Canadian Pacific Kansas City Ltd/Cn Q2 FY2025 Earnings Call

Good afternoon. My name is Margo, and I'll be your conference operator today. At this time, I'd like to welcome everyone to CPKC's Second Quarter 2025 Conference Call. The slides accompanying today's call are available at investor.cpkcr.com. I would like to introduce Chris de Bruyn, Vice President, Capital Markets, to begin the conference call.

Thank you, Margo. 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 U.S. regulators. This presentation also contains non-GAAP measures outlined on Slide 3. 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'd appreciate it if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Okay. Thanks, Chris. I want to thank everyone for joining us here today. As I always do, let me start by thanking the 20,000 strong family of railroaders we have across our three-nation network that delivered the results we get the honor to share with you today. As a leader, it's always my honor with these folks that I work on and serve with on behalf of their body of work to represent that. So speaking to the results for the quarter, the team delivered volume growth of 7%. Revenues were up 3%, $3.7 billion, with a 110 basis point improvement on our operating ratio to a 60.7% and earnings of $1.12, which is an increase of 7% versus last year. From an outlook on the balance of the year perspective, I'm very pleased with where we stand midway through the year. I certainly see a clear line of path to our year-end guidance with opportunities that lie before us in the second half of 2025. So despite all the headlines and the evolving trade policies, the challenges we have all faced as an industry, we continue to drive differentiated, sustainable, and profitable growth at CPKC. And as you all know, this is not just a 2025 story. This franchise continues to be positioned to deliver a unique outcome for years to come. That said, let me share a couple of exciting developments in the quarter that underpins some of that forward-looking thinking. Continued ramp-up of our Gemini partnership is something we're extremely excited about that's creating meaningful international growth for us. The 180/181 premium domestic intermodal service grew 40% versus last year. There was a continued increase in our traffic flows between Canada and Mexico via our CPKC land bridge, which we've spoken to, uniquely enabled by this North American network. And lately, we see the momentum behind our newly named Southeast Mexico Express service, which is our partnership with CSX over the Meridian Speedway through our new gateway to the Southeast, again, creating an unrivaled network, bringing new solutions to the market. Now maybe a couple of comments on the proverbial elephant in the room or better said, the one that wants to come into the room. Obviously, some recent developments in our industry include yesterday's announcements of this proposed combination between UP and NS. Let me start by saying this team remains focused, as it always has been, on our fiduciary responsibility to maximize shareholders' value. Our value proposition is unchanged from yesterday's news. This is a unique and powerful network, the only network that connects all three nations—U.S., Canada, and Mexico—a network that will continue to drive differentiated growth. We have a management team that certainly has the track record of execution to back up our actions with our words. The value and the strength of this network that we've created puts us in a unique position that has allowed us to produce what we have over the last two years. That does not change. Similarly, our multi-year outlook and the value proposition remain unchanged. The team and the network will continue to deliver differentiated results. On the regulatory front, we will be actively engaged, as you can imagine, in the regulatory process to ensure, number one, that our customers and industry interests are protected in this proposed combination; number two, that the high standards set around mergers is defined under these new, untested 2001 merger rules, which require the applicants to demonstrate enhanced competition and consider downstream effects. That standard must be met. Rest assured, we'll be a loud voice in the room to ensure that the facts are known, understood, and weighed upon by the STB when they come to their conclusions and decisions. Meanwhile, you can imagine this network is uniquely positioned, as I've said in the past, to compete or to partner with any Class I. We are literally 2.5 years old. We've been working hard to develop these alliances and to create new revenue streams and these new customer solutions—not only uniquely in our network but also through those partnerships, as evidenced in what we've done with CSX less than a year after we came into existence. I can tell you, in this world, that list of opportunities is not exhausted. The list of potential partners still exists. I can tell you those partners not involved in this combination are more motivated than ever to have those discussions. Rest assured, we're deep into those discussions. This isn't something we just started. This will only enhance and gain momentum. In closing, whether it be short-term and continued uncertainties from the macro trade policies, we will continue to deliver a differentiated outcome. Our network, the team, and the opportunity are unique. We will continue to deliver value for our stakeholders. So with that, let me hand it over to Mark. He's going to speak to the operations. John will bring some color on the markets. Nadeem will elaborate on the numbers, and we look forward to the Q&A.

Thank you, Keith, and good afternoon. I'd like to start by thanking our employees for their hard work and dedication in the quarter, and for their efforts towards the integration of our operations in the U.S. and Canada. This is a major merger milestone and a complex undertaking. While not without challenges, we have made significant progress over the last two months. I'm very pleased with how the team has pulled together to restore service to customers in the Southern region of the U.S. network who were impacted the most by the change. The rest of the network continued to perform well through the quarter, and we are carrying operational momentum into the third quarter. Now looking at the results, we saw a 1% improvement in both train weights and train lengths. System-wide dwell increased by 7% in the quarter, driven by an increase in dwell on the legacy KCSR Southern U.S. terminals. Terminal dwell in the region peaked in early June but largely recovered to pre-cutover levels. Dwell on the legacy KCSR improved 42% over this 2-month time period and car miles per car day improved 38% as well. Although with regret to the disruption to the customers during this time period, I'm extremely encouraged by the progress we have made over the last two months. As improvements take hold, we expect efficiency and fluidity improvements to flow through the network and metrics in the second quarter. Looking at safety, FRA personal injuries were 0.77, which is an 8% year-over-year improvement, and FRA train accidents were 0.97, which continues to be a year-to-date record performance. We posted another notable reduction in personal injury as a testament to the team's dedication to our home safe culture. While our industry-leading train accident frequency increased from weather-related incidents in the quarter, engineering and mechanical related train accidents continued to decline year-over-year. This improvement is being driven by our increased use of geometry cars and improvements in wheel-bearing management technology we have. As for our resources and capital, we continue to control our resources and invest in unique growth the merger has enabled. From a resource perspective, we are selectively managing headcount to backfill attrition and support the volume growth we're bringing onto this network. Our resources remain well in line with the growth outlook, and headcount is slightly down on 7% of RTM growth, which is driving strong labor productivity. I'm encouraged by the progress that we continue to see from the FRA on initiatives to enhance safety and network efficiencies. We're also making good strides with combining crew districts, most recently between Kendleton, Texas and Laredo, Texas, to improve cycle times and deliver more resilient customer service in key cross-border corridors. From a capital perspective, in addition to safety investments across our network, we have received the first 40 of the Tier 4 locomotives. These locomotives are supporting our strong growth and improving the reliability and fuel efficiency of our fleet. In closing, we have operational momentum heading into the second half. Our network is prepared to safely and efficiently deliver strong growth according to our plan. We have resources in place and certainly the management team needed to deliver and execute on that growth. With that, I'll turn it over to John.

All right. Thank you, Mark, and good afternoon, everyone. Let me say I'm extremely pleased that we delivered another quarter of record volumes and revenue, and I certainly want to thank all of our customers for their ongoing support and collaboration over the last few months. The strength and diversity of this franchise are reflected in our results, and I'm proud of the team for what they do every day to deliver sustainable, profitable growth. Despite continued uncertainty from the macro and trade policy, Q3 is off to a solid start, and we are well-positioned for continued differentiated growth. Now, looking at our Q2 results, we delivered freight revenue growth of 3% on a 7% increase in RTMs. Our pricing results remain strong, with my team achieving renewal pricing in excess of our long-term outlook of 3% to 4%. Yields in the quarter were impacted by lower fuel surcharges, the removal of the carbon tax in Canada, as well as a negative business mix. Taking a closer look at our second quarter revenue performance, I will speak to FX adjusted results. Starting with bulk, grain revenues were up 11% on 13% volume growth, a record Q2 performance. Canadian grain volumes were up 16%, driven by increased grain to Vancouver, Thunder Bay and down into the U.S. markets. For July and August, our volume growth has decelerated as the remaining stocks in Canada are starting to get low, and farmers have become more reluctant to sell. Looking ahead at the upcoming harvest, our outlook is positive, and we currently expect crop size to be in the 70 million to 75 million metric ton range, which is in line with the 5-year average. We all had a strong quarter in U.S. grain, with volumes up 11% over the prior year. We continue to move more grain into Mexico as our network matches our strong areas of production with the demand in the South. While we watch the impact of potential tariffs on soybean exports this fall, the upcoming crop across all portions of our U.S. network looks very strong, and we're well-positioned for a strong grain season. Potash revenues were down 8% on a 7% volume growth, but with positive demand fundamentals, Canpotex is fully committed at record levels. We expect a strong second half with a more normalized mix. We closed out the first quarter with coal revenue up 8% and 5% volume growth, driven by higher U.S. thermal coal and higher Canadian met coal as we move more volume, driven by production improvements at the mine sites and continued inventory drawdowns. Moving to the merchandise business, energy, chemicals, and plastics revenue grew 2% on a 5% volume decline. Our base ECP franchise continues to deliver revenue and diverse volume growth across multiple commodities from synergies, self-help, and market share gains. That growth this quarter was offset by lower crude volumes, primarily due to an outage at our Hardisty terminal. We delivered strong growth from LPGs and plastics in the quarter as our network continues to connect Canadian production with destinations in Mexico using our network as a land bridge and facilitating new trade. Forest products revenues were down 5% on flat volumes. Volumes in this segment continue to be impacted by macro softness in base demand. However, the team remains focused on what we can control to drive synergies and extended length of haul, which is helping to offset some of these headwinds. Metals, minerals & consumer products revenue was down 3% on a 1% volume decline. Increased tariffs on cross-border steel impacted volumes in the quarter, partially offset by higher frac sand. We continue to be encouraged by industrial development projects in this space with new aggregate and steel business ramping up in the second half of the year. Moving to automotive. Revenue was down 5% on 8% volume growth. This continues to be an area of unique growth for CPKC, driven by our advantaged footprint serving production plants and auto compounds across North America, along with our closed-loop service solution. While evolving trade policy resulted in some choppy volumes early in the second quarter, we are staying close to our customers, and we have recent wins in this space that continue to support our conviction in growth and another record year in automotive. On the intermodal side of the business, revenue was up 8% on 18% volume growth, another record quarter. Starting with international intermodal, volumes are up 28%, driven by strong growth from Gemini, as this alliance continues to ramp up volumes through our CPKC served ports at Vancouver, Port of Saint John and Lazaro Cardenas. Although there is ongoing volatility within international intermodal volumes, we continue to see upside for CPKC in the second half of the year. We also delivered strong growth for domestic intermodal, with volumes up 8%. Momentum on our MMX continues, with volumes on this service up 40% year-over-year and 20% sequentially from Q1 to Q2, as more and more customers take advantage of the fastest, most efficient cross-border rail solution between Canada, the U.S., and Mexico. Looking forward, there's still a lot to be excited about in this space. We have a strong line of sight to domestic intermodal growth with our partner, Schneider, as they continue to outperform in the marketplace. Second, we have new auto part lanes ramping up, and volumes out of America's cold storage warehouse, co-located in Kansas City, will start moving in August. Finally, I’m also excited about our SMX service that Keith spoke about with CSX, our newest east-west service product that connects shippers between Mexico, Texas and the U.S. Southeast. To close, while the macro and trade policy remain uncertain and create some choppiness across many of our customers' supply chains, our unique franchise is proving its resilience, and we continue to produce diverse new volume growth. Looking forward, we are confident in our self-help growth initiatives, strong fundamentals that underpin our bulk business, and our disciplined pricing strategy. I feel good about our volume outlook as I look towards the full year. So with that, I will hand it over to Nadeem.

All right. Thanks, John. Good afternoon. I'd like to start by thanking our railroaders for their hard work and dedication in producing this quarter's strong results. Our system integration was a major merger milestone, and having combined systems in Canada and the U.S. will make this organization stronger and more efficient while also creating opportunities for efficiencies and savings as we have better visibility of data and the ability to optimize workflow. Now turning to our second quarter results on Slide 12. CPKC's reported operating ratio was 63.7%, and the core adjusted operating ratio came in at 60.7%, a 110 basis point improvement over last year. Diluted earnings per share was $1.33, and core adjusted diluted earnings per share was $1.12, up 7% versus last 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 $659 million, or $652 million adjusted for acquisition costs. The year-over-year increase was driven by higher stock-based compensation, inflation, and volume-driven increases from higher GTMs. That increase was partially offset by lower incentive compensation, efficiency gains from workforce optimization, and improved train weights. As we look to the rest of the year, we continue to expect our average headcount to be roughly flat, driving strong labor productivity gains against our expectation for mid-single-digit volume growth. Fuel expense was $405 million, down 12% year-over-year. The decline was driven by lower fuel prices, including the removal of the Canadian federal carbon tax effective April 1. That decline was partially offset by higher GTMs from increased volumes. Overall, changes in fuel prices were a $0.02 headwind to EPS in the quarter. Materials expense was $124 million, up 29% year-over-year. The year-over-year increase was driven primarily by the long-term parts agreement that was put in place last year, driving higher materials expense with a favorable offset within purchased services and other for net savings in the quarter. Additionally, we saw higher spending on safety materials and volume-driven increases in materials expense. Equipment rents were $103 million, up 23% year-over-year. The increase was driven primarily by higher car payments from increased dwell. Depreciation and amortization expense was up 4%, resulting from a larger asset base. Purchased services and other expenses were $560 million, adjusted for acquisition costs, down 5% year-over-year. The decline was driven primarily by savings from the long-term parts agreement and other productivity improvements, partially offset by cost inflation and volume-driven increases. Overall, we delivered strong financial results this quarter, despite systems integration challenges that impacted earnings by $0.03 to $0.04. Looking forward, with operations largely restored, we expect a second half that fully recaptures the financial and operational momentum that we had prior to integration. Moving below the line on Slide 14, other income was up $16 million in Q2, driven by lower equity income year-over-year. Other components of net periodic benefit recovery were $107 million, reflecting favorable pension plan asset returns in 2024. Net interest expense was $208 million, or $203 million, excluding the impact of purchase accounting. The year-over-year increase was driven by interest incurred on new long-term notes. In the quarter, we recognized a $333 million pre-tax gain on the sale of our 50% equity investment in the Panama Canal Railway Company, which is excluded from core adjusted results. Income tax expense was $357 million, or $336 million adjusted for significant items in purchase accounting. For 2025, we continue to expect CPKC's core adjusted effective tax rate to be approximately 24.5%. Turning to Slide 15 and cash flow, Q2 cash provided by operating activities increased 6% to $1.36 billion. We continued our strategic investments in the network for safety and growth with CapEx spending of $743 million in the quarter. Cash flow remained strong as we delivered $605 million in adjusted free cash for the quarter. As we continue to generate strong top-line and earnings growth for the next several years while holding CapEx relatively flat, we expect continued strong cash flow generation as we reduce the capital intensity in the business. Turning to our share repurchase program, we continue to take advantage of the volatility in the market to reward shareholders with disciplined and opportunistic returns. At the end of the second quarter, we repurchased 16.4 million shares, or approximately 44% of the current program. As we look to the second half of the year, John and his team are delivering strong growth, and we are well on track to deliver mid-single-digit volumes for the year. The network is running well, and we continue to deliver discipline on price and cost control with more opportunities on that front in the second half. We feel very good about our guidance, and CPKC remains well-positioned to once again lead the industry with double-digit earnings growth this year. With that, let me turn things back over to Keith.

Thank you for the color, gentlemen. Let's open it up for questions.

Our first question comes from Chris Wetherbee with Wells Fargo.

Keith, I just want to maybe address, like you said, the sort of elephant in the room. Maybe you could expand a little bit on your thoughts here. I guess my question is, as you see these industry dynamics playing out, what do you view CP's role in this process? Is there something strategic to be done? Are there commercial things that you can try to accomplish? And is this something that you would push back against? I guess, how do you think about it from a regulatory perspective?

Yes. The answer is yes. Commercially, there's opportunity, that's undeniable. This network that we've created, again, the way we connect with and partner with all railroads across all three nations right down the middle of the heart of America gives us a chance to create unique partnerships and alliances. That's what we've been about doing, and that’s what we will continue to do. Again, the CSX example is but one example. Rest assured, this gives us an opportunity and, obviously, the other parties motivation, where we can help them win in marketplaces and compete to create new revenues or protect existing revenues, to provide better service for customers, or win new customers that might be concerned about the risk that this proposed combination entails. So we're going to be hard at working those opportunities. I know with the best of intentions, the applicants would say they're not going to be distracted. But the reality of it is having gone through this, the gravity of what they're pursuing is undeniably enormous. The complexity of it is undeniably significant. There's going to be some distraction. And even if there were not, I guarantee there's some customers out there that they're sitting on the edge of their seats looking at their existing supply chains, trying to hedge their bets thinking what's at risk and what do they know. Their memories are not clear from perhaps the condition the industry was in specifically in the U.S., undeniably three years ago. It was a world where UP was in trouble. BNSF was having challenges. NS was having challenges. CSX was having challenges, all coming out of the pandemic and all the associated meltdown in the industry. Those customers experienced a lot of pain and suffering. So to think about a combination and the risk that's going to unfold before them is a real scenario, and they will consider alternatives. Rest assured, we will help in those discussions. It's our responsibility, too. We owe that to our customers, our shareholders. I think the partners we will talk to will feel the same way. In fact, I've already had a couple of conversations, and I can tell you the sentiment is aligned with mine. On the regulatory front—here's the other piece. This is not a stand-alone proposal. This does not just affect UP and NS. UP and NS both know this. The regulator knows this, we all know this. This could well be the trigger, if this is approved and their facts are fully represented, to lead us to a decision that says this serves the public interest best. That could lead to additional industry consolidation, an endgame scenario. So this downstream analysis required by the rules would need to be thoroughly reviewed. Again, this is not just about UP and NS; it’s about the entire industry and every customer that ships on any rail network in North America. The weight of this can’t be taken lightly. Jim Vena said yesterday, and I believe Jim to his word, he hasn't taken this lightly. Still, we have a responsibility to make sure their view aligns with ours, and I’m sure other railroads will say the same—that our view is full. A lot to be said about that. I think it boils down to looking at that public interest test. The core public interest question will focus on whether this two-duopoly structure serves the public interest because it potentially leads us there. The regulator knows that. This scenario was anticipated when the regulations were written in 2001. And I go back to past conversations surrounding this very issue—when UP was against other proposed transactions back then, they believed it was a threat to competition. It’s hard to deny that that same concern does not exist now. More to follow, we will be active participants, and the facts matter. We have a little experience ensuring that the truth is understood and heard; we will continue to rely upon that experience.

Yes, thanks for the perspective, Keith. Just maybe a quick follow-up, just trying to make sure I and others take the proper takeaway. Through a regulatory process, assuming we have an endgame with transcon networks in the U.S., is the commercial opportunity for CP neutral or potentially better than what it is today? When you look at the pipeline of opportunities that John highlighted and you highlighted early in the call going into H2 and into 2026, is this mid-single digit volume run rate sustainable even in a scenario where the economy remains stable, not really gaining momentum from where we are today? Is the pipeline sufficient to support this level of growth?

I'll start with that. The answer is yes. We see an ability to sustain this growth, Fadi. Regarding the merger question, the only way 1 or 2 mega mergers get accomplished is if they meet and exceed the public interest test, meaning they have enhanced competition and not just preserved it, adequately considering downstream impacts. To meet that standard in my mind requires meaningful concessions. Concessions that, when you have a network that uniquely connects north and south right down the spine of America, connecting the U.S. and Canada, with a significant industry presence, we can compete with concessions. Those could allow us greater access to markets we don't have today, or open new opportunities for partnerships. Again we approach this from a position of strength. So yes, while we're going to face competition, we will also have opportunities.

I'm going to bring it back to CPKC. Nadeem, thanks for the $0.03 to $0.04 impact from the system crossover. From a cost/revenue/operating ratio perspective, is there a way to quantify that for the second quarter? Was it fully ring-fenced to that period? Or is there going to be some overhang into July?

Yes. I'd say it's about $30 million to $40 million of revenue impact overall. We also saw some operational metrics hampered during that time, particularly in dwell and overall velocity, which impacted fuel efficiency. I'd say there's a small carryover into July, but not significant in terms of the cost side; it has a limited effect on revenue. So we'll start Q3 with a clean slate.

Yes. So Keith, you—in a different setting—have expressed a favorable view on single-line service. I think even looking at the success of 180, 181, relative to your competitor, single line is important. Do you think that there are opportunities they might have at UP, for example, in intermodal that would not necessarily affect CP? I want to understand a little better why you seem to be taking quite a strong position versus UP and NS.

Yes. Let me start with this. I will never argue against the benefits of single-line service for any railroad and any customer. If a railroad can operate their network appropriately and manage capacity to deliver the benefits of a single-line move for a customer, that’s the gold standard. So, I won’t deny that UP and NS have proposed something that could enable that outcome, if executed correctly. In isolation, it’s tough to compete against that. I stand by that statement. But this isn't just about a standalone review of single-line service; there are so many complexities that arise from such combinations that must be weighed into the analysis. If I look specifically at intermodal, their single-line service in intermodal doesn’t threaten my single-line service intermodal; they don't have a network in Canada, which is our strength. We play to the strength of our network. We can replicate that model from Chicago to Mexico. This proposal doesn't impact that, doesn't replicate or replace it, so I’m not threatened at all. Single-line service is the gold standard, but the debate is larger than that—it's about a multitude of factors and how they eventually connect into a two-duopoly system across North America. That needs to be understood.

Just wanted to ask a bit more. Keith, you covered the public interest aspect of all this, but they also have to prove that the only way to achieve these benefits is through a merger. I wanted to see if you can elaborate on some of the partnerships and JVs that you're talking about here. Clearly, it's hard to compete with single lines, so is that the solution? Also, given your history, do you think there's a read-through to what could happen with integration challenges for larger mergers?

Yes, I would say the challenges we faced during our integration, particularly in southern regions, pale in comparison to the magnitude and complexity of the implications of UP and NS merging. Not to be underestimated, that requires a different scale of effort and focus. A network that large, if it stumbles, it doesn’t just affect a local region; the entire national rail system could be affected. It’s a tremendous responsibility. And the questions posed must be answered very thoroughly by UP and NS and ensure their plans are well substantiated. In terms of partnerships and alliances—our responsibility is to explore all options before considering mergers. I can safely say we have not exhausted those partnerships on our end.

Can we just do kind of a hypothetical where, if the transcon mergers do go ahead, what are the options you see? Are you suggesting that commercial options are the main course of action, or could you consider going to a round two of consolidation and involve yourself with a transcon railroad?

Our responsibility at CPKC is to ensure we create shareholder value and all stakeholder value. As these dynamics play out, we will certainly engage as active participants and observers as well. This team and this network represent unique industry value, and in multiple scenarios, we can make compelling cases for ourselves against any other combinations. However, it’s vital for us to remain flexible and responsive to those opportunities.

So Keith, when you discuss enhanced competition and concessions, can you share your wish list of what you'd want to see? What's the opportunity for CP to benefit in terms of numbers?

Sure, we'll continue to see sequential improvements in Q3. Typically Q4 has been our strongest quarter of the year, and you will see a significant improvement as we approach Q4. We're not backing off our belief in a sub-60 OR for the year; we have visibility to achieve that based on our volume recovery and overall operational efficiency.

Hypothetically, I can’t provide figures until I analyze the concessions. I have a list of ideas, but the final number relies on our success in achieving those outcomes. We will definitely face competition but know that our strong network allows us to find unique opportunities even when faced with challenges.

I wanted to ask about tariffs in your business and the growth outlook, specifically for the auto business. How are the tariffs impacting it, and should we expect other impacts in the back half of the year?

Looking at the back half of the year, there are undeniable trade uncertainties and macro issues. We're focusing on self-help initiatives and efficiencies that have driven our growth. Our pipeline remains strong, and we expect good output in bulk. Our best bet for the grain, potash, and coal business is solid. We expect positive ongoing momentum with pricing controls in the second half.

Keith, you mentioned having some conversations already; could you share any non-confidential insights? How are customers responding to the merger proposals?

With all due respect, those conversations have been direct with other railroad CEOs. I won’t represent the content but can say they were encouraging and positive. On the customer side, John, do you want to comment?

The phone's been pretty active on that front. Certainly, we want to understand customer sentiment, especially coming out of past challenges with integration. There’s indeed a mix of concern regarding operational performance; people need assurances that existing systems will be stable. We need to keep advocating before the STB to ensure those customer interests are protected as this merger continues to develop.

Thank you for your insights today, and let’s recognize the importance of how we execute our plans moving forward. We’re committed to achieving our objectives. Looking forward to continuing this discussion next quarter.

Thank you. And this concludes today's conference call. You may now disconnect.