Great. Let's keep the Canadian rail team going, with Canadian National, our, our top rail pick, in North America. I'm very happy here to have with us CFO, Ghislain Houle, and Stacy Alderson from, from IR. Thank you both for being here. Thanks for having us, Ravi, and it's always nice to come to Laguna. We've participated in your conference for many, many years. I've got Stacy with me, all dressed in green. So, that's the color of going fast. The color of money, but you didn't. That's what I was gonna say that. It's a bit crass. Chose not to. But I'll say it for you. Thanks. Thanks. Before we kick off, please note that for research disclosures, please see Morgan Stanley's research disclosure website, or read our research. With that, Ghislain, you want to kind of start off and give us a sense of what's going on? Yeah. Maybe just opening remarks, and then we'll turn over to your questions, and you've got good questions, Ravi, as usual. So you know, I know everybody's questioning volumes, and it's a very volatile environment as we speak. So when you look at, you know, our volumes, as you know, in Q2, and I always talk in volumes in terms of RTM Revenue Ton Miles. They were down 8%. When you look at July in Q3, we were down still 8%, but then it was down 4% in August, and when you look at September, today, that's down 4%. So my view is, I think we've hit bottom, and those volume softness is not specific to CN. I mean, you've heard the other rails. I know, Jim was here, and I want to congratulate Jim, by the way, on his appointment. Jim is a good friend of mine. I've known him for over 25 years. He was a superintendent in Symington. Jim, I wanna really congratulate you, and I think that him being at UP bodes very well for CN. He knows our network, and I think we'll work very well together. So I think we've hit bottom. I think definitely, Ravi, Q4 will be better than Q3. I'm convinced of that. I can see it. As you know, we were hoping to get some type of recovery in Q4. I think we're not gonna see the regular intermodal fall peak, as we've typically seen. I think this is gonna be pushed in 2024. I'm confident that we will see some recovery in 2024. Q1 will be tough comparables. You remember, we had a stellar operating performance in Q1, but I think you're gonna start seeing it at the end of Q1, and then Q2, Q3, Q4. When you look at the areas of weakness, obviously, it's the consumer consumption segments of our business, namely intermodal. You see some weakness as well in forest products, with interest rates being higher. But the good news is, when you look at our centerb eam orders, and centerb eams are the cars we use to move lumber, they've been up, now and rising in the last couple of weeks. So that's good news. When you look at the bulk side of our business, it continues to be strong. I mean, grain is strong. Potash is strong. When you look at, you know, frac sand as well, coal, little bit down, but that's more related to customer production issues than anything else. When you look at the coal prices, it's continuing to be favorable for producers. So, that bodes well for us. Going back to Canadian grain, you probably have heard StatCan came out last week, saying that the Canadian grain crop will be or should be or could be about 62 million metric tons. When you talk to experts, people say anywhere between 61 and 65. That's down versus this year. This year was 75. Yep. Because of the dryness, mostly in the southern part of the prairies. We're kind of fortunate a little bit because our railroad is the railroad of the north, so we don't think we're gonna be hit as hard because of where we're situated. So that's, that's related to grain. Let me talk a little bit about the operations side of the business. I'm extremely proud of our operating team. I'm extremely proud of as well, and happy about the operating model that we're running at CN with the scheduled railroad focused on car velocity. When you look at, you know, there still were disruptions in Q3. There were still some forest fires going on. We had as well, the strike of the longshoremen, both in Rupert and Vancouver. But still, when you look at our operating metrics, they're all in line with Q2. Yep. If you know, whether you look at car velocity or dwell. So the team is doing very, very well, and we have other proof points now and more proof points that this operating model allows us to recover. When we have a service disruption, it allows us to recover much quicker than if we would have an operating model focused on train length or train load. So hats off to the team. They've worked very, very hard. And then we actually surveyed our customers through an NPS survey, a Net Promoter Score, and the customer service has not been ever as good as since I've been in the business. We've done that intentionally, and that will lead into the financial piece. As you know, we've decided to not have any knee-jerk reaction and send people home in terms of conductors. We've got ahead of the game in terms of training them to become locomotive engineers. We did not want to slash and cut train starts and then have a negative impact on customer service. This is intentional, to make sure that when there is a recovery, and there will be a recovery, that we will be ready. Yep. So I'm very pleased with that. As well, you've heard from other rails and other transportation companies, that with fuel prices going up in Q3, significantly more than at the end of Q2, there will be some noise on fuel surcharge. In our case, fuel surcharge lag, I think if WTI stays around where it is, around $90 per barrel, it could be in the, in the $0.10, maybe a little more than $0.10, on a non-favorable fuel surcharge lag in the quarter. But again, that's noise. Yep. That's timing. That's exactly, that's noise. So, you know, when you put all of this together, I think that, we are confident that we will deliver on our guidance for this year, and I'm very bullish for the future of this company. And you have a question on our CN growth-specific initiatives that we went through in Investor Day, and so I won't steal your thunder, and we'll provide more visibility, but they're coming. I mean, they're happening as planned. We have clear proof points that this is coming, that will allow us to grow more than the economy. So I'm, I'm very bullish about the future of this company. I think the team is gelling well. I think Tracy made some key people decisions. And people is very important because you can have the best network out there, but if you don't have the team to convert the network into value, then you don't have much. So I'm very pleased with that, and I'm very comfortable that we will deliver on our longer-term guidance that we provided at Investor Day of 10%-15% EPS growth. It may be pushed a little bit because the recovery is starting. Right A little later than what we expected. But at the end of the day, people will need to change their dishwashers. People will need to start consuming. Right now, they're pushing, you know, they're relaxing on consuming because they're traveling. Like, people are traveling a lot, but eventually, they need to consume, and like I said, with these CN-specific initiatives, I think it bodes very well for this company going forward. Stacy, did I forget anything? You covered that super well. Okay, for once. As always. That's a great overview. Thanks, Ghislain. A couple of follow-ups there. The wildfires and the strikes, kind of how much of an impact that's is that having to your volumes, and can you quantify that in terms of EPS or something? Yeah, you're right. So as you know, we did quantify it in Q2, so the wildfires, we said $0.07 in Q2, and we said 100 basis points to the OR. It continued in Q3. We haven't quantified it yet, so stay tuned on that one. And on the longshoremen strike, as we said, you know, we did recover some business, but not all of it. Didn't quantify it yet, so stay tuned for the earnings call in Q3. Got it. And just to your point, you're very confident in the long-term guidance. You also said you're confident in the guidance for this year, which you took down last quarter. But does that mean that it's gonna get pushed out to the right, or will it just be like, will it be a more powerful 2024 because your 2023 starting point is much lower? I think it's gonna be a little bit of both. Okay. I think it's gonna be a little of both. You're right. I mean, and that's a good pickup. We're starting from a lower base. Yep. But, I think it's gonna be a little bit of both. I think it's gonna be a little stronger. I don't think, though, and again, this could be debatable, I don't think the recovery will be a V-shaped recovery I think it takes time for the interest rates to do what it's supposed to do. The unemployment is still, like, it's full employment. Right. When you have unemployment at 3%, so people are working but I think that, you know, I think we'll have a little bit of both. Got it. So maybe just moving to the long-term plan here, and at the Investor Day, kind of you sort of gave us a lot of detail on your new operating plan, just referenced that. For those who weren't at that event, or just a refresh on the story, can you just tell us kind of what are the main, kind of building blocks of the new operating plan, and kind of how is it going with actually selling that plan was a big focus? Right. So I can start, and then Stacy, you can jump in here. So it's really, you know, in railroad, there's two operating models on there. There's either you have a scheduled railroad, so you move your trains on time. Yep. That's whether the train is big or whether it's small, you move the trains on time. Or, you know, you wait, you know, you wait, you let the car sit until you've got a big train, and then you let that train go. When Tracy came, that's one of the things she did, was to really come in and clarify, you know, what operating plan we're gonna use at CN, which is really move the trains on time. So, you measure it. You measure, you know, train departing on time, and I must say that now our train departing on time are over 90%. Then you measure train arriving on time. That's over 80%. That's 80%, around 80%. Then you monitor Block Integrity, because if you don't have the right blocks, then you're just pushing the work to another yard. Yep. That's in the 75%. And then, does the cars make connections? That's in the 75%-80% range. When we started this, we were in the 50%-60%. Now, why is that, to your point? So if it's not clear, if I'm a superintendent in Winnipeg, and I have a train that's scheduled to depart at 2:00 P.M., and the train is 9,000 feet, and I know my traffic that's coming in, my inbound traffic, and I know I have another 2,000 feet coming in b ut I've got to let that train sit for two hours. If it's not clear for me, I'll probably wait two hours because I'm gonna maximize my yard, and I'm gonna maximize my train. I add 2,000 ft, and all of a sudden, hey, I'm going with an 11,000 ft, same conductor, same locomotive, great thing. Yep. The problem when you do this is you do maximize this yard and this train, but you suboptimize the network. Because those locomotives were required further on in the network. Those cars that are empties, that will become load, were required to make connection to another train. So that's the thing. And the notion when you run with a plan is that you will be able to move more traffic with less cars. Like, when you look at it, and it's, it's incredible. Like, I remember when we got into some of our congestion issues, and, and you've been following us for a long time, at the end of 2017, early 2018. January of 2018, we had 35,000 more cars on the network, and we moved 10% less volume. In Q1 of this year, we were able to move, was it 6% more volume with 15,000 less cars? It's very powerful. What happens now, you say, "Hey, okay, now, so therefore, if the railroad owns the car, then we get the car ownership benefit." If the customers own the car, like for example, tank cars. Right. and the like, frac sand cars, then they do get the benefit because then they can move more volume with less cars, or they can return cars to lessors. But what do you think that does when Doug MacDonald goes, and the marketing team goes and tries to get a price increase above rail inflation? Makes it much, much easier. Right. On top of now, if that scheduled railroading plan allows you to be more reliable w hich is why customers come to the railroad in the first place. Right. Like, how can you be reliable if you never start your trains on time? Right. But you need to measure, and we measure each car. Each car. So I think now it's clear. The last point I'm going to make is, let's say that train is always 9,000 ft. Then there's two things you do. You either push... This is not and/or, it's both. You push the marketing team to fill up that train. Right. Pat, and you saw those two guys, Pat and Derek, who's like, Yeah. What, what did they call them? The nicknames they call them, Stacy? Big Bird and Whatever. Sorry, Ernie and Bert. Ernie and Bert. So they work very well together. You tweak the plan. Okay. You tweak the plan to maximize the business. Always with a view of customer service. Customer service is first and foremost, and that's what it is. So scheduled railroading is actually, you know, the foundation of great customer service, because starting your trains on time provides reliability, and then if you can do it with less cars, then that's the proof of the pudding. So I know for our network, and I've seen both. I've seen running scheduled railroading before, and I've seen us getting away from it a little bit. Right. I can tell you that I'm extremely excited about what we're doing right now, and the team is extremely excited. I can't wait to have those volumes come back, because, you know, this is gonna be terrific. That's exactly my follow-up point, which is kind of what stood out to me at Investor Day: a very back-to-basics approach. Kind of, I was really surprised that you guys had a really sophisticated rig that you took 45 minutes to walk us through, that basically taught your employees how to walk. And that, that's how back to basics you were going to. And kind of what you described to me seemed like fairly basic building blocks of PSR. You're running the train on the schedule with respect to length. So does this back to basic approach means that the execution risk here is relatively low because you're doing stuff that you, again, may have kind of gone away from, or like, bad, bad habits may have crept in, and so you can kind of make this happen with, with pretty low risk? The execution risk. It's very low. Because people have asked us: How could you go back and demonstrate benefits so quickly? You remember last year? Because we have the muscle memory. Like, I've been around for 25 years. Like, I'm a finance guy, but I've been in operations for a year and a half, two years. I've been, you know, I've been trained by Hunter. You know, Derek Taylor, I remember, was in Vancouver when Hunter was around, fixing up Vancouver. So we have people that have been around, and we have the muscle memory. That's why it went so quickly. Right. What we were missing, and hats off to Tracy, was the clear direction. Correct. If it's not clear, because we're diversified, we're geographically diversified, then people are not trying to be bad. They'll do whatever they think is best with their view of the world. You need to have the overall view of the network, and the network at the end is what we maximize. So Pat Whitehead, he's got the final call on what we do because he's responsible to make the plan. Derek is responsible to run the plan and make sure that we maximize the network. The other thing that we've been doing, and you'd say it's back to basics, absolutely, is we're working in a more integrated fashion. Believe it or not, in the past, marketing would go out selling, finance would not have a view of the contracts we're negotiating, and then operation would move whatever is in front of them. We're not doing this anymore. So again, we have an operating committee that Tracy has asked me to facilitate, where Ed, Doug, Tracy, myself are in. We review all the customer contract renewals. We make sure that, you know, there's appropriate pricing and profitability. We look at the OD pair. We make sure that we have the, you know, the resources and the people to make sure that we will be able to provide good customer service that the customers are entitled to receive. So we have these discussions to make sure that, again, and the key here is that when we look at business in Western Canada, that we just don't grow to grow, but we grow profitably, and we bring on that business to make sure that we bring the top-line growth to the bottom line. So that's another key point that we're bringing. And when we look at all of this, I don't look at it with just the finance. I look at it as a business person. Right. MacDonald does the same. So... And, you know, we've known each other for years. So again, the value of the team and the team coming together in, you know, and trusting each other and wanting to do the right thing is critical, and that's what, under Tracy's leadership, that's what we've implemented in the last year and a half that she's been around. Got it. Let's shift gears a little bit and talk a little more kind of commercial side of things. Obviously, Falcon service, you guys kind of announced on your last conference call. How has the initial market reaction to that been? We kind of did our own surveys and kind of we were, again, this may not surprise you, but we were a little bit surprised by how kind of strong the reception was gonna be for Falcon service. Yeah Given that it was a newer offering. So how, how has the go-to-market been for that? I would tell you, I'm extremely excited. Personally, I'll talk personally, I'm extremely excited by this because it allows CN to access Mexico without having to make a huge bet and without having any integration issues. Sure. So I think that I think that I'm extremely bullish on this. I think that, like anything else, it starts small. I think that, you know, I was happy to hear, and but not to hear, but to see the - and I, you know, as part of it, the press release that we're cutting service now. Okay. Service, the transit time by a day. And when we look at our transit time right now, Stacy, we're talking about this morning. Yeah. I think the key service from Monterrey to Toronto is five days, which is truck-like. So I think, like anything else, it starts small, but I think the opportunity that that presents is unbelievable, in my view. I think it's all about taking long-haul trucking out of the road to the railroad, which is good for the environment. I think the fact that Jim is—and I don't want to take anything away from Lance, not at all. Jim knows CN's network extremely well. He worked for us for over 35 years, for God's sake, so he knows. Knowing him, unless with the age, he got a little bit more patient, but he was not all that patient when. He did not sound very patient yesterday. I'm not surprised. And he's Italian, so, I'm going there. So this bodes extremely well for that service. So I think stay tuned on that one, but I'm—I don't know whether you want to add anything, Stacy, but this is gonna be good. Now, here's what we need to do. Jim knows this very well, and we know this. We need... You know, there's three railroads, FXE, UP, and us. Yep. We need to work as a single line railroad. Right. That's the key. We cannot let that train sit in Chicago, for example, for a week or two. We cannot, we cannot, we cannot. We need to work, and we need to make these interchanges as fluid as if we--it would be in our own network, our own railroad, going from Mexico to Canada. If we do that, and we do that on a consistent basis--now, stuff will happen. We're an outdoor sport, you know? You know, there may be, you know, some storms, some this, some that. People understand that, but if on a consistent basis, we're able to deliver these transit times that are truck-like transit times, with all the benefit that railroad comes from a pricing standpoint and from an environmental tran- standpoint, people will come in. They won't come in... It won't be a big blob. Yep, yep. They're gonna come in a little bit, couple loads. I'm gonna try it, then, "Oh, I like it." A couple more, a couple of more, a couple of more, and then in a year, two, three years from now, you know, if I'm still sitting in this chair, 'cause you know, Tracy fired me at Investor Day this year, and. That was hilarious. That was hilarious, yeah. If I'm still here, we'll look back at this, and if we've done things right, on my view, we'll say, "My God, we never thought that this was gonna be so good. Sorry. Just, just to follow up on that, again, just factually, kind of having multiple rails kind of at interchange is not gonna be as quick and smooth as having one rail network from point A to point B, right? So, A, can you just expand that point a little bit more? Are you guys doing anything tangible? Are you changing the network? Are you changing communications to make sure that you don't drop the ball in the interchange from one line to the other? And second, even if there is a time gap to your nearest competitor that's doing it on their own network, like, is there a price adjustment you can make? Is there some way or is that even a sensitive point to customers? Well, you're right. So first of all, what we've put in on the Falcon service, for example, and we've announced some other partnerships with NS, as you know to offer intermodal service to Atlanta and Kansas City. You need to put in the governance model, okay, to make sure that, you know, people follow this up, and that, yes, we work as a single line railroad to be successful. And we've done this in Falcon. We're gonna do this, with NS. And then you need to measure it. You need to measure it because typically what gets measured gets done. And then when people are not doing what they're supposed to do, constructively you need to tweak, which would be the same as when you're a single railroad. Right. Because, you know, people, sometimes your superintendent there works for you, but they're not doing what they're supposed to do. Right. It happens in the single line railroad, as it happens with two companies. I think the important thing is to have the commitment, and I think railroads understand, like with us, with UP or with us, with NS, that this is again to the benefit of both rails. We know that there's not gonna be probably another round of consolidation in the foreseeable future. Yep. Rails lost their market share to trucks in the 1950s. So now this is an attempt for us to work as an industry, to get that market share or some of that market share back. So, and remember, going to the Falcon service, this is where the EJ& E, the strategic acquisition that some people said we paid too much for. Yep Is worth gold, because we're the only railroad that can go around Chicago on our own tracks. I was on that train. Nobody else, and you were on that train, and it's pretty phenomenal. So again, that helps because you don't have to wait for a signal from some other rail when you're sitting there on the locomotive and you have a red, and you can't move because you're waiting for the green. So my view, railroads are working better together, and we're a big leader of this, to work better with UP and NS. The other place where railroads needs to work better together is on safety. You know, safety, when there's an accident or a bad derailment happening to one rail, it impacts all of us. Of course. We need to work together, and we've said that at CN publicly. We need to share data, we need to share technology. We need to work together to up our game, because, you know, if you know, from a regulatory standpoint, safety is number one. If you want to make the regulator happy, keep those trains on rail, work together as an industry, and then have good customer service so customers don't have an opportunity to go and complain to the regulator. This is where the industry needs to work together, and we're seeing proof points that it, you know, we're not 100% there yet, but we're getting there. Got it. Any questions? Earlier, the benefit to the environment from converting trucks, I feel like that has been talked about a lot over the years, but sometimes it feels like when push comes to shove, it's service and price that ultimately is kind of that deciding factor. So, you know, how do you view that as becoming a more important kind of decision-making consideration? Do you think it actually gets to be, you know, in the top two kind of consideration over time? I think I hope I understood your question correctly. You're saying, you know, converting truck to rail has typically been just purely more on price than the environment. And Stacy, jump in here, but I think more and more we see our customers now being cognizant about what they do to the environment more and more. So, and they know that rails, I mean, our gas emissions are four times less than truck. So more and more customers—First of all, we do get a price advantage, but, you know, to the truck typically. But you would say currently, I think the trucking pricing is very, like, there's a loss of truck capacity as we speak, so it's not as, it's not as conducive. People are looking at more and more the environment, and some of them are converting their traffic to us and to the rails related to the environment. The key for me and for them, what they tell us, is reliability. If you're going to do you know, Rupert to Chicago in 100 hours, do it 95%-97% of the time. Don't tell us you're going to do it in 80 hours and you hit the pin only 50%, because then they can manage their inventories, they can, you know, they can do all sorts of things. Hence, why the scheduled railroading model makes a lot of sense. So that's the key. That's how they convert. Then, if you can help on the environment, you're a good social citizen as a trucking company, you know, working on your own emissions and pushing more traffic to rail, then that's everybody's wins on this. I don't know, Stacy, you want to. Yeah, I would just say that as Scope Two emissions become more and more important for our customers, obviously, rail is a solution to the problem. So we're getting more, as you said, more and more requests from customers. We're helping them measure what the savings is. Yep. So it's really becoming more of a competitive advantage, whereas before, as you said, it was more based on price than service. Understood. So then maybe just to close out here, I want to combine a couple of my questions and, and go back to something you said earlier, which is you're not going to make knee-jerk reactions to the current volume environment, because of how hard it was for you and all your peers to size up again, coming out of the pandemic. That's right. Does that mean that real earnings are going to be more cyclical than in the past because you're not going to flex up and down as much as you used to? And second, are there any other actions you can take that do not involve labor or some of the kind of fixed cost aspects of the network to actually cut costs in the near term until the volumes come back? Yeah. Going back to labor, I think the key, you know, with the labor market right now and trying to attract young folks to work, not only for the rails, but for industrial companies, it's been tougher- Yep. than it was 10 years ago because these young people are not as attracted on financial rewards as maybe my generation was. They want their weekends, they want their Tuesdays off, so I think we need to be aware of this. You know, like, really, it takes about nine to 12 months to train a conductor. So you want to make sure that, you know... It costs about $75,000 -$80,000. So you let them go and all of a sudden, you know, they've got a young family, they've got a mortgage, they don't come back to you. You need to. But people will have a tendency to let them go when you think about the quarter. Yep. We want to think more midterm, and we know right now we're carrying a little bit more labor costs than we would have otherwise, but we truly believe that this is the right thing to do from the mid to long-term standpoint. I think our employees are appreciating what we do. So on the other stuff that we do, you know, we were able to park some cars, and in some cases, we were able to return cars because, you know, we have some cars that are under lease. Yep. We have staggered expiry date, so we have a bunch that, you know, on any given year, expire, we return them. We actually, you know, parked some locomotives. We're starting to take some out with the grain c oming on board in the fourth quarter, but third and fourth quarter. But we did park, and we parked the ones that are less fuel efficient. So there's things that you can do. You know, we're focusing on making sure that, you know, from the discretionary standpoint, a spend standpoint, that we tighten our belt a little bit. So these are things we do, but we have a mindset, we're not going to run for a couple of pennies on a quarter to do the bad decision for a mid to long term. Maybe I see the, time is at zero, Ravi. Yep. Maybe just a couple of closing remarks. Yep. As I said, I think, you know, Q4 will definitely be better than Q3. I think I'm, you know, we will deliver on our guidance. I'm confident of that. I'm very, very bullish for the future. I think that, you know, we've got the team gelling. I'm having fun. I think Stacy's having fun, that's why she's dressing green, the color of a dollar bill. She sees the money right in front of her nose. And I think that, you know, we have these growth opportunities, and we didn't have a chance to go through, but for investors, go back to our Investor Day, and they're all laid out, and we're talking about 800,000-900,000 car loads that are going to come at us. Maybe not all of it day one, but these are, these are specific opportunities. They're advancing as planned. Some are even maybe a little bit bigger than what we thought about. So, and that demonstrates to us that this company will be able to grow organically very well in the next years. Yep. With the discipline that the team and Tracy, with her leadership, brings on board to not oversell our capacity, especially in Western Canada, we will bring that top-line growth to the bottom line. Good. Listen, it's always enlightening and always fun to talk to you. So thanks so much for coming here. Thanks for having us. You'll definitely be back next year.