Let's kick off day three at Laguna with arguably the most exciting kind of idiosyncratic story in the space right now, Norfolk Southern. Very happy to have with us newly appointed CEO, Mark George, and COO John Orr. Gentlemen, thanks so much for being here. Mark, congratulations. I know it's been less than 48 hours, but and obviously, you're very well known to the investment community, but any early thoughts on kind of, you know, how would you like to make the role your own? Kind of any what would you do the same, what would you do differently? Thanks, Ravi. It's great to be here, and it's great to see all these familiar faces, too. We're really excited, John and I, about moving forward right now. W e've been in the news for all the wrong reasons in the past week. I am super proud of our board for moving very swiftly and very decisively and very quickly, that this is just a speed bump, and it's not a continuation of all the distractions that our organization has been dealing with for the past eighteen months. I'm really happy about that, regardless of who the appointment was. In this case, it's, excuse me, in this case, it's me. But, I'm just happy that we got this behind us quickly. We can get the organization focused moving forward. We've got a lot of momentum inside of Norfolk Southern. You know, I think you've all seen the weekly progress that John, to my left here, has made since his arrival. It's been immediate and consistently progressing forward, I am thrilled because, look, I've been here for five years inside the company. You know, we can talk about the fact that I spent 30 years inside of another industrial conglomerate, United Technologies, and I've seen the world operate differently, without a whole lot of patience for anything other than excellence on the operations side. You know, a high quality-oriented organization that, you know, we had a quality system in place for my thirty years, whether it's Six Sigma or ACE, you know, that concept existed, and that's what I was bred with, and the tolerance for poor performance inside of rails has always bothered me, and the fact that now we've got a real operator with forty years of experience. You started very young, I know, but with forty years of experience, who's seen everything, has seen everything that's been broke and has been able to fix it, and we now have that legitimate operator, I'm thrilled with. Because we can't have patience for anything other than excellence. Because if you're not excellent in the way you serve your customers, they have options. And we've suffered from that over my first four and a half years. T hank you, John for coming on and making the impact that you and your team are making. I know it's not a one-man show. I think that's kind of the biggest story. In short order, the difference that one leadership change can make, I'm really blown away by it. Got it. I'm gonna pepper John with a bunch of questions, m aybe just one follow-up to kind of just wrap up what you were saying. It has been a distracting eighteen months for the organization. How do you turn the page? How do you kind of make a fresh start, especially kind of through the organization? Obviously, like you said, very decisive action at the top of the company, but how do you kind of permeate that through the organization? Look, I'll be honest with you, this, the eighteen months has been brutal for our organization, for our employees. Nobody wants to work with a name card, with a company who's infamous right now. Whether it was the derailment, the PR crisis, the GR crisis, the environmental crisis, being in the news for all of the wrong reasons, they're eager to move forward with pride. Norfolk Southern has a very long history of being successful, and we want to get great again. You know, we really do as a company. P eople are excited that we're now turning the page, we're moving forward, and, you know, I think that's the main focus is to harness the best out of everybody. W ith John and John's leadership, maybe talk a little about that. If I could just add, I think, you know, just I'll frame it in the last six months. We've been churning through change and organizational realignment for the six months, even as I came in in the midst of the proxy issues. All through that, leading operations with confidence and capability and creating that accountability structure was really key. J ust over the last seven days, last five days, our team has been well-practiced with dealing with exception management and driving performance with a common purpose of serving the customer at the best cost and closing the gap to our competitors. I was really proud of the team when this news broke and the hype that they recognized this could be distracting. Immediately, all of them, including Tim, led by Tim Livingston, my Senior Vice President of Operations, went out to the field, engaged our employees on safety. Safety is the key to everything. It's the value that we drive every decision. That stabilizing force allowed us to just work through. Last thing we wanted was somebody to get distracted they got hurt or caused a disruption within the community or within the organization as a derailment or something like that, and as they saw the press and they saw the board reaction, and of course, you know, Mark is well known in operations. We have a lot of great debates and great discussions, but they were stoked, if I could put it in California terms a nd we're stoked. We're really excited, and to a person, they have already moved on, moved up, and are energized. Great. L et's talk about the path forward from here, but maybe starting with a little bit of a step back. When you kind of came in, like you said, kind of a few months ago, in the middle of the proxy battle, A, what did you find? And B, what were customers telling you they needed to see to kind of come back on the railroad? The nice thing, I'll start with the customers because, you know, Ed is 10 steps away from me in the office. Mark was 30, now he's 40, I'll get more steps in. W e're tight. We're very tight, the three of us. I was less worried about that and more worried about the actions and deeds and deliverables I could provide Ed to have a better narrative. As we got more momentum, starting with on-time performance in our terminals, really focusing on the merchandise cost structure and capability structure, that started this first turn of improvement. The second turn was increasing standards and capabilities and visibility. That allowed us then to see the proof of what we were doing, especially as we moved to higher standards and capabilities. We didn't erode our service product. In fact, our intermodal composite improved. It notched up a couple of points in our. We started to improve our merchandise on-time deliveries. And then we started to hear from the customers, and then we saw the customers vote with their actions. We started to get more spot moves. The capabilities that we created to have locomotives in the right place at the right time, the right cars being used, less cars per load, allowed us that capacity that we created from a car, a resource, an over-the-road component, and they voted with their products, so I saw that through their actions. Ed and I talked about it. Ed and I, three times a week, have a structured ops commercial meeting where we talk through any issues, we talk through what's coming up. And we energize around how to build that top-line growth. O f course, then I'm focused on the bottom line. In context with that. I think that's the most critical piece that we're doing in focusing on what I do, and that cascades into the value proposition for the entire organization. Got it. I'm going to come back to top line and growth in a second, but when you think of the continuous improvement in service product, is that just implementing best practices, or do you need to invest in the network to kind of get it up to that level as well? There's some things that we don't have to invest as much as we thought coming in like locomotives and resources, because we've really got a discipline around that. Even structurally, changing how we view locomotive distribution- Horsepower per ton, cranking that down. Like I describe an eight-burner stove. T hose are things, but then I look at how do I consolidate assets, create world-class facilities to minimize downtime as we increase our safety composition of wheels and safety appliances on cars, for example. T here'll be investments. They'll be investments with a high ROIC. That's the P&L, you know, link between, you know, Jason Zampi, as we call him, JZ and Mark, and me, and the team. But it will be tailored, really bespoke capital investments, but certainly not for capital for capacity, unless it's something new and emerging. I'd say, Ravi, we've had a lot of low-hanging fruit with just some process changes and some focus by operations. John has quickly harvested that. In fact, you know, there's been a three-month payback on bringing John into the company, because we immediately took out all of our poor service-related costs in the Q2 Just with the process changes that John brought in. T here's more of that, as John talked about, whether it's a six-burner stove. You know, I think he's more like a hip-hop DJ, you know, mixing records It's that stuff, you know, he's grinding it out, the costs are coming out, and yes, there will be bigger stuff that has to get worked on to get the next layer of productivity and expense reduction in two and in three years that we have to start forward planning for now, whether it's a little bit of investments in our yards- or whether it's sidings, things like that, we'll focus on. R ight now, what I love about it, going back to my quality analogy, they're looking at processes and standards. T he other thing I want to point out that John has done, which I love, is he's set up these war rooms, okay? That's analogous to kind of this relentless root cause analysis. When you have issues in a quality organization, when you have issues, you drill into the processes to understand what broke down and then what process changes you need to fix it permanently. He's got these war rooms set up with these guys behind, and gals behind these huge screens, identifying the issues, what the root causes are, and how to permanently fix them. We haven't seen that, and I'm thrilled because that's what I've been looking for and waiting for, for my five years, and he's brought it in, and I'm just thrilled. Got it. I just want to clarify that we have Jay-Z here, or we have a hip-hop DJ here, but Beyoncé will not be making an appearance. W hen you think of that $250 million kind of cost opportunity, can you remind us kind of how far are we into this? What's the timeline to delivering that, and kind of what could be potential for upsizing that? I am really excited on how we're progressing along that front, and you see it, you see it in the bottom line. line. I would say, we're tracking very well on that, and I'm confident that we're going to meet our commitments. And- We got two fifty You know, roughly half of that has kind of already been harvested because we took out those poor service-related costs I've talked about. The rest is absolutely on track for this year. Y ou know, next year, we've got another one fifty that we got line of sight to. Got it. And maybe kind of last question on this topic. Kind of, you mentioned that customers are rewarding you almost immediately with spot business. Usually, it takes a little bit of time for, you know, service improvements to resonate with customers and kind of have that convert. D o you feel like, kind of, you made those conversions early, or is there, like, more? How much of pipeline is yet to come in terms of kind of being rewarded for those improvements you're making? I think it's hard to really differentiate between what was pent up and what is now a reaction to better service, at first. Now we're seeing that, we saw that a couple of months ago, that pipeline of pent up, service-related, you know, volume was cleaned up and as we see now, it coming on board. I think what's important is we're grabbing it, and we're able to leverage it. Now, we're able to now start to frame out with some relative certainty, what is the resource allocation for that? How do we structure, you know, our planning around that, our costing around that? And I think as we go, what I see is in the most service-sensitive lanes, like automotive and intermodal, we're seeing growth, and we have less cars. We're fixing, we're fixing our cars more quickly, so we have more in service. We're able to pull out bad leases and expense in those environments. I f you can gain in a soft truck environment, in those service really sensitive competitive lanes to truck, then to me, that's a testament to what we're doing is the right thing, and we're also seeing it in merchandise and in spot moves for agriculture and fuel and things like that, but I would say that, I'm confident now it's really about the service. Got it. Just on that note, let's pivot to growth. Clearly, you're seeing a nice acceleration in volumes from two Q to three Q. How would you characterize the demand environment out there right now? I think, there's been some focus on maybe volumes being good, but mix being a headwind. So kind of anything, put some dates to keep in mind for three Q and four Q. Actually, we started the quarter really well. I mean, July and August, from a revenue perspective, we're running ahead of our own plan. W e're really excited. I would tell you that that overage has been eaten up a little bit in September. We've seen some moderating of... compared to our expectations, largely in a couple of discrete markets- like auto and steel. You know, we're keeping our eye on that, but I think we're fully on track for the Q3 because, you know, the great headwinds, sorry, the headwinds we have in September are really offset by the great tailwinds we saw in July and August. We're gonna keep our eye on it as we go into Q4. Hopefully, the volume pressures are, you know, abate going into Q4, but yeah, mix has been a headwind, for sure throughout the year, and it, unfortunately, it's continuing here, in the Q3, and I expect that those mix headwinds will continue to exist in the Q2, too. We're not just sitting back, hoping things change. We're creating actions, and Mark and I, we're the executives really in charge of driving the intermodal reservation system. We put that in place a week ago, Monday, and you know, it's running in parallel now. We're starting to see the expectation of more disciplined gate activity, forecasting train length, now really harvesting value and cost reduction in our intermodal facilities. We're doing whatever we can, all that we can, to make sure that cost structure is in the right range, and everything's on the table. A s we churn through these next developments, we're really making sure that we're doing everything we can to control costs, control that mix issue from a bottom line perspective. I'm excited because as the market changes, and truck tightens up, and those headwinds become pretty significant tailwinds. I think it's a very, very disciplined structure. Got it. On that point, Mark, you're definitely not the first company to talk about auto and steel being a headwind in July, August, September timeframe. What are you hearing from your customers? It feels like a short-term inventory balancing type softness. Could you think it can continue in 4Q, or what are they telling you? I t's demand related Yeah, the inventory destocking is really what's driving that I think, it's hard to say. We've got to talk a little bit more with our auto customers to see how long they expect it to happen. But, you know, I do think the destocking is, you know, at risk of lasting throughout the Q2. But we'll see, and I think that has a direct impact on steel, too. W e just have to keep our eyes on it. Got it. A part from these couple of end markets, volumes have nice momentum, the service product is improving, the net result should be price. W hat are you thinking in terms of the kind of, I don't necessarily care about three Q, but kind of the medium-term outlook on price, especially in an environment that's still inflationary with the new labor contracts? Can you just talk about kind of your algorithm for getting price over inflation? Look, I think in merchandise, we're doing a sensational job driving price in excess of inflation. We're well ahead of our own internal budgets on that, and the team has done a great job. I think intermodal, you know, unfortunately, three years into a freight recession, you know, we're a victim of spot rates in the trucking market, which have not come off the bottom yet. They seem to have stabilized, but they're still at, stabilized at a relatively low level. We're waiting for a recovery there, where hopefully intermodal price will follow for sure. We know it will. T he timing of that, you know, we just don't know if it's within the next three, four months, and we start to enjoy that going right out of the gate in 2025, or if it's gonna take a little bit longer. We'll see what the Fed does, and we'll see what the, how the economy reacts there. O f course, you know, our coal pricing is also tied to industry and those have been a little weak. H onestly, with fuel coming down our surcharge revenue follows. That's, you know, all that kind of shows up in RPU in addition to the mix that I talked about. So we got to put it in the whole mix, master, I would expect similar kind of pressure, you know, as we go through the rest of the year. Got it - on RPU. You definitely have, like, a DJ set as beyond for sure mix master. I call him DJ Khaled. Just to kind of follow up on that, how do you think of the volume versus price dynamic? Y ou have a much better service product that's probably not going to be cheap to kind of put out there. I t is a very competitive environment, kind of. Obviously, you have a very strong peer. The truck market can be very competitive. A re you willing to walk away from volume to protect price or kind of how do you think of that balance? These are, these are unit-by-unit decisions that get made. Oftentimes, and we want to be smart about it. You know, for incremental volume growth, we really want it to be accretive. W e want it, we want accretive to our OR. But at the same time, we want it to be attractive and sustainable business, and we want it to be business that John can move that doesn't create disruption. W e really go through a great enterprise-wide kind of decision-making process on this stuff. So, go ahead. I would add, you know, we demarketed some of our intermodal lanes. Quite a number, and yet we grew intermodal. So in some cases it moved our customer to where we were, and it's a win-win. In other cases, you know, we're able to use the capacity for other things, whether it's merchandise through that corridor or it's intermodal from somewhere else. You could probably have that same thesis with reservation system. You're going to chase things away, but actually, you just create quality, and you create winning solutions and certainty, and that's what customers want. Certainty, and pricing follows certainty. Pricing follows the win of the win because they're able to take out costs for car hire and handling costs and labor as well. So that's what we want. We want everyone to win within our ecosystem Help our customers be as competitive as they can be within their own space because of our reliability and our service quality. Got it. Mark, you started out talking about the noise over the last eighteen months. Unfortunately, there may be another one coming up in the form of a potential East Coast port action, potentially as soon as end of this month. There you go again, East Coast, West Coast. Oh, there You know? Just on that note, kind of, what are your thoughts on that? Are you seeing any diversion away already or kind of how are you planning for that? I'm not sure we're seeing the diversion away already, but we're somewhat, you know, neutral on it. I mean, we've always been largely geared toward moving the West Coast-oriented or originated product, but I think we've shown the nimbleness now to where when the product moves to the East Coast, we handle that just fine too. You know, there's puts and takes on where it lands on our network. Either way, we have no problem moving it, so it, it's not really a big focus internally for us. Would you add anything? I would say we've got great trading partners with the Western carriers. Really sophisticated interchange in Chicago that, you know, it works. Obviously, we don't want disruption in the U.S. economy. We don't want any kind of inflationary- Pressure in the macro, but whatever the world gives us, we're able to respond, and we showed that in Baltimore when, you know, the bridge disruption happened. We within twelve hours, Ed, Mark, and I got together, restructured, you know, commercial proposition with some of our biggest customers, reengineered our supply chain overnight, and we were really, really effective in continuing that export for the U.S. coal. A s Baltimore came back with relatively short notice in supply chain terms, we were able to pivot back, and it did a lot of good things. The one thing that I would say that this East Coast, West Coast issue might give as a kind of a golden nugget is that we learned more about our own capacity and capability in the coal supply chain that we're now leveraging, and it'll be a permanent improvement. Much like the issues that we Hunter with Hunter and CN back in the day, we learned so much about our labor organizations when we had unfortunate disruptions, and we were able to extract value on an ongoing basis. It's the same thing here. We'll learn more about our capabilities and our, our ability to interchange more effectively, our abilities to pivot and be more responsive in the market, and really, what our capacity really is. Got it. M aybe just to tie all that up together, how would you like to be judged? I s it a single metric? Is it a bunch of metrics? Is it revenue growth? Is it EBIT growth? Is it OR? Is it cash return? Kind of what's the philosophy there? I think it's a composite of different metrics. Definitely right now we are out of balance with the industry We have got to get our profitability back in line, and that is our principal focus right now. We've got to get our operating ratio back in line in the same zip code as our peers. We're committed to do that. We fell out of balance, W e've demonstrated here that we're making the moves in the right direction. Ultimately, we've got to start driving revenue growth to drive the bottom line growth. You know, it's dollars and cents that you deposit, not percentages. W e have got to focus on earnings growth in dollars, and earnings growth in dollars will generate a lot of free cash flow, which then allows for share repurchases to help drive EPS growth at a faster rate than the profit growth That's kind of the algorithm. A t the same time, you've got to also look at ROIC. We've got to be smart in the way we invest our capital and we've got to drive returns higher as a percentage of invested capital. I think you've got to look at everything, but right now, you know, we are going to be a little imbalanced, focusing on restoring our profitability. Did you have anything? I would say the only heavyweight metric I look at is safety. The performance of the organization- Totally Our social license to operate, our reputation is so important, and everything's driven through safety, and I would say then the rest, you're right, Mark, it's really a mosaic of information that manifests in four or five key metrics that we look at There's no one metric that I think outweighs the rest. It otherwise gets into a vanity metric, and it's for that sake rather than the organizational health, but I look at asset, network, and customer those on a kind of two-by-six every day, and I'm watching how we're performing with our terminals and with over-the-road. I'm watching from that how's our car per mile, our HPT for available horse, and then the customer composites. That gives us a good indication of where we are. Man, we're under the hood on everything.. We are into the weeds on contracts, on capability, on cost, on service, on people and development, the speak-up culture that's leading, and how we're driving safety and performance, and how we're really reinforcing that safety enables performance and, as Mark said, manifests in so many other ways in the financials, whether it's direct or it's a little lagging, and that's some of the things that I'm really excited about, those lagging financial implications into the latter part of this quarter and next. I think, you know, you gotta be careful about cherry-picking and looking at a certain operating metric and say, "Oh, geez, their dwell just spiked." L ook, at the end of the day, John and his team may make some very tactical decisions. In the course of a couple of weeks that may have an adverse impact on dwell to accelerate the network in other areas. That are of high priority. So that's why he looks at the mosaic, and, you know, there's a lot of data out there, but there's also sometimes a lot of decisions that are behind investing in one area you know, at the expense of another, to accelerate for the longer term. That's the cool thing about, we just brought on a new CIO Anil is -- he's dialed into operational value. We're looking at a single source of truth. Hunter may have called it Data City back in the day. I'm not trying to plagiarize from Hunter, but I learned a lot from the man, and as we're building out the single source of truth, now we can peel back every layer, not just me, but a train master in the field. That was the magic that Keith Creel brought to CN. He said he could mobilize the entire company to get information. He then unselfishly said, "I want everybody to have that same capability," and really leveraged up on what Hunter said about getting data and Data City, use it, drive it. We've had a lot of talks with Anil, and he understands the importance of that. He's on board, and I think we're going to see some really good capability developed from that as well. This, this is a big deal. We don't have that today. We don't have those disciplines today inside the railroad, and I believe that's going to unleash a lot of opportunity going forward. I'm really excited that John shining a light on it. In fact, you know, when I first joined the company five years ago, I spent a lot of time with Claude Mongeau the former CEO of CN, who happens to be on our board, and he was speaking exactly about Data City and explaining how Hunter would almost sit in the control room and be on the phone with all the various branches, pointing to data and asking the train masters: "What's going on with this train? What's going on with that train?" We have a lot of data today. I wouldn't say that we have good, clear access to it in the right kind of data lake system. That's where I think John's shining the light on, and we're pointing Anil to it and saying, "We have to prioritize our IT investments right now toward what's going to provide the greatest return." W e are turning off a lot of other nice little projects that have a lot of promise for the future, m aybe they're not going to have the kind of leverage that this Data City will. That's, I think, the other thing I would leave you with, is we have to do a lot more prioritization of our investments, which means turning off some other things from people's wish lists. Because they're just not as important. Sounds like a great stop for another investor day, kind of just to, Shine some light on that. With that, maybe we can squeeze in one or two questions if anyone has in the room. Okay, want to go? Thanks. Good morning. You alluded to this a little bit earlier with the productivity comments and the focus on OR, but can you just walk through the path to sub sixty? How much is internal initiatives? How much is the macro maybe being a little bit more helpful? Yeah, what we talked about is that path to sub-60. You know, you're going to require kind of modest revenue growth, 3% to 3.5% per year, while we're working on these productivity initiatives that are going to unleash $550 million of savings, okay? That's going to get us down into the lower 60s, call it 63. W e know that there's going to be a secular recovery in the industry, in the market, okay? When that comes, it's safe to assume you're going to get another couple points, you know, that would get us probably more in the 5% to 5.5% range of top-line growth. W hen that recovery comes, that's going to get us below 60, because we're going to have tremendous incrementals from that volume. Given all the work that John and his team are doing, the incrementals on growth beyond the three, three and a half are going to be really attractive. Got it. With that, we've reached our time. Mark, John, you are, I think, again, I think it's been one of the most exciting kind of turnaround stories in the space in the last kind of six or seven months or so. I think everyone's focused on what you're doing. C ongratulations again. Thank you. We'll be able to focus on this. Thank you very much. Take care. Thank you.