Good afternoon. My name is [Raisa] [ph] and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC’s First Quarter 2023 Conference Call. The slides accompanying today’s call are available at investor.cpr.ca. All lines have been placed in mute to prevent any background noise. [Operator Instructions] I would now like to introduce Maeghan Albiston, Vice President, Capital Markets to begin the conference.

Thank you, Raisa. Good afternoon, everyone and thank you for joining us today. Before we begin, I want to remind you that this presentation contains forward-looking information and actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on Slide 2 in our press release and in the MD&A filed with Canadian and U.S. regulators. This presentation will also contain non-GAAP measures which are outlined on Slide 3. With me here today is Keith Creel, President and Chief Executive Officer; Nadeem Velani, Executive Vice President and Chief Financial Officer; John Brooks, Executive Vice President and Chief Marketing Officer; and Mark Redd, Executive Vice-President and Chief Operating Officer. With that, I will hand things over to Keith.

Thanks, Maeghan. Listen, it’s been a journey, but we’re finally here today. It’s an honor to speak for the first time as the CEO of the newly formed CPKC family. You know, it’s reflecting the last 11 days, 12 days that go by fast. We are not quite at the two week mark since we drove that historic final spike solidifying our combination, but I can tell you the energy and the passion and the pride that I’m seeing from employees across this entirely new formed network is energizing. For the conviction I have personally, for what this company would deliver for our customers, for our employees, and North American Commerce has never been greater. I'd also like to take a moment to thank and commend the CPKC team on all the work that's been done to this point to ensure a smooth start to integrating these two great companies, which I can tell you is no small feat. We intend for history to show that we integrated successfully. So, let me move on to our CP final first quarter results. Most importantly, on the safety front, I'm proud that the team's built on last year's record safety performance, continuing a strong performance in the first quarter with FRA personal injuries down 10%, train accidents down an additional 65. Running a safe and reliable railroad is the key ingredient to what successfully running a PSR operating model is all about and it's something that we take tremendous pride in. It's CP and now CPKC. On the financial side, in the first quarter, we produced revenues of 2.3 billion, an operating ratio of 62.9 and core EPS of $0.90. On the labor front, we continue to make progress with our labor agreements in the quarter. We ratified recently a collective agreement with the TCRC Maintenance of Way Employees here in Canada, also ratified negotiated hourly agreement with the [indiscernible] employees represented by the BLET on the U.S. side, as well as several other agreements. You'll also notice that our numbers we've continued to hire and to train with the headcount up about 10% year-over-year preparing for the volume growth that we expect to deliver. A couple of comments on the transaction, you know John is going to talk about it a bit more in a minute, but I'm extremely excited about the customer response to this service opportunity CPKC is going to create with our two most recent announcements that we've made this week and last, partnerships with Schneider and Knight-Swift are only at the beginning, more to come in June. So, with that said, over to you, John, to provide some color on the markets.

All right. Thank you, Keith, and good afternoon everyone. So, look I'm very pleased with our first quarter performance. The volume growth that the team delivered throughout the quarter. Well, certainly we saw pockets of softer demand. Our unique business initiative served us well and give us momentum as we head into this exciting new chapter as CPKC. Now, looking at the first quarter, I'll speak to the standalone CPU results for the last time. Total revenues were up 23% on the quarter. Volumes were up 11%, while FX and fuel combined to be a 10% tailwind. The pricing environment continues to be strong with inflation plus renewals across the book of business. Now, taking a closer look at our first quarter revenue performance, I'll speak to the results on a currency adjusted basis. Grain volumes were up 26% on the quarter or revenues were up 37%. We saw another strong quarter in Canadian grain, posting our second largest February on record and breaking our January record of 2.3 million metric tons. The strength in Canadian grain was partially offset by softer demand for U.S. grain corn exports, as well as challenging compares from last year. Looking ahead, although in the first few weeks, we've seen challenging crop conditions and grain movements in Canada with favorable compares relative to last year's crop, I still expect our grain franchise to provide a stable base layer of business as we move through 2023. Finally, although it's only in the early days, I'm excited to see a number of new grain flows emerge on the CPKC system with recent movements from the upper Midwest in Canada to markets such as St. Louis, the Gulf, and in the Mexico. Further, the CP team is working hard with multiple customers to expand infrastructure development of…

Alright. Thanks, John. Good afternoon. I'm pleased with the results the team produced this quarter and extremely excited about the path ahead for the combined CPKC family. Looking at the quarter, the adjusted operating ratio came in at 62.9%, a 690 basis point improvement from last year's challenging Q1. Taking a closer look at a few items on the expense side, I'll speak to the variances on an FX adjusted basis. Cost and benefits expense was up 18 million or 4% versus last year, increased volume, training and hiring, as well as wage inflation were the main drivers of the increase. These were partially offset by lower stock based compensation expense and lower current service costs in the DB pension plan resulting from higher discount rates at the end of 2022. Fuel expense increased 38 million or 13%, driven by higher volume and a modest year-over-year increase in fuel price versus last year. Materials expense was up 14% or 9 million, driven mostly by increased maintenance activity across the networks and cost inflation. Equipment rents were down 19% or 7 million as a result increased receipts from the use of CP assets by foreign roads. Depreciation expense was 225 million, an increase of 11 million, as a result of a higher asset base. Purchase services came in at 334 million, an increase of 35 million or 12% when adjusted for acquisition cost. The main drivers of the increase were lower land sales compared to last year, increased casualty expense, and some third-party cost inflation including pickup and delivery fuel surcharge costs. Moving below the line, the equity pickup from KCS in the first quarter was 256 million when adjusted for KCS acquisition-related costs and purchase accounting. Other components of net periodic benefit recoveries decreased 15 million, reflecting higher discount rates,…

Thanks, Nadeem. I'll tell you our – before we open up for questions, I can tell you this is my 31st year of railroading, I've never been more excited about the path that this newly formed company's create for our employees, for our communities, for our shareholders, and for commerce in North America. We look forward to showcasing and we're going to start that journey in June when we all come together. But for now, let's open it up for questions on our first quarter results. So, go ahead, operator.

Thank you. [Operator Instructions] Our first question comes from Fadi Chamoun with BMO. Your line is open.

Good afternoon, everyone. And congrats team on closing this transaction. It's very exciting. But I have a couple of quick things. First, if John can – can you give us an estimate of what the revenue synergy that you're expecting from Schneider and Knight out of the gate just on, I guess some loads are going to transfer to the CP network out of the gate and then ultimately you're anchoring these customers to grow faster after, but what does that look like? And Keith, you mentioned the integration in your remark and I just wanted to get your thoughts. This is not, kind of an overlapping network and probably it doesn't have the same challenges we've seen with prior mergers, but what are you focused on in terms of a key aspect of this integration to ensure it goes smoothly? Is it technology? Is it people [alignment] [ph]? If you can give us an idea about what is your key focus to, kind of ensure that this is going to go smoothly going forward?

Well, let me take – welcome back to Fadi. [We'll be able] [ph] to speak to you on this call. So, glad to have you back on the call. Let me start with the integration piece. This is a process – an issue itself, it doesn't have a really good history in our industry. And we've known that going into it. In my railroading time, I've lived through some integrations that history shows did not go well and I participated in some that have. So with that said, I can tell you we did not underestimate the magnitude of this. This team has been hard at work with our counterparts at the KCS when they're in trust focused on integration. So we integrate well because the last thing we need to do obviously is not provide safe and efficient service for our customers as we bring the two roads together. So, we hit the ground running. We have an integration management office that I chair that we've created the last nine months. We have a cadence. We need a couple of weeks. We have integration champions. We've broken down our disciplines in our business into eight different groupings. Those are full time assets committed to that. And I think of over 168 processes that we have active plans against that all define integration from the way we pay employees to the way we work with our customers to the way we manage the real estate. Everything is covered for the lack of a better term. So, very thought out, very disciplined approach. So, we trigger that obviously day one. We had a day minus 30 count down. We had a day one to hit the ground running. But I can tell you this, we were all in Kansas City on…

Welcome back, Fadi. This is John here. So look, we are super excited about having Schneider and Knight-Swift part of the CPKC team here. I can tell you, we worked hard as I said previously really for two years, really finding the right partners that can best utilize our capacity and service in this marketplace. We're excited, Schneider has over 30 years of experience of operations in Mexico. The Knight-Swift team, very excited about the convelling value proposition that a single-line haul will bring from Canada, U.S., and into Mexico. I'll tell you both of those shippers are going to be on the door step of our terminals day one, May 11. They will be on that train and bringing volume and synergies to the new CPKC. We'll ramp that business up, but you should expect it to be $100 million plus line of business for us. And that's just the start of filling that train Fadi. So, I can tell you there's going to be some more exciting announcements on the horizon in markets that not only deliver and can utilize best our service is intermodal service, but most importantly take trucks off the road. We have been very focused on opportunities that can capitalize on the 60% to up to 75% Greenhouse gas emission savings that this service is going to bring when you compare it against an overload truck heading down from Chicago down to Laredo and into Mexico. I'll tell you this, as much as it's been a long sales cycle in educating of what the power of what this network can do, I can also tell you these customers are excited and compelled with the capacity that we offer. It's been a tough couple of years of railroading for the industry and a lot of these customers are ready for a differentiator. And I truly believe come May 11, that's what this service will bring.

Great. Thank you.

Your next question comes from Ben Nolan with Stifel. Your line is open.

Yes, thanks. I guess my question really is, we heard from your competitor in Canada that they are expecting or already seeing a recession in their numbers, haven't seen it in years and even so far in April haven't seen it in years. Are you guys under the impression or are you seeing a recessionary environment or is this just something where you're finding other ways to supplement your volumes, despite what may actually be recession?

I'll let John provided a bit of color, but as we said from the beginning, we have a very unique story in this industry and this combination only makes it even more unique. We're not recession proof. Obviously, if the macro was bad enough, anybody could be impacted. But I can tell you we have some very unique recession insulators that no other rail network has in North America. So, I would say, Ben, we're definitely – we're not completely immune to it in some of the sectors in the international intermodal space, certainly the volumes for all ports in North America are down. To your point, this is a self-help area. We've been aggressive. We've been able to grow. We've been able to find some customers that wanted to shift some business to our best-in-class service out of Vancouver with CMA. You're familiar. We've had a ton of success out of the Port of St. John in growing that business and I'm actually – I'm very excited. You know [indiscernible] started up a new service with their alliance partners here a few weeks ago through the port. So, albeit that area is being hit by volume pressures that we've been insulated by it. I would call out not only the KCS network, but also most recently our network, the domestic intermodal area has felt pressures. We're seeing quite an imbalance of our flows with maybe decent demand, West Brown, but certainly demand degradation if you think about the eastbound flows. So, we're not immune in those areas, but I think to Keith's point, there are self-help initiatives that are helping keep us float a little better. Obviously, CPKC in these synergies and every day my expectation and my team reports out to me where we're at in converting some of these business opportunities. And again, regardless what the macro does in the coming months, there's going to be an opportunity for us to buck some of those trends as we continue to delay around some of these opportunities on the new CPKC network.

All right. Appreciate it. Thanks.

Your next question comes from Walter Spracklin with RBC Capital Markets. Your line is open.

Yes, thanks very much, operator. Thanks taking my question. Really want to come back to Schneider, but look at it a little more conceptually. I think, Schneider was an example of where KCS had to kind of interchange with UP to bring it to Chicago and converting that over to a single line now makes a lot sense and is, I don’t want to call it an easy win, but it's certainly a very attractive proposition to that customer. Can you bench or can you ballpark for us how much more in revenue dollars is out there where KCS was interchanging with a partner that you can now deliver a single line service to and perhaps get some easy proposition wins right out of the gate along those same lines.

Yes, Walter. So, when you're kind of getting in the [weeds] [ph] a little bit, on me here. I can tell you there's a compelling opportunity there. I think you've hit the nail on the head. We are going to speak very specific to those conversion opportunities and that on our Investor Day. So, I can't go into a lot of details there. I will tell you this, though. Certainly, I think what you described, extending that haul and that single line haul value proposition was important to a Schneider. In that reliability of capacity and service. But again, I'm going to point more to – as much of that story is about that, it's about taking trucks off the road. And if you look at the value proposition we're going to create in terms of Laredo to Chicago, on a third day delivery and into Monterrey on a fourth day delivery and down into Mexico city on a fifth day delivery, it's competitive with trucks over the road. And as much as again, Schneider in Knight-Swift, saw the value prop to stay on one railroad and use that single line haul advantage, they saw the opportunity to make headway on their own greenhouse gas emission savings opportunities with their own truck fleets. And to go after some of those pieces of the business that I think the rail sector has long sought to get after, but just haven't been able to demonstrate the service to really compete. So – but we'll get into those details also as part of our Investor Day story.

I want to add a little color there Walter. I think about this and talking to Schneider and Swift both, you think about what this enables? You think about asking them that same question, what freight to their competitors all over the road today that this service reliability in this single line reach into Mexico, be it going south, be it going north, gives them to be able to go compete for? So, there's revenue out there that's moving across the road that's not moving into Schneider vehicle. It's not moving currently in a Swift it’s going to be able to be competitive for them to bring to our rail network and partnership with us to get it into Mexico and to get it out of Mexico. So, there's such, I would call, maybe the conversion just the tip of the iceberg for the lack of a better term. It's what we don't know yet that excites me so much. And once we put this product in the marketplace, it's not spin, it's not rhetoric. It's truly best-in-class service connecting it seamlessly, Chicago to Mexico and Mexico to Chicago and those locations in between that's a game changer. It's a new market, it's markets we don't know about, its markets that we're going to enjoy uniquely with the people that partner with us and I'm super encouraged that Schneider and Swift see the value in that.

That's fantastic color. Look forward to hearing more about it in June. Thanks everyone.

Our next question comes from Konark Gupta with Scotia Capital. Your line is open.

Thanks, operator. Good afternoon, everyone, and I echo my congrats on this historic moment. I just wanted to dig in into these intermodal contracts with Schneider and Knight-Swift once more. So, my understanding is, your line, single line between [Taxmax] [ph] and Chicago was probably a little bit longer in terms of mileage, compared to your competitors on the West Coast job. How's that you are getting service faster there compared to those guys? I mean, are you making any significant changes in the way you operate those trains in that route.

And I think it just kind of boils down to the way we execute versus the alternative. And again, scroll over, we're not surprised that our combination surprised, you know trigger competition. We said from the very beginning this combination would create new competition, it's going to create new options for shippers and that's exactly what this is. So that announcement that was made this Falcon Express or premium service that I heard about yesterday. Complement my friends in Montreal, they finally validated our case for consolidation. We knew it from the beginning. The facts would support and I think history is going to show the STB got this right because of this very specific issue. But then you get to – it's ironic, I was sitting in the same seat two years ago, and I made a comment that the facts matter. So, let me explain to you just because it might be a shorter distance, if you don't convert it, does it really make the difference? So speaking to Fax, getting from Chicago to Salinas Victoria, which is the CPKC ramp that serves the moderate market. Yes, it's true that the Falcon service is 194 miles shorter. However, the reality is, we delivered in four days and we ran a 194 miles long versus their advertised 5.9. So, we're beating them two days to the market. Now, let's go closer to Mexico City, [Inter-Porto] [ph], which is our CPKC terminal versus the [indiscernible] terminal that's advertised with the Falcon service. And actually there, it's 76 miles shorter via the CPKC network, because what happens in U.S. where UP enjoys as a [crow flies] [ph] a shorter length of haul, it's the reverse to these same markets when you get across the border in Mexico. CPKC calls that back. But from a service standard from what we delivered to the customer, it's 4.6 days on the CPKC 181 service versus this premium service that I heard yesterday aspirationally was untouchable at 7.9. So, perhaps it is today, but on May 11, it's going to be touched with a much superior service. So again, the facts matter, rhetoric spin, we're just people of fact here and people of truth We're about to launch a train service that's unparalleled in this industry. And those that partner with us are going to be winners in this game of service reliability. They're going to be winners in the game of serving our environment, taking trucks off the road and making everything we said to be true about this perfect combination, fact based truth, not rhetoric, not spin, history is going to show that. So, we're ready to compete. We're ready to get after.

That's a great color, Keith. Thank you so much.

I'll let you know tomorrow what we're going to name it. It won't be [Falcon] [ph]. We're going to come up with something that truly exemplifies the superior surface that this is.

Okay. Thanks.

Our next question comes from Chris Wetherbee with Citigroup. Your line is open.

Hey, thanks. Good afternoon, guys. Keith, understanding that you guys have obviously had oversight of KCS for a while now, but with operational control, I guess, just kind of curious how you're thinking about sort of sequencing the next either couple of days, weeks, months, however you think about it in terms of things that you can, kind of get going operationally or from a cost perspective or otherwise, kind of right out of the gate, it would seem that there could be some changes now that were passed at April 14. I'm just kind of curious how you're thinking about that?

Yes, let me say this, Chris. There was a lot of thought in planning ahead of time in the guide that’s responsible for executing that. Our COO, Mark Redd is here and I'm going to let him speak to that.

Yes, thanks, Keith. And Chris, thanks for the question. It really [moves] [ph] around Mexico U.S. operations on KCS. And what we're doing is pretty much aligned. We've got our leadership in place. The metrics in Mexico are starting to stabilize a bit now. We're building on the improvements that the team had in place just prior to control. And what we'll focus on is really just back to basics. You'll look at our PSR metrics. We'll make sure that our car fleets are leaned out in both areas, both railroads. We'll look at focus around dwell, speed, yard speed, locomotive optimization in the yards and also just inventory reviews. So, we'll just – really would just get the number two pencil out and just start railroading and stay focused on just the metrics themselves, but also just getting into the details of how we railroad on MCP.

I think Chris, the other point that [I commend Mark] [ph] on is, from right out of the gate day one, it's about cross pollinating, it's about best practices as well. We've got some of KCS' talent, Tim Livingston has moved to St. Paul, so he's on the former CP network. We've got Tracy Miller, who’ in St. Paul that stands in Shreveport. We got Mark Garlasco, who is a very talented operating officer at the Canadian Pacific and Shreveport as well. So, Mark went through a very methodical well thought out plan to make sure that we've got an opportunity to drive change on both networks to create a better outcome for CPKC. So they're well into it. I'm encouraged with the progress that hits the ground running and we're going to accelerate.

That's helpful. Thanks very much. Appreciate it.

Our next question comes from Jon Chappell with Evercore ISI. Your line is open.

Thank you. Good afternoon. Keith, I want to tie a couple of things together from a little bit earlier. I mean on the integration it's very clear you don't want to take on more than you can chew as to maybe bottlenecks things in the early stages, but it does sound anecdotally like there's a ton of business maybe more than you're ready to take that wants to come to you on day 1 or day 60. So, how do you kind of manage which freight you're taking in the early stages of the integration. And knowing that there's probably more demand than you have capacity for today, how do you think about pricing for that?

Well, the reality is the way we manage it is the way we've managed our business partners on CP for the last 5, 6 years. Mike Foran is key to that relative to our modeling. We've got John on the marketing side with the opportunities, we got Mark on the operating side with the execution and they've got to deal with me in the middle. So, we are very well, all of us connected to help assessing these opportunities, sequencing this business, I'm not going to allow this network to get oversold. So, as much as if we could, we would take it all tomorrow, we can't and we will not. The last thing I'm going to do is disappoint the customers that have an obligation to today be they former CP, be they former KCS, and especially those that we're starting to partner with. So, we've got a commitment and obligation to Knight-Swift, as well as to Schneider, to bring them on the right way. We're going to launch this train each way. It's going to be a 7-day a week service, that's where we're going to start. And then we're going to see what's next. And all the while, we're doing our infrastructure work. We're continuing to build-out our sidings. We're continuing to execute the merger, plan that we gave the SDB again so that we could be men and women of our word. And every bit of that was thought out and sequenced in-line with these business opportunities. So, we're not going to get ahead of our skis. We're going to be methodical about this. I think our customers as much as they would love the benefits of this network tomorrow, I think they would much rather appreciate our honesty and say not yet, we're not ready yet, then we just bring them on and we fail them. We're going to get one kick at the can. We're going to make this thing right and we're not going to fail by letting our aggressiveness in our want for revenue over subscriber ability to execute. That's just not what true PSR is about. We've got to make sure the network can handle the business to be able to execute our operating model and that's exactly what we're going to do.

Jon, I might add just a little more color to that. It's John Brooks. Day one in Kansas City, I got the entire sales and marketing team in a room together and spend a full two hours plus just talking around expectations and how we want to grow this network. And I can tell you the excitement to just sell, sell, sell was impressive. It made me excited. But to Keith's point, there was also a lot of temperament around we're going to sell to the right customers. We're going to look at those opportunities that can really value our capacity and our service. We're going to work closely with Mark and the operating team. And I can tell you, we have a very distinct process that we've used at CP with Mike Foran that any sort of incremental business that we consider to bring on the network, we make sure it fits our trains and ultimately what we sell, we can deliver to the customer, and we layered that process onto the KCS network, I guess that would be in about hour 40 of control. So, I'm quite comfortable that the team understands this mandate. They are like thoroughbred though. I got to hold them back, but nonetheless, we're not going to oversell this network as Keith said.

Appreciate that. Thanks, John. Thanks, Keith.

Your next question comes from Scott Group with Wolfe Research. Your line is open.

Hey, thanks. Good afternoon guys. So, I know we'll get the longer-term guidance in June, so I'll stick a little bit shorter-term this quarter. Any thoughts, color on how to think about Q2 from an RTM revenue operating ratio standpoint and then either core CP or now consolidated, however you want to think about it? And then John, any color on price mix of plus 1% and some of the puts and takes there? Thank you, guys.

Hey, Scott. Just a couple more months of patience we ask from you and we'll give you some promise, we'll give you some color. And I think John gave you some insight into what we're seeing as far as the near-term volume outlook, some of the headwinds, some of the opportunities and we've been reporting our April RTMs. So, let me just leave it at that Scott.

Yes, Scott. I mean, I think a lot of the challenges in April that the other roads have identified. We're not completely immune to those by no means, but I can tell you, if you look at the numbers, we have fared a little better. And again, I do think we've got some upside as we'll continue to layer on these synergies. On the pricing front, I continue to be pleased with our performance contract renewals. I'm going to say mid-to-high single digits. We continue on that pace. Mix has shifted a little bit negative on us as we've seen a bigger part of our bulk franchise move and naturally with that, sort of longer haul business. You begin to see a little bit of mix shift negative. I don't see that being that alarming of an issue as I look forward. A little bit of headwind and other freight on the [accessorials] [ph]. But again, I would say smaller relative to the others in the industry and we actually view that as a benefit of CP as we begin to see operating upside in our terminals as a result of some of that lack of congestion related to the accessorials.

That's it. Thank you, guys.

Our next question comes from Tom Wadewitz with UBS. Your line is open.

Yes. Good afternoon and congratulations on the skill and persistence in getting this deal done and approved. Wanted to ask you, I was just thinking about operating changes and some things that have been done in the past. I mean, this is probably not a good analogy, but I think 10 years ago, CPU was doing something called whiteboarding and the idea that you were just reconfiguring the flow of traffic on the system. Is there an exercise like that? Is there a process like that that eventually will take place for CPKSU and what might be the timing. And I guess if not, should be better to think about it as you're really just adding train starts as you bring on new business? Thank you.

Tom, I mean, that's part of the way we do business. We still whiteboard on the former CP network. So, it's just part of our discipline, part of the rhythm of making a plan, executing the plan, stress testing the plan, adjusting and tweaking the plan. So, as the ebbs and flows of business occur, it's never going to be static or should be static unless we're not growing or shrinking. And then we still have a responsibility to adjust. So, I can tell you that [John] [ph] did quite a bit of whiteboarding himself when the company was in trust. Mark and his team are going to build upon that. There's always something that a new set of eyes and ears we'll see in here that perhaps the previous didn't, that's true about me, that's true about Mark. But that's definitely part of his playbook that he'll be executing with his leadership team. And that's part of when you talk about cross pollinating, when I talk about bringing Tim Livingston and his abilities and skill sets for leadership impact in the Saint Paul and we're taking Tracy Miller, where Tim Livingston is. It's kind of a replication of that. Both of those gentlemen will see things the other didn't and it's nothing to be ashamed of, it's nothing to apologize for. To me it's something to celebrate because it creates new opportunities for us. So, whiteboarding and railroading that way, that is what PSR is. That's a key ingredient to it and it will be part of our DNA as long as I have anything to do with this railroad or anything to do with the people that run this railroad that I'm going.

The only thing I would add – the add I would have with that is really May the eighth will bring KCS team up to Calgary and we'll have that alignment meeting. We'll talk about what good looks like, we'll talk about the standards and expectations. That's what will [indiscernible] out of the conversations. We'll make sure that we time every job that we have, the connections, understand what freight goes where and just align ourselves on how – what good looks like.

I'm sorry. I was just going to say, so we should think of it as more a process, not like in some of the PSR stuff in the past, it's, you know, you do a lot of work to plan a new schedule and then you implement broadly the new schedule. But it sounds like this is more of, kind of a process and a gradual thing than point in time where there's a big change to the schedule?

Yes, the schedule itself, the service designs team teams did a phenomenal job having it ready to go day one. So, literally to say that we had a system schedule day one is unparalleled. I don't know the new railroads ever been able to do that. So, there was a lot of prework into that, so we could hit the ground running. But it's these wide boarding sessions that's – you go out and you stress test that schedule. You make sure that the local jobs are right, you make sure the road performance is right, you make the stops and the times you switch your customers are correct and you're properly resource to optimize that plan. And I can tell you, I'll give you a case in point. I walked in Mark's office this morning and we got to a discussion about inspecting locomotives. And listen, they're good railroaders, but we do a little bit different. It's about best practices, why don't you provide a little color about this. [Indiscernible] this morning.

So, actually I was, I don't know, probably midnight last night talking to the trainmaster in Wylie, Texas. And what we – what I've noticed was just a detail I'm asking for and he actually had a crew come on duty walks through the locomotives, but also here that we had a mechanical inspection as well. So during that, I learned that we spent about 20 minutes walking the locomotives, make sure they're set up right, make sure the hand brakes are off, and the mechanical person just went through it. So, all I've asked for is now let's get a card on the lead engine that says job briefing card that says this engine has been signed off by Joe or Jane or whoever the mechanical person is, so when the engineer gets on the locomotive, they can just leave. They don't have to do a brake test. They don't have to do all that whole 9 yards. They can just leave. And just that alone will save 15, 20 minutes to every start that comes out of a shop facility and you just multiply that by 365 times – 365 times a year and think about how much time would just save?

Yes. Tom, I don't want that to be misinterpreted. You've got a qualified certified mechanic that's been trained and is an expert at inspecting in service net locomotive that signs off on it and they hand it off to the locomotive engineer who is a trained expert at operating it safely. If that qualified mechanical employee was not there, then of course the engineer would do that work. The work has to be done. This isn't talking about eliminating work that needs to be done to run a safe and efficient railroad. This is talk about eliminating redundancy, so that we can convert it to productivity and that locomotive can get moving across the railway so that we can drive locomotive productivity so that we can drive service reliability, so that we can take those trains and those cars additional car miles per car day. That's what it's all about. It's about optimizing the processes. Not eliminating necessary component to the process.

Great. Thanks for the time. Appreciate it.

Your next question comes from Ariel Rosa with Credit Suisse. Your line is open.

Hey, good afternoon and I'll just echo everyone else in congratulating you on a historic combination here. Keith, it did seem like KCS had a number of operating challenges, kind of leading into the closing of the merger. Just wanted to understand what accounted for some of those issues from your perspective and what does the timeline look like to fix those issues? Thanks.

Well, the fix has begun. I would suggest that John and the team did quite a bit leading up to stabilize the metrics and I believe a lot of the deterioration was in Mexico. Specifically, the U.S. operation was running quite well. On the Mexican front though, there were some congestion data in Mexico. There were some challenges with labor availability. John and the team are working hard to address the labor opportunity to communicate to our employees that are in Mexico that listen, they're a key piece to this. Those employees in Mexico and the growth that Mexico can enable their success enablers. And part of that getting out and making sure that they understand that is part of how you win the hearts and the minds of your employees. And John's about doing that, Mark's about doing that. I've been down to Mexico myself. I went down. I've done town halls in Mexico City twice. I went down just before control date. I guess it was maybe the day before. Two days before, did a Town Hall in Monterey. And I can tell you those employees down there have energy, they're engaged. They feel like they they're part of something. I'm going to make sure that they know how important they are to that something. We're creating something special. And I think all that matters. I think as we progress this and we educate those employees and they feel like they're part of this, not just the officers, but most importantly equal of importance are the men and women that operate the [trains] [ph]. And quite frankly, I think there's a big opportunity to do that to make sure they understand the opportunities before them and how important this is not only for Mexico and for their families, but for the North American continent. And I think that's going to be a game changer. So, you should expect to see the performance improve. The things that Mark's doing today with the team taking it to the next level building upon that work, taking cars out of service that are just setting their dwelling, that are taking up valuable space that some are eating us up in car hire, getting them back to the railroads they belong to, leaning our fleets out so that we could be more efficient and turn our fleets and reduce wells in yard, that's all about the odds and the sides and the intricate nature of running a PSR railroad is about. It's about getting into the details. And that's what we're about doing. And as we do that, the performance will continue to improve.

Thanks for those thoughts, Keith.

Thank you.

Our next question comes from Brandon Oglenski with Deutsche Bank. Your line is open.

Hi, this is Brandon, but I'm from Barclays not Deutsche. But Keith and team, congrats as well. Keith, you did mention culture, I think in the first question or in your prepared remarks, is being the most important here. How are you aligning management incentives along these lines, especially coming off that last question about the operational challenges that have been pretty much existent for a while now south of the border? Thank you.

That's a great question. And I'll tell you It's not lost on me. I'm a person that believes I'm working hard, but I'm also a person that believes when you create value, you should share that value. So, something we've done as far as officer compensation, we are implementing a more CP like compensation model. So, the KCS had a different program. The KCS obviously, they've been in trust. They couldn't issue equity, all those things that create value. We're going deeper in the organization. The other thing we did and I was proud to announce day one, we're creating more shareholders. I want more owners in the company. The KCS, former KCS employees obviously have not been able to enjoy or participate in a share purchase program for quite some time. And in fact, 100% of the CP employees, we're not participating in our program as well. With day one CPKC, we announced 100% of all employees. On the U.S. side or the Canadian side, could participate in CPKC share purchase program. So, that went into effect since then on the KCS side, we've seen in 10 days, 20% of their employees have signed up and registered for that. So that kind of tells you, and I believe in this, they're going to create the value they should enjoy the value. And as owners, I think they behave differently and perform differently than if they're not owners. On the sell side too something that's very CP like, we're introducing the sales incentive plan. So, the sales force as they're going to go out and sell this product, they're going to be motivated to meet and exceed their budgets and they'll be rewarded handsomely for doing that. So, we're trying to sweep out all the corners, we're not trying to bolt the ocean, but at the same time create some CPKC like motivational compensation measures out there to make sure that our employees' interests are aligned with our shareholders' interests so that we can get at creating this value faster not slower.

Thank you, Keith.

Thank you.

Our next question comes from Amit Mehrotra with Deutsche Bank. Your line is open.

Thanks. Nadeem, can you just give us a sense of, I know, any expectations around RTM growth this year? I know there's just a lot of moving parts macro, grain, and then obviously some of these new business wins which are great. But any sense of RTM growth this year? And then just another topic on synergies. I assume you'll update the synergies at the end of June, but there's obviously a volume component to synergies and a pricing component to synergies and pricing is up a lot over the last couple of years. And so, wondering if you could just kind of give us a sense of if you mark the pricing to market kind of where the synergies would be relative to when you first put them out? Thank you.

Sure. So, I'd say we're still – it's been 12 days. We're still evaluating their plan incorporating that into our view and then obviously as you know, it's a pretty volatile macro right now. So, for me to give you an RTM I’ll look for the rest of the year is not going to happen. I think we'll update as I mentioned this to Scott earlier, we'll update in a couple of months at the Investor Day and we'll have more visibility into the details of their plan. And then as we go through our whiteboard process and so forth and I'd say, you know, recall our whiteboard process isn't just on the operating side. It's also meaningfully on the revenue side. And so we spent some time this week with John and some of his sales marketing team, some of my financial planning team, our costing team and etcetera to look in at some of the revenue contracts and opportunities that are in front of us and that we've inherited. So, I think that's an important point as well just on the white boarding. So, we will get back to you in terms of revenue outlook for 2023 when we meet in a couple of months, maybe a sense of what the second half of the year looks like. At that same time, we'll also give you a longer-term view in that 3 to 5 year type of timeframe. And we'll give you visibility into what the synergy outlook looks like in terms of execution. So, we've given you some visibility near term. John mentioned there's going to be more that come out between then and now. But I think at that Investor Day, a big part of it is going to be visibility into the synergies that we laid out as part of our as part of the acquisition and part of the application and give you more color. As far as the pricing environment, yes, it's certainly from the 2.5 years ago and we entered the process of acquisition, the pricing environment change meaningfully. And that should be an opportunity, as far as the overall revenue outlook. And so, what we've said consistently the last few years is the size of the [pie] [ph] is probably larger. We're in a midst of a challenging macro environment, but I would expect that the size of the pie is going to result in bigger synergies than what we've outlined. It might take a little bit longer to realize it might take and that's why we're going to give you a longer outlook as well on how we're going to execute that.

Great. Okay. Very helpful. Thank you very much.

Our next question comes from Ken Hoexter with Bank of America. Your line is open.

Hey, great. Good afternoon and congrats on closing CPKC as well. I'm certainly not a fan, but I think the Patriots beat the Falcon, so maybe - but I think Patriot Rail is taken. Just watching from afar, I guess now that you're under the hood, I mean, just asked about the synergies. Maybe go on the other side. Are there some bigger projects where it might take a bit longer now that you look through and you at this for a while, whether it's software? I remember when UP and SP merged, the network almost came to a standstill. And I know you don't have those issues, but are there some major projects that might take a little longer that you can maybe walk us through Keith?

Hey, you know what? I've got James Clements. He's our expert in that space. I'm not getting to speak to that. But before I turn it over, I can't resist commenting. We can't be patriots. We got to be Real Chiefs.

Trust me, Keith, I'm not a Patriot fan. I'm a New Yorker.

Thanks, Keith. Thanks, Ken. It's James Clement. I'm Executive Vice President of Strategic Planning and Technology. And yes, when you look at the integration, what we said to the STB is that we were going to go through a very measured approach we were going to make sure that we tested everything before we launched it and put it in place. And day one, we certainly did launch some important tools. As Keith mentioned, we have the integrated operating plan that's now running for the combined entity. We've provided operational visibility to Mark and the team so that they can understand how the entire network is running. And we've also provided the information needed for the finance team to do their work and have their data. And that was our first step. We have a longer roadmap. We'll talk a little bit about it at Investor Day as well, but the big real one platform systems integration, whether it's what we're doing with SAP, what we're doing with our operating systems is more in that 2 plus year timeframe. But in between, we will have incremental releases of different tools, our carbon calculator as an example, isn't integrated today. We see that coming in Q2 of this year as one piece. So, we have a long road map and a very comprehensive plan and we're taking that measured approach so that we live up to the promises we made to the STB.

So will that – just to clarify that process for SAP or something like that, does that change your time frame on synergies? I know Nadeem just throughout maybe some of them might be longer now?

No, absolutely not. As an example, when you talk about the operating side, the visibility we've created, we did it on day one so that Mark and team would have the ability to start asking those questions drilling down into the operation. And converting the opportunities that they could see. So, we've given them those tools on day one and they'll just get better and better and they will be part of that ramp on the synergies.

Yes. And Ken, just to clarify, when I say it's going to be longer, I mean there's – when we first assessed this, we gave it year view of when we're going to achieve our synergies. And I'd say that we kind of did a split of a third to third to third. We think the pie is, we've consistently said, we think the pie is bigger. I'm just saying that we're not going to get the bigger pie in that 3 years. So, this isn't going to be a 3-year story. This is going to be an extended story and a larger one of developing greater synergies. And to Keith's point, we're not going to put our network at risk by trying to do everything all at once. We're going to take a measured approach and provide the best service in the industry that we're used to providing and do that take on business in a sustainable, profitable way.

Great. Keith, James and thanks for the time. Appreciate it.

Thanks, Ken. We have reached our allotted time for Q&A. I would like to now turn the call back over to Mr. Keith Creel.

Okay. Well, thanks for joining us today. Let me just close by saying this. I think this is critically important. We disclosed in combined two proud iconic CP's 142 year plus chapters combining with KCS is 136 years. The story is not over. It's just beginning. We're 11 days into a forever store. I think that's the best way to look at it. We uniquely and only and solely bring three nations together. It's never been done before. I would suggest it will never be done again. And we're about creating the most relevant rail network in North America to create those nations. So again, the next three years are extremely exciting, but it's what's beyond that. That it sets me the most. We look forward to talking more about that in June. Have a great day.

This concludes today's conference call. You may now disconnect.