknown Executive: Please go ahead, sir.

Luke Nichols: At this time, I would like to turn the conference over to Luke Nichols. Please go ahead, sir.

Mark: Good morning.

Luc Nichols: Good morning, everyone.

Mark: Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual events. Please refer to our annual and quarterly reports filed with the SEC for a full disclosure of those risks and uncertainties we view as the most important.

Speaker Change: Please note that during today's call, we will make certain forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

Speaker Change: These statements relate to future events or future performance of Norfolk, Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results.

Speaker Change: Please refer to our annual and quarterly reports filed with the SEC for a full disclosure of those risks and uncertainties, we view as the most important.

Mark: Our presentation slides are available at NorfolkSouthern.com in the Investor section, along with our reconciliation of any non-GAP measures used today to the Comparable GAP � including Adjusted or Non-Gap Operating Ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis.

Speaker Change: Presentation slides are available at Norfolk, Southern Dotcom and the investors' section along with a reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio.

Speaker Change: Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis.

Mark: Turning to slide three.

Speaker Change: Now turning to slide three.

Mark: It's my pleasure to introduce Norfolk Southern's President and Chief Executive Officer, Mark Good morning and thank you everyone for joining.

Speaker Change: My pleasure to introduce Norfolk, Southern's, President and Chief Executive Officer, Mark George.

Speaker Change: Good morning, and thank you everyone for joining representing Norfolk, Southern with me today are John or our Chief operating Officer, Ed Elkins, Our Chief commercial officer, and Jason Xanthe, Our Chief Financial Officer.

Mark: Representing Norfolk Southern with me today are John Orr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. We're looking forward to updating you on our Q1 2025 results. There's a lot to be pleased with this quarter as we delivered results in line with what we signaled to you while dealing with a vicious winter, including 18 storms that were far more consequential to our network than Helene was last fall.

Speaker Change: We're looking forward to updating you on our Q1 2025 results. There's a lot to be pleased with this quarter as we delivered results in line with what we signaled to you while dealing with a vicious winter, including 18 storms that were.

Speaker Change: We're far more consequential to our network dental lean was last fall.

John Orr: John will share details on that impact and how we quickly restored fluidity to our network in order to serve our customers with minimal disruption. Our network resiliency was evident again, thanks to great planning and execution.

Speaker Change: John will share details on that impact and how we quickly restored fluidity to our network in order to serve our customers with minimal disruption.

Speaker Change: Our network resiliency was evident again, thanks to a great planning and execution by our team.

Mark: and we did it safely. Lower Injury and Accident. As our team continues to embrace safety as a core value. Despite all this disruption and absorbing $35 million of storm restoration costs that Jason will detail, we delivered 8% EPS growth on an adjusted basis. driven in part by $55 million of labor productivity.

Speaker Change: And we did it safely with lower injury and accident rates as our team continues to embrace safety is a core value.

Speaker Change: Despite all this disruption and absorbing $35 million of storm restoration costs that Jason will detail, we delivered 8% EPS growth on an adjusted basis driven in part by $55 million of labor productivity savings.

Mark: I'd like to thank every member of the Thoroughbred team for their hard work and dedication during the quarantine. Teamwork and a focus on safety and service excellence are what's propelling our progress. We're also proud of our commercial agility staying close to our customers as we and they dealt with weather related impacts to operation.

Speaker Change: I'd like to thank every member of the Thoroughbred team for their hard work and dedication during the quarter.

Speaker Change: Teamwork and our focus on safety and service excellence are whats propelling our progress.

Speaker Change: We're also proud of our commercial agility, staying close to our customers as we and they dealt with weather related impacts to operations East Coast Port rebalancing.

Mark: East Coast Port Rebalance and Volume Fluctuations in Anticipation of Terror. Our behaviors and performance are increasing our customers confidence in our service product. And that's driving meaningful shared We're doing a better job anticipating market and customer needs, taking on the right long-term growth opportunities in the most strategic way.

And volume fluctuations in anticipation of tariffs.

Speaker Change: Our behaviors and performance are increasing our customers' confidence in our service product and that's driving meaningful share gains.

Speaker Change: We're doing a better job anticipating market and customer needs, taking on the right long term growth opportunities in the most strategic lanes.

Mark: We are dressed and ready to handle volume. Overall, Norfolk Southern is doing what we set out to do. We remain focused on what we can control. Safety, Network Performance, Customer Service, and Cost.

Speaker Change: We are dressed and ready to handle volume growth.

Speaker Change: Overall, Norfolk Southern is doing what we set out to do we remain focused on what we can control that safety network performance customer service and costs.

Mark: I'll hand it off to the team now to provide more color on the results.

Speaker Change: I'll hand, it off to the team now to provide more color on the results starting with John.

John Orr: Thanks, Mark, and good morning. Starting on slide five, as you said, the weather tested the resolve of the operating in what was both a challenging and rewarding quarter. We faced significant weather across most of our Mark mentioned 18 Storm.

John: Thanks, Mark and good morning.

John: Starting on slide five as you said the weather tested the resolve of the operating team and what was both a challenging and rewarding quarter.

John: We faced significant weather across most of our network Mark.

Speaker Change: Mark mentioned 18 storms.

John Orr: Let me tell you about one of. Depicted in slide 5 is our Heartland Corridor. A flash flood caused the Tug River to rise almost instantaneously to its highest flood level. since 1977. This impacted a 100 mile stretch of our main line that moves over 50 trains a day. Depicted in the top left is a seal failure. The restoration of this one location required 8,700 tons of rock. The equivalent of about 700 truckloads of material. The repair to this remote yet critical location was accomplished in just 52 hours. Meanwhile, 87 miles down the same river. The floodwaters and debris surged against this overbound.

John: Well, let me tell you about one of them.

Speaker Change: Depicted in slide five is our Heartland corridor.

Speaker Change: Our flash floods caused the tug river to rise almost instantaneously to its highest levels.

Speaker Change: Since $19 77.

Speaker Change: This impacted our 100 mile stretch of our mainline that moves over 50 trains a day.

Speaker Change: Depicted in the top left is a field failure.

Speaker Change: The restoration of this one location.

Speaker Change: Acquired 8700 tons of rock.

Speaker Change: The equivalent of about 700 truckloads of material.

Speaker Change: The repair to this remote yet critical location was accomplished in just 52 hours.

Speaker Change: Meanwhile, <unk>.

Speaker Change: 87 miles down the same river system.

Speaker Change: The floodwaters and debris searched against this overpass.

John Orr: That's the image you see depicted in the lower left. Debris and high water jeopardize the bridge's structural integrity. We fought for two days against the surging water before being able to remove the debris and restore the bridge deck. There were 35 additional outages caused by the Tug River flood that were simultaneously repaired over a four day period.

Speaker Change: That's the image you see depicted in the lower left.

Speaker Change: Debris and high water jeopardize the bridges structural integrity.

Speaker Change: We fought for two days against the surging water before being able to remove the debris and restore the bridge deck.

Speaker Change: There were 35 additional outages caused by the tug River flood that we're simultaneously repaired over a four day period.

John Orr: During the quarter, we incurred $35 million in extraordinary expense to respond to storms. which adversely affected our operating Well, we can't control the weather. We can control our preparation and our response. and I am extremely proud of the entire team.

Speaker Change: During the quarter.

Speaker Change: We incurred $35 million in extraordinary expense to respond to storms.

Speaker Change: Which adversely affected our operating ratio.

Speaker Change: While we can't control the weather.

Speaker Change: We can control our preparation and our response and I am extremely proud of the entire team.

John Orr: Turning to slide six. Our FRA injury ratio was down 13% year over year and 15% sequentially. This is the lowest quarterly ratio in over a decade. Train accident frequency reduced by 43% year over year.

Speaker Change: Turning to slide six.

Speaker Change: Our FRE injury ratio was down 13% year over year and 15% sequentially.

Speaker Change: This is the lowest quarterly ratio in over a decade.

Speaker Change: Train accident frequency reduced by 43% year over year.

John Orr: Our pursuit of safety excellence and speak of culture is showing tangible results. Turning to slide seven. We delivered year-over-year network and productivity improvements across the board. Terminal dwell, AAR train speed. Car Velocity, and Locomotive Productivity. improved meaningfully year over year.

Speaker Change: Our pursuit of safety excellence and speak up culture is showing tangible results.

Speaker Change: Turning to slide seven.

Speaker Change: We delivered year over year network and productivity improvements across the board.

Speaker Change: Terminal dwell.

Speaker Change: AAR train speed car.

Speaker Change: Car velocity and locomotive productivity improved meaningfully year over year.

John Orr: Turning to our service metrics. Well, we improved merchandise trip plan compliance. Our time-sensitive intermodal composite was the most impacted by the storm. Exiting February, Intermodal Service Stable. And in recent weeks, we are at target.

Speaker Change: Turning to our service metrics.

Speaker Change: While we improved merchandize trip plan compliance.

Speaker Change: Our time sensitive intermodal composite was the most impacted by the storms.

Speaker Change: Exiting February intermodal service stabilized and in recent weeks, we are at target.

John Orr: These numbers alone don't tell the whole story of our. The first half of the quarter was the story of the Operations Center and the Engineering Department planning and executing responses to the many disruptions. The second half was the story of commercial, mechanical, and transportation teamwork.

Speaker Change: These numbers alone don't tell the whole story of our performance.

The first half of the quarter was the story of the Operation Center in the Engineering Department planning and executing responses to the many disruptions.

Speaker Change: The second half was the story of commercial mechanical and transportation teamwork.

John Orr: For example. Commercial and Operations created an inspirational March Madness initiative to catch up Lambert's Point. Quarterly Export Coal Volume. They collaborated with our supply chain and terminal partners to optimize coal sequencing and dumping at the pier. Together, we've delivered both our forecasted and backlogged volume efficiently. Safety and service excellence are evident in these results.

Speaker Change: For example.

Speaker Change: Commercial and operations created an inspirational March madness initiative to catch up Lambert's points quarterly export coal volume.

Speaker Change: So he collaborated with our supply chain and terminal partners to optimize core sequencing and dumping at the Pierre.

Speaker Change: Together, we delivered both our forecasted and backlog volume efficiently.

Speaker Change: Safety and service excellence are evident in these results.

John Orr: Turning to slide 8. The team is proving the art of the possible. Our PSR 2.0 transformation is unlocking network value and delivering on our financial commitment.

Speaker Change: Turning to slide eight.

Speaker Change: The team is proving the art of the possible.

Speaker Change: Rps are two dato transformation is unlocking network value and delivering on our financial commitments.

John Orr: Our Zero-Base Operating Plan rolled out in the quarter. Phase 1 Simplified Train Plan heightened connection standards and strengthened our competitive resource and cost. for example. We netted a reduction of over 100 weekly crew stars. This generated yields in train and T&E productivity. Reduced final mild well for over 600 and Reduced Overall Transition.

Speaker Change: Our zero base operating plan rolled out in the quarter.

Speaker Change: Phase one simplify train plans tightened.

Speaker Change: Heightened connection standards and strengthened our competitive resource and cost structures.

Speaker Change: For example, we.

Speaker Change: We netted a reduction of over 100 weekly crew starts.

Speaker Change: This generated yields in train and <unk> productivity.

Speaker Change: Reduced final mile dwell for over 600 customers and reduced overall transit.

John Orr: Meanwhile, Enterprise Resources streamlined our materials management and distribution network. They're reducing material handling. Controlling Expenses, and all the while increasing product They are relentlessly pursuing every opportunity to eliminate waste and drive efficiencies across all spend categories. This includes further improving energy management solutions. and Implementing Advanced Fuel Initiatives. For example, our HPT improved by 13% year over year. This resulted in a fuel efficiency record for the fourth consecutive quarter. We are aligning more closely to our suppliers while optimizing internal and transactional process. Positioning NS to fully leverage our scale and drive greater value for the long term.

Speaker Change: Meanwhile, enterprise resources streamlined our materials management and distribution network.

Speaker Change: They are reducing material handling.

Speaker Change: Controlling expenses and all the while increasing productivity.

Speaker Change: They are relentlessly pursuing every opportunity to eliminate waste and drive efficiencies across all spend categories.

Speaker Change: This includes further improving energy management solutions and implementing advanced fuel initiatives.

Speaker Change: For example, our HPT improved by 13% year over year.

Speaker Change: This resulted in a fuel efficiency record for the fourth consecutive quarter.

Speaker Change: We are aligning more closely to our suppliers, while optimizing internal and transactional processes.

Speaker Change: Positioning us to fully leverage our scale.

Speaker Change: And drive greater value for the long term.

John Orr: Our PSR 2.0 transformation simultaneously delivered safety, service, and resilience. We've powered through the adversity in the quarter, and we are carrying that great momentum into Q2.

Speaker Change: Our <unk> two <unk> transformation simultaneously deliver safety <unk>.

Service and resilience.

Speaker Change: We powered through the adversity in the quarter and we are carrying that great momentum into Q2.

Ed Elkins: Over to you, Ed.

Ed: Over to you Ed.

Ed Elkins: Well, thanks, John, and good morning, everyone.

Ed: Well, thanks, John and good morning, everyone now, let's move to slide 10, and Youll see that the overall volume for the first quarter rose, 1% year over year. Despite the winter weather conditions that we enter customers' experience during that period.

Ed Elkins: Now let's move to slide 10. Page PAGE of NUMPAGES www.vernon.com Page PAGE of NUMPAGES www.vernon.com Page PAGE of NUMPAGES And while total revenue was flat, continued fuel surcharge headwinds masked an otherwise solid revenue. Total revenue, less fuel was up 2%. RPU less fuel was up 1% year over year, despite sharply lower export coal price. Specifically within merchandise, volume fell from a year ago as gains in our chemicals and ag businesses were offset by weakness in our metals and our construction.

Ed: And while total revenue was flat.

Ed: <unk> fuel surcharge headwinds masked otherwise solid revenue performance as total revenue less fuel was up 2%.

Ed: <unk> fuel was up 1% year over year, despite sharply lower export coal pricing.

Specifically within merchandise volume fell from a year ago as gains in our chemicals and AG businesses were offset by weakness in our metals and our construction segment the.

Ed Elkins: period saw a 4% increase in merchandise RPU less Delivering another consecutive quarterly record in that In the intermodal, we achieved a 3% year-over-year volume Gains in both domestic and international, while premium continues to face market pressure. Overall, intermodal RPU less fuel was up slightly for the second quarter due to stabilization and truck Now let's turn to coal, where lower export coal prices drove RPU less fuel lower by 3%.

Ed: The period saw a 4% increase in merchandize <unk> less fuel delivering another consecutive quarterly record in that metric.

Ed: In intermodal, we achieved a 3% year over year volume increase with gains in both domestic and international while premium continues to face market pressure.

Ed: Overall intermodal <unk> less fuel was up slightly for the second consecutive quarter due to stabilization in drug pricing.

Ed: Now, let's turn to coal where lower export coal prices drove <unk> less fuel lower by 3%.

Ed Elkins: Partially offsetting these shortfalls were volume gains in our utility business thanks to strong electricity demand and support from higher natural gas Okay, let's move to slide 11 for our market outlook.

Ed: Partially offsetting these shortfalls with volume gains in our utility business, thanks to strong electricity demand and support from higher natural gas prices.

Ed: Okay, let's move to slide 11 for our market outlook, it's clear that we're in a dynamic economic environment.

Ed Elkins: It's clear that we're in a dynamic economic. For our merchandise markets, we expect strength in autos to continue in the near term, although announced tariffs could be a headwind to volumes for the remainder of the year. Manufacturing activity has been building in many markets and we will stay close to our customers as trade policies unfold. Strengthen our chemicals markets, such as waste and plastics, along with our intense focus on recapturing market share, give us confidence that we are well positioned to mitigate some of the uncertain market conditions that we see. Staying very close to our customers is the key.

Ed: Our merchandise markets, we expect strength in autos to continue in the near term, although announced tariffs could be a headwind to volumes for the remainder of the year.

Ed: Manufacturing activity has been building in many markets and we will stay close to our customers as trade policies unfold.

Ed: Strength in our chemicals markets, such as waste and plastics, along with our intense focus on recapturing market share give us confidence that we are well positioned to mitigate some of the uncertain market conditions that we see.

Ed: Staying very close to our customers is the key here.

Ed Elkins: When we look at our intermodal markets, we expect continued normalization of our ESCO share and are watching shipping patterns very carefully as trade policy evolves. If tariffs drive prices for international goods higher, import demand may soften. Staying close. Truck capacity remained steady throughout the quarter, which maintained a flat trend for our price output. Co-prices continue to be pressured as the industry is expected to see tempered production amid significant uncertainty around export In the near term, we expect the current trends in the utility markets to continue.

Ed: When we look at our intermodal markets. We expect continued normalization of our east coast share and are watching shipping patterns very carefully as trade policy evolves.

Ed: If tariffs drive prices for international goods higher import demand may soften and we're staying close to that.

Ed: Chuck capacity remained steady throughout the quarter, which maintained a flat trend for our price outlook.

Ed: Coal prices continue to be pressured as the industry is expected to see tempered production.

Ed: Mid significant uncertainty around export trade.

Ed: In the near term, we expect the current trends in the utility markets to continue.

Ed Elkins: on slide 12. Industrial Development Activity Continues to Increase with Strong Interest from Firms Seeking to Expand Domestic Production as well as International Companies Seeking to Locate New Manufacturing Facilities in the United States. Sectors such as steel manufacturing, metals fabrication, food production, and construction materials saw an increase in project activity through the latter half of the first quarter, with momentum continuing to build through April.

Ed: On slide 12.

Ed: Industrial development activity continues to increase with strong interest from firms seeking to expand domestic production as well as international companies seeking to locate new manufacturing facilities in the United States.

Ed: Sectors, such as steel manufacturing metals fabrication food production and construction materials saw an increase in project activity through the latter half of the first quarter with momentum continuing to build through April.

Ed Elkins: However, we're also noting cases where decision timelines appear to be extending as customers evaluate the macroeconomic environment. Considering all the uncertainty, I'm encouraged by our ability to maintain our quality service as volumes increased as we closed out the quarter, and I'm encouraged by our trajectory moving forward. As our customers navigate this uncertainty, we are by their side, offering a service product that can help reduce their costs and their supply chain.

Ed: However, we're also noting cases, where decision timelines appear to be extending as customers evaluate the macroeconomic environment.

Ed: Considering all of the uncertainty I'm encouraged by our ability to maintain our quality service as volumes increased as we closed out the quarter and I am encouraged by our trajectory moving forward.

Ed: As our customers navigate this uncertainty we are by their side offering a service product that can help reduce their costs and their supply chains.

Ed Elkins: We sincerely appreciate the partnership that we've built with our customers and are striving to grow trust and to earn more of their business every single day.

Ed: We sincerely appreciate the partnership that we've built with our customers and are striving to grow trust and earn more of their business every single day.

Jason Zampi: And with that, I'm going to turn it over to Jason to review our financial Thanks, Ed. Slide 14 reconciles our gap results to the adjusted numbers that I will speak to today. Insurance recoveries continue to exceed the incremental cost of the Eastern Ohio Institute. which resulted in a net benefit of $185 million in the quarter. Total insurance recoveries to date are nearing $1 billion, with less than $100 million of coverage remaining. Adjusting for the net recovery related to the incident, operating ratio for the quarter was 67.9, which includes 120 basis points from storm restoration costs.

Ed: And with that I'm going to turn it over to Jason to review our financial results.

Jason: Thanks, Ed.

Jason: <unk> <unk> thousand 14 reconciles our GAAP results to the adjusted numbers that I will speak to you today.

Jason: Insurance recoveries continued to exceed the incremental cost of the eastern Ohio incident, which.

Jason: Which resulted in a net benefit of $185 million in the quarter.

Jason: Total insurance recoveries to date are nearing $1 billion with less than $100 million of coverage remaining.

Adjusting for the net recovery related to the incident operating ratio for the quarter was $67 nine which includes a 120 basis points from storm restoration costs from.

Jason Zampi: From a bottom line perspective, EPS was $2.69.

Jason: From a bottom line perspective, EPS was $2 69.

Jason Zampi: Moving to slide 15, you'll find the comparison of our adjusted results versus last year and last As we previewed during the quarter, the impacts of typical seasonality, coupled with the higher than expected winter storm restoration costs, drove a sequential increase in the operating ratio of 300 bases. From a year-over-year perspective. Despite the elevated storm costs and flat revenues, our productivity initiatives have continued to take hold and we generated 200 basis points of operating ratio improvement. with operating expenses down 3% on higher bonds.

Jason: Moving to slide 15, you'll find a comparison of our adjusted results versus last year and last quarter.

Jason: As we previewed during the quarter the impacts of typical seasonality coupled with the higher than expected winter storm restoration costs drove a sequential increase in the operating ratio of 300 basis points.

Jason: From a year over year perspective, despite the elevated storm costs and flat revenues our productivity initiatives have continued to take hold and we generated 200 basis points of operating ratio improvement with operating expenses down 3% on higher volumes.

Jason Zampi: Let's take a closer look at the $68 million year-over-year expense decline on slide 16. The $35 million of incremental storm restoration costs are embedded in multiple lineups. Including Comp and Bend, Purchase Services, and Materials.

Jason: Let's take a closer look at the $68 million year over year expense decline on slide 16.

Jason: $35 million of incremental storm restoration costs are embedded in multiple line items, including comp and Ben.

Speaker Change: <unk> services and materials.

Jason Zampi: We are focused on what we can control, and our operational momentum and execution on productivity initiatives delivered cost savings across Labor productivity was strong in the That, coupled with timing of land sales, helped offset an incentive comp adjustment related to 2024, increased pay rates, and higher claims costs. We continue to gain traction on our fuel efficiency. And importantly, our purchase services and rents were down $30 million in the face of 3% higher intermodal volume. All of these actions support our cost takeout.

Speaker Change: We are focused on what we can control and our operational momentum and execution on productivity initiatives delivered cost savings across the board late.

Speaker Change: Labor productivity was strong in the quarter.

Speaker Change: That coupled with timing of land sales helped offset an incentive comp adjustment related to 2024 increased pay rates and higher claims costs.

Speaker Change: We continue to gain traction on our fuel efficiency and importantly, our purchased services and rents were down $30 million in the face of 3% higher intermodal volumes.

Speaker Change: All of these actions support our cost takeout goals.

Jason Zampi: Summarizing our adjusted financial results on slide seven. The strong operational momentum that has been the foundation for continued productivity safety. led to 8% improvements in both net income and EPS over last year.

Speaker Change: Summarizing our adjusted financial results on Slide 17 the.

Speaker Change: The strong operational momentum that has been the foundation for continued productivity savings led to 8% improvements in both net income and EPS over last year.

Jason Zampi: These results, together with ongoing balance sheet repair, led to the resumption of share repurchases, and we bought back nearly $250 million of shares in the quarter. The 200 basis point improvement in the operating ratio and this team's ability to deliver productivity savings in any environment gives us a lot of confidence as we move through these uncertain times.

Speaker Change: These results together with ongoing balance sheet repair led to the resumption of share repurchases and we bought back nearly $250 million of shares in the quarter.

Speaker Change: The 200 basis point improvement in the operating ratio and next team's ability to deliver productivity savings in any environment gives us a lot of confidence as we move through these uncertain times.

Mark: I'll turn it over to Mark to wrap up. All right, as you have heard, we successfully navigated the first quarter to recover from the significant weather impacts to our network. At the same time, we delivered better service on higher volume, all while continuing to drive greater productivity. Now, as it relates to our guidance on slide 19, one thing that we can control is our costs, and we remain highly confident in our ability to extract at least $150 million, as evidenced by our strong momentum that continued in Q1. At this time, there is no clear information on how tariffs may impact our end markets and revenues.

Mark George: I'll turn it over to Mark to wrap up.

Mark George: Alright, as you have heard we successfully navigated the first quarter to recover from the significant weather impacts to our network at the same time, we delivered better service on higher volume, all while continuing to drive greater productivity.

Mark George: Now as it relates to our guidance on slide 19.

Mark George: One thing that we can control is our costs and we remain highly confident in our ability to extract at least $150 million as evidenced by our strong momentum that continued in Q1.

Mark George: At this time there is no clear information on how tariffs may impact our end markets and revenues.

Mark: So we are reiterating our full year 3% revenue growth guide and 150 basis points of OR improvement while acknowledging that there is uncertainty on the horizon.

Mark George: So we are reiterating our full year, 3% revenue growth guide and 150 basis points of or improvement, while acknowledging that there is uncertainty on the horizon.

Mark: So to drill a little deeper on that point. We will be keeping a close eye on the NMRA. There may be cases where we see changes in freight origin and destination, as well as changes between customers, some who may be on our network or on others. We may benefit in some instances or suffer in other cases. But our growing track record of service excellence and agility positions us to continue to capitalize on all opportunities.

Mark George: So to drill a little deeper on that point.

Mark George: We will be keeping a close eye on the end markets staying in close communication with our customers.

Mark George: There may be cases, where we see changes in freight origin and destination as well as changes between customers, some who may be on our network or on others.

Mark George: We made benefit in some instances or suffer in other cases.

Mark George: But our growing track record of service excellence and agility positions us to continue to capitalize on all opportunities.

Unknown Executive: So as the effects become clearer in the months and quarters ahead, we will calibrate and communicate with you accordingly, but right now, our guidance remains in So with that, let's open the call for questions. Operator. Thank you, sir.

Mark George: So as the effects become clearer in the months and quarters ahead, we will calibrate and communicate with you accordingly, but right now our guidance remains intact.

Mark George: So with that let's open the call for questions operator.

Speaker Change: Thank you, Sir ladies and gentlemen, if you do have any questions. Please press star followed by one on a touchtone phone.

Unknown Executive: Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to decline from the polling, please press star followed by two. And if using a speakerphone, you will need to lift the handset first before pressing any key.

Speaker Change: You will hear a prompt that Johan has been raised and should you wish to decline from the polling. Please press star followed by two and it's using a speakerphone you laid to lift the handset first before pressing any keys.

Unknown Executive: and out of consideration to other callers on the line today, we ask that you please limit yourself to one primary question. Thank you.

Speaker Change: And I was consideration to other callers on the line today, we ask that you. Please limit yourself to one primary question. Thank you.

Ken Hoexter: First, we will hear from Ken Hoexter at Bank of America.

Speaker Change: First we will hear from Kevin Hester Bank of America. Please go ahead Ken.

Ken Hoexter: Please go ahead, Ken. Hey, great. Good afternoon. Or good morning. Sorry. I guess if let's just start out with the the operating ratio, just given the strong performance on the cost savings. And I guess I'd like to hear your thought on on upside or speed of targets. But my question would be if you, you know, if 120 basis points of cost that that would have gotten you to a 66 seven without that normally, seasonally, I guess, if you were Jason could talk about that, you know, 250 basis points, it looks like is your long term trend.

Speaker Change: Hey, great good afternoon.

Speaker Change: Sorry.

Speaker Change: Let's just start with the operating ratio just given the strong performance on the cost savings.

Speaker Change: I guess I'd like to hear your thought on an upside or speed of targets, but my question would be if you.

Speaker Change: If a 120 basis points of cost that would have gotten you to a 66 seven without that normally seasonally I guess, if you or Jason could talk about that 250 basis points. It looks like as you're a long term trend. So is that a good benchmark to think you start at 66, seven and so the second quarter should be in the 64.

Ken Hoexter: So is that a good benchmark to think you started 66 seven, and so the second quarter should be in the 64s?

Ken Hoexter: Is that a good way to at least think about your potential here?

Speaker Change: Or is that a good way to at least think about your potential here.

Jason Zampi: Jason, why don't you talk a little bit about the case? Yeah, thanks, Ken. So, you know, we're, we're very focused on our full year guidance, you know, as Mark laid out here, delivering that $150 million of productivity and cost reduction savings, as well as the 150 basis points of margin improvement on that 3% revenue growth. So as you as you pointed out, we had some headwinds from the abnormally harsh winter weather, as well as 50 basis points of headwind from fuel price. So while there's obviously some uncertainty on the macro side, we've got a lot of good momentum.

Speaker Change: Jason why don't you talk a little bit about the cadence.

Jason: Yeah. Thanks, Ken So we're we're very focused on our full year guidance.

Jason: As mark laid out here delivering that $150 million of productivity and cost reduction savings.

Jason: As well as the 150 basis points of margin improvement on that 3% revenue growth.

Jason: As you pointed out we had some headwinds from the abnormally harsh winter weather as well as 50 basis points.

Jason: Of headwind from fuel price. So while there is obviously some uncertainty on the macro side, we've got a lot of good momentum from our strong service product and as you saw this quarter. We have made really good progress towards those productivity targets. So I think about it Ken from this perspective, I think the math would tell you the remainder of the year needs to be like under a 64.

Jason Zampi: From our strong service product. And as you saw this quarter, we've made really good progress towards those productivity targets. So I think about it, Ken, from this perspective, you know, I think the math would tell you the remainder of the year needs to be, you know, like under a 64 operating ratio to hit our targets. I would just say that, you know, it wouldn't, it's not going to be evenly spread over each quarter. I'd expect the second quarter to be better than normal seasonality off of the 67.9. here that we just posted in the first quarter.

Jason: Operating ratio to hit our targets I would just say that it wouldn't it's not going to be evenly spread over each quarter I would expect the second quarter to be better than normal seasonality off of the 67 nine.

Jason: Here that we just posted in the first quarter, but beyond that I really don't want to get into too much more specificity on a quarterly basis given this.

Jason Zampi: But beyond that, I really don't wanna get into too much more specificity on a quarterly basis given this environment of uncertainty we're in. Thanks. Appreciate it. Thank you.

Jason: Environment of uncertainty we're in thanks.

Jason: I appreciate it.

Jason: Thank you.

Chris Wetherbee: Next question will be from Chris Wetherbee at Wells Fargo.

Speaker Change: Our next question will be from Chris Wetherbee Wells Fargo. Please go ahead.

Chris Wetherbee: Please go ahead. Hey, thanks for the question.

Chris Wetherbee: Hey, Thanks, good morning.

Chris Wetherbee: Hey wanted to ask about yields so merchandise stepped up I know, we have a record their intermodal was up year over year for the second quarter in a row can you talk a little bit about what youre seeing in the pricing environment. Obviously service has improved quite a bit and just kind of curious how much. You think this is sort of a norfolk specific dynamic where you're seeing some some opportunity to play some catch up on price and what the market is kind of giving you.

Chris Wetherbee: Hey, Thanks for the question. This is Ed we've been successfully taken price in the merchandise side of the business really on the back of improving service and for US that's been the headline for the last three quarters, our customers are trusting us more and more and really offer us more opportunity both on the price side as well.

Ed Elkins: This is Ed. You know, we've been successful taking price in the merchandise side of the business, really on the back of improving service. And for us, that's been the headline for the last three quarters. Our customers are trusting us more and more and really offering us more opportunity both on the price side as well as on the volume side to expand our portfolio with them. You know, on the on the intermodal side, we're taking what the market will give us, basically. And that's really a sideways price right now. It's very flattish, and we'll see where it goes with all the uncertainty going forward here.

Chris Wetherbee: On the volume side to expand our portfolio with them.

Chris Wetherbee: On the on the intermodal side, we're taking what the market will give us basically and that's really a sideways price right now, there's very flattish and we'll see where it goes with all the uncertainty going forward here, but we're still we're still taking price.

Ed Elkins: But we're still taking price predicated off the value of the service that we're providing. And we feel good about our trajectory there. Obviously, the seaborne met coal pricing is the biggest challenge that eats away at a lot of that other good core pricing performance. Clearly, in the coal side, seaborne prices have been a drag, and there looks like they're going to be a drag for a few more quarters.

Chris Wetherbee: Predicated off the value of the service that we're providing and we feel good about our trajectory. There obviously the seaborne met coal pricing is the biggest challenge that eats away at a lot of that other good core pricing performance clearly in the coal side seaborne prices have been a drag in there looks like they're going to be a drag for a few more quarters.

Chris Wetherbee: Thanks, Chris.

Chris Wetherbee: Thanks, Chris Thank.

Chris Wetherbee: Thank you.

Scott Group: Next question will be from Scott Group at Wolf Research.

Speaker Change: Next question will be from Scott Group Wolfe Research. Please go ahead.

Scott Group: Please go ahead. Hey, thanks. Good morning. Just to follow up there, the merchandise yields up 4%x fuel. Is that more about mix or is that sort of core price accelerating? And then I understand the point about just all the uncertainty. So I guess I just want to get your perspective.

Speaker Change: Hey, Thanks, Good morning, just to follow up the merchandise yields up 4% ex fuel is that more about mix or is that.

Speaker Change: Sort of core price accelerating and then.

I understand the point about just all the uncertainty yet so I guess I just wanted to get your perspective.

Scott Group: In an environment where volumes start declining, if that's what happens, what's your ability and willingness to start to further reduce costs? If we wake up and volume's down 5% or something, do you think you can reduce headcount and cost in line with that?

Speaker Change: The environment, where volumes start declining if that's what happens what's your ability and willingness to start.

Speaker Change: To further reduce costs like if volume.

Speaker Change: And volumes down 5% or something like do you think you can reduce head count and cost in line with that.

Scott Group: Why don't you answer the yield question?

Speaker Change: Once you answer the yield question sure.

Ed Elkins: It's hard to remember it now, it's been so long. Merch yield. We're up 4%. On the merchandise side, you know, it's a function of both, really. We've been successful in taking share in a couple of key markets, notably in chemicals, and that's coming from a variety of sources.

Speaker Change: It's hard to remember it now.

Speaker Change: Yes.

Speaker Change: 4% on the merchandise side.

Speaker Change: Function of both really we've been successful in taking share in a couple of key markets, notably in chemicals, and thats coming from a variety of sources.

Ed Elkins: That's good for the portfolio. At the same time, we're beating our plan for same store price right now, feel good about that. And, you know, all the indications that we see from our customer base are that, number one, they're seeing increasing value from the product that we're delivering, and number two, they're looking for a way to save money, and we're clearly a great place to do that.

Speaker Change: Good that's good for the portfolio at the same time.

Speaker Change: We are beating our plan for <unk> for the same store price right now I feel good about that and you know all the indications that we see from our customer base are that number one they're seeing the increasing value from the product that we're delivering and number two they are looking for ways to save money and we're clearly a great place to do that.

Mark: You know, to your second question, I'll start, and then I'm going to, well, I'll hand it off to Mark here.

Mark George: To your second question I'll start and then I'm going to well I'll hand, it off to Mark.

Mark: Go ahead. Yeah, no, that's a hypothetical, you know, if you get a 5%, that's a 5% decline. It's a pretty cataclysmic scenario. We are not fully, you know, volume variable as an enterprise. As you know, you'd have to go and do some draconian things if you wanted to be volume variable. I think we learned a harsh lesson when we tried doing that in 2020 with the onset of COVID, and then was unable to respond quickly. So the reality is we're going to keep our eye on the external outlook. Meanwhile, we're doing really great stuff looking at being more productive and efficient, and you see the way we've been handling the volume last year while actually dealing and absorbing attrition in our direct headcount.

Mark George: <unk> go ahead.

Mark George: Yes no.

Mark George: That's a hypothetical if you get a 5%.

Mark George: 5% declines pretty cataclysmic.

Mark George: <unk>, we are not fully.

Mark George: Volume variable and.

Speaker Change: Enterprise as you know you'd have to go and do some draconian things. If you wanted to be volume variable I think we've learned a harsh lesson. When we tried doing that in 2020 with the onset of Covid.

Mark George: And then was unable to respond quickly. So the reality is we're going to keep our eye on the external outlook.

Mark George: Meanwhile, we're doing a really great staff looking at being more productive and efficient and you see the way we've been handling the volume last year, well actually dealing in absorbing attrition in our in our direct head count we're continuing to do that that's part of the map this year as well.

Mark: We're continuing to do that. That's part of the map this year as well. You know, I'm not going to respond to a 5% scenario, 5% decline scenario, but just know that, you know, we've got a lot of productivity runway left. John and the team are doing some great stuff, and others are doing great stuff inside the organization, including in IT and technology where we're trying to drive and find productivity savings. So, you know, we're keeping our eye on the volume trends right now. You know, we hear a lot of the same stuff in the marketplace about potential for recession.

Mark George: I'm not going to respond to a 5% scenario, a 5% decline scenario, but just know that.

Mark George: We've got a lot of productivity runway left.

John and the team are doing some great stuff and others are doing great stuff inside the organization, including in it.

Mark George: In technology, where we're trying to drive and find productivity savings so.

Mark George: We're keeping our eye on the volume trends right now.

Mark George:

Mark George: We hear a lot of the same stuff in the marketplace about potential for recession.

Mark: You know, we felt really good last week. We felt pretty bad yesterday. Today we feel a little more encouraged. That just shows. There's no way to predict where we go right now. We're in a really uncertain spot, but we haven't seen We haven't seen negative trends yet that really alarm us or cause us to do anything.

Mark George: We felt really bad last sorry, we felt really good last week, we felt pretty bad yesterday today, we feel a little more encouraged that just shows.

Mark George: There is no way to predict where we go right now we're in a really uncertain spot, but we havent seen.

Mark George: We haven't seen negative trends yet.

Mark George: <unk> really alarm us or cause us to do anything that said, we're scenario planning and.

Mark: That said, we're scenario planning and, you know, stay tuned.

Mark George: Stay tuned.

Mark George: Thank you.

Brian Ossenbeck: Next question will be from Brian Ossenbeck at J.P.

Speaker Change: Next question will be from Brian <unk> of Jpmorgan. Please go ahead.

Brian Ossenbeck: Morgan. Please go ahead. Hey, good morning. Thanks for taking the question. First, to quickly follow up on the land sale. It sounds like maybe there's some timing, so I just want That was pulled forward or if that was still in the full year expectation just came a little bit earlier.

Mark George: Okay.

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

Brian: First of all quickly a follow up on the land sale. It sounds like maybe there's some timing. So I just wanted to see if that was pulled forward or if that was still on a full year expectation just came a little bit earlier and then.

John Orr: And then maybe John, you can just talk about the network performance. Looks like it's bouncing back pretty well in terms of resiliency. So wanted to see how you're getting about that.

Brian: Maybe John you can just talk about the network performance looks like it's bouncing back pretty well in terms of resiliency. So wanted to see how youre getting about that if you think that's sort.

Brian: Sort of a new normal under the two point out program.

Unknown Executive: University of Northern Iowa. Thank you. Issues that they're not able to recover from. is what it seems like you are. Thank you.

Brian: And what sort of market opportunities that brings you because clearly your peer is having some some different issues that they're not able to recover from its fast because it seems like you are thank you.

Jason Zampi: Yeah, hey, this is Jason. I'll start off on the land sale question. You know, we continue to think about land sales in that 30 to $40 million range for the year. But you know, as you've seen last couple quarters, those those can be lumpy. And that's kind of what you what you saw here. But it's, you know, we still think we're going to be in that range for the full year.

Brian: Yeah, Hey, this is Jason I'll start off on the land sale question. We continue to think about land sales in that $30 million to $40 million range for the year.

Brian: But as you've seen last couple of quarters, those those can be lumpy and thats kind of what you what you saw here, but it's.

Brian: We still think we're going to be in that range for the full year.

John Orr: Yeah, and I would say I'm never satisfied with how the operating environment is at any given time. So that's a curse my team has to endure. But I can tell you, I'm very, very pleased at the strength and resilience that we demonstrated coming out of the storms. We, we recovered quickly between the storms and prepared ourselves for the next round. And I think the efficiencies in the network were really driven by the investments we made. In our capital over the over the years in our pulling back and managing our resources, so that we had the resilience where we can inject locomotives and cars where the market responded faster than than other places so that we could serve our customers and be there for them.

Brian: Yes, and I would say I'm never satisfied with how the operating environment is at any given time. So that's a curse my team and I assumed here, but I can tell you I'm very very pleased with the strength and resilience that we demonstrated coming out of the storms.

Brian: We.

Brian: We recovered quickly between the storms and prepared ourselves for the next round.

Brian: And I think the efficiencies in the network, we're really driven by the investments we've made.

In our capital over the over the years.

Brian: Pulling back and managing our resources. So that we had the resilience, where we can inject locomotives and cars, where the market responded faster than in other places so that we could serve our customers and be there for them.

John Orr: And then, as we're doing today pulling them back out so you know we deploy locomotives now we've got 40 back in stored serviceable ready for the next round of surge either in either in a. challenge or in an opportunity. So I think the the creating efficient transportation networks and really driving volume and resources to meet our GTMs is what we're all about.

Brian: And then as we're doing today pulling them back out. So we deploy locomotives now we've got 40 back in storage service will have ready for the next round of <unk>.

Brian: Serge either.

Brian: Either.

Speaker Change: Challenge or an opportunity so I think the creating efficient transportation networks, and really driving volume and resources to meet our GTS is what we're all about what are the things that I think is really important is that we're in the midst of all of this we're still in the midst of transformation.

John Orr: One of the things I think is really important is that we're in the midst of all of this, we're still in the midst of transformation. And we're introducing rigorous standards across the organization relative to our new zero-based plan. We're structurally engineering out cost and improving our customer service offerings. As I said earlier, we've accelerated over 600 customer last mile capabilities. And we're putting in our yard operating plans and our mechanisms to really more visibility for our customer and more visibility for our service offerings at the last mile or first mile. And I think that helps Ed because that visibility is in collaboration with the commercial.

Speaker Change: And we're introducing rigorous standards across the organization relative to our new zero based plan, we're structurally engineering out.

Speaker Change: Cost and improving our customer service offerings.

Speaker Change: I said earlier, we've accelerated over 600 600 customer last mile.

Speaker Change: Capabilities and we're putting in our yard operating plans at R.

Speaker Change: Our mechanisms to really create more visibility for our customer and more visibility for our service offerings at the last mile or first model.

Speaker Change: That helps Ed because visibility is in collaboration with the commercial team.

Ed Elkins: Yeah, look, over the past four or five years, we've lost share to a lot of different competitors. And our teams are working every single day to unwind those alternatives as quickly as possible and bring that freight back to NS. And you know, that's really, like I said earlier, on the back of good service that our customers can count on. And it's working. Yeah, consistent service begets share gains. And it's playing out right now in real time. So we're happy about it. Thanks for the question.

Speaker Change: Yes look over the past four or five years, we've lost share to a lot of different competitors and our teams are working every single day to unwind those alternatives as quickly as possible and bring that freight back to NFS and that's really like I said earlier on the back of good service their customers can count on.

Speaker Change: And it's working consistent service begets share gains.

Speaker Change: Playing out right now real time, so we're happy about that thanks for the question.

Speaker Change: Okay. Thank you.

Jonathan Chappell: Next will be Jonathan Chappell at Evercore ISI.

Speaker Change: Next will be Jonathan Chappell with Evercore ISI. Please go ahead.

Jonathan Chappell: Please go ahead. Thank you, good morning. Ed, you pointed out the 50, I'm sorry, John, you pointed out the $55 million of productivity improvements. And if we look at Jason's slides, it's all under the comp and benefit line item. As we think about getting to the $150 million and more importantly, the plus component of that $150 million, does that all still fall in comp and bend as we go through this year? Or are there other opportunities in purchase services, rents, materials, etc., where you think is more of a second half opportunity to reap the productivity benefit?

Jonathan Chappell: Thank you good morning.

Speaker Change: As you pointed out the <unk> I'm sorry.

Speaker Change: John you pointed out the $55 million of productivity improvements and if we look at Jason slides, it's all under the comp and benefit line item as we think about getting to the 150 and more importantly, the plus component of that 150 does that all still fall in comp and Ben as we go through this year or are there other opportunities in purchase services.

Speaker Change: Rents materials et cetera.

Where do you think is more of a second half opportunity to reap the productivity benefits.

Jason Zampi: Yeah, so this is Jason, I'll start off here, you know, we we've committed to that $550 million of productivity and cost reductions over this three year time horizon. And last year, we got more than we promised that right around 290. You know, you look this quarter, and we've highlighted the two most significant areas. So one is labor productivity that you just called out the others fuel efficiency. So those are those are the big pieces this quarter. So a couple different pieces there on the labor productivity side, you know, I think last year, we were probably more harvesting that from a T&E perspective.

Jason: Yes. So this is Jason I'll start off here.

Jason: We've committed to that $550 million of productivity and cost reductions over this three year <unk>.

Jason: Horizon and last year, we got more than we had promised that right around $2 90.

Jason: You look this quarter.

Jason: And we've highlighted the two most significant areas. So one is labor productivity that you just called out the others fuel efficiency.

Jason: Those are the big pieces this quarter.

Jason: So a couple of different pieces there on the labor productivity side I think last year we.

Jason: We were probably more <unk>.

Jason Zampi: Now, it's really more broad based across all of our different crafts. But you'll also see productivity really throughout the the income statement here, as you as you mentioned, purchase services, that's a great example, equipment rents. You know, you see the the improvements we have there, just due to a more fluid network. So it's really across the board here, we've just called out, you know, kind of two of the bigger ones here on the slide for you. Yeah, and you're right, Jason.

Jason: Harvest thing that from a <unk> perspective, now it's really more broad based across all of our different kras, but youll also see productivity really throughout the income statement here as you as you mentioned purchase services that is a great example equipment rents.

Jason: You see the.

Jason: Improvements we have there just.

Jason: Just due to a more fluid network. So it's really across the board here, we just called out kind of two of the bigger ones here on the slide for you.

Jason: You're right Jason.

John Orr: And I'll tell you, we can talk about high numbers, and we can talk about our what's next strategies, where we continue to develop the skills and capabilities of people, where we're really harvesting ROIC on our capital investments, and focusing on the, you know, diversity of our, of our vendor relationships, and really strengthening and narrowing down our purchasing capabilities. A lot of those things are building momentum. And then we layer on top of our zero based plan, phase one, phase two, phase three, that's a continued elevation of our service offering our commitment to rigorous standards across the organization and really pushing the boundaries of a transportation ecosystem.

Jason: I will tell you we can talk about high numbers and we can talk about or what's next strategies, where we continue to develop the skills and capabilities of people, where we're really harvesting ROIC see on our capital investments and focusing on the diversity of our.

Jason: Of our vendor relationships and really strengthening and narrowing down our purchasing capabilities a lot of those things are building momentum and then we layer on top of our zero based planning phase one phase II phase III, that's a continued.

Jason: Elevation of our service offering our commitment to rigorous standards across the organization and really pushing the boundaries of a transportation ecosystem, but then you go down a little deeper and we think about what are we control it.

John Orr: But then you go down a little deeper, and we think about what what are we controlling? From from our discipline approach on service and looking at things that impede that service, we get into war rooms. And our war room, the very first war room that we started was on reliability of our over the road train. From there, our fleet management, our freight car costs, all of those things are coming down and flowing out. Kudos to Brian Barr and Ryan Clark who are leading our mechanical department. Our freight car maintenance in the quarter was down significantly.

Jason: From our disciplined approach on service and looking at things that impede that service, we get into war rooms, and our war room. The very first war room that we started was on reliability of our over the road trains.

Jason: From there our fleet management, our freight car costs all of those things are coming down and flowing out.

Jason: Those two two Brian Barr and writing CLARCOR, leaving our mechanical department, our freight car maintenance in the quarter was down significantly.

John Orr: And you have to go back to Q123 to find anything close to that. And when you do that, and you think about all of the investments that we've made in field operations technology and more sampling we're doing, to really be driving down that cost means we're getting to the issues before they come across the road. Same with loss and damage. Our safety camp investors That's reducing our overtime, our purchase and services, our resources, all of the things that cost when you disrupt the natural flow of transit. And even as we get into how we have more reliability and availability of people, our taxi usage is down $15 million in the quarter.

Jason: And you have to go back to Q1, 'twenty three defined anything close to that and.

Jason: And when you do that and you think about all of the investments that we've made in field operations technology and more sampling we're doing to really be driving down that cost means we're getting to the issues before they come across the road same with loss and damage our safety camp investments for.

Jason: 43% down in our FRE accident ratios and 60% down in a non fr reaction so really.

Jason: Below the line activities or customer goods and shipments are less disrupted the goods that they're trusting with are leaving and departing and arriving in the same state we get them.

Jason: Thats, reducing our or over time of our purchase and services our resources there all of the things that cost when you disrupt the natural flow of transit.

Jason: And even as we get into to how we have more reliability and available availability availability of people our taxi usage is down $15 million in the quarter.

John Orr: You have to go back over three years to find that. That means we're our speed is translating into more direct and indirect value. So all of these values Give us a lot of confidence, and Jason and his insights into the finance and the linkages to our activities between the two of us are really driving attention and attentiveness to that $150 million commitment. And I would say it's natural we get a little bit more in the first quarter, but we're going to keep these initiatives driving value all through the year.

Jason: Do you have to go back over three years to find that that means we're our speed is translating into more direct and indirect value. So all of these value streams gives us a lot of confidence and Jason and his insights into the finance and the linkages to our activities.

Jason: Between the two of us are really driving.

Jason: Attention and attentiveness to the $150 million commitment.

Jason: And I would say its natural we get a little bit more in the first quarter.

Jason: But we're going to we're going to keep these initiatives driving value all through the year.

Jason: Super helpful. Thanks, Thanks, John Jason.

Jason Zampi: Thanks, John and Jason.

Jason Seidl: Next question will be from Jason Seidl at TD Cowan. Please go ahead. Thanks. Mark. Wanted to focus a little bit, uh, sort of... Unknown Speaker on your pointing out the...

Speaker Change: Next question will be from Jason Seidl Cowen.

Jason Seidl: Cowen. Please go ahead, thanks, operator, Mark and team good morning, and congrats on.

Jason Seidl: Good earnings in a challenging environment, we wanted to focus a little bit sort of you know on your agility going forward to manage cost because Margaret I think he did a great job of pointing.

Jason Seidl: Pointing out the uncertainty in the marketplaces.

Jason Seidl: What you might be faced with challenging going forward I was hoping maybe you could talk to us a little bit about some of the levers you guys can pull.

Mark: I was hoping maybe you could talk to us a little bit about... Thanks, Jason. Appreciate the question. You know, we're doing really great stuff. John just really listed a handful of things that we're focused on. We're getting down into details now when he's talking about taxis and meals and overtime and recruits. In the meantime, you know, on the other side of the ledger, we've got IT that's doing tremendous work trying to find cost reduction and efficiency opportunities. And then, you know, on the other administrative functions, you know, you recall, we did a RIF reduction in force.

Jason Seidl: And how nimble you think you can be to sort of manage those markets.

Jason Seidl: Thanks, Jason appreciate the question.

Jason Seidl: We're doing really great stuff, John just really listed a handful of things that we're focused on we're getting down into the details now when he's talking about.

Jason Seidl: Taxis and meals and overtime and re crews in the meantime.

Jason Seidl: The other side of the Ledger, we've got it thats doing tremendous work trying to find cost reduction and efficiency opportunities.

Jason Seidl: And then on the <unk>.

Jason Seidl: Other administrative functions.

Jason Seidl: Recall, we did a RIF.

Jason Seidl: Reduction in force.

Mark: Last year that took out 10% of our administrative, really it's about 9% of our administrative staff at the headquarters. So we've been looking at everything and we continue to look, we're not done. We all are contributing to trying to find opportunities to streamline the company and be more nimble, more efficient. We know we're in uncertain times right now. We don't really know how it's going to manifest yet on the top line, as I've mentioned before. We haven't seen the evidence yet, but we are scenario planning and we're getting into details, as you heard John give you some of those examples.

Jason Seidl: Last year that took out 10% of our administrative really it's about 9% of our administrative staff.

Jason Seidl: At the headquarters so we've been looking at everything and we continue to look we're not done.

Jason Seidl: We all are contributing to trying to find opportunities to streamline the company and be more nimble more efficient we know we're in uncertain times right now.

Jason Seidl: We don't really know, how it's going to manifest yet on the topline as I've mentioned before.

Jason Seidl: We haven't seen the evidence yet, but we are scenario planning and we're getting into details as you heard John give you some of those examples.

Mark: Thank you. Yeah, yeah, I would say, you know, we talk in terms of the kind of the big five or six initiatives that are big rocks, T&E, mechanical and equipment, purchase services and others, fuel and, and as Mark said, even even in the G&A. So there are core cost takeouts that we're looking at. But we're keeping we're keeping our resources active and in reserve to be able to respond to any kind of market that's changing, whether it's a spot market, or whether it's some emerging condition that gives us more volume. And we're we've also accelerated our onboarding capability for new hires.

Speaker Change: Thank you Tom you want to add to that.

Speaker Change: I would say we talk in terms of the kind of the big five or six initiatives that are big rocks.

Speaker Change: Any mechanical and equipment purchased services and others.

Speaker Change: And as Mark said, even in the G&A. So there are core cost take outs that we're looking at but we're keeping we're keeping our resources active and in reserve to be able to respond to any kind of market thats changing.

Speaker Change: Whether its a spot market or whether it's.

Speaker Change: Some emerging condition that gives us more volume.

Speaker Change: We've also accelerated our onboarding capability for new hires so we've we've compressed the time it takes to.

Mark: So we've, we've compressed the time it takes to bring on a new a new conductor, for example, bring, take them through the the technical training, get them ready for a productive life with NS. And so even our responsiveness on that front is, has been streamlined and optimized. So we're we're a much different Railway than we may have been a few years ago. And the agility that we've created and across all these streams is really giving us pretty good, strong confidence that we're ready to take on the world as it evolves. Yeah. And, you know, those are great examples.

Speaker Change: Bring on a new a new conductor for example.

Speaker Change: Take him through the the technical training get them ready for a productive life with us and so even our responsiveness on that front has been streamlined and optimized so we're a much different.

Speaker Change: Railway then we may have been a few years ago and the agility that we've created and across all these streams has really given us pretty good strong confidence that we are ready to take on the world as it evolves.

Speaker Change: Those are great examples and even last week, we tightened controls around the use of consultants. So.

Mark: And even last week, you're right, we tightened controls around the use of consultants. So, again, we're getting into every detail here where I want to see everything that our team is doing with regard to engaging new consultants. So we're getting into some details here and we're getting ready to hunker down. Oh, that sounds good.

Speaker Change: Again, we're getting into every detail here, where I want to see everything that our team is doing with regard to engaging new consultants. So we're getting into some details here and we're getting ready to hunker down.

Speaker Change: Well that sounds good how should we think about head count overall, as we sort of head into these uncertain times.

John Orr: How should we think about EdCount overall? you guys sort of keeping it flat. Look, I think what we've done, and I mentioned this before, is we've been managing really well, our 83 hiring locations and in crew locations with attrition and very controlled hiring practices, because we do have a window into attrition in the future, just based on the age of our crews that are out there. We know we're going to have some attrition. So we're backfilling with hires in the training pool, but we're being very controlled, very measured for the 83 specific locations, keeping an eye on volume and where that volume is going to show up on the network.

Speaker Change: Sort of keeping it flat and maybe thinking about furloughs after you see any impacts.

Speaker Change: Look I think what we've done and I mentioned this before is we've been managing really well.

Speaker Change: 83, hiring locations and crew locations with attrition in very controlled hiring practices, because we do have a window into attrition in the future just based on the age of.

Speaker Change: Age of our crews that are out there we know we're going to have some attrition. So we're back filling with hires in the training pool, but we're being very controlled very measured for the 83 specific locations keeping an eye on volume and where that volume is going to show up on the network. So it's a very delicate balance that we've got it.

John Orr: So it's a very delicate balance that we've got to do. So what you've seen is that we've actually attrited down what we've taken on more volume last year. That was very strategic, and that's another form of productivity. Volume absorption is another angle of productivity that we don't give the same credit to, but it's a very important part of the recipe here. I think in terms of this year, I'd be surprised if you see much growth in headcount, if any at all, and certainly if top line pressure is manifest in the back half, I would imagine we'd attrit down quicker.

Speaker Change: Do.

Speaker Change: So were.

Speaker Change: You have seen is that we've actually had treated down what we've taken on more volume last year that was very strategic and that's another form of productivity.

Speaker Change: Absorption is another angle of productivity that we don't give the same credit too, but it's but it's a very important part of the recipe here.

Speaker Change: I think in terms of this year I'd be surprised if you see much growth in head count if any at all and certainly if topline topline pressures manifest in the back half I would imagine we'd a trip down quicker.

Jason.

Jason Seidl: Just like Mark said.

Speaker Change: We're really matching all of our resources to the volume trends and obviously, you head counts and part of that.

Speaker Change: And you saw the great productivity that were that were.

Speaker Change: Generating here and I think just to Mark's point there at this time, we still expect head count flat with with kind of where we exited the fourth quarter, but we're keeping an eye on it and we'll adjust accordingly.

Unknown Executive: It makes sense, guys. Appreciate the color. Appreciate it.

Speaker Change: Makes sense guys I appreciate the color appreciate the time.

Jason Seidl: Thanks, Jason.

Speaker Change: Yes.

Brandon Oglenski: And next question will be from Brandon Oglenski at Barclays.

Speaker Change: And next question will be from Brandon Glinski at Barclays. Please go ahead.

Brandon Oglenski: Please go ahead.

John Orr: Hey, thanks for taking the question. So John, I was wondering if you could talk about like these intermodal service composite scores that you give and merchandise plan compliance. I know that you definitely had weather impacts in the quarter, but where do you want to see those, you know, long term?

Brandon Glinski: Hey, Thanks for taking the questions. So John I was wondering if you could talk about like the intermodal service composite score that you gave in merchandize plan compliance.

Speaker Change: You definitely had weather impacts in the quarter, but where do you want to see those.

John Orr: And Ed, maybe if you can just follow up to like, what are you seeing domestic intermodal? Are you seeing highway conversions? Because I think we're hearing that from some of the IMCs, especially in the Yeah, from the Merchandise Neuromodal or Tripline Compliance and Composites, those are really internal measures that demonstrate our commitment to our customer plan. And as we evolve the plan, we're tightening down our standards even more. So I want to see, obviously, the Tripline Compliance at a high level. So, you know, in the 80s and 90s, respectively. But also bear in mind that as we tighten down our standards, we're pushing the boundaries within our terminals and forcing waste out of even the clock that measures Tripline Compliance.

Speaker Change: Long term and maybe if you can just follow up to like what are you seeing domestic intermodal are you seen highway conversions because I think we are hearing that from some of the IMC is especially in the east.

Speaker Change: Yeah from a.

Speaker Change: From the merchandize and intermodal composite.

Speaker Change: We're planning compliance in composites those are really internal measures that that demonstrate our commitment to our customer plan and as we evolve the plan, we're tightening down our standards, even more so I want to see obviously the trip plan compliance is.

Speaker Change: At a high level so.

Speaker Change: In the Eighty's Ninety's, respectively.

Speaker Change: Also bear in mind that as we tightened down our standards, we're pushing the boundaries within our terminals enforcing forcing waste out of the even the clock measures trip plan compliance so.

Ed Elkins: So I expect some variability in there as we learn and develop the skills and create the environment for better on-time delivery, better standards across the entirety of the over-the-road experience of a customer. But ultimately, what matters to me is that our customers getting their goods on us, and we've got the resources to supply them cars and locomotives and people to move it when they expect it, that we do it safely and effectively, and we deliver it to the final terminal so that they can get to their marketplaces and win. And that's how Ed and I measure ourselves.

Speaker Change: I expect some variability in there.

Speaker Change: You learn and develop the skills and create the environment for better on time delivery better standards across the entirety of the over the road experience of a customer.

Speaker Change: But ultimately what matters to me is that our customers getting their goods on us and we've got the resources to supply them cars and locomotives and people to move it when they expect it.

Speaker Change: We do it safely and effectively and we deliver it to the final terminal so that they can get to their marketplaces and win.

Speaker Change: And that's how Ed and I measure ourselves.

Ed Elkins: And we have to put a pin somewhere, and that's what we put on our Merchandise and Tripline Compliance measure.

Speaker Change: And we have to we have to put a pin somewhere and that's where we put on our our merchandising trip plan compliance measure and is a perfect segue to why we're getting some highway conversions right. Yes, we're a fair part of the way through the spring bid season, and we've had very encouraging results so far.

Ed Elkins: And it's a perfect segue to why we're getting some highway conversions, right? Yeah, we're a fair part of the way through the spring bid season, and, you know, we've had very encouraging results so far. What we're seeing is customers clearly want to save money, and if they have a service product that they can trust from us, then we are a great resource for them to de-risk their supply chains from a cost perspective. We see that happening, and I fully expect it to continue.

Speaker Change: What we're seeing is customers clearly want to save money and if they have a service product that they can trust from us than we are a great resource for them to de risk their supply chain from a cost perspective, we see that happening and I fully expect it to continue.

Stephanie Moore: Thank you.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you next question next question will be from Stefan anymore at Jefferies. Please go ahead.

Stephanie Moore: Next question will be from Stephanie Moore at Jeffreys.

Ed Elkins: Please go ahead. Hi, good morning. Thank you.

Stefan: Hi, good morning, Thank you.

Ed Elkins: Maybe a question for you, Ed, here. You know, based on the conversations you're having with customers, you know, how has your pipeline of opportunities changed at all as of late, just given kind of the uncertainty of the market, particularly the industrial economy? Have you seen, you know, maybe any project pauses or delays? And then maybe in the same vein, any indication of a pull forward of shipments in one queue due to tariffs? Thank you. Sure, I think I referenced it when I was talking about industrial development there, we've seen the top of the pipeline expand pretty substantially, with a lot of companies, both domestic and international, evaluating where they could expand or create new manufacturing nodes.

Speaker Change: Maybe a question for you Ed here based on the conversations you're having with customers. How is your pipeline of opportunities changed at all as of late given kind of the uncertainty in the market, particularly in the industrial economy have you seen maybe any project pauses or delayed and then maybe in the same vein.

Speaker Change: Any indication of a pull forward of shipments and one Canada due to tariffs. Thank you.

Speaker Change: Sure I think I referenced when I was talking about industrial development. There we've seen the top of the pipeline expand pretty substantially with a lot of companies both domestic and international.

Speaker Change: Evaluating where they could expand or create new manufacturing nodes and we're really focused on that.

Ed Elkins: And we're really focused on that. Broadly, our teams are very, very focused on how we can solve problems for our customers, whether it's from, you know, the current uncertainty, or whether it's just ongoing business opportunities. We have a great team out there. We're enhancing our capability when it comes to how we address our customers commercially. And I think that's paying dividends.

Speaker Change: Broadly our teams are very very focused on how we can solve problems for our customers whether it's from.

Speaker Change: The current uncertainty or whether it's just ongoing business opportunities.

Speaker Change: We have a <unk>.

Speaker Change: <unk> team out there, we're enhancing our capability when it comes to how we address our customers for commercially and I think that's paying dividends.

Ed Elkins: When I think about Q1, there's a lot of put and takes out there. Number one, we had a lot of auto holes and some disruption in the first part of the quarter. We had all that terrible weather that John referenced, which really impacted our customers as well as us, you know, miners couldn't get to the mine. Staying very close to our customers is the most important thing that we can do commercially right now. It helps us and helps our customers, both of us, figure out how to solve these problems. I think another point on the whole pull forward question, you know, you talk to the customers, we're not necessarily hearing that that's what was going on.

Speaker Change: When I think about Q1, there's a lot of put and takes out there number one we had a lot of autos and some disruption in the first part of the quarter. We had all that terrible weather that John referenced which really impacted our customers as well as us miners couldnt get to the mine.

Speaker Change: <unk> shipments couldn't get to the railhead et cetera.

Speaker Change: Do we see some pull forward there might've been some in there or was it make up from the from the early part of the quarter a lot of things going on there, but we are encouraged by the trends right now, but we're keeping a real weather eye on whats happening and I know I've said, it over and over again, but I want to reinforce it staying very close to our customers at the most.

Speaker Change: The thing that we can do commercially right now helps us and helps our customers both of us figure out how to solve these problems I think another point on the whole pull forward question.

Speaker Change: You talked to the customers were not necessarily hearing that that's what was going on there.

Ed Elkins: The data doesn't scream out at you, like Ed is saying. So there probably is some in there, but it's not meaningful to call out.

Speaker Change: The data doesn't scream out at you like it is saying so there probably is some in there, but it's not as meaningful to call out.

Stephanie: Thank you Stephanie.

Tom Wadowitz: Next question will be from Tom Wadowitz at UBS. Please go ahead. Yeah, good morning, Ed. I have, I guess, a couple of kind of just feed into puts and takes on the Outlook. You have talked about share gain as you, the railroad runs better, you know, despite some of the weather impacting 1Q. And I think you focused on truck. I'm wondering, have you seen any new contracts, kind of recovery in chemicals or other areas that you might be more likely to have share in, you know, versus the other railroad? Is that something you've seen? Or do you think there's potential there?

Next question will be from Thomas <unk> at UBS. Please go ahead.

Stephanie: Yeah. Good morning, Ed I have I guess, a couple of kind of just feed into puts and takes on the outlook you have talked about.

Stephanie: Share gain as you the railroad runs better.

Stephanie: Despite some of the weather impact in <unk> and I think you've focused on truck.

Stephanie: I'm wondering have you seen any new contracts kind of recovery in chemicals or other areas that you might be more likely to have share in versus the other railroad is that something that you've seen or do you think there's potential there.

Tom Wadowitz: And then I guess, another markets related would just be, you know, I understand the tariff outlooks, you know, really hard to factor in, but are there particular segments that you're most focused on is auto if you think that, you know, 25% tariffs persist? Is that what would be, you know, autos and metals? So just any, any thoughts on kind of what's, you know, most in focus on tariffs and whether it's kind of good or bad, because it's tougher to tell for the Eastern Railroad, right? So there could be both good and bad from tariffs, right?

Stephanie: And then I guess.

Stephanie: Another markets related would just be you know I understand the tariff outlooks, you know really hard to factor in but are there particular segments that you're most focused on is auto if you think.

Stephanie: 25% tariffs persist is that what would be autos and metal. So just any any thoughts on kind of whats most in focus on tariffs and whether it's good or bad because its tougher to Telford Eastern railroad right. So there could be both good and bad from tariffs right. Thank you.

Tom Wadowitz: Thank you. Yeah, no problem. Thank you, Tom, for the question. You know, on the topic of share gain, I'm encouraged by our progress. And I'm encouraged specifically by our progress in our merchandise markets, where we've been able to take some share back. And that's coming from a whole variety of sources, including alternative sourcing of the product, as well as other modes, other competitors. The thing that we're really focused on when I talk about share gain, is making sure that customers who want to use Norfolk Southern, but in the past haven't been able to because of our service, I can bring them back confidently, because I know that the service John is providing is one that they can trust every single day.

Speaker Change: Yeah No problem. Thank you Tom for the question.

Speaker Change: On the topic of share gain I'm encouraged by our progress and I'm encouraged specifically by our progress and our merchandise markets, where we've been able to take some share back and thats coming from a whole variety of sources, including alternative sourcing of the product as well as other modes other competitors.

Speaker Change: The thing that we're really focused on when I talk about share gain is making sure that customers, who want to use Norfolk southern but in the past haven't been able to because of our service I can bring them back confidently because I know that the service John is providing is one that they can trust every single day and that's that's really the most important lever that I have when it comes to.

Mark: And that's, that's really the most important lever that I have when it comes to gaining share, wherever it's coming from. On on tariffs, you know, there's, you're right, as an Eastern railroad, there's a whole bunch of intakes out there. I think it's certainly plausible that we can see both tailwinds and headwinds in a variety of markets, maybe maybe auto is one of those going forward, where perhaps there'll be more domestic production, but at the same time, you can't predict. And so we're just keeping a really, really close eye on it. And it's probably not going to be short term, it'll probably take a while to play out some of those market shifts.

Speaker Change: Gaining share wherever it is coming from.

Speaker Change: On tariffs.

Speaker Change: You are right as an eastern railroad Theres, a whole bunch of puts and takes out there.

Speaker Change: I think it's certainly plausible that we could see both.

Speaker Change: Tailwind than headwinds in a variety of markets, maybe maybe auto was one of those going forward, where perhaps there'll be more domestic production, but at the same time, you can't predict and so we're just keeping a really really close and it's probably not going to be short term it'll take a while to play out some of those market shifts but.

Mark: But look, I think the challenge to us, I'll just put a finer point on the whole, what is the tariff impact to us on the top line, really hard to really hard to put a point on it. I think the bigger risk for us is a broader economic slowdown. A recessionary type of scenario where you lose the few points of top line because there's a general GDP slowdown. Tariffs, it's harder to say, certainly in the short term. And bear in mind, we're largely a domestic business. We said last quarter, 75% of our business is a U.S.

Speaker Change: Look I think the challenge to US I will just put a finer point on the whole what is the tariff impact to us on the top line really hard to really hard to put a point on it I think the bigger risk for us as a broader economic slowdown.

Speaker Change: Recessionary type of scenario, where you lose that.

Speaker Change: A few points of topline because theres, a general GDP slowdown tariffs, it's harder to say certainly in the short term and bear in mind, we are largely a domestic business. We said last quarter, 75% of our business is a U S domestic business.

Mark: domestic business. And when you look at the other 25% Europe is about high single digits, right Ed? That's right. About high single digits. And then when you look at Mexico, Canada, and China, each, those are about low single digits of our revenue. Each. Okay. And then the rest of the world is kind of the balance, mid-single digits. So whether, how tariffs play out is gonna be hard to say, but I don't think it's gonna be as meaningful as the risk we have on the broader. a broader economy. Thanks. Thanks a lot, Tom. Okay. Thank you.

Speaker Change: When you look at the other 25%.

Speaker Change: Europe is about high single digits right.

Speaker Change: Ed that's alright, but high single digits and then when you look at Mexico, Canada and China.

Speaker Change: Each of those are about low single digits of our revenue each okay. And then the rest of the world is kind of balanced mid single digits.

Speaker Change: So whether how tariffs play out is going to be hard to say, but I don't think its going to be as meaningful as the risk we have on the broader.

Speaker Change: Broader economy.

Speaker Change: So.

Thanks, Thanks, a lot Tom.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Walter Spracklin: Next question will be from Walter Spracklin at RBC Capital Markets.

Speaker Change: Next question will be from Novartis, Brooklyn at RBC capital markets. Please go ahead, yes. Thanks very much good morning, everyone. So John. This question is for you I know you've been working very hard on the resiliency and Recoverability of the railroad. When you have some of the winter effects like this and you articulated those very well.

Walter Spracklin: Please go ahead. Yes. Thanks very much.

John Orr: Good morning, everyone.

John Orr: So, John, this question is for you. I know you've been working very hard on the resiliency and recoverability of the railroad when you have some of the winter effects like this, and you articulated those very well this quarter. My question is really on a kind of run rate basis, and we get the weekly data, and we're always on those productivity gains. So, is there a metric you can kind of indicate where you're happy of those that come out weekly? And I'm kind of leaning toward velocity, but is there a certain car miles per day or something that we get weekly that says, okay, things are running pretty well right now.

Speaker Change: This quarter. My question is really on a kind of run rate basis.

Speaker Change: We get the weekly data and we're always focused on with Norfolk Southern is on those productivity gains. So is there is there a metric you can kind of indicate where you're happy all of those that come out weekly and I'm kind of leaning toward velocity, but is there a certain car miles per day or something that we get.

Speaker Change: Weekly that says okay things are running pretty well right. Now this is the level, we're pretty happy with so that when we met when we monitor that and we see it at that level and this could differ by quarter, but to the extent that you can give that seasonality when we see that level. We know okay things are running according to to Johns.

John Orr: This is the level we're pretty happy with, so that when we monitor that and we see it at that level, and this could differ by quarter, but to the extent that you can give that seasonality, when we see that level, we know, okay, things are running according to John's plan here, and we can feel comforted by that. Any indication there would be helpful.

Speaker Change: I am here and we can feel comforted by that.

Speaker Change: Any indication there would be helpful.

John Orr: Yeah, Walter, first, congrats on the overtime win last night. Maybe there is hope that the Leafs can get out of the first round. This is the year. Well, let's hope. There's a lot of people in Canada looking for that silver lining. Hey, listen, I think, as I've always said, and as you know, well, being an experienced railroad analyst, that there's no one measure that's going to drive a good indication of what's going on in the business. And that's why we really focus on network asset and customer health indices. And, and, as I once described, it's an eight burner stove, and we're always balancing out what we're doing on that.

Speaker Change: Yeah, Walter first congrats on the overtime win last night, maybe there is hope that the Leafs can get out of the FERC issued a year. This is the year.

Speaker Change: Let's hope.

Speaker Change: A lot of people in Canada looking for the silver lining.

Speaker Change: Hey, listen.

Speaker Change: Think as I've always said and as you know well being and experienced.

Speaker Change: Railroad to analyst.

Speaker Change: There is no one measure that's going to drive a good indication of what's going on in the business and Thats why we really focus on network asset and customer health indices.

Speaker Change: And as I.

Speaker Change: Once described it's eight.

Speaker Change: <unk> eight burner stove, and we're always balancing out what we're doing on that stores to make sure that the products that we're putting in.

John Orr: stove to make sure that the product we're putting in drives safety and service excellence, and does it at the best cost structure. And that's what we'll continue to do. But what I think as we watch those six numbers, Walter, is then the balance of what we're doing about it. Were we sitting on those numbers and just letting them be the status quo? Or are we challenging ourselves to do something more constructive? And that's why it's important, the zero based plan. It's taking our current customer service indices and challenging us to do better. It's challenging us to cut whatever fat is left in the service schedules, the terminal performance, the over the road, the crew change off locations, the meet pass planning, and really balance that out.

Speaker Change: Drives drive safety and service excellence and does it at the best cost structure and thus we will continue to do but what I, what I think as we watch those six numbers.

Speaker Change: Walter is then the balance of what we're doing about it where are we sitting on those numbers and just letting them be the status quo are challenging ourselves to do something more constructive.

Speaker Change: That's why that's why it's important the zero based plan.

Speaker Change: Taking our current.

Speaker Change: Customer service indices and challenging us to do better.

Speaker Change: Challenge is to cut whatever is left in the service schedules. The terminal performance the over the road the crew change off locations, the meat past planning and real.

Speaker Change: We balance that out one of the things I thought was very constructive in the fourth quarter and we're continuing this quarter is the compression of our fastest lanes like our intermodal offerings and are what has historically been our slowest trains in the in the unit trains and compressing the gap so.

Speaker Change: Speed differential was closed so that means we're moving the entire capacity at a faster rate and a more productive right and that's manifesting into cost takeout less less overheads less crews required and all of those things. So we're doing that at the same time, we're not standing still on the <unk>.

John Orr: Crews Required, and all of those things. So we're doing that. At the same time, we're not standing still on the performances that support those things, like our resource management, and the work that MENA's doing to draw down the complexity, simplify our distribution of materials, simplify our consumption knowledge, and give us better visibility. The work that we're doing on our yard operating plan and daily operating plan to give our customers more visibility through our heartbeat initiative, so that, or sorry, home stretch initiative, so that they can see what our local yard is planning, and they can bank on that and save money.

Speaker Change: Performance is that that support those things like our resource management and the work that mean is doing to draw down our complexity simplify our distribution of materials simplify our consumption knowledge and give us better visibility the work that we're doing on our yard operating plan.

Speaker Change: Daily operating plan to.

Speaker Change: To give our customers more visibility through our heartbeat initiative.

Speaker Change: Or sorry, a homestretch initiatives so that they can see what our yard local yard is planning and they can bank on that and save money. Those are the things that we're doing that will help enhance.

John Orr: Those are the things that we're doing that will help enhance. what the those big six numbers are driving. So I think there's going to be variability within that. Fuel, loss and damage, crew starts, overtime, all are in those big six numbers, and that's really what's going to drive the performance. That's awesome.

Speaker Change: What the big six numbers are driving.

Speaker Change: So.

Speaker Change: I think there's going to be variability within that.

Speaker Change: Fuel.

Speaker Change: Loss and damage crew starts over time all are in those those big six numbers and Thats really whats going to drive the performance.

Unknown Executive: We appreciate the time, Josh. Thanks, Walter.

Josh: It's also I appreciate the time Josh.

Josh: Thanks Walter.

Richa Harnain: Next question will be from Richa Harnain at Deutsche Bank.

Wechat Harnett: Next question will be from Wechat Harnett at Deutsche Bank. Please go ahead.

Richa Harnain: Please go ahead.

Mark: Hey everyone, nice to meet you on this call. So I wanted to hone in, Mark, on your point around seeing meaningful share gains. I know a theme from your prepared remarks was that this came from being very close to your current customers, and in response to a prior question, you suggested you are winning new business as well. I'm just curious how sticky that is, and I ask in the context of one of your closest peers recently reporting and lamenting leaving business on the table, given their network issues, but showing confidence that that should turn around in some time.

Speaker Change: Hey, everyone nice to meet you on this call.

Speaker Change: I wanted to hone in Mark on your point around themes for share gains.

Speaker Change: And now it seems from your prepared remarks was that this team from being very close yes.

Speaker Change: In response to a prior question you suggested you are winning new business as well I'm just curious how sticky that is and ask.

Speaker Change: Context of one of your closest peers recently and appointing and lamenting leaving business on the table given that I guess he is showing confidence that that's a turnaround in some time. So that's perfect and then just a quick clarification around the full year guidance.

Mark: So that's the first one, and just a quick clarification around the full year guidance. Mark, again, I appreciated the point around scenario planning around a very uncertain backdrop, but in the event we do have flat revenue or down revenue, can you still grow operating profit with all of these cost takeout initiatives you have? You've done better for the past two consecutive quarters with down revenue and up operating profit, but just wanted to hear more on this from you.

Speaker Change: Mark again, I appreciated the point around scenario planning around a very uncertain backdrop, but any of that we do have flat revenue or down revenue can you still grow operating profit with all of these.

Speaker Change: Cost takeout initiatives, you have you've done better for the past two consecutive quarters went down revenue and operating profit.

Speaker Change: Kim Thank you.

Mark: Thank you. Yeah, I think I'm going to have Ed talk a little bit about the share gain dynamic and the stickiness, which we think is there. And you know, with regard to growing operating profit, absolutely, that's, that's our goal. We're going to be trimming where we can to try to help neutralize and offset some of the challenges, you know, that might present in the back half for these last nine months, if they materialize. But again, we're scenario planning, we're trying to remain nimble, because we have to respond to the growth that we do anticipate happening.

Speaker Change: Yes, I think.

Speaker Change: I'm going to have Ed talk a little bit about the share gain dynamic and the stickiness, which we think is there.

Speaker Change: With regard to growing operating profit absolutely.

Speaker Change: That's our goal we're going to be.

Speaker Change: Trimming, where we can to try to help neutralize an offset.

Speaker Change: Some of the challenges that might present in the back half for these last nine months, if they materialize, but again, we are scenario planning we are trying to remain nimble.

Speaker Change: Cause we have to respond to the growth that we do anticipate happening so.

Mark: So we can't get too far ahead of the curve here. So it's really a question of agility and being able to pivot quickly.

Speaker Change: So we can't get too far ahead of the curve here. So it's really a question of agility and being able to pivot quickly.

Ed Elkins: But Ed, why don't you talk a little bit about the share game? Sure, and many of the people in this room and on this call have heard me talk about this before, but over the past few years, because of the service challenges that we had, some of our customers had to make alternative arrangements and go to other modes or other competitors to satisfy their needs. And frankly, in most cases, we believe those alternatives were more expensive and probably less efficient overall. And so, as I said earlier, we're working really hard. Especially from the highway. Especially from the highway and maybe from other places as well.

Speaker Change: But I wanted to talk a little bit about the share gain sure and.

Speaker Change: Many of the people in this room and on this call Greg we've talked about this before but over.

Speaker Change: Over the past few years because of the service challenges that we had some of our customers had to make alternative arrangements.

Speaker Change: And go to other modes or other competitors.

Speaker Change: To satisfy their needs and frankly in most cases, we believe those those alternatives were more expensive and probably less efficient overall and so as I said earlier, we're working really hard on the highway, especially from the highway and maybe maybe from other places as well, but we're working really hard with our customer.

Ed Elkins: But we're working really hard with our customers to unwind those alternatives and to help them save more money and be more efficient. And when we do that and deliver the kind of service that John's been talking about, we will be sticky and we are sticky with our customers because they can trust us. And the fact is, we are a highly efficient mode for them to both deliver demand for their customers and satisfy their customers' needs, but also save money. And we're confident in that.

Speaker Change: For us to unwind those alternatives and to help them save more money and be more efficient and when we do that and deliver the kind of service that John has been talking about.

Speaker Change: Will be sticky and we are sticking with our customers because they can trust us.

Speaker Change: The fact is we are a highly efficient mode for them to both deliver demand for their customers and satisfy their customers needs, but also save money and we're confident in that.

Mark: Yeah, I wanna just get back and talk again about the guidance that we gave and the scenarios that we have. You know, first, we remain fully committed to the $150 million of cost taken. We've got really good momentum here. You saw the first quarter results. We are gonna hit that number or beat it. Now, when you look at the revenue outlook, on the positive side, right, our volume trends have been consistent with the way we planned them to be in the first quarter, especially since the recovery from the winter storms, right? We were running at, you know, call it 142, 144, some weeks 146,000 carloads per week.

Speaker Change: I wanted to just get back and talk again about the guidance that we gave in the scenarios that we have.

Speaker Change: First we remain fully committed to the $150 million of cost takeout.

Speaker Change: Got really good momentum here you saw the first quarter results, we are going to hit that number or beat it.

Speaker Change: Now when you look at the revenue outlook on the positive side right. Our volume trends have been consistent with the way we planned them to be in the first quarter.

Speaker Change: Especially since the recovery from the winter storms right. We were running at call. It 140 244, some weeks 146000 carloads per week.

Jason Zampi: We're feeling pretty good about that. John's done a great job on service and Ed's been opportunistically leveraging that to bring volume onto the railroad. Remember, we've got a very diversified portfolio of business. So should there be challenges, you know, we've got a pretty good hedge in our diversification. And pricing has been pretty steady and pretty good as you heard Ed lay out. That said, export coal pricing has been a challenge that we have to keep our eye on. Hopefully that can recover to somewhat in the back half and provide some relief. But we're keeping our eye on that, as well as fuel prices, which have been under pressure, as well.

Speaker Change: We're feeling pretty good about that John has done a great job on service and ed's been opportunistically leveraging that to.

Speaker Change: To bring volume onto the railroad.

Speaker Change: Remember, we've got a very diversified portfolio of business. So should there be challenges, we've got a pretty good hedge in our diversification.

Speaker Change: And pricing.

Speaker Change: It has been pretty steady and pretty good as you as you heard Ed lay out.

Speaker Change: That said.

Speaker Change: Export coal pricing has been a challenge that we have to keep our eye on.

Speaker Change: Hopefully that can recover somewhat in the back half and provide some relief, but we're keeping our eye on that as well as fuel prices, which have been under pressure as well that can cause a headwind to us on fuel surcharge revenue.

Jason Zampi: That can cause a headwind to us on fuel surcharge revenue.

Jason Zampi: Now, on the negative side. We see the same macro headlines you all see, you know, the risk of lower GDP, heightened recession concerns. We are not immune to those same pressures, but we are staying in contact with our customers. There's just been no clear sign from our customers that they're concerned, and we're not seeing it in the numbers yet. So we'll see how things play out, but we've got to be realistic. You know, there's two tangible pressures I talked about, and then there's this risk. So, you know, when we're reiterating our guidance here, you know, we don't have our heads in the sand.

Speaker Change: Now on the negative side.

Speaker Change: We see the same macro headlines you will see the risk of a lower GDP heightened recession concerns.

Speaker Change: We are not immune to those same pressures.

Speaker Change: But we are staying in contact with our customers. There's just been no clear sign from our customers that they are concerned.

Speaker Change: And we're not seeing it in the numbers yet so we'll see how things play out.

Speaker Change: But we've got to be realistic.

Speaker Change: There's two tangible pressures I've talked about and then there's this risk.

Speaker Change: So when we are reiterating our guidance here, we don't have our heads in the sand we understand that the situation is fluid.

Mark: We understand that the situation is fluid. That's why we're a scenario in case things do turn south on us, and we'll see what we can do to offset and mitigate some of those pressures.

Why were a scenario.

Speaker Change: In case things do turn south on Us and we will see what we can do to offset and mitigate some of those pressures.

Mark: Meanwhile, the things we can control. We're taking out the cost. John's running an outstanding network right now. That resiliency in the first quarter, following the resiliency we had in the fourth quarter after Helene, it's showing that something's different here, and that's great. Our network's responding. And Ed, and the commercial agility has been fantastic. We're seeing that manifest. So we still think even in a down market, we should be able to get some volume from sharing. So, that's the overall kind of look at the way we're managing the year as we go. Control the controllables and try to help mitigate some of the things we can't.

Speaker Change: Meanwhile, the things we can control, we're taking out the cost Johns running an outstanding network right now that resiliency in the first quarter. Following the resiliency, we had in the fourth quarter. After Helene its showing thats something different here and thats, great our networks, responding and Ed and.

Speaker Change: The commercial agility has been fantastic, we're seeing that manifest. So we still think even in a down market, we should be able to get some volume from share gains.

Speaker Change: So that's the overall kind of look at the way.

Speaker Change: The way, we're managing the year as we go control the controllable.

Speaker Change: And try to help mitigate some of the things we can control.

Mark: Thanks for your time. Very helpful. Thank you.

Speaker Change: Thanks, Bruce very helpful. Thank you.

Unknown Executive: That is all the time we have for questions today. I will turn the call back over to Mr. George. Okay, thank you everyone. We appreciate your participation. And for those of you who were just listening in, and we'll look forward to touching base throughout the quarter. Take care and be safe. Thank you, sir.

Mark George: That is all the time, we have for questions today, I'll turn the call back over to Mr. George.

Speaker Change: Okay. Thank you everyone. We appreciate your participation and for those of you who were just listening in and we will.

Mark George: I look forward to touching base throughout the quarter take care and be safe.

Speaker Change: Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

Unknown Executive: Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.