CSX CORP — Call Transcript 2025

All right, good morning, everybody. Thanks for joining us here on the first day, first presentation of the JPMorgan Industrials Conference and the Transportation Track. I'm Brian Ossenbeck, I cover transports for JPMorgan. Very happy to start off with CSX. We have Sean Pelkey here, the CFO, Matt Korn, Head of IR and Strategy in the room as well. We're going to pass it over to Sean. He's got a few slides that I believe are posted. He's going to give us a little bit of intro, then we'll jump into Q&A. If you've got any questions in the room, we should have a few mics here as well. Guys, thanks very much coming and kicking us off here. Sean, turn it over to you. Thanks, Brian, and appreciate you guys having us here so early, but happy to kick things off. What I wanted to do is just kind of give you a sense of how the year's been trending so far, a couple of months in for CSX. Before I get into those details, of course, we've got our forward-looking disclosures related to any comments I'll make during the presentation. On slide three here, if we look sort of how January and February trended relative to normal historical averages, what we've got there in those blue ranges is January and February volume relative to the Q4 average volume, the range that we've seen over the last nine years. The little diamond shows you where we fell in 2025. The gray shaded area gives you a sense of what the mean has been over that time frame. Coming out of the gates in January, you can see actually held up okay, even though we navigated through some difficult weather. The market that was off the most in January was auto. We saw production get off to a very slow start. Inventories were high going into the new year. Coal was off a little bit as well, mainly both producer issues as well as weather. In total, volumes were about what we would have expected in terms of normal seasonality. Similar story in February, I would say the one big difference, of course, being the auto market did recover in February. I would say the weather had more significant impacts in merchandise. Through both months, intermodal was a little higher than normal seasonality, which was nice to see. Hard to say how much of that might be pulled forward from tariff impacts and whatnot. The other thing I would say here is that even though total volumes were in line with what we would have normally expected on a seasonal trend basis, they were not what we coming into the year. We are a little bit off our own plan through January and February. March, of course, is a really important month. We are a little over a week and a half into March, and we are actually trending fairly well in March, pretty close to what we would have expected across the board. When we get into the details kind of around individual markets, I will not go through every single one of those. Like I said, intermodal is off to a pretty good start, both on the domestic as well as the international side for different reasons, but both are up more than 2% on a year-to-date basis. Ag is up as well. That's really been driven by demand for feed grain. Export has been a headwind and some of the other markets within ag, but overall ag's been good. Auto was off to a slow start. It has picked back up. Domestic and export coal, I would say going into the year, we thought export coal would grow. Domestic coal would be down. Still expect overall coal to be down, I should say. Domestic with some plant closures. Export with some production issues that'll linger here through the first half. Metals is one that's down year-over-year. We're cycling some comps from last year that will start to fade. I actually think metals may have a little bit of momentum given the tariff trade. Now, you get off to a relatively slow start, and you start questioning and saying, "Hey, what do we have built in in terms of productivity initiatives? How do we make sure that we're managing our costs well while also leaving the door open to capture growth as the markets begin to normalize, hopefully later into the year, in particular the truckload market?" Mike Cory's been with us now for a year and a half. He has brought in a fresh perspective. He's brought in some leaders that he's worked with across the industry for a number of years and worked very closely with my finance team to go through line by line every single one of the budgets within the operating departments. I would say where Mike has brought a tremendous amount of value is envisioning what the idealized train plan looks like that achieves that balance of cost efficiency as well as service to the customer. If you look at kind of where our service metrics have been, the one that has been as stable as it can be is our delivery of service to the customer, which has been right around 95%, plus or minus a couple percentage points. We've done that while making significant reductions to the number of road starts that we're running. Part of that is volume with coal volumes down, but there's a significant amount of re-engineering of the network. The Cumberland Yard, which we can talk about later, has been a big driver of that. You can see there are about 1,000 fewer crew starts a week. Just to give you some perspective, that's around $1 million a week that we're saving there. On the right-hand side, the costs that we can manage kind of most directly are the purchase services costs. If you look at how well CSX has done over the last two years on that line item, we've been able to offset all of our inflation and essentially hold those costs flat on a two-year basis. There are a lot of initiatives that go into that. Certainly, keeping a very close eye on locomotive utilization and productivity is an important driver there. We last month hit our highest horsepower per trailing ton that we've seen since 2016. Definitely headed in the right direction there and more initiatives to come. I did also want to take a moment just to talk about Howard Street because it's a significant project that just began in earnest February 1st. When we originally started talking about Howard Street, I mean, I should say we've been talking about Howard Street my entire career, 20 years. And forever it was, "Howard Street is the bottleneck in the network. It will never be fixed." Five or six years ago, we started to envision a world where we could double-stack clear the Howard Street Tunnel, which would open up the New England area in the Northeast to us to be able to double-stack and create tremendous capacity for CSX. The problem was to think about shutting down that tunnel for an extended period of time would have significant customer disruption, and we didn't see a way of being able to do it. What we were going to do was do a three-year plan where we would run trains for 12 hours a day, and the other 12 hours, the team would come in, they would basically pick up a 12-foot section of track, take it out. If you see that crane with that giant piece of concrete, they would lay that in, which would go under where the existing ballast and track was. They would lay the ballast and track back on, do all of that within a 12-hour period, start running trains again, and repeat every single day for three years. When Mike came in, he challenged the team to find a way to do a full shutdown of the tunnel, knowing that that kind of disruption was going to be probably more impactful to the customer for three years, and there were things that were going to go wrong. There were going to be days when we just were not able to get the track time. We came up with a plan to do this in 6 months-8 months with a full shutdown. Part of that plan included the redesign of the Cumberland Yard that Mike talked about at our investor day last year, which is now complete and has almost doubled the processing capacity of that yard, taking a lot of the pressure out of that Baltimore area and allowing us to reroute a significant number of trains around the tunnel. In fact, 10% of our trains would have run through that tunnel. They are being rerouted today, about 15% when you include what we are doing on the Blue Ridge. It is a big project. It is about $500 million. CSX's commitment is about $140 million. The other $360 million is funded through partnerships with federal and state and local governments. In fact, CSX's capital, we've already spent about half of it even before beginning construction in earnest in terms of clearance work that's been done around the tunnel. We're getting closer and closer to the finish line as we speak. What it'll do for us really is kind of open up, my arrows aren't on the screen, but hopefully they're on the slide on the website. There's some nice arrows that show you the flows and everything. Basically, the punchline is the merchandise traffic is going to go across from Willard directly to Baltimore, given the work that we've done at Cumberland. The intermodal trains are going to have a faster high-speed route through New England and down into Philadelphia and Baltimore. What that does for us, it allows us to consolidate trains, reduce crew starts, reduce costs on crews and locomotives. It also allows us to grow into the opportunity, into the capacity. We've got, we think, an opportunity to increase intermodal volume anywhere from 75,000 loads-125,000 loads once the project is complete. Very, very significant benefits. We will start to see that at the end of this year going into 2026. Okay. Thanks very much. Do not know what happened to the arrows there, but I think we can envision it nonetheless. A lot of good detail to start off, Sean. I think just to focus a little bit more on the near term for the time being. You have the $350 million headwind that you laid out on the last earnings call. We are pretty clear about what that meant, but obviously it has been a tough start for the network and for the industry on a weather basis as well here. Any more specific thoughts you can offer, at least how the year has started, particularly the first quarter, which we know is always tough for the rail industry, but specifically to you guys here. Yeah, one of the things we said on the January call is that Q1 was going to be trough earnings for us. I think that's still what we have line of sight to. In terms of the $350 million of headwinds, that's primarily related to export coal price and fuel price, as well as roughly $10 million a month of costs associated with network disruptions as we shut down the Howard Street Tunnel and reroute around the Blue Ridge as that reconstruction takes place. That number is similar to what it was going into the year. Met coal prices have been fairly steady, down a little bit, but I would say we expect a little bit of recovery from where we are right now over the balance of the year. No change to that per se. On the volume side, off to a little bit of a slower start than we expected in January and February. March is holding in okay. Not really ready to kind of change anything in terms of the full year guide. Still expect low to mid-single-digit volume growth in total. When we talk about all the uncertainty that's out there from the tariff headlines, I mean, I don't know if any have come across this morning as we're speaking, but it's hard for the network and for customers to adapt to that. What have your conversations been with folks as you've gone through this the first couple of months of the year? You had the slide with autos having a little bit of volatility off to a slow start in the January timeframe. Was that related to kind of the stop and start of the tariffs? I'd love to hear just how you and Mike are planning with the customers to adjust to that because it's a bit of a whiplash. Yeah. Let me start more broadly, and then we can talk about auto. Just overall, in terms of tone around tariffs, I think all of the customers are saying something similar, which is we're watching this very closely. We're very curious about what happens. We're trying to make contingency plans. In terms of the actions that are being taken to date and how it's impacting our volumes year-to-date, I don't think we're seeing anything all that significant. You could debate maybe there's a little bit of pull forward on the intermodal side. There are isolated examples of fertilizer from Canada that isn't moving today that was previously because of the potential threat of tariffs. We're not talking about big numbers, big dollars right now. I think those impacts will be felt if and when certain tariffs go into effect. We have markets that could benefit as well when you think about metals in particular. We saw that back in 2018, a positive uplift in terms of domestic metals production that favored CSX. There is capacity to ramp up production in the metal space. There are some positives as well. In terms of autos, I do not think January had anything to do with tariffs. I think it was largely a little bit too much inventory on the ground going into the year, retooling of plants that took a little longer shutdowns than they normally would have. When we think about the network impacts and how we managed through that, I think talking to Mike about this, I think it is something they keep an eye on every single day. As changes occur, and we've had a couple of fits and starts with auto tariffs on, off, on, off, the team's been at the ready. They adjust the train start plan daily based on what's happening. We can reduce starts very, very quickly. We get immediate benefits from that because unlike other crafts in other areas of the company, when we don't run trains, the crews don't get paid. There are benefits. There are carrying costs, of course, of having those crews. The network is flexible enough to be able to adjust the train plan on a daily basis. You think about that road crew start slide that I showed, that didn't all happen in a day. That was going in and making plan changes gradually over a period of months to see how the network would react. Are we able to still make our connections? There are areas where we've unwound some of the changes that we've made to be adaptable and make sure that the customer is receiving the level of service that we would want them to receive. When you think about the commodities and markets that could be exposed to the tariffs as they're written, which is a big if, how that changes or if it changes, what are some of the ones you're more focused on? You mentioned metals, potentially a bit of an uplift. What are some of the top five ones that you're focused on? I would imagine maybe a little bit of a concern from a retaliatory perspective on China for maybe export ag and coal. What are the ones that I guess you and Kevin are focused on from a market perspective? Yeah, if we start with China, we really don't have any export grain exposure to China per se. Most of the grain that we export goes to South America. In fact, our export grain is a very small percentage of our total ag and food volumes and has already been impacted by a strong Brazilian crop. Our export ag is down quite a bit to start the year and probably expect it to be. Again, it's not a significant part of what we do. Much, much bigger for the Western roads. In terms of exposure to export coal, it's a very small portion of our export coal that does go to China. There is some percentage that does that could be impacted. I think the expectation is if we see that happen and U.S. tons are not going to China, there will be a displacement effect. The amount of demand for export coal out of the U.S. should remain fairly constant and will just change destination. We may have more that goes to India, as an example, if that were to happen. When we think about Canada and Mexico, specifically, about 10% of our volume is cross-border between Canada and Mexico and the U.S. A little bit more exposure to Canada, actually, than Mexico. That trans-border traffic to and from Canada is sort of diversified across a number of merchandise markets. You think about fertilizers, forest chemicals, metals. In terms of Mexico, we do have some exposure to auto. Certainly would expect if we see an impact there that auto volumes would be impacted. Now, there is capacity opportunity at U.S.-owned plants as well, particularly with the big three, whether they can ramp that quickly, how long the tariffs last, all of that kind of remains to be seen. There is the ability to produce more at some of the U.S. plants. One other big wildcard we're watching for the time being is just the potential to levy some fees on the China coming into the U.S. Obviously not a direct impact, but certainly a pretty big indirect one I would expect if that were to happen. When you speak to your ocean carriers and everybody else in that supply chain, do they have a read on what that might do? How would that affect the CSX network? Yeah, so it's a big one. First, I would say when we talk to our international partners on the international steamship line, we're off to a pretty good start. I think there's good line of sight to that continuing, at least through the first half of the year, regardless of what happens around tariffs and everything else. Feel good about that market as we speak. That being said, certainly this potential port fee that could come into play would be a significant disruptive impact, not only across international intermodal. You think about export coal, as an example. There are Chinese-built ships that serve the Port of Baltimore and Newport News as well that could be impacted. It would be significant in terms of the supply chain impacts. I think everybody's speculating at this point. Certainly, there are some numbers out there in terms of the dollar impact on the cost to land that freight here in the U.S. that we think would drive behavior changes, some of which would benefit us. If there's more consolidation at ports that we serve and there's more volume that wants to come into those ports, that's a good thing. We can be a part of the solution for that. It could also result in more congestion as well, which could have significant disruptive effects and, of course, lead to higher inflation. It is a watch item for us. I think like everything, we're not going to change our network plan or our projections just yet until we see how things play out. On the met coal, and I guess export met coal specifically, last year had some closures. You had a ship loader break. You had obviously the bridge collapse. Tough year last year. Sounds like the first quarter is maybe off to a little bit of a soft start. You have already talked about the headwinds year-over-year. Is there room just to have a little bit of an improvement just because last year was so difficult? Yeah. On the export side, off to a slower start than we had hoped with both weather, producer issues, and then we had another mine catch fire. That mine is likely going to be out through the first half of the year. We had another one last year that had a more significant fire event. That one may be out through most of this year. That will help us in terms of comps for 2026. I think demand has remained relatively steady for export coal as well, which I think is the good news. The issues that we had at Curtis Bay and with the Key Bridge last year should provide a little bit of a year-over-year uplift as we get a little bit later into the year. I would say when you think about overall coal volumes, we would expect domestic to be down a little bit more than export, or certainly that's what we expected going into the year. The domestic picture has gotten a little bit better, particularly with a really cold winter, which has helped stockpile levels. Those have been worked down. We actually have a number of customers that are looking at adding additional sets and haven't necessarily seen a lot of that benefit just yet. I think as we get into March and certainly into the spring, into the shoulder season here, we'll start to see some rebuilding of stockpiles. Q1 coal volumes will probably be the worst in terms of year-over-year. Can you talk a little bit about the domestic market for intermodal and the truck conversion? Because it's more of a theme, and it sounds like it's actually getting some momentum. Maybe it's the service product you guys have had out there for a while. What's driving that? I guess kind of more importantly, how do you think it can stick? Because it's, as you said, it's a pretty weak truck market. The fact that we're seeing it now is worth a question. Yeah. In terms of truck conversions, it's not just intermodal. It's not just domestic intermodal. It's across merchandise as well. I think the team tracked over 100 different projects last year that led to truckload conversions. Now, many of those are small, $1 million or less, but there's some larger ones as well. I think it's a combination of running a stable, consistent service for a number of years now, really since 2022, and doing that in a way where we're communicating differently with the customer, being much more proactive when things are not running well to let them know when freight may be delayed and when to expect it. We've invested heavily into the technology platforms that interface with our customers, and that provides them greater visibility and line of sight into what's happening with their freight, which doesn't go unappreciated. I think the collaboration between operations and sales and marketing also goes a long way. There is much less casting blame and deflection going on, as there has been historically, not just at CSX, but across the rail industry, sort of this natural tension between operations and sales and marketing. I think they are working together in partnership and responding to each other's concerns. That goes a long way with the customer. We are seeing a lot of success there, and I think it will continue. I think you sort of hit the nail on the head there. The truckload market, we are going on three years now where it has been challenging. As we start to see a turn there, I think there's some volume that we've already won that there's an opportunity to ramp it up and win even more of that share as that price dyna mic between rail and truck widens. On the domestic side in particular, with early start of bid season here or early in the bid season rather, how do you feel that your channel partners are faring? Anything you can do to help them? I'm sure the service product, communication are helping, but what's the sense as we get underway here for bid season for that group in particular? Yeah, it's less bad than it's been the last couple of years, let's say that. I think we're seeing on the UMAX side, we're seeing pricing, and that's our joint-owned product between us and Union Pacific. We're seeing pricing flat to up a little bit, which is encouraging. We have not seen that for a couple of years now. The pricing on the UMAX product tends to be much more sensitive to what's happening in the truckload space than the rest of our domestic volume. That's encouraging. Our truckload volume in domestic intermodal with our partners is actually up on a year-to-date basis. That's encouraging. I think it's less bad. I think there's been a little bit of inflection in terms of the pricing, probably not what many had hoped going into the year. We are seeing some BCOs that want to line up multi-year deals, which is also encouraging in terms of what they're coming out of exiting bid season here in 2025. With all the stuff that's happened over the last couple of years with the ports and the labor uncertainty, I would assume that we get a little bit of a share shift back to the Gulf Coast and to the East Coast, but clearly you can handle transcontinental interchange anyway. What are you guys planning for? What do you see right now? I guess ultimately, how would that impact the network if we were to see sort of a normalization or reversion of that share? Yeah. I mean, certainly the East Coast ports have been investing. They're continuing to invest in capacity. Naturally, we'll see growth at the East Coast ports, whether it's share shift back from west to east or whether it's growth in total with the disproportionate share landing on the east. I'm not sure, maybe a combination of the two. CSX is relatively indifferent, right? If it lands west and coming inland to the consumption markets along the I-95 corridor, landing on the West Coast is probably better for us. If it's going into the Midwest, we're relatively indifferent. We've seen a tremendous amount of inland port activity and growth over the last couple of years, and CSX has been a big beneficiary of that. We were just at a groundbreaking for the inland port that's going in in Montgomery. There's been billions of dollars of private investment in and around that domestic ter minal. In the next couple of years, we'll see that open, and CSX will be a big beneficiary of that as well. Those are short-haul moves that essentially take that volume off of the truck and onto the rail, but they're quite profitable. A lot of the costs are borne by the ter minal operators. The contribution margin on that is actually quite healthy. Maybe you can talk a little bit about the industrial development pipeline. You guys have been pretty vocal about that, adding a point or two of growth here over the years. You talked about the investor day. Has any of that really shifted or changed given all the uncertainty here, or those are just long lead projects that take time anyway? Yeah. I think one thing that's encouraging is the phones are still ringing. There's still activity going on. There's still interest. In fact, I think if you were to ask the industrial development team, they'd tell you they've probably seen a 15%-20% increase in terms of total call coming into this year versus last year. The inquiries are out there. Is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint? I think that would be fair to say, yeah. It's not stopping the amount of activity that's going on in the background. We now have almost 600 active projects. I think last year at the investor day, we said, what, over 500, almost 550. We're now at 600. The pipeline is growing. That gives us a lot of confidence as we go into the next couple of years. Industrial development projects, both new and expansion of existing facilities, added about 1% to our merchandise growth last year. That will similar this year and ramps up as we get into 2026 and 2027 to the point where it is likely accretive to the tune of 1-2 percentage points of total volume. We have line of sight. The projects that are being developed are not slowing down, and we are excited about where the future takes us. Cargo theft isn't something we really talk about on earnings calls, but the more we talk to shippers and go to these conferences, it comes up almost all the time. It is getting more coverage in the press as well. How do you think about that at CSX? How does the industry address that? Is this really as big of a concern as it seems to be when it comes from a shipper perspective? Yeah. There's been cargo theft forever, right? Ever since freight has been moving by truck, by rail, by buggy, there's been the issue of cargo theft. This is not something new. It's something that we've been dealing with for almost 200 years, all of our existence. Yet at the same time, clearly, it's an issue that needs attention that must be dealt with. It's a supply chain issue. This is not just about railroads. Everyone is impacted here. The rails put some numbers together through the AAR that indicated it's over a $100 million a year problem for the rail industry. CSX is a part of that. We've got our proportionate share of that. There are years when it's a little bit more and years when it's a little bit less. I don't think there's a sharp trend upwards, but it's not going down either. I think the bigger issue is the confidence that shippers need to have in the ability to get their freight to destination. I think what the industry is looking for from a supply chain perspective is the ability to coordinate a little bit better with law enforcement and do a better job of prosecuting because there are a number of times where we see repeat offenders. The stick needs to be there in order to make sure that there is enough of a threat not to continue to come back to the well. We are opti mistic that we get some traction there. I know there is a bill that is being floated, so that would certainly be helpful. CSX does have its own police force, as do all the railroads, and they do a tremendous job. We try to strategically position them in places where it is needed. We've invested in a lot of technology, particularly around facilities that have higher value freight. It is something we've got to watch out for. You mentioned some of the productivity initiatives earlier and excuse me, the Cumberland Yard. How are those progressing so far? I think we heard a lot of them at the investor day. One that was pretty interesting as well is just the real-time visibility I think Mike was talking about into the network. That sounds like it's a pretty big initiative. Anything else that gets you excited as you look forward to the rest of the year here? Yeah. I mean, you talk to Mike, there's always new ideas and new opportunity. I think, again, it's that collaboration between his team and the finance team looking at every single line item where we spend dollars. Some of them are large, like crew starts and network planning. When you make reductions to the crew plan, you save crew dollars, you save fuel dollars, locomotive dollars. It's big. There are a lot of things that are not as big that are still important initiatives that we've got to look at. Things like how much money are we spending on freight, shipping parts to mechanical facilities? How much money are we spending on vehicles and maintenance related to that? Any outside or third-party spend? Everything in that purchase services and other bucket that's flexible. Locomotive utilization, fuel productivity. We delivered over $45 million of fuel efficiency last year. We're off to a good start again this year with year-over-year gains. It’s broad-based. We've got scorecards that have over 100 different initiatives that we're working on right now. The idea here is not to, I always tell people, if you don't do something this year that you normally spend $1 million on and then you do it next year, that's a $2 million year-over-year swing. That's not what we're looking for, right? We're looking for you to take that $1 million spend, make it $750,000, and keep it there, right? How do we get more efficient in the dollars that we are spending? How do we get better utilization out of our assets? There's a lot of ideas. I think there's a lot of opportunity out there still to be had. Certainly, growing into the capacity that we have also generates productivity. Filling up trains that are running at 75%-80% capacity today gives us tremendous incremental margins, which is a big part of the story over the next couple of years. Maybe just give a little bit of color on pricing and how it's flowing throughout the start of the year. Obviously, the truck market's not really helping too much, but I imagine a better service product can also help move the needle a little bit on that as well. On the other side, you did talk about costs, about the productivity, about the crew coming down. Maybe just thoughts on general inflation and how that started to begin the year relative to where you thought it would be. Yeah. Let me start on the cost side. We got a pretty good read going into the year in terms of where inflation's going to come in. I think we'll be on the purchase services side generally in line with what you're seeing in terms of CPI, PPI. That has come down. Maybe it's not back to the 2% level, but call it 2.5%-3% is kind of what we're seeing across that area. In terms of labor, we know what the wage inflation is going to be. We've got about half of our workforce already has signed agreements that will go into effect July 1st. 4.25% wage inflation. Health and welfare is actually deflationary. All-in labor inflation will be less than 4% this year. Clear line of sight in terms of where the bogey is there and what we've got to try to offset. On the price side, I think we're off to a fairly decent start. What I'm always looking at is the dollars of price relative to the dollars of inflation, and are we seeing drop-through that helps drive operating income growth? We've seen that every year for the last decade, and we expect to see it again this year. Through February, we've repriced about $1.5 billion of the merchandise portfolio. Only about 5% of that has come in below plan. That's very encouraging to start the year. On the flip side, I don't want to get you too excited. We're not blowing the plan out of the water, but we are definitely ahead of where we expected to coming into the year. Conversations are constructive. The goal is to opti mize bottom-line profit through a combination of price and volume gains and truckload conversions. Okay. 5% below plan, but still above expectations. Only 5% of the renewals came in below plan. Only 5%. Yeah. 95% are on or above plan. Okay. Okay. Maybe we can wrap up just with a little bit on the Howard Street Tunnel because, like you said, we've heard about it for quite some time. At the investor day, it is all pulled forward in a pretty accelerated fashion. You did outline some of the, I guess, engineering that you had to go through, but the train coming down, the rerouting. You've laid out the cost, but what are you going to do in terms of the revenue side? Is there going to be a disruption on service? Maybe explain that a little bit more. You did give some opportunities, but is there a bigger market we should be thinking about now that when that's done, that's now available to CSX as it hasn't been in the past? Yeah. Let me start just sort of say every train, every customer that's impacted, we have a solution for. Those solutions are higher costs than they were previously. Some include a little bit of trucking as well in order to get the freight where it needs to be. We are preserving the service to the customer. We expect very minimal revenue loss as a result of all of this. Now, it's hard to tell from a network perspective as we digest challenges like the weather we had in January and February. We have impacted two of our four major north-south routes across the network. When you do that, even if you have a plan for how you reroute around that, the recoverability of the network is hampered. It is challenged. We have seen that play itself out over the first couple of months of the year. That has an impact on cost. That has an impact likely on perishable revenue. A lot of what we move is able to be made up, but some of it isn't. Customers don't always tell us when they divert that traffic. There probably is a little bit of a hidden cost on the revenue side that we don't see in terms of missed opportunity because of the challenged recoverability with those two routes out. We did not plan to have the Blue Ridge out at the same time as the Howard Street. That happened once we had already made the decision to move forward with Howard Street. I think that this is part of what makes us opti mistic about 2026 and beyond is when we look at what the network will be able to handle in terms of the amount of capacity we're creating, not just through the Howard Street project and shoring up the Blue Ridge subdivision, but projects like Cumberland. We've got a few others in the works that we're working on this year as we speak. coming up with new ideas every time he goes out to the field in order to get more efficient direct routing that saves on costs and improves the service to the customer. There is opportunity out there, certainly beyond the 75,000 loads-125,000 loads just directly due to the Howard Street Tunnel as we think about gaining capacity across the network. I think that's what's exciting. That combined with the industrial development activity that we're seeing across the network gives us good line of sight, tariffs or not, to seeing some growth and being able to deliver it over the course of the next couple of years. Okay. That is a good place to wrap up. Since we are out of time, we probably should anyway, but thanks very much, John, for kicking us off here. We appreciate being here. Thank you. Thank you. Just because of those kind of trees. Yeah. Okay. Thanks very much for joining us here. We'll kick off our second session here of the day with Union Pacific. Again, I'm Brian Ossenbeck, I cover transports for JPMorgan. Very happy to have Jennifer Hinman, the CFO, Eric Gehringer, the EVP of Operations here to keep things rolling. Jennifer's got some slides she's going to go through with a few opening comments. I will turn it over to her, and then we'll jump into Q&A. All right. Thanks very much for being here. Oh, thank you, Brian. Thanks for the invitation. Thanks for all of you who are here with us in New York and those that are joining us online. We will be making some forward-looking statements today. Those statements are subject to risks and uncertainties. Please refer to the UP website and SEC filings for more information. Thought I'd start out today with what really is the foundation for UP, our franchise. We truly believe it's the best franchise in North America. It's the largest, 33,000 route mi across 23 states, giving us really broad access to diverse customers, diverse markets. What we have been focused on as a company over, call it the last 20 months or so since Jim came on board is unlocking the full potential of that franchise. Our methodology or our strategy for doing that is pretty simple. It's focusing on safety, service, and operational excellence, really the fundamentals of railroading. We believe if we do that right and do that excellently day in and day out, that's going to allow us to grow our business. We look at 2024 as a proof statement for the success of that strategy, that it's the right strategy for us. We grew our volumes 3%. EPS was up 6%. We improved our operating ratio almost 2.5 points, improved ROIC. We're leading the industry in both of those metrics, which that's a goal of ours. We believe we should be the industry leader. Want to be the industry leader in safety as well. We're still working on that. Again, that's kind of the backdrop from which we're looking at ourselves right now. Obviously, moving into 2025, we want to take that success from 2024 and build on that. If you see the volumes there on the slide for 2024, first quarter, quarter to date, we're up 8%. Strong growth to start the year. You see the variety and again, the diversity of our business mix. They're just looking at that with bulk up to our industrial segment flat and then pre mium up 15%. The story there really continues to be the same thing that we experienced in the second half of 2024. Very strong growth on the international intermodal side. In fact, international intermodal volumes are up a little bit over 30% right now. Continuing some of the strength we saw last year. Obviously, question marks about how long that's going to continue. Is there some pull forward there? May very well be. We certainly know in the second half of the year, it's going to be a very tough comparison. Our volumes were up 30% plus in the second half of 2024. We don't expect that for 2025. Really, our goal is with Eric and his team and Kenny and the great service product that they're providing, we want to try to retain some of that business. If you look further into intermodal, our domestic volumes are actually up here in the quarter. They're up about 6% right now. I think that's attributable in part to the international intermodal, some of the transloading that's happening, as well as some new business wins, which we'll talk about in a minute. The other part of pre mium, though, that I should mention is our automotive piece. Finished vehicles and parts are actually down about 7% to start the quarter. You've seen some production callbacks. It's just been a little bit of an ane mic start to the year on the auto side. Going back to bulk, grain, grain products continues to be a growth engine for us. Very strong pull through there. I should highlight one thing that might surprise some people. Coal, our coal volume is actually up about 1% here in the quarter. That's really about higher natural gas prices making some of our plants a bit more competitive there. Last thing I'll say before I turn it over to Eric is just a re minder that 2024 was a leap year. We do lose a day here in 2025 year-over-year, and it's worth about 25,000 carloads to us. Just a little re minder there. With that, Eric, I'll turn it over to you to talk about the network. Perfect. You recall on our Q4 earnings and talked about the momentum that we were carrying out of the fourth quarter that it really had built all the way through 2024. I'm very pleased to tell you today that we have carried that momentum. It shows in our results that you can see here. Most importantly, after safety is our freight car velocity. As a re minder, this is the best measure of fluidity on the railroad. 217 mi per day through February, 7% improvement. What that is allowing us to do is to support the growth that Jennifer mentioned. It's also delivering exceptional service. You can see those in our manifest and intermodal SPIs. One thing I do want to point out about the SPI metric is remember, we rebase that every single year. The math is pick the best month that you've ever accomplished in the last three years and compare yourself to that. With every year as we get better, the goal actually becomes even more difficult. It is an even stronger compliment to the collective team at Union Pacific that we're operating at this level. If you then transition and you think through, okay, what's driving that freight car velocity? It's the bottom right. It's the 7% improvement in dwell. Let's level set on that. 2024 was the best full year performance in the history of Union Pacific for dwell. You can see we've added 7% on top of that all the way through February. Why is that important? Number one, it's fundamentally how we deliver our service product, right? Improved dwell drives car velocity. Car velocity provides the fluidity that we need. In addition, we're turning our customers' assets faster. That's what's allowing us to do two things for them. One, to be able to support the growth they have, and also to be conscious of the fact that they can be capital intensive like we are. The faster we turn those cars, the less they need to invest in their asset base. On the locomotive productivity side, at 133 through February, 1% improvement. Now, you look at that, the biggest, most important thing about that is when Jennifer was talking about the volume increases we've seen on the international intermodal side, 30%. That one number right there tells you that as we think about being able to onboard volume, some of which even we didn't know ahead of time that we were going to onboard, we're being very judicious in how we think about assets on the railroad. That means that we're taking that roughly 500 at the ready locomotives that we've staged across the system, and we're injecting them as we need them. That can be for volume, and it also can be for weather. Now, weather has certainly visited us this year, and we've weathered it quite well, as measured by everything that you see on this chart. Finally, on workforce productivity, off to just a super strong start at 9% improvement. As a re minder, this is a measure of workforce productivity that encompasses every employee in Union Pacific. One of the biggest drivers that is resulting there is our continued work on train length. As you'll see, as we close out the quarter, we've had a very strong start on train length, and I still see more opportunities for that. Now, let's talk about what really is going to continue to drive our service product, continue to drive our productivity. This is really the epicenter in its technology. I'm very proud of what we have as a collective portfolio across the board, and it's all departments. Today, obviously, we're going to focus on the ones that deliver service and deliver productivity. Adaptive transportation planning. We haven't talked very much publicly about this. We launched it last year. We're about six months into its development. The best way to think about this is kind of imagine whatever your favorite navigation app is on your phone, like Waze. If you think about what you're doing on that, you're sitting here in New York, you're saying, "I want to go to Boston." You put it in, it calculates how long it's going to take you, and it gives you the route. As you're driving to Boston, the world around you changes. It could be a car accident, could be a storm, etc. As a result, that app adjusts. Adaptive transportation planning is the exact same thing. We've always had a version of this. It's what's inside what we call CADX, which is how we dispatch the railroad. In CADX, it looks at like 10- mile or 20- mile sections of the railroad. Inside that, it considers everything that's happening. How many trains do I have? Which ones have most preference? Which ones are going which way? We don't have a tool yet that looks at the whole 33,000 mi and opti mizes. That's what this is. We're already implementing it, and it's going to come in modules. Just like some of the other initiatives we've taken on in the past, you'll see us be able to continue to layer value over and over again with that. What's most important for us on the service side is whether you're talking about mixed changes, a storm event, or some other type of variability event, we can now get the transportation plan changes we need in a matter of seconds and minutes. Instead of today, in some cases, it can take us multiple days to be able to adjust. Again, whether you're talking about service or productivity, it's a big driver there. Ter minal Command Center is really a visualization tool combined with an opti mization tool. This is for our frontline leaders in our ter minals. If you think about everything that happens on the railroad, whether you're talking about manifest, intermodal, or auto ramps, it all starts in the ter minals. What this tool allows our frontline leaders to do is to see with even better visibility what's in their yard from A to Z. What I mean by that is it can look at every single track, how long have the cars been dwelling in there, how do I want to opti mize the way that I actually bring in cars from the receiving to be able to switch them, which tracks do I want to pull first as I'm building outbound trains, and on and on it goes. It's a phenomenal tool. We're just starting to scratch the surface on its value proposition, but we expect that it's going to have a large value proposition for us. Train control and emerging tech is really about safety, that as we work to become even more safe, we also become more consistent in our service product, and we become more productive. We believe that in our hearts, those three things are linked together. What this is, is a very vast portfolio that focuses on things like how do we help people have to not walk as far, and how do we handle material better, and how do we handle trains better. Those are the three biggest risks on the railroad that's inherent to what we do. You have seen us talk in the past about SwitchPro NX, or before we called it Mobile NX. This allows an operator in the ter minal to be able to handle cars and takes their walking from six miles down to one mile. It also improves the dwell in those ter minals by up to 20%. In the case of material handling, it's the automation of our engineering equipment that removes the need to physically have to handle things like ties and move to automated distribution. Of course, on the train handling side, it's our precision train builder that we talk about consistently, and we always are going to talk about it because it's the best tool. It's proprietary to Union Pacific, and it's in large part what's allowed us to reduce our derailments on the main line while we've still been able to grow train length. On the customer interface, this is a portfolio of initiatives that really focus on, as the customer is engaging with Union Pacific, even beyond our APIs, what do we need to be able to provide them, in what frequency we need to provide them, and what manner do we need to provide it to them that's easiest for them to understand the things like where their cars, their estimated arrival times, being able to handle if they have a claim of some sort, if they have a question, being able to handle it in the most efficient fashion. Again, whether you're talking about safety, service, or productivity, we have the best portfolio of technology initiatives, I believe, in the industry. Obviously, the strategy is to take those three fundamentals of railroading and translate them into growth. I'll wrap things up with a couple of growth stories for us. The first two really are centered around that service product. I think sometimes it's maybe hard for people to conceptualize how does better service actually drive growth. I think these are two really good examples of that. The first one's with our ethanol business, where many of those customers, most of those customers either own or lease their rail cars. To the extent that we can drive productivity, speed their cycle times, that's real savings for those customers. Last year, we took about a day and a half out of the cycle time for some of our ethanol customers. That allowed us to win new business, gain market share, and it added about 9,000 carloads to the railroad in 2024. Si milarly, we've talked about a new coal contract that we won here in 2025. Now, that business doesn't start on us until April, but cycle time was part of what helped drive that business win as well. We had and provided faster cycle times than did the competition, and that allowed us to pick up that business. That's going to add about a train a day to us from a coal perspective starting again here in April. The other two examples really get into business development. We talked about this quite a bit at our investor day. We know that we need to work directly with our customers, addressing them at the project level to be able to bring new business onto the railroad. A couple of wins here. One is with Norfolk Crush. It's a soybean processing plant in northeastern Nebraska. They made the decision to construct their plant on the UP rail lines, in part because we worked with them to offer them both unit train service as well as manifest service so that we could, again, meet the needs that they had. It's a great opportunity for us because it gives us both an inbound load in terms of the soybeans as well as the outbound loads in terms of the processed oils. That's about a 9,000 annual carload lift for us. The last one was with Uber Freight. This is a direct off-the-truck onto a rail conversion, 6,000 trucks that we picked up here. It is the service product that we are providing to the customers, the value that we are providing them, the consistency Eric mentioned, the SPI, and really proving on a consistent basis to our customers that we are able to be there with them and support their growth initiatives. Really, that is the end game for us, with the execution of our strategy, using that to drive growth on the railroad. Growth across a very efficient network can be a beautiful thing from a profitability standpoint, and it lets us drive strong returns for our shareholders. We will open it up for your questions. Okay. Great. Thanks very much. That was a very helpful start in terms of growth and technology, both very important for the railroad going in the future. Just to start a little bit more in the near term, obviously, weather was not that great in the first quarter. First quarter OR is never the best for anybody really throughout the year for the most part. Can you give us a little more color? Maybe you can put some specific thoughts on just how the first quarter is shaping up in particular. Yeah. To your point about seasonality, it is a part of our business, certainly. First quarter, you generally have less car loadings. You generally have the tougher operating conditions. Historically, I would say that shows up in, call it a point and a half to two points sequential degradation in your operating ratio. This year, our carloads have been strong, are staying strong decently, up 8% year-to-date. That's a positive. The mix continues to be on the unfavorable side of the ledger when you see that most of that growth is continuing to come from international intermodal. Although I think we did a nice job in the fourth quarter showing that that can still be good, profitable business for us. Hopefully, that helps to allay some of the investor concerns about the fact, can you both grow intermodal and improve your margins? The answer to that is yes, you can do both. Weather-wise, February was certainly tougher for us, but I do not think Eric would say that that was unseasonably so. No. I think you're exactly right. So. Okay. Obviously, the other big topic is tariffs. A couple of questions on that. How would you characterize conversations with shippers and customers at this point? I guess, Eric, for you in particular, have you seen any impact of the start and stop with the auto in particular? How do you just in general think about planning for some of the volatility and working through that with the network? Yeah. I'll start and then turn it over to Eric. In talking with our customers, I think everybody's in the same place a little bit in terms of there's uncertainty and they're unsure what's the next move that they need to make or that will potentially be made relative to tariffs. For our customers and for ourselves, it all comes back to what is the consumer going to do. Is the consumer going to stay engaged or is the consumer going to pull back. I was listening to some news this morning and small business consumer confidence hit, I think, a four-month low in the most recent survey. That's concerning. Obviously, that's something that we're watching very closely. We need to stay very aligned with our customers to understand what their plans are. I think everyone's, I don't want to say frozen, but people are unwilling to make big bets one way or the other right now in terms of they don't want to pull back because there isn't a tariff yet in many cases. Now, Wednesday, I think some of that changes for steel and alu minum. At the same time, people aren't willing to really step out and make big investments. That's the landscape that we're dealing with right now. Hopefully, we get some certainty here soon so that then people can really start to make those investment choices and move forward. As far as reacting to the uncertainty, that's a playbook we know quite well. When you're thinking about it, especially from a productivity perspective, the first place you're going to start as you get clarity towards what's the outcome is we start looking at our transportation plan. We start fundamentally redefining where are we going to run certain trains, how many of those are we going to run. That really starts to trickle down through the matrix of the rest of the organization so that then goes into how many people do we need to hire. Already this year, we have made some adjustments to our hiring plan. They've been small adjustments, but appropriate adjustments. We look at how many locomotives do we need to have in the active fleet, and we just keep working all the way through that. Our ability to respond to those types of things, we're very good at it. We've demonstrated that in the past. In terms of the commodities or maybe end markets that you're focused on from a potential impact of tariffs, which are the ones that are maybe the top five or three from your perspective, I would think? Autos and lumber. Obviously, we saw the retaliatory tariffs last time that impacted export ag. Those are the top three in my mind. Are there any others that you would sort of put on that list as well? No. I mean, you certainly hit my top three, Brian. And automotive clearly is at the top of the list when you look at flows into and out of Mexico as well as into and out of Canada. Parts are going north-south and finished vehicles coming out of Mexico. Like I said, those volumes are down 7% to start the year. It is a little bit of a weaker market anyway, setting tariffs aside. Certainly, if you put an added cost to that, that would be concerning for us. Again, lumber, housing has been down. That has been a bit of an anemic market for us as well in 2024 and starting out 2025. If there is a further shock or further cost to that, that is going to be concerning. The retaliatory tariffs on grain southbound into Mexico would certainly be the other piece that comes to my mind. You have intermodal flows just north-south as well. Really watching all of those things. That is where, again, staying close with our customers, understanding what their plans are so that we can make adjustments and support them if they look to be changing their supply chains. Because if ultimately that is where this takes us, we want to be working with them very closely as they are looking to maybe put more operations in the United States. We want to make sure that they have an opportunity to do that, that Union Pacific can serve them. One other potential big supply chain change could come about if they put in the fees for the vessels tied to China, either flagged or built or in the backlog. From what I've heard, that would create a lot of potential grouping at larger ports, potentially big ones that you serve. I do not know what you're hearing from your ocean carrier partners, the international folks, from that perspective. Eric, that would probably put some strain on the network. Clearly, you're up 30% international intermodal. You can handle a good amount. I just wanted to see how far along that thought process was and how you're viewing that potentially if it were to come to pass. Yeah. I mean, again, you hit it on the head. I think it does lend a preference then to the larger ports. I think that's where we really like the diversity of our franchise. We serve large ports and small ports. That may concentrate traffic a bit. I think that's where the agility that Eric and his team demonstrated last year with responding to that very strong international intermodal growth and handling it while improving our service product, I think will certainly come into play again. I think you're exactly right. You also see we're making investments even in the LA Basin, right? Inland Empire, we've been able to add another 70,000 lifts last year. We're going to add in even more than that this year. If you think about really the whole intermodal network in total, over the last handful of years, we've added in almost a million lifts across our network. We've been building in this capacity, and we'll be able to handle that volume. Periods where we start to see challenges, it usually comes down to, okay, how do I just simply shift some of the resources down to that part of the railroad to be able to handle it. We're starting to hear more about truckload conversion in general across the industry, but in particular for UP. At least my perspective, that's been a pretty significant change over the last couple of years. What's causing that? I know there's internal focus probably as part of that. New partners, perhaps, with Uber Freight seems like another one. Maybe you can characterize what's driving some of that and where are these coming from? Are these people who trust the service? Are these new to rail? Is it a mix of all the above? Yeah. I would say it's a mix of all the above. Certainly, one of the first places that we're looking to grow our share is with existing customers. Because generally speaking, our existing customers don't literally put all their eggs in one basket. They're going to ship with ourselves. They may ship with another railroad, even out of the same plant, or they may be dividing that traffic between rail and truck. Some of our first conversations are, how can we shift more of that business to us? Talk to them and share with them the cost savings that we're hopefully driving for them, the improved service that Eric and his team are giving them, and then talking to them about where those opportunities are. Certainly, when you're providing that really strong service product, that's a much easier conversation. We are having customers that are being much more open. They are opening their transportation book to us and saying, okay, here are some different lanes. Let's talk about what you can do. Those are obviously great conversations to have. The other piece certainly is with newer customers. We did add a couple large IMCs to our stable here a couple of years ago. We did that at a time that the truck market was starting to go down. We believe we really have not seen the full benefit to our network yet of those significant contract wins. We are working very closely with those partners to help them grow their businesses on the intermodal side. You hear us talk about customer vision. You saw Eric talk about the different things that we are doing from a technology standpoint. All of those things are geared towards making it easier for customers to do business with us, giving them greater visibility to the traffic when it's on our lines, and obviously backing that up with a very strong service product. We know we can be a more economical, safer option for our customers. As we're proving that day in and day out, we're gaining confidence in that consumer base, and they're giving us more business. Eric, when you're dealing with the big coming out of the West Coast in one particular product line, I guess, how are you thinking about network balance going back in the other direction? Is that a challenge now? Are you being able to handle it? Are you able to find different ways to do matchbacks and possibly exports? Because it does seem like this is going to be a good problem to have at least for the first half and maybe even further than that. Yeah. Kenny and I work as our teams together because we believe this is a critical initiative for us. We've demonstrated progress certainly over the last many years. As you said, your matchbacks, biggest opportunity is always going to continue to be things like our G4 ag facility. In addition to that, not a lot of people know this. For example, we ship a lot of hay west. We have hay farmers in Arizona that we do matchbacks into the LA Basin as well. Kenny and the team are constantly looking for any opportunity and every opportunity they can to be able to fill those containers on their westbound moves. What's beautiful for operating it is we're going to take that box back anyways. We don't have to make complex transportation plans to make that happen. It is one of those wonderful scenarios where everybody wins. We are able to be consistent and reliable with it. The customer has the means to be able to send it back west. Of course, Kenny gets revenue and price as he does it. One thing we do not really talk too much about in these earnings calls, but the AAR says it is a $100 million a year problem, would be cargo theft. We hear that a lot more from shippers, and there has always been this sort of challenge. Maybe it is a little bit elevated relative to the past years. How has that come up in your conversations with BCOs and shippers? Is there anything in particular that you are doing differently to address that risk this year? It certainly has been coming up more with shippers. I would say that dates back all the way to really COVID. To your point, we've seen it not necessarily go back to the levels that it was in COVID. We've done a lot of different things, especially over the last 2.5 years. This is an industry problem, not just a Union Pacific problem. In no particular order, the first thing that you want to do is obviously you want to follow up and your partnerships with those entities that we operate in. Right out of the bat, we've been able to partner with some of our customers who've actually partnered with us in additional security efforts, largely boots on the ground, having special agents or the equivalent there. We've also partnered with the state and federal entity. That partnership takes a couple of different forms. From a strategic perspective, it takes the form of task force that we, BN and others are part of. Very more tactically, it involves having agents on the ground. We have added in about 50 additional agents just to the LA Basin. In addition to that, we have also continued our infrastructure investment, largely in the form of additional fencing around our terminals and around those sections of our main lines where we build trains. It is tens of millions of dollars that we are investing just in the LA Basin on an annual basis. The partnership that is most new and that we are most optimistic about is if we look politically inside the LA Basin, we have seen a significant increase in the willingness to prosecute those that try to vandalize our trains or other trains. That is a critical step here. Doing a lot of different things, our customers expect us to do those things, and we're partnered with them to make sure that we can ensure we have consistent, reliable service. Jennifer, you mentioned one of our favorite topics, mix, earlier. Price mix, I think, was a little bit of a drag in the fourth quarter. It feels like maybe it'll still be a little bit in the first quarter, but price is accretive to margin percent this year. Maybe you can give us a little more context in terms of how the fourth quarter is tracking in that regard. Maybe just the bigger cost profile as well. You probably have some pretty good visibility to where those bigger buckets are heading this year, in particular on the labor side. Yeah. I'll start with the price versus inflation. You're right. We have long talked about and delivered price dollars that are in excess of our inflation dollars. That's table stakes for us. As inflation really kicked up in the, call it 2022, 2023 timeframe, those price dollars, while still above the inflation dollars, weren't accretive to our margins. We changed that in the fourth quarter. We have said going forward in 2025 and beyond, we expect our pricing to be accretive to our margins. I think that's a very positive step, positive statement forward. We know that has to be part of our overall profitability story. When we look at what's happening with inflation overall, it's still high historically. I think we said from a wage inflation standpoint, it's about 4% overall. Total inflation for us is about 3.5% this year. When we talk about inflation, we do exclude fuel from that because we have the fuel surcharges that cover that separately. Think about that as all of our costs ex-fuel. I would say we feel fairly confident that those are going to stay. Obviously, we're in the midst of labor negotiations right now, having those talks. Those are continuing. We have separated ourselves from the national bargaining this year because we want to be very specific in working directly with our unions to make sure not only do we reach good wage and benefit packages with them, and we want to reward our employees. In fact, we're happy for Union Pacific's employees to be some of the highest paid in the rail industry. We want to make sure that we also are able to work with them in a productive manner in a way that supports the service product that our customers need. It is important for us to be able to achieve some of that through this round of bargaining as well. The pricing environment in general, I think at least you guys have been a little more specific in terms of what percentage contracts are renewal from the longer-term perspective. How's that going? Considering we still have a fairly soft truck market, but obviously the service product has improved for you guys pretty significantly and consistently. Is that helping a little bit on the negotiations in that regard? Yeah. A strong service product does not just bring new business to us. It also helps us support the value proposition that we are providing to our customers. Even going back to the ethanol example I used where we are taking cycle time out, again, that is productivity savings for the customer. As part of us being able to provide them with that, we are looking to share some of that productivity savings in the form of a little bit higher price for ourselves. Those conversations have been productive. We feel very confident in our ability to do that. We want to make sure that we are providing that service product that we guaranteed them and that we brought them onto the railroad with. By doing that, that supports our price efforts. Maybe we can wrap up with a little bit more of the growth and investment viewpoint here. Some of the other rails are putting more dollars into the ground. Obviously, everybody's got an industrial development pipeline. In particular, looking at BN, it has a few large projects out west. Is that something you feel like you need to bring to the market in similar fashion? Are there other things you feel like are better solutions? You mentioned 1 million lifts over the last year. I guess the question really is, can you still grow the way you want to and support the customers without making significant multi-billion dollar investments? How do you try to solve for that? Yeah. I think, first of all, if there was the right investment opportunity, we would certainly make that to grow with our customers. That is a conversation that we're having with them all the time. I think right now our pipeline is, call it 200 or so different projects that we think will bring about $1.5 billion worth of revenue onto the Union Pacific. Some of that involves a little bit of investment for UP. Some of that is more customer investment. That is the pipeline that we have in front of us right now. The thing that I think is important to note is we are investing for growth. Of the $3.4 billion that we're investing this year, that we invested last year, call it $2 billion of that is for maintaining our infrastructure. The other $1.4 billion is for locomotive modernizations. That supports growth. It is for new freight cars. It is for technology investments. It is capacity, some of the intermodal capacity Eric talked about. It is siding extension. All of those things are there to support growth. I think we are doing it in a very capital-efficient way, though, because we are looking at our network differently today than we used to. Instead of going out greenfield and building a new intermodal facility that might cost $500 million-$1 billion, we are making investments in places like the Inland Empire, which was our West Colton switching facility. We are transfor ming that over time, building it as we need it for the capacity to support the intermodal growth that is there. We have done that in the Twin Cities. We are doing that right now in Kansas City. We've got a pop-up ramp that we've put in Phoenix. When you're doing it brownfield instead of greenfield, it's a much more capital-efficient way to do that. I could say the same about our locomotive fleet. We have locomotives that we can bring back into service. You have to put some more money into that to refurbish the locomotive. That's a much more capital-efficient way than having to go out and buy new. The investment dollars are there. It's supporting the customer growth. I think you're seeing that in our results. Okay. We are out of time, but really appreciate you guys being here. Thanks very much for the update. All right. Thanks, Brian. All right. Take care. Okay. We're going to get started with the next presentation and Q&A. Again, I'm Brian Ossenbeck. I cover Transport and Logistics for JPMorgan here. Very excited to have CH Robinson. We've got Dave Bozeman, President and CEO; Damon Lee, CFO; and Chuck Ives from Investor Relations. I'm going to just give it over to Dave just briefly here to make some intro comments. Then we'll get to some Q&A. We've got a big list. If anybody wants to raise their hand and join in, we can try to get you a mic as well. Thanks very much for coming, guys. Dave, I'll turn it over to you. Yeah. Thanks, Brian. First of all, thanks for having us. Congratulations on this conference. I think you guys went from 650 to almost 950 this year. A really big step up in attendance. Glad to be here. A couple of things for us just to start off. There's a lot going on in the world right now and certainly in the markets. I think we're obviously right on the coal face is what I'd like to say with that. I would also say that it's times like this and others that are really the value prop for CH Robinson. We help customers deal with disruption and things that are happening. This is not the first time we've dealt with disruption. Whether it's been port strikes or tariffs or anything like that, we deal with over 85,000 customers. We guide them through a lot of that. Right now, we have a balance sheet that helps our customers. We feel really good about where we are. Uncertainty is going to happen. At the end of the day, we'll get through this like we have in the past. I think our customers feel good about that. If you guys saw our investor day, we remain committed, really solid plan on where we are. Damon will go into that as we talk. Strong inclinations going out to 2026. We still feel really good about that marketplace. At the end of the day, we lean on higher highs and higher lows. It does not matter what a market is. We're into our 37th month of this kind of freight pullback, freight recession on an 18 month-24 month normal cycle. It is not normal. This is abnormal. At the end of the day, I think with our asset-light model and how we are doing it, we have the flexibility and the agility to deal with that. We feel really good about that and look forward to talking about it. All right. Thanks very much. Maybe we can start there with sort of the current state of the North American freight market from your guys' perspective. Any signs of life in the spot truckload market? Is this mostly weather, which I feel like we did this same thing last year. The market improved. People thought it was turning. Then it was weather. Seasonality is a good thing to have back. It doesn't feel like we're necessarily off to the races or an inflection at this point. Curious to see what you guys are seeing. Yeah. I'll start. You can jump in, Damon. First of all, I would say that there's no material change yet, Brian, on what we're seeing. You're right to call out there is seasonality. We saw that in Q4. That's normal seasonality. We haven't seen it where it's been steady and starting to go. Now, a couple of things that we watch and we continue to watch. There are some things that you guys should hear too. When it comes to capacity, that continues to burn down. We like that. It's still burning at somewhat of a slow rate. It's starting to burn down. That will eventually get back to normal levels. Because you just can't continue to hold these types of prices and costs that's happening, that's just not sustainable in the long run. We do see that happening. Ultimately, it's got to be a balance, though. It's got to be demand plus capacity. We've not yet seen that full demand yet that would give you that feeling of things just being totally right. I don't know if you want to add. Yeah. I'll just add to that. We did see truckload spot rates increase in December and January. We believe that was certainly on the back of seasonality and weather. When the weather abated and the seasonality was over, we saw the rates come right back down again. Rates are right now below the operating cost of most carriers. I think that's obvious that that's unsustainable. Rates are not sustainable where they're at today. We still believe rates will increase throughout 2025. We have not seen a sign of any structural change in rates thus far this year coming out of Q4 and into Q1. I would say there is one bright spot, which is when we do have seasonality and we do have weather events, we are seeing tension in the carrier capacity market. That's a good sign that at least some of that excess is starting to leave the system. I think that's kind of a first indicator of, okay, there is some tension when there's irregularity in the marketplace. Now we just need more of that phased capacity to exit the market. We believe it will. It's just, as Dave mentioned, it's going at a slow pace. Damon, on that point with renewals, it's hard to judge just by one customer or one anecdote because everybody's got a different base that they're starting from. What's sort of the range of renewals? You mentioned they're expecting them to go up throughout the year. Consensus still seems to be the back half recovery, which would be third year in a row. Obviously, you're off to a little bit of a slower start, at least from our discussions. Wanted to see if you guys had a different perspective here to begin the year. Yeah. As it relates to volume, as you know, we do not guide. What I would say is just echo what Dave has said, which is it is still a very tough market. Therefore, Robinson's strategy, I think different than Robinson's strategy in the past, has been not going to try to predict where the market is going to go and let that facilitate my success. We have coined the phrase higher highs and higher lows. That is really how we drive the company now, how we drive our operating model, how we have pegged our strategic initiatives, which is we are going to outperform the market from a volume perspective, regardless of what cycle it is in, regardless of what level it is at. That has boded well for us over the course of 2024. Certainly, to that point, as Dave mentioned, we are in an extremely prolonged freight recession. I think the recession has been predicted to end probably five or six times now in that 37 months. It is kind of a fool's errand to predict when it is going to revert. What we are doing at Robinson is we have got a number of scenarios that we have planned out that says, okay, if the market does this, we are going to react this way. We feel like we are in very good shape, better than we have ever been, to not just deal with the market when it does inflect or if it continues to bounce along the bottom like it has. We are still going to deliver the industry-leading performance that we have been delivering in 2024, regardless of market conditions. I would say to your point, early 2025, I think it is starting off slower than what most people expected coming into 2025. I feel like Robinson is prepared regardless of what the market does. Maybe this is a question you ask when you've been in a long trough or freight market. I do wonder if anything has changed from a market structure perspective over the last couple of years. I mean, you've got more private fleets. You've got greater visibility in tech tools. You've got trailer pools. From your perspective, is any of that stuff maybe causing a longer and more extended trough here at this point just because there's perhaps more capacity than there was ever before or availability of capacity? Yeah. I think a couple of things on the capacity. Number one, during the pandemic, the amount of capacity that was infused into the system was the highest. As you know, it was the highest amount of capacity that was put in. On the backside of that and burning that down, people can forget what happened there. There were some pretty good profits made in 2021 and really assets along with recovery assets as well as far as pandemic relief and things like that. All of that just added up to carriers being able to pay off assets. That slowed down the exit of this as well. Trailer pools continued to be out there. That kind of lengthens the carriers to be able to stay in the marketplace. There has just been a number of different things. The banks really did not want to be in the used truck market. When it comes to trucks having to redo deals, we coined the term zombie trucks that are kind of out there. There is just a lot of hang-on capacity because of a number of factors. We are starting to see that continue to break down. It was burning down at about 4%. That went up to about 6%. That is going to get its way down to where it needs to be. I am pretty confident of that overall. No. I think you said it well, Dave. I would just add that certainly everything of what Dave just went through actually fits the Robinson business model very well. I mean, what we're seeing from a capacity perspective is certainly more flexibility, more agility is desired in the marketplace, both from assets and brokers. I think Robinson has a very good mix of certainly being the leading broker in the industry and our asset-light business model, which commands higher than average returns throughout all the cycles. With that, our strategy in showing up more like an asset allows us to take advantage of some of those market structural changes that you mentioned. I think our business model, I think our business strategy fits very well to where those market dynamics are going. You mentioned showing up like an asset carrier theme from the investor day. What does that mean? I guess where do you sort of draw the line between owning more? It does seem like there's going to be more of a hybrid model just in general over time with assets getting more asset-light and vice versa. How do you view that within Robinson? Is there a line that you would draw in terms of what you would or would not own? First of all, we feel good about the asset-light model. We do. It has helped us out. It has allowed us to have a P&L and a balance sheet that is in the black and allowed us to invest in times like this. We are able to invest. I think that separates us from a lot of the marketplace to do that. We will continue to do that investment. When we start to look at showing up like an asset, we look at it as our total addressable market. You are talking about a $400 billion TAM. In doing that, some of that would not, for a for-hire brokerage, you really would not get access to some of that TAM unless you showed up like an asset. For us, it is our drop trailer. To put some numbers on this, when we say drop trailer, our drop trailer business represents about 15%-20% of our NAST volume. That is pretty significant of where we are. That allows us to be able to get in bids and really go for volume that normally would have been just shut out in just a traditional brokerage model. LTL, consolidation, warehousing, that is another showing up like an asset. That is a significant service that our customers like, that they want, and that we are really good at, what LTL. Brian, you noticed we have said this before. I mean, our LTL business is a $3 billion LTL business. That usually stops people because that is a pretty big scale that we are dealing with. There are a number of things that we do that will be part of our strategy as we continue to move forward and show up like that asset to get part of that TAM. Damon and I watch that on how much. For example, trailers. We own over 2,000 trailers. We have access to over 10,000 trailers. Now, we're going to have a strict ROI type of process that we go through on how many more we would add to that. It's strictly around that return on the invested dollars. No. I think it's exactly right. You mentioned what draws the line. It certainly is the ROI expectations of would we invest in more assets. As Dave mentioned, we already own a lot of assets today. I know that's always a fun fact that a lot of people forget about Robinson. The optionality to partner assets is really a differentiator for us. I think what we've proved out over time is as we continue to grow, we'll add more and more assets. I think that ROI expectation will always show up as the asset-light model is still superior. I think that'll end up being that range in which we play in as far as how many incremental assets we add. When you think about the current conversations with customers, how would you characterize that? Obviously, there's a lot of noise. There's a lot of headlines. There's a lot of back and forth. Any short-term changes that people are making at this point? Are they making longer-term changes? I'm sure it differs by customer and by day. How would you overall characterize those conversations right now? You're right. It's a lot going on with customers right now and what they're thinking. Listen, at Robinson, we know we have the largest data set in the industry. We have over 85,000 customers. We see a wide variety of what customers are doing. It's a mix, Brian. Number one, we have some customers that are very strategic on how they're doing this. They're sitting back, and they want to be calm, be wise in how they're doing it. We have some customers that are somewhat reacting to some of the things that's happening. With them, they're having to do a bit of a pause because things are changing somewhat rapidly. I would call it sawtooth. A lot of customers do not like that. If you're dealing with, for example, a potential 25% tariff coming out of Mexico, we're right in the middle of all of that. We do 1 out of 10 shipments coming from Mexico to the U.S. We touch those. We move those. We've had customers, we've seen customers do this, hold a bit on some of their shipments because they don't know if a 25% tariff is going to be relieved or not. We've had to kind of deal with them in that. In the same coming from Canada in, we're a significant player when it comes to moving that product. We're dealing with those customers on that front and just kind of guiding them. It is a mix. From a pricing strategy, we've had some customers that like to be strategic. We work with them around potential price increases and have that conversation. We have others that are more transactional when it comes to pricing. We have a way of dealing with that as well through revenue management. The operating model has really helped on that. I do not know if you would add anything. You covered the short-term well, Dave. I'll just speak a little bit to the long-term. I don't think what we're coining kind of tariffs 2.0 has necessarily facilitated long-term strategies yet. I think, as Dave said, I think many customers are trying to see if this is transitory and are the tariffs going to stick, or are they just leveraged to drive some other policy for the administration. I would say if you go all the way back to pandemic, I think the customers that were strategic, the customers that used pandemic as an opportunity to get more strategic about supply chain, to build resiliency and optionality into their supply chain, I think those are the customers that are benefiting now. Because even though it's a different disruption, it's still a disruption. As Dave mentioned, I think you've got a section of customers that went through pandemic, went through some of the disruptions in the Red Sea, went through tariffs 1.0 and said, "Okay. I'm not going to be caught flat-footed on this again." They put a lot of actions in play, partnered with us on optionality going forward. I think those customers right now have optionality that others don't. As Dave mentioned, there's also a section of customers that operate more transactionally, kind of viewed pandemic as a one-time event, didn't invest a lot in strategic capability of their supply chain. Now they're kind of wondering, "What do I do?" because transactional doesn't work when you don't know what tomorrow is going to bring from a tariff perspective. As Dave mentioned, I think it's somewhat bifurcated in our customer space. I don't think long-term structural changes have occurred due to tariff 2.0. I think they really occurred from pandemic forward with all the disruptions we've incurred the last several years. Interesting. Okay. Two questions, maybe more specific on forwarding. In terms of the first one, just the de minimis exemption, we've seen it removed and then, I guess, restored. From your perspective on forwarding, would you expect an impact on maybe air freight rates and customs clearing? Did you see any volatility with people trying to get stuff over the border when that was pulled off for what, less than 24 hours? Yeah. I would say on de minimis, for us, it's not really a big deal, partly because that is really dealing with parcel. And we're really not in that business on dealing with parcel. That was really not a big deal overall for us on the de minimis changes. Certainly, it could affect some air freight if this comes down to shipping pullback when it comes to that. That is non-material for us overall as a business. Well said. Okay. The other one that might be more of a 2.0 if it goes through would just be the layers of fees that they might charge on vessels either tied to or built in for China. Big topic recently, especially at a recent conference with TPM. What are you hearing from sort of your partners in that regard? Are they preparing for that yet? Or is it still a little too early? It seems like it would be a pretty significant event if it were to go through as written, which is, of course, the big question mark if that will actually happen. Yeah. I would say carriers are starting to prepare for that just from an optionality perspective. I would say I think they're looking for ways to drive more efficiency in their port calls. I think they'll make fewer port calls and try to drive more density in each call. I think that'll help them drive efficiency to offset any of that cost pressure they may incur. I think that'll be one step they'll use to try to abate any impact that may come. I think secondly, which is really what ends up happening with tariffs anyways, is I think they'll end up passing those fees along to the shipper. Then it'll be up to the shipper on what they do with those added costs. Those are the two actions that I think are probably most front and center on the carrier's minds. We often hear about and are asked about technology in the brokerage industry. It's always difficult to figure out who has the best or leading tech from an outside perspective. If you were in all of our seats, how would you sort of address that question? That's a good question. I would actually ask the question differently if we were in a seat. This is really important. From a tech perspective, I think when you look at the amount of tech that's out there in the industry, everyone has some level of pretty good technology in what they're dealing with and helps them run the business. The key thing on that question is, how are you integrating that with your people as a strategy? For us, it's different at Robinson now. We don't lead and say our strategy is technology. Our strategy is our people enabled by our technology. We think that makes a huge difference than if you just say the technology strategy. We've kind of been there and done that. That one play doesn't work if it's just technology. You have to have this connection between this kind of human in the loop and the technology stack that we feel is the best technology in the industry, but that it's now busted up against the best logisticians in the world. That together is a really powerful combination that allows us, our unit, our operating mechanism, to run like it's running. As Damon said, and you're seeing that in 2024, this strategy has worked with an operating model that really produces. I don't know if you. Yeah. I'll only add that, as Dave mentioned, I think historically, companies in our industry, even ourselves, viewed technology as our strategy. That did not work. To us, the litmus test on do we have the best technology is, what results is it yielding? Is it giving a better customer experience? For Robinson, we believe the answer is yes. Is it giving a better carrier experience? We believe the answer is yes. Is it driving growth in our revenue? We believe the answer is yes for Robinson. Is it enabling margin expansion at the gross margin level? The answer is yes for Robinson. Lastly, is it allowing us to generate operating leverage to drive a more efficient company at the operating margin level? We believe the answer is yes. For us, technology, we have a very high bar for technology at Robinson. It goes through we had the ROI discussion before. We do not do any technology at Robinson unless it has a high probability of success and a compelling ROI. There is really no kind of pie-in-the-sky investment when it comes to technology for Robinson. Just to summarize that, I mean, our key test on do we have the best tech in the industry, as Dave mentioned, we do not think it is the tech by itself. We think it is the combination of our expert people with the tech, which we call human in the loop. We do not think the ends of that spectrum are correct. We have seen technology pure plays that did not work in the marketplace. We have seen more labor-intensive efforts. Those are proven out to be not competitive in the marketplace. We do believe that optimal combination of people and technology is the right answer for our industry. We think we've got that right formula. One of the big goals, I think, of the operating model in the next upcycle would be to decouple headcount in NAST with volume growth. Maybe working backwards from there. Obviously, you did in global forwarding already. Are there some steps or project initiatives or successes that you've already had that would give you some visibility and confidence to that happening if and when we actually get to the upcycle here? Yeah, Brian. I mean, one of the tough things and we started this conversation out by saying it's 37 months and dealing with that is we know the case that's been on Robinson is like, "Hey, listen." I always say people are from Missouri. Dave would say, "You got to show me. It's a show me state." You can't do that unless the market is back in doing that. We have been debating that and really kind of showing this group and many others, we tend to say that there's a canary in a coal mine. We actually feel like we have debunked that story to say disconnect headcount growth from volume growth because we've done it in global forwarding. That's a business that makes us unique because we get end to end. It separates us out from the competition. We know that. This is why we have to talk about it. Our operating model and how we're driving a company, how we're improving it, we take global forwarding through that same operating model. They've gone through that last year. What was the result? The result was growth every quarter, year-over-year, while costs went down and to the right. Growth up and to the right. Costs went down and to the right. Headcount was reduced. If we had not done that, we would have added people and had higher expenses within global forwarding, period. You go over and say, "For NAST, we feel that's going to be even a stronger play." Why? We have a deeper technology stack within NAST that we have not yet put into global forwarding, but coming. We have processes in place in NAST that we've driven. I think we've talked about our productivity, 15% in 2023, 15% we achieved in 2024, kind of a CAGR of over 30% of productivity. Now when the market returns, we feel like that case is already here that you should have confidence that we're going to actually do that within the NAST space. It'll actually be in probably even a more aggressive way than you saw in global forwarding because of how we're set up in that. I feel super bullish on where we are. I feel like we've debunked that. I understand, again, the market isn't here in NAST. Just look at what we've done in global forwarding. Yeah. Could I add to that? Because this is a topic Dave and I are extremely passionate about. Just a few more specifics on what global forwarding actually did in 2024. We grew revenue year-over-year in 2024 while reducing headcount 10%, while generating more than 15% productivity. That is the bare thesis debunked for global forwarding. As Dave mentioned, all of those operating cadences, all the discipline, all the rigor that allow those results to be generated for global forwarding are in place for our NAST business. I would argue, from a technology perspective, we've over-indexed to NAST. We have a better technology stack in NAST than we do in global forwarding, which is just going to further enable that probability of success going forward. The one thing we keep driving home is there are two things that will prevent us from adding headcount back from a NAST perspective when the market recovers. The first one is we have fundamentally changed those processes. Those processes now do not require the same amount of headcount that they did before. The process itself fundamentally changed. Continuing to follow that process, there would be no reason to add back headcount. It would actually be adverse to the process we have in place. There is no driver to add headcount back in many areas of processes within Robinson because we have fundamentally changed those processes through automation, through lean techniques, through efficiency. We think that is of key importance. The other one is our operating model gives us visibility to what we are doing. There will not be a surprise that said, "Oops, we added back headcount. We did not know it. Our operating model does not allow that. We will see the early indications of that through the operating model process. We will certainly receive the results of that through the operating model process. There will not be a situation where we are not on top of headcount versus volume on the NAST perspective. Dave and I are both extremely confident that you will see similar results, if not better. In fact, I would argue you will see better results on the NAST side as we have demonstrated on global forwarding in 2024. Yeah. Just one last point on this, Brian, is I always like to say yesterday and today. It's fair for all of you to do that because we do it to ourselves. Where was the company yesterday? Where is it today? Why is it fundamentally different? If you go back to 2018, 2019, there's a fundamental, as Damon said, structural difference. This is really important that I've been telling to a lot of people as I talk to them. There's a fundamental structural difference of where the company was. We call it a term called evergreen productivity within Robinson. Evergreen productivity means it's forever. We do not give it back because you structurally change the company. We have achieved this evergreen productivity in global forwarding and NAST. That's not a clawback. That will not go away. When the market comes back, you've got these things built in. Our digital bookings and our digital transactions within the company. You go back to 2018, 2019, it was less than 5% and pretty clunky on dealing with that. Now, fast forward to today, we're north of 50%-55% in a number of different things. That doesn't go away when the market comes back. We feel like it's some of the best in the industry. There's just a structural difference. At our scale, that makes it a game changer. Especially how we're leaning in with large language models, which has really, really changed at our data set. All right. Appreciate that. Try to squeeze in two last quick ones here. First one on cargo theft. We hear about it more in the news. We hear about it more from shippers. It is not just being reported more. They are definitely more concerned about it. It is obviously an industry supply chain challenge. How does that affect Robinson? What are sort of the conversations and concerns you hear from your shippers? Yes. Good question. I'll start with this. We've been focused on this for almost 18 months. Actually, it was part of the diagnosis coming in and looking at that. We have a great team, an awesome team that is really on this. The outputs, this is a key part of the operating model. It was on our enterprise score sheet. We looked at this. We tracked it. The team just did a wonderful job at producing results here. I mean, take for example, our truckload cargo theft would be really we have almost zero theft in truckload. We're at 99.99% successful on that. Our customers can feel very confident when they use our service and that we do that. We've also taken a leadership role in this. We lead up a consortium of some really big names out there and a number of different companies that actually are working with Robinson and seeing some of the things we're doing and actually helping with this consortium. We have also partnered with Highway as well when it comes to this. We put a lot of work and effort into driving this. I think the benefit has showed up in the numbers. This is no hubris. We always knock on wood. We always have a bit of paranoia around this and always trying to improve when it comes to fraud and theft in cargo. It's a big industry. We're doing pretty good about it. I don't know if you'd add anything on that. No. I would say, look, certainly, as Dave mentioned, our theft-free rate from a load perspective, it rounds to 100%. But we do a lot of loads, as you guys know. There is still opportunity to reduce the dollar impact. We made significant process improvements in 2024 to yield that benefit. It has been a big focus for us. I would say in many areas, we are probably close to leading the industry on some of our practices there. I think the partnerships that we have developed, one with Highway, just continue to safeguard our network as well. It is an area that the rate can be a little misleading because we do so many loads. It says, "Hey, there is not much of an opportunity." We would argue, from a lean mindset, every bit of leakage is an opportunity. It is certainly a focus of ours. That's right. Maybe to wrap up with just some thoughts on how to look at normalized earnings power through whatever normal cycle is that being in the future. Maybe just to use the investor day framework, is that a good way to look at 2026 forecast or your projections? Is that a good proxy for normalized earnings power when you think about all the changes in the processes and the operating model that you've driven over the last 18 months or so? Yeah. What I would reiterate is we've committed externally that at mid-cycle, our NAST business will generate 40% operating margins. Our global forwarding business will generate 30% operating margins. The enterprise will generate mid-30% operating margins at mid-cycle. That's what committed to externally. We reiterated that in investor day. From a specifics perspective, for versus 2023, which was the baseline we used, we're going to generate between $350 million-$450 million of incremental operating income 2026 versus 2023. One of the assumptions in that construct, of course, is truckload spot rate, which we've assumed will go back to levels of, say, 2019. If you look at 2019, we would consider 2019 rates to be slightly above mid-cycle. Using truckload and NAST as kind of a proxy there, we would say we'll be within the range of mid-cycle with what we've communicated for 2026, assuming the market backdrop has the same composition that a normal mid-cycle would have. I'd say we'd be in a pretty tight range to mid-cycle with our 2026 guide. Okay. We are out of time. That is a good place to wrap up anyway. Dave, Damon, thank you very much for joining us today. Really appreciate it. Yeah. Thanks, Brian. Thank you. Thanks for having us. Appreciate it.

Speaker 3: All right, good morning, everybody. Thanks for joining us here on the first day, first presentation of the JPMorgan Industrials Conference and the Transportation Track. I'm Brian Ossenbeck, I cover transports for JPMorgan. Very happy to start off with CSX. We have Sean Pelkey here, the CFO, Matt Korn, Head of IR and Strategy in the room as well. All right, good morning, everybody. all right good morning everybody Thanks for joining us here on the first day, first presentation of the JPMorgan Industrials Conference and the Transportation Track. thanks for joining us here on the first day first presentation of the jpmorgan industrials conference and the transportation track I'm Brian Ossenbeck, I cover transports for JPMorgan. i'm brian ossenbeck i cover transports for jpmorgan Very happy to start off with CSX. very happy to start off with csx We have Sean Pelkey here, the CFO, Matt Korn, Head of IR and Strategy in the room as well. we have sean pelkey here the cfo matt korn head of ir and strategy in the room as well We're going to pass it over to Sean. He's got a few slides that I believe are posted. He's going to give us a little bit of intro, then we'll jump into Q&A. If you've got any questions in the room, we should have a few mics here as well. Guys, thanks very much coming and kicking us off here. Sean, turn it over to you. We're going to pass it over to Sean. we're going to pass it over to sean He's got a few slides that I believe are posted. he's got a few slides that i believe are posted He's going to give us a little bit of intro, then we'll jump into Q&A. he's going to give us a little bit of intro then we'll jump into q&a If you've got any questions in the room, we should have a few mics here as well. if you've got any questions in the room we should have a few mics here as well Guys, thanks very much coming and kicking us off here. guys thanks very much coming and kicking us off here Sean, turn it over to you. sean turn it over to you

Speaker 5: Thanks, Brian, and appreciate you guys having us here so early, but happy to kick things off. What I wanted to do is just kind of give you a sense of how the year's been trending so far, a couple of months in for CSX. Before I get into those details, of course, we've got our forward-looking disclosures related to any comments I'll make during the presentation. Thanks, Brian, and appreciate you guys having us here so early, but happy to kick things off. thanks brian and appreciate you guys having us here so early but happy to kick things off What I wanted to do is just kind of give you a sense of how the year's been trending so far, a couple of months in for CSX. what i wanted to do is just kind of give you a sense of how the year's been trending so far a couple of months in for csx Before I get into those details, of course, we've got our forward-looking disclosures related to any comments I'll make during the presentation. before i get into those details of course we've got our forward-looking disclosures related to any comments i'll make during the presentation On slide three here, if we look sort of how January and February trended relative to normal historical averages, what we've got there in those blue ranges is January and February volume relative to the Q4 average volume, the range that we've seen over the last nine years. The little diamond shows you where we fell in 2025. The gray shaded area gives you a sense of what the mean has been over that time frame. On slide three here, if we look sort of how January and February trended relative to normal historical averages, what we've got there in those blue ranges is January and February volume relative to the Q4 average volume, the range that we've seen over the last nine years. on slide three here if we look sort of how january and february trended relative to normal historical averages what we've got there in those blue ranges is january and february volume relative to the q4 average volume the range that we've seen over the last nine years The little diamond shows you where we fell in 2025. the little diamond shows you where we fell in 2025 The gray shaded area gives you a sense of what the mean has been over that time frame. the gray shaded area gives you a sense of what the mean has been over that time frame Coming out of the gates in January, you can see actually held up okay, even though we navigated through some difficult weather. The market that was off the most in January was auto. We saw production get off to a very slow start. Inventories were high going into the new year. Coal was off a little bit as well, mainly both producer issues as well as weather. In total, volumes were about what we would have expected in terms of normal seasonality. Coming out of the gates in January, you can see actually held up okay, even though we navigated through some difficult weather. coming out of the gates in january you can see actually held up okay even though we navigated through some difficult weather The market that was off the most in January was auto. the market that was off the most in january was auto We saw production get off to a very slow start. we saw production get off to a very slow start Inventories were high going into the new year. inventories were high going into the new year Coal was off a little bit as well, mainly both producer issues as well as weather. coal was off a little bit as well mainly both producer issues as well as weather In total, volumes were about what we would have expected in terms of normal seasonality. in total volumes were about what we would have expected in terms of normal seasonality Similar story in February, I would say the one big difference, of course, being the auto market did recover in February. I would say the weather had more significant impacts in merchandise. Through both months, intermodal was a little higher than normal seasonality, which was nice to see. Hard to say how much of that might be pulled forward from tariff impacts and whatnot. Similar story in February, I would say the one big difference, of course, being the auto market did recover in February. similar story in february i would say the one big difference of course being the auto market did recover in february I would say the weather had more significant impacts in merchandise. i would say the weather had more significant impacts in merchandise Through both months, intermodal was a little higher than normal seasonality, which was nice to see. through both months intermodal was a little higher than normal seasonality which was nice to see Hard to say how much of that might be pulled forward from tariff impacts and whatnot. hard to say how much of that might be pulled forward from tariff impacts and whatnot The other thing I would say here is that even though total volumes were in line with what we would have normally expected on a seasonal trend basis, they were not what we coming into the year. We are a little bit off our own plan through January and February. March, of course, is a really important month. We are a little over a week and a half into March, and we are actually trending fairly well in March, pretty close to what we would have expected across the board. The other thing I would say here is that even though total volumes were in line with what we would have normally expected on a seasonal trend basis, they were not what we coming into the year. the other thing i would say here is that even though total volumes were in line with what we would have normally expected on a seasonal trend basis they were not what we coming into the year We are a little bit off our own plan through January and February. we are a little bit off our own plan through january and february March, of course, is a really important month. We are a little over a week and a half into March, and we are actually trending fairly well in March, pretty close to what we would have expected across the board. march of course is a really important month. we are a little over a week and a half into march and we are actually trending fairly well in march pretty close to what we would have expected across the board When we get into the details kind of around individual markets, I will not go through every single one of those. Like I said, intermodal is off to a pretty good start, both on the domestic as well as the international side for different reasons, but both are up more than 2% on a year-to-date basis. Ag is up as well. When we get into the details kind of around individual markets, I will not go through every single one of those. when we get into the details kind of around individual markets i will not go through every single one of those Like I said, intermodal is off to a pretty good start, both on the domestic as well as the international side for different reasons, but both are up more than 2% on a year-to-date basis. like i said intermodal is off to a pretty good start both on the domestic as well as the international side for different reasons but both are up more than 2% on a year-to-date basis Ag is up as well. ag is up as well That's really been driven by demand for feed grain. Export has been a headwind and some of the other markets within ag, but overall ag's been good. Auto was off to a slow start. It has picked back up. Domestic and export coal, I would say going into the year, we thought export coal would grow. That's really been driven by demand for feed grain. that's really been driven by demand for feed grain Export has been a headwind and some of the other markets within ag, but overall ag's been good. export has been a headwind and some of the other markets within ag but overall ag's been good Auto was off to a slow start. auto was off to a slow start It has picked back up. it has picked back up Domestic and export coal, I would say going into the year, we thought export coal would grow. domestic and export coal i would say going into the year we thought export coal would grow Domestic coal would be down. Still expect overall coal to be down, I should say. Domestic with some plant closures. Export with some production issues that'll linger here through the first half. Metals is one that's down year-over-year. We're cycling some comps from last year that will start to fade. I actually think metals may have a little bit of momentum given the tariff trade. Domestic coal would be down. domestic coal would be down Still expect overall coal to be down, I should say. still expect overall coal to be down i should say Domestic with some plant closures. domestic with some plant closures Export with some production issues that'll linger here through the first half. export with some production issues that'll linger here through the first half Metals is one that's down year-over-year. metals is one that's down year-over-year We're cycling some comps from last year that will start to fade. we're cycling some comps from last year that will start to fade I actually think metals may have a little bit of momentum given the tariff trade. i actually think metals may have a little bit of momentum given the tariff trade Now, you get off to a relatively slow start, and you start questioning and saying, "Hey, what do we have built in in terms of productivity initiatives? How do we make sure that we're managing our costs well while also leaving the door open to capture growth as the markets begin to normalize, hopefully later into the year, in particular the truckload market?" Mike Cory's been with us now for a year and a half. Now, you get off to a relatively slow start, and you start questioning and saying, "Hey, what do we have built in in terms of productivity initiatives? now you get off to a relatively slow start and you start questioning and saying "hey what do we have built in in terms of productivity initiatives How do we make sure that we're managing our costs well while also leaving the door open to capture growth as the markets begin to normalize, hopefully later into the year, in particular the truckload market?" Mike Cory's been with us now for a year and a half. how do we make sure that we're managing our costs well while also leaving the door open to capture growth as the markets begin to normalize hopefully later into the year in particular the truckload market?" mike cory's been with us now for a year and a half He has brought in a fresh perspective. He's brought in some leaders that he's worked with across the industry for a number of years and worked very closely with my finance team to go through line by line every single one of the budgets within the operating departments. He has brought in a fresh perspective. he has brought in a fresh perspective He's brought in some leaders that he's worked with across the industry for a number of years and worked very closely with my finance team to go through line by line every single one of the budgets within the operating departments. he's brought in some leaders that he's worked with across the industry for a number of years and worked very closely with my finance team to go through line by line every single one of the budgets within the operating departments I would say where Mike has brought a tremendous amount of value is envisioning what the idealized train plan looks like that achieves that balance of cost efficiency as well as service to the customer. If you look at kind of where our service metrics have been, the one that has been as stable as it can be is our delivery of service to the customer, which has been right around 95%, plus or minus a couple percentage points. I would say where Mike has brought a tremendous amount of value is envisioning what the idealized train plan looks like that achieves that balance of cost efficiency as well as service to the customer. i would say where mike has brought a tremendous amount of value is envisioning what the idealized train plan looks like that achieves that balance of cost efficiency as well as service to the customer If you look at kind of where our service metrics have been, the one that has been as stable as it can be is our delivery of service to the customer, which has been right around 95%, plus or minus a couple percentage points. if you look at kind of where our service metrics have been the one that has been as stable as it can be is our delivery of service to the customer which has been right around 95% plus or minus a couple percentage points We've done that while making significant reductions to the number of road starts that we're running. Part of that is volume with coal volumes down, but there's a significant amount of re-engineering of the network. The Cumberland Yard, which we can talk about later, has been a big driver of that. You can see there are about 1,000 fewer crew starts a week. We've done that while making significant reductions to the number of road starts that we're running. we've done that while making significant reductions to the number of road starts that we're running Part of that is volume with coal volumes down, but there's a significant amount of re-engineering of the network. part of that is volume with coal volumes down but there's a significant amount of re-engineering of the network The Cumberland Yard, which we can talk about later, has been a big driver of that. the cumberland yard which we can talk about later has been a big driver of that You can see there are about 1,000 fewer crew starts a week. you can see there are about 1,000 fewer crew starts a week Just to give you some perspective, that's around $1 million a week that we're saving there. On the right-hand side, the costs that we can manage kind of most directly are the purchase services costs. If you look at how well CSX has done over the last two years on that line item, we've been able to offset all of our inflation and essentially hold those costs flat on a two-year basis. Just to give you some perspective, that's around $1 million a week that we're saving there. just to give you some perspective that's around $1 million a week that we're saving there On the right-hand side, the costs that we can manage kind of most directly are the purchase services costs. on the right-hand side the costs that we can manage kind of most directly are the purchase services costs If you look at how well CSX has done over the last two years on that line item, we've been able to offset all of our inflation and essentially hold those costs flat on a two-year basis. if you look at how well csx has done over the last two years on that line item we've been able to offset all of our inflation and essentially hold those costs flat on a two-year basis There are a lot of initiatives that go into that. Certainly, keeping a very close eye on locomotive utilization and productivity is an important driver there. We last month hit our highest horsepower per trailing ton that we've seen since 2016. Definitely headed in the right direction there and more initiatives to come. There are a lot of initiatives that go into that. there are a lot of initiatives that go into that Certainly, keeping a very close eye on locomotive utilization and productivity is an important driver there. certainly keeping a very close eye on locomotive utilization and productivity is an important driver there We last month hit our highest horsepower per trailing ton that we've seen since 2016. we last month hit our highest horsepower per trailing ton that we've seen since 2016 Definitely headed in the right direction there and more initiatives to come. definitely headed in the right direction there and more initiatives to come I did also want to take a moment just to talk about Howard Street because it's a significant project that just began in earnest February 1st. When we originally started talking about Howard Street, I mean, I should say we've been talking about Howard Street my entire career, 20 years. And forever it was, "Howard Street is the bottleneck in the network. It will never be fixed." I did also want to take a moment just to talk about Howard Street because it's a significant project that just began in earnest February 1st. i did also want to take a moment just to talk about howard street because it's a significant project that just began in earnest february 1st When we originally started talking about Howard Street, I mean, I should say we've been talking about Howard Street my entire career, 20 years. when we originally started talking about howard street i mean i should say we've been talking about howard street my entire career 20 years And forever it was, "Howard Street is the bottleneck in the network. and forever it was "howard street is the bottleneck in the network It will never be fixed." it will never be fixed." Five or six years ago, we started to envision a world where we could double-stack clear the Howard Street Tunnel, which would open up the New England area in the Northeast to us to be able to double-stack and create tremendous capacity for CSX. The problem was to think about shutting down that tunnel for an extended period of time would have significant customer disruption, and we didn't see a way of being able to do it. Five or six years ago, we started to envision a world where we could double-stack clear the Howard Street Tunnel, which would open up the New England area in the Northeast to us to be able to double-stack and create tremendous capacity for CSX. five or six years ago we started to envision a world where we could double-stack clear the howard street tunnel which would open up the new england area in the northeast to us to be able to double-stack and create tremendous capacity for csx The problem was to think about shutting down that tunnel for an extended period of time would have significant customer disruption, and we didn't see a way of being able to do it. the problem was to think about shutting down that tunnel for an extended period of time would have significant customer disruption and we didn't see a way of being able to do it What we were going to do was do a three-year plan where we would run trains for 12 hours a day, and the other 12 hours, the team would come in, they would basically pick up a 12-foot section of track, take it out. If you see that crane with that giant piece of concrete, they would lay that in, which would go under where the existing ballast and track was. What we were going to do was do a three-year plan where we would run trains for 12 hours a day, and the other 12 hours, the team would come in, they would basically pick up a 12-foot section of track, take it out. what we were going to do was do a three-year plan where we would run trains for 12 hours a day and the other 12 hours the team would come in they would basically pick up a 12-foot section of track take it out If you see that crane with that giant piece of concrete, they would lay that in, which would go under where the existing ballast and track was. if you see that crane with that giant piece of concrete they would lay that in which would go under where the existing ballast and track was They would lay the ballast and track back on, do all of that within a 12-hour period, start running trains again, and repeat every single day for three years. When Mike came in, he challenged the team to find a way to do a full shutdown of the tunnel, knowing that that kind of disruption was going to be probably more impactful to the customer for three years, and there were things that were going to go wrong. They would lay the ballast and track back on, do all of that within a 12-hour period, start running trains again, and repeat every single day for three years. they would lay the ballast and track back on do all of that within a 12-hour period start running trains again and repeat every single day for three years When Mike came in, he challenged the team to find a way to do a full shutdown of the tunnel, knowing that that kind of disruption was going to be probably more impactful to the customer for three years, and there were things that were going to go wrong. when mike came in he challenged the team to find a way to do a full shutdown of the tunnel knowing that that kind of disruption was going to be probably more impactful to the customer for three years and there were things that were going to go wrong There were going to be days when we just were not able to get the track time. We came up with a plan to do this in 6 months-8 months with a full shutdown. Part of that plan included the redesign of the Cumberland Yard that Mike talked about at our investor day last year, which is now complete and has almost doubled the processing capacity of that yard, taking a lot of the pressure out of that Baltimore area and allowing us to reroute a significant number of trains around the tunnel. There were going to be days when we just were not able to get the track time. there were going to be days when we just were not able to get the track time We came up with a plan to do this in 6 months-8 months with a full shutdown. we came up with a plan to do this in 6 months-8 months with a full shutdown Part of that plan included the redesign of the Cumberland Yard that Mike talked about at our investor day last year, which is now complete and has almost doubled the processing capacity of that yard, taking a lot of the pressure out of that Baltimore area and allowing us to reroute a significant number of trains around the tunnel. part of that plan included the redesign of the cumberland yard that mike talked about at our investor day last year which is now complete and has almost doubled the processing capacity of that yard taking a lot of the pressure out of that baltimore area and allowing us to reroute a significant number of trains around the tunnel In fact, 10% of our trains would have run through that tunnel. They are being rerouted today, about 15% when you include what we are doing on the Blue Ridge. It is a big project. It is about $500 million. CSX's commitment is about $140 million. In fact, 10% of our trains would have run through that tunnel. They are being rerouted today, about 15% when you include what we are doing on the Blue Ridge. It is a big project. It is about $500 million. in fact 10% of our trains would have run through that tunnel. they are being rerouted today about 15% when you include what we are doing on the blue ridge. it is a big project. it is about $500 million CSX's commitment is about $140 million. csx's commitment is about $140 million The other $360 million is funded through partnerships with federal and state and local governments. In fact, CSX's capital, we've already spent about half of it even before beginning construction in earnest in terms of clearance work that's been done around the tunnel. We're getting closer and closer to the finish line as we speak. The other $360 million is funded through partnerships with federal and state and local governments. the other $360 million is funded through partnerships with federal and state and local governments In fact, CSX's capital, we've already spent about half of it even before beginning construction in earnest in terms of clearance work that's been done around the tunnel. in fact csx's capital we've already spent about half of it even before beginning construction in earnest in terms of clearance work that's been done around the tunnel We're getting closer and closer to the finish line as we speak. we're getting closer and closer to the finish line as we speak What it'll do for us really is kind of open up, my arrows aren't on the screen, but hopefully they're on the slide on the website. There's some nice arrows that show you the flows and everything. Basically, the punchline is the merchandise traffic is going to go across from Willard directly to Baltimore, given the work that we've done at Cumberland. The intermodal trains are going to have a faster high-speed route through New England and down into Philadelphia and Baltimore. What it'll do for us really is kind of open up, my arrows aren't on the screen, but hopefully they're on the slide on the website. what it'll do for us really is kind of open up my arrows aren't on the screen but hopefully they're on the slide on the website There's some nice arrows that show you the flows and everything. there's some nice arrows that show you the flows and everything Basically, the punchline is the merchandise traffic is going to go across from Willard directly to Baltimore, given the work that we've done at Cumberland. basically the punchline is the merchandise traffic is going to go across from willard directly to baltimore given the work that we've done at cumberland The intermodal trains are going to have a faster high-speed route through New England and down into Philadelphia and Baltimore. the intermodal trains are going to have a faster high-speed route through new england and down into philadelphia and baltimore What that does for us, it allows us to consolidate trains, reduce crew starts, reduce costs on crews and locomotives. It also allows us to grow into the opportunity, into the capacity. We've got, we think, an opportunity to increase intermodal volume anywhere from 75,000 loads-125,000 loads once the project is complete. Very, very significant benefits. We will start to see that at the end of this year going into 2026. What that does for us, it allows us to consolidate trains, reduce crew starts, reduce costs on crews and locomotives. what that does for us it allows us to consolidate trains reduce crew starts reduce costs on crews and locomotives It also allows us to grow into the opportunity, into the capacity. it also allows us to grow into the opportunity into the capacity We've got, we think, an opportunity to increase intermodal volume anywhere from 75,000 loads-125,000 loads once the project is complete. we've got we think an opportunity to increase intermodal volume anywhere from 75,000 loads-125,000 loads once the project is complete Very, very significant benefits. very very significant benefits We will start to see that at the end of this year going into 2026. we will start to see that at the end of this year going into 2026

Speaker 3: Okay. Thanks very much. Do not know what happened to the arrows there, but I think we can envision it nonetheless. A lot of good detail to start off, Sean. I think just to focus a little bit more on the near term for the time being. You have the $350 million headwind that you laid out on the last earnings call. Okay. okay Thanks very much. Do not know what happened to the arrows there, but I think we can envision it nonetheless. thanks very much. do not know what happened to the arrows there but i think we can envision it nonetheless A lot of good detail to start off, Sean. a lot of good detail to start off sean I think just to focus a little bit more on the near term for the time being. i think just to focus a little bit more on the near term for the time being You have the $350 million headwind that you laid out on the last earnings call. you have the $350 million headwind that you laid out on the last earnings call We are pretty clear about what that meant, but obviously it has been a tough start for the network and for the industry on a weather basis as well here. Any more specific thoughts you can offer, at least how the year has started, particularly the first quarter, which we know is always tough for the rail industry, but specifically to you guys here. We are pretty clear about what that meant, but obviously it has been a tough start for the network and for the industry on a weather basis as well here. we are pretty clear about what that meant but obviously it has been a tough start for the network and for the industry on a weather basis as well here Any more specific thoughts you can offer, at least how the year has started, particularly the first quarter, which we know is always tough for the rail industry, but specifically to you guys here. any more specific thoughts you can offer at least how the year has started particularly the first quarter which we know is always tough for the rail industry but specifically to you guys here

Speaker 5: Yeah, one of the things we said on the January call is that Q1 was going to be trough earnings for us. I think that's still what we have line of sight to. In terms of the $350 million of headwinds, that's primarily related to export coal price and fuel price, as well as roughly $10 million a month of costs associated with network disruptions as we shut down the Howard Street Tunnel and reroute around the Blue Ridge as that reconstruction takes place. Yeah, one of the things we said on the January call is that Q1 was going to be trough earnings for us. yeah one of the things we said on the january call is that q1 was going to be trough earnings for us I think that's still what we have line of sight to. i think that's still what we have line of sight to In terms of the $350 million of headwinds, that's primarily related to export coal price and fuel price, as well as roughly $10 million a month of costs associated with network disruptions as we shut down the Howard Street Tunnel and reroute around the Blue Ridge as that reconstruction takes place. in terms of the $350 million of headwinds that's primarily related to export coal price and fuel price as well as roughly $10 million a month of costs associated with network disruptions as we shut down the howard street tunnel and reroute around the blue ridge as that reconstruction takes place That number is similar to what it was going into the year. Met coal prices have been fairly steady, down a little bit, but I would say we expect a little bit of recovery from where we are right now over the balance of the year. No change to that per se. That number is similar to what it was going into the year. that number is similar to what it was going into the year Met coal prices have been fairly steady, down a little bit, but I would say we expect a little bit of recovery from where we are right now over the balance of the year. met coal prices have been fairly steady down a little bit but i would say we expect a little bit of recovery from where we are right now over the balance of the year No change to that per se. no change to that per se On the volume side, off to a little bit of a slower start than we expected in January and February. March is holding in okay. Not really ready to kind of change anything in terms of the full year guide. Still expect low to mid-single-digit volume growth in total. On the volume side, off to a little bit of a slower start than we expected in January and February. on the volume side off to a little bit of a slower start than we expected in january and february March is holding in okay. march is holding in okay Not really ready to kind of change anything in terms of the full year guide. not really ready to kind of change anything in terms of the full year guide Still expect low to mid-single-digit volume growth in total. still expect low to mid-single-digit volume growth in total

Speaker 3: When we talk about all the uncertainty that's out there from the tariff headlines, I mean, I don't know if any have come across this morning as we're speaking, but it's hard for the network and for customers to adapt to that. What have your conversations been with folks as you've gone through this the first couple of months of the year? When we talk about all the uncertainty that's out there from the tariff headlines, I mean, I don't know if any have come across this morning as we're speaking, but it's hard for the network and for customers to adapt to that. when we talk about all the uncertainty that's out there from the tariff headlines i mean i don't know if any have come across this morning as we're speaking but it's hard for the network and for customers to adapt to that What have your conversations been with folks as you've gone through this the first couple of months of the year? what have your conversations been with folks as you've gone through this the first couple of months of the year You had the slide with autos having a little bit of volatility off to a slow start in the January timeframe. Was that related to kind of the stop and start of the tariffs? I'd love to hear just how you and Mike are planning with the customers to adjust to that because it's a bit of a whiplash. You had the slide with autos having a little bit of volatility off to a slow start in the January timeframe. you had the slide with autos having a little bit of volatility off to a slow start in the january timeframe Was that related to kind of the stop and start of the tariffs? was that related to kind of the stop and start of the tariffs I'd love to hear just how you and Mike are planning with the customers to adjust to that because it's a bit of a whiplash. i'd love to hear just how you and mike are planning with the customers to adjust to that because it's a bit of a whiplash

Speaker 5: Yeah. Let me start more broadly, and then we can talk about auto. Just overall, in terms of tone around tariffs, I think all of the customers are saying something similar, which is we're watching this very closely. We're very curious about what happens. We're trying to make contingency plans. In terms of the actions that are being taken to date and how it's impacting our volumes year-to-date, I don't think we're seeing anything all that significant. Yeah. yeah Let me start more broadly, and then we can talk about auto. let me start more broadly and then we can talk about auto Just overall, in terms of tone around tariffs, I think all of the customers are saying something similar, which is we're watching this very closely. just overall in terms of tone around tariffs i think all of the customers are saying something similar, which is we're watching this very closely We're very curious about what happens. we're very curious about what happens We're trying to make contingency plans. we're trying to make contingency plans In terms of the actions that are being taken to date and how it's impacting our volumes year-to-date, I don't think we're seeing anything all that significant. in terms of the actions that are being taken to date and how it's impacting our volumes year-to-date i don't think we're seeing anything all that significant You could debate maybe there's a little bit of pull forward on the intermodal side. There are isolated examples of fertilizer from Canada that isn't moving today that was previously because of the potential threat of tariffs. We're not talking about big numbers, big dollars right now. I think those impacts will be felt if and when certain tariffs go into effect. You could debate maybe there's a little bit of pull forward on the intermodal side. you could debate maybe there's a little bit of pull forward on the intermodal side There are isolated examples of fertilizer from Canada that isn't moving today that was previously because of the potential threat of tariffs. there are isolated examples of fertilizer from canada that isn't moving today that was previously because of the potential threat of tariffs We're not talking about big numbers, big dollars right now. we're not talking about big numbers big dollars right now I think those impacts will be felt if and when certain tariffs go into effect. i think those impacts will be felt if and when certain tariffs go into effect We have markets that could benefit as well when you think about metals in particular. We saw that back in 2018, a positive uplift in terms of domestic metals production that favored CSX. There is capacity to ramp up production in the metal space. There are some positives as well. In terms of autos, I do not think January had anything to do with tariffs. We have markets that could benefit as well when you think about metals in particular. we have markets that could benefit as well when you think about metals in particular We saw that back in 2018, a positive uplift in terms of domestic metals production that favored CSX. we saw that back in 2018 a positive uplift in terms of domestic metals production that favored csx There is capacity to ramp up production in the metal space. there is capacity to ramp up production in the metal space There are some positives as well. there are some positives as well In terms of autos, I do not think January had anything to do with tariffs. in terms of autos i do not think january had anything to do with tariffs I think it was largely a little bit too much inventory on the ground going into the year, retooling of plants that took a little longer shutdowns than they normally would have. When we think about the network impacts and how we managed through that, I think talking to Mike about this, I think it is something they keep an eye on every single day. I think it was largely a little bit too much inventory on the ground going into the year, retooling of plants that took a little longer shutdowns than they normally would have. i think it was largely a little bit too much inventory on the ground going into the year retooling of plants that took a little longer shutdowns than they normally would have When we think about the network impacts and how we managed through that, I think talking to Mike about this, I think it is something they keep an eye on every single day. when we think about the network impacts and how we managed through that i think talking to mike about this i think it is something they keep an eye on every single day As changes occur, and we've had a couple of fits and starts with auto tariffs on, off, on, off, the team's been at the ready. They adjust the train start plan daily based on what's happening. We can reduce starts very, very quickly. We get immediate benefits from that because unlike other crafts in other areas of the company, when we don't run trains, the crews don't get paid. As changes occur, and we've had a couple of fits and starts with auto tariffs on, off, on, off, the team's been at the ready. as changes occur and we've had a couple of fits and starts with auto tariffs on off on off the team's been at the ready They adjust the train start plan daily based on what's happening. they adjust the train start plan daily based on what's happening We can reduce starts very, very quickly. we can reduce starts very very quickly We get immediate benefits from that because unlike other crafts in other areas of the company, when we don't run trains, the crews don't get paid. we get immediate benefits from that because unlike other crafts in other areas of the company when we don't run trains the crews don't get paid There are benefits. There are carrying costs, of course, of having those crews. The network is flexible enough to be able to adjust the train plan on a daily basis. You think about that road crew start slide that I showed, that didn't all happen in a day. That was going in and making plan changes gradually over a period of months to see how the network would react. There are benefits. there are benefits There are carrying costs, of course, of having those crews. there are carrying costs of course of having those crews The network is flexible enough to be able to adjust the train plan on a daily basis. the network is flexible enough to be able to adjust the train plan on a daily basis You think about that road crew start slide that I showed, that didn't all happen in a day. you think about that road crew start slide that i showed that didn't all happen in a day That was going in and making plan changes gradually over a period of months to see how the network would react. that was going in and making plan changes gradually over a period of months to see how the network would react Are we able to still make our connections? There are areas where we've unwound some of the changes that we've made to be adaptable and make sure that the customer is receiving the level of service that we would want them to receive. Are we able to still make our connections? are we able to still make our connections There are areas where we've unwound some of the changes that we've made to be adaptable and make sure that the customer is receiving the level of service that we would want them to receive. there are areas where we've unwound some of the changes that we've made to be adaptable and make sure that the customer is receiving the level of service that we would want them to receive

Speaker 3: When you think about the commodities and markets that could be exposed to the tariffs as they're written, which is a big if, how that changes or if it changes, what are some of the ones you're more focused on? You mentioned metals, potentially a bit of an uplift. When you think about the commodities and markets that could be exposed to the tariffs as they're written, which is a big if, how that changes or if it changes, what are some of the ones you're more focused on? when you think about the commodities and markets that could be exposed to the tariffs as they're written which is a big if how that changes or if it changes what are some of the ones you're more focused on You mentioned metals, potentially a bit of an uplift. you mentioned metals potentially a bit of an uplift What are some of the top five ones that you're focused on? I would imagine maybe a little bit of a concern from a retaliatory perspective on China for maybe export ag and coal. What are the ones that I guess you and Kevin are focused on from a market perspective? What are some of the top five ones that you're focused on? what are some of the top five ones that you're focused on I would imagine maybe a little bit of a concern from a retaliatory perspective on China for maybe export ag and coal. i would imagine maybe a little bit of a concern from a retaliatory perspective on china for maybe export ag and coal What are the ones that I guess you and Kevin are focused on from a market perspective? what are the ones that i guess you and kevin are focused on from a market perspective

Speaker 5: Yeah, if we start with China, we really don't have any export grain exposure to China per se. Most of the grain that we export goes to South America. In fact, our export grain is a very small percentage of our total ag and food volumes and has already been impacted by a strong Brazilian crop. Our export ag is down quite a bit to start the year and probably expect it to be. Yeah, if we start with China, we really don't have any export grain exposure to China per se. yeah if we start with china we really don't have any export grain exposure to china per se Most of the grain that we export goes to South America. most of the grain that we export goes to south america In fact, our export grain is a very small percentage of our total ag and food volumes and has already been impacted by a strong Brazilian crop. in fact our export grain is a very small percentage of our total ag and food volumes and has already been impacted by a strong brazilian crop Our export ag is down quite a bit to start the year and probably expect it to be. our export ag is down quite a bit to start the year and probably expect it to be Again, it's not a significant part of what we do. Much, much bigger for the Western roads. In terms of exposure to export coal, it's a very small portion of our export coal that does go to China. There is some percentage that does that could be impacted. I think the expectation is if we see that happen and U.S. tons are not going to China, there will be a displacement effect. Again, it's not a significant part of what we do. again it's not a significant part of what we do Much, much bigger for the Western roads. much much bigger for the western roads In terms of exposure to export coal, it's a very small portion of our export coal that does go to China. in terms of exposure to export coal it's a very small portion of our export coal that does go to china There is some percentage that does that could be impacted. there is some percentage that does that could be impacted I think the expectation is if we see that happen and U.S. tons are not going to China, there will be a displacement effect. i think the expectation is if we see that happen and u.s tons are not going to china there will be a displacement effect The amount of demand for export coal out of the U.S. should remain fairly constant and will just change destination. We may have more that goes to India, as an example, if that were to happen. When we think about Canada and Mexico, specifically, about 10% of our volume is cross-border between Canada and Mexico and the U.S. A little bit more exposure to Canada, actually, than Mexico. The amount of demand for export coal out of the U.S. should remain fairly constant and will just change destination. the amount of demand for export coal out of the u.s should remain fairly constant and will just change destination We may have more that goes to India, as an example, if that were to happen. we may have more that goes to india as an example if that were to happen When we think about Canada and Mexico, specifically, about 10% of our volume is cross-border between Canada and Mexico and the U.S. when we think about canada and mexico specifically about 10% of our volume is cross-border between canada and mexico and the u.s A little bit more exposure to Canada, actually, than Mexico. a little bit more exposure to canada actually than mexico That trans-border traffic to and from Canada is sort of diversified across a number of merchandise markets. You think about fertilizers, forest chemicals, metals. In terms of Mexico, we do have some exposure to auto. Certainly would expect if we see an impact there that auto volumes would be impacted. That trans-border traffic to and from Canada is sort of diversified across a number of merchandise markets. that trans-border traffic to and from canada is sort of diversified across a number of merchandise markets You think about fertilizers, forest chemicals, metals. you think about fertilizers forest chemicals, metals In terms of Mexico, we do have some exposure to auto. in terms of mexico we do have some exposure to auto Certainly would expect if we see an impact there that auto volumes would be impacted. certainly would expect if we see an impact there that auto volumes would be impacted Now, there is capacity opportunity at U.S.-owned plants as well, particularly with the big three, whether they can ramp that quickly, how long the tariffs last, all of that kind of remains to be seen. There is the ability to produce more at some of the U.S. plants. Now, there is capacity opportunity at U.S.-owned plants as well, particularly with the big three, whether they can ramp that quickly, how long the tariffs last, all of that kind of remains to be seen. now there is capacity opportunity at u.s.-owned plants as well particularly with the big three whether they can ramp that quickly how long the tariffs last all of that kind of remains to be seen There is the ability to produce more at some of the U.S. plants. there is the ability to produce more at some of the u.s plants

Speaker 3: One other big wildcard we're watching for the time being is just the potential to levy some fees on the China coming into the U.S. Obviously not a direct impact, but certainly a pretty big indirect one I would expect if that were to happen. When you speak to your ocean carriers and everybody else in that supply chain, do they have a read on what that might do? How would that affect the CSX network? One other big wildcard we're watching for the time being is just the potential to levy some fees on the China coming into the U.S. one other big wildcard we're watching for the time being is just the potential to levy some fees on the china coming into the u.s Obviously not a direct impact, but certainly a pretty big indirect one I would expect if that were to happen. obviously not a direct impact but certainly a pretty big indirect one i would expect if that were to happen When you speak to your ocean carriers and everybody else in that supply chain, do they have a read on what that might do? when you speak to your ocean carriers and everybody else in that supply chain do they have a read on what that might do How would that affect the CSX network? how would that affect the csx network

Speaker 5: Yeah, so it's a big one. First, I would say when we talk to our international partners on the international steamship line, we're off to a pretty good start. I think there's good line of sight to that continuing, at least through the first half of the year, regardless of what happens around tariffs and everything else. Feel good about that market as we speak. Yeah, so it's a big one. yeah so it's a big one First, I would say when we talk to our international partners on the international steamship line, we're off to a pretty good start. first i would say when we talk to our international partners on the international steamship line we're off to a pretty good start I think there's good line of sight to that continuing, at least through the first half of the year, regardless of what happens around tariffs and everything else. i think there's good line of sight to that continuing at least through the first half of the year regardless of what happens around tariffs and everything else Feel good about that market as we speak. feel good about that market as we speak That being said, certainly this potential port fee that could come into play would be a significant disruptive impact, not only across international intermodal. You think about export coal, as an example. There are Chinese-built ships that serve the Port of Baltimore and Newport News as well that could be impacted. It would be significant in terms of the supply chain impacts. I think everybody's speculating at this point. That being said, certainly this potential port fee that could come into play would be a significant disruptive impact, not only across international intermodal. that being said certainly this potential port fee that could come into play would be a significant disruptive impact not only across international intermodal You think about export coal, as an example. you think about export coal as an example There are Chinese-built ships that serve the Port of Baltimore and Newport News as well that could be impacted. there are chinese-built ships that serve the port of baltimore and newport news as well that could be impacted It would be significant in terms of the supply chain impacts. it would be significant in terms of the supply chain impacts I think everybody's speculating at this point. i think everybody's speculating at this point Certainly, there are some numbers out there in terms of the dollar impact on the cost to land that freight here in the U.S. that we think would drive behavior changes, some of which would benefit us. If there's more consolidation at ports that we serve and there's more volume that wants to come into those ports, that's a good thing. Certainly, there are some numbers out there in terms of the dollar impact on the cost to land that freight here in the U.S. that we think would drive behavior changes, some of which would benefit us. certainly there are some numbers out there in terms of the dollar impact on the cost to land that freight here in the u.s that we think would drive behavior changes some of which would benefit us If there's more consolidation at ports that we serve and there's more volume that wants to come into those ports, that's a good thing. if there's more consolidation at ports that we serve and there's more volume that wants to come into those ports that's a good thing We can be a part of the solution for that. It could also result in more congestion as well, which could have significant disruptive effects and, of course, lead to higher inflation. It is a watch item for us. I think like everything, we're not going to change our network plan or our projections just yet until we see how things play out. We can be a part of the solution for that. we can be a part of the solution for that It could also result in more congestion as well, which could have significant disruptive effects and, of course, lead to higher inflation. it could also result in more congestion as well which could have significant disruptive effects and of course lead to higher inflation It is a watch item for us. it is a watch item for us I think like everything, we're not going to change our network plan or our projections just yet until we see how things play out. i think like everything we're not going to change our network plan or our projections just yet until we see how things play out

Speaker 3: On the met coal, and I guess export met coal specifically, last year had some closures. You had a ship loader break. You had obviously the bridge collapse. Tough year last year. Sounds like the first quarter is maybe off to a little bit of a soft start. You have already talked about the headwinds year-over-year. Is there room just to have a little bit of an improvement just because last year was so difficult? On the met coal, and I guess export met coal specifically, last year had some closures. on the met coal and i guess export met coal specifically last year had some closures You had a ship loader break. you had a ship loader break You had obviously the bridge collapse. you had obviously the bridge collapse Tough year last year. tough year last year Sounds like the first quarter is maybe off to a little bit of a soft start. sounds like the first quarter is maybe off to a little bit of a soft start You have already talked about the headwinds year-over-year. you have already talked about the headwinds year-over-year Is there room just to have a little bit of an improvement just because last year was so difficult? is there room just to have a little bit of an improvement just because last year was so difficult

Speaker 5: Yeah. On the export side, off to a slower start than we had hoped with both weather, producer issues, and then we had another mine catch fire. That mine is likely going to be out through the first half of the year. We had another one last year that had a more significant fire event. That one may be out through most of this year. Yeah. yeah On the export side, off to a slower start than we had hoped with both weather, producer issues, and then we had another mine catch fire. on the export side off to a slower start than we had hoped with both weather producer issues and then we had another mine catch fire That mine is likely going to be out through the first half of the year. that mine is likely going to be out through the first half of the year We had another one last year that had a more significant fire event. we had another one last year that had a more significant fire event That one may be out through most of this year. that one may be out through most of this year That will help us in terms of comps for 2026. I think demand has remained relatively steady for export coal as well, which I think is the good news. The issues that we had at Curtis Bay and with the Key Bridge last year should provide a little bit of a year-over-year uplift as we get a little bit later into the year. That will help us in terms of comps for 2026. that will help us in terms of comps for 2026 I think demand has remained relatively steady for export coal as well, which I think is the good news. i think demand has remained relatively steady for export coal as well which i think is the good news The issues that we had at Curtis Bay and with the Key Bridge last year should provide a little bit of a year-over-year uplift as we get a little bit later into the year. the issues that we had at curtis bay and with the key bridge last year should provide a little bit of a year-over-year uplift as we get a little bit later into the year I would say when you think about overall coal volumes, we would expect domestic to be down a little bit more than export, or certainly that's what we expected going into the year. The domestic picture has gotten a little bit better, particularly with a really cold winter, which has helped stockpile levels. I would say when you think about overall coal volumes, we would expect domestic to be down a little bit more than export, or certainly that's what we expected going into the year. i would say when you think about overall coal volumes we would expect domestic to be down a little bit more than export or certainly that's what we expected going into the year The domestic picture has gotten a little bit better, particularly with a really cold winter, which has helped stockpile levels. the domestic picture has gotten a little bit better particularly with a really cold winter which has helped stockpile levels Those have been worked down. We actually have a number of customers that are looking at adding additional sets and haven't necessarily seen a lot of that benefit just yet. I think as we get into March and certainly into the spring, into the shoulder season here, we'll start to see some rebuilding of stockpiles. Q1 coal volumes will probably be the worst in terms of year-over-year. Those have been worked down. those have been worked down We actually have a number of customers that are looking at adding additional sets and haven't necessarily seen a lot of that benefit just yet. we actually have a number of customers that are looking at adding additional sets and haven't necessarily seen a lot of that benefit just yet I think as we get into March and certainly into the spring, into the shoulder season here, we'll start to see some rebuilding of stockpiles. i think as we get into march and certainly into the spring into the shoulder season here we'll start to see some rebuilding of stockpiles Q1 coal volumes will probably be the worst in terms of year-over-year. q1 coal volumes will probably be the worst in terms of year-over-year

Speaker 3: Can you talk a little bit about the domestic market for intermodal and the truck conversion? Because it's more of a theme, and it sounds like it's actually getting some momentum. Maybe it's the service product you guys have had out there for a while. What's driving that? I guess kind of more importantly, how do you think it can stick? Because it's, as you said, it's a pretty weak truck market. The fact that we're seeing it now is worth a question. Can you talk a little bit about the domestic market for intermodal and the truck conversion? can you talk a little bit about the domestic market for intermodal and the truck conversion Because it's more of a theme, and it sounds like it's actually getting some momentum. because it's more of a theme and it sounds like it's actually getting some momentum Maybe it's the service product you guys have had out there for a while. maybe it's the service product you guys have had out there for a while What's driving that? what's driving that I guess kind of more importantly, how do you think it can stick? i guess kind of more importantly how do you think it can stick Because it's, as you said, it's a pretty weak truck market. because it's as you said it's a pretty weak truck market The fact that we're seeing it now is worth a question. the fact that we're seeing it now is worth a question

Speaker 5: Yeah. In terms of truck conversions, it's not just intermodal. It's not just domestic intermodal. It's across merchandise as well. I think the team tracked over 100 different projects last year that led to truckload conversions. Now, many of those are small, $1 million or less, but there's some larger ones as well. I think it's a combination of running a stable, consistent service for a number of years now, really since 2022, and doing that in a way where we're communicating differently with the customer, being much more proactive when things are not running well to let them know when freight may be delayed and when to expect it. Yeah. yeah In terms of truck conversions, it's not just intermodal. in terms of truck conversions it's not just intermodal It's not just domestic intermodal. it's not just domestic intermodal It's across merchandise as well. it's across merchandise as well I think the team tracked over 100 different projects last year that led to truckload conversions. i think the team tracked over 100 different projects last year that led to truckload conversions Now, many of those are small, $1 million or less, but there's some larger ones as well. now many of those are small $1 million or less but there's some larger ones as well I think it's a combination of running a stable, consistent service for a number of years now, really since 2022, and doing that in a way where we're communicating differently with the customer, being much more proactive when things are not running well to let them know when freight may be delayed and when to expect it. i think it's a combination of running a stable consistent service for a number of years now really since 2022 and doing that in a way where we're communicating differently with the customer being much more proactive when things are not running well to let them know when freight may be delayed and when to expect it We've invested heavily into the technology platforms that interface with our customers, and that provides them greater visibility and line of sight into what's happening with their freight, which doesn't go unappreciated. We've invested heavily into the technology platforms that interface with our customers, and that provides them greater visibility and line of sight into what's happening with their freight, which doesn't go unappreciated. we've invested heavily into the technology platforms that interface with our customers and that provides them greater visibility and line of sight into what's happening with their freight which doesn't go unappreciated I think the collaboration between operations and sales and marketing also goes a long way. There is much less casting blame and deflection going on, as there has been historically, not just at CSX, but across the rail industry, sort of this natural tension between operations and sales and marketing. I think the collaboration between operations and sales and marketing also goes a long way. There is much less casting blame and deflection going on, as there has been historically, not just at CSX, but across the rail industry, sort of this natural tension between operations and sales and marketing. i think the collaboration between operations and sales and marketing also goes a long way. there is much less casting blame and deflection going on as there has been historically not just at csx but across the rail industry sort of this natural tension between operations and sales and marketing I think they are working together in partnership and responding to each other's concerns. That goes a long way with the customer. We are seeing a lot of success there, and I think it will continue. I think you sort of hit the nail on the head there. The truckload market, we are going on three years now where it has been challenging. I think they are working together in partnership and responding to each other's concerns. i think they are working together in partnership and responding to each other's concerns That goes a long way with the customer. that goes a long way with the customer We are seeing a lot of success there, and I think it will continue. we are seeing a lot of success there and i think it will continue I think you sort of hit the nail on the head there. i think you sort of hit the nail on the head there The truckload market, we are going on three years now where it has been challenging. the truckload market, we are going on three years now where it has been challenging As we start to see a turn there, I think there's some volume that we've already won that there's an opportunity to ramp it up and win even more of that share as that price dyna mic between rail and truck widens. As we start to see a turn there, I think there's some volume that we've already won that there's an opportunity to ramp it up and win even more of that share as that price dyna mic between rail and truck widens. as we start to see a turn there i think there's some volume that we've already won that there's an opportunity to ramp it up and win even more of that share as that price dyna mic between rail and truck widens

Speaker 3: On the domestic side in particular, with early start of bid season here or early in the bid season rather, how do you feel that your channel partners are faring? Anything you can do to help them? I'm sure the service product, communication are helping, but what's the sense as we get underway here for bid season for that group in particular? On the domestic side in particular, with early start of bid season here or early in the bid season rather, how do you feel that your channel partners are faring? on the domestic side in particular with early start of bid season here or early in the bid season rather how do you feel that your channel partners are faring Anything you can do to help them? anything you can do to help them I'm sure the service product, communication are helping, but what's the sense as we get underway here for bid season for that group in particular? i'm sure the service product communication are helping but what's the sense as we get underway here for bid season for that group in particular

Speaker 5: Yeah, it's less bad than it's been the last couple of years, let's say that. I think we're seeing on the UMAX side, we're seeing pricing, and that's our joint-owned product between us and Union Pacific. We're seeing pricing flat to up a little bit, which is encouraging. We have not seen that for a couple of years now. Yeah, it's less bad than it's been the last couple of years, let's say that. yeah it's less bad than it's been the last couple of years let's say that I think we're seeing on the UMAX side, we're seeing pricing, and that's our joint-owned product between us and Union Pacific. i think we're seeing on the umax side we're seeing pricing and that's our joint-owned product between us and union pacific We're seeing pricing flat to up a little bit, which is encouraging. we're seeing pricing flat to up a little bit which is encouraging We have not seen that for a couple of years now. we have not seen that for a couple of years now The pricing on the UMAX product tends to be much more sensitive to what's happening in the truckload space than the rest of our domestic volume. That's encouraging. Our truckload volume in domestic intermodal with our partners is actually up on a year-to-date basis. That's encouraging. I think it's less bad. I think there's been a little bit of inflection in terms of the pricing, probably not what many had hoped going into the year. The pricing on the UMAX product tends to be much more sensitive to what's happening in the truckload space than the rest of our domestic volume. the pricing on the umax product tends to be much more sensitive to what's happening in the truckload space than the rest of our domestic volume That's encouraging. that's encouraging Our truckload volume in domestic intermodal with our partners is actually up on a year-to-date basis. our truckload volume in domestic intermodal with our partners is actually up on a year-to-date basis That's encouraging. that's encouraging I think it's less bad. i think it's less bad I think there's been a little bit of inflection in terms of the pricing, probably not what many had hoped going into the year. i think there's been a little bit of inflection in terms of the pricing probably not what many had hoped going into the year We are seeing some BCOs that want to line up multi-year deals, which is also encouraging in terms of what they're coming out of exiting bid season here in 2025. We are seeing some BCOs that want to line up multi-year deals, which is also encouraging in terms of what they're coming out of exiting bid season here in 2025. we are seeing some bcos that want to line up multi-year deals which is also encouraging in terms of what they're coming out of exiting bid season here in 2025

Speaker 3: With all the stuff that's happened over the last couple of years with the ports and the labor uncertainty, I would assume that we get a little bit of a share shift back to the Gulf Coast and to the East Coast, but clearly you can handle transcontinental interchange anyway. What are you guys planning for? What do you see right now? I guess ultimately, how would that impact the network if we were to see sort of a normalization or reversion of that share? With all the stuff that's happened over the last couple of years with the ports and the labor uncertainty, I would assume that we get a little bit of a share shift back to the Gulf Coast and to the East Coast, but clearly you can handle transcontinental interchange anyway. with all the stuff that's happened over the last couple of years with the ports and the labor uncertainty i would assume that we get a little bit of a share shift back to the gulf coast and to the east coast but clearly you can handle transcontinental interchange anyway What are you guys planning for? what are you guys planning for What do you see right now? what do you see right now I guess ultimately, how would that impact the network if we were to see sort of a normalization or reversion of that share? i guess ultimately how would that impact the network if we were to see sort of a normalization or reversion of that share

Speaker 5: Yeah. I mean, certainly the East Coast ports have been investing. They're continuing to invest in capacity. Naturally, we'll see growth at the East Coast ports, whether it's share shift back from west to east or whether it's growth in total with the disproportionate share landing on the east. I'm not sure, maybe a combination of the two. CSX is relatively indifferent, right? Yeah. yeah I mean, certainly the East Coast ports have been investing. i mean certainly the east coast ports have been investing They're continuing to invest in capacity. they're continuing to invest in capacity Naturally, we'll see growth at the East Coast ports, whether it's share shift back from west to east or whether it's growth in total with the disproportionate share landing on the east. naturally we'll see growth at the east coast ports whether it's share shift back from west to east or whether it's growth in total with the disproportionate share landing on the east I'm not sure, maybe a combination of the two. i'm not sure maybe a combination of the two CSX is relatively indifferent, right? csx is relatively indifferent right If it lands west and coming inland to the consumption markets along the I-95 corridor, landing on the West Coast is probably better for us. If it's going into the Midwest, we're relatively indifferent. We've seen a tremendous amount of inland port activity and growth over the last couple of years, and CSX has been a big beneficiary of that. We were just at a groundbreaking for the inland port that's going in in Montgomery. If it lands west and coming inland to the consumption markets along the I-95 corridor, landing on the West Coast is probably better for us. if it lands west and coming inland to the consumption markets along the i-95 corridor landing on the west coast is probably better for us If it's going into the Midwest, we're relatively indifferent. if it's going into the midwest we're relatively indifferent We've seen a tremendous amount of inland port activity and growth over the last couple of years, and CSX has been a big beneficiary of that. we've seen a tremendous amount of inland port activity and growth over the last couple of years and csx has been a big beneficiary of that We were just at a groundbreaking for the inland port that's going in in Montgomery. we were just at a groundbreaking for the inland port that's going in in montgomery There's been billions of dollars of private investment in and around that domestic ter minal. In the next couple of years, we'll see that open, and CSX will be a big beneficiary of that as well. Those are short-haul moves that essentially take that volume off of the truck and onto the rail, but they're quite profitable. A lot of the costs are borne by the ter minal operators. The contribution margin on that is actually quite healthy. There's been billions of dollars of private investment in and around that domestic ter minal. there's been billions of dollars of private investment in and around that domestic ter minal In the next couple of years, we'll see that open, and CSX will be a big beneficiary of that as well. in the next couple of years we'll see that open and csx will be a big beneficiary of that as well Those are short-haul moves that essentially take that volume off of the truck and onto the rail, but they're quite profitable. those are short-haul moves that essentially take that volume off of the truck and onto the rail but they're quite profitable A lot of the costs are borne by the ter minal operators. a lot of the costs are borne by the ter minal operators The contribution margin on that is actually quite healthy. the contribution margin on that is actually quite healthy

Speaker 3: Maybe you can talk a little bit about the industrial development pipeline. You guys have been pretty vocal about that, adding a point or two of growth here over the years. You talked about the investor day. Has any of that really shifted or changed given all the uncertainty here, or those are just long lead projects that take time anyway? Maybe you can talk a little bit about the industrial development pipeline. maybe you can talk a little bit about the industrial development pipeline You guys have been pretty vocal about that, adding a point or two of growth here over the years. you guys have been pretty vocal about that adding a point or two of growth here over the years You talked about the investor day. you talked about the investor day Has any of that really shifted or changed given all the uncertainty here, or those are just long lead projects that take time anyway? has any of that really shifted or changed given all the uncertainty here or those are just long lead projects that take time anyway

Speaker 5: Yeah. I think one thing that's encouraging is the phones are still ringing. There's still activity going on. There's still interest. In fact, I think if you were to ask the industrial development team, they'd tell you they've probably seen a 15%-20% increase in terms of total call coming into this year versus last year. Yeah. yeah I think one thing that's encouraging is the phones are still ringing. i think one thing that's encouraging is the phones are still ringing There's still activity going on. there's still activity going on There's still interest. there's still interest In fact, I think if you were to ask the industrial development team, they'd tell you they've probably seen a 15%-20% increase in terms of total call coming into this year versus last year. in fact i think if you were to ask the industrial development team they'd tell you they've probably seen a 15%-20% increase in terms of total call coming into this year versus last year The inquiries are out there. Is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint? I think that would be fair to say, yeah. It's not stopping the amount of activity that's going on in the background. We now have almost 600 active projects. I think last year at the investor day, we said, what, over 500, almost 550. We're now at 600. The pipeline is growing. The inquiries are out there. the inquiries are out there Is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint? is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint I think that would be fair to say, yeah. i think that would be fair to say yeah It's not stopping the amount of activity that's going on in the background. it's not stopping the amount of activity that's going on in the background We now have almost 600 active projects. we now have almost 600 active projects I think last year at the investor day, we said, what, over 500, almost 550. i think last year at the investor day we said what over 500 almost 550 We're now at 600. we're now at 600 The pipeline is growing. the pipeline is growing That gives us a lot of confidence as we go into the next couple of years. Industrial development projects, both new and expansion of existing facilities, added about 1% to our merchandise growth last year. That will similar this year and ramps up as we get into 2026 and 2027 to the point where it is likely accretive to the tune of 1-2 percentage points of total volume. We have line of sight. The projects that are being developed are not slowing down, and we are excited about where the future takes us. That gives us a lot of confidence as we go into the next couple of years. that gives us a lot of confidence as we go into the next couple of years Industrial development projects, both new and expansion of existing facilities, added about 1% to our merchandise growth last year. That will similar this year and ramps up as we get into 2026 and 2027 to the point where it is likely accretive to the tune of 1-2 percentage points of total volume. industrial development projects both new and expansion of existing facilities added about 1% to our merchandise growth last year. that will similar this year and ramps up as we get into 2026 and 2027 to the point where it is likely accretive to the tune of 1-2 percentage points of total volume We have line of sight. we have line of sight The projects that are being developed are not slowing down, and we are excited about where the future takes us. the projects that are being developed are not slowing down and we are excited about where the future takes us

Speaker 3: Cargo theft isn't something we really talk about on earnings calls, but the more we talk to shippers and go to these conferences, it comes up almost all the time. It is getting more coverage in the press as well. How do you think about that at CSX? How does the industry address that? Is this really as big of a concern as it seems to be when it comes from a shipper perspective? Cargo theft isn't something we really talk about on earnings calls, but the more we talk to shippers and go to these conferences, it comes up almost all the time. cargo theft isn't something we really talk about on earnings calls but the more we talk to shippers and go to these conferences it comes up almost all the time It is getting more coverage in the press as well. it is getting more coverage in the press as well How do you think about that at CSX? how do you think about that at csx How does the industry address that? how does the industry address that Is this really as big of a concern as it seems to be when it comes from a shipper perspective? is this really as big of a concern as it seems to be when it comes from a shipper perspective

Speaker 5: Yeah. There's been cargo theft forever, right? Ever since freight has been moving by truck, by rail, by buggy, there's been the issue of cargo theft. This is not something new. It's something that we've been dealing with for almost 200 years, all of our existence. Yet at the same time, clearly, it's an issue that needs attention that must be dealt with. It's a supply chain issue. This is not just about railroads. Yeah. yeah There's been cargo theft forever, right? there's been cargo theft forever right Ever since freight has been moving by truck, by rail, by buggy, there's been the issue of cargo theft. ever since freight has been moving by truck by rail by buggy there's been the issue of cargo theft This is not something new. this is not something new It's something that we've been dealing with for almost 200 years, all of our existence. it's something that we've been dealing with for almost 200 years all of our existence Yet at the same time, clearly, it's an issue that needs attention that must be dealt with. yet at the same time clearly it's an issue that needs attention that must be dealt with It's a supply chain issue. it's a supply chain issue This is not just about railroads. this is not just about railroads Everyone is impacted here. The rails put some numbers together through the AAR that indicated it's over a $100 million a year problem for the rail industry. CSX is a part of that. We've got our proportionate share of that. There are years when it's a little bit more and years when it's a little bit less. I don't think there's a sharp trend upwards, but it's not going down either. Everyone is impacted here. everyone is impacted here The rails put some numbers together through the AAR that indicated it's over a $100 million a year problem for the rail industry. the rails put some numbers together through the aar that indicated it's over a $100 million a year problem for the rail industry CSX is a part of that. csx is a part of that We've got our proportionate share of that. we've got our proportionate share of that There are years when it's a little bit more and years when it's a little bit less. there are years when it's a little bit more and years when it's a little bit less I don't think there's a sharp trend upwards, but it's not going down either. i don't think there's a sharp trend upwards but it's not going down either I think the bigger issue is the confidence that shippers need to have in the ability to get their freight to destination. I think what the industry is looking for from a supply chain perspective is the ability to coordinate a little bit better with law enforcement and do a better job of prosecuting because there are a number of times where we see repeat offenders. I think the bigger issue is the confidence that shippers need to have in the ability to get their freight to destination. i think the bigger issue is the confidence that shippers need to have in the ability to get their freight to destination I think what the industry is looking for from a supply chain perspective is the ability to coordinate a little bit better with law enforcement and do a better job of prosecuting because there are a number of times where we see repeat offenders. i think what the industry is looking for from a supply chain perspective is the ability to coordinate a little bit better with law enforcement and do a better job of prosecuting because there are a number of times where we see repeat offenders The stick needs to be there in order to make sure that there is enough of a threat not to continue to come back to the well. We are opti mistic that we get some traction there. I know there is a bill that is being floated, so that would certainly be helpful. CSX does have its own police force, as do all the railroads, and they do a tremendous job. We try to strategically position them in places where it is needed. The stick needs to be there in order to make sure that there is enough of a threat not to continue to come back to the well. the stick needs to be there in order to make sure that there is enough of a threat not to continue to come back to the well We are opti mistic that we get some traction there. we are opti mistic that we get some traction there I know there is a bill that is being floated, so that would certainly be helpful. i know there is a bill that is being floated so that would certainly be helpful CSX does have its own police force, as do all the railroads, and they do a tremendous job. csx does have its own police force as do all the railroads and they do a tremendous job We try to strategically position them in places where it is needed. we try to strategically position them in places where it is needed We've invested in a lot of technology, particularly around facilities that have higher value freight. It is something we've got to watch out for. We've invested in a lot of technology, particularly around facilities that have higher value freight. we've invested in a lot of technology particularly around facilities that have higher value freight It is something we've got to watch out for. it is something we've got to watch out for

Speaker 3: You mentioned some of the productivity initiatives earlier and excuse me, the Cumberland Yard. How are those progressing so far? I think we heard a lot of them at the investor day. One that was pretty interesting as well is just the real-time visibility I think Mike was talking about into the network. That sounds like it's a pretty big initiative. Anything else that gets you excited as you look forward to the rest of the year here? You mentioned some of the productivity initiatives earlier and excuse me, the Cumberland Yard. you mentioned some of the productivity initiatives earlier and excuse me the cumberland yard How are those progressing so far? how are those progressing so far I think we heard a lot of them at the investor day. i think we heard a lot of them at the investor day One that was pretty interesting as well is just the real-time visibility I think Mike was talking about into the network. one that was pretty interesting as well is just the real-time visibility i think mike was talking about into the network That sounds like it's a pretty big initiative. that sounds like it's a pretty big initiative Anything else that gets you excited as you look forward to the rest of the year here? anything else that gets you excited as you look forward to the rest of the year here

Speaker 5: Yeah. I mean, you talk to Mike, there's always new ideas and new opportunity. I think, again, it's that collaboration between his team and the finance team looking at every single line item where we spend dollars. Some of them are large, like crew starts and network planning. When you make reductions to the crew plan, you save crew dollars, you save fuel dollars, locomotive dollars. It's big. Yeah. yeah I mean, you talk to Mike, there's always new ideas and new opportunity. i mean you talk to mike there's always new ideas and new opportunity I think, again, it's that collaboration between his team and the finance team looking at every single line item where we spend dollars. i think again it's that collaboration between his team and the finance team looking at every single line item where we spend dollars Some of them are large, like crew starts and network planning. some of them are large like crew starts and network planning When you make reductions to the crew plan, you save crew dollars, you save fuel dollars, locomotive dollars. when you make reductions to the crew plan you save crew dollars you save fuel dollars locomotive dollars It's big. it's big There are a lot of things that are not as big that are still important initiatives that we've got to look at. Things like how much money are we spending on freight, shipping parts to mechanical facilities? How much money are we spending on vehicles and maintenance related to that? Any outside or third-party spend? Everything in that purchase services and other bucket that's flexible. Locomotive utilization, fuel productivity. We delivered over $45 million of fuel efficiency last year. There are a lot of things that are not as big that are still important initiatives that we've got to look at. there are a lot of things that are not as big that are still important initiatives that we've got to look at Things like how much money are we spending on freight, shipping parts to mechanical facilities? things like how much money are we spending on freight shipping parts to mechanical facilities How much money are we spending on vehicles and maintenance related to that? how much money are we spending on vehicles and maintenance related to that Any outside or third-party spend? any outside or third-party spend Everything in that purchase services and other bucket that's flexible. everything in that purchase services and other bucket that's flexible Locomotive utilization, fuel productivity. locomotive utilization fuel productivity We delivered over $45 million of fuel efficiency last year. we delivered over $45 million of fuel efficiency last year We're off to a good start again this year with year-over-year gains. It’s broad-based. We've got scorecards that have over 100 different initiatives that we're working on right now. The idea here is not to, I always tell people, if you don't do something this year that you normally spend $1 million on and then you do it next year, that's a $2 million year-over-year swing. That's not what we're looking for, right? We're off to a good start again this year with year-over-year gains. we're off to a good start again this year with year-over-year gains It’s broad-based. it’s broad-based We've got scorecards that have over 100 different initiatives that we're working on right now. we've got scorecards that have over 100 different initiatives that we're working on right now The idea here is not to, I always tell people, if you don't do something this year that you normally spend $1 million on and then you do it next year, that's a $2 million year-over-year swing. the idea here is not to i always tell people if you don't do something this year that you normally spend $1 million on and then you do it next year that's a $2 million year-over-year swing That's not what we're looking for, right? that's not what we're looking for right We're looking for you to take that $1 million spend, make it $750,000, and keep it there, right? How do we get more efficient in the dollars that we are spending? How do we get better utilization out of our assets? There's a lot of ideas. I think there's a lot of opportunity out there still to be had. Certainly, growing into the capacity that we have also generates productivity. We're looking for you to take that $1 million spend, make it $750,000, and keep it there, right? we're looking for you to take that $1 million spend make it $750,000 and keep it there right How do we get more efficient in the dollars that we are spending? how do we get more efficient in the dollars that we are spending How do we get better utilization out of our assets? how do we get better utilization out of our assets There's a lot of ideas. there's a lot of ideas I think there's a lot of opportunity out there still to be had. i think there's a lot of opportunity out there still to be had Certainly, growing into the capacity that we have also generates productivity. certainly growing into the capacity that we have also generates productivity Filling up trains that are running at 75%-80% capacity today gives us tremendous incremental margins, which is a big part of the story over the next couple of years. Filling up trains that are running at 75%-80% capacity today gives us tremendous incremental margins, which is a big part of the story over the next couple of years. filling up trains that are running at 75%-80% capacity today gives us tremendous incremental margins which is a big part of the story over the next couple of years

Speaker 3: Maybe just give a little bit of color on pricing and how it's flowing throughout the start of the year. Obviously, the truck market's not really helping too much, but I imagine a better service product can also help move the needle a little bit on that as well. On the other side, you did talk about costs, about the productivity, about the crew coming down. Maybe just thoughts on general inflation and how that started to begin the year relative to where you thought it would be. Maybe just give a little bit of color on pricing and how it's flowing throughout the start of the year. maybe just give a little bit of color on pricing and how it's flowing throughout the start of the year Obviously, the truck market's not really helping too much, but I imagine a better service product can also help move the needle a little bit on that as well. obviously the truck market's not really helping too much but i imagine a better service product can also help move the needle a little bit on that as well On the other side, you did talk about costs, about the productivity, about the crew coming down. on the other side you did talk about costs about the productivity about the crew coming down Maybe just thoughts on general inflation and how that started to begin the year relative to where you thought it would be. maybe just thoughts on general inflation and how that started to begin the year relative to where you thought it would be

Speaker 5: Yeah. Let me start on the cost side. We got a pretty good read going into the year in terms of where inflation's going to come in. I think we'll be on the purchase services side generally in line with what you're seeing in terms of CPI, PPI. That has come down. Maybe it's not back to the 2% level, but call it 2.5%-3% is kind of what we're seeing across that area. In terms of labor, we know what the wage inflation is going to be. Yeah. yeah Let me start on the cost side. let me start on the cost side We got a pretty good read going into the year in terms of where inflation's going to come in. we got a pretty good read going into the year in terms of where inflation's going to come in I think we'll be on the purchase services side generally in line with what you're seeing in terms of CPI, PPI. i think we'll be on the purchase services side generally in line with what you're seeing in terms of cpi ppi That has come down. that has come down Maybe it's not back to the 2% level, but call it 2.5%-3% is kind of what we're seeing across that area. maybe it's not back to the 2% level but call it 2.5%-3% is kind of what we're seeing across that area In terms of labor, we know what the wage inflation is going to be. in terms of labor we know what the wage inflation is going to be We've got about half of our workforce already has signed agreements that will go into effect July 1st. 4.25% wage inflation. Health and welfare is actually deflationary. All-in labor inflation will be less than 4% this year. We've got about half of our workforce already has signed agreements that will go into effect July 1st. 4.25% wage inflation. we've got about half of our workforce already has signed agreements that will go into effect july 1st 4.25% wage inflation Health and welfare is actually deflationary. health and welfare is actually deflationary All-in labor inflation will be less than 4% this year. all-in labor inflation will be less than 4% this year Clear line of sight in terms of where the bogey is there and what we've got to try to offset. On the price side, I think we're off to a fairly decent start. What I'm always looking at is the dollars of price relative to the dollars of inflation, and are we seeing drop-through that helps drive operating income growth? We've seen that every year for the last decade, and we expect to see it again this year. Clear line of sight in terms of where the bogey is there and what we've got to try to offset. clear line of sight in terms of where the bogey is there and what we've got to try to offset On the price side, I think we're off to a fairly decent start. on the price side i think we're off to a fairly decent start What I'm always looking at is the dollars of price relative to the dollars of inflation, and are we seeing drop-through that helps drive operating income growth? what i'm always looking at is the dollars of price relative to the dollars of inflation and are we seeing drop-through that helps drive operating income growth We've seen that every year for the last decade, and we expect to see it again this year. we've seen that every year for the last decade and we expect to see it again this year Through February, we've repriced about $1.5 billion of the merchandise portfolio. Only about 5% of that has come in below plan. That's very encouraging to start the year. On the flip side, I don't want to get you too excited. We're not blowing the plan out of the water, but we are definitely ahead of where we expected to coming into the year. Conversations are constructive. Through February, we've repriced about $1.5 billion of the merchandise portfolio. through february we've repriced about $1.5 billion of the merchandise portfolio Only about 5% of that has come in below plan. only about 5% of that has come in below plan That's very encouraging to start the year. that's very encouraging to start the year On the flip side, I don't want to get you too excited. on the flip side i don't want to get you too excited We're not blowing the plan out of the water, but we are definitely ahead of where we expected to coming into the year. we're not blowing the plan out of the water but we are definitely ahead of where we expected to coming into the year Conversations are constructive. conversations are constructive The goal is to opti mize bottom-line profit through a combination of price and volume gains and truckload conversions. The goal is to opti mize bottom-line profit through a combination of price and volume gains and truckload conversions. the goal is to opti mize bottom-line profit through a combination of price and volume gains and truckload conversions

Speaker 3: Okay. 5% below plan, but still above expectations. Okay. 5% below plan, but still above expectations. okay 5% below plan but still above expectations

Speaker 5: Only 5% of the renewals came in below plan. Only 5% of the renewals came in below plan. only 5% of the renewals came in below plan

Speaker 3: Only 5%. Only 5%. only 5%

Speaker 5: Yeah. 95% are on or above plan. Yeah. 95% are on or above plan. yeah 95% are on or above plan

Speaker 3: Okay. Okay. Maybe we can wrap up just with a little bit on the Howard Street Tunnel because, like you said, we've heard about it for quite some time. At the investor day, it is all pulled forward in a pretty accelerated fashion. You did outline some of the, I guess, engineering that you had to go through, but the train coming down, the rerouting. Okay. okay Okay. okay Maybe we can wrap up just with a little bit on the Howard Street Tunnel because, like you said, we've heard about it for quite some time. maybe we can wrap up just with a little bit on the howard street tunnel because like you said we've heard about it for quite some time At the investor day, it is all pulled forward in a pretty accelerated fashion. at the investor day it is all pulled forward in a pretty accelerated fashion You did outline some of the, I guess, engineering that you had to go through, but the train coming down, the rerouting. you did outline some of the i guess engineering that you had to go through but the train coming down the rerouting You've laid out the cost, but what are you going to do in terms of the revenue side? Is there going to be a disruption on service? Maybe explain that a little bit more. You did give some opportunities, but is there a bigger market we should be thinking about now that when that's done, that's now available to CSX as it hasn't been in the past? You've laid out the cost, but what are you going to do in terms of the revenue side? you've laid out the cost but what are you going to do in terms of the revenue side Is there going to be a disruption on service? is there going to be a disruption on service Maybe explain that a little bit more. maybe explain that a little bit more You did give some opportunities, but is there a bigger market we should be thinking about now that when that's done, that's now available to CSX as it hasn't been in the past? you did give some opportunities but is there a bigger market we should be thinking about now that when that's done that's now available to csx as it hasn't been in the past

Speaker 5: Yeah. Let me start just sort of say every train, every customer that's impacted, we have a solution for. Those solutions are higher costs than they were previously. Some include a little bit of trucking as well in order to get the freight where it needs to be. Yeah. yeah Let me start just sort of say every train, every customer that's impacted, we have a solution for. let me start just sort of say every train every customer that's impacted we have a solution for Those solutions are higher costs than they were previously. those solutions are higher costs than they were previously Some include a little bit of trucking as well in order to get the freight where it needs to be. some include a little bit of trucking as well in order to get the freight where it needs to be We are preserving the service to the customer. We expect very minimal revenue loss as a result of all of this. Now, it's hard to tell from a network perspective as we digest challenges like the weather we had in January and February. We have impacted two of our four major north-south routes across the network. When you do that, even if you have a plan for how you reroute around that, the recoverability of the network is hampered. It is challenged. We have seen that play itself out over the first couple of months of the year. We a re preserving the service to the customer. we a re preserving the service to the customer We expect very minimal revenue loss as a result of all of this. we expect very minimal revenue loss as a result of all of this Now, it's hard to tell from a network perspective as we digest challenges like the weather we had in January and February. now it's hard to tell from a network perspective as we digest challenges like the weather we had in january and february We have impacted two of our four major north-south routes across the network. we have impacted two of our four major north-south routes across the network When you do that, even if you have a plan for how you reroute around that, the recoverability of the network is hampered. when you do that even if you have a plan for how you reroute around that the recoverability of the network is hampered It is challenged. it is challenged We have seen that play itself out over the first couple of months of the year. we have seen that play itself out over the first couple of months of the year That has an impact on cost. That has an impact likely on perishable revenue. A lot of what we move is able to be made up, but some of it isn't. Customers don't always tell us when they divert that traffic. There probably is a little bit of a hidden cost on the revenue side that we don't see in terms of missed opportunity because of the challenged recoverability with those two routes out. We did not plan to have the Blue Ridge out at the same time as the Howard Street. That happened once we had already made the decision to move forward with Howard Street. That has an impact on cost. that has an impact on cost That has an impact likely on perishable revenue. that has an impact likely on perishable revenue A lot of what we move is able to be made up, but some of it isn't. a lot of what we move is able to be made up but some of it isn't Customers don't always tell us when they divert that traffic. customers don't always tell us when they divert that traffic There probably is a little bit of a hidden cost on the revenue side that we don't see in terms of missed opportunity because of the challenged recoverability with those two routes out. there probably is a little bit of a hidden cost on the revenue side that we don't see in terms of missed opportunity because of the challenged recoverability with those two routes out We did not plan to have the Blue Ridge out at the same time as the Howard Street. we did not plan to have the blue ridge out at the same time as the howard street That happened once we had already made the decision to move forward with Howard Street. that happened once we had already made the decision to move forward with howard street I think that this is part of what makes us opti mistic about 2026 and beyond is when we look at what the network will be able to handle in terms of the amount of capacity we're creating, not just through the Howard Street project and shoring up the Blue Ridge subdivision, but projects like Cumberland. We've got a few others in the works that we're working on this year as we speak. I think that this is part of what makes us opti mistic about 2026 and beyond is when we look at what the network will be able to handle in terms of the amount of capacity we're creating, not just through the Howard Street project and shoring up the Blue Ridge subdivision, but projects like Cumberland. i think that this is part of what makes us opti mistic about 2026 and beyond is when we look at what the network will be able to handle in terms of the amount of capacity we're creating not just through the howard street project and shoring up the blue ridge subdivision but projects like cumberland We've got a few others in the works that we're working on this year as we speak. we've got a few others in the works that we're working on this year as we speak coming up with new ideas every time he goes out to the field in order to get more efficient direct routing that saves on costs and improves the service to the customer. There is opportunity out there, certainly beyond the 75,000 loads-125,000 loads just directly due to the Howard Street Tunnel as we think about gaining capacity across the network. I think that's what's exciting. coming up with new ideas every time he goes out to the field in order to get more efficient direct routing that saves on costs and improves the service to the customer. coming up with new ideas every time he goes out to the field in order to get more efficient direct routing that saves on costs and improves the service to the customer There is opportunity out there, certainly beyond the 75,000 loads-125,000 loads just directly due to the Howard Street Tunnel as we think about gaining capacity across the network. there is opportunity out there certainly beyond the 75,000 loads-125,000 loads just directly due to the howard street tunnel as we think about gaining capacity across the network I think that's what's exciting. i think that's what's exciting That combined with the industrial development activity that we're seeing across the network gives us good line of sight, tariffs or not, to seeing some growth and being able to deliver it over the course of the next couple of years. That combined with the industrial development activity that we're seeing across the network gives us good line of sight, tariffs or not, to seeing some growth and being able to deliver it over the course of the next couple of years. that combined with the industrial development activity that we're seeing across the network gives us good line of sight tariffs or not to seeing some growth and being able to deliver it over the course of the next couple of years

Speaker 3: Okay. That is a good place to wrap up. Since we are out of time, we probably should anyway, but thanks very much, John, for kicking us off here. We appreciate being here. Okay. okay That is a good place to wrap up. that is a good place to wrap up Since we are out of time, we probably should anyway, but thanks very much, John, for kicking us off here. since we are out of time we probably should anyway but thanks very much john for kicking us off here We appreciate being here. we appreciate being here

Speaker 5: Thank you. Thank you. thank you

Speaker 3: Thank you. Just because of those kind of trees. Yeah. Thank you. thank you Just because of those kind of trees. just because of those kind of trees Yeah. yeah Okay. Thanks very much for joining us here. We'll kick off our second session here of the day with Union Pacific. Again, I'm Brian Ossenbeck, I cover transports for JPMorgan. Very happy to have Jennifer Hinman, the CFO, Eric Gehringer, the EVP of Operations here to keep things rolling. Jennifer's got some slides she's going to go through with a few opening comments. I will turn it over to her, and then we'll jump into Q&A. Okay. okay Thanks very much for joining us here. thanks very much for joining us here We'll kick off our second session here of the day with Union Pacific. we'll kick off our second session here of the day with union pacific Again, I'm Brian Ossenbeck, I cover transports for JPMorgan. again i'm brian ossenbeck i cover transports for jpmorgan Very happy to have Jennifer Hinman, the CFO, Eric Gehringer, the EVP of Operations here to keep things rolling. very happy to have jennifer hinman the cfo eric gehringer the evp of operations here to keep things rolling Jennifer's got some slides she's going to go through with a few opening comments. I will turn it over to her, and then we'll jump into Q&A. jennifer's got some slides she's going to go through with a few opening comments. i will turn it over to her and then we'll jump into q&a

Speaker 2: All right. All right. all right

Speaker 3: Thanks very much for being here. Thanks very much for being here. thanks very much for being here

Speaker 2: Oh, thank you, Brian. Thanks for the invitation. Thanks for all of you who are here with us in New York and those that are joining us online. We will be making some forward-looking statements today. Those statements are subject to risks and uncertainties. Please refer to the UP website and SEC filings for more information. Thought I'd start out today with what really is the foundation for UP, our franchise. Oh, thank you, Brian. oh thank you brian Thanks for the invitation. thanks for the invitation Thanks for all of you who are here with us in New York and those that are joining us online. thanks for all of you who are here with us in new york and those that are joining us online We will be making some forward-looking statements today. we will be making some forward-looking statements today Those statements are subject to risks and uncertainties. those statements are subject to risks and uncertainties Please refer to the UP website and SEC filings for more information. please refer to the up website and sec filings for more information Thought I'd start out today with what really is the foundation for UP, our franchise. thought i'd start out today with what really is the foundation for up our franchise We truly believe it's the best franchise in North America. It's the largest, 33,000 route mi across 23 states, giving us really broad access to diverse customers, diverse markets. What we have been focused on as a company over, call it the last 20 months or so since Jim came on board is unlocking the full potential of that franchise. Our methodology or our strategy for doing that is pretty simple. We truly believe it's the best franchise in North America. we truly believe it's the best franchise in north america It's the largest, 33,000 route mi across 23 states, giving us really broad access to diverse customers, diverse markets. it's the largest 33,000 route mi across 23 states giving us really broad access to diverse customers diverse markets What we have been focused on as a company over, call it the last 20 months or so since Jim came on board is unlocking the full potential of that franchise. what we have been focused on as a company over call it the last 20 months or so since jim came on board is unlocking the full potential of that franchise Our methodology or our strategy for doing that is pretty simple. our methodology or our strategy for doing that is pretty simple It's focusing on safety, service, and operational excellence, really the fundamentals of railroading. We believe if we do that right and do that excellently day in and day out, that's going to allow us to grow our business. We look at 2024 as a proof statement for the success of that strategy, that it's the right strategy for us. We grew our volumes 3%. EPS was up 6%. We improved our operating ratio almost 2.5 points, improved ROIC. It's focusing on safety, service, and operational excellence, really the fundamentals of railroading. it's focusing on safety service and operational excellence really the fundamentals of railroading We believe if we do that right and do that excellently day in and day out, that's going to allow us to grow our business. we believe if we do that right and do that excellently day in and day out that's going to allow us to grow our business We look at 2024 as a proof statement for the success of that strategy, that it's the right strategy for us. we look at 2024 as a proof statement for the success of that strategy that it's the right strategy for us We grew our volumes 3%. we grew our volumes 3% EPS was up 6%. eps was up 6% We improved our operating ratio almost 2.5 points, improved ROIC. we improved our operating ratio almost 2.5 points improved roic We're leading the industry in both of those metrics, which that's a goal of ours. We believe we should be the industry leader. Want to be the industry leader in safety as well. We're still working on that. Again, that's kind of the backdrop from which we're looking at ourselves right now. We're leading the industry in both of those metrics, which that's a goal of ours. we're leading the industry in both of those metrics which that's a goal of ours We believe we should be the industry leader. we believe we should be the industry leader Want to be the industry leader in safety as well. want to be the industry leader in safety as well We're still working on that. we're still working on that Again, that's kind of the backdrop from which we're looking at ourselves right now. again that's kind of the backdrop from which we're looking at ourselves right now Obviously, moving into 2025, we want to take that success from 2024 and build on that. If you see the volumes there on the slide for 2024, first quarter, quarter to date, we're up 8%. Strong growth to start the year. You see the variety and again, the diversity of our business mix. They're just looking at that with bulk up to our industrial segment flat and then pre mium up 15%. Obviously, moving into 2025, we want to take that success from 2024 and build on that. obviously moving into 2025 we want to take that success from 2024 and build on that If you see the volumes there on the slide for 2024, first quarter, quarter to date, we're up 8%. if you see the volumes there on the slide for 2024 first quarter quarter to date we're up 8% Strong growth to start the year. strong growth to start the year You see the variety and again, the diversity of our business mix. you see the variety and again the diversity of our business mix They're just looking at that with bulk up to our industrial segment flat and then pre mium up 15%. they're just looking at that with bulk up to our industrial segment flat and then pre mium up 15% The story there really continues to be the same thing that we experienced in the second half of 2024. Very strong growth on the international intermodal side. In fact, international intermodal volumes are up a little bit over 30% right now. Continuing some of the strength we saw last year. Obviously, question marks about how long that's going to continue. Is there some pull forward there? May very well be. The story there really continues to be the same thing that we experienced in the second half of 2024. the story there really continues to be the same thing that we experienced in the second half of 2024 Very strong growth on the international intermodal side. very strong growth on the international intermodal side In fact, international intermodal volumes are up a little bit over 30% right now. in fact international intermodal volumes are up a little bit over 30% right now Continuing some of the strength we saw last year. continuing some of the strength we saw last year Obviously, question marks about how long that's going to continue. obviously question marks about how long that's going to continue Is there some pull forward there? is there some pull forward there May very well be. may very well be We certainly know in the second half of the year, it's going to be a very tough comparison. Our volumes were up 30% plus in the second half of 2024. We don't expect that for 2025. Really, our goal is with Eric and his team and Kenny and the great service product that they're providing, we want to try to retain some of that business. If you look further into intermodal, our domestic volumes are actually up here in the quarter. We certainly know in the second half of the year, it's going to be a very tough comparison. we certainly know in the second half of the year it's going to be a very tough comparison Our volumes were up 30% plus in the second half of 2024. our volumes were up 30% plus in the second half of 2024 We don't expect that for 2025. we don't expect that for 2025 Really, our goal is with Eric and his team and Kenny and the great service product that they're providing, we want to try to retain some of that business. really our goal is with eric and his team and kenny and the great service product that they're providing we want to try to retain some of that business If you look further into intermodal, our domestic volumes are actually up here in the quarter. if you look further into intermodal our domestic volumes are actually up here in the quarter They're up about 6% right now. I think that's attributable in part to the international intermodal, some of the transloading that's happening, as well as some new business wins, which we'll talk about in a minute. The other part of pre mium, though, that I should mention is our automotive piece. Finished vehicles and parts are actually down about 7% to start the quarter. They're up about 6% right now. they're up about 6% right now I think that's attributable in part to the international intermodal, some of the transloading that's happening, as well as some new business wins, which we'll talk about in a minute. i think that's attributable in part to the international intermodal some of the transloading that's happening as well as some new business wins which we'll talk about in a minute The other part of pre mium, though, that I should mention is our automotive piece. the other part of pre mium though that i should mention is our automotive piece Finished vehicles and parts are actually down about 7% to start the quarter. finished vehicles and parts are actually down about 7% to start the quarter You've seen some production callbacks. It's just been a little bit of an ane mic start to the year on the auto side. Going back to bulk, grain, grain products continues to be a growth engine for us. Very strong pull through there. I should highlight one thing that might surprise some people. Coal, our coal volume is actually up about 1% here in the quarter. You've seen some production callbacks. you've seen some production callbacks It's just been a little bit of an ane mic start to the year on the auto side. it's just been a little bit of an ane mic start to the year on the auto side Going back to bulk, grain, grain products continues to be a growth engine for us. going back to bulk grain grain products continues to be a growth engine for us Very strong pull through there. very strong pull through there I should highlight one thing that might surprise some people. i should highlight one thing that might surprise some people Coal, our coal volume is actually up about 1% here in the quarter. coal our coal volume is actually up about 1% here in the quarter That's really about higher natural gas prices making some of our plants a bit more competitive there. Last thing I'll say before I turn it over to Eric is just a re minder that 2024 was a leap year. We do lose a day here in 2025 year-over-year, and it's worth about 25,000 carloads to us. Just a little re minder there. With that, Eric, I'll turn it over to you to talk about the network. That's really about higher natural gas prices making some of our plants a bit more competitive there. that's really about higher natural gas prices making some of our plants a bit more competitive there Last thing I'll say before I turn it over to Eric is just a re minder that 2024 was a leap year. last thing i'll say before i turn it over to eric is just a re minder that 2024 was a leap year We do lose a day here in 2025 year-over-year, and it's worth about 25,000 carloads to us. we do lose a day here in 2025 year-over-year and it's worth about 25,000 carloads to us Just a little re minder there. just a little re minder there With that, Eric, I'll turn it over to you to talk about the network. with that eric i'll turn it over to you to talk about the network

Speaker 4: Perfect. You recall on our Q4 earnings and talked about the momentum that we were carrying out of the fourth quarter that it really had built all the way through 2024. I'm very pleased to tell you today that we have carried that momentum. It shows in our results that you can see here. Most importantly, after safety is our freight car velocity. As a re minder, this is the best measure of fluidity on the railroad. Perfect. perfect You recall on our Q4 earnings and talked about the momentum that we were carrying out of the fourth quarter that it really had built all the way through 2024. you recall on our q4 earnings and talked about the momentum that we were carrying out of the fourth quarter that it really had built all the way through 2024 I'm very pleased to tell you today that we have carried that momentum. i'm very pleased to tell you today that we have carried that momentum It shows in our results that you can see here. it shows in our results that you can see here Most importantly, after safety is our freight car velocity. most importantly after safety is our freight car velocity As a re minder, this is the best measure of fluidity on the railroad. as a re minder this is the best measure of fluidity on the railroad 217 mi per day through February, 7% improvement. What that is allowing us to do is to support the growth that Jennifer mentioned. It's also delivering exceptional service. You can see those in our manifest and intermodal SPIs. One thing I do want to point out about the SPI metric is remember, we rebase that every single year. 217 mi per day through February, 7% improvement. 217 mi per day through february 7% improvement What that is allowing us to do is to support the growth that Jennifer mentioned. what that is allowing us to do is to support the growth that jennifer mentioned It's also delivering exceptional service. it's also delivering exceptional service You can see those in our manifest and intermodal SPIs. you can see those in our manifest and intermodal spis One thing I do want to point out about the SPI metric is remember, we rebase that every single year. one thing i do want to point out about the spi metric is remember we rebase that every single year The math is pick the best month that you've ever accomplished in the last three years and compare yourself to that. With every year as we get better, the goal actually becomes even more difficult. It is an even stronger compliment to the collective team at Union Pacific that we're operating at this level. If you then transition and you think through, okay, what's driving that freight car velocity? It's the bottom right. It's the 7% improvement in dwell. The math is pick the best month that you've ever accomplished in the last three years and compare yourself to that. the math is pick the best month that you've ever accomplished in the last three years and compare yourself to that With every year as we get better, the goal actually becomes even more difficult. with every year as we get better the goal actually becomes even more difficult It is an even stronger compliment to the collective team at Union Pacific that we're operating at this level. it is an even stronger compliment to the collective team at union pacific that we're operating at this level If you then transition and you think through, okay, what's driving that freight car velocity? if you then transition and you think through okay what's driving that freight car velocity It's the bottom right. it's the bottom right It's the 7% improvement in dwell. it's the 7% improvement in dwell Let's level set on that. 2024 was the best full year performance in the history of Union Pacific for dwell. You can see we've added 7% on top of that all the way through February. Why is that important? Number one, it's fundamentally how we deliver our service product, right? Improved dwell drives car velocity. Car velocity provides the fluidity that we need. Let's level set on that. 2024 was the best full year performance in the history of Union Pacific for dwell. let's level set on that 2024 was the best full year performance in the history of union pacific for dwell You can see we've added 7% on top of that all the way through February. you can see we've added 7% on top of that all the way through february Why is that important? why is that important Number one, it's fundamentally how we deliver our service product, right? number one it's fundamentally how we deliver our service product right Improved dwell drives car velocity. improved dwell drives car velocity Car velocity provides the fluidity that we need. car velocity provides the fluidity that we need In addition, we're turning our customers' assets faster. That's what's allowing us to do two things for them. One, to be able to support the growth they have, and also to be conscious of the fact that they can be capital intensive like we are. The faster we turn those cars, the less they need to invest in their asset base. On the locomotive productivity side, at 133 through February, 1% improvement. In addition, we're turning our customers' assets faster. in addition we're turning our customers' assets faster That's what's allowing us to do two things for them. that's what's allowing us to do two things for them One, to be able to support the growth they have, and also to be conscious of the fact that they can be capital intensive like we are. one to be able to support the growth they have and also to be conscious of the fact that they can be capital intensive like we are The faster we turn those cars, the less they need to invest in their asset base. the faster we turn those cars the less they need to invest in their asset base On the locomotive productivity side, at 133 through February, 1% improvement. on the locomotive productivity side at 133 through february 1% improvement Now, you look at that, the biggest, most important thing about that is when Jennifer was talking about the volume increases we've seen on the international intermodal side, 30%. That one number right there tells you that as we think about being able to onboard volume, some of which even we didn't know ahead of time that we were going to onboard, we're being very judicious in how we think about assets on the railroad. Now, you look at that, the biggest, most important thing about that is when Jennifer was talking about the volume increases we've seen on the international intermodal side, 30%. now you look at that the biggest most important thing about that is when jennifer was talking about the volume increases we've seen on the international intermodal side 30% That one number right there tells you that as we think about being able to onboard volume, some of which even we didn't know ahead of time that we were going to onboard, we're being very judicious in how we think about assets on the railroad. that one number right there tells you that as we think about being able to onboard volume some of which even we didn't know ahead of time that we were going to onboard we're being very judicious in how we think about assets on the railroad That means that we're taking that roughly 500 at the ready locomotives that we've staged across the system, and we're injecting them as we need them. That can be for volume, and it also can be for weather. Now, weather has certainly visited us this year, and we've weathered it quite well, as measured by everything that you see on this chart. Finally, on workforce productivity, off to just a super strong start at 9% improvement. That means that we're taking that roughly 500 at the ready locomotives that we've staged across the system, and we're injecting them as we need them. that means that we're taking that roughly 500 at the ready locomotives that we've staged across the system and we're injecting them as we need them That can be for volume, and it also can be for weather. that can be for volume and it also can be for weather Now, weather has certainly visited us this year, and we've weathered it quite well, as measured by everything that you see on this chart. now weather has certainly visited us this year and we've weathered it quite well as measured by everything that you see on this chart Finally, on workforce productivity, off to just a super strong start at 9% improvement. finally on workforce productivity off to just a super strong start at 9% improvement As a re minder, this is a measure of workforce productivity that encompasses every employee in Union Pacific. One of the biggest drivers that is resulting there is our continued work on train length. As you'll see, as we close out the quarter, we've had a very strong start on train length, and I still see more opportunities for that. As a re minder, this is a measure of workforce productivity that encompasses every employee in Union Pacific . as a re minder this is a measure of workforce productivity that encompasses every employee in union pacific One of the biggest drivers that is resulting there is our continued work on train length. one of the biggest drivers that is resulting there is our continued work on train length As you'll see, as we close out the quarter, we've had a very strong start on train length, and I still see more opportunities for that. as you'll see as we close out the quarter we've had a very strong start on train length and i still see more opportunities for that Now, let's talk about what really is going to continue to drive our service product, continue to drive our productivity. This is really the epicenter in its technology. I'm very proud of what we have as a collective portfolio across the board, and it's all departments. Today, obviously, we're going to focus on the ones that deliver service and deliver productivity. Adaptive transportation planning. Now, let's talk about what really is going to continue to drive our service product, continue to drive our productivity. now let's talk about what really is going to continue to drive our service product continue to drive our productivity This is really the epicenter in its technology. this is really the epicenter in its technology I'm very proud of what we have as a collective portfolio across the board, and it's all departments. i'm very proud of what we have as a collective portfolio across the board and it's all departments Today, obviously, we're going to focus on the ones that deliver service and deliver productivity. today obviously we're going to focus on the ones that deliver service and deliver productivity Adaptive transportation planning. adaptive transportation planning We haven't talked very much publicly about this. We launched it last year. We're about six months into its development. The best way to think about this is kind of imagine whatever your favorite navigation app is on your phone, like Waze. If you think about what you're doing on that, you're sitting here in New York, you're saying, "I want to go to Boston." You put it in, it calculates how long it's going to take you, and it gives you the route. We haven't talked very much publicly about this. we haven't talked very much publicly about this We launched it last year. we launched it last year We're about six months into its development. we're about six months into its development The best way to think about this is kind of imagine whatever your favorite navigation app is on your phone, like Waze. the best way to think about this is kind of imagine whatever your favorite navigation app is on your phone like waze If you think about what you're doing on that, you're sitting here in New York, you're saying, "I want to go to Boston." You put it in, it calculates how long it's going to take you, and it gives you the route. if you think about what you're doing on that you're sitting here in new york you're saying "i want to go to boston." you put it in it calculates how long it's going to take you and it gives you the route As you're driving to Boston, the world around you changes. It could be a car accident, could be a storm, etc. As a result, that app adjusts. Adaptive transportation planning is the exact same thing. We've always had a version of this. It's what's inside what we call CADX, which is how we dispatch the railroad. In CADX, it looks at like 10- mile or 20- mile sections of the railroad. Inside that, it considers everything that's happening. As you're driving to Boston, the world around you changes. as you're driving to boston the world around you changes It could be a car accident, could be a storm, etc. As a result, that app adjusts. it could be a car accident could be a storm etc as a result that app adjusts Adaptive transportation planning is the exact same thing. adaptive transportation planning is the exact same thing We've always had a version of this. we've always had a version of this It's what's inside what we call CADX, which is how we dispatch the railroad. it's what's inside what we call cadx which is how we dispatch the railroad In CADX, it looks at like 10- mile or 20- mile sections of the railroad. in cadx it looks at like 10- mile or 20- mile sections of the railroad Inside that, it considers everything that's happening. inside that it considers everything that's happening How many trains do I have? Which ones have most preference? Which ones are going which way? We don't have a tool yet that looks at the whole 33,000 mi and opti mizes. That's what this is. We're already implementing it, and it's going to come in modules. How many trains do I have? how many trains do i have Which ones have most preference? which ones have most preference Which ones are going which way? which ones are going which way We don't have a tool yet that looks at the whole 33,000 mi and opti mizes. we don't have a tool yet that looks at the whole 33,000 mi and opti mizes That's what this is. that's what this is We're already implementing it, and it's going to come in modules. we're already implementing it and it's going to come in modules Just like some of the other initiatives we've taken on in the past, you'll see us be able to continue to layer value over and over again with that. What's most important for us on the service side is whether you're talking about mixed changes, a storm event, or some other type of variability event, we can now get the transportation plan changes we need in a matter of seconds and minutes. Just like some of the other initiatives we've taken on in the past, you'll see us be able to continue to layer value over and over again with that. just like some of the other initiatives we've taken on in the past you'll see us be able to continue to layer value over and over again with that What's most important for us on the service side is whether you're talking about mixed changes, a storm event, or some other type of variability event, we can now get the transportation plan changes we need in a matter of seconds and minutes. what's most important for us on the service side is whether you're talking about mixed changes a storm event or some other type of variability event we can now get the transportation plan changes we need in a matter of seconds and minutes Instead of today, in some cases, it can take us multiple days to be able to adjust. Again, whether you're talking about service or productivity, it's a big driver there. Ter minal Command Center is really a visualization tool combined with an opti mization tool. This is for our frontline leaders in our ter minals. Instead of today, in some cases, it can take us multiple days to be able to adjust. instead of today in some cases it can take us multiple days to be able to adjust Again, whether you're talking about service or productivity, it's a big driver there. again whether you're talking about service or productivity it's a big driver there Ter minal Command Center is really a visualization tool combined with an opti mization tool. ter minal command center is really a visualization tool combined with an opti mization tool This is for our frontline leaders in our ter minals. this is for our frontline leaders in our ter minals If you think about everything that happens on the railroad, whether you're talking about manifest, intermodal, or auto ramps, it all starts in the ter minals. What this tool allows our frontline leaders to do is to see with even better visibility what's in their yard from A to Z. If you think about everything that happens on the railroad, whether you're talking about manifest, intermodal, or auto ramps, it all starts in the ter minals. if you think about everything that happens on the railroad whether you're talking about manifest intermodal or auto ramps it all starts in the ter minals What this tool allows our frontline leaders to do is to see with even better visibility what's in their yard from A to Z. what this tool allows our frontline leaders to do is to see with even better visibility what's in their yard from a to z What I mean by that is it can look at every single track, how long have the cars been dwelling in there, how do I want to opti mize the way that I actually bring in cars from the receiving to be able to switch them, which tracks do I want to pull first as I'm building outbound trains, and on and on it goes. It's a phenomenal tool. We're just starting to scratch the surface on its value proposition, but we expect that it's going to have a large value proposition for us. What I mean by that is it can look at every single track, how long have the cars been dwelling in there, how do I want to opti mize the way that I actually bring in cars from the receiving to be able to switch them, which tracks do I want to pull first as I'm building outbound trains, and on and on it goes. what i mean by that is it can look at every single track how long have the cars been dwelling in there how do i want to opti mize the way that i actually bring in cars from the receiving to be able to switch them which tracks do i want to pull first as i'm building outbound trains and on and on it goes It's a phenomenal tool. it's a phenomenal tool We're just starting to scratch the surface on its value proposition, but we expect that it's going to have a large value proposition for us. we're just starting to scratch the surface on its value proposition but we expect that it's going to have a large value proposition for us Train control and emerging tech is really about safety, that as we work to become even more safe, we also become more consistent in our service product, and we become more productive. We believe that in our hearts, those three things are linked together. What this is, is a very vast portfolio that focuses on things like how do we help people have to not walk as far, and how do we handle material better, and how do we handle trains better. Train control and emerging tech is really about safety, that as we work to become even more safe, we also become more consistent in our service product, and we become more productive. train control and emerging tech is really about safety that as we work to become even more safe we also become more consistent in our service product and we become more productive We believe that in our hearts, those three things are linked together. we believe that in our hearts those three things are linked together What this is, is a very vast portfolio that focuses on things like how do we help people have to not walk as far, and how do we handle material better, and how do we handle trains better. what this is is a very vast portfolio that focuses on things like how do we help people have to not walk as far and how do we handle material better and how do we handle trains better Those are the three biggest risks on the railroad that's inherent to what we do. You have seen us talk in the past about SwitchPro NX, or before we called it Mobile NX. This allows an operator in the ter minal to be able to handle cars and takes their walking from six miles down to one mile. Those are the three biggest risks on the railroad that's inherent to what we do. those are the three biggest risks on the railroad that's inherent to what we do You have seen us talk in the past about SwitchPro NX, or before we called it Mobile NX. you have seen us talk in the past about switchpro nx or before we called it mobile nx This allows an operator in the ter minal to be able to handle cars and takes their walking from six miles down to one mile. this allows an operator in the ter minal to be able to handle cars and takes their walking from six miles down to one mile It also improves the dwell in those ter minals by up to 20%. In the case of material handling, it's the automation of our engineering equipment that removes the need to physically have to handle things like ties and move to automated distribution. Of course, on the train handling side, it's our precision train builder that we talk about consistently, and we always are going to talk about it because it's the best tool. It's proprietary to Union Pacific, and it's in large part what's allowed us to reduce our derailments on the main line while we've still been able to grow train length. It also improves the dwell in those ter minals by up to 20%. it also improves the dwell in those ter minals by up to 20% In the case of material handling, it's the automation of our engineering equipment that removes the need to physically have to handle things like ties and move to automated distribution. in the case of material handling it's the automation of our engineering equipment that removes the need to physically have to handle things like ties and move to automated distribution Of course, on the train handling side, it's our precision train builder that we talk about consistently, and we always are going to talk about it because it's the best tool. of course on the train handling side it's our precision train builder that we talk about consistently and we always are going to talk about it because it's the best tool It's proprietary to Union Pacific, and it's in large part what's allowed us to reduce our derailments on the main line while we've still been able to grow train length. it's proprietary to union pacific and it's in large part what's allowed us to reduce our derailments on the main line while we've still been able to grow train length On the customer interface, this is a portfolio of initiatives that really focus on, as the customer is engaging with Union Pacific, even beyond our APIs, what do we need to be able to provide them, in what frequency we need to provide them, and what manner do we need to provide it to them that's easiest for them to understand the things like where their cars, their estimated arrival times, being able to handle if they have a claim of some sort, if they have a question, being able to handle it in the most efficient fashion. Again, whether you're talking about safety, service, or productivity, we have the best portfolio of technology initiatives, I believe, in the industry. On the customer interface, this is a portfolio of initiatives that really focus on, as the customer is engaging with Union Pacific, even beyond our APIs, what do we need to be able to provide them, in what frequency we need to provide them, and what manner do we need to provide it to them that's easiest for them to understand the things like where their cars, their estimated arrival times, being able to handle if they have a claim of some sort, if they have a question, being able to handle it in the most efficient fashion. on the customer interface this is a portfolio of initiatives that really focus on as the customer is engaging with union pacific even beyond our apis what do we need to be able to provide them in what frequency we need to provide them and what manner do we need to provide it to them that's easiest for them to understand the things like where their cars their estimated arrival times being able to handle if they have a claim of some sort if they have a question being able to handle it in the most efficient fashion Again, whether you're talking about safety, service, or productivity, we have the best portfolio of technology initiatives, I believe, in the industry. again whether you're talking about safety service or productivity we have the best portfolio of technology initiatives i believe in the industry

Speaker 2: Obviously, the strategy is to take those three fundamentals of railroading and translate them into growth. I'll wrap things up with a couple of growth stories for us. The first two really are centered around that service product. I think sometimes it's maybe hard for people to conceptualize how does better service actually drive growth. I think these are two really good examples of that. Obviously, the strategy is to take those three fundamentals of railroading and translate them into growth. obviously the strategy is to take those three fundamentals of railroading and translate them into growth I'll wrap things up with a couple of growth stories for us. i'll wrap things up with a couple of growth stories for us The first two really are centered around that service product. the first two really are centered around that service product I think sometimes it's maybe hard for people to conceptualize how does better service actually drive growth. i think sometimes it's maybe hard for people to conceptualize how does better service actually drive growth I think these are two really good examples of that. i think these are two really good examples of that The first one's with our ethanol business, where many of those customers, most of those customers either own or lease their rail cars. To the extent that we can drive productivity, speed their cycle times, that's real savings for those customers. Last year, we took about a day and a half out of the cycle time for some of our ethanol customers. The first one's with our ethanol business, where many of those customers, most of those customers either own or lease their rail cars. the first one's with our ethanol business where many of those customers most of those customers either own or lease their rail cars To the extent that we can drive productivity, speed their cycle times, that's real savings for those customers. to the extent that we can drive productivity speed their cycle times that's real savings for those customers Last year, we took about a day and a half out of the cycle time for some of our ethanol customers. last year we took about a day and a half out of the cycle time for some of our ethanol customers That allowed us to win new business, gain market share, and it added about 9,000 carloads to the railroad in 2024. Si milarly, we've talked about a new coal contract that we won here in 2025. Now, that business doesn't start on us until April, but cycle time was part of what helped drive that business win as well. We had and provided faster cycle times than did the competition, and that allowed us to pick up that business. That allowed us to win new business, gain market share, and it added about 9,000 carloads to the railroad in 2024. that allowed us to win new business gain market share and it added about 9,000 carloads to the railroad in 2024 Si milarly, we've talked about a new coal contract that we won here in 2025. si milarly we've talked about a new coal contract that we won here in 2025 Now, that business doesn't start on us until April, but cycle time was part of what helped drive that business win as well. now that business doesn't start on us until april but cycle time was part of what helped drive that business win as well We had and provided faster cycle times than did the competition, and that allowed us to pick up that business. we had and provided faster cycle times than did the competition and that allowed us to pick up that business That's going to add about a train a day to us from a coal perspective starting again here in April. The other two examples really get into business development. We talked about this quite a bit at our investor day. We know that we need to work directly with our customers, addressing them at the project level to be able to bring new business onto the railroad. That's going to add about a train a day to us from a coal perspective starting again here in April. that's going to add about a train a day to us from a coal perspective starting again here in april The other two examples really get into business development. the other two examples really get into business development We talked about this quite a bit at our investor day. we talked about this quite a bit at our investor day We know that we need to work directly with our customers, addressing them at the project level to be able to bring new business onto the railroad. we know that we need to work directly with our customers addressing them at the project level to be able to bring new business onto the railroad A couple of wins here. One is with Norfolk Crush. It's a soybean processing plant in northeastern Nebraska. They made the decision to construct their plant on the UP rail lines, in part because we worked with them to offer them both unit train service as well as manifest service so that we could, again, meet the needs that they had. A couple of wins here. a couple of wins here One is with Norfolk Crush. one is with norfolk crush It's a soybean processing plant in northeastern Nebraska. it's a soybean processing plant in northeastern nebraska They made the decision to construct their plant on the UP rail lines, in part because we worked with them to offer them both unit train service as well as manifest service so that we could, again, meet the needs that they had. they made the decision to construct their plant on the up rail lines in part because we worked with them to offer them both unit train service as well as manifest service so that we could again meet the needs that they had It's a great opportunity for us because it gives us both an inbound load in terms of the soybeans as well as the outbound loads in terms of the processed oils. That's about a 9,000 annual carload lift for us. The last one was with Uber Freight. This is a direct off-the-truck onto a rail conversion, 6,000 trucks that we picked up here. It's a great opportunity for us because it gives us both an inbound load in terms of the soybeans as well as the outbound loads in terms of the processed oils. it's a great opportunity for us because it gives us both an inbound load in terms of the soybeans as well as the outbound loads in terms of the processed oils That's about a 9,000 annual carload lift for us. that's about a 9,000 annual carload lift for us The last one was with Uber Freight. the last one was with uber freight This is a direct off-the-truck onto a rail conversion, 6,000 trucks that we picked up here. this is a direct off-the-truck onto a rail conversion 6,000 trucks that we picked up here It is the service product that we are providing to the customers, the value that we are providing them, the consistency Eric mentioned, the SPI, and really proving on a consistent basis to our customers that we are able to be there with them and support their growth initiatives. It is the service product that we are providing to the customers, the value that we are providing them, the consistency Eric mentioned, the SPI, and really proving on a consistent basis to our customers that we are able to be there with them and support their growth initiatives. it is the service product that we are providing to the customers the value that we are providing them the consistency eric mentioned the spi and really proving on a consistent basis to our customers that we are able to be there with them and support their growth initiatives Really, that is the end game for us, with the execution of our strategy, using that to drive growth on the railroad. Growth across a very efficient network can be a beautiful thing from a profitability standpoint, and it lets us drive strong returns for our shareholders. We will open it up for your questions. Really, that is the end game for us, with the execution of our strategy, using that to drive growth on the railroad. really that is the end game for us with the execution of our strategy using that to drive growth on the railroad Growth across a very efficient network can be a beautiful thing from a profitability standpoint, and it lets us drive strong returns for our shareholders. growth across a very efficient network can be a beautiful thing from a profitability standpoint and it lets us drive strong returns for our shareholders We will open it up for your questions. we will open it up for your questions

Speaker 3: Okay. Great. Thanks very much. That was a very helpful start in terms of growth and technology, both very important for the railroad going in the future. Just to start a little bit more in the near term, obviously, weather was not that great in the first quarter. First quarter OR is never the best for anybody really throughout the year for the most part. Can you give us a little more color? Maybe you can put some specific thoughts on just how the first quarter is shaping up in particular. Okay. okay Great. great Thanks very much. thanks very much That was a very helpful start in terms of growth and technology, both very important for the railroad going in the future. that was a very helpful start in terms of growth and technology both very important for the railroad going in the future Just to start a little bit more in the near term, obviously, weather was not that great in the first quarter. just to start a little bit more in the near term obviously weather was not that great in the first quarter First quarter OR is never the best for anybody really throughout the year for the most part. first quarter or is never the best for anybody really throughout the year for the most part Can you give us a little more color? can you give us a little more color Maybe you can put some specific thoughts on just how the first quarter is shaping up in particular. maybe you can put some specific thoughts on just how the first quarter is shaping up in particular

Speaker 2: Yeah. To your point about seasonality, it is a part of our business, certainly. First quarter, you generally have less car loadings. You generally have the tougher operating conditions. Historically, I would say that shows up in, call it a point and a half to two points sequential degradation in your operating ratio. This year, our carloads have been strong, are staying strong decently, up 8% year-to-date. Yeah. yeah To your point about seasonality, it is a part of our business, certainly. to your point about seasonality it is a part of our business certainly First quarter, you generally have less car loadings. first quarter you generally have less car loadings You generally have the tougher operating conditions. you generally have the tougher operating conditions Historically, I would say that shows up in, call it a point and a half to two points sequential degradation in your operating ratio. historically i would say that shows up in call it a point and a half to two points sequential degradation in your operating ratio This year, our carloads have been strong, are staying strong decently, up 8% year-to-date. this year our carloads have been strong are staying strong decently up 8% year-to-date That's a positive. The mix continues to be on the unfavorable side of the ledger when you see that most of that growth is continuing to come from international intermodal. Although I think we did a nice job in the fourth quarter showing that that can still be good, profitable business for us. Hopefully, that helps to allay some of the investor concerns about the fact, can you both grow intermodal and improve your margins? That's a positive. that's a positive The mix continues to be on the unfavorable side of the ledger when you see that most of that growth is continuing to come from international intermodal. the mix continues to be on the unfavorable side of the ledger when you see that most of that growth is continuing to come from international intermodal Although I think we did a nice job in the fourth quarter showing that that can still be good, profitable business for us. although i think we did a nice job in the fourth quarter showing that that can still be good profitable business for us Hopefully, that helps to allay some of the investor concerns about the fact, can you both grow intermodal and improve your margins? hopefully that helps to allay some of the investor concerns about the fact can you both grow intermodal and improve your margins The answer to that is yes, you can do both. Weather-wise, February was certainly tougher for us, but I do not think Eric would say that that was unseasonably so. The answer to that is yes, you can do both. the answer to that is yes you can do both Weather-wise, February was certainly tougher for us, but I do not think Eric would say that that was unseasonably so. weather-wise february was certainly tougher for us but i do not think eric would say that that was unseasonably so

Speaker 4: No. I think you're exactly right. No. no I think you're exactly right. i think you're exactly right

Speaker 2: So. So. so

Speaker 3: Okay. Obviously, the other big topic is tariffs. A couple of questions on that. How would you characterize conversations with shippers and customers at this point? I guess, Eric, for you in particular, have you seen any impact of the start and stop with the auto in particular? How do you just in general think about planning for some of the volatility and working through that with the network? Okay. okay Obviously, the other big topic is tariffs. obviously the other big topic is tariffs A couple of questions on that. a couple of questions on that How would you characterize conversations with shippers and customers at this point? how would you characterize conversations with shippers and customers at this point I guess, Eric, for you in particular, have you seen any impact of the start and stop with the auto in particular? i guess eric for you in particular have you seen any impact of the start and stop with the auto in particular How do you just in general think about planning for some of the volatility and working through that with the network? how do you just in general think about planning for some of the volatility and working through that with the network

Speaker 2: Yeah. I'll start and then turn it over to Eric. In talking with our customers, I think everybody's in the same place a little bit in terms of there's uncertainty and they're unsure what's the next move that they need to make or that will potentially be made relative to tariffs. For our customers and for ourselves, it all comes back to what is the consumer going to do. Is the consumer going to stay engaged or is the consumer going to pull back. Yeah. yeah I'll start and then turn it over to Eric. i'll start and then turn it over to eric In talking with our customers, I think everybody's in the same place a little bit in terms of there's uncertainty and they're unsure what's the next move that they need to make or that will potentially be made relative to tariffs. in talking with our customers i think everybody's in the same place a little bit in terms of there's uncertainty and they're unsure what's the next move that they need to make or that will potentially be made relative to tariffs For our customers and for ourselves, it all comes back to what is the consumer going to do. for our customers and for ourselves it all comes back to what is the consumer going to do Is the consumer going to stay engaged or is the consumer going to pull back. is the consumer going to stay engaged or is the consumer going to pull back I was listening to some news this morning and small business consumer confidence hit, I think, a four-month low in the most recent survey. That's concerning. Obviously, that's something that we're watching very closely. We need to stay very aligned with our customers to understand what their plans are. I was listening to some news this morning and small business consumer confidence hit, I think, a four-month low in the most recent survey. i was listening to some news this morning and small business consumer confidence hit i think a four-month low in the most recent survey That's concerning. that's concerning Obviously, that's something that we're watching very closely. obviously that's something that we're watching very closely We need to stay very aligned with our customers to understand what their plans are. we need to stay very aligned with our customers to understand what their plans are I think everyone's, I don't want to say frozen, but people are unwilling to make big bets one way or the other right now in terms of they don't want to pull back because there isn't a tariff yet in many cases. Now, Wednesday, I think some of that changes for steel and alu minum. I think everyone's, I don't want to say frozen, but people are unwilling to make big bets one way or the other right now in terms of they don't want to pull back because there isn't a tariff yet in many cases. i think everyone's i don't want to say frozen but people are unwilling to make big bets one way or the other right now in terms of they don't want to pull back because there isn't a tariff yet in many cases Now, Wednesday, I think some of that changes for steel and alu minum. now wednesday i think some of that changes for steel and alu minum At the same time, people aren't willing to really step out and make big investments. That's the landscape that we're dealing with right now. Hopefully, we get some certainty here soon so that then people can really start to make those investment choices and move forward. At the same time, people aren't willing to really step out and make big investments. at the same time people aren't willing to really step out and make big investments That's the landscape that we're dealing with right now. that's the landscape that we're dealing with right now Hopefully, we get some certainty here soon so that then people can really start to make those investment choices and move forward. hopefully we get some certainty here soon so that then people can really start to make those investment choices and move forward

Speaker 4: As far as reacting to the uncertainty, that's a playbook we know quite well. When you're thinking about it, especially from a productivity perspective, the first place you're going to start as you get clarity towards what's the outcome is we start looking at our transportation plan. We start fundamentally redefining where are we going to run certain trains, how many of those are we going to run. As far as reacting to the uncertainty, that's a playbook we know quite well. as far as reacting to the uncertainty that's a playbook we know quite well When you're thinking about it, especially from a productivity perspective, the first place you're going to start as you get clarity towards what's the outcome is we start looking at our transportation plan. when you're thinking about it especially from a productivity perspective the first place you're going to start as you get clarity towards what's the outcome is we start looking at our transportation plan We start fundamentally redefining where are we going to run certain trains, how many of those are we going to run. we start fundamentally redefining where are we going to run certain trains how many of those are we going to run That really starts to trickle down through the matrix of the rest of the organization so that then goes into how many people do we need to hire. Already this year, we have made some adjustments to our hiring plan. They've been small adjustments, but appropriate adjustments. We look at how many locomotives do we need to have in the active fleet, and we just keep working all the way through that. Our ability to respond to those types of things, we're very good at it. We've demonstrated that in the past. That really starts to trickle down through the matrix of the rest of the organization so that then goes into how many people do we need to hire. that really starts to trickle down through the matrix of the rest of the organization so that then goes into how many people do we need to hire Already this year, we have made some adjustments to our hiring plan. already this year we have made some adjustments to our hiring plan They've been small adjustments, but appropriate adjustments. they've been small adjustments but appropriate adjustments We look at how many locomotives do we need to have in the active fleet, and we just keep working all the way through that. we look at how many locomotives do we need to have in the active fleet and we just keep working all the way through that Our ability to respond to those types of things, we're very good at it. our ability to respond to those types of things we're very good at it We've demonstrated that in the past. we've demonstrated that in the past

Speaker 3: In terms of the commodities or maybe end markets that you're focused on from a potential impact of tariffs, which are the ones that are maybe the top five or three from your perspective, I would think? Autos and lumber. Obviously, we saw the retaliatory tariffs last time that impacted export ag. Those are the top three in my mind. Are there any others that you would sort of put on that list as well? In terms of the commodities or maybe end markets that you're focused on from a potential impact of tariffs, which are the ones that are maybe the top five or three from your perspective, I would think? in terms of the commodities or maybe end markets that you're focused on from a potential impact of tariffs which are the ones that are maybe the top five or three from your perspective i would think Autos and lumber. autos and lumber Obviously, we saw the retaliatory tariffs last time that impacted export ag. obviously we saw the retaliatory tariffs last time that impacted export ag Those are the top three in my mind. those are the top three in my mind Are there any others that you would sort of put on that list as well? are there any others that you would sort of put on that list as well

Speaker 2: No. I mean, you certainly hit my top three, Brian. And automotive clearly is at the top of the list when you look at flows into and out of Mexico as well as into and out of Canada. Parts are going north-south and finished vehicles coming out of Mexico. Like I said, those volumes are down 7% to start the year. No. no I mean, you certainly hit my top three, Brian. i mean you certainly hit my top three brian And automotive clearly is at the top of the list when you look at flows into and out of Mexico as well as into and out of Canada. and automotive clearly is at the top of the list when you look at flows into and out of mexico as well as into and out of canada Parts are going north-south and finished vehicles coming out of Mexico. parts are going north-south and finished vehicles coming out of mexico Like I said, those volumes are down 7% to start the year. like i said those volumes are down 7% to start the year It is a little bit of a weaker market anyway, setting tariffs aside. Certainly, if you put an added cost to that, that would be concerning for us. Again, lumber, housing has been down. That has been a bit of an anemic market for us as well in 2024 and starting out 2025. If there is a further shock or further cost to that, that is going to be concerning. It is a little bit of a weaker market anyway, setting tariffs aside. it is a little bit of a weaker market anyway setting tariffs aside Certainly, if you put an added cost to that, that would be concerning for us. certainly if you put an added cost to that that would be concerning for us Again, lumber, housing has been down. again lumber housing has been down That has been a bit of an anemic market for us as well in 2024 and starting out 2025. that has been a bit of an anemic market for us as well in 2024 and starting out 2025 If there is a further shock or further cost to that, that is going to be concerning. if there is a further shock or further cost to that, that is going to be concerning The retaliatory tariffs on grain southbound into Mexico would certainly be the other piece that comes to my mind. You have intermodal flows just north-south as well. Really watching all of those things. That is where, again, staying close with our customers, understanding what their plans are so that we can make adjustments and support them if they look to be changing their supply chains. The retaliatory tariffs on grain southbound into Mexico would certainly be the other piece that comes to my mind. the retaliatory tariffs on grain southbound into mexico would certainly be the other piece that comes to my mind You have intermodal flows just north-south as well. you have intermodal flows just north-south as well Really watching all of those things. really watching all of those things That is where, again, staying close with our customers, understanding what their plans are so that we can make adjustments and support them if they look to be changing their supply chains. that is where again staying close with our customers understanding what their plans are so that we can make adjustments and support them if they look to be changing their supply chains Because if ultimately that is where this takes us, we want to be working with them very closely as they are looking to maybe put more operations in the United States. We want to make sure that they have an opportunity to do that, that Union Pacific can serve them. Because if ultimately that is where this takes us, we want to be working with them very closely as they are looking to maybe put more operations in the United States. because if ultimately that is where this takes us we want to be working with them very closely as they are looking to maybe put more operations in the united states We want to make sure that they have an opportunity to do that, that Union Pacific can serve them. we want to make sure that they have an opportunity to do that that union pacific can serve them

Speaker 3: One other potential big supply chain change could come about if they put in the fees for the vessels tied to China, either flagged or built or in the backlog. From what I've heard, that would create a lot of potential grouping at larger ports, potentially big ones that you serve. I do not know what you're hearing from your ocean carrier partners, the international folks, from that perspective. One other potential big supply chain change could come about if they put in the fees for the vessels tied to China, either flagged or built or in the backlog. one other potential big supply chain change could come about if they put in the fees for the vessels tied to china either flagged or built or in the backlog From what I've heard, that would create a lot of potential grouping at larger ports, potentially big ones that you serve. from what i've heard that would create a lot of potential grouping at larger ports potentially big ones that you serve I do not know what you're hearing from your ocean carrier partners, the international folks, from that perspective. i do not know what you're hearing from your ocean carrier partners the international folks from that perspective Eric, that would probably put some strain on the network. Clearly, you're up 30% international intermodal. You can handle a good amount. I just wanted to see how far along that thought process was and how you're viewing that potentially if it were to come to pass. Eric, that would probably put some strain on the network. eric that would probably put some strain on the network Clearly, you're up 30% international intermodal. clearly you're up 30% international intermodal You can handle a good amount. you can handle a good amount I just wanted to see how far along that thought process was and how you're viewing that potentially if it were to come to pass. i just wanted to see how far along that thought process was and how you're viewing that potentially if it were to come to pass

Speaker 2: Yeah. I mean, again, you hit it on the head. I think it does lend a preference then to the larger ports. I think that's where we really like the diversity of our franchise. We serve large ports and small ports. That may concentrate traffic a bit. I think that's where the agility that Eric and his team demonstrated last year with responding to that very strong international intermodal growth and handling it while improving our service product, I think will certainly come into play again. Yeah. yeah I mean, again, you hit it on the head. i mean again you hit it on the head I think it does lend a preference then to the larger ports. i think it does lend a preference then to the larger ports I think that's where we really like the diversity of our franchise. i think that's where we really like the diversity of our franchise We serve large ports and small ports. we serve large ports and small ports That may concentrate traffic a bit. I think that's where the agility that Eric and his team demonstrated last year with responding to that very strong international intermodal growth and handling it while improving our service product, I think will certainly come into play again. that may concentrate traffic a bit. i think that's where the agility that eric and his team demonstrated last year with responding to that very strong international intermodal growth and handling it while improving our service product i think will certainly come into play again

Speaker 4: I think you're exactly right. You also see we're making investments even in the LA Basin, right? Inland Empire, we've been able to add another 70,000 lifts last year. We're going to add in even more than that this year. If you think about really the whole intermodal network in total, over the last handful of years, we've added in almost a million lifts across our network. We've been building in this capacity, and we'll be able to handle that volume. I think you're exactly right. i think you're exactly right You also see we're making investments even in the LA Basin, right? you also see we're making investments even in the la basin right Inland Empire, we've been able to add another 70,000 lifts last year. inland empire we've been able to add another 70,000 lifts last year We're going to add in even more than that this year. we're going to add in even more than that this year If you think about really the whole intermodal network in total, over the last handful of years, we've added in almost a million lifts across our network. if you think about really the whole intermodal network in total over the last handful of years we've added in almost a million lifts across our network We've been building in this capacity, and we'll be able to handle that volume. we've been building in this capacity and we'll be able to handle that volume Periods where we start to see challenges, it usually comes down to, okay, how do I just simply shift some of the resources down to that part of the railroad to be able to handle it. Periods where we start to see challenges, it usually comes down to, okay, how do I just simply shift some of the resources down to that part of the railroad to be able to handle it. periods where we start to see challenges it usually comes down to okay how do i just simply shift some of the resources down to that part of the railroad to be able to handle it We're starting to hear more about truckload conversion in general across the industry, but in particular for UP. At least my perspective, that's been a pretty significant change over the last couple of years. What's causing that? I know there's internal focus probably as part of that. New partners, perhaps, with Uber Freight seems like another one. Maybe you can characterize what's driving some of that and where are these coming from? Are these people who trust the service? Are these new to rail? Is it a mix of all the above? We're starting to hear more about truckload conversion in general across the industry, but in particular for UP. we're starting to hear more about truckload conversion in general across the industry but in particular for up At least my perspective, that's been a pretty significant change over the last couple of years. at least my perspective that's been a pretty significant change over the last couple of years What's causing that? what's causing that I know there's internal focus probably as part of that. i know there's internal focus probably as part of that New partners, perhaps, with Uber Freight seems like another one. new partners perhaps with uber freight seems like another one Maybe you can characterize what's driving some of that and where are these coming from? maybe you can characterize what's driving some of that and where are these coming from Are these people who trust the service? are these people who trust the service Are these new to rail? are these new to rail Is it a mix of all the above? is it a mix of all the above

Speaker 2: Yeah. I would say it's a mix of all the above. Certainly, one of the first places that we're looking to grow our share is with existing customers. Because generally speaking, our existing customers don't literally put all their eggs in one basket. They're going to ship with ourselves. They may ship with another railroad, even out of the same plant, or they may be dividing that traffic between rail and truck. Yeah. yeah I would say it's a mix of all the above. i would say it's a mix of all the above Certainly, one of the first places that we're looking to grow our share is with existing customers. certainly one of the first places that we're looking to grow our share is with existing customers Because generally speaking, our existing customers don't literally put all their eggs in one basket. because generally speaking our existing customers don't literally put all their eggs in one basket They're going to ship with ourselves. they're going to ship with ourselves They may ship with another railroad, even out of the same plant, or they may be dividing that traffic between rail and truck. they may ship with another railroad even out of the same plant or they may be dividing that traffic between rail and truck Some of our first conversations are, how can we shift more of that business to us? Talk to them and share with them the cost savings that we're hopefully driving for them, the improved service that Eric and his team are giving them, and then talking to them about where those opportunities are. Certainly, when you're providing that really strong service product, that's a much easier conversation. Some of our first conversations are, how can we shift more of that business to us? some of our first conversations are how can we shift more of that business to us Talk to them and share with them the cost savings that we're hopefully driving for them, the improved service that Eric and his team are giving them, and then talking to them about where those opportunities are. talk to them and share with them the cost savings that we're hopefully driving for them the improved service that eric and his team are giving them and then talking to them about where those opportunities are Certainly, when you're providing that really strong service product, that's a much easier conversation. certainly when you're providing that really strong service product that's a much easier conversation We are having customers that are being much more open. They are opening their transportation book to us and saying, okay, here are some different lanes. Let's talk about what you can do. Those are obviously great conversations to have. The other piece certainly is with newer customers. We did add a couple large IMCs to our stable here a couple of years ago. We are having customers that are being much more open. They are opening their transportation book to us and saying, okay, here are some different lanes. we are having customers that are being much more open. they are opening their transportation book to us and saying okay, here are some different lanes Let's talk about what you can do. let's talk about what you can do Those are obviously great conversations to have. those are obviously great conversations to have The other piece certainly is with newer customers. the other piece certainly is with newer customers We did add a couple large IMCs to our stable here a couple of years ago. we did add a couple large imcs to our stable here a couple of years ago We did that at a time that the truck market was starting to go down. We believe we really have not seen the full benefit to our network yet of those significant contract wins. We are working very closely with those partners to help them grow their businesses on the intermodal side. You hear us talk about customer vision. You saw Eric talk about the different things that we are doing from a technology standpoint. We did that at a time that the truck market was starting to go down. we did that at a time that the truck market was starting to go down We believe we really have not seen the full benefit to our network yet of those significant contract wins. we believe we really have not seen the full benefit to our network yet of those significant contract wins We are working very closely with those partners to help them grow their businesses on the intermodal side. we are working very closely with those partners to help them grow their businesses on the intermodal side You hear us talk about customer vision. you hear us talk about customer vision You saw Eric talk about the different things that we are doing from a technology standpoint. you saw eric talk about the different things that we are doing from a technology standpoint All of those things are geared towards making it easier for customers to do business with us, giving them greater visibility to the traffic when it's on our lines, and obviously backing that up with a very strong service product. We know we can be a more economical, safer option for our customers. As we're proving that day in and day out, we're gaining confidence in that consumer base, and they're giving us more business. All of those things are geared towards making it easier for customers to do business with us, giving them greater visibility to the traffic when it's on our lines, and obviously backing that up with a very strong service product. all of those things are geared towards making it easier for customers to do business with us giving them greater visibility to the traffic when it's on our lines and obviously backing that up with a very strong service product We know we can be a more economical, safer option for our customers. we know we can be a more economical safer option for our customers As we're proving that day in and day out, we're gaining confidence in that consumer base, and they're giving us more business. as we're proving that day in and day out we're gaining confidence in that consumer base and they're giving us more business

Speaker 3: Eric, when you're dealing with the big coming out of the West Coast in one particular product line, I guess, how are you thinking about network balance going back in the other direction? Is that a challenge now? Are you being able to handle it? Are you able to find different ways to do matchbacks and possibly exports? Because it does seem like this is going to be a good problem to have at least for the first half and maybe even further than that. Eric, when you're dealing with the big coming out of the West Coast in one particular product line, I guess, how are you thinking about network balance going back in the other direction? eric when you're dealing with the big coming out of the west coast in one particular product line i guess how are you thinking about network balance going back in the other direction Is that a challenge now? is that a challenge now Are you being able to handle it? are you being able to handle it Are you able to find different ways to do matchbacks and possibly exports? are you able to find different ways to do matchbacks and possibly exports Because it does seem like this is going to be a good problem to have at least for the first half and maybe even further than that. because it does seem like this is going to be a good problem to have at least for the first half and maybe even further than that

Speaker 4: Yeah. Kenny and I work as our teams together because we believe this is a critical initiative for us. We've demonstrated progress certainly over the last many years. As you said, your matchbacks, biggest opportunity is always going to continue to be things like our G4 ag facility. In addition to that, not a lot of people know this. For example, we ship a lot of hay west. Yeah. yeah Kenny and I work as our teams together because we believe this is a critical initiative for us. kenny and i work as our teams together because we believe this is a critical initiative for us We've demonstrated progress certainly over the last many years. we've demonstrated progress certainly over the last many years As you said, your matchbacks, biggest opportunity is always going to continue to be things like our G4 ag facility. as you said your matchbacks biggest opportunity is always going to continue to be things like our g4 ag facility In addition to that, not a lot of people know this. in addition to that not a lot of people know this For example, we ship a lot of hay west. for example we ship a lot of hay west We have hay farmers in Arizona that we do matchbacks into the LA Basin as well. Kenny and the team are constantly looking for any opportunity and every opportunity they can to be able to fill those containers on their westbound moves. What's beautiful for operating it is we're going to take that box back anyways. We don't have to make complex transportation plans to make that happen. We have hay farmers in Arizona that we do matchbacks into the LA Basin as well. we have hay farmers in arizona that we do matchbacks into the la basin as well Kenny and the team are constantly looking for any opportunity and every opportunity they can to be able to fill those containers on their westbound moves. kenny and the team are constantly looking for any opportunity and every opportunity they can to be able to fill those containers on their westbound moves What's beautiful for operating it is we're going to take that box back anyways. what's beautiful for operating it is we're going to take that box back anyways We don't have to make complex transportation plans to make that happen. we don't have to make complex transportation plans to make that happen It is one of those wonderful scenarios where everybody wins. We are able to be consistent and reliable with it. The customer has the means to be able to send it back west. Of course, Kenny gets revenue and price as he does it. It is one of those wonderful scenarios where everybody wins. We are able to be consistent and reliable with it. it is one of those wonderful scenarios where everybody wins. we are able to be consistent and reliable with it The customer has the means to be able to send it back west. the customer has the means to be able to send it back west Of course, Kenny gets revenue and price as he does it. of course kenny gets revenue and price as he does it

Speaker 3: One thing we do not really talk too much about in these earnings calls, but the AAR says it is a $100 million a year problem, would be cargo theft. We hear that a lot more from shippers, and there has always been this sort of challenge. Maybe it is a little bit elevated relative to the past years. How has that come up in your conversations with BCOs and shippers? Is there anything in particular that you are doing differently to address that risk this year? One thing we do not really talk too much about in these earnings calls, but the AAR says it is a $100 million a year problem, would be cargo theft. one thing we do not really talk too much about in these earnings calls but the aar says it is a $100 million a year problem would be cargo theft We hear that a lot more from shippers, and there has always been this sort of challenge. we hear that a lot more from shippers and there has always been this sort of challenge Maybe it is a little bit elevated relative to the past years. maybe it is a little bit elevated relative to the past years How has that come up in your conversations with BCOs and shippers? how has that come up in your conversations with bcos and shippers Is there anything in particular that you are doing differently to address that risk this year? is there anything in particular that you are doing differently to address that risk this year

Speaker 4: It certainly has been coming up more with shippers. I would say that dates back all the way to really COVID. To your point, we've seen it not necessarily go back to the levels that it was in COVID. We've done a lot of different things, especially over the last 2.5 years. This is an industry problem, not just a Union Pacific problem. It certainly has been coming up more with shippers. it certainly has been coming up more with shippers I would say that dates back all the way to really COVID. i would say that dates back all the way to really covid To your point, we've seen it not necessarily go back to the levels that it was in COVID. to your point we've seen it not necessarily go back to the levels that it was in covid We've done a lot of different things, especially over the last 2.5 years. we've done a lot of different things especially over the last 2.5 years This is an industry problem, not just a Union Pacific problem. this is an industry problem not just a union pacific problem In no particular order, the first thing that you want to do is obviously you want to follow up and your partnerships with those entities that we operate in. Right out of the bat, we've been able to partner with some of our customers who've actually partnered with us in additional security efforts, largely boots on the ground, having special agents or the equivalent there. We've also partnered with the state and federal entity. In no particular order, the first thing that you want to do is obviously you want to follow up and your partnerships with those entities that we operate in. in no particular order the first thing that you want to do is obviously you want to follow up and your partnerships with those entities that we operate in Right out of the bat, we've been able to partner with some of our customers who've actually partnered with us in additional security efforts, largely boots on the ground, having special agents or the equivalent there. right out of the bat we've been able to partner with some of our customers who've actually partnered with us in additional security efforts largely boots on the ground having special agents or the equivalent there We've also partnered with the state and federal entity. we've also partnered with the state and federal entity That partnership takes a couple of different forms. From a strategic perspective, it takes the form of task force that we, BN and others are part of. Very more tactically, it involves having agents on the ground. We have added in about 50 additional agents just to the LA Basin. In addition to that, we have also continued our infrastructure investment, largely in the form of additional fencing around our terminals and around those sections of our main lines where we build trains. That partnership takes a couple of different forms. that partnership takes a couple of different forms From a strategic perspective, it takes the form of task force that we, BN and others are part of. from a strategic perspective it takes the form of task force that we bn and others are part of Very more tactically, it involves having agents on the ground. very more tactically it involves having agents on the ground We have added in about 50 additional agents just to the LA Basin. we have added in about 50 additional agents just to the la basin In addition to that, we have also continued our infrastructure investment, largely in the form of additional fencing around our terminals and around those sections of our main lines where we build trains. in addition to that, we have also continued our infrastructure investment largely in the form of additional fencing around our terminals and around those sections of our main lines where we build trains It is tens of millions of dollars that we are investing just in the LA Basin on an annual basis. The partnership that is most new and that we are most optimistic about is if we look politically inside the LA Basin, we have seen a significant increase in the willingness to prosecute those that try to vandalize our trains or other trains. It is tens of millions of dollars that we are investing just in the LA Basin on an annual basis. it is tens of millions of dollars that we are investing just in the la basin on an annual basis The partnership that is most new and that we are most optimistic about is if we look politically inside the LA Basin, we have seen a significant increase in the willingness to prosecute those that try to vandalize our trains or other trains. the partnership that is most new and that we are most optimistic about is if we look politically inside the la basin, we have seen a significant increase in the willingness to prosecute those that try to vandalize our trains or other trains That is a critical step here. Doing a lot of different things, our customers expect us to do those things, and we're partnered with them to make sure that we can ensure we have consistent, reliable service. That is a critical step here. that is a critical step here Doing a lot of different things, our customers expect us to do those things, and we're partnered with them to make sure that we can ensure we have consistent, reliable service. doing a lot of different things our customers expect us to do those things and we're partnered with them to make sure that we can ensure we have consistent reliable service

Speaker 3: Jennifer, you mentioned one of our favorite topics, mix, earlier. Price mix, I think, was a little bit of a drag in the fourth quarter. It feels like maybe it'll still be a little bit in the first quarter, but price is accretive to margin percent this year. Maybe you can give us a little more context in terms of how the fourth quarter is tracking in that regard. Maybe just the bigger cost profile as well. You probably have some pretty good visibility to where those bigger buckets are heading this year, in particular on the labor side. Jennifer, you mentioned one of our favorite topics, mix, earlier. jennifer you mentioned one of our favorite topics mix earlier Price mix, I think, was a little bit of a drag in the fourth quarter. price mix i think was a little bit of a drag in the fourth quarter It feels like maybe it'll still be a little bit in the first quarter, but price is accretive to margin percent this year. it feels like maybe it'll still be a little bit in the first quarter but price is accretive to margin percent this year Maybe you can give us a little more context in terms of how the fourth quarter is tracking in that regard. maybe you can give us a little more context in terms of how the fourth quarter is tracking in that regard Maybe just the bigger cost profile as well. maybe just the bigger cost profile as well You probably have some pretty good visibility to where those bigger buckets are heading this year, in particular on the labor side. you probably have some pretty good visibility to where those bigger buckets are heading this year in particular on the labor side

Speaker 2: Yeah. I'll start with the price versus inflation. You're right. We have long talked about and delivered price dollars that are in excess of our inflation dollars. That's table stakes for us. As inflation really kicked up in the, call it 2022, 2023 timeframe, those price dollars, while still above the inflation dollars, weren't accretive to our margins. We changed that in the fourth quarter. Yeah. yeah I'll start with the price versus inflation. i'll start with the price versus inflation You're right. you're right We have long talked about and delivered price dollars that are in excess of our inflation dollars. we have long talked about and delivered price dollars that are in excess of our inflation dollars That's table stakes for us. that's table stakes for us As inflation really kicked up in the, call it 2022, 2023 timeframe, those price dollars, while still above the inflation dollars, weren't accretive to our margins. as inflation really kicked up in the call it 2022 2023 timeframe those price dollars while still above the inflation dollars weren't accretive to our margins We changed that in the fourth quarter. we changed that in the fourth quarter We have said going forward in 2025 and beyond, we expect our pricing to be accretive to our margins. I think that's a very positive step, positive statement forward. We know that has to be part of our overall profitability story. When we look at what's happening with inflation overall, it's still high historically. I think we said from a wage inflation standpoint, it's about 4% overall. Total inflation for us is about 3.5% this year. We have said going forward in 2025 and beyond, we expect our pricing to be accretive to our margins. we have said going forward in 2025 and beyond we expect our pricing to be accretive to our margins I think that's a very positive step, positive statement forward. i think that's a very positive step positive statement forward We know that has to be part of our overall profitability story. we know that has to be part of our overall profitability story When we look at what's happening with inflation overall, it's still high historically. when we look at what's happening with inflation overall it's still high historically I think we said from a wage inflation standpoint, it's about 4% overall. i think we said from a wage inflation standpoint it's about 4% overall Total inflation for us is about 3.5% this year. total inflation for us is about 3.5% this year When we talk about inflation, we do exclude fuel from that because we have the fuel surcharges that cover that separately. Think about that as all of our costs ex-fuel. I would say we feel fairly confident that those are going to stay. Obviously, we're in the midst of labor negotiations right now, having those talks. Those are continuing. When we talk about inflation, we do exclude fuel from that because we have the fuel surcharges that cover that separately. when we talk about inflation we do exclude fuel from that because we have the fuel surcharges that cover that separately Think about that as all of our costs ex-fuel. think about that as all of our costs ex-fuel I would say we feel fairly confident that those are going to stay. i would say we feel fairly confident that those are going to stay Obviously, we're in the midst of labor negotiations right now, having those talks. obviously we're in the midst of labor negotiations right now having those talks Those are continuing. those are continuing We have separated ourselves from the national bargaining this year because we want to be very specific in working directly with our unions to make sure not only do we reach good wage and benefit packages with them, and we want to reward our employees. In fact, we're happy for Union Pacific's employees to be some of the highest paid in the rail industry. We have separated ourselves from the national bargaining this year because we want to be very specific in working directly with our unions to make sure not only do we reach good wage and benefit packages with them, and we want to reward our employees. we have separated ourselves from the national bargaining this year because we want to be very specific in working directly with our unions to make sure not only do we reach good wage and benefit packages with them and we want to reward our employees In fact, we're happy for Union Pacific's employees to be some of the highest paid in the rail industry. in fact we're happy for union pacific's employees to be some of the highest paid in the rail industry We want to make sure that we also are able to work with them in a productive manner in a way that supports the service product that our customers need. It is important for us to be able to achieve some of that through this round of bargaining as well. We want to make sure that we also are able to work with them in a productive manner in a way that supports the service product that our customers need. we want to make sure that we also are able to work with them in a productive manner in a way that supports the service product that our customers need It is important for us to be able to achieve some of that through this round of bargaining as well. it is important for us to be able to achieve some of that through this round of bargaining as well

Speaker 3: The pricing environment in general, I think at least you guys have been a little more specific in terms of what percentage contracts are renewal from the longer-term perspective. How's that going? Considering we still have a fairly soft truck market, but obviously the service product has improved for you guys pretty significantly and consistently. Is that helping a little bit on the negotiations in that regard? The pricing environment in general, I think at least you guys have been a little more specific in terms of what percentage contracts are renewal from the longer-term perspective. the pricing environment in general i think at least you guys have been a little more specific in terms of what percentage contracts are renewal from the longer-term perspective How's that going? how's that going Considering we still have a fairly soft truck market, but obviously the service product has improved for you guys pretty significantly and consistently. considering we still have a fairly soft truck market but obviously the service product has improved for you guys pretty significantly and consistently Is that helping a little bit on the negotiations in that regard? is that helping a little bit on the negotiations in that regard

Speaker 2: Yeah. A strong service product does not just bring new business to us. It also helps us support the value proposition that we are providing to our customers. Even going back to the ethanol example I used where we are taking cycle time out, again, that is productivity savings for the customer. As part of us being able to provide them with that, we are looking to share some of that productivity savings in the form of a little bit higher price for ourselves. Yeah. yeah A strong service product does not just bring new business to us. a strong service product does not just bring new business to us It also helps us support the value proposition that we are providing to our customers. it also helps us support the value proposition that we are providing to our customers Even going back to the ethanol example I used where we are taking cycle time out, again, that is productivity savings for the customer. even going back to the ethanol example i used where we are taking cycle time out again, that is productivity savings for the customer As part of us being able to provide them with that, we are looking to share some of that productivity savings in the form of a little bit higher price for ourselves. as part of us being able to provide them with that we are looking to share some of that productivity savings in the form of a little bit higher price for ourselves Those conversations have been productive. We feel very confident in our ability to do that. We want to make sure that we are providing that service product that we guaranteed them and that we brought them onto the railroad with. By doing that, that supports our price efforts. Those conversations have been productive. those conversations have been productive We feel very confident in our ability to do that. we feel very confident in our ability to do that We want to make sure that we are providing that service product that we guaranteed them and that we brought them onto the railroad with. we want to make sure that we are providing that service product that we guaranteed them and that we brought them onto the railroad with By doing that, that supports our price efforts. by doing that that supports our price efforts

Speaker 3: Maybe we can wrap up with a little bit more of the growth and investment viewpoint here. Some of the other rails are putting more dollars into the ground. Obviously, everybody's got an industrial development pipeline. In particular, looking at BN, it has a few large projects out west. Is that something you feel like you need to bring to the market in similar fashion? Are there other things you feel like are better solutions? Maybe we can wrap up with a little bit more of the growth and investment viewpoint here. maybe we can wrap up with a little bit more of the growth and investment viewpoint here Some of the other rails are putting more dollars into the ground. some of the other rails are putting more dollars into the ground Obviously, everybody's got an industrial development pipeline. obviously everybody's got an industrial development pipeline In particular, looking at BN, it has a few large projects out west. in particular looking at bn it has a few large projects out west Is that something you feel like you need to bring to the market in similar fashion? is that something you feel like you need to bring to the market in similar fashion Are there other things you feel like are better solutions? are there other things you feel like are better solutions You mentioned 1 million lifts over the last year. I guess the question really is, can you still grow the way you want to and support the customers without making significant multi-billion dollar investments? How do you try to solve for that? You mentioned 1 million lifts over the last year. you mentioned 1 million lifts over the last year I guess the question really is, can you still grow the way you want to and support the customers without making significant multi-billion dollar investments? i guess the question really is can you still grow the way you want to and support the customers without making significant multi-billion dollar investments How do you try to solve for that? how do you try to solve for that

Speaker 2: Yeah. I think, first of all, if there was the right investment opportunity, we would certainly make that to grow with our customers. That is a conversation that we're having with them all the time. I think right now our pipeline is, call it 200 or so different projects that we think will bring about $1.5 billion worth of revenue onto the Union Pacific. Yeah. yeah I think, first of all, if there was the right investment opportunity, we would certainly make that to grow with our customers. i think first of all if there was the right investment opportunity we would certainly make that to grow with our customers That is a conversation that we're having with them all the time. that is a conversation that we're having with them all the time I think right now our pipeline is, call it 200 or so different projects that we think will bring about $1.5 billion worth of revenue onto the Union Pacific. i think right now our pipeline is call it 200 or so different projects that we think will bring about $1.5 billion worth of revenue onto the union pacific Some of that involves a little bit of investment for UP. Some of that is more customer investment. That is the pipeline that we have in front of us right now. The thing that I think is important to note is we are investing for growth. Of the $3.4 billion that we're investing this year, that we invested last year, call it $2 billion of that is for maintaining our infrastructure. Some of that involves a little bit of investment for UP. some of that involves a little bit of investment for up Some of that is more customer investment. some of that is more customer investment That is the pipeline that we have in front of us right now. that is the pipeline that we have in front of us right now The thing that I think is important to note is we are investing for growth. the thing that i think is important to note is we are investing for growth Of the $3.4 billion that we're investing this year, that we invested last year, call it $2 billion of that is for maintaining our infrastructure. of the $3.4 billion that we're investing this year that we invested last year call it $2 billion of that is for maintaining our infrastructure The other $1.4 billion is for locomotive modernizations. That supports growth. It is for new freight cars. It is for technology investments. It is capacity, some of the intermodal capacity Eric talked about. It is siding extension. All of those things are there to support growth. I think we are doing it in a very capital-efficient way, though, because we are looking at our network differently today than we used to. The other $1.4 billion is for locomotive modernizations. the other $1.4 billion is for locomotive modernizations That supports growth. It is for new freight cars. It is for technology investments. It is capacity, some of the intermodal capacity Eric talked about. that supports growth. it is for new freight cars. it is for technology investments. it is capacity some of the intermodal capacity eric talked about It is siding extension. it is siding extension All of those things are there to support growth. all of those things are there to support growth I think we are doing it in a very capital-efficient way, though, because we are looking at our network differently today than we used to. i think we are doing it in a very capital-efficient way though because we are looking at our network differently today than we used to Instead of going out greenfield and building a new intermodal facility that might cost $500 million-$1 billion, we are making investments in places like the Inland Empire, which was our West Colton switching facility. We are transfor ming that over time, building it as we need it for the capacity to support the intermodal growth that is there. We have done that in the Twin Cities. We are doing that right now in Kansas City. Instead of going out greenfield and building a new intermodal facility that might cost $500 million-$1 billion, we are making investments in places like the Inland Empire, which was our West Colton switching facility. instead of going out greenfield and building a new intermodal facility that might cost $500 million-$1 billion we are making investments in places like the inland empire which was our west colton switching facility We are transfor ming that over time, building it as we need it for the capacity to support the intermodal growth that is there. We have done that in the Twin Cities. We are doing that right now in Kansas City. we are transfor ming that over time building it as we need it for the capacity to support the intermodal growth that is there. we have done that in the twin cities. we are doing that right now in kansas city We've got a pop-up ramp that we've put in Phoenix. When you're doing it brownfield instead of greenfield, it's a much more capital-efficient way to do that. I could say the same about our locomotive fleet. We have locomotives that we can bring back into service. We've got a pop-up ramp that we've put in Phoenix. we've got a pop-up ramp that we've put in phoenix When you're doing it brownfield instead of greenfield, it's a much more capital-efficient way to do that. when you're doing it brownfield instead of greenfield it's a much more capital-efficient way to do that I could say the same about our locomotive fleet. i could say the same about our locomotive fleet We have locomotives that we can bring back into service. we have locomotives that we can bring back into service You have to put some more money into that to refurbish the locomotive. That's a much more capital-efficient way than having to go out and buy new. The investment dollars are there. It's supporting the customer growth. I think you're seeing that in our results. You have to put some more money into that to refurbish the locomotive. you have to put some more money into that to refurbish the locomotive That's a much more capital-efficient way than having to go out and buy new. that's a much more capital-efficient way than having to go out and buy new The investment dollars are there. the investment dollars are there It's supporting the customer growth. it's supporting the customer growth I think you're seeing that in our results. i think you're seeing that in our results

Speaker 3: Okay. We are out of time, but really appreciate you guys being here. Thanks very much for the update. Okay. okay We are out of time, but really appreciate you guys being here. we are out of time but really appreciate you guys being here Thanks very much for the update. thanks very much for the update

Speaker 2: All right. Thanks, Brian. All right. all right Thanks, Brian. thanks brian

Speaker 3: All right. Take care. Okay. We're going to get started with the next presentation and Q&A. Again, I'm Brian Ossenbeck. I cover Transport and Logistics for JPMorgan here. Very excited to have CH Robinson. We've got Dave Bozeman, President and CEO; Damon Lee, CFO; and Chuck Ives from Investor Relations. I'm going to just give it over to Dave just briefly here to make some intro comments. Then we'll get to some Q&A. We've got a big list. If anybody wants to raise their hand and join in, we can try to get you a mic as well. Thanks very much for coming, guys. Dave, I'll turn it over to you. All right. all right Take care. take care Okay. okay We're going to get started with the next presentation and Q&A. we're going to get started with the next presentation and q&a Again, I'm Brian Ossenbeck. again i'm brian ossenbeck I cover Transport and Logistics for JPMorgan here. i cover transport and logistics for jpmorgan here Very excited to have CH Robinson. very excited to have ch robinson We've got Dave Bozeman, President and CEO; Damon Lee, CFO; and Chuck Ives from Investor Relations. we've got dave bozeman president and ceo damon lee cfo and chuck ives from investor relations I'm going to just give it over to Dave just briefly here to make some intro comments. i'm going to just give it over to dave just briefly here to make some intro comments Then we'll get to some Q&A. then we'll get to some q&a We've got a big list. we've got a big list If anybody wants to raise their hand and join in, we can try to get you a mic as well. if anybody wants to raise their hand and join in we can try to get you a mic as well Thanks very much for coming, guys. thanks very much for coming guys Dave, I'll turn it over to you. dave i'll turn it over to you

Speaker 6: Yeah. Thanks, Brian. First of all, thanks for having us. Congratulations on this conference. I think you guys went from 650 to almost 950 this year. A really big step up in attendance. Glad to be here. A couple of things for us just to start off. There's a lot going on in the world right now and certainly in the markets. Yeah. yeah Thanks, Brian. thanks brian First of all, thanks for having us. first of all thanks for having us Congratulations on this conference. congratulations on this conference I think you guys went from 650 to almost 950 this year. i think you guys went from 650 to almost 950 this year A really big step up in attendance. a really big step up in attendance Glad to be here. glad to be here A couple of things for us just to start off. a couple of things for us just to start off There's a lot going on in the world right now and certainly in the m arkets. there's a lot going on in the world right now and certainly in the m arkets I think we're obviously right on the coal face is what I'd like to say with that. I would also say that it's times like this and others that are really the value prop for CH Robinson. We help customers deal with disruption and things that are happening. This is not the first time we've dealt with disruption. Whether it's been port strikes or tariffs or anything like that, we deal with over 85,000 customers. I think we're obviously right on the coal face is what I'd like to say with that. i think we're obviously right on the coal face is what i'd like to say with that I would also say that it's times like this and others that are really the value prop for CH Robinson. i would also say that it's times like this and others that are really the value prop for ch robinson We help customers deal with disruption and things that are happening. we help customers deal with disruption and things that are happening This is not the first time we've dealt with disruption. this is not the first time we've dealt with disruption Whether it's been port strikes or tariffs or anything like that, we deal with over 85,000 customers. whether it's been port strikes or tariffs or anything like that we deal with over 85,000 customers We guide them through a lot of that. Right now, we have a balance sheet that helps our customers. We feel really good about where we are. Uncertainty is going to happen. At the end of the day, we'll get through this like we have in the past. I think our customers feel good about that. If you guys saw our investor day, we remain committed, really solid plan on where we are. We guide them through a lot of that. we guide them through a lot of that Right now, we have a balance sheet that helps our customers. right now we have a balance sheet that helps our customers We feel really good about where we are. we feel really good about where we are Uncertainty is going to happen. uncertainty is going to happen At the end of the day, we'll get through this like we have in the past. at the end of the day we'll get through this like we have in the past I think our customers feel good about that. i think our customers feel good about that If you guys saw our investor day, we remain committed, really solid plan on where we are. if you guys saw our investor day we remain committed really solid plan on where we are Damon will go into that as we talk. Strong inclinations going out to 2026. We still feel really good about that marketplace. At the end of the day, we lean on higher highs and higher lows. It does not matter what a market is. We're into our 37th month of this kind of freight pullback, freight recession on an 18 month-24 month normal cycle. Damon will go into that as we talk. damon will go into that as we talk Strong inclinations going out to 2026. strong inclinations going out to 2026 We still feel really good about that marketplace. we still feel really good about that marketplace At the end of the day, we lean on higher highs and higher lows. at the end of the day we lean on higher highs and higher lows It does not matter what a market is. it does not matter what a market is We're into our 37th month of this kind of freight pullback, freight recession on an 18 month-24 month normal cycle. we're into our 37th month of this kind of freight pullback freight recession on an 18 month-24 month normal cycle It is not normal. This is abnormal. At the end of the day, I think with our asset-light model and how we are doing it, we have the flexibility and the agility to deal with that. We feel really good about that and look forward to talking about it. It is not normal. it is not normal This is abnormal. this is abnormal At the end of the day, I think with our asset-light model and how we are doing it, we have the flexibility and the agility to deal with that. at the end of the day i think with our asset-light model and how we are doing it we have the flexibility and the agility to deal with that We feel really good about that and look forward to talking about it. we feel really good about that and look forward to talking about it

Speaker 3: All right. Thanks very much. Maybe we can start there with sort of the current state of the North American freight market from your guys' perspective. Any signs of life in the spot truckload market? Is this mostly weather, which I feel like we did this same thing last year. The market improved. People thought it was turning. Then it was weather. Seasonality is a good thing to have back. It doesn't feel like we're necessarily off to the races or an inflection at this point. Curious to see what you guys are seeing. All right. all right Thanks very much. thanks very much Maybe we can start there with sort of the current state of the North American freight market from your guys' perspective. maybe we can start there with sort of the current state of the north american freight market from your guys' perspective Any signs of life in the spot truckload market? any signs of life in the spot truckload market Is this mostly weather, which I feel like we did this same thing last year. is this mostly weather which i feel like we did this same thing last year The market improved. the market improved People thought it was turning. people thought it was turning Then it was weather. then it was weather Seasonality is a good thing to have back. seasonality is a good thing to have back It doesn't feel like we're necessarily off to the races or an inflection at this point. it doesn't feel like we're necessarily off to the races or an inflection at this point Curious to see what you guys are seeing. curious to see what you guys are seeing

Speaker 6: Yeah. I'll start. You can jump in, Damon. First of all, I would say that there's no material change yet, Brian, on what we're seeing. You're right to call out there is seasonality. We saw that in Q4. That's normal seasonality. We haven't seen it where it's been steady and starting to go. Now, a couple of things that we watch and we continue to watch. There are some things that you guys should hear too. Yeah. yeah I'll start. i'll start You can jump in, Damon. you can jump in damon First of all, I would say that there's no material change yet, Brian, on what we're seeing. first of all i would say that there's no material change yet brian on what we're seeing You're right to call out there is seasonality. you're right to call out there is seasonality We saw that in Q4. we saw that in q4 That's normal seasonality. that's normal seasonality We haven't seen it where it's been steady and starting to go. we haven't seen it where it's been steady and starting to go Now, a couple of things that we watch and we continue to watch. now a couple of things that we watch and we continue to watch There are some things that you guys should hear too. there are some things that you guys should hear too When it comes to capacity, that continues to burn down. We like that. It's still burning at somewhat of a slow rate. It's starting to burn down. That will eventually get back to normal levels. Because you just can't continue to hold these types of prices and costs that's happening, that's just not sustainable in the long run. We do see that happening. When it comes to capacity, that continues to burn down. when it comes to capacity that continues to burn down We like that. we like that It's still burning at somewhat of a slow rate. it's still burning at somewhat of a slow rate It's starting to burn down. it's starting to burn down That will eventually get back to normal levels. that will eventually get back to normal levels Because you just can't continue to hold these types of prices and costs that's happening, that's just not sustainable in the long run. because you just can't continue to hold these types of prices and costs that's happening that's just not sustainable in the long run We do see that happening. we do see that happening Ultimately, it's got to be a balance, though. It's got to be demand plus capacity. We've not yet seen that full demand yet that would give you that feeling of things just being totally right. I don't know if you want to add. Ultimately, it's got to be a balance, though. ultimately it's got to be a balance though It's got to be demand plus capacity. it's got to be demand plus capacity We've not yet seen that full demand yet that would give you that feeling of things just being totally right. we've not yet seen that full demand yet that would give you that feeling of things just being totally right I don't know if you want to add. i don't know if you want to add

Speaker 1: Yeah. I'll just add to that. We did see truckload spot rates increase in December and January. We believe that was certainly on the back of seasonality and weather. When the weather abated and the seasonality was over, we saw the rates come right back down again. Rates are right now below the operating cost of most carriers. I think that's obvious that that's unsustainable. Yeah. yeah I'll just add to that. i'll just add to that We did see truckload spot rates increase in December and January. we did see truckload spot rates increase in december and january We believe that was certainly on the back of seasonality and weather. we believe that was certainly on the back of seasonality and weather When the weather abated and the seasonality was over, we saw the rates come right back down again. when the weather abated and the seasonality was over we saw the rates come right back down again Rates are right now below the operating cost of most carriers. rates are right now below the operating cost of most carriers I think that's obvious that that's unsustainable. i think that's obvious that that's unsustainable Rates are not sustainable where they're at today. We still believe rates will increase throughout 2025. We have not seen a sign of any structural change in rates thus far this year coming out of Q4 and into Q1. I would say there is one bright spot, which is when we do have seasonality and we do have weather events, we are seeing tension in the carrier capacity market. Rates are not sustainable where they're at today. rates are not sustainable where they're at today We still believe rates will increase throughout 2025. we still believe rates will increase throughout 2025 We have not seen a sign of any structural change in rates thus far this year coming out of Q4 and into Q1. we have not seen a sign of any structural change in rates thus far this year coming out of q4 and into q1 I would say there is one bright spot, which is when we do have seasonality and we do have weather events, we are seeing tension in the carrier capacity market. i would say there is one bright spot which is when we do have seasonality and we do have weather events we are seeing tension in the carrier capacity market That's a good sign that at least some of that excess is starting to leave the system. I think that's kind of a first indicator of, okay, there is some tension when there's irregularity in the marketplace. Now we just need more of that phased capacity to exit the market. We believe it will. It's just, as Dave mentioned, it's going at a slow pace. That's a good sign that at least some of that excess is starting to leave the system. that's a good sign that at least some of that excess is starting to leave the system I think that's kind of a first indicator of, okay, there is some tension when there's irregularity in the marketplace. i think that's kind of a first indicator of okay there is some tension when there's irregularity in the marketplace Now we just need more of that phased capacity to exit the market. now we just need more of that phased capacity to exit the market We believe it will. we believe it will It's just, as Dave mentioned, it's going at a slow pace. it's just as dave mentioned it's going at a slow pace

Speaker 3: Damon, on that point with renewals, it's hard to judge just by one customer or one anecdote because everybody's got a different base that they're starting from. What's sort of the range of renewals? You mentioned they're expecting them to go up throughout the year. Consensus still seems to be the back half recovery, which would be third year in a row. Obviously, you're off to a little bit of a slower start, at least from our discussions. Wanted to see if you guys had a different perspective here to begin the year. Damon, on that point with renewals, it's hard to judge just by one customer or one anecdote because everybody's got a different base that they're starting from. damon on that point with renewals it's hard to judge just by one customer or one anecdote because everybody's got a different base that they're starting from What's sort of the range of renewals? what's sort of the range of renewals You mentioned they're expecting them to go up throughout the year. you mentioned they're expecting them to go up throughout the year Consensus still seems to be the back half recovery, which would be third year in a row. consensus still seems to be the back half recovery which would be third year in a row Obviously, you're off to a little bit of a slower start, at least from our discussions. obviously you're off to a little bit of a slower start at least from our discussions Wanted to see if you guys had a different perspective here to begin the year. wanted to see if you guys had a different perspective here to begin the year

Speaker 1: Yeah. As it relates to volume, as you know, we do not guide. What I would say is just echo what Dave has said, which is it is still a very tough market. Therefore, Robinson's strategy, I think different than Robinson's strategy in the past, has been not going to try to predict where the market is going to go and let that facilitate my success. We have coined the phrase higher highs and higher lows. Yeah. yeah As it relates to volume, as you know, we do not guide. as it relates to volume as you know we do not guide What I would say is just echo what Dave has said, which is it is still a very tough market. what i would say is just echo what dave has said which is it is still a very tough market Therefore, Robinson's strategy, I think different than Robinson's strategy in the past, has been not going to try to predict where the market is going to go and let that facilitate my success. therefore robinson's strategy i think different than robinson's strategy in the past has been not going to try to predict where the market is going to go and let that facilitate my success We have coined the phrase higher highs and higher lows. we have coined the phrase higher highs and higher lows That is really how we drive the company now, how we drive our operating model, how we have pegged our strategic initiatives, which is we are going to outperform the market from a volume perspective, regardless of what cycle it is in, regardless of what level it is at. That has boded well for us over the course of 2024. Certainly, to that point, as Dave mentioned, we are in an extremely prolonged freight recession. That is really how we drive the company now, how we drive our operating model, how we have pegged our strategic initiatives, which is we are going to outperform the market from a volume perspective, regardless of what cycle it is in, regardless of what level it is at. That has boded well for us over the course of 2024. that is really how we drive the company now how we drive our operating model how we have pegged our strategic initiatives which is we are going to outperform the market from a volume perspective regardless of what cycle it is in regardless of what level it is at. that has boded well for us over the course of 2024 Certainly, to that point, as Dave mentioned, we are in an extremely prolonged freight recession. certainly to that point as dave mentioned, we are in an extremely prolonged freight recession I think the recession has been predicted to end probably five or six times now in that 37 months. It is kind of a fool's errand to predict when it is going to revert. What we are doing at Robinson is we have got a number of scenarios that we have planned out that says, okay, if the market does this, we are going to react this way. I think the recession has been predicted to end probably five or six times now in that 37 months. i think the recession has been predicted to end probably five or six times now in that 37 months It is kind of a fool's errand to predict when it is going to revert. it is kind of a fool's errand to predict when it is going to revert What we are doing at Robinson is we have got a number of scenarios that we have planned out that says, okay, if the market does this, we are going to react this way. what we are doing at robinson is we have got a number of scenarios that we have planned out that says okay if the market does this, we are going to react this way We feel like we are in very good shape, better than we have ever been, to not just deal with the market when it does inflect or if it continues to bounce along the bottom like it has. We are still going to deliver the industry-leading performance that we have been delivering in 2024, regardless of market conditions. I would say to your point, early 2025, I think it is starting off slower than what most people expected coming into 2025. We feel like we are in very good shape, better than we have ever been, to not just deal with the market when it does inflect or if it continues to bounce along the bottom like it has. We are still going to deliver the industry-leading performance that we have been delivering in 2024, regardless of market conditions. we feel like we are in very good shape better than we have ever been to not just deal with the market when it does inflect or if it continues to bounce along the bottom like it has. we are still going to deliver the industry-leading performance that we have been delivering in 2024 regardless of market conditions I would say to your point, early 2025, I think it is starting off slower than what most people expected coming into 2025. i would say to your point early 2025 i think it is starting off slower than what most people expected coming into 2025 I feel like Robinson is prepared regardless of what the market does. I feel like Robinson is prepared regardless of what the market does. i feel like robinson is prepared regardless of what the market does

Speaker 3: Maybe this is a question you ask when you've been in a long trough or freight market. I do wonder if anything has changed from a market structure perspective over the last couple of years. I mean, you've got more private fleets. You've got greater visibility in tech tools. You've got trailer pools. From your perspective, is any of that stuff maybe causing a longer and more extended trough here at this point just because there's perhaps more capacity than there was ever before or availability of capacity? Maybe this is a question you ask when you've been in a long trough or freight market. maybe this is a question you ask when you've been in a long trough or freight market I do wonder if anything has changed from a market structure perspective over the last couple of years. i do wonder if anything has changed from a market structure perspective over the last couple of years I mean, you've got more private fleets. i mean you've got more private fleets You've got greater visibility in tech tools. you've got greater visibility in tech tools You've got trailer pools. you've got trailer pools From your perspective, is any of that stuff maybe causing a longer and more extended trough here at this point just because there's perhaps more capacity than there was ever before or availability of capacity? from your perspective is any of that stuff maybe causing a longer and more extended trough here at this point just because there's perhaps more capacity than there was ever before or availability of capacity

Speaker 6: Yeah. I think a couple of things on the capacity. Number one, during the pandemic, the amount of capacity that was infused into the system was the highest. As you know, it was the highest amount of capacity that was put in. On the backside of that and burning that down, people can forget what happened there. Yeah. yeah I think a couple of things on the capacity. i think a couple of things on the capacity Number one, during the pandemic, the amount of capacity that was infused into the system was the highest. number one during the pandemic the amount of capacity that was infused into the system was the highest As you know, it was the highest amount of capacity that was put in. as you know it was the highest amount of capacity that was put in On the backside of that and burning that down, people can forget what happened there. on the backside of that and burning that down people can forget what happened there There were some pretty good profits made in 2021 and really assets along with recovery assets as well as far as pandemic relief and things like that. All of that just added up to carriers being able to pay off assets. That slowed down the exit of this as well. Trailer pools continued to be out there. That kind of lengthens the carriers to be able to stay in the marketplace. There has just been a number of different things. There were some pretty good profits made in 2021 and really assets along with recovery assets as well as far as pandemic relief and things like that. there were some pretty good profits made in 2021 and really assets along with recovery assets as well as far as pandemic relief and things like that All of that just added up to carriers being able to pay off assets. all of that just added up to carriers being able to pay off assets That slowed down the exit of this as well. that slowed down the exit of this as well Trailer pools continued to be out there. trailer pools continued to be out there That kind of lengthens the carriers to be able to stay in the marketplace. that kind of lengthens the carriers to be able to stay in the marketplace There has just been a number of different things. there has just been a number of different things The banks really did not want to be in the used truck market. When it comes to trucks having to redo deals, we coined the term zombie trucks that are kind of out there. There is just a lot of hang-on capacity because of a number of factors. We are starting to see that continue to break down. It was burning down at about 4%. That went up to about 6%. That is going to get its way down to where it needs to be. I am pretty confident of that overall. The banks really did not want to be in the used truck market. the banks really did not want to be in the used truck market When it comes to trucks having to redo deals, we coined the term zombie trucks that are kind of out there. when it comes to trucks having to redo deals we coined the term zombie trucks that are kind of out there There is just a lot of hang-on capacity because of a number of factors. We are starting to see that continue to break down. there is just a lot of hang-on capacity because of a number of factors. we are starting to see that continue to break down It was burning down at about 4%. it was burning down at about 4% That went up to about 6%. that went up to about 6% That is going to get its way down to where it needs to be. I am pretty confident of that overall. that is going to get its way down to where it needs to be. i am pretty confident of that overall

Speaker 1: No. I think you said it well, Dave. I would just add that certainly everything of what Dave just went through actually fits the Robinson business model very well. I mean, what we're seeing from a capacity perspective is certainly more flexibility, more agility is desired in the marketplace, both from assets and brokers. No. no I think you said it well, Dave. i think you said it well dave I would just add that certainly everything of what Dave just went through actually fits the Robinson business model very well. i would just add that certainly everything of what dave just went through actually fits the robinson business model very well I mean, what we're seeing from a capacity perspective is certainly more flexibility, more agility is desired in the marketplace, both from assets and brokers. i mean what we're seeing from a capacity perspective is certainly more flexibility more agility is desired in the marketplace both from assets and brokers I think Robinson has a very good mix of certainly being the leading broker in the industry and our asset-light business model, which commands higher than average returns throughout all the cycles. With that, our strategy in showing up more like an asset allows us to take advantage of some of those market structural changes that you mentioned. I think our business model, I think our business strategy fits very well to where those market dynamics are going. I think Robinson has a very good mix of certainly being the leading broker in the industry and our asset-light business model, which commands higher than average returns throughout all the cycles. i think robinson has a very good mix of certainly being the leading broker in the industry and our asset-light business model which commands higher than average returns throughout all the cycles With that, our strategy in showing up more like an asset allows us to take advantage of some of those market structural changes that you mentioned. with that our strategy in showing up more like an asset allows us to take advantage of some of those market structural changes that you mentioned I think our business model, I think our business strategy fits very well to where those market dynamics are going. i think our business model i think our business strategy fits very well to where those market dynamics are going

Speaker 3: You mentioned showing up like an asset carrier theme from the investor day. What does that mean? I guess where do you sort of draw the line between owning more? It does seem like there's going to be more of a hybrid model just in general over time with assets getting more asset-light and vice versa. How do you view that within Robinson? Is there a line that you would draw in terms of what you would or would not own? You mentioned showing up like an asset carrier theme from the investor day. you mentioned showing up like an asset carrier theme from the investor day What does that mean? what does that mean I guess where do you sort of draw the line between owning more? i guess where do you sort of draw the line between owning more It does seem like there's going to be more of a hybrid model just in general over time with assets getting more asset-light and vice versa. it does seem like there's going to be more of a hybrid model just in general over time with assets getting more asset-light and vice versa How do you view that within Robinson? how do you view that within robinson Is there a line that you would draw in terms of what you would or would not own? is there a line that you would draw in terms of what you would or would not own

Speaker 6: First of all, we feel good about the asset-light model. We do. It has helped us out. It has allowed us to have a P&L and a balance sheet that is in the black and allowed us to invest in times like this. We are able to invest. I think that separates us from a lot of the marketplace to do that. We will continue to do that investment. First of all, we feel good about the asset-light model. first of all we feel good about the asset-light model We do. we do It has helped us out. It has allowed us to have a P&L and a balance sheet that is in the black and allowed us to invest in times like this. it has helped us out. it has allowed us to have a p&l and a balance sheet that is in the black and allowed us to invest in times like this We are able to invest. we are able to invest I think that separates us from a lot of the marketplace to do that. i think that separates us from a lot of the marketplace to do that We will continue to do that investment. we will continue to do that investment When we start to look at showing up like an asset, we look at it as our total addressable market. You are talking about a $400 billion TAM. In doing that, some of that would not, for a for-hire brokerage, you really would not get access to some of that TAM unless you showed up like an asset. For us, it is our drop trailer. When we start to look at showing up like an asset, we look at it as our total addressable market. You are talking about a $400 billion TAM. when we start to look at showing up like an asset we look at it as our total addressable market. you are talking about a $400 billion tam In doing that, some of that would not, for a for-hire brokerage, you really would not get access to some of that TAM unless you showed up like an asset. in doing that some of that would not for a for-hire brokerage you really would not get access to some of that tam unless you showed up like an asset For us, it is our drop trailer. for us it is our drop trailer To put some numbers on this, when we say drop trailer, our drop trailer business represents about 15%-20% of our NAST volume. That is pretty significant of where we are. That allows us to be able to get in bids and really go for volume that normally would have been just shut out in just a traditional brokerage model. To put some numbers on this, when we say drop trailer, our drop trailer business represents about 15%-20% of our NAST volume. to put some numbers on this when we say drop trailer our drop trailer business represents about 15%-20% of our nast volume That is pretty significant of where we are. that is pretty significant of where we are That allows us to be able to get in bids and really go for volume that normally would have been just shut out in just a traditional brokerage model. that allows us to be able to get in bids and really go for volume that normally would have been just shut out in just a traditional brokerage model LTL, consolidation, warehousing, that is another showing up like an asset. That is a significant service that our customers like, that they want, and that we are really good at, what LTL. Brian, you noticed we have said this before. I mean, our LTL business is a $3 billion LTL business. That usually stops people because that is a pretty big scale that we are dealing with. LTL, consolidation, warehousing, that is another showing up like an asset. That is a significant service that our customers like, that they want, and that we are really good at, what LTL. ltl consolidation warehousing, that is another showing up like an asset. that is a significant service that our customers like that they want and that we are really good at what ltl Brian, you noticed we have said this before. brian you noticed we have said this before I mean, our LTL business is a $3 billion LTL business. i mean our ltl business is a $3 billion ltl business That usually stops people because that is a pretty big scale that we are dealing with. that usually stops people because that is a pretty big scale that we are dealing with There are a number of things that we do that will be part of our strategy as we continue to move forward and show up like that asset to get part of that TAM. Damon and I watch that on how much. For example, trailers. We own over 2,000 trailers. We have access to over 10,000 trailers. Now, we're going to have a strict ROI type of process that we go through on how many more we would add to that. It's strictly around that return on the invested dollars. There are a number of things that we do that will be part of our strategy as we continue to move forward and show up like that asset to get part of that TAM. there are a number of things that we do that will be part of our strategy as we continue to move forward and show up like that asset to get part of that tam Damon and I watch that on how much. damon and i watch that on how much For example, trailers. for example trailers We own over 2,000 trailers. we own over 2,000 trailers We have access to over 10,000 trailers. we have access to over 10,000 trailers Now, we're going to have a strict ROI type of process that we go through on how many more we would add to that. now we're going to have a strict roi type of process that we go through on how many more we would add to that It's strictly around that return on the invested dollars. it's strictly around that return on the invested dollars

Speaker 1: No. I think it's exactly right. You mentioned what draws the line. It certainly is the ROI expectations of would we invest in more assets. As Dave mentioned, we already own a lot of assets today. I know that's always a fun fact that a lot of people forget about Robinson. The optionality to partner assets is really a differentiator for us. No. no I think it's exactly right. i think it's exactly right You mentioned what draws the line. you mentioned what draws the line It certainly is the ROI expectations of would we invest in more assets. it certainly is the roi expectations of would we invest in more assets As Dave mentioned, we already own a lot of assets today. as dave mentioned we already own a lot of assets today I know that's always a fun fact that a lot of people forget about Robinson. i know that's always a fun fact that a lot of people forget about robinson The optionality to partner assets is really a differentiator for us. the optionality to partner assets is really a differentiator for us I think what we've proved out over time is as we continue to grow, we'll add more and more assets. I think that ROI expectation will always show up as the asset-light model is still superior. I think that'll end up being that range in which we play in as far as how many incremental assets we add. I think what we've proved out over time is as we continue to grow, we'll add more and more assets. i think what we've proved out over time is as we continue to grow we'll add more and more assets I think that ROI expectation will always show up as the asset-light model is still superior. i think that roi expectation will always show up as the asset-light model is still superior I think that'll end up being that range in which we play in as far as how many incremental assets we add. i think that'll end up being that range in which we play in as far as how many incremental assets we add

Speaker 3: When you think about the current conversations with customers, how would you characterize that? Obviously, there's a lot of noise. There's a lot of headlines. There's a lot of back and forth. Any short-term changes that people are making at this point? Are they making longer-term changes? I'm sure it differs by customer and by day. How would you overall characterize those conversations right now? When you think about the current conversations with customers, how would you characterize that? when you think about the current conversations with customers how would you characterize that Obviously, there's a lot of noise. obviously there's a lot of noise There's a lot of headlines. there's a lot of headlines There's a lot of back and forth. there's a lot of back and forth Any short-term changes that people are making at this point? any short-term changes that people are making at this point Are they making longer-term changes? are they making longer-term changes I'm sure it differs by customer and by day. i'm sure it differs by customer and by day How would you overall characterize those conversations right now? how would you overall characterize those conversations right now

Speaker 6: You're right. It's a lot going on with customers right now and what they're thinking. Listen, at Robinson, we know we have the largest data set in the industry. We have over 85,000 customers. We see a wide variety of what customers are doing. It's a mix, Brian. Number one, we have some customers that are very strategic on how they're doing this. You're right. you're right It's a lot going on with customers right now and what they're thinking. it's a lot going on with customers right now and what they're thinking Listen, at Robinson, we know we have the largest data set in the industry. listen at robinson we know we have the largest data set in the industry We have over 85,000 customers. we have over 85,000 customers We see a wide variety of what customers are doing. we see a wide variety of what customers are doing It's a mix, Brian. it's a mix brian Number one, we have some customers that are very strategic on how they're doing this. number one we have some customers that are very strategic on how they're doing this They're sitting back, and they want to be calm, be wise in how they're doing it. We have some customers that are somewhat reacting to some of the things that's happening. With them, they're having to do a bit of a pause because things are changing somewhat rapidly. I would call it sawtooth. A lot of customers do not like that. They're sitting back, and they want to be calm, be wise in how they're doing it. they're sitting back and they want to be calm be wise in how they're doing it We have some customers that are somewhat reacting to some of the things that's happening. we have some customers that are somewhat reacting to some of the things that's happening With them, they're having to do a bit of a pause because things are changing somewhat rapidly. with them they're having to do a bit of a pause because things are changing somewhat rapidly I would call it sawtooth. i would call it sawtooth A lot of customers do not like that. a lot of customers do not like that If you're dealing with, for example, a potential 25% tariff coming out of Mexico, we're right in the middle of all of that. We do 1 out of 10 shipments coming from Mexico to the U.S. We touch those. We move those. We've had customers, we've seen customers do this, hold a bit on some of their shipments because they don't know if a 25% tariff is going to be relieved or not. If you're dealing with, for example, a potential 25% tariff coming out of Mexico, we're right in the middle of all of that. if you're dealing with for example a potential 25% tariff coming out of mexico we're right in the middle of all of that We do 1 out of 10 shipments coming from Mexico to the U.S. we do 1 out of 10 shipments coming from mexico to the u.s We touch those. we touch those We move those. we move those We've had customers, we've seen customers do this, hold a bit on some of their shipments because they don't know if a 25% tariff is going to be relieved or not. we've had customers we've seen customers do this hold a bit on some of their shipments because they don't know if a 25% tariff is going to be relieved or not We've had to kind of deal with them in that. In the same coming from Canada in, we're a significant player when it comes to moving that product. We're dealing with those customers on that front and just kind of guiding them. It is a mix. From a pricing strategy, we've had some customers that like to be strategic. We've had to kind of deal with them in that. we've had to kind of deal with them in that In the same coming from Canada in, we're a significant player when it comes to moving that product. in the same coming from canada in we're a significant player when it comes to moving that product We're dealing with those customers on that front and just kind of guiding them. we're dealing with those customers on that front and just kind of guiding them It is a mix. it is a mix From a pricing strategy, we've had some customers that like to be strategic. from a pricing strategy we've had some customers that like to be strategic We work with them around potential price increases and have that conversation. We have others that are more transactional when it comes to pricing. We have a way of dealing with that as well through revenue management. The operating model has really helped on that. I do not know if you would add anything. We work with them around potential price increases and have that conversation. we work with them around potential price increases and have that conversation We have others that are more transactional when it comes to pricing. we have others that are more transactional when it comes to pricing We have a way of dealing with that as well through revenue management. we have a way of dealing with that as well through revenue management The operating model has really helped on that. the operating model has really helped on that I do not know if you would add anything. i do not know if you would add anything

Speaker 1: You covered the short-term well, Dave. I'll just speak a little bit to the long-term. I don't think what we're coining kind of tariffs 2.0 has necessarily facilitated long-term strategies yet. I think, as Dave said, I think many customers are trying to see if this is transitory and are the tariffs going to stick, or are they just leveraged to drive some other policy for the administration. You covered the short-term well, Dave. you covered the short-term well dave I'll just speak a little bit to the long-term. i'll just speak a little bit to the long-term I don't think what we're coining kind of tariffs 2.0 has necessarily facilitated long-term strategies yet. i don't think what we're coining kind of tariffs 2.0 has necessarily facilitated long-term strategies yet I think, as Dave said, I think many customers are trying to see if this is transitory and are the tariffs going to stick, or are they just leveraged to drive some other policy for the administration. i think as dave said i think many customers are trying to see if this is transitory and are the tariffs going to stick or are they just leveraged to drive some other policy for the administration I would say if you go all the way back to pandemic, I think the customers that were strategic, the customers that used pandemic as an opportunity to get more strategic about supply chain, to build resiliency and optionality into their supply chain, I think those are the customers that are benefiting now. Because even though it's a different disruption, it's still a disruption. I would say if you go all the way back to pandemic, I think the customers that were strategic, the customers that used pandemic as an opportunity to get more strategic about supply chain, to build resiliency and optionality into their supply chain, I think those are the customers that are benefiting now. i would say if you go all the way back to pandemic, i think the customers that were strategic the customers that used pandemic as an opportunity to get more strategic about supply chain to build resiliency and optionality into their supply chain i think those are the customers that are benefiting now Because even though it's a different disruption, it's still a disruption. because even though it's a different disruption it's still a disruption As Dave mentioned, I think you've got a section of customers that went through pandemic, went through some of the disruptions in the Red Sea, went through tariffs 1.0 and said, "Okay. I'm not going to be caught flat-footed on this again." They put a lot of actions in play, partnered with us on optionality going forward. I think those customers right now have optionality that others don't. As Dave mentioned, I think you've got a section of customers that went through pandemic, went through some of the disruptions in the Red Sea, went through tariffs 1.0 and said, "Okay. as dave mentioned i think you've got a section of customers that went through pandemic, went through some of the disruptions in the red sea went through tariffs 1.0 and said "okay I'm not going to be caught flat-footed on this again." They put a lot of actions in play, partnered with us on optionality going forward. i'm not going to be caught flat-footed on this again." they put a lot of actions in play partnered with us on optionality going forward I think those customers right now have optionality that others don't. i think those customers right now have optionality that others don't As Dave mentioned, there's also a section of customers that operate more transactionally, kind of viewed pandemic as a one-time event, didn't invest a lot in strategic capability of their supply chain. Now they're kind of wondering, "What do I do?" because transactional doesn't work when you don't know what tomorrow is going to bring from a tariff perspective. As Dave mentioned, I think it's somewhat bifurcated in our customer space. As Dave mentioned, there's also a section of customers that operate more transactionally, kind of viewed pandemic as a one-time event, didn't invest a lot in strategic capability of their supply chain. as dave mentioned there's also a section of customers that operate more transactionally kind of viewed pandemic as a one-time event didn't invest a lot in strategic capability of their supply chain Now they're kind of wondering, "What do I do?" because transactional doesn't work when you don't know what tomorrow is going to bring from a tariff perspective. now they're kind of wondering "what do i do?" because transactional doesn't work when you don't know what tomorrow is going to bring from a tariff perspective As Dave mentioned, I think it's somewhat bifurcated in our customer space. as dave mentioned i think it's somewhat bifurcated in our customer space I don't think long-term structural changes have occurred due to tariff 2.0. I think they really occurred from pandemic forward with all the disruptions we've incurred the last several years. I don't think long-term structural changes have occurred due to tariff 2.0. i don't think long-term structural changes have occurred due to tariff 2.0 I think they really occurred from pandemic forward with all the disruptions we've incurred the last several years. i think they really occurred from pandemic forward with all the disruptions we've incurred the last several years

Speaker 3: Interesting. Okay. Two questions, maybe more specific on forwarding. In terms of the first one, just the de minimis exemption, we've seen it removed and then, I guess, restored. From your perspective on forwarding, would you expect an impact on maybe air freight rates and customs clearing? Did you see any volatility with people trying to get stuff over the border when that was pulled off for what, less than 24 hours? Interesting. interesting Okay. okay Two questions, maybe more specific on forwarding. two questions maybe more specific on forwarding In terms of the first one, just the de minimis exemption, we've seen it removed and then, I guess, restored. in terms of the first one just the de minimis exemption we've seen it removed and then i guess restored From your perspective on forwarding, would you expect an impact on maybe air freight rates and customs clearing? from your perspective on forwarding would you expect an impact on maybe air freight rates and customs clearing Did you see any volatility with people trying to get stuff over the border when that was pulled off for what, less than 24 hours? did you see any volatility with people trying to get stuff over the border when that was pulled off for what less than 24 hours

Speaker 6: Yeah. I would say on de minimis, for us, it's not really a big deal, partly because that is really dealing with parcel. And we're really not in that business on dealing with parcel. That was really not a big deal overall for us on the de minimis changes. Certainly, it could affect some air freight if this comes down to shipping pullback when it comes to that. That is non-material for us overall as a business. Yeah. yeah I would say on de minimis, for us, it's not really a big deal, partly because that is really dealing with parcel. i would say on de minimis for us it's not really a big deal partly because that is really dealing with parcel And we're really not in that business on dealing with parcel. and we're really not in that business on dealing with parcel That was really not a big deal overall for us on the de minimis changes. that was really not a big deal overall for us on the de minimis changes Certainly, it could affect some air freight if this comes down to shipping pullback when it comes to that. certainly it could affect some air freight if this comes down to shipping pullback when it comes to that That is non-material for us overall as a business. that is non-material for us overall as a business

Speaker 1: Well said. Well said. well said

Speaker 3: Okay. The other one that might be more of a 2.0 if it goes through would just be the layers of fees that they might charge on vessels either tied to or built in for China. Big topic recently, especially at a recent conference with TPM. What are you hearing from sort of your partners in that regard? Are they preparing for that yet? Or is it still a little too early? It seems like it would be a pretty significant event if it were to go through as written, which is, of course, the big question mark if that will actually happen. Okay. okay The other one that might be more of a 2.0 if it goes through would just be the layers of fees that they might charge on vessels either tied to or built in for China. the other one that might be more of a 2.0 if it goes through would just be the layers of fees that they might charge on vessels either tied to or built in for china Big topic recently, especially at a recent conference with TPM. big topic recently especially at a recent conference with tpm What are you hearing from sort of your partners in that regard? what are you hearing from sort of your partners in that regard Are they preparing for that yet? are they preparing for that yet Or is it still a little too early? or is it still a little too early It seems like it would be a pretty significant event if it were to go through as written, which is, of course, the big question mark if that will actually happen. it seems like it would be a pretty significant event if it were to go through as written which is of course the big question mark if that will actually happen

Speaker 1: Yeah. I would say carriers are starting to prepare for that just from an optionality perspective. I would say I think they're looking for ways to drive more efficiency in their port calls. I think they'll make fewer port calls and try to drive more density in each call. I think that'll help them drive efficiency to offset any of that cost pressure they may incur. I think that'll be one step they'll use to try to abate any impact that may come. Yeah. yeah I would say carriers are starting to prepare for that just from an optionality perspective. i would say carriers are starting to prepare for that just from an optionality perspective I would say I think they're looking for ways to drive more efficiency in their port calls. i would say i think they're looking for ways to drive more efficiency in their port calls I think they'll make fewer port calls and try to drive more density in each call. i think they'll make fewer port calls and try to drive more density in each call I think that'll help them drive efficiency to offset any of that cost pressure they may incur. i think that'll help them drive efficiency to offset any of that cost pressure they may incur I think that'll be one step they'll use to try to abate any impact that may come. i think that'll be one step they'll use to try to abate any impact that may come I think secondly, which is really what ends up happening with tariffs anyways, is I think they'll end up passing those fees along to the shipper. Then it'll be up to the shipper on what they do with those added costs. Those are the two actions that I think are probably most front and center on the carrier's minds. I think secondly, which is really what ends up happening with tariffs anyways, is I think they'll end up passing those fees along to the shipper. i think secondly which is really what ends up happening with tariffs anyways is i think they'll end up passing those fees along to the shipper Then it'll be up to the shipper on what they do with those added costs. then it'll be up to the shipper on what they do with those added costs Those are the two actions that I think are probably most front and center on the carrier's minds. those are the two actions that i think are probably most front and center on the carrier's minds

Speaker 3: We often hear about and are asked about technology in the brokerage industry. It's always difficult to figure out who has the best or leading tech from an outside perspective. If you were in all of our seats, how would you sort of address that question? We often hear about and are asked about technology in the brokerage industry. we often hear about and are asked about technology in the brokerage industry It's always difficult to figure out who has the best or leading tech from an outside perspective. it's always difficult to figure out who has the best or leading tech from an outside perspective If you were in all of our seats, how would you sort of address that question? if you were in all of our seats how would you sort of address that question

Speaker 6: That's a good question. I would actually ask the question differently if we were in a seat. This is really important. From a tech perspective, I think when you look at the amount of tech that's out there in the industry, everyone has some level of pretty good technology in what they're dealing with and helps them run the business. The key thing on that question is, how are you integrating that with your people as a strategy? That's a good question. that's a good question I would actually ask the question differently if we were in a seat. i would actually ask the question differently if we were in a seat This is really important. this is really important From a tech perspective, I think when you look at the amount of tech that's out there in the industry, everyone has some level of pretty good technology in what they're dealing with and helps them run the business. from a tech perspective i think when you look at the amount of tech that's out there in the industry everyone has some level of pretty good technology in what they're dealing with and helps them run the business The key thing on that question is, how are you integrating that with your people as a strategy? the key thing on that question is how are you integrating that with your people as a strategy For us, it's different at Robinson now. We don't lead and say our strategy is technology. Our strategy is our people enabled by our technology. We think that makes a huge difference than if you just say the technology strategy. We've kind of been there and done that. That one play doesn't work if it's just technology. For us, it's different at Robinson now. for us it's different at robinson now We don't lead and say our strategy is technology. we don't lead and say our strategy is technology Our strategy is our people enabled by our technology. our strategy is our people enabled by our technology We think that makes a huge difference than if you just say the technology strategy. we think that makes a huge difference than if you just say the technology strategy We've kind of been there and done that. we've kind of been there and done that That one play doesn't work if it's just technology. that one play doesn't work if it's just technology You have to have this connection between this kind of human in the loop and the technology stack that we feel is the best technology in the industry, but that it's now busted up against the best logisticians in the world. You have to have this connection between this kind of human in the loop and the technology stack that we feel is the best technology in the industry, but that it's now busted up against the best logisticians in the world. you have to have this connection between this kind of human in the loop and the technology stack that we feel is the best technology in the industry but that it's now busted up against the best logisticians in the world That together is a really powerful combination that allows us, our unit, our operating mechanism, to run like it's running. As Damon said, and you're seeing that in 2024, this strategy has worked with an operating model that really produces. I don't know if you. That together is a really powerful combination that allows us, our unit, our operating mechanism, to run like it's running. that together is a really powerful combination that allows us our unit our operating mechanism to run like it's running As Damon said, and you're seeing that in 2024, this strategy has worked with an operating model that really produces. as damon said and you're seeing that in 2024 this strategy has worked with an operating model that really produces I don't know if you. i don't know if you

Speaker 1: Yeah. I'll only add that, as Dave mentioned, I think historically, companies in our industry, even ourselves, viewed technology as our strategy. That did not work. To us, the litmus test on do we have the best technology is, what results is it yielding? Is it giving a better customer experience? For Robinson, we believe the answer is yes. Is it giving a better carrier experience? We believe the answer is yes. Is it driving growth in our revenue? We believe the answer is yes for Robinson. Is it enabling margin expansion at the gross margin level? The answer is yes for Robinson. Lastly, is it allowing us to generate operating leverage to drive a more efficient company at the operating margin level? We believe the answer is yes. For us, technology, we have a very high bar for technology at Robinson. Yeah. yeah I'll only add that, as Dave mentioned, I think historically, companies in our industry, even ourselves, viewed technology as our strategy. i'll only add that as dave mentioned i think historically companies in our industry even ourselves viewed technology as our strategy That did not work. that did not work To us, the litmus test on do we have the best technology is, what results is it yielding? to us the litmus test on do we have the best technology is what results is it yielding Is it giving a better customer experience? is it giving a better customer experience For Robinson, we believe the answer is yes. for robinson we believe the answer is yes Is it giving a better carrier experience? is it giving a better carrier experience We believe the answer is yes. we believe the answer is yes Is it driving growth in our revenue? is it driving growth in our revenue We believe the answer is yes for Robinson. we believe the answer is yes for robinson Is it enabling margin expansion at the gross margin level? is it enabling margin expansion at the gross margin level The answer is yes for Robinson. the answer is yes for robinson Lastly, is it allowing us to generate operating leverage to drive a more efficient company at the operating margin level? lastly is it allowing us to generate operating leverage to drive a more efficient company at the operating margin level We believe the answer is yes. we believe the answer is yes For us, technology, we have a very high bar for technology at Robinson. for us technology we have a very high bar for technology at robinson It goes through we had the ROI discussion before. We do not do any technology at Robinson unless it has a high probability of success and a compelling ROI. There is really no kind of pie-in-the-sky investment when it comes to technology for Robinson. Just to It goes through we had the ROI discussion before. it goes through we had the roi discussion before We do not do any technology at Robinson unless it has a high probability of success and a compelling ROI. we do not do any technology at robinson unless it has a high probability of success and a compelling roi There is really no kind of pie-in-the-sky investment when it comes to technology for Robinson. there is really no kind of pie-in-the-sky investment when it comes to technology for robinson Just to just to summarize that, I mean, our key test on do we have the best tech in the industry, as Dave mentioned, we do not think it is the tech by itself. We think it is the combination of our expert people with the tech, which we call human in the loop. We do not think the ends of that spectrum are correct. We have seen technology pure plays that did not work in the marketplace. We have seen more labor-intensive efforts. Those are proven out to be not competitive in the marketplace. We do believe that optimal combination of people and technology is the right answer for our industry. summarize that, I mean, our key test on do we have the best tech in the industry, as Dave mentioned, we do not think it is the tech by itself. summarize that i mean our key test on do we have the best tech in the industry as dave mentioned we do not think it is the tech by itself We think it is the combination of our expert people with the tech, which we call human in the loop. we think it is the combination of our expert people with the tech which we call human in the loop We do not think the ends of that spectrum are correct. We have seen technology pure plays that did not work in the marketplace. we do not think the ends of that spectrum are correct. we have seen technology pure plays that did not work in the marketplace We have seen more labor-intensive efforts. we have seen more labor-intensive efforts Those are proven out to be not competitive in the marketplace. those are proven out to be not competitive in the marketplace We do believe that optimal combination of people and technology is the right answer for our industry. we do believe that optimal combination of people and technology is the right answer for our industry We think we've got that right formula. We think we've got that right formula. we think we've got that right formula

Speaker 3: One of the big goals, I think, of the operating model in the next upcycle would be to decouple headcount in NAST with volume growth. Maybe working backwards from there. Obviously, you did in global forwarding already. Are there some steps or project initiatives or successes that you've already had that would give you some visibility and confidence to that happening if and when we actually get to the upcycle here? One of the big goals, I think, of the operating model in the next upcycle would be to decouple headcount in NAST with volume growth. one of the big goals i think of the operating model in the next upcycle would be to decouple headcount in nast with volume growth Maybe working backwards from there. maybe working backwards from there Obviously, you did in global forwarding already. obviously you did in global forwarding already Are there some steps or project initiatives or successes that you've already had that would give you some visibility and confidence to that happening if and when we actually get to the upcycle here? are there some steps or project initiatives or successes that you've already had that would give you some visibility and confidence to that happening if and when we actually get to the upcycle here

Speaker 6: Yeah, Brian. I mean, one of the tough things and we started this conversation out by saying it's 37 months and dealing with that is we know the case that's been on Robinson is like, "Hey, listen." I always say people are from Missouri. Dave would say, "You got to show me. It's a show me state." You can't do that unless the market is back in doing that. Yeah, Brian. yeah brian I mean, one of the tough things and we started this conversation out by saying it's 37 months and dealing with that is we know the case that's been on Robinson is like, "Hey, listen." I always say people are from Missouri. i mean one of the tough things and we started this conversation out by saying it's 37 months and dealing with that is we know the case that's been on robinson is like "hey listen." i always say people are from missouri Dave would say, "You got to show me. dave would say "you got to show me It's a show me state." You can't do that unless the market is back in doing that. it's a show me state." you can't do that unless the market is back in doing that We have been debating that and really kind of showing this group and many others, we tend to say that there's a canary in a coal mine. We actually feel like we have debunked that story to say disconnect headcount growth from volume growth because we've done it in global forwarding. That's a business that makes us unique because we get end to end. It separates us out from the competition. We know that. We have been debating that and really kind of showing this group and many others, we tend to say that there's a canary in a coal mine. we have been debating that and really kind of showing this group and many others we tend to say that there's a canary in a coal mine We actually feel like we have debunked that story to say disconnect headcount growth from volume growth because we've done it in global forwarding. we actually feel like we have debunked that story to say disconnect headcount growth from volume growth because we've done it in global forwarding That's a business that makes us unique because we get end to end. that's a business that makes us unique because we get end to end It separates us out from the competition. it separates us out from the competition We know that. we know that This is why we have to talk about it. Our operating model and how we're driving a company, how we're improving it, we take global forwarding through that same operating model. They've gone through that last year. What was the result? The result was growth every quarter, year-over-year, while costs went down and to the right. Growth up and to the right. Costs went down and to the right. Headcount was reduced. This is why we have to talk about it. this is why we have to talk about it Our operating model and how we're driving a company, how we're improving it, we take global forwarding through that same operating model. our operating model and how we're driving a company how we're improving it we take global forwarding through that same operating model They've gone through that last year. they've gone through that last year What was the result? what was the result The result was growth every quarter, year-over-year, while costs went down and to the right. the result was growth every quarter year-over-year while costs went down and to the right Growth up and to the right. growth up and to the right Costs went down and to the right. costs went down and to the right Headcount was reduced. headcount was reduced If we had not done that, we would have added people and had higher expenses within global forwarding, period. You go over and say, "For NAST, we feel that's going to be even a stronger play." Why? We have a deeper technology stack within NAST that we have not yet put into global forwarding, but coming. We have processes in place in NAST that we've driven. If we had not done that, we would have added people and had higher expenses within global forwarding, period. if we had not done that we would have added people and had higher expenses within global forwarding period You go over and say, "For NAST, we feel that's going to be even a stronger play." Why? you go over and say "for nast we feel that's going to be even a stronger play." why We have a deeper technology stack within NAST that we have not yet put into global forwarding, but coming. We have processes in place in NAST that we've driven. we have a deeper technology stack within nast that we have not yet put into global forwarding but coming. we have processes in place in nast that we've driven I think we've talked about our productivity, 15% in 2023, 15% we achieved in 2024, kind of a CAGR of over 30% of productivity. Now when the market returns, we feel like that case is already here that you should have confidence that we're going to actually do that within the NAST space. It'll actually be in probably even a more aggressive way than you saw in global forwarding because of how we're set up in that. I feel super bullish on where we are. I feel like we've debunked that. I understand, again, the market isn't here in NAST. Just look at what we've done in global forwarding. I think we've talked about our productivity, 15% in 2023, 15% we achieved in 2024, kind of a CAGR of over 30% of productivity. i think we've talked about our productivity 15% in 2023 15% we achieved in 2024 kind of a cagr of over 30% of productivity Now when the market returns, we feel like that case is already here that you should have confidence that we're going to actually do that within the NAST space. now when the market returns we feel like that case is already here that you should have confidence that we're going to actually do that within the nast space It'll actually be in probably even a more aggressive way than you saw in global forwarding because of how we're set up in that. it'll actually be in probably even a more aggressive way than you saw in global forwarding because of how we're set up in that I feel super bullish on where we are. i feel super bullish on where we are I feel like we've debunked that. i feel like we've debunked that I understand, again, the market isn't here in NAST. i understand again the market isn't here in nast Just look at what we've done in global forwarding. just look at what we've done in global forwarding

Speaker 1: Yeah. Could I add to that? Because this is a topic Dave and I are extremely passionate about. Just a few more specifics on what global forwarding actually did in 2024. We grew revenue year-over-year in 2024 while reducing headcount 10%, while generating more than 15% productivity. That is the bare thesis debunked for global forwarding. As Dave mentioned, all of those operating cadences, all the discipline, all the rigor that allow those results to be generated for global forwarding are in place for our NAST business. Yeah. yeah Could I add to that? could i add to that Because this is a topic Dave and I are extremely passionate about. because this is a topic dave and i are extremely passionate about Just a few more specifics on what global forwarding actually did in 2024. just a few more specifics on what global forwarding actually did in 2024 We grew revenue year-over-year in 2024 while reducing headcount 10%, while generating more than 15% productivity. we grew revenue year-over-year in 2024 while reducing headcount 10% while generating more than 15% productivity That is the bare thesis debunked for global forwarding. that is the bare thesis debunked for global forwarding As Dave mentioned, all of those operating cadences, all the discipline, all the rigor that allow those results to be generated for global forwarding are in place for our NAST business. as dave mentioned all of those operating cadences all the discipline all the rigor that allow those results to be generated for global forwarding are in place for our nast business I would argue, from a technology perspective, we've over-indexed to NAST. We have a better technology stack in NAST than we do in global forwarding, which is just going to further enable that probability of success going forward. I would argue, from a technology perspective, we've over-indexed to NAST. i would argue from a technology perspective we've over-indexed to nast We have a better technology stack in NAST than we do in global forwarding, which is just going to further enable that probability of success going forward. we have a better technology stack in nast than we do in global forwarding which is just going to further enable that probability of success going forward The one thing we keep driving home is there are two things that will prevent us from adding headcount back from a NAST perspective when the market recovers. The first one is we have fundamentally changed those processes. Those processes now do not require the same amount of headcount that they did before. The process itself fundamentally changed. Continuing to follow that process, there would be no reason to add back headcount. It would actually be adverse to the process we have in place. The one thing we keep driving home is there are two things that will prevent us from adding headcount back from a NAST perspective when the market recovers. the one thing we keep driving home is there are two things that will prevent us from adding headcount back from a nast perspective when the market recovers The first one is we have fundamentally changed those processes. the first one is we have fundamentally changed those processes Those processes now do not require the same amount of headcount that they did before. those processes now do not require the same amount of headcount that they did before The process itself fundamentally changed. the process itself fundamentally changed Continuing to follow that process, there would be no reason to add back headcount. continuing to follow that process there would be no reason to add back headcount It would actually be adverse to the process we have in place. it would actually be adverse to the process we have in place There is no driver to add headcount back in many areas of processes within Robinson because we have fundamentally changed those processes through automation, through lean techniques, through efficiency. We think that is of key importance. The other one is our operating model gives us visibility to what we are doing. There will not be a surprise that said, "Oops, we added back headcount. There is no driver to add headcount back in many areas of processes within Robinson because we have fundamentally changed those processes through automation, through lean techniques, through efficiency. there is no driver to add headcount back in many areas of processes within robinson because we have fundamentally changed those processes through automation through lean techniques through efficiency We think that is of key importance. we think that is of key importance The other one is our operating model gives us visibility to what we are doing. the other one is our operating model gives us visibility to what we are doing There will not be a surprise that said, "Oops, we added back headcount. there will not be a surprise that said "oops we added back headcount We did not know it. Our operating model does not allow that. We will see the early indications of that through the operating model process. We will certainly receive the results of that through the operating model process. There will not be a situation where we are not on top of headcount versus volume on the NAST perspective. Dave and I are both extremely confident that you will see similar results, if not better. In fact, I would argue you will see better results on the NAST side as we have demonstrated on global forwarding in 2024. We did not know it. we did not know it Our operating model does not allow that. our operating model does not allow that We will see the early indications of that through the operating model process. we will see the early indications of that through the operating model process We will certainly receive the results of that through the operating model process. we will certainly receive the results of that through the operating model process There will not be a situation where we are not on top of headcount versus volume on the NAST perspective. there will not be a situation where we are not on top of headcount versus volume on the nast perspective Dave and I are both extremely confident that you will see similar results, if not better. dave and i are both extremely confident that you will see similar results if not better In fact, I would argue you will see better results on the NAST side as we have demonstrated on global forwarding in 2024. in fact i would argue you will see better results on the nast side as we have demonstrated on global forwarding in 2024

Speaker 6: Yeah. Just one last point on this, Brian, is I always like to say yesterday and today. It's fair for all of you to do that because we do it to ourselves. Where was the company yesterday? Where is it today? Why is it fundamentally different? If you go back to 2018, 2019, there's a fundamental, as Damon said, structural difference. This is really important that I've been telling to a lot of people as I talk to them. Yeah. yeah Just one last point on this, Brian, is I always like to say yesterday and today. just one last point on this brian is i always like to say yesterday and today It's fair for all of you to do that because we do it to ourselves. it's fair for all of you to do that because we do it to ourselves Where was the company yesterday? where was the company yesterday Where is it today? where is it today Why is it fundamentally different? why is it fundamentally different If you go back to 2018, 2019, there's a fundamental, as Damon said, structural difference. if you go back to 2018 2019 there's a fundamental as damon said structural difference This is really important that I've been telling to a lot of people as I talk to them. this is really important that i've been telling to a lot of people as i talk to them There's a fundamental structural difference of where the company was. We call it a term called evergreen productivity within Robinson. Evergreen productivity means it's forever. We do not give it back because you structurally change the company. We have achieved this evergreen productivity in global forwarding and NAST. That's not a clawback. That will not go away. There's a fundamental structural difference of where the company was. there's a fundamental structural difference of where the company was We call it a term called evergreen productivity within Robinson. we call it a term called evergreen productivity within robinson Evergreen productivity means it's forever. evergreen productivity means it's forever We do not give it back because you structurally change the company. we do not give it back because you structurally change the company We have achieved this evergreen productivity in global forwarding and NAST. we have achieved this evergreen productivity in global forwarding and nast That's not a clawback. that's not a clawback That will not go away. that will not go away When the market comes back, you've got these things built in. Our digital bookings and our digital transactions within the company. You go back to 2018, 2019, it was less than 5% and pretty clunky on dealing with that. Now, fast forward to today, we're north of 50%-55% in a number of different things. When the market comes back, you've got these things built in. when the market comes back you've got these things built in Our digital bookings and our digital transactions within the company. our digital bookings and our digital transactions within the company You go back to 2018, 2019, it was less than 5% and pretty clunky on dealing with that. you go back to 2018 2019 it was less than 5% and pretty clunky on dealing with that Now, fast forward to today, we're north of 50%-55% in a number of different things. now fast forward to today we're north of 50%-55% in a number of different things That doesn't go away when the market comes back. We feel like it's some of the best in the industry. There's just a structural difference. At our scale, that makes it a game changer. Especially how we're leaning in with large language models, which has really, really changed at our data set. That doesn't go away when the market comes back. that doesn't go away when the market comes back We feel like it's some of the best in the industry. we feel like it's some of the best in the industry There's just a structural difference. there's just a structural difference At our scale, that makes it a game changer. at our scale that makes it a game changer Especially how we're leaning in with large language models, which has really, really changed at our data set. especially how we're leaning in with large language models which has really really changed at our data set

Speaker 3: All right. Appreciate that. Try to squeeze in two last quick ones here. First one on cargo theft. We hear about it more in the news. We hear about it more from shippers. It is not just being reported more. They are definitely more concerned about it. It is obviously an industry supply chain challenge. How does that affect Robinson? What are sort of the conversations and concerns you hear from your shippers? All right. all right Appreciate that. appreciate that Try to squeeze in two last quick ones here. try to squeeze in two last quick ones here First one on cargo theft. first one on cargo theft We hear about it more in the news. we hear about it more in the news We hear about it more from shippers. we hear about it more from shippers It is not just being reported more. They are definitely more concerned about it. It is obviously an industry supply chain challenge. it is not just being reported more. they are definitely more concerned about it. it is obviously an industry supply chain challenge How does that affect Robinson? how does that affect robinson What are sort of the conversations and concerns you hear from your shippers? what are sort of the conversations and concerns you hear from your shippers

Speaker 6: Yes. Good question. I'll start with this. We've been focused on this for almost 18 months. Actually, it was part of the diagnosis coming in and looking at that. We have a great team, an awesome team that is really on this. The outputs, this is a key part of the operating model. It was on our enterprise score sheet. We looked at this. We tracked it. The team just did a wonderful job at producing results here. Yes. yes Good question. good question I'll start with this. i'll start with this We've been focused on this for almost 18 months. we've been focused on this for almost 18 months Actually, it was part of the diagnosis coming in and looking at that. actually it was part of the diagnosis coming in and looking at that We have a great team, an awesome team that is really on this. we have a great team an awesome team that is really on this The outputs, this is a key part of the operating model. the outputs this is a key part of the operating model It was on our enterprise score sheet. it was on our enterprise score sheet We looked at this. we looked at this We tracked it. we tracked it The team just did a wonderful job at producing results here. the team just did a wonderful job at producing results here I mean, take for example, our truckload cargo theft would be really we have almost zero theft in truckload. We're at 99.99% successful on that. Our customers can feel very confident when they use our service and that we do that. We've also taken a leadership role in this. I mean, take for example, our truckload cargo theft would be really we have almost zero theft in truckload. i mean take for example our truckload cargo theft would be really we have almost zero theft in truckload We're at 99.99% successful on that. we're at 99.99% successful on that Our customers can feel very confident when they use our service and that we do that. our customers can feel very confident when they use our service and that we do that We've also taken a leadership role in this. we've also taken a leadership role in this We lead up a consortium of some really big names out there and a number of different companies that actually are working with Robinson and seeing some of the things we're doing and actually helping with this consortium. We have also partnered with Highway as well when it comes to this. We put a lot of work and effort into driving this. I think the benefit has showed up in the numbers. We lead up a consortium of some really big names out there and a number of different companies that actually are working with Robinson and seeing some of the things we're doing and actually helping with this consortium. we lead up a consortium of some really big names out there and a number of different companies that actually are working with robinson and seeing some of the things we're doing and actually helping with this consortium We have also partnered with Highway as well when it comes to this. we have also partnered with highway as well when it comes to this We put a lot of work and effort into driving this. we put a lot of work and effort into driving this I think the benefit has showed up in the numbers. i think the benefit has showed up in the numbers This is no hubris. We always knock on wood. We always have a bit of paranoia around this and always trying to improve when it comes to fraud and theft in cargo. It's a big industry. We're doing pretty good about it. I don't know if you'd add anything on that. This is no hubris. this is no hubris We always knock on wood. we always knock on wood We always have a bit of paranoia around this and always trying to improve when it comes to fraud and theft in cargo. we always have a bit of paranoia around this and always trying to improve when it comes to fraud and theft in cargo It's a big industry. it's a big industry We're doing pretty good about it. we're doing pretty good about it I don't know if you'd add anything on that. i don't know if you'd add anything on that

Speaker 1: No. I would say, look, certainly, as Dave mentioned, our theft-free rate from a load perspective, it rounds to 100%. But we do a lot of loads, as you guys know. There is still opportunity to reduce the dollar impact. We made significant process improvements in 2024 to yield that benefit. It has been a big focus for us. I would say in many areas, we are probably close to leading the industry on some of our practices there. No. no I would say, look, certainly, as Dave mentioned, our theft-free rate from a load perspective, it rounds to 100%. i would say look certainly as dave mentioned our theft-free rate from a load perspective it rounds to 100% But we do a lot of loads, as you guys know. but we do a lot of loads as you guys know There is still opportunity to reduce the dollar impact. there is still opportunity to reduce the dollar impact We made significant process improvements in 2024 to yield that benefit. we made significant process improvements in 2024 to yield that benefit It has been a big focus for us. I would say in many areas, we are probably close to leading the industry on some of our practices there. it has been a big focus for us. i would say in many areas, we are probably close to leading the industry on some of our practices there I think the partnerships that we have developed, one with Highway, just continue to safeguard our network as well. It is an area that the rate can be a little misleading because we do so many loads. It says, "Hey, there is not much of an opportunity." We would argue, from a lean mindset, every bit of leakage is an opportunity. It is certainly a focus of ours. I think the partnerships that we have developed, one with Highway, just continue to safeguard our network as well. i think the partnerships that we have developed one with highway just continue to safeguard our network as well It is an area that the rate can be a little misleading because we do so many loads. it is an area that the rate can be a little misleading because we do so many loads It says, "Hey, there is not much of an opportunity." We would argue, from a lean mindset, every bit of leakage is an opportunity. it says "hey there is not much of an opportunity." we would argue from a lean mindset every bit of leakage is an opportunity It is certainly a focus of ours. it is certainly a focus of ours

Speaker 6: That's right. That's right. that's right

Speaker 3: Maybe to wrap up with just some thoughts on how to look at normalized earnings power through whatever normal cycle is that being in the future. Maybe just to use the investor day framework, is that a good way to look at 2026 forecast or your projections? Is that a good proxy for normalized earnings power when you think about all the changes in the processes and the operating model that you've driven over the last 18 months or so? Maybe to wrap up with just some thoughts on how to look at normalized earnings power through whatever normal cycle is that being in the future. maybe to wrap up with just some thoughts on how to look at normalized earnings power through whatever normal cycle is that being in the future Maybe just to use the investor day framework, is that a good way to look at 2026 forecast or your projections? maybe just to use the investor day framework is that a good way to look at 2026 forecast or your projections Is that a good proxy for normalized earnings power when you think about all the changes in the processes and the operating model that you've driven over the last 18 months or so? is that a good proxy for normalized earnings power when you think about all the changes in the processes and the operating model that you've driven over the last 18 months or so

Speaker 1: Yeah. What I would reiterate is we've committed externally that at mid-cycle, our NAST business will generate 40% operating margins. Our global forwarding business will generate 30% operating margins. The enterprise will generate mid-30% operating margins at mid-cycle. That's what committed to externally. We reiterated that in investor day. Yeah. yeah What I would reiterate is we've committed externally that at mid-cycle, our NAST business will generate 40% operating margins. what i would reiterate is we've committed externally that at mid-cycle our nast business will generate 40% operating margins Our global forwarding business will generate 30% operating margins. our global forwarding business will generate 30% operating margins The enterprise will generate mid-30% operating margins at mid-cycle. the enterprise will generate mid-30% operating margins at mid-cycle That's what committed to externally. that's what committed to externally We reiterated that in investor day. we reiterated that in investor day From a specifics perspective, for versus 2023, which was the baseline we used, we're going to generate between $350 million-$450 million of incremental operating income 2026 versus 2023. One of the assumptions in that construct, of course, is truckload spot rate, which we've assumed will go back to levels of, say, 2019. If you look at 2019, we would consider 2019 rates to be slightly above mid-cycle. From a specifics perspective, for versus 2023, which was the baseline we used, we're going to generate between $350 million- $450 million of incremental operating income 2026 versus 2023. from a specifics perspective for versus 2023 which was the baseline we used we're going to generate between $350 million- $450 million of incremental operating income 2026 versus 2023 One of the assumptions in that construct, of course, is truckload spot rate, which we've assumed will go back to levels of, say, 2019. one of the assumptions in that construct of course is truckload spot rate which we've assumed will go back to levels of say 2019 If you look at 2019, we would consider 2019 rates to be slightly above mid-cycle. if you look at 2019 we would consider 2019 rates to be slightly above mid-cycle Using truckload and NAST as kind of a proxy there, we would say we'll be within the range of mid-cycle with what we've communicated for 2026, assuming the market backdrop has the same composition that a normal mid-cycle would have. I'd say we'd be in a pretty tight range to mid-cycle with our 2026 guide. Using truckload and NAST as kind of a proxy there, we would say we'll be within the range of mid-cycle with what we've communicated for 2026, assuming the market backdrop has the same composition that a normal mid-cycle would have. using truckload and nast as kind of a proxy there we would say we'll be within the range of mid-cycle with what we've communicated for 2026 assuming the market backdrop has the same composition that a normal mid-cycle would have I'd say we'd be in a pretty tight range to mid-cycle with our 2026 guide. i'd say we'd be in a pretty tight range to mid-cycle with our 2026 guide

Speaker 3: Okay. We are out of time. That is a good place to wrap up anyway. Dave, Damon, thank you very much for joining us today. Really appreciate it. Okay. okay We are out of time. That is a good place to wrap up anyway. we are out of time. that is a good place to wrap up anyway Dave, Damon, thank you very much for joining us today. dave damon thank you very much for joining us today Really appreciate it. really appreciate it

Speaker 6: Yeah. Thanks, Brian. Yeah. yeah Thanks, Brian. thanks brian

Speaker 1: Thank you. Thank you. thank you

Speaker 6: Thanks for having us. Appreciate it. Thanks for having us. thanks for having us Appreciate it. appreciate it