CSX Corporation (NASDAQ:CSX) Q2 2023 Earnings Call Transcript

Brian Ossenbeck: Hey, thanks. Good afternoon. So maybe just on the topic of truckload conversion, it’s been mentioned several times on the call. Obviously, it’s a big opportunity. But can you give us any context in terms of the wins you’re getting or you have line of sight to? Would you be able to quantify that at some point in time because clearly, making the long-term decision to go after that and sounds like you’re getting some — but it’s hard to say what relative size that could be? And then, Sean, if you could just clarify cost per employee that we should expect for the next quarter? I know payments go up or the wages go up another 4%, but you got mix over time, a few other things in there as well. So it would be helpful if you can clarify that, too. Thank you.

Kevin Boone: Yes. I think in terms of numbers, we’ll probably put a finer point on the truck conversion opportunity over the next three years at some time in the future. There’s a huge focus by the team to really look at our pipeline and measure it and focus on those customers where there’s an opportunity. And some customers have a lot more opportunities than others and making sure we have the resources up against those customers to really drive that conversion. So a lot of activity. We have a lot of new tools internally that we’re focused on in terms of measuring that. So our data is getting better and better every day, and there’s a lot of momentum. And as I mentioned, our pipeline, as we measure it on a year-over-year basis, is up significantly, up 30%.

On a dollar volume perspective, it’s up even more than that. So a lot of momentum building. Obviously, the trucking market is not the most receptive market to compete against right now. Hopefully, there’s some optimism that’s firming up here, and that will even drive more opportunities as we work with customers over the next few months to drive more opportunities. And we’re upwards of 25 whiteboarding sessions year-to-date, and those are driving a lot of opportunities. They don’t necessarily come to fruition tomorrow. But over the next couple of quarters, we think those are going to translate into a lot of opportunities to shift share from truck as well. So we’re — teams are very, very excited. I don’t think we’ve had this much of momentum in terms of the things that we can control going forward.

It’s just some of these markets obviously are against us right now. Over to you, Sean.

Sean Pelkey: Yeah. Thanks. And in terms of cost per employee, it should be fairly stable other than the 4% wage increase on the union piece. I think there are some opportunities to drive some efficiencies there. So we hope to do better than a 4% increase from the first-half to the second-half, but we’ll certainly feel the impact of higher wages.

Operator: Your next question comes from the line of Justin Long with Stephens. Your line is open.

Justin Long: Thanks. I wanted to ask about intermodal, because there’s a big divergence between the domestic intermodal and international intermodal volume trends. And I was wondering if you could share how those numbers compared in the second quarter. And looking into the back half, around your comment about the domestic intermodal market gaining momentum. Is that a function of demand getting better or your expectation for business wins starting to kick in? Thanks.

Kevin Boone: Yes. I think when you look at the second quarter, think about the international market being down in that high-teens range. We probably, from a bottom perspective, peak that down in that mid-20s, and it’s improved slightly from there. So our exit rate is a little bit better than what we saw middle of the quarter. What we saw through the quarter on the domestic side is sequential improvement month-over-month or on a year-over-year basis each month as we get to move through the quarter. So that gives us optimism there. The team has done, quite frankly, a fantastic job of introducing some new lanes, working with some of our Class 1 partners to do that and identify new business. And some of those things are really playing out.

Some of our partners have done really, really well in the market despite some of the, obviously, headwinds there. So working with them, identifying markets where we have some opportunities. And in these kind of markets, it gives you more flexibility to go out there and look at things, look at your network, identify opportunities, try things out that work — may work and really go after it. So that’s what the team has been using the softness in the market to go and do and set us up for growth as the market rebounds. And I think you’re starting to see that in the numbers here.

Operator: Your next question comes from the line of Tom Wadewitz with UBS. Your line is now open.