Union Pacific Corporation (UNP) Management Presents At Stephens Annual Investment Conference (Transcript)

Union Pacific Corporation (NYSE:UNP) Stephens Annual Investment Conference December 1, 2021 9:00 AM ET

Company Participants

Jennifer Hamann - CFO

Conference Call Participants

Justin Long - Stephens Inc.

Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.

Justin Long

00:00 I want to welcome everyone to the Nashville Conference since we're the first presentation of the day. I think that I need to give thanks to our corporate access team that's led by [Alisha Pars] (ph). They've done a tremendous job planning this event in person. I know we all have Zoom fatigue and we're excited to be here in person in Nashville. So thanks for being here with us, excited for the next few days.

00:25 Kicking off our track today is Union Pacific. So to my left here is Jennifer Hamann, CFO. I'm going to turn it over to Jennifer to make some prepared remarks. And then after that, we'll get into Q&A. This is a fireside chat format. I'll lead off with a few questions and then open it up to the audience if there's any questions out there, you can be thinking of those now. So Jennifer, thanks for being here and I'll kick it to you.

Jennifer Hamann

00:51 Alright. Well, thank you very much, Justin. And good morning to everyone. I was just telling Justin a little bit ago, it's just great to see everybody live. I think there is some enthusiasm to be back together again. So really appreciate the invitation.

01:05 The slides that I have, we will be referencing today that have been passed on the room can also be found on our investor website, next to the event webcast. So if you want to access those from your laptop, you can.

01:16 But on slide two, I do need to remind everyone that I will be making some forward-looking statements and those statements are subject to risks and uncertainties. So, please refer to the UP website and SEC filings for additional information our risk factors.

01:28 So, I’ll kick things off on slide three. As I look back over the eleven months of twenty twenty one that are in the books today, it's been a pretty challenging year for our operating team. And their agility certainly has been tested for winter storm Uri and the Northern California Wildfires to all the supply chain disruptions. Even our volume drivers are turning out quite differently than our outlook that we gave back in January. And unfortunately, the challenges are reflected in our metrics that are shown on slide three.

01:55 Our freight car velocity and freight car terminal dwell trail last year's metric and have lowered our trip plan compliance measures, which we know directly impacts our customers. Looking at the network today, actions taken to help alleviate global supply chain congestion have largely restored our intermodal service product back to a fluid position, and we're eager to add volumes to that network. However, we still have some work to do in our bulk and manifest products. Our crew available is stressed due to the impact of COVID and the vaccine mandate and the just general sluggish in our service product.

02:31 We did make some gains over the Thanksgiving holiday weekend, which is good, but our work really isn't done there. We want to maintain those gains and build on them, so that we can exit twenty twenty one in a stronger position that enables us to capitalize on the growth that we see ahead in twenty twenty two. Our core PSR principles give us confidence that we can accomplish these tasks.

02:51 If you turn now to slide four, here's an update on our current volumes in the fourth quarter. We're showing you both year over year and sequential seven day carload comparisons as both are really important to understand what is happening in the markets that we serve. Compared to last year, fourth quarter volume are down five percent driven by a fifteen percent decrease in premium, partially offset by gains in both industrial and bulk. Sequentially, our volumes have declined two percent on a seven day basis.

03:20 In our premium markets, year over year volume continues to be impacted by global supply chain congestion and the semiconductor chip shortages. Sequentially premium is down four percent, driven primarily by lower international volume as the ocean carriers continue to shift their business to transload at local West Coast warehouses in an effort to reduce turn times and make the most of their container assets.

03:43 Our bulk business is up six percent versus last year and three percent sequentially. Natural gas prices are driving demand for more coal shipments and at the same time, strong grain harvest is increasing grain shipments sequentially in the fourth quarter. Finally, industrial is up seven percent versus twenty twenty and down one percent sequentially. We have seen relatively consistent volumes across most industrial market segments, and we're encouraged by the steady demand in those sectors such as steel, industrial chemicals, plastics and forest products.

04:14 Turning to slide five, while the game plan that we drew up at the beginning of twenty twenty one isn't turning out exactly as we had planned, and it's been frustrated in part by the current supply chain and operational issues. Our enthusiasm and belief in UP’s ability to win and grow with our customers is undeterred. Our growth plans are rooted and leveraging our network efficiencies to deliver a more reliable service product and win new business, most notably from trucks. A lower cost structure opens markets for us and a more reliable service product opens new markets for our customers to compete.

04:46 We continue to make investments that support these new products from our new pop up intermodal terminals in the twin cities in the Inland empire in Southern California to our grain reload facility in Chicago, we are expanding our reach to serve new customers and help existing customers grow.

05:02 Lastly, we expect to convert more business from truck to rail with our customers as they work to reduce their carbon footprint. Rail is three to four times more fuel efficient than trucks and taking freight from the highways is one of the ways that UP supports ESG initiatives and enables sustainable growth across our supply chain.

05:20 To that end, if you turn to slide six, along with enabling our customers to win with their ESG and sustainability initiatives, Union Pacific continues to make strides towards our own goals in reducing our carbon footprint. We're taking another step forward next week with the release of our initial climate action plan. On Monday, December sixth, at 08:00 AM Eastern Time we will release our initial plan, and we're going to follow that up with a conference call at 08:45 AM Eastern Time to discuss further and answer questions. The plan will lay out details of how we expect to achieve our stated goal of reducing greenhouse gas emissions on an absolute basis by twenty six percent by the year twenty thirty.

05:58 We recognized the importance that all stakeholders have and are placing on this global initiative and we plan to be an industry leader. As a hundred and fifty nine year old company, we obviously know a thing or two about sustainability, and we're excited to begin the conversation on our next chapter, and we hope you're able to tune in next week.

06:16 If you turn then to slide seven, with just a month left in the year, the final picture for twenty twenty one is crystalizing. Unfortunately, the volume picture has not bounced back at the level we anticipated as those international intermodal volumes remain historically low. For context, our international volumes in October were below one hundred thousand car loading, that's a level we have not seen since February of twenty fifteen. We had expected a rebound in rail bound containers by this point in the quarter, but it now seems that those volumes are still at least a few weeks away. Although our bulk and industrial volumes remain robust, we now see full year volumes coming in up around four percent versus twenty twenty.

06:55 Operational challenges and our volume picture are having a negative impact on productivity as well. We're working hard to maintain year to date productivity gains. However, we're losing a little bit of ground there and now see a full year number of around two fifty million dollars. And with this updated volume and productivity forecast, as well as the continued volatility, but upward pressure generally with our fuel prices we now expect margin improvement in the neighborhood of one hundred and fifty basis points.

7:21 While this is at the low end of this target that we established back in January, we should note that we did not forecast the fuel prices providing an estimated one hundred and fifty basis points of headwind either. Importantly, the results still show that UP is going to be producing its most profitable year ever in twenty twenty one, and we're setting the stage for an even better twenty twenty two.

07:41 Wrapping things up then on slide eight. In twenty twenty one UP is driving strong returns to our shareholders through our growing cash generation. Year to date through the third quarter, our cash flow conversion rate is a very solid ninety five percent and we’ve returned seven point nine billion dollars to shareholders through dividends and share repurchases. Actions taken during the year include increasing our industry leading dividend by ten percent in May. And repurchasing twenty seven point five million shares for a total of five point nine billion dollars. We believe these are stronge achievements and demonstrate our commitment to returning great value to our owners.

08:23 And as we laid out in our Investor Day in May, this really is just the beginning for UP. We are committed to delivering for all of UP stakeholders and we're excited about what's ahead.

08:34 So with that, Justin, we'll open it up to Q&A.

Question-and-Answer Session

Q - Justin Long

08:37 All right. Great. Well, thanks, Jennifer. Maybe I'll follow-up on the updated guidance first of all. So volume guidance tweaked down along with productivity and the OR. It sounds like international intermodal was the main driver to that, but anything else beyond that that drove the reduction?

Jennifer Hamann

08:54 Well, as I noted, it is the sluggishness, and our services playing a role in that as well, which certainly impacts some of the cost and some of the productivity. And to the extent that it slowed some of our car cycles, it does have a little bit of an impact on Carloads, but international intermodal certainly [Technical Difficulty] has been a significant drag and just that ongoing. I'll call it lays in the supply chain that's impacting the autos volumes as well.

Justin Long

09:36 Okay. And at one point, you did say that the intermodal network is more fluid today. So when I look at these quarter to date metrics [Technical Difficulty] delayed. So is that still the view? And should we be thinking about twenty twenty two maybe having a more [Technical Difficulty]

Jennifer Hamann

10:33 The people who are listening virtually can't hear the question. So the question was about the pricing dynamic and kind of the outlook and just being able to pass on higher prices. I mean, inflation is obviously in the news everywhere, and it's affecting everyone. Whether it's inflation in fuel prices, inflation in labor costs, materials, it's somewhat across the board. What we deliver to our customers is a value proposition based on our service. And so that's really the conversation that we're having with them is about what we can help them do to stay competitive in their markets to grow their business and to provide them with a reliable and safe transportation product.

11:12 It's never easy. No one ever opens their arms wide and embraces a price increase. But it's a contract between us and the customer in terms of what we're looking to deliver for them, and they understand the competitive pressure. So it's an active dialogue, it's an active debate, but we obviously are very committed to making sure that each piece of business that we move is profitable and price is a component of that.

Q – Unidentified Analyst

11:39 Great. Hi, Jennifer, this is [indiscernible] Thanks for your time. Just like to stay one the mix question. And just give some of the favorability you have with [indiscernible] national intermodal more [indiscernible]. I guess I’m little bit suppressed [indiscernible] I was just wondering like, is that incremental being offset some of the investment [indiscernible]. And then next year as that international intermodal come back, how do you think about the profitability vis-a-vis the rest of the year intermodal [indiscernible] rest of the business?

Jennifer Hamann

12:21 So the question was about, questioning the reduction in the guidance just because of the change in the mix of business thinking that that should have maybe been more favorable and then looking to next year, is that going to change the outlook? Let me talk to the last part first, again, we're not going to talk specifically to twenty twenty two. But our guidance that we laid out in terms of -- we did put a stake in the ground, I'll say, for twenty twenty two that we're going to get to a fifty five dot X operating ratio. We are very much are firmly committed to that, and very much believe and expect to achieve that and we'll talk more about that in January.

13:00 Going back to this year, there are cost pressures in terms of the operational performance. That is a factor, there are the cost pressures from fuel. And then with just less volume overall, you do lose some of that leverage that we were otherwise expecting to be able to drive.

Unidentified Analyst

13:19 And may be specifically on the intermodal piece. Like, how does that change in mix less international intermodal like sort of play into. How do you think about opportunity [indiscernible]

Jennifer Hamann

13:33 Well, I mean, international is just obviously one piece of the intermodal pie. We've talked about and I think you're asking this question more prospectively. For twenty twenty two to twenty twenty four with our growth targets, growing above industrial production, we said that we expect a large portion of that growth to come from intermodal. Mostly domestic intermodal but certainly international intermodal would be a piece of that as well.

14:00 We know that that's very truck competitive business. I think everybody knows that on a relative basis, the intermodal business does not have quite the margin profile, but that's our opportunity. And so, we know that we have opportunities to improve how we run our ramps, how we run our service product in the intermodal business. And so, those are things that we've already, I would say, kind of baked in and taken into account when we think about that longer term guidance.

Unidentified Analyst

14:23 Got it. Thank you.

Jennifer Hamann

14:24 You bet.

Justin Long

14:25 And just to follow-up on that Jennifer, and then we'll go to a question in the back. Twenty twenty two volume outlook, is that guidance to grow consolidated volumes above industrial production? I just wanted to clarify that point.

Jennifer Hamann

14:38 Yes. That is. On a total basis.

Justin Long

14:41 Okay. Great. Question in the back.

Unidentified Analyst

14:43 Yeah. This is [indiscernible].

Jennifer Hamann

14:49 I Yeah. No, thanks for that question. And the question is about intermodal growth. We've talked a long time about intermodal growth. You could probably expand that to say volume growth, but intermodal growth for sure, what's going change or what has changed. And I think it's a number of things. I'll start first with PSR and our adoption of PSR. It does give us a more reliable network, it gives us a better service product and we know that we have to have a stronger service product to be truck competitive and to win more business and bring more business to the railroad.

15:31 And in my earlier remarks, I said that the intermodal business is much more fluid today and we would certainly welcome the addition of traffic to that network today. The other piece, I think that's very important is the ESG narrative. We know that customers easiest way, and I call it the easy button that they can use to improve their carbon footprint is simply to shift more business from truck to rail. We have to give them the service product to be able to support that and we understand that. But that's a dynamic that has not been present that we certainly see ahead for us, and we're already seeing proof statements.

16:05 I think everybody is familiar with the win that we have coming into twenty twenty two with Knight-Swift. That's a big achievement for us. And we're very pleased to be able to welcome them to our network and feel very bullish about that opportunity. And that, like I said, is a proof statement for us in terms of being able to build on that intermodal growth profile.

Justin Long

16:27 And on that point, Jennifer, Kenny has been very excited about some of the new business wins here in twenty twenty one and I'm sure there's more in twenty twenty two. Is there a way to help us kind of think through that impact as we get into next year and beyond? Like, what the target is for outgrowing IDP and how new business wins factor into that? Have you've been public about the Knight-Swift agreement, but any other wins that we should be factoring in next year?

Jennifer Hamann

16:59 You know, at our Investor Day, I think we laid out a number of different markets and areas where we're winning new business. You think about the biofuels market, that's a great market that is going to expand we believe tremendously over the coming years and we've been making some really good wins in that space. We've been making wins in the electric vehicle space.

17:20 You think about the steel markets, I think you've heard us talk about the fact that we had a new steel mill opened on our lines, one of the first new mills that's opened on our lines we think in close to one hundred years. So, just a tremendous dynamic there. So that's where we see a lot of the bullishness is new customer citing plants on our lines, new markets that are coming to us and just kind of that overall customer dynamic and the marketing team, I think as you also know, is taking a very aggressive posture to go out and sell this lower cost service product that we have in the marketplace. That in and of itself opens more opportunities and more doors for us.

Justin Long

18:02 So do you feel like you can continue to win share from truck in the current service environment, just given the cost dynamics to focus on ESG? Or in order to see an acceleration in truckload conversions, do we need to see the service product improve meaningfully from where it is today?

Jennifer Hamann

18:19 Well, again, I'll separate it a little bit in terms of the intermodal service product today is running fairly well. We would like to do two things there, I would say, continue to improve it a little bit and get it in a more consistent space, and that's the piece that we probably have the most room to gain is in that consistency. The customer only remembers you as good as your last load so to speak. And so, we need to make sure that that memory is a long one of consistent on time arrivals.

Justin Long

18:50 Okay. Any other questions in the audience? One over here.

Unidentified Analyst

18:58 [indiscernible]

Jennifer Hamann

19:10 Yeah. Now, the question is about the vaccine mandate and the risk that presents to us. We have announced our employees in keeping with the federal mandate, we are federal contractor. And so that's the scope that we are under is as a federal contractor needing to have all of our workers vaccinated. We started a process, I think late October-ish, where we started communicating with our employees and giving them a mechanism with which to report the vaccination status, also providing some time off, some compensation for people who became vaccinated. And so we're tracking that very closely.

19:49 I think through, like before the Thanksgiving holiday, we were probably in the sixty percent to sixty five percent kind of range. So we obviously have some room to go there. The federal government has continued to kind of, I’ll say, pushed the ball out a little bit in terms of their deadlines. It's something that we are watching very closely. We know that crude supply is critical. I think everyone -- and you hear that and just in general talk about the labor markets and the impact that the vaccination can have on the labor supply in general, and we would share some of those same concerns, which is why we're taking a very active role with our employee base to educate them, to give them every opportunity that we can to help them get vaccinated. We've had clinics at our various locations to help folks get vaccinated. But it's something we're watching very carefully.

Justin Long

20:40 And on the labor situation in general, outside of the vaccine mandate. Does it feel like it's getting better sequentially, worse, about the same? What are you seeing in the fourth quarter?

Jennifer Hamann

20:51 Yeah. I mean, I think it’s -- it's really for us, it's about utilization of our crews. I think if we were running a little bit more fluid network, and if the crews were more available, either because of not taking time off to get the vaccination or just having COVID, we feel pretty good about the absolute numbers, it’s really the utilization. We are hiring in preparation for twenty twenty two. I'd say the market is tighter, there's no doubt about that. But we still have very good paint jobs, great benefits and a lot of opportunities for folks. And so it means, we're maybe working a little bit harder than we have in the past to hire, but we are still able to fill our classes.

Justin Long

21:30 Okay. And if the problem is mainly crude utilization, as we think about volumes next year outpacing IDP, do you need to increase headcount meaningfully in order to handle that? Or if the network becomes more fluid and utilization of crews improves can you hold headcount relatively steady as we get into next year?

Jennifer Hamann

21:51 Well, I'm not giving you an exact volume headcount or volume number for next year, so I'm not going to give you a crew count either. We will not grow crews as fast as we grow volumes. I mean, we feel very confident in being able to continue to be very productive with our crew base. And I think at a high level, you're thinking about it correctly, we generate crews as we operate more fluid, and as people come through the vaccination process and the COVID process, that creates greater availability as well. So those are certainly things that can play a positive dynamic for us. And it's always a little bit location specific too. And I think you're aware, we hire crews for a certain region. And so if you're hiring crews and you're seeing growth in another area, that makes it a little tougher to move people around to be in the exact grade spot.

Justin Long

22:41 Makes sense. On the network congestion, do you feel like we're kind of past the peak, is the worst behind us on that front? And the one million dollars question is, when the entire network will get back to kind of normal fluidity. So what's your best guess on that?

Jennifer Hamann

22:57 I don't have a great guess on that, but it's improving today. I think it's – we made some, like I said, really good gains over the Thanksgiving holidays. Those are always good times for us to kind of sweep out older cars, get some of the trains moving that had been laid down. So I think we're in a good spot there. I think we're in a good spot to be able to continue to make some traction through the month of December. And then head into twenty twenty two in a pretty good spot, and we know we need to be running well. Again, we've got a new big customer coming online day one in twenty twenty two. And so, we're absolutely focused on being ready for that and feel very confident about that.

Justin Long

23:37 Okay, Great. Any other questions in the audience? Maybe one on pricing. You mentioned that earlier as an upside driver this year along with mix. But could you just remind us of how your -- the cadence of your pricing renewals going forward, and does it feel like this is an environment where the pace of year over year increases can continue to accelerate as we get into twenty twenty two?

Jennifer Hamann

24:02 So, just as a reminder, if you look at our book of business, about forty five percent of our book is multi-year contracts, about twenty five percent is tariff or spot business, and then the remaining thirty percent are one year or less in duration. And so, that tells you we've got, call it, fifty five percent that we're able to touch in any given year. And then you've also got some portion of the multi-year contracts that are rolling off and they have escalators in them as well. So, that's how you should think about the portfolio.

24:35 In terms of cadence of renewals, the beginning of the area is always a pretty active time. This is also an active time in terms of the intermodal renewals. Those generally don't kick in until the third and fourth quarters of the coming years. so twenty twenty two. But we're seeing good uptake there. The demand environment, I think, everybody that's looking out, I don't think anybody's calling to a near term solution to some of the supply chain congestion issues. And so, while that's frustrating from potentially a volume growth perspective, that does create a pretty solid price environment.

Justin Long

25:10 Okay. Great. And if you look at the difference between rail contractual pricing and truck contractual pricing right now. What is that percentage look like just given the strength we've seen in the truckload market and the pricing environment there?

Jennifer Hamann

25:24 You probably have a better idea about some of those [indiscernible] than I do.

Justin Long

25:28 I have a guess.

Jennifer Hamann

25:31 I think -- and it depends on the market, it depends on the length of haul. There's a number of drivers. But I think those gaps have typically ranged in probably the fifteen percent to twenty five percent kind of range. I don't know that that's changed dramatically over this year.

Justin Long

25:46 Okay.

Unidentified Analyst

25:49 [indiscernible]

Jennifer Hamann

25:48 Sure. So the question is about competitive dynamic within the rail industry kind of in general. Very strong competitive dynamic, the [indiscernible] is a long time been a great competitor of ours and continues to be. See no real change in that posture. In terms of the merger environment, I think the STB -- certainly they've got their schedule set out for the CPK issue. That seems to be moving forward by all accounts. I think also it seems like from many of the statements that you've heard from Chairman [indiscernible] and others, there's not a lot of appetite for further consolidation in the industry. That would be my read of it today, and that always can change, because it changes as STB changes, as administration change, all of those things. But as we sit here today, if I were to bet, I'd say CP cash [indiscernible] that happens and that you don't see further rail consolidation.

Justin Long

27:18 So on that point, Jennifer, we put out a note earlier this year on the potential combination of Union Pacific and [indiscernible] buying out your remaining ownership position. So sorry for all the questions you got about that, But I thought it was an interesting idea. I know you can't say anything too formal about that. But I'm just curious from kind of a strategic perspective if that's something thing that could be on the table, particularly given the fact that CP KCS just got approval from the Mexican regulators for this deal and the potential competitive threats that that deal could present.

Jennifer Hamann

28:04 Yeah. So maybe level set on a couple of things. I think the approval that they've gotten from the Mexican authorities is preliminary. I don't think it's the final approval yet. In terms of just looking at our book of business in Mexico, it's about eleven percent of our volumes in total, and that split pretty evenly between what we exchanged with the Kansas City Southern we exchange with the FXC. So when you talk about the competitive dynamics of CPKSU, you're talking about something that impacts something less than six percent of our business volumes. And I think fairly recently CP would acknowledged that we have a better route structure into and out of Mexico. And so, while we will compete very vigorously for that business and I keep her to say that we just want to make sure that we're treated equitably south of the border and that's our primary concern, and so we're going to participate in the regulatory process. But I feel very good about our competitive posture there.

29:10 In terms of FXE, it's been a great partnership for us. We have a twenty six percent ownership in them. We've had that since the late nineties. Worked very closely with them. We have three board seats. I have one of those. And so it's a great working dynamic. They run a great railroad, I think Group of Mexico, their primary owner also likes their ownership position in FXE. And so our long term plans with the FXE is just to continue to grow that partnership and do business to [indiscernible] and make sure that we work very collaboratively with them.

Justin Long

29:49 Okay. Any other questions in the audience? Well, one topic that's coming up a lot is in [Technical Difficulty] you made some progress on things. Just curious if that's getting any better?

Jennifer Hamann

30:26 Yeah. I know that there are a large number of warehouse jobs available, certainly in the LA basin probably across the country. I think different things that you hear indicate that labor market in general is getting a little better and some of it, I think from a warehouse standpoint too is you're certainly seeing a draw through the holiday season, people trying to move things out. I don't think we're anywhere back to where we need to be. I think there is -- we're a long way off from that. But you're reading things like the fact that the driver schools for truck drivers are getting a little bit better in terms of what's coming out of there. So just in general, it feels like it's a little bit better, but we've got a ways to go there certainly.

Justin Long

31:22 Okay. Maybe a couple more [Technical Difficulty]

Jennifer Hamann

31:40 [Technical Difficulty] report, you hear us talk about sustainability in our conference materials, we talked about a little bit about it directly. And really walks folks through each section of how we think about sustainability. This obviously is going to have a large focus on the climate action plan, but it really is an opportunity for us to kind of pull the different pieces that we have been talking about and really crystallize it for our investor base, so that folks really understand in a holistic manner how we're thinking about sustainability in our future and the role that we play there.

Justin Long

32:13 Okay. Great. Last call for questions in the audience. Well, I thought a great way to end it would just be to ask about the economy headed into twenty twenty two and your latest thoughts, it's really challenging to get a read on the demand environment. One pushback back I get from investors sometimes is do we really understand what demand looks like? Could it could it look better today just because of the capacity constraints? So, I'd love to just get your thoughts on the macro environment going into next year.

Jennifer Hamann

32:44 Yeah. I mean, when we look ahead to next year and we're looking at the same economic data that everybody else is, it's calling for a pretty decent year next year. I think the GDP and the IPI Numbers are both you know, four to five percent kind of range. So I'd say the global call is that you've got a strong economy in twenty twenty two. Some of that is potentially supported. I would argue by the congestion issues that we've had this year that are just kind of the tale of the inventory restocking, the tail of being able to get back to whatever the new normal is going to be in terms of shipments and demand. So, I think those are while painful this year, I think will probably a little bit of a tailwind going into next year.

33:33 For us to have our automotive shipments down on a year over year basis versus twenty twenty when the factories were closed for about four to six weeks pretty staggering when you think about that. And so, certainly, pent up demand for automobile purchases and that impacts our auto parts, that impacts plastics, that impact steel. I mean, there's just a whole trickle down impact from just that one industry sector that's been impacted by the supply chain.

33:58 So I think there's a lot of good opportunities coming into twenty twenty two. This new macron variant that's rear its head. We'll see what happens with that. And that's why i just, I think kind of to your point, we have to be nimble and flexible. I think we've demonstrated a great ability to do that. We did in twenty twenty, we've done that again this year with the various things that have happened. And so, we know whatever plan we put together for twenty twenty two. It's going to probably change, and we just need to be nimble and able to react to that.

Justin Long

34:28 And it seems like there's a lot of up arrows as we get into next year, especially given the comps that we're going to be facing in twenty twenty two, is there anything that you see as a potential down arrow?

Jennifer Hamann

34:40 Sitting here right now, it's hard to see that. But certainly, if something happens with the economy, that could be a down arrow if the labor market tighten up again maybe kind of going back to the question about the vaccine mandate if that really drives workers out of the work space. Those are things that could certainly be headwinds. Right now, it doesn't feel like that's going to be the ultimate outcome, but we'll wait and see.

Justin Long

35:06 Okay. Well, Jennifer, we'll wrap it up there. Thank you so much for being here. Thanks everyone for joining and hope the conference goes well.

Jennifer Hamann

35:12 All right. Thanks, Justin. Appreciate it.