Mark George: Yeah, Jordan, on the cash side, yeah, we’ve got the big CSR purchase here in March. We’ve gone outside of our preferred debt to EBITDA range at the very end of the year, in part because we’ve had to also fund these Palestine costs. So that will continue to consume some cash as well in 2024, and then we’ve got the CSR purchase in addition to that. There are no debt redemptions planned this year. So, it’s really an issue of operating cash minus CapEx, gets you to free cash flow. And then, in that free cash flow, we’ve got our CapEx budget, which is flat with last year, as well as the CSR purchase. From there, we don’t expect to have remaining cash to do share repurchase. So, as we go into 2025, we should be in a better track with EBITDA growth to start to have a more normal capital allocation cycle like we’ve experienced in the past.
Jordan Alliger: Thanks. And then just the first part.
Mark George: Yeah. Why don’t you repeat the first part?
Jordan Alliger: Yeah. I mean, sure you’ve mentioned a few times that you expect steadily increasing volumes and steadily increasing incrementals as we move through the year, with the second half seeing the lion’s share, I suppose, of the margin improvements. I guess I’m just curious would the plan contemplate in excess of the 100 basis points to 150 basis points in the back half? And what needs to happen to do that? I assume it’s volume, but…
Mark George: Yeah. So, Jordan, I think as you look at it, one thing that’s going to happen on the cost side is these service costs that I laid out in my chart will come out. They may not come out as great in the first quarter, largely because of what we’re doing to mitigate the cold weather, but they’re going to come out and they’re going to start coming out in the first quarter. And the plan is that most of those will start to release here in the second quarter, if not, it will be completely gone. So that provides us some traction for sure. A lot of the other fluidity and improvements that Paul mentioned will start to really take hold and provide traction, where we actually think our T&E counts may end the year a little bit lower than where they started the year, which means you’re taking on more volume and you’re actually having perhaps fewer crews, that’s embedded productivity right there.
And then, of course, we’re doing actions on the non-agreement side that will also yield some benefits. So, we feel really good about our back half and our margin profile. I think a little bit stronger revenue, we can absolutely outperform that 150 basis points in the back half — the 100 basis points to 150 basis points in the back half, and possibly be there for the full year because of it.
Jordan Alliger: Thank you.
Mark George: Thank you.
Operator: Thank you. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question.
Ravi Shanker: Thanks. Good morning, everyone. Maybe just a high-level question here, maybe going back to some of the previous questions asked and just tying it up. I mean, look, there’s obviously a margin gap to your peers and it’s kind of easy to point the cost to the reason why. But you guys have been cutting costs for many years and you’ve taken a lot of resources down and you’ve done a lot to improve the service product. I think you have the lowest cost per carload of any of your peers. At what point is this not really a cost problem and is more of a revenue problem and that needs the bulk of the resources addressing that rather than trying to take out more cost?
Alan Shaw: Look, it’s a balanced approach, and we overcame a lot of Norfolk Southern specific headwinds in 2023. And we enter 2024 with a safer network, a more fluid network and a network that is attracting business from our most service-sensitive customers. Once we get through this freight recession, and we will, we are poised for outperformance during the upcycle. That is the essence of our strategy. We’re doing what we laid out at our Investor Day 14 months ago. And I’m proud of the way that we’ve overcome these obstacles in 2023 and set the stage for margin improvement in 2024, while protecting the best long-term interest of our shareholders and the Norfolk Southern franchise.
Mark George: Yeah. Make no mistake, Ravi, this franchise, this network is built to handle a lot more volume, but we have a lot of cost runway ahead of us. And that’s what we’re focused on right now and we’re certainly going to welcome the revenue when it comes. And I think again that’s going to drive the high incrementals at that point. Thank you.
Operator: Thank you. Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question.
David Vernon: Hi, thanks guys, and thanks for taking the question. So, Mark, on the topic of cost, I think there were some headlines last night about some headcount actions, non-union workforce. Is there a specific cost program in place with a quantifiable number that we can be thinking about in terms of pursuit of sort of the non-operational costs as we kind of await the flywheel starting to spin?
Mark George: Well, with regard to the non-agreement program, maybe I’m going to assume that’s what you’re referring to, we had mentioned about 7% was our target and that’s kind of deal over 300 people. But I think that the timing will probably start to take effect here in the second quarter, just the way the voluntary program works. So, we’ll start to see the cost relief take place here in the second quarter. And frankly, the savings amount will depend upon the mix of the folks that put their names in. So, we certainly internally have a number in mind and we’ll see where it settles after that. But we’re going to — aside from that, there are other areas we’re going to go after. Again, we’re not happy with our purchased service spend.
We were in a year of very difficult, challenging situation where we had to quickly get our network up and running again from a number of challenges, be it weather or accidents. So, we’ve put a lot of money into quickly revamp using some outside services to quickly revamp our network on the mechanical side as well as engineering side. I would hope that those things start to really settle down. That’s our focus, Paul and I, as well as even on the technology spend, we’ve been using a lot more software as a service, cloud-based services, which show up in purchased services as opposed to CapEx. So that’s been putting pressure on our purchased services, but we’ve got to try to again put a lid on that growth. And I will mention that can’t discount inflation.
