And certainly, I think we had initially anticipated that, again, in a really good position, Schneider National, our partner there has had a stronger start-up than we ever could have anticipated. We’re working in some specific areas to introduce some retail products on that train. We’ve got some of our partners in Canada when you think about growth in reefers in that beginning to startup on that service. So that intermodal area has been just a little bit tricky, but I’m looking for big things in 2024. To go along with an area of surprise like the automotive sector that we’ve just seen a lot of success in creating, as Keith spoke about the closed-loop system in that area. So, I hope that’s helpful, Jon.
Jon Chappell: Yes. Very. Thank you, John.
John Brooks: Yes.
Operator: Our next question will come from Konark Gupta with Scotiabank.
Konark Gupta: Thanks operator and good evening, everyone. I just wanted to understand, if new free synergies you reported within the 2023 earnings what would 2024 earnings look like?
Keith Creel: Say that again.
Konark Gupta: So, I’m thinking in terms of passing out the double-digit EPS growth for 2024, maybe more for Nadeem and John, if we increase 2023 synergies you realize, how much 2024 earnings would grow without growing synergies?
Nadeem Velani: So, you want to understand what our 2024 synergy incremental is versus 2023? How much of that of double-digit earnings is?
Konark Gupta: Yes, maybe. That’s — if you break it down?
Nadeem Velani: Yes. We’re not giving that granular guidance at this point. So, we’ve given you an indication of where we see our synergies. We’ve told you that we’re at 400 run rate, and we’re going to ramp up over the course of the next three years, we initially guided to $1 billion over that first three years, and that we’re on pay. So, I think you can do the math yourself. Happy if you want to follow up with Chris and Ashley after the call. Maybe you can — questions more clearly than I can.
Konark Gupta: Yes. Thanks, Nadeem. Thank you.
Operator: Our next question will come from Ken Hoexter with Bank of America.
Ken Hoexter: Great. Good afternoon and thanks for the detailed answers so far. Maybe Nadeem if I can follow-up on the cost side synergies there. There’s been a lot of questions to John on the revenue side. Can you talk about how well you’ve executed to your target so far, where you see that going, where you can see some of those synergy goals on the cost side? And then thinking about headcount, how do we think about that going forward relative to your RTM, I think you threw out there a low mid-single-digit RTM growth as part of the double-digit earnings growth. How does headcount play in that? Thanks.
Nadeem Velani: Yes. Great, Ken. So, if you think about what we had guided to on the EBITDA synergies on the expense side, we have talked about $180 million in the first three years. So, it’s very much on target. The headcount piece of that initially was a big part of it, just given near-term attrition, some of the — as the team combined some people chose not to be a part of the team. And so you can imagine that at the more senior level, some of those costs were a little higher. So, from a G&A type of head count, we’re fully on track, a little bit ahead of schedule. From an operating synergies, we’re going to see that increase in year two. Certainly, that’s going to ramp up. If you think about early on, focus on the US part of the network, thinking about some of the challenges on the network where we’re were on the Mexico side.
So, we weren’t getting a huge amount of operating synergies near term as kind of day one. But as you’ve seen the results this quarter and we’ve talked about the huge improvements, both across the network on the performer KCSM and the KCSR, the synergies on the cost side is really starting to ramp up on that front. And that’s what’s given us the ability to deliver the ORs that we have in the back half of the year and meet the industry. So, I’m really bullish on where we see the operating synergies coming in. You think about some of the procurement, some of the sourcing synergies those take time as contracts come up and you can negotiate with your vendors. We’re on track in the first year, actually slightly ahead of pace. This year, we’ll start seeing additional synergies on that front as additional contracts come to the table.
So, all-in-all, we’re slightly ahead of schedule on the expense side. Again, it’s a smaller piece of the total synergy pie. We’re slightly ahead of pace. And I think this year, we’re going to see more of the value come in as we run this network as well as it can. So, very excited about that.
Ken Hoexter: And thought on the headcount versus the volumes going forward?
Nadeem Velani: Headcount, we’re talking low single-digit type of RPM assumption. I see a flattish type of headcount for the year.
Ken Hoexter: Okay. Excellent. Thanks.
Operator: Our next question will come from Justin Long with Stephens.
Justin Long: Thank. Good afternoon. And Nadeem you mentioned the assumption for low single-digit RTM growth this year. I’m assuming that includes a benefit from synergies. So is there a way to think about the organic volume growth that you’re assuming for the business? And then Nadeem it would also be helpful to get a little bit of color on first quarter OR, if you can, just given some of the weather disruption we’ve seen thus far. I know you said you could make up a good bit of it, but curious how you expect that to net out to margins.
Nadeem Velani: Yes. So, think about this year, the headwind on grain, the Canadian grain side is going to be made up on kind of base growth. So, I’d say almost flattish on the base organic side from a volume point of view and then the synergies driving low single-digit and as Keith mentioned, we’re being conservative. And I think that’s appropriate at this point in the macro and at this point, not knowing what specifically what intermodal looks like in the back half and where the grain crop comes in. So, that’s our view. I think more of the growth on the revenue side, we feel very good about the pricing, and that’s just I think good output as far as what that brings to the earnings cadence. As far as the Q1 OR, yes, January started off of great and then winter hit and some of these challenges that we had in minus 40, minus 45 ambient temperature without even the windshield.
