Good afternoon. My name is Marjorie and I'll be your conference operator today. I would like to welcome everyone to CPKC's Third Quarter 2024 Conference Call. The slides for today's call can be found at investor.cpkcr.com. All lines are on mute to eliminate background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to introduce Ashley Thorne, AVP of Investor Relations, to begin the conference call.

Thank you, Marjorie. Good afternoon everyone and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on Slide 2 in the press release and in the MD&A filed with Canadian and US regulators. This presentation also contains non-GAAP measures outlined on Slide 3. Please note, in addition to our regular quarterly financials, there's supplemental Q3 combined revenue and operating performance data available at investor.cpkcr.com. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, our Executive Vice President and Chief Financial Officer; John Brooks, our Executive Vice President and Chief Marketing Officer; and Mark Redd, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by Q&A. In the interest of time, we would appreciate it if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Thank you, and good afternoon. Thanks for being with us today to discuss the review of third quarter ‘24 results. I'm pleased to share the results of our 20,000 strong CPKC family. I can tell you the body of work in what was a very challenging operational quarter with the significant derailment that Mark and the team faced in early July and the strike in August, both of which they did an exceptional job managing. They bounced back and the network responded well as a result. In spite of the challenges, I’m proud to say we remain on track to deliver full year guidance, double-digit earnings growth, including volume growth, which is better than what we had projected earlier in the year. So, specific to the results for the quarter, the CPKC family delivered revenues of $3.5 billion, which is up 6%, strong volume growth, an increase of over 4%, an operating ratio of 62.9%, earnings per share of $0.99, which is an increase of 8%. Most importantly, from a safety perspective, there is continuing improvement, with train accidents decreasing by 17% and personal injuries decreasing by 8%. On the operating front, we saw continued strong performance across the network, which Mark will provide a bit of color on, but I'd like to specifically recognize the operating team, especially regarding those challenges with the strike; they did an exceptional job in preparing for and bouncing back from the outage we experienced as a result. Commercially, John and his team continue to generate industry-best sustainable and profitable growth. We're delivering unique products to the market with strong service offerings to our customers, which are reflected in the results that we are going to share with you today. The MBNR is another exciting development over the quarter. I'm pleased that we received approval last week from the STB for our new direct connection with CSX, going through Mexico, Texas, and the US Southeast over the MBNR corridor. I'd like to specifically again thank the STB for their thorough review and approval of this competitive transaction. The new interchange we are establishing with CSX is going to provide a new competitive rail service to rapidly grow markets. It's going to bring new solutions to our customers and take trucks off the road. It's another example of the unique growth story that the CPKC franchise is delivering. On the hydrogen locomotive front, another milestone was reached in the quarter. In early September, I'm very pleased to say that our first high horsepower hydrogen locomotive, along with the fuel tender, joined a consist of three diesel locomotives on a fully loaded bulk train in our Western Canada corridor. This is certainly an impressive achievement, a demonstration of this company's commitment to leadership and sustainability. In closing, I'm proud of the results the team has produced. We're off to a strong start in the fourth quarter, and we're in a great position for a strong finish to ‘24 and an even more exciting transition into 2025. With that, I'm going to hand it over to Mark to provide some comments on the operating performance. John will provide color on the markets, and then Nadeem will wrap up, elaborating on the numbers.

Thank you, Keith, and good afternoon. Looking at the quarter, I’m extremely proud of the railroaders for their continued hard work, ensuring safe and reliable service. In the third quarter, we continued to drive strong year-over-year operating improvements. The average terminal dwell declined by 8%, average train speed increased by 6%, locomotive productivity improved by 8%, and just to round off, fuel efficiency improved by 2%. All of these results illustrate an efficient, fluid, resilient network that is delivering strong service to our customers. These results are particularly impressive given the challenges we faced in the quarter. I'm proud of the resiliency this network and team have displayed. As Keith mentioned, we navigated through a four-day work stoppage across our Canadian operations, and thanks to the hard work and preparation of the team, I am pleased to say that we had a quick, efficient transition back to normal operations. I would be frank; it was probably one of the best transitions I've seen in my career. The operating team worked closely with the customers and rail partners to minimize the interchanges and disruptions. The work stop is behind us, and we're well positioned to continue delivering the growth we are committed to and strong service that our customers expect. Thank you to all the railroaders who contributed to this outcome. Looking at safety for the quarter, if I look at FRA train accident frequency at 1.27, that is an 8% improvement year-over-year. Regarding personal injuries, we were at 0.85, which is a 17% year-over-year improvement. I’m pleased with these results, but remember, safety is a journey, and we will always strive for further improvement. We also continue to execute a number of initiatives that are improving efficiency and operating performance. The engineering team, in coordination with operations, is improving efficiency, significantly reducing slow orders across the network, and also train delays. Part of that is leveraging data from our investments in autonomous geometry testing curves to help us accurately plan for preventive maintenance and capital investments. Looking forward, there are additional benefits to these investments as we deploy them across our network, and specifically in New Mexico, and as we continue to make interoperability upgrades to the legacy KCS fleet. By the end of the year, we will have about 175 upgraded locomotives to be fully interchangeable across the North American network. Regarding capital, we are executing to our plan to support safe and sustainable growth through investments in the network. In the first three quarters, we have serviced six new sidings as part of a $275 million merger capital commitment. Two sidings will be targeted by the end of the year, along with a capital project centered around the Kansas City area that will come online this year as well. Capacity in Kansas City will further help us align and streamline the connection between the two legacy networks, improving service through this key corridor. We’ve also put into service new sidings in Mexico, along with crossovers and track-rail alignment in our Escobedo yard, improving our capacity and fluidity in a key and growing segment of our network. Additional sidings and other capacity investments in Mexico are on the way, scheduled to be in service in Q4. These projects are targeted to enhance the efficiency of our local operations so we can run mainline trains while serving customers, clearing the mainline, and increasing throughput. Finally, I’m pleased to announce we are still on time with the second span of the Laredo bridge, which will open by the end of the year. Before I turn it over to John, I’d like to share my view of the first phase of our high horsepower hydrogen locomotive task completed in Q4. This is a tremendous accomplishment, resulting from a lot of hard work and dedication to achieving our sustainable objectives. In summary, we’re operating safely and efficiently, the network is in excellent shape, our investments are creating capacity, and we have strong momentum heading into the fourth quarter. With that, John?

All right. Thank you, Mark, and good afternoon everyone. I'm extremely pleased with the top line performance the team delivered despite the work stoppage in the quarter. We are creating and delivering on unique opportunities with the strong service product we have, and we're pricing to the value of the capacity of our service. This quarter, we delivered freight revenue growth of 6% on a 4% increase in RTMs. This performance was despite the four-day work stoppage that Keith and Mark spoke to. This was a 3% headwind to RTMs in the quarter. Our sense for RTMs was up 2% with strong pricing partially offset by mix. Now, taking a closer look at our third quarter revenue performance, I'll speak to the FX adjusted results, starting with bulk. Grain revenues were up 10% on 7% RTM growth. US grain volume grew 11% over the prior year. Our franchise is benefiting from strong production in our growing regions and increasing shipments to Mexico as we connect new markets and create new opportunities for our grain customers. Canadian grain volumes grew 3% with increased wheat to Mexico and the ramp-up of harvest across the Canadian prairies. Looking forward, we expect Canadian grain production to be in line with our five-year average, and our comps in Q4 and early 2025 will be favorable as farmers held on to their crop a year ago. This favorable volume setup, coupled with regulated grain pricing of approximately 6.5%, has us well positioned in Canadian grain. For grain as a whole, we are working closely with our customers across all three countries and expect to deliver strong grain results into Q4 and well into 2025. In potash, revenues were up 7% on a 20% volume growth. We moved higher volumes of potash with Canpotex to their Portland terminal as demand remained solid and we lapped the ship loader outage during the ILWU strike last year. Since our work stoppage this quarter, the potash supply chain has normalized, and demand for export potash service is at an all-time high. Coal revenue was up 8% on a 2% decline in volume. Lower natural gas prices weakened demand for US coal, and the strike impacted our Canadian coal shipments to Vancouver and Thunder Bay. As we move into Q4, we've seen both of these supply chains stabilize, resulting in increased coal volumes on our network. Moving over to merchandise, energy, chemicals, and plastics revenue grew 10% on 6% volume growth. Volume growth this quarter was driven by our self-help initiatives, synergy wins, and market share gains. Now, looking ahead to Q4, with the ongoing ramp-up of these business wins and the growing demand for LPGs, we are set up for a solid year-end for EPP. Forest products revenues and volumes were both down 1%. This area continues to be impacted by a soft macro environment, and we are experiencing pressure on our base book of business. We are able to partially offset these impacts with our unique synergy growth and our extended length of haul. I'm confident that we will be in a position of strength as the construction and paper markets rebound in the future. Metals, minerals, and consumer products revenue was down 3% on an 8% volume decline, as we see similar soft macro impacts. Moving to the automotive area, this business segment produced another record quarter with revenue up 27% on a 37% volume growth. This franchise continues to benefit from our closed-loop service solution that we introduced shortly after we took control of KCS and is developing longer-haul volumes across our network. Our new Dallas auto compound, along with other investments in auto racks and expanding our Chicago compound, have helped deliver an entirely new supply chain model for the OEMs, providing them with new competition, service, and capacity certainty like they've never experienced before. Looking forward, we expect our auto business to continue driving differentiated growth due to these gains and the opportunities to compete for new business in the years ahead. On the intermodal side, revenue was down 5% on a 2% volume growth. Starting with the domestic intermodal, volumes were down 70%, impacted by lower short-haul business in Mexico that was de-marketed late last year and the work stoppage as customers temporarily shifted some of their business to trucks. This decline was partially offset by growth on our MMX 180/181 cross-border service, which continues to perform extremely well in an otherwise challenging domestic market. Looking forward, we have a strong pipeline of opportunities in this area, including wholesale and retail shipments, as well as our temp-controlled service offerings. I’d like to also take this opportunity to share my enthusiasm for the STB's approval of our MNBR transaction. This is just one example of the unique opportunities we are developing, which will continue to offer new optionality and routing efficiency for many of our customers. On the international intermodal front, volumes are up 12%, primarily due to onboarding our new contract with O&E that started up in June, and lapping the impact of our port strike a year ago. In this space, we are excited about our opportunity to grow our international cross-border service out of Lazaro. More to come as we move into 2025, as we are expanding the scope of our test shipments with several key customers who are interested in creating diversity and adding more resiliency into their supply chains. To close, volumes came in better than expected excluding the impact of our work stoppage, and I'm very pleased we are in a position to improve our RPM outlook to mid-single-digits for the year. While the macro certainly remains challenging in a few areas, we continue to have line of sight to unique growth opportunities from synergies, self-help, and strong pricing. Our outlook is supported by the reliable and resilient service that Mark spoke about and that our operating team across three countries continues to deliver. I'm very excited about what we have accomplished so far this year and will continue to accomplish in the years ahead. With that, I'll pass it over to Nadeem.

Great, thanks, John, and good afternoon. This quarter was marked by strong core performance and the continued execution of our unique strategy that is delivering disciplined growth. I’d also like to thank our best-in-class team of railroaders, whose continued focus on execution helped deliver these results despite challenges in the quarter. Looking at our results from Slide 12, CPKC reported an operating ratio of 66.1%, and the core adjusted combined operating ratio came in at 62.9%. Diluted earnings per share were $0.90, and core adjusted combined diluted earnings per share were $0.99, up 8% from the prior year. Taking a closer look at our expenses on Slide 13, I will speak to the year-over-year variances on an FX adjusted basis. Compensation and benefits expense was $644 million or $640 million on an adjusted basis. The year-over-year increase in compensation and benefits was driven by higher stock-based compensation, along with inflation and volume-driven increases from higher GTMs. This increase was partially offset by efficiency gains from reduced overtime, improved train paths, improved crew utilization, and other productivity gains as we continue to optimize the combined network. Looking to Q4, we continue to expect average headcount to be roughly flat on a year-over-year basis, driving further labor productivity gains as we grow volumes, particularly at bulk. Fuel expense was $419 million, down 2% year-over-year. The decline was driven by lower fuel prices and a 2% improvement in fuel efficiency from running longer and heavier trains, which resulted in $8 million in P&L savings for the quarter. These savings were partially offset by volume-driven increases from higher GTMs. Material expense was $99 million or $98 million on an adjusted basis. The year-over-year increase was driven by higher locomotive maintenance from increased fleet utilization along with higher GTMs and inflation. We also insourced the locomotive maintenance contract in the quarter, resulting in incremental material expense, but a favorable offset within purchased services and other net savings in the quarter. Equipment rent was $89 million, down 4% year-over-year. The decline was driven by higher receipts from increased participation in the fleet pool, reduced car hire payments along with efficiency gains from improved cycle times and increased network velocity, partially offset by inflation. Depreciation and amortization expense is up 4% year-over-year as a result of a higher asset base. Purchased services and other expenses amounted to $623 million or $599 million on an adjusted basis. This line was impacted by lapping insurance proceeds in Q3 2023, as well as higher in-quarter casualty costs and inflation. These increases were partially offset by reduced intermodal service expenses, efficiency savings, insourcing synergies, and savings on insurance renewals. I am pleased to see continued efficiency and synergy gains. We expect these gains, along with the impact of lower inflation, to be sustainable and continue improving our cost structure going forward. Moving below the line on Slide 14, other components of net periodic benefit recovery were $89 million in Q3, reflecting a lower discount rate compared to 2023. Net interest expense was $192 million or $188 million, excluding the impact of purchase accounting. The decline was driven by reduced debt balance. Income tax expense was $262 million or $295 million on a core adjusted combined basis. We now expect the CPKC core adjusted effective tax rate to be approximately 24.75% for the year. Turning to Slide 15, we are generating strong cash flow with cash provided by operating activities of $1.272 billion in Q3. Capital investments in safety and growth remain our priority. In this quarter, we reinvested $748 million in line with our continued expectation to invest approximately $2.75 billion in 2024. As Mark discussed, we continue to make strategic investments in capacity across our network, positioning us to efficiently absorb the growth that this merger has enabled. We generated $523 million in adjusted combined free cash flow and continue to repay debt. Our leverage ratio is 3.1 times, and we still expect to reach our target leverage of 2.5 times in early 2025, at which point we will evaluate shareholder returns with our board. Reviewing the quarter, the team continues to deliver industry-leading volume growth along with continued discipline in price and cost control. The net impact of the work stoppage was a 100 basis point headwind to the quarter, primarily driven by loss in revenue from temporary diversions and supply chain delays. That event, along with higher casualties and stock-based compensation, provided a 300 basis point or $0.11 year-over-year headwind to Q3 operating ratio and EPS respectively. As all of these impacts were isolated to the quarter, we believe we are well positioned for sequential and year-over-year OR improvement in Q4. Our strong core performance puts us on track to deliver double-digit core adjusted combined earnings growth in 2024 and mid-single-digit volume growth, which is an improvement from our view at the beginning of the year and industry leading. This all adds up to strong positive momentum as we head into 2025, and we feel good about the opportunities ahead of us. With that, let me turn things back over to Keith.

Okay. Thanks, Nadeem, John, Mark. Operator, let's open it up for questions.

Your first question comes from Chris Wetherbee from Wells Fargo. Please go ahead.

Yeah, hey, thanks. Good afternoon. Maybe if I could start at a higher level, Keith, I was kind of curious if I could get your take on what we've seen coming out of Mexican legislation potentially about some rail reform down there. I want to get a sense of how you guys are thinking about that. Is it something we should be concerned about from a risk perspective?

Yeah. Great point, Chris. I think the best way to summarize my feelings on it is encouraged. We made progress in understanding the mandate from the previous government. At this point, everything that’s happened with the new president has only reinforced that. The new mandate expands upon the previous one, and I was very encouraged to hear the president announce a commitment to protect freight and create a dedicated corridor for two passenger tracks in the adjacent right-of-way. This approach complements our operations. I am also encouraged by their commitment to the environment and the need to get trucks off the road to create additional highway capacity, being friendly to the environment, and bringing more business to the railway. We are part of the solution, and as long as we are part of the solution, I believe we are in a good place.

Okay. That's helpful. And just one point of clarification. Nadeem, you talked in the short term about some improvement both sequentially and year-over-year in the operating ratio in the fourth quarter. Could you elaborate on some of the opportunities here, as RTMs seem like they're ramping back up?

Yes, we had that labor disruption that had a 100 basis point headwind to the operating ratio in Q3. Additionally, we had a significant derailment in Bordulac, North Dakota, that resulted in a $60 million expense hit. These are two unique items, with stock-based compensation being a significant headwind in Q3. When looking at these one-time impacts not occurring in Q4, along with the opportunity for operating leverage in grain production, I believe we have the opportunity for a sequential 500 basis point improvement in the operating ratio. Stay tuned.

Appreciate the time. Thank you.

Thank you. Your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead.

Yeah. Thanks so much, operator. Hi, good afternoon. I’d like to talk about your volume growth here. I mean, you've increased your projection here on expectations for this year. Just curious, this is on a backdrop of still a weak macro environment. So presumably, you're capturing a lot of esoteric volumes here. Can you talk about those? And are you rethinking your ‘28 targets of $1.5 billion revenue synergy on the upside?

Well, maybe I'll start, Walter. Thanks for the question. Focusing on the near term, as the team has already mentioned, our bulk franchise is performing well. Notably, we have a strong North American grain crop and the potential to move grains from the Upper Plains into new markets. Records in potash demand present good opportunities as well. Coal demand is also normalizing, and we are seeing growth across our domestic intermodal business.

Great color. Appreciate it, John.

Thank you. Your next question comes from Jon Chappell from Evercore ISI. Please go ahead.

Thank you. John, I'm going to stick with you. From any way we measure yield, whether it's per RTM or revenue per carload, the numbers are pretty strong. So just generally on core pricing momentum, but also highlighting auto and intermodal from a revenue per RTM perspective, a little pressure there. Can you comment on that?

Yes. You nailed it. Our automotive length of haul in the quarter was up 17%, and our intermodal length of haul increased by about 20%. I'm confident we have taken pricing for the value of our service seriously. We're actively running north of 5% in discussions regarding contracts. There are areas where we feel competitive pressures, especially in intermodal due to the abundance of trucking capacity. However, tightening in 2025 should allow for some catch-up.

Helpful. Thank you, John.

Thank you. Your next question comes from Fadi Chamoun from BMO Capital Markets. Please go ahead.

Yes. Good evening. Thanks. I wanted to ask about the Gemini alliance. They announced some schedules starting in February. Can you share any insights into what this, if anything, might mean for your network or share?

Sure. We’ve always had a strategic relationship with Hapag-Lloyd. We’re excited by the Gemini opportunity and how it aligns with our operations. The investments they’re making at Port of Saint John and Lazaro, where we have a growing presence, position us for growth in 2025. We anticipate this could yield additional volume through those terminals.

That's great. Thanks.

Thank you. And your next question comes from Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Afternoon, guys. So I don’t know if this is for Nadeem or Keith. Looking back to Analyst Day last year, you talked about multiyear high single-digit revenue growth and mid to upper teens earnings growth. Any updates on what should be factored in for next year?

Yes, Scott. We'll provide formal guidance in January. However, we are holding the line on our multiyear outlook with high single-digit revenue growth and double-digit EPS growth. We're looking at capital expenditures in the range of $2.6 to $2.8 billion. We should start seeing the benefits of our buyback program next year, allowing us to hit our stride in 2025.

Helpful. Thank you, guys.

And your next question comes from Tom Wadewitz with UBS. Please go ahead.

Hi, good afternoon. I wanted to see if you could provide some thoughts on where you might be more optimistic in 2025 regarding specific markets. Are there areas you think can really drive growth?

Certainly, Tom. I think 2025 could mirror our strong finish this year. Our expectation for grain goods, international intermodal growth, and strong auto demand indicate a positive trend. Our investments in capacity and terminal expansions position us well. The Laredo Bridge expansion will significantly enhance our fluidity. We aim to optimize routes where we avoid congestion to continue delivering strong service.

Great. That’s very helpful.

Thank you. And your next question comes from Ken Hoexter with Bank of America. Please go ahead.

Hey, great. Good afternoon. Nadeem, that was a great rundown on the potential for 500 basis points sequential OR improvement. You talked about the 100 basis point impact. Could you clarify the 300 basis point impact you just mentioned?

Yes, Ken. The stock-based compensation increase was part of the 300 basis points, and we incurred an additional $60 million expense because of the derailment in Bordulac. The work stoppage accounted for the other 100 basis points.

Thanks.

Yeah. Look, it's a wait-and-see approach regarding potential administrative changes affecting tariffs. I’m optimistic that any administration will recognize the importance of North American commerce. We will remain engaged with our customers and monitor any changes closely to navigate accordingly.

Great. Thanks, John.

Your next question comes from Brian Ossenbeck with JPMorgan. Please go ahead.

Yeah. Thanks. I appreciate that you guys are taking my question. I wanted to know if you think you've already seen some impact from the uncertainty regarding constitutional reform in the passenger rail and the broader external factors affecting cross-border transport. Have foreign direct investment been soft because of this uncertainty?

It's tricky to quantify the impact. However, we’ve noticed significant activity in Mexico supporting various industries, leading to opportunities for cross-border transport. I don't see a marked slowdown, and recent investments indicate confidence in continued growth. We are seeing capture rates improve, especially in grain segments as supply chain needs shift.

Very helpful. Thank you, John.

Thank you. And we have run out of time. So I will now turn the call back over to Mr. Keith Creel.

Thank you. I appreciate your time this afternoon discussing our results. I hope you agree that what you've heard demonstrates nearly in spite of the macro challenges, we continue to be a unique value-creating story at CPKC, outpacing industry growth and generating exceptional value for our shareholders. Stay tuned for our fourth quarter results. Thank you.

Thank you. And that concludes today's conference. We appreciate your participation, and please have a wonderful day.