CSX Corporation (CSX) Earnings Call Transcript & Summary

So welcome to our 29th Annual Global Transportation Airline and Industrial Conference. I'm Ken Hoexter, for those that I haven't met, the airfreight and surface transportation and shipping analyst. So today, we're going to kick off the conference with CSX. With us today from the company is Sean Pelkey. He's been CFO since January of '22 after serving as acting CFO since June of last year. He's been at CSX since 2005. Fun fact for Sean Pelkey, he is a [indiscernible] also here from CSX in the audience is Matt Korn and Tom McDuffie from the CSX Finance team. We welcome CSX for its 14th consecutive year and 19th time in the 21 years we've been hosting the conference. So we thank CSX for their steadfast commitment to the conference. So with that, Sean, a lot going on in the near term.

Fresh off the STB hearings on the rail service. You talked about a lot of hiring, Jim was at NARS last week, really focused on hiring and maybe lead to working with unions a little differently and focusing on service. So we've got a lot of questions for you through the morning on pricing, margin service and so much. So let me just turn it over to you with maybe an update. We're halfway through the first quarter. What's your key message today?

Yes. Thank you, Ken, and it's great to be here in Boston with everybody today. I think, generally speaking, Ken, what we're seeing out there is the demand for our services continues to outstrip our ability to meet that demand. So as we go out and talk to customers, really no indications yet that we're seeing a falloff in terms of the demand environment, and we are making great progress in terms of hiring conductors, but as you look across the network and you look at the constraints that are sort of driving our service did not be back to where it was in 2019 as well as us ultimately having additional opportunities to grow the business, it really boils down to, as Jim has said multiple times, hiring the right number of people in the right locations. The good news is we're making progress on that front. We've got over 500 conductors that are in training right now, and we continue to bring conductors through our training center every week, get them out on the field and get them marked up. So making progress, but it's probably going to be into the second half before we really start to see meaningful improvements in service and velocity.

So let's start off with volumes, right? So if the demand is that strong, we're seeing volumes trending flat quarter-to-date. Just slightly below our 1% target, so relatively in line, but it's improved. It's improved from minus 2% in the first quarter. Is that really solely due to as you get the staffing back up and running? Or is there -- are we still looking at certain segments being impacted by the congestion and other impacts?

So I think as we look forward to the second half of the year, I think what gives us some optimism is a couple of specific markets. On the auto side, we've gotten a couple of recent wins. And so if you look at sequential auto volumes, we're trending up a little bit. But clearly, auto manufacturers are not back at the production levels that they'd like to be at. And the shutdowns in China, the COVID-related shutdowns in China are not helping with that situation. But we think that as the year progresses, we'll be able to move more autos. Intermodal is a similar story where still chassis availability is impacting our -- the fluidity of the intermodal network. And so we think there's the ability to grow that business more significantly in the second half of the year. And then coal, the demand environment, both for export and domestic utility coal remains very strong. There's issues both in terms of production at the mines, at the ports on the export side and then the crew hiring that we're doing to help with that. So those are really the markets that we're most optimistic about as we get to the second half of the year in terms of growth.

And so if we look at your target, right, which is still to volumes to excess of GDP, maybe one, just what is your GDP target so we have a baseline? And then two, that would incorporate a pretty big ramp up in the second half, can the system handle that?

Well, so GDP target, we're looking right about 3% for the year. And yes, I think we certainly can. The comps are a little bit easier in the second half of the year, but we are ramping up steady and slow, which is ultimately how you want it to come online. And we're graduating 100 conductors every month from the training center -- or excuse me, from on-the-job training and getting them fully marked up. So as long as those trends continue, we're going to get close to that magical 7,000 number of crews that we need in order to get back to service fluidity. Now I'll caveat that by saying those crews need to be in the right locations. I think one of the underappreciated facts about our network and all rail networks is that you've got for ours over 100 hiring locations that are unique. That means that if Ken, you want to come work for the railroad, you've got to hire on at a specific location, and we don't get to choose, you do. So if we need people in a specific area, and we're not able to get the right number of applicants, you think about the network fluidity, if you're okay at the origin and destination, but you're not okay in the middle, you're not going to get to the level of fluidity that you need. And so really, the effort right now is around specific targeted recruiting in those areas that are most critical while on the whole, continuing to grow the overall head count.

So you need to get to 7,000 total [indiscernible] you're at where now?

We're at just over 6,600 right now. And you're netting up 100 -- you're grossing up 100 every month, but you've got attrition as well that you're fighting against. And you think about a specific crew district maybe that's got 100 people, you plan for 6%, 7% attrition, what happens if in that specific location, you have 10% to 15%, now you're behind. We certainly plan for attrition in our hiring plan. But when you've got over 100 locations, you're going to have a distribution of attrition. And so there are locations that maybe were under the radar screen that all of a sudden pop up. And you're constantly looking at that and refreshing the plan every single week. And it's that communication between what the operating folks are seeing in terms of need and what the HR team needs to go out and recruit and hire for.

And can you just talk about the training time in terms of the ability to expedite the process to get them from training back on to the work?

Yes. So I think you got to be very careful about expediting the training process when you're talking about a safety critical job like the conductor. We have taken some steps out of the process. I would say where we probably focused more of our efforts has been on the front end on the processing of job candidates, getting those resume screens done very quickly. We've launched an online platform to do virtual interviews, which allows the candidates to go on at any time, record their interview and then we push them through. Once they get to the training center, and I was just up at our training center a couple of weeks ago in Atlanta, they're going to spend 4 weeks there. That's where they learn on the job safety. They actually get out; they switch some cars. They begin to kind of get up to speed on the rules and they've got to pass all of that before they go out into the field. When they get to the field, it's really a function of how many jobs are there in that specific geographic location. So it could be 3 months, [ they're writing ] jobs. It could be up to 6 months that [ they're writing ] jobs. I think I was very heartened by the quality of conductor trainees that we are getting into the training center and that gives me a lot of hope for where we're headed here. These are a lot of folks who have been in construction, manufacturing, trucking. They've got experience, similar experience and the instructors in Atlanta are doing a phenomenal job. They go out, they get their on-the-job training and mark up. And the hope is that we retain as many of them as we possibly can.

Is it -- we talked a lot about people. And Jim talked a lot about people, both at NARS and on the quarterly call. Is it just people? How do you think the assets? What's the capacity of the network? Is there anything else you need to do at this point? Or is it really just as focused as getting the engineers and conductors?

I think that's one of the great new stories about CSX. If you look pre-scheduled railroading versus today, our volumes are roughly the same, a little bit of a different mix, but we've got 35% fewer trains running on the network. And so there is capacity across just about every area of the network. There are some siding investments that we're making in the Southeast where it's a single-track railroad. But in terms of line of road capacity, we're in good shape. Certainly, you look at terminal capacity, are there places where we may need to add equipment in order to increase fluidity or maybe expand slightly? There'll probably be some of that, but nothing material. We're good in terms of locomotives, very good situation there. And then in terms of freight cars, I would say most of the fleets are in great shape. The good news is that we're getting some industrial development wins that are going to build the pipeline as we go forward. And so car supply may be something that we've got to address as those plants start to come online. But by and large, it's not a freight car issue. It's not line of road capacity. It's not locomotives right now. It's about crews.

So then it sounds like CapEx, you're at 14% of revenues. No need to see that ramp up. There's nothing on the capital side.

So I would say I'd bifurcate it into our maintenance capital and our growth capital, right? About 80% of what we spend today is on maintenance. Our goal with that spend is to deliver efficient and reliable and safe rail network at the lowest possible cost, right? So we're driving efficiency metrics. We're looking at how we continue to do the most that we can with the capital that we allocate to maintenance. And then on the growth side, we're looking for new projects. So if that number goes up, that's a good thing. It means we've got strategic high-return projects that we can invest in, whether that's to attract new business or investing in new technology.

So I think one of the -- since PSR, right, where you came in, you cut costs and we've kind of been waiting for the flip to growth, not just from CSX, but for the rail industry. I think we saw at Canadian National years ago where they were able to get double-digit growth. Long term, how do you think about growth at CSX? Should we -- is there a point where we start seeing the benefits from that? I mean it seems like given where truck pricing is, the shippers want to move more onto the rail. Obviously, you've got the service issues that we hear about. It seems like maybe the rails have lost a little bit of share through this as opposed to gaining given where prices are, which is all in a high fuel, high inflationary period. So how does that set up for CSX?

So I mean, we're a service industry. So reliability is critically important if we want to win share. And we've had a number of really nice headline wins, whether it's the Ford plant, Rivian. We've got a number of electric vehicle manufacturers that will be locating on CSX in the next couple of years. We just had a fully integrated aluminum plant that has low carbon footprint with Novelis that announced earlier this week, they're going to be locating on CSX. So you're building that momentum in the background and a lot of those plants are going to take a few years to come fully online. But you look at the cost advantage that rails can provide, and then you couple that with the environmental advantage that rail has over truck. And it really sets up well if we're able to deliver the service reliability that the customers expect. We recently had a customer come to us and say, hey, look, today, if I look across my footprint, I'm moving 15% of my traffic with you, CSX, and I'm moving 85% by truck. In the next 5 years, because of our sustainability goals, I would like to see that completely flipped. We're not going to get there if we can't deliver a service product that's reliable and efficient. So that's why that's job #1 right now, Ken.

All right. As a CFO, I've asked you a bunch of service questions. So I went COO on you. I'm going to go marketing on you in a minute, but let's go with the CFO hat. So your 10-year improvement -- or 10-year improvement from first quarter to second quarter has historically been about 350 basis points in operating ratio. That would indicate going from 63 in the first quarter into the upper 50s. Is there anything -- I know you're not here to give an exact number, but anything that would -- that you've seen service wise or anything else that moves you higher or lower than normal in terms of where we are in the market today?

Right. So typically, that trend of improvement in the operating ratio from first to second quarter is purely a function of seasonal growth in demand when you've got costs that are relatively flat, maybe they come down a little bit from an efficiency standpoint from first to second quarter because you've got some winter costs in the first quarter. There's really nothing unique to this year. The only 2 things I would point to, we're going to have a roughly $120 million gain from the Virginia transaction, the next phase of it in the second quarter and then the fuel headwind as prices go up, there's a lag effect, higher prices do have a drag on the operating ratio as well. So we'll see a little bit of that. But outside of those 2 items, the biggest variable is what do sequential volumes look like and the higher those volumes get, the more we'll be able to spread those fixed costs across the growth that we're expecting.

Just on your fuel, just to clarify that, though, given first quarter was also higher, the cause of that...

They trended up higher -- that sense...

Okay. So you've seen it. Okay, got it. Going on to some of the commodities, right? You threw out coal. We're all kind of constantly waiting for this return of secular decline. So it's kind of like, oh, okay, that's fine this quarter, maybe next quarter and then it falls off. Is anything from your point of view, is it the export? Does it hold at 30 million tons, domestic, kind of mid-40 million tons? Do we return to a secular decline? Is it sustainably stronger right now for a little bit longer than you thought? Any thoughts on that? Just because it can be so profitable when you move.

Yes. So I think on the domestic side, secular decline is -- that story hasn't changed. But temporarily, given where inventories are, they're still quite low in the U.S. for thermal coal. There's definitely a need for us to move more of it to big utilities. And part of that is reliably turning those trains, but also part of it is we lost a lot of thermal production capacity in the United States over the last couple of years. And the ability to meet the needs of those utilities is dependent both upon what the producers can do as well as what we can deliver. So I would say right now, the outlook is good for domestic utility coal but longer-term secular decline. In terms of export coal, the dynamics, obviously, are quite strong. We're at record levels for met coal prices. And obviously, API2 thermal coal prices have spiked here in the last couple of months as well. That's an indication that demand is outstripping supply right now and the U.S. is a critical producer. So we're moving up as much of that as we can. Again, it's that combination of producer issues that we've had, unfortunately. There's been some outages and there's also been some outages at the ports, our own Curtis Bay facility. We are up and running but running at less capacity than we could be once we fully rebuild. So that will be coming online in the second half of the year. And once we do that, that's part of what gives us optimism in terms of being able to continue to see growth in the coal business at least this year.

So just to clarify for people that may not know. So at Curtis Bay, you had a fire that knocked out the terminal. I think last quarter was [ about half ] up and running and now you're saying ...

Roughly half. And on our way back. So there's...

And what percentage of your export goes through Curtis Bay?

About 1/4.

Okay. And then you had 2 strikes at coal plants domestically, Sugar Camp, which had 2 mines, almost [ 40 ] million tons, one of those reopened, another one closed as well given a strike at the Warrior mine. Are those coming back? Or are they still shut down because that would be a way to get more production, right?

That's right. That's right. So Sugar Camp is coming back. They're still not back to where they were previously. Same thing with Warrior. And I think as time goes on, we'll see those fully returned.

So we talked about demand and moving pricing you mentioned on the met and thermal export still record prices, so it could be very strong for pricing going forward as well?

Yes. So Q1 coal RPUs were up quite a bit, obviously, even on a sequential basis versus Q4. What we said is second quarter, we expect to be flat, maybe even a little bit up on coal RPUs versus the first. Where it goes from there is highly dependent upon what that -- the global markets look like. We are pegged to the indices for most of our contracts. I'll note that we're up against the ceilings on those contracts right now. So if rates move higher, it doesn't necessarily help us from here. And I think ultimately, what will drive coal RPU from here in the second quarter at least is the mix of business between export and domestic.

So autos, it sounded like you -- the chip issue is kind of solving itself? Or are you seeing -- you were talking about maybe picking up...

I think it is persisting and then I think on top of that, with China lockdowns, there's critical supplies that are making their way to the plants. And so we've had a couple of outages as a result of that. There are cars on the ground for us to pick up, which is good news. Cars are being produced, but we're optimistic that as we get into the second half of the year, we'll see continued improvement in that market.

So intermodal, are we -- talking about the congestion [ and enroll ] your ability to move. Are you seeing -- it seems like one, we're ready for this [indiscernible] now that Shanghai starting to reopen I guess, in 1.5 months, we'll maybe start to see some of that hit the shores? What's your thought on the ability to handle that at that point? Is that something you expect at the ports?

Yes. So there's been a lot of talk about the China business coming landing in the U.S. There's a potential issue -- labor issue on the West Coast ports coming this summer. And so you've got shippers who are saying, well, maybe I should ship some to the east, but how much can the East handle. So maybe I'll go west, and vessel capacity is tight. So do I really want to ship through the Panama Canal, if it's going to take a little longer? So I think you're going to see there'll be a little bit of a surge. My hope is that we'll be able to work through it as quickly as possible, and it will ultimately lead to some volume growth for us.

So let's just stick on that theme for a minute because I get the crush of freight that might come. But in -- as the truckers are starting to see some early signs of softening demand on the spot pricing, right? We're seeing spot pricing really take a leg down. Typically, that's an indication of when contract rates are going to follow and that's a sign of consumer demand. The setup you've given us seems to be for a very strong rebound in second half. Where is the disconnect? Or what is the time frame that you usually see that softening in the truckload market flow through to rail demand?

Yes. Well, it'd be tough to predict if that's going to happen and when. But what I can tell you is that as we look at contract rates right now, as we -- as renewals come up, we're not seeing that same dynamic that you're seeing in the spot market.

Okay. So not seeing it in terms of -- on the demand side, there's no indication that there's any area of economic activity that's decelerating.

Right. And those contracts are repricing at rates that were higher than last year.

Okay. Maybe talk -- shift to Pan Am, which you just acquired, what are the benefits and the shift of rails buying some of the short lines back in? What do you need to do to integrate the asset? Maybe thoughts on the impact to the top line, bottom line from it?

Sure. So I've been at CSX for a long time over 15 years. And in almost all of those years, the motto was if it's low density and a short line can leverage some economics and run it better than we can, then we should -- and they're willing to pay for it, then we should lease it or we should sell it to them. I think what's changed is we can run a better railroad today. And we had a very unique asset in terms of the Pan Am railroad that -- Pan Am Railways that connected end-to-end with CSX. It's 1,000 miles that we can add to our network, 3 new states. And about 50% of the traffic that Pan Am interchanges today, interchanges with CSX. So it's a phenomenal fit. The team up at Pan Am has done a really good job of developing some new markets. And so we're very excited about the ability to grow the business, to run a more efficient railroad as we invest. We're going to invest about $50 million this year and about $100 million over the course of the next couple of years to upgrade the track significantly. That will not only allow us to take some costs out, but it will allow us to grow that business. So at the end of the day, we're talking about adding about 1% of annualized revenue to the top line. But our hope is that we'll be able to grow that business well in excess of GDP for the foreseeable future.

Any impact on operating ratio margin?

It's minimum. Yes, there will be a slight negative impact to start.

So just I want to revisit that for a second. We talked about moving the sequential movement. And can you get back to the 50s. You said it is a normal process, maybe a little fuel impact. Is there -- is that a right thought process from going forward is into the -- moving back into the 50s in terms of where CSX operates?

Yes. I mean we -- our primary goal is to grow the business, right? We don't focus on what operating ratio do I need to achieve in order to win the gold star, right? It's not about lowest operating ratio in the industry. What it's about is differentiating ourselves in terms of the service product and growth. But if you have a better service product and you're running more efficiently and you're growing the business, it's going to translate into better margins, and we'll be able to price the business to the value of the service as well. So we're not hyper-focused on does it need to be in the 50s, but I think it would be a logical conclusion that if we're running well, we're growing the business and we're running efficiently, there's probably no reason we shouldn't be back in the 50s. Now we do have the impact of quality, which is always going to be there, and that's about 250 basis points for us. But outside of that, that's probably a good way to think about it.

Okay. So 55 is your...

No [indiscernible]

Regulatory, obviously, big hearings back at the end of April in terms of the service levels. Maybe your thoughts in hindsight, looking back on the hearings, Jim being called up on stage. What's in store for a more activist STB takeaways from the service? What do you think that -- their thought process is on the impact on recip -- and we'll hear from the Commission Chairman later on recip comp mandates, does it mean kind of limitation on pricing in some fashion longer term?

So for the casual observer of the rail industry, when you think about the role that the STB plays for the railroads, there's really 2 things they're focused on. The first is rates and the second is service. We're in an environment right now where service is challenged. So I think it's only natural that the STB step in and say, what's going on, what needs to be done to fix it. At the end of the day, the interest of the railroads and the interest of the STB are aligned. What we would like to do is we'd like to grow more rail business. We'd like to provide a service product that's efficient and reliable for our customers. And we'd like to take share off of the highways and leverage the environmental advantage of rail. So I think at a fundamental level, because of that alignment, we hope that we will land in a very reasonable place with all of this. I think when you look at -- you'll have Chairman [ overrun up here ] shortly, but when you look at the way that he has managed the STB, he very much wants it to be a consensus-driven solutions-oriented STB. And what that means is you've got to be conscious of all the stakeholders and interests that are out there. You've got to make sure that if the STB is going to act, they're not going to do something that's going to further exacerbate the supply chain issues and the service issues that we're already facing with. So to the extent that we need to provide some metrics and visibility on how we're doing with hiring and service recovery, those are things that we certainly can do. This is ultimately about the shippers just want to pay less for our product, that's another story, and we've got a proposal, the railroads do for how the STB can deal with that going forward. But ultimately, at the end of the day, I think the [indiscernible] aligned and the fact that the STB is really driving towards consensus, gives us hope that we'll land in a good spot. And hopefully, we'll have taken care of the service issues well before the STB needs to go further than we'd like them to.

Always helps to answer the question before you get the question. Quality carriers. You just brought it up. Now you're a year in. Obviously, we know the operating impact. But the whole point of it was conversion of some of the chemical business to rail. Maybe talk about how this transition has gone in terms of are you seeing the benefits to the commodity? What's the experience been like? Should we see truck to rail conversions accelerate because of this? Maybe just walk us through now we're a year into it.

Yes. So if you go back, maybe prior to the acquisition and you think about if we're going to do M&A, what are the factors that we're going to look at. The first is, we're going to do market segmentation, and we're going to say, where are the more profitable segments of our business. And then we're going to look at where do we have a lower level of rail penetration than we would like. And the 2 of those things lined up, and we said specialty chemicals is one of those areas. And then we said, well, who's the major player that can help connect the dots to us and Quality Carriers was differentiated in the marketplace. They have the best management team. They have a dominant market share. And many of the customers that they dealt with on a day-to-day basis were the same customers that CSX deals with on the chemical side. So we said, look, if the chemical shippers aren't shipping rail because we don't serve the origin or the destination, we have a truck solution with Quality Carriers that can put together truck and rail, deliver the product reliably in maybe 1 or 2 extra days, save the customer money and drive significantly more profitability to the combined CSX and Quality. So that's the thesis. Is it working? I would say Quality Carriers has proven itself to be an extraordinarily well-run business. They're doing very, very well in this environment. And we are starting to see some of those conversions take place. It's been primarily through the transloading of product from truck to rail. And the profitability of that conversion has been very strong. And the customers that have chosen to convert have been very happy with the product. So we're optimistic. We're still in the early innings of it. We should be getting some of the ISO tank containers delivered here in the second half of the year. We expect about 200 of those. Those containers allow us to move the product directly from the truck on to intermodal, which is a lot more efficient way of handling it. And if it goes well, those 200 containers will translate into 500, 800 as we go forward, and that's when we'll start to see a more meaningful conversion.

We used to follow them. They had a bunch of ISO containers, right? Or are you...

They had some, yes. These containers are patented specifically for this purpose to go truck to rail. And they solve some of the issues that the prior ISO containers had and give the shippers some more comfort in terms of converting product to the combined solution.

Great. I've got a couple more questions. We've got a couple of more minutes but let me open it up if there's any questions from the audience. Anyone? Okay, then I'll just keep jumping in. And please, though, if you have a question, feel free to raise your hand. I'll stop as we go through the questions. Technology, something the rail industry is talking more and more about in terms of autonomous track inspection, car inspection, which can have significant savings and operating benefits as you roll them out. What is the next step for the rails? Rails used to be kind of at the [ Fortive ] technology. We saw years where it wasn't as big of a focus. And now it seems like they're coming up with some really innovative things that can accelerate some of the cost savings and the benefits to operations. What are your thoughts there?

If there's an area you're going to be excited about in terms of where the rails are heading and specifically CSX technology is definitely one of those areas. Technology is going to support our long-term growth vision. There's no doubt about it. We recently hired and brought on Steve Fortune, who's the Chief -- now our Chief Digital and Technology Officer. Steve has several decades of executive leadership in technology at BP. And when you think about BP versus the rails, and you say where are the similarities? Well, they're both network-based businesses. They're both legacy businesses that have been around a long time. So Steve is very quickly seeing a lot of parallels and tremendous opportunities as we go forward, both in terms of the autonomous inspection that you talked about, which not only increases the safety of the rail but also has an impact on service, right? If you catch issues before they occur, whether it be rail breaks or issues with wheels, other safety appliances on the railcar, whatever it might be, you're not having that issue out on the line of road. If you have a line of road failure today, you're backing up multiple trains in an environment where we're already trying to clear out congestion, that's a significant issue. So investments in technology are critically important. I think an area that we have a lot of room to develop, and grow is in customer-facing technology. I would say that we've been one of the leaders in that front in the rail space, but there's still tremendous opportunity that we have in front of us in terms of providing customers real-time visibility and making it easier to do business with CSX.

So just taking a scan real quick. All right. So on -- yes, go ahead. I think you've got a mic coming to you.

So the -- I want to get back to the conductor things. So you've got a video on your website or on the YouTube where it just shows how difficult and challenging the conductor work is. And this is something that was addressed many times during the STB hearings. What's the opportunity to change the job? Because clearly, you're having trouble as many operating businesses are hiring for this type of work. So how are you working with the unions to change the job, so your hiring path gets a little easier over time?

Yes. I appreciate that question. This is something Jim talked about last week. The path is not easy to get there, right? And the lifestyle of a conductor is really challenging. When you first hire on, you don't get to choose what your jobs are. They choose you basically because you're the low person on the totem pole. So it's a difficult quality of life for our conductors, and we've got to be able to do something to move the ball forward with them. What that solution looks like? We've had some dialogue with the unions about how do you give them a more predictable schedule. Ultimately, it's a matter of give and take, and we are very hopeful that we can get to something that is transformative. I think the first step is getting through this round of national bargaining. And once we're through that, I think the discussions are happening, they're going to happen prior to that. But I think in order to get the transformative change, we've got to get national bargaining behind us, settle wages and benefits and then move forward and look at work rules.

Does that seem close in terms of the -- getting to this end of this negotiation? I mean, obviously, Jim has taken a stand saying, we want to give our employees the raise now. Some resisted kind of -- some of the unions resisted. Some are not in this ultimate round, right? Your conductors are not in the -- in this current round, right?

In terms of -- well, I mean everybody is participating in national bargaining, yes. Now the $600 payment that we wanted to give the union, it's -- hey, you could probably use that today, right? You haven't gotten a pay raise in multiple years. And yet, it's an indication, I think, of the lack of trust that exists today between union and management that, for the most part, the union said, not right now, I'm going to wait. They saw it potentially as a stall tactic on the part of the railroads that I honestly say it had really had nothing to do with that. It was really a recognition that gas prices are almost $5 a gallon in most of the country, food prices are going up, and they haven't gotten an extra dime in their paycheck, and they've been relentlessly coming to work every day. So it was truly just a function of wanting to make them whole as soon as we possibly could in lieu of getting to the end of national bargaining. I think we'll get there. How long it takes? It's measured in months, not weeks at this point.

And you're getting close, right? You're 6,600, your goal is 7,000 operating employees. I got the adjustment. Is there -- is it -- once you get to that point, a bogey's hit and fluidity kind of starts improving? Is there a delay? It takes....

I think it's going to be a process. I don't think the switch will flip overnight. It will be a process to get us there, right? Because you got to work through the backlog of fluidity. You've got to start adding in places where you've got headcount coming on and adjusting the train plan and tweaking it to get back to that level of fluidity that was required.

So if I sum up what we've heard today, GDP, 3% second half volume, see that kind of ramping up operating margin sequentially, nothing really abnormal here. So we'll see the continued progression here seasonally benefiting. Staffing almost there, and that's kind of the key, the core here to the discussion. CapEx remains constrained and should just given that you have the capacity going forward. Is there anything from -- I asked you in the opening statement, what's your message today? Is there anything you want to throw in that we should take away?

Double-digit revenue and operating income growth this year. So I think in light of -- in spite of all the challenges that we're facing, should be a good year financially for us, and we're hopeful that as we get out of this hiring challenge, that long-term growth will continue to exceed GDP and we'll be able to leverage technology to drive a better customer experience and transform the labor environment.

Wonderful. Sean, I truly appreciate you taking the time to join us at the -- kicking off our 29th conference. Thank you.