Canadian Pacific Kansas City Limited (CP) Earnings Call Transcript & Summary

Okay. All right. So we're going to go ahead and get started with the next presentation. My name is Tom Wadewitz. I cover the freight transports at UBS. It's a pleasure for us to have Canadian Pacific. We have John Brooks, the Chief Marketing Officer and EVP, Marketing and Sales up with me. We have Maeghan Albiston is here with us as well. Thanks to both of you for joining. John, I'll turn it to you for some intro comments, and then I'm going to surprise you that I have a good list of questions here. But no, we can take some from the audience too, if there are any, and you have the QR code or just raise your hand.

All right. Good. Well, thanks for having us, Tom. It's good to be certainly back face-to-face. Honor here to be representing CP and the team. Let me just make some opening comments sort of a state of the nation a little bit we can get into the Q&A. So thinking about Q2, certainly glad to have Q1 behind us, not a quarter that we're used to at CP at all, let alone all the other challenges that we faced in the quarter. The good news is, and we were talking about it earlier, we've seen sort of volume and demand begin to sort of [indiscernible], far better than we had seen in the past. If you think about April, overall, RTMs in that bounce back pretty good. May progressively got better. And I expect June to be better on top of that. Our demand profile really across the book of business is strong in all the areas, except Canadian grain, which we fully expected. If you think about on an RTM basis, we're up, let's call it, mid-single digits plus if you exclude Canadian grain. So actually quite impressive. I'm really pleased with how our other lines of business and our growth in those areas have exceeded expectations, frankly. As you think about the year as a whole, it's kind of what we talked about from day 1. It's going to be the tale of 2 halves, Tom. And really, my expectations, as you look at sort of 3 pillars in the second half of the year, I think our base business levels continue to sort of maintain at a level that they're at today. So I think that run rate continues. Two, you think about self-help. We've done a good job at CP of, again, targeting surgical growth to our network. We announced an agreement with CMA. We've got the Hapag-Lloyd at St. John. We've got a couple of energy-related pieces of business starting up the back half of the year. So you're going to see that self-help sort of kick in second half of the year story also. And then the third leg of that stool, and it's a big one, is Canadian grain. I just got a text from my Vice President of that area that says it's raining in Lethbridge and Swift Current right now. So those of you in the room that know where those places are that matters. So we are increasingly optimistic that we're going to get a good Canadian grain crop this year. And frankly, you put those 3 things together, and we're looking at double-digit RTM growth the back half of the year. And that should manifest itself into full year RTM growth, which, given the headwind that Canadian grain represents, is significant. And then maybe the third comment is CPKC. Conviction and excitement, anxiousness, all those words come to mind. We are deep into the integration planning. I'd say, going very well. We're pleased with the process. A lot of work behind the scenes, whether it be IT. Certainly, my department, we are active out with our customers, the KCS customers. Wanting to understand their business, wanting to understand their service requirements, wanting to understand, certainly, what those synergies and opportunities could represent. So as much conviction on the synergies that we've laid out a year ago, more so today. So with that, do you want to ask any questions?

Here we go. All right. So that's helpful. I think there's been -- there have been recent commentary from the CP team on kind of OR framework for 2Q and second half. Did those -- so specifically, I think like sub-60 OR in 2Q? And then I think it was like, I don't know, mid-50s in second half. Are those still the right kind of the right framework to have in mind?

Absolutely. That is -- lines up exactly with sort of what we're thinking and what it looks like right now, Tom. I think the big piece in that with this volume coming back to the level which it has and then the self-help in the Canadian grain really sort of drives that home second half of the year. So I think we're quite comfortable with those OR targets and look forward to delivering that the rest of the year.

Okay. Great. How do you think about, I guess, one other kind of just, I guess, I don't know, affirming prior commentary, timing for the deal, I think you've pointed to February is kind of the later point of getting STB approval. And then, I guess, we were just talking beforehand that there's a little a month after that before you kind of take your steps or integrate the railroads, begin integrating. Is that still the right framework? And do you see any risk around that? Or what might be the risks around that?

Yes. So that is the right thinking on the timing. Our expectations, and I think they've been somewhat affirmed by the STB and some of the recent decisions and then our -- getting our application back in and the data they were looking for back to the STB. It's a pretty defined timeline and process. So that would put us maybe on the outside, a February decision, to your point, and then 30 days after that. So let's call it, back half or end of Q1 control. You know what, I was saying earlier to you, I don't see and anticipate. Now certainly, this STB, it's their decision. If they need more time, they have the full right to do what they need to do. But I think we feel pretty comfortable on where we're at in the process. There's a lot of ongoing discussion with stakeholders, whether it be on the environmental front and communities that will operate through or with other railroads in terms of some of their ask. But -- and on the other hand, I think a lot of those other railroads are also pretty distracted or at least consumed with some of the things that they have going on, on their own networks. So we'll see. I don't anticipate either of those items causing the timeline to push out at all.

Are there agreements that potentially you reach with other railroads to address concerns? Or is it pretty much around the path that it's just STB's going to make the decision and we just leave it to them?

Well, I'll tell you this, at first blush, I would say it's more likely that we're going to run the course with the STB. That being said, and I know Keith has been adamant. We are open to any reasonable discussion. The problem is, Tom, some of those discussions haven't been overly reasonable. Thus, I don't have a lot of optimism. But nonetheless, they're all a little different. And I can tell you, some of those are still robust, and we're at the table and there's, I think, a healthy dialogue and others, there's -- that's kind of broken off.

Right. Okay. That makes sense. Let's talk a little bit about labor in the network, and then we'll go into the sweet spot on the customers and all the growth opportunity in CP-KSU. Where are you at on labor? You -- a lot of your labor is in Canada, but there's some in the U.S. You're pretty clearly describing a nice ramp in activity, which your ramp activity, you need more people, right? And so where are you at today? And how much confidence and visibility do you have to the ramp in labor resource as you look through the year?

Yes. Well, certainly, we are going to be a total group earlier this morning. We are going to be a busy railroad this -- we're busy railroad right now. But we're going to be a really busy railroad in the second half of the year here. So we've been aggressive on the people front. There's no doubt about it. Now I can tell you, we also -- we didn't do some of the furloughing, and some of the other stuff that I think some of the other roads may have done that maybe got them into a people deficit position. So we've had a little more success there, particularly in the U.S. in terms of availability. We've hired, I think the latest number I saw was around 300 conductors, engineers to our network that are in training right now across our network. We have another 400 in the pipeline that will continue down sort of the training and education path, the back half of the year. That sort of -- look, there's hotspots and there are some differences as you go through certain segments of our network. But generally, we find ourselves in a pretty good people position. I think the runway and sort of the line of sight towards the people to be able to handle the volume, so we're in a good position.

Okay. So you're not holding trains for crews at the present time. That's 1 metric, I think of, well, what's your percent of trains held for crews in a given day. And if it's 1% or 2%, that's normal. If it's 10%, there's a problem?

We're in the 1% and 2% range, not the 10%, for sure.

Yes. Okay. Good. Let's talk a bit about the -- maybe the near-term demand. We're seeing this kind of cross currents and transport, where I think rails are seeing a lot of strength in demand, and not handling the demand that's out there. Maybe more of a U.S. issue than Canadian. And at the same time, we're seeing weakening with big-box retailers that have maybe too much inventory, maybe some change in sales profile or outlook. And so do you see any of that coming through with your customer conversations? And how might that affect your demand if you look out a couple of quarters?

Yes. So look, I would say, again, in Canada, we're a little bit unique. A couple of comments. One is our franchise is uniquely bulk positioned where we have a fair amount of, I would say, maybe natural insulation to some of the more consumer-based retail concerns that are out there. Now that being said, we need a Canadian grain crop. We think we're going to get it. Our potash franchise has never been as busy. And then certainly, our tech coal business is also running strong. So if you sort of lay the foundation of the bulk business, it sort of gives me -- I'm not going to say recession proof, but certainly puts us in a pretty good position if, in fact, those worries are out there. On the retail side, I think we're different in Canada. Honestly, we have not seen a pullback whatsoever from our major retail customers. And as you know, the Home Depots, the Loblaws, the Canadian tires or those bellwethers, we're the dominant service provider for those carriers and their outlook, the back half of the year is as strong as it's been in the front half of the year. We've set domestic intermodal records every month so far this year, May was another record for us, and I don't see it letting up as we move through the back half of the year. That being said, also, Tom, the other gauge is international intermodal. Are we seeing any sort of slowdown in terms of those volumes? And the answer is no, and it's no for 2 reasons for us. Number one, again, I still think the pent-up demand that is required across Canada has yet to play itself out fully. So I still think there's opportunity there. The boat lineup for Vancouver or Montreal, now for St. John, is strong. So I see that tail continuing. But then also the self-help in the new business. We recently announced our CMA agreement. I can tell you that was a catalyst and driven from our access into St. John, Tom. They've been running a service into St. John for quite a while. They've been running it with our competitor in Canada. And it just flat out has made no sense. We have the most -- we have the capacity and most direct route to the market. So really that St. John opportunity became the catalyst for us winning a bigger piece of business with CMA. So we're going to get that lift. And then I can't emphasize enough what a big deal Hapag-Lloyd's announcement of St. John and the new calling they have there. This is a massive boat. This is a really big calling that we've worked on them for now a better part of the year in bringing to reality. Just to give you a sense, when we bought the CMQ, that was 150,000 TEU facility at St. John. It's now a 300,000 TEU facility, and it's sold out. And I can tell you with the recent announcement from the Ottawa government and New Brunswick government on spending $42 million to fill it in these pieces of like open water [indiscernible] and now take the capacity of that St. John terminal, 100,000 TEUs to 800,000 TEUs and [indiscernible]. We've got the second of Hapag-Lloyd [indiscernible] showing up 31,000 TEUs it's a big boat in the [indiscernible] it's now really creates the density on St. John, Montreal, Toronto line, whereas we are around 6000-foot-trains today we are around 10,000-foot-trains [indiscernible] and the operating leverage that creates not only for that [indiscernible] in that intermodal business but also exceeds for [indiscernible] all the other business that [indiscernible]. So we sold out that [indiscernible] [Audio Gap] And we move up to [ 80,000, 100,000 ], [indiscernible]. That's right, it gives us more runway.

Right. Okay. What -- those 2 pieces of business, plus, I think some -- you mentioned some additional energy or new energy business. Can you frame like the magnitude of that? I don't know if you want to say, like a full year run rate revenue? Or however, whatever framework you think is helpful to get a sense on that?

Yes. So I think I said on the Q1 -- our Q1 earnings call, line of sight to $200 million-plus in annualized revenues. So I think you could sort of relate that. I was foreshadowing a little bit on that call, those opportunities. So if you -- CMA, Hapag-Lloyd. I think today, we're loading our first cars out of in our pipeline up in the Alberta Heartland that new plastics facility is ramping up today. And then you got Independent Energy who's a small refined fuels facility in Kerrobert, Saskatchewan, that will also be starting up here, let's say, in the next 30 to 60 days. So you combine those 4 and $200 million-plus.

Okay. And is that mostly ramping in 2Q, so you'd get kind of full run rate in second half or what's the timing on the ramp?

Yes. So CMA's agreement starts July 1. The Hapag-Lloyd, as I said, we'll have our second vessel here show up in a few days, about a week. So we'll get a little bit of benefit in Q2 from that. IPL is starting up now and then Independent Energy will be more of a July forward, so Q3 story.

Okay. So it sounds like you'll get maybe a full run rate in 4Q and a little bit of ramp 2Q, 3Q.

Yes, I think that's fair.

Okay. Great. So I had a question coming here on the Canadian grain, basically saying kind of is there opportunity in the future? I think it's related to the impact of the Russia-Ukraine war. And so saying in the future, can you be kind of a higher level than you've been in the past, right? And so I think that's a Canadian grain question. I'll frame it as let's talk about that, but let's talk about other business segments affected as well. So if you want to say, where does potash go to? What happens with crude by rail? Is there a future or just Western Canada energy related? Are there other elements that elevated commodity prices and give you a step-up for the future versus where you were?

Sure. Well, look, first of all, I'm just going to say, I have long touted that I believe Canadian Pacific has the greatest grain origination franchise in North America. I stand by that. And we only get better when in the future with CPKC. It is going to be a powerful franchise in, frankly, North American grain. Now that being said, specific to your question, think about this. We spent over $500 million, Maeghan, on hopper cars. We have the newest, most modern largest fleet in the industry. You couple that with -- we now have in Canada, I think 42, 43, 8,500-foot elevators built in the country. We haven't -- and then we had a small crop. So I just -- I get excited about the idea of a normalized crop and really getting the breadth of sort of the yield and margin opportunity that Canadian grain presents itself as we get into this fall. So I think that's -- it's a huge opportunity. I think absolutely there. When you put all that together, there is a significant upside to sort of take that grain franchise will really realize all the investment we've made in it and our shippers have made into it and take that grain to the next level.

And the specific question to make sure I hit -- we hit on it today's profitability. So I guess it sounds like also you make the investment in running longer trains and then you didn't get a chance to take advantage of that. So in the future, profitability could be even stronger on your Canadian grain business as you kind of harvest the, not to be cute, in investments that, that you've made? Is that a fair way to think about it?

Harvest will be high yield.

There you go.

Here you go. Honestly, I was saying at the Maeghan, the power of the margin of the grain business, driven by that operating model is strong. And to your point, with a regular crop and with the investments made, the total, we realized that, yes, absolutely, there's upside there.

Okay. So yes, and then if you want to keep going on the broader question?

Yes. So then, I think similar to Canada, the U.S. grain franchise benefits from sort of the macro or world whether it be Ukraine and some of the dynamics that are going on nowadays. Our U.S. grain franchise benefits from that. We're in the early innings of that ball game in terms of building out that franchise. So I think there's a lot of opportunity there. We are actively looking at new 8,500-foot elevators that will complement not only our traditional U.S. grain flows, but if the STB gives us the approvals, that will definitely complement running grain southbound into the Gulf in the Mexico. So I think a lot of opportunity as you think about the transformation of the U.S. franchise similar to Canada to run big, long, heavy grain trains into the U.S., Gulf for New Mexico with the KCS franchise.

So is there a share gain in kind of Dakotas and Minnesota and maybe Iowa? Is that partly a share gain versus other modes or, I suppose, versus BN? Or how do we think about where you get the new business from?

Yes. I think it definitely is. I think there is -- I can tell you, our elevators in the North have largely been disadvantaged because typically, our grain has one market, and that's in conjunction with the UP to get to the P&W. Now with the ability for those grain elevators to expand or have -- to be able to arbitrage markets a little differently. We here going to the P&W or maybe into Mexico or maybe to the Gulf, give their ability to buy and secure more grain a bigger footprint. And yes, that comes with a share opportunity against other modes or other rail carriers. But I can tell you, there's also other areas on our network that we've been reluctant to develop that are good growing regions just because for CP stand-alone, the market reach was either a very short haul. There wasn't a lot of benefit in it for us. But now there's a lot of interest in us developing these areas where it would be completely new to CP. Again, it would probably -- would be going after UP and BN or truck-to-the-river type grain flows. But now it makes complete sense because we can haul that grain 2,000 to 3,000 miles down into the KCS territory in the future. So sort of back to the question around the macro drivers that could give us some tailwind. I think U.S. grain fits in that category. You mentioned potash, Tom, I was saying I had lunch with the CEO of Canpotex the other day, and he is extremely bullish about double-digit growth in their production capabilities and also export capabilities over the coming years.

What is that when you say double-digit growth, is that volume in 2022, volume in '23? Is that you can do that each year for 3 or 4 years? Or how far -- because my limited understanding of potash mines is that it's not like you can build them on a dime, right? It takes a long time to make the investment. So at some point, there's super strong demand, but you hit a kind of how much can the mines produce? So maybe if you kind of -- is this multiyear or is it one big step up?

Yes. I think is -- if you look at a window, let's say, in due early 2024, now to [ 24% ] double digits, and that means volume output, export volume. I think that line of sight working with the producers, the nutrients, the mosaics, certainly what K+S can do to begin to ramp up their franchise. But I think the big opportunity there is certainly, we move a lot of that potash, 80%-plus of that, out of Vancouver, out of Portland. There's an emerging opportunity to move that out of the center Gulf. And as you think about Russia's ability and Belarus' ability and who's going to backfill that potash into South America. Really Canpotex and Canadian potash becomes a natural fit, Tom. And I think truly the best place to do it is out of the Gulf.

How would you frame the impact to CP of running potash instead of running it to Vancouver, if you run it down to the Gulf. I don't know if you could use that in terms of length of haul or revenue per car or presumably those are linked. But how would you frame the kind of benefit of doing that routing versus conventional to Vancouver or Portland?

Sure. Maybe a couple of comments on that. If there's anything -- look, maybe one of the biggest selling tools of CPKC is the route redundancy, it's the capacity. It's the supply chain certainty that markets and customers want today. You couple with it some of the struggles of the railroads have had in filling that demand and all of that is a tailwind to the opportunities that CPKC present the marketplace. And I think that's important to the regulator, too, getting on a little bit of a Turkey trail, but I think that's an important point to make. Specific to this potash opportunity, I look at it like this. Canpotex has got a huge world opportunity. The macro dynamics line up perfect. They need additional outlets. And this is a natural way. KCS is blessed with land opportunities. If we can put this opportunity together, it just gives them another outlet to get to market. And think about it like this: we're running DRU. We have our DRU projects. So we're running DRU from Hardisty to Port Arthur. Those cycles are taking 14 to 16 days, full cycle, all right? So we run potash today out of Saskatchewan to Portland off with UP. Those cycles are taking 16 to 18 days. So you got Canpotex making investment in cars to be able to handle the growth for the future. And here, we have a single line -- a future single-line opportunity that even if we could shave a few days when it's all one railroad with STB approval, we get that down to 14-day cycle-or-so comes pretty compelling.

Length of haul, do you like -- what would the length of haul be broad-brushed offhand?

I'm going to say 22,000 (sic) [ 2,200 ] to 2,500 miles, I would say.

2,200 to 2,500 miles. And then if you -- versus your conventional move, how long is that?

Well, it's probably -- if you're just thinking about Vancouver.

Yes, Vancouver.

Might be about half of that.

Okay. So like, yes, we'll call...

Yes. So that cycle to Vancouver is more like 8 to 10 days, 9 to 10 days. But in terms of next best alternatives, the center Gulf becomes great appealing.

Pretty attractive.

Yes.

What about on the energy side and the opportunity should we -- I mean it's remarkable the elevation of crude prices. And hard to know if that goes down, how quickly it goes down or goes up a lot further. But you would think there'd be at least potential opportunity in the future for the railroad to participate. How do you -- is that the right way to think about it or is there just lack of sufficient investment to generate more rail business related to the energy book?

Thinking crude by rail, Tom?

Or related, whatever you want to talk about.

You know what, on the crude by rail front, I'm going to put it in the category we have since day 1, if it's there and there's an opportunity we're going to price to the value of our capacity and will be a player. I'm not banking on it. I just don't see it right now. There seems to be ample pipe capacity. My focus on that front is how we grow the DRU. What do we need to do with our partners to bring on the next 50,000 and ultimately leverage CPKC to bring that to market in the future. I think some of the ancillary commodities that go with the energy opportunity, the frac sand, the pipe, the drilling material, very strong. We could move probably as much frac sand as we wanted today. The neat thing the team has been doing is really working with our operating team to lengthen those trains out of frac sand. So we -- our traditional frac sand trains are, let's call it, 110 cars, but we've been moving some 200 car trains to the Marcellus. With the NS, we've been pretty much shifted most of our Bakken trains up to 150 cars. So not only creating a good story in terms of operating leverage, but also at a time where locomotives and crews are in strong demand, you can take out a crew start. Every 4 trains creates a whole another train of crew start. So it becomes a pretty powerful tool for us.

Great. I would just remind you, if you have any questions from the audience, you are welcome to submit them or welcome to raise your hand and I'll try to address the questions. Your commentary, you and Keith, I think, a lot of bullishness on the synergy targets that there is upside to the revenue synergies specifically, that there's upside and that there's kind of increasing, maybe building confidence in that upside. I guess we've been talking about some of the things that support that. But what are the -- how do you think about what potentially would drive that upside? And what's different today versus 6 months ago?

Yes. As an example, what's different, the potash example. Tom, we had 0 revenue synergy built in the CPKC related to either I'll tell you what import fertilizers or export potash. Now it's a $100 million-plus revenue synergy opportunity that is real to be realized in 2023. So there's certainly things like that, that have emerged, whether it be through macro things that have helped driven it or just by us getting out and really being able to sit down with the customers and understand the opportunities. The upside, I have no doubt we have developed and have line of sight to, I'm going to say, blow past the revenue synergies that we've talked about. This is all about timing and how we meter it onto the network with our investment. This story is honestly not a whole lot different than how you saw us grow the CP stand-alone, say, from 2016, '17, '18, '19 time period. We made the investments. We ensured the terminals were ready. We had the over-the-road capacity, the locomotives and then we brought the business on in lockstep. I see this journey being exactly the same on CPKC. We've talked about $300 million of investment sidings and in new siding, siding extensions. As we begin to sort of build out the book, we will go in lockstep constructive tension, all those things we do at CP, I think, better than any other railroad to make sure that we have the capacity on our network to bring on these new synergies.

What's the -- I guess, what's the most difficult area to add capacity on your railroad. And I mean, I guess sometimes they say, okay, terminals are long pole in the tent to, one way of framing it. But I think line capacity, if you're going through the mountains or if you're in an area where it's maybe tougher to add capacity. So how do you think about where on the railroad, it's most difficult to add capacity?

Well, I think, naturally, you called it out, I think, terminals, right? If -- depending on your footprint, and I think our competitor has Certainly, we've seen that struggles and all the journey they've gone through in Toronto with their [indiscernible] development and trying to add capacity, I'll go on and say, look, I think CP has been blessed. Our terminals have not only -- we have the capacity, but we also have the land footprint around our terminals to be able to expand KCS, I think, in a very similar position. You think about their Kansas City terminal. You think about their Wiley Dallas terminal. There's a good footprint there, Tom, that as we grow the business, we can expand the capacity. I frankly get less concerned about the over the road piece. You can add sidings. You can find areas to double track you can extend sidings. That becomes sort of secondary. To me, the terminal is the driver. You got to have a landing spot for that 747.

Okay. So you just don't foresee a long line segment that single track that you don't have sidings. You just -- you look at -- you have visibility to put those in place far enough at...

Well, you know what, we did a ton of work in that Western corridor. We have good capacity. Of course, some of the tech business shifted out of that lane from Kamloops in that created capacity in that Western corridor. I look at -- we spent $90 million on the CMQ in that franchise in Atlantic Canada to get that franchise up the standards. We've got good capacity there. All right, it's more about lockstep getting the terminals and then certainly making sure you have the locomotives and the people.

Right. Okay. This may be -- I don't know how much you can do to drive visibility on the truck conversion piece. If that's something that you can do a lot of work on today or if that's more when you get control. How do you think about visibility to that truck conversion because that was a significant component of your overall synergy expectation?

Yes. There's no weighting going on, Tom. We are deep into that with our customers. There's nothing that prohibits us to be working with new customers, existing customers to understand their truck freight. I'll give you an example. We are working with a major North American importer of produce. They're telling me they truck 80-plus trucks a day over the border in Mexico into the U.S. to service the upper Midwest and Canada. They've dealt with spikes and peaks and valleys in terms of service, driver availability, spot rates popping up and down. They're at their [indiscernible] and with being so reliant on the trucking industry to fulfill all their transportation needs. This is a tremendous opportunity for us to put equipment into whether it be Laredo or directly in the Mexico to service this marketplace. So we're not waiting on any of that to come to us. These are opportunities that are real. And honestly, we just moved a couple of test refers over the last couple of days from Laredo up into the Midwest. I think deliveries are being made today to the customer. Again, proof of concept, things that we can do on an interline basis today with KCS that will set us up with these customers for tomorrow.

Do you think the cross-border truck opportunity or overall truck conversion opportunity is bigger than you thought it was 6 months ago? Or is it kind of like same frame?

It's things like realizing that the border crossing for trucks isn't open 24 hours a day. Our rail network is open 24 hours a day, 365. Tom, I think we realized the size of that, but until you get in and really talk to the customers on what is convertible, what makes sense on rail versus not. We've got a tailwind from the supply chain environment that a lot of these customers that have been just so dependent on trucks now saying, "Look, if I could diversify 10%, 20% of my book, hedge it by using intermodal, there's a benefit."

Right. Okay. Yes, that makes a ton of sense. I have one granular question I didn't cover where we're pretty much at the end here. I -- this is a modeling one. But like ECP, you've had that kind of liquidated damages starting to roll off. Any thoughts on how we think about that. Did that kind of happen in 1Q and that's run rate? Or is there more to roll off when you look forward?

Yes. The direct answer is there's more to roll off. So you'll continue to see that as we move through the year. I think what you'll also see though is that specific sense for RTM for ECP will sequentially get better also as we move through the year. So we're not through that journey yet that will be carry us through the year. We'll have that liquidated damage is rolling off, but we will see that actual basis get a little better as we move through the year also.

Okay. And then the last question that I've got, I promise, is price. Be a shame, not talk at least offer your question on price. Pricing, I don't know, 6% or better maybe, how do you characterize price today? And how much visibility do you have to what price would be like in 2023?

So honestly, in my going on 28 years of railroading, it is about as strong as pricing environment as I've seen. You're spot on. I would say we're in the 6% to 10% range depending on the business unit on a lot of our renewals. As of right now, I don't see a softening in that. It's hard for me to gauge, Tom, what 2023 is going to look like on that front. Other than I'll tell you, you know us, we are disciplined on that front. There's a lot of -- either from the CEO or the CFO, there's a lot of constructive tension on that pricing area. So whatever it is in 2023, we'll be on the plus side of it.

Okay. That's a great way to end things. John, thank you so much for all the insight. Thanks for your time for joining us. Maeghan, thanks as well.

Always a pleasure. Thanks, Tom.