FDX - Earnings call transcript Q1 2021

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Operator

Good day everyone and welcome to the FedEx Corporation First Quarter Fiscal Year 2021 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn things over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Mickey Foster

Good afternoon, and welcome to FedEx Corporation's first quarter earnings conference call.

XX-Q at and fedex.com. Form on book quarter website our first earnings stat release are The one This website will about where is the call being replay be streamed available from our year. for

today are us the Joining members on the media. of call

projections Harbor Corporation be of want During to of statements statements. statements in in differ materially Act. listeners to provisions this cause to all regarding the remind one us the like are conference forward-looking would future expressed meaning and those the FedEx limited those from our all risks, may allow call Act. forward-looking callers could who Securities to desires implied to such other Private question advantage Litigation considered to session, results accommodate question-and-answer forward-looking Certain Safe by which to such will statements as take subject actual be order to of or Such participate. the that performance within uncertainties I factors, Reform

information Relations For of discussed Investor releases SEC. the to on our non-GAAP website reconciliation call fedex.com measures this Please most the the GAAP to comparable measures. refer for with press financial refer and at a filings to of on the additional directly our portion factors, please these

will Secretary; Marketing Fred John Freight. our Joining Mark some Vice his Fred Alan views CEO President, CFO; the President FedEx of CEO Allen, Q&A and are on session Carter, Smith Express; Alan And us Carere, and and Executive the of of on Subramaniam, share have FedEx Vice and Vice Maier, After call Officer; General Communications CIO; President Executive and Don will comments. Information President FedEx Fred and Ground; President Colleran, and now Services quarter. and Executive and Smith, today, additional and Smith, CEO President Graf, Henry Counsel Raj Chairman; Rob today Chief President, Chief Brie President, Executive Operating FedEx Officer; Vice

Fred Smith

Mickey. you, Thank

we FedEx, every world goes we times the healthcare, ongoing during to for FedEx scale in home to the keeping and thanks Detailed their are sincere my during foremost, At who at our periods outstanding needs, what tirelessly the members worldwide industrial, have at as and worked and good respond connected is supply to day. challenges. efforts our do With and First planning keep is first great team world’s of and approved. chains we vaccines at to to priority, pulling safety once pandemic. distribute underway COVID-XX

years Board grateful to counsel ways, last Alan also words. role is corporation accelerated our the confident the will not of will we XX of This business Advisor and the been In Edwardson, years. leadership. earnings helped will underscores many would of Alan will Graf’s world growth remain and global FedEx. acquisitions, several are CFO his part end of for over and ask earnings from importance without the end Alan’s thank to and our dedicated has more retiring Lenz Directors would change. I wise market the of the to of tremendous navigate the service. XX than of the FedEx more At FedEx Mike future December. of I a Alan a admired assume the very, is call, the it be service. than say remain for years Our and call decision this XX like and who of beginning September globally few until today Senior meet in very John Alan and we initiatives investments his has be strategic and significant every growth, last very international strategies investments,

FedEx’s in be approved Meeting Investor of has greater themselves September I website. success. John will share provide the Alan will XX on both and Relations at of the contribution that Shareholders appreciation to these for Board and posted highlight resolutions our the invaluable of resolutions Directors detail Our their

Let take your Brie? me their now ask questions. Brie, will which comments, we Alan to Raj and provide after

Brie Carere

towards Thank is holiday continued Retail impact a to into have spending and the Until U.S., loosened. available volumes pandemic In and the growth. the is recovery services trade contained, you, severely calendar global declined on economic and uncertain afternoon, everyone. as hold remains improving normally April low sector world. Manufacturing that the have outlook recovery the sales moment. The due moment. which of and vaccine levels pent-up Good year-over-year further course, activity in is that coronavirus-related been resumed demand. taken are in growth. the would with output service remains is XXXX higher ecommerce sequential on Fred. off globally, Trade continues goods employment U.S., – to around the economic first rates of growing Outside have goods by of building forecasting gone at has as boosted has spending of again the The to virus more come the COVID-XX on trade well shifted is a impacted restrictions and is half year XX% by weigh challenging.

negative GDP trends remain growth are basis calendar this the year-over-year and the given substantial depth the proposition. to our two incredible and impact of we However, had on of trade have downturn, for value showcase remainder FedEx’s on There industry global that year. expect a

total to is driven and incredibly XX% loss XX% on we as freighter of Express the significant of expansion and key a customer for XX% capacity believe traditional for freight compares enabling is Europe the the air accounts of to capacity. demand has Transatlantic, of This Europe’s air the continues XX% demand indicate development managing disintermediate was the XX% for Transpacific benefit job result reduction trend Current from Transpacific capacity lower the cargo on an pre-COVID a Asia. the strongest to Asia lane. to dramatic to commercial shipments forwarders’ this to and capacity experienced growth done Transpacific freighter commercial XX% capacity relationships well excellent airline an estimates that Transatlantic opportunity Ultimately, of team FedEx of Asia We’ve for PPE market. existing both and the positioned first lane, month-over-month. Europe lane on constrained air Internationally, of The ecommerce. is of relationships. be relationships. customer by international capacity demand of mix. on demand, the elevated The the with new percentage now

know, As premium volumes international were package XX% year-over-year. priority you up will our

yields continue We to the strong. remains monitor environment and airfreight pricing airfreight

commitments. to market current contracts base reflect establish conditions renegotiating are We better longer-term and to

parcel trend that the domestic ecommerce. of projected we a per is acceleration would XXXX. this the XXX fueled will hit calendar expectation. The packages that U.S. year Pre-COVID, pandemic by the rejections by driving the substantially We market calendar U.S. years pulling hit mark is volume second Ecommerce profound day XXXX forward project by by this and extraordinary domestic perhaps now year the previous from market three more growth. million

of growth from to XX% ecommerce. come U.S. fact expected is In the

calendar While year is compared of April, for retail Ecommerce from total has to ecommerce of XXXX at XXXX. total percentage percentage in a as QX XX% QX XX% retail declined it calendar a elevated. its in year as estimated remains apex

of ecommerce, and the completed the best the solutions We period have comes the more retail when best of into FedEx services XX,XXX same a United more reinforces seven XX% digital fiscal to previous while FedEx Sunday week and In to or XX% with make U.S. year on XXXX, deliveries, the returns the FedEx our business. our and coverage the XX% And built residential General a offer population than from of it integral mentioned off yields. unsurpassed were Ground a proposition States, that within at in of market optimize to locations Dollar of increasing FedEx first proposition round value living has centered ability channels. in the now enhance portfolio increasing have August, staff nearly five days drop returns last location. U.S. than two miles calls, In XX% the In customer pickup is expansion. ecommerce the volume year. capacity year of strong for with I now industry population. services commercial Returns we Express network ecommerce reaches experience. and drives of months as retail value

network brick enrollees fiscal they and the vast merchants and provides ecommerce enrollments before. to delivery XX% mortar consumers have ever with without more year small medium FDM than proximity the deliveries in increased convenience Our expense. manager and than and with today interacting are in FedEx store pickup bioline more XXXX

As we will it be keep we ahead record-breaking look believe volumes will elevated ecommerce a and peak. to peak,

We to are are we the ready calling prepared what and we warmed we and up deliver. are shipathon to are

during quality, revenue we focused while we the peak customers this a for to prepare very service best we like other, providing challenging are with on be possible time. continue no ensuring As our

several will strong are for help customers. be increased and of those us surcharges largest the accordingly. peak while our increased will proportion We consuming customers are of These peak levels the are implementing of covering manage of we to in that our capacity surcharges cost network delivering ensure charged demand who maintaining shipments entire service base

solutions leverage We to are develop peak the ecommerce out capacity demand customers our and to to season. largest during creative spikes collaborating with smooth

our small recovery fastest small working post-COVID. our surcharges are continues champion recovery. and peak customers quarter revenue support most to nascent to and and growth from ensure their protect growing segment customer of grow with We segment double-digit in continues impact medium FedEx diligently and medium The was the the to that their high to

domestic ID distribution, proprietary services. monumental movement extensive other innovation supplies. supply needed capabilities. and most transmits using to two SenseAware eventually to the as that will shipments and anticipated compact enhanced a which technology, of to overnight express for we prepare sensor next-generation We latest of applied this scale vaccine Finally, continued the the intervention feature tackle for first is SenseAware ID seconds. within attributes of provides believe That’s efforts shipments are initially package distribution critical the we and launch U.S. chain pharmaceuticals a size include were FedEx as announce thrilled the ID medical lifesaving and this temperature and is visibility we and SenseAware vaccine sensor-based control initiative planned be believe every premium critical the the to FedEx network why to yesterday. location visibility, safe

attract other as such customers innovation are confident With it turn and Beyond for will his high we will to aerospace. Raj industries value that, over this I healthcare, remarks.

Raj Subramaniam

good and afternoon. Brie you, Thank

team by the our valiant time. first sentiments echoing historic about efforts start me Let of members during this Fred’s

to networks pandemic. We during are commitment this XX in the exceptionally to ongoing what’s flexing the team dynamic of FedEx members nearly the proper ahead proud your midst you and dedication grateful day years global and who each deliver has team experience time. worked our of stay FedEx diligently of next. of Thank promise, our especially for FedEx

Over integrating capabilities every networks Through residential moves The Door directly handle large all TVs; recap, of with such network’s furniture, optimize couple locations. our a the years, accelerating number of that increase of U.S. of we decisions General, investing into businesses and initiatives and our and items first expansion and offering delivery Walgreens, the strategic retail this have of efficiently smart day the Service virtually equipment own the office which convenience real-time opportunities. network; items the bulker includes, to to week; To launched branded building past enable technologies exercise ecommerce larger Ground FedEx FedEx’s customers’ our to package more Ground and Dollar homes in and as aspects post our volume into FedEx address operation; expanding

change, our five years growth to happened in see months. of The did strategy timing period the of certainly a to to three we that period three not a expected five did. While over

the are execution Our strong acceleration in largely ready with strategy, excellent aforementioned our ecommerce quarter of by trends. financial of coupled results the future the driven

have improve We note BXB volume prior steadily levels. that BXB the Ground with over in segments our across are summer also the year exceeding August happy average volumes daily to to continued

our shipping to like look we to company’s what enter other no holiday peak a in As season we history. be QX, we expect

customers working closely to with them to enable are building our solutions We succeed. and

markets key in positions XX,XXX the United than States. more across adding also are We

stations, Ground facilities expanded and strategic automation. additional will automated facilities being additional planned and capacity six located expanded strategically existing new including to provide with short-haul sortation expanded New solutions or new and each large equipment large provide XX to for package facilities are material handling retailers. prior peak facilities eight regional Four

to U.S. completion market. improve Additionally, track operations, growing of our last for are seven a the for us adding positioning use sorted and capacity elements repurposing we sortation. the year Ground through existing serve we Ground SmartPost as this fall, residential the and are facilities package of on facilities of in optimizing mile rapidly day the expanding Many transformation dozens efficiency

the facilities available month, XX% technology will network residential this increasing serve our cost of optimization of as available route delivery of completed SmartPost operating driving providers to our Ground Sunday out is population. this sorted is and our to of nearly U.S. to service density As be is integration and in one volume next residential thus and holiday month season. delivered down XX%

Now start of globally revenue driven our customers premium, trends to a initiatives. positioning turning historic relentless to to by profitable most we revenue Express. towards mark year strong our our execution are FedEx QX at ongoing With air quality. capacity enhance a XXXX and our assets strategic fiscal

accelerate acquisition integration sound will including we the of further network pursue transform our the optimize to expansion XX as rationale particularly the remains international The TNT and to next continue actions over capabilities. the full Express and in We FedEx benefits ecommerce Europe complete business for months.

complete international in ahead a provides opportunity build in the calendar air we can acquisition that of significant us of early is understand portfolio with said our interoperability of there improve with to network that, us to XXXX. region. that expect clearly performance phase final Europe. a we The in the on strong We Having compete TNT

Our mission. hard execute European at that team is work to

focus successfully income to XX a Collaboration Let highlight Freight’s margins manage growth me origin to in also this quarterly the miles Freight quarter results To of of record has highest XXXX. FedEx in safety optimization Last take intermodal between cost so for million FedEx package before delivered XXXX. perspective, to reflect this volume reduce year. us year our and quality, Logistics levels mile one Ground ability Freight FedEx increased since the for Ground to These companies packages operating revenue historic secure had and outstanding operating this year that this The and residential reached results levels. opportunity network has fiscal allows QX. to network launched in commitment operating including to density profitable flex and the put And laser the never delivery more to May delivered which together on in and rural charges exceeds provided FedEx for customers and road fiscal provided Freight U.S. to for support more and in Ground market. XXX,XXX Express our in XXXX. FedEx far shipments than than XX far than air miles QX support operating throughout continue less non-conveyable had Freight year work alone fiscal the million companies a delivering

additional back intervention our launch Before recognize to these the industry. the with to network solutions, critical circle I positioned like that ID shipping technology sensor-based SenseAware complex well yesterday’s FedEx I’d close, vaccines XX Europe to cold healthcare in handle network, The put, open our is Brie’s facilities capabilities shipments and the real-time comments years. to and FedEx of knowhow to with Australia vaccines and technology provider brings of work. temperature to and they is distribute plan control about monitoring, have is Today, Asia, We value across the are ready. when Americas, course and more logistics our than coming we and transportation Simply chain the and unparalleled network. facilities the

by movement such the number years increasingly of am now ecommerce. our also foundation is for industry that recent close two, me value, the becoming everyone the role are our solid points. course FedEx ahead the by differentiated. making critical in portfolio and industry, global Let our our I times. in with healthcare to within the us. Number economy provide confident clarity broad best growth the that three It industrial plays FedEx network highlighted of three, aware the And clear the of of is Number is sector is one, abundantly of

legendary his I my certainly personal FedEx years before Now, FedEx a past incredibly and his benefited and have are thanks XX during over, to contributions and sincere as than add His to hand and it from years months. let almost for appreciation on also me Alan of wisdom XX CFO. note, to especially the service I counsel more XX

to B. for final Corporation. it turn So over Alan FedEx Graf now remarks Officer Alan? his Chief quarterly earnings let of Financial as me

Alan Graf

the FedEx operating Freight, FedEx a from of higher by aviation partially at in alignment by Cares by a million additional our excise expanded cost and an in provided to in Freight. variable driven reduction and the am year volume from with very XX% basis significant more better expenses, income a the were a $XXX approximate service million Act an $XX quarter expense, million margin you quarter than Freight points Well, income Raj, basis income our operating shift increased totaled, Ground our thank first a good adjusted mix a XX%, FedEx to of increased X% margin in yield And FedEx compensation residential day, customers. volume FedEx points. X.X% to benefit factors increased due to improved Ground, year-over-year package Variable taxes benefit a XXX performance. a much, offset income and at surge decline operating These demand very especially for plan operating offerings U.S. compensation everyone. year-over-year Express XX% Ground reversal related proud first accruals I of in $XXX of operating priority members prior incentive Adjusted adjusted as despite afternoon, expense doubled $XXX and improvement the year-over-year delivery. team international average period. residential XXX shipments. improved increase increased FedEx increased primarily growth at million and adjusted XX% daily FedEx long-term and ensure delivery, the due approximately COVID-XX cost half safety despite to surge All of operating of and

aviation. to favorably year’s rate year impacted legal increased for issued move a and structure billion certificates X%. The pass-through transaction of in our affirms We flexibility tax aircrafts. earnings in despite This the in provides $X XX.X% as corporate, non-U.S. period. and was unprecedented by cash in Boeing rate equivalents credit cash disruption we first and tax liquidity fixed the commercial XX.X% jurisdictions. facilities. available us are additional billion XXX and effective and Last under certain and financing was aircraft quarter our million ended the than with prior market changes month, availability certificates we quarter by interest of less of the compared with $X.X in cargo rate Our entity uncertainties $XXX This with in XX the secured forward the XXX

Looking earnings forward, providing XXXX. are forecast not expected we of a fiscal share per for

While improved the continued in cloud business full forecast quarter, uncertainties earnings. ability demand year first our to

anticipate Express based on to remainder we for higher fiscal FedEx the business, our of current income in result Ground and FedEx operating XXXX. However, and increased trends in demand at revenue the

addition, current anticipated to compensation incentive variable In and in we to and revenue growth productivity income improved our Freight trends XXXX. at is higher management contribute including expenses, certain expect FY If continue, yield FedEx operating accruals supplies the other quarter, million last and pandemic $XX down We year. incurred first XXXX. in and $XX million to integration fiscal to in from increased remain the in expenses COVID-XX cost TNT headwinds related

physical We be XXXX. year. $X.X still incur through billion integration is aggregate completion of our expected expect this the approximately to fiscal TNT million integration to FY The in $XXX integration TNT approximately of network expenses expense

is benefit management continue expect and and we cost freight to spending. increased FY has lower opportunities by yield to than by forecast international capital the new markets, volume billion The from and initiatives reemphasizing year’s Our our position I’ll slightly in conclude additional capital to initiatives. strong $XXX million expenditure support capacity XXXX last to improvement $X.X that package increased forecast levels. driven U.S.

Now the the operator begin session. can Q&A

Operator

today from hear [Operator Tom first with UBS. Instructions] Wadewitz We’ll

Tom Wadewitz

to the or you accordingly? that a again. a in quarter. in forecast trends off afternoon. the a you I earnings revenue you Great quarter likely at got from sign Express business in or how terms think about Good to – strong Yes. such we continue Ground fall wanted some to there performance congratulations perspective Alan, and think what things kind to fell ask of The off do see, well, career, and are let’s in think way And the of were and margin the off

Alan Graf

thanks I boat major these howevers Tom, that worked to forecast think current are three will be comments improve that’s for them. would a if all really today of trends questions, this, to go my get in two I about I you at you as going It’s is appreciate continue kind I going opcos our I to knowing say, the back in opening if get to reemphasize and couple did and probably just good we’d give you from of to time those, would volume remarks. same I in XXXX. did Lenz was in your but hard that this really say And Mike as to today. difficult say, too all uncertainties. incomes December’s the operating with going

Tom Wadewitz

not? I was mean, anything this of any kind there one-time or Okay. was that quarter

Alan Graf

Well, planned had operating extra when other me, I years knew have quarter was fortunately I that this I one day nothing. for in than advance leaving. to But

Operator

from Stephens. with We’ll hear Jack next Atkins

Jack Atkins

to on you Congratulations years as congratulations on pulling forward let indicates it’s XXXX are by sustainable. me afternoon. expectations Good Tom’s Raj, Brie’s growth to I Alan Great. three me guess, for to retirement. XXXX forward than but one what your that appreciate domestic of thoughts want I seeing quarter echo the your well, great and a more

Ground, on is, remain capacity networks, the capital question Express, versus terms participate you to about disciplined to revenue where do today balancing hand? when upgrading hand on your your strong think of How and one think tailwind your a market grow the the utilization? other need my Freight they sit in in your So and about you such desire do

Raj Subramaniam

thing. same then start Clearly, think me Let to and add can we it. the first Brie

market growth market growing – and by pull and large it’s has the the forward as accelerated I years. think is the ecommerce three

now. that’s clear And so,

the then the clear value to ecommerce. is of provides with particularly the several to the solutions. that The work world U.S. growth strategically and retailers the of in second We FedEx provide thing that’s the around

the stories revenue Brie? bet forward. working of to you while when with most ecommerce for across solutions going is thirdly, best stories. going those quality we hear retailers, to creative are you FedEx in working different strategically capital behind be So be customers about disciplined that we possible can And our provide how importantly ecommerce solution for our and very the we to working But are manage hand-in-hand are we – in them. growth

Brie Carere

not much I I The only Henry Really and to locked add. to want thing say step. have is

We are as partnering and but forward into to an talking we and been several improving again that a in can and with about I strategic we a factored a customers needle trying are really huge from that thread this quality the a that of peak advantage previously customers also who from keep perspective delivery Sunday incredible capacity also reminder, this volume strategically advantage in customer leveraging a perspective. pull advance. advantage and into peaks that don’t weekend. going And think it’s understand has It’s

Raj Subramaniam

there. just Brie, to it you you take another We there why one, it. is hand don’t

Brie Carere

subscription question I’ve Walmart got new a Walmart Sure. about Plus. also service,

them. Obviously, So, it’s we I very relationship. strategic. are we much. to can’t talk value long-term a with about growing and one It’s committed lot the It’s

We healthy have partnership there. a very

it. We as XXXX. we are excited want market market to day. to by about about about the double size questions growing, in some is think very here is essentially going highlight There I also the same

ecommerce remains perspective percentage the as the that’s very going I double tiny those a that’s from give So, an by when the is to I been market market. lost Same XXXX. think numbers, of day other

Walmart. we very the the that focused excited are to our we So partnership remainder be of market continue about with on

Fred Smith

units. I the cost about because you should seven day also advantages and is very capacity not more network, the note cost-effective, talk across it only the Brie that spreads when and it’s fixed mentioned, Raj many it

Operator

Chris Wetherbee with Citi.

Chris Wetherbee

I I ask going to Yes. sort strategy forward. of about wanted Hey. afternoon. pricing Good Thanks. the guess,

Do next are side, appears how the coming are about daily through we surcharges on worst deep being the term So, might think and impact of bit do in you be How months? pricing yields, how have charge surcharges? you you have Ground comes six next through months little and particularly sort of getting you could the so, the sort much longer the think opportunity? some and you or more pack much in contracts the temporary a long it having meaning can the

Brie Carere

aware, on surcharges. our for a SmartPost. The everybody I $X.XX Xth. put and residential domestic was June the So, we think the surcharges $X.XX $X.XX being perspective, in is from the in That for

announced that as will in early through had to we increase and from peak. head increase surcharges we we oversize into have our XXth. increase The to November surcharges those October holiday We then January portfolio will

an surcharges of piece So quality. certainly that are say that. I of our they would one But are part revenue important

conversations We and customers. with have top-XX a here. actively to had our moving strategy now multi-tiered we’ve our got top-XXX And

talked can we I are earlier, about volume As forward. customers that rewarding pull

inbound forecast. perspective, their longer supply no just We we rewarding longer that that open capacity can are And are taking integrate chain customers a to term contracts. of are from course,

are kind capacity conversation between a yields, and we are surcharges having management. base of customers and working with We balanced

a to going to we we sales a with My because long-term. strategy. that. have good relationships. So We planning job it’s are the customers multi-tiered done an excellent are job we We partner really and the with just off hats doing the of this. are want to for in strategic market want think they win Most importantly, team that

Operator

We’ll move next Allison to Suisse. with Landry Credit

Allison Landry

Thanks. Good afternoon.

Thank take competitors for cost you as at to main broadly FedEx beyond a going going cost forward. the incremental integration, of able integration, SmartPost margin you et forward TNT terms we is your SG&A? also do words, opportunities structure, might a big have In maybe you. cost signal other could opportunities SG&A lower see So, the that what be we some be of improvement to and that cetera that are reduction think focus in about real

Raj Subramaniam

our Obviously, to done of Allison, able a been are headwinds I good really for what past. is the compensation doing to additional that job those a to pay think incentive one good is we’ve teammates one with great are the versus we the SG&A. we’ve in job able do

to I going think our grow little very can that, addition structured we with SG&A very forward. our is rapidly such SG&A

of the some work more hard very accounting density to excited much We’ll where have about productivity on we becoming bought are productive. hour. in per and very regard. that continue department. We stops I am I stand and even

airplanes us you any new measure that cost, lower Our continue. and greater way it almost providing can those reliability will and

I and rig forward. great also cost but revenue So, will performance that not only for think that going performance pricing

Operator

move Jordan And Sachs, from we’ll to Alliger. Goldman

Jordan Alliger

seasonality. and through Hi, Alan, of your on Yes. is year, and normal margin alters is on flow question here be of the retirement. retirement. that Express a or something particularly quarters what from would though you this patterns? Ground the My Congratulations would margins anticipate Alan. ebb your typical sort move typical we not on as Realizing

Alan Graf

not I probably the it that predictor has of a would year as been. otherwise history as this good say is

You is normally, and ago as much quarter was stronger. we so weaker year to able our that may about to fourth quarter are right But a the this traffic handle be the is be almost our acceleration our unbelievable. of bigger our summer than

We some are COVID in hits. took Obviously we hit.

So to be my stand the on it’s rest in my reemphasizes going forecast. spotty I’ll as of two and my howevers

Operator

Pfennigwerth on to Duane Evercore with We’ll ISI. move

Duane Pfennigwerth

for question much the so on Thanks for A you time. Hey. Europe.

for is worth. we Can turn currently? Express maybe what of Europe margins investors you with, in looking are be can holding profit in of how you Some we could speak opportunity improvement to the a much spoke frame TNT the And quantification for back Europe? better

Raj Subramaniam

be I’ll you quantify the going for that his and Let we to Obviously, me comments. Colleran Don to are to then like. level not start able give it

our that’s we market to clearly, that opportunity sure Europe. better make – and performed of the are biggest we in us is ahead However, international

have portfolio think to and in gone the do have to a that. I activities that of now TNT take the apace advantage position we we exactly integration of are

do Express light so is remind good acquisition, to and team European and But Don? in were in us or stead. ground due we good. on is to that ahead against of Intra never now focused is intercontinental we we there going And domestic Intra European were we were a opportunity and very portfolio believe executing plan. this present TNT us the Express good we to Just before heavily stand you, markets the

Don Colleran

One Europe. about get I’ll and couple what A are in comments. Raj. our Express to plans Thanks, quickly

commercial is. men marketing, supported the unit, the Express quarter. and recognize to First look wonderfully had and that partners amazing that Greatly a first that fantastic and women historic thank made it our by I team put of really IT want quarter the sales, together

However, and earlier We’ve is need our on planning, two. handle around to vaccine at the that about you are one season head think position well what as a earlier. as culture Raj network. though, you uniquely to and think to we on said is Express corner where When have Raj our about down a you focused Europe said moved knowingly quarter with peak got global that as we said, hoping

on team. are air for We terms be the our European plans integrated we by fully where would will But the solid we it in told our we street April be be hopefully side. where of essentially have integration transformation, XXXX really

are if record well. they We of ground as an amazing plans, of team regions, team the that’s Europe things have execute our we and in solid chase are to that making on happen on and these rest units they track as execution the excellent have on And supported the in expect team a be just we our watch and how globally. by are focused we you

Operator

We’ll with move Wolfe Research. Group on Scott to

Scott Group

in best Afternoon retirement, Thanks. And Alan. guys. luck of Hey.

when wanted ask capacity down pike does Express maintain Do through ground yields Express – and I then, into peak. all still increases? And strategies the going network So, – volume have get growth see peak to with on. in season, opportunity we we the the to were yields the year-over-year if for XX%

Henry Maier

Maier. Henry We’ve March. peak been since at is this Scott, operating

So not seven we operating of important in years to point off that things said, day are have network, point been past. frankly year much the already every here been round. this the the It’s out it’s as stepping year day some of a as peak is for week

We the repurpose will SmartPost have operations and that’s SmartPost by to and integrated capacity for facilities former small fully might us to large and peak, which package Ground ground into I get. allows sortation add cheap pretty XX network

whole than we past. have network. better through We as the utilization, lower Fred are the in yielding asset And across out, pointed running higher fixed cost packages much

right XX,XXX That’s the on at FedEx for addition, Ground hires In number announcement a you of saw new historic top now. on employees peak. of

stepped back all of Our of in of new and since this drivers hired service thousands tens providers up began March. have

We are four regional adding six stations. automated facilities, new sort

which underway the capacity then we things projects material additional additional XX able handling all typically short expansion sortation other peak to do about of being have out that of the include fairly automated We and of capabilities squeeze in at and terms a for network of period time.

we that to ready. Ground I great to this peak going are is would team that we be say It’s but nevertheless, highly busy, the have confident a going year. So, are

Brie Carere

the yield Let me take international question.

you fuel, package was both is impact the doing when you most team of job That with think and understand outbound about with well the to out very is weight growth and a up there density the by International important excited as an we’re I really led per Don from and yield, good a for from pressure being we this as if So perspective partnering ecommerce Express look the Express, ecommerce at Domestic, are per pound impact, growth. strip of Europe fuel on perspective. half that his the growth yields said, significantly. when

So Express just level. just international can’t the look at at yields frankly quite shipment you

to got network is yield perspective overall per pound up per Express You’ve total year-over-year. pound and a from XX% look at yield

performance overall yield really about feel good with consideration. we from So taking things a perspective those the into

Operator

move to Allison we’ll Fargo, Wells From next Poliniak.

Allison Poliniak

margin a is anything level more obviously, I Hi, little today, evening. some business. incremental business sort you that would a structural some sort you that But opportunity had to look longer there. am out mid-teen of there as operating keeping Ground, would getting think in within that guys. business? you you nice about, bit leverage at hinder that on Good Raj, of operating talked term, back incremental guys

Raj Subramaniam

that network but business. provided paying Fred into off or most business think we more the now, proposition as two is translating that in thing that marketplace over customers. more not in place the year out pointed with the period put is things important last we we I better And about and have a profitable Firstly, have value is of the yesterday, the the the in And ground ways. many provide our that’s

So, I don’t add and have Henry, the we anymore to we know, just to to structure continue forward you and both revenue the do is want target that. to do to course go that. believe of margins to improve

Henry Maier

Raj’s me say just on comments. things to to let Yes, couple add Allison,

quarter number those quarterly of first was a and of revenue The FedEx years steps fiscal Ground’s highest took that, history. of flow operating ago results several we In XXXX income spite quarter in integration Ground dominated ecommerce. I’ve and I’ve SmartPost of spoke FedEx in the transform day. and Ground market expansion to prosper networks. by the spoken increasingly FedEx the a seven to of of position from of

do any introduction technologies. this and the world-class can’t of You without use of

middle this to from our having a out away optimization the out advanced rolled pandemic on networks of a delivery rolled We on I The SmartPost have software week in drivers. the already that cost in a trucks, trucks, developed it of trucks Not good improved methods already year plan should out dynamic across stops talked our square line everything network providers our networks a specifically and of of number per agile of basis volume density safe pretty the using efficiency to the months. mile all routes, quickly basis, to stats but XX in are types route hundred spite we it’s you and on increasing damn about driving ask a final point in in both was was in type, enable service hour you mile this me. fleet significantly average only does if about better That’s our found. integration of QX. on improved basis the daily

best And So, are where we are still here. a think – have sit of I to do ahead we of today, I our think us. we days lot work

Operator

from next Ossenbeck We’ll Brian hear with J.P. Morgan.

Brian Ossenbeck

want season. questions. into back to for just Thanks the your evening. Hey, holiday peak the execution I come to good taking

it last year and that period you’ve with and the a about it’s planned in same initiatives Cyber talked volume coming some to Monday also announced lot leverage tough and level got at to more recently. here but Just obviously with more – which here lot down

that recover like can have confident if stepping So, successful you make to enough you and back you a adjustments peak how needed? feel it’s do and are

Raj Subramaniam

add. let can Henry me Well, and and start let Brie then

the to none going is like other. we have and that a peak lot. capabilities the do to I think believe this But we be flexibility now a

the that operations the that one we here days think we technology is I working and sure a deliver we thing have. are that, and the seven now a having to them make with for can that strategically week looking customers capacity number helps lot again too

solutions together infrastructure we put quite clean together, that that that we that manage to and we going So, flexibility are for her in comments. technology And we speak well. with the Brie the have that and we to our to customer turn we put the have we think so

Brie Carere

with perspective, talk the are simply a I’ll allotments, Henry physical let our really hard from ecommerce working about customer merchants. capacity but to expectations we set

very expose to and most thing hard and customers’ to very we our think expectations to customers that channels customers’ like all transportation I set be and transparency a The that that the to digital working digital is expectations to are this are to aware appropriate for commitments visibility do no get to well other. our them our and they appropriate to is set give important going peak channels.

hard. are we working very So,

week adjusted really we team Cyber our that anything wherever we can. to peak that You we that volume posting specific and surcharge also season the out customers sure else? their help Henry possibly Henry, make saw to and

Henry Maier

operations are this you me a within day would daily this of is seven Yes, advantage seven I a only capacity. since that normal our has customers back think our the all of going thing network, began existing in all not take almost and have up of new and are peak, capacity a When customers. operating network, also is, we even here Once that a if a is let want I been top operating advantage but say, untapped when a But of with conversations new back new you the network normal March. all again, new for are here add at have untapped for And level, we normal in there there is day to customers. FedEx. we this

and capacity ample Monday. delivery Saturday, have Sunday we example, on For

demand of most we on a Sunday. can at then people one and to on ship everybody that have modify to day what customer is Saturday flexible, to Friday, I we going wants are on have If available If fit to conversations people capacity wish year about we capacity pickup to with accommodate ample have We the have think we Monday, how ship week. peak. this

Operator

Helane question. next Becker Cowen our has with

Helane Becker

Thanks very much, these operator. without do Alan, very you. sad calls to

– of and John, this very to I work you all thank appreciated. the you’ve whole do work time CFO year on this you the the behalf probably important that very only for and think, been is the

to very to handled that your in a store – places either question, can move that we to we like Brazil, cases Africa networks. participate be just and the how capabilities India, you strong to ability and about in in have Celsius goods, talk gets much. ability some many so, where thought that? And the if on as about Thank that or chilled sense vaccine distribution how vaccine in has the you about How my for XX you your very should and think and

Raj Subramaniam

we we that vaccines network, have is talked about network solutions to critical that. we the across the technology, the work we yes, global do just the believe very moving as and recognize earlier, So, Helane,

the we timing we have well network, with customers several of unique the is vaccines. physical to engaged have the in platforms point. that appropriately this ability And is are the mode. visibility SenseAware enhanced well for to launched as think who we again, this storage are we vaccine the I TBD the production ID as capabilities the handle our in as solutions, planning around just world including intervene and needed and and situated and that But this We at it are

Don going turn network. to lot Express Let to the for, travel because are those me on of a over it

Don Colleran

look the thanks as and design of this customers a add manufacturers were the space, really at supply HHS major as and Raj to like with CDC you, and to Yes, for chain the would healthcare we question. I for can talking along opportunity the of bit FDA. color this, little months you with all because we many Thank in first imagine a

of effort. uniquely we is is global. our for team to it. it through So, for XXX clearly need global these positioned about there think ingredients other this country the of a or are and is the When are the be a And are the and at made this unique network consumption initiative. this have over be and look you in we to one why uniquely to will chance Air you good that vaccines other in very manufacturing our What’s Ground, this in that, are with The aircrafts country. and positioned. is, And region going lot opportunity we that XXX countries we ready support are we serve, that well integrate this ability critical when

multiple peaks, vaccines to – are of ready. basis, become on a they We the looking ability are but planning move global these for at with this that when the we also

later, rather manufacturing hopeful We everybody those when like is then else we’ll the come manufacturers than basis. global sooner be the support off able to a as on that and line, came obviously they but do are

Operator

to Vernon Bernstein. We’ll David go next with

David Vernon

forward heard two trending Thanks is are of a and back the size Hey years also network the is the feel performance a working the shipping service the lagging some kind next of change CapEx you we’ve come the chance taking given envelope guys. is even you to topic you you people about ground to give from brought pull Ground? as that of wanted then pushing how with wanted question. anecdotally, about customers’ little volume a the to maybe profitability around on different bit. I for for Thanks. the couple in to transit you for just up growth Henry, comment network thinking levels to of three on-time the through think that the is I

Henry Maier

never I’ve this in. for I’ve from difficult seen operating one in David, business environment Well, been forty years. a we the more are

through the year I’ve unrest facilities. since XXs. so XXX as a in I Wildfires, absenteeism unlike anything I it. with dealing a result are And remember live the XXs, social hurricanes, seen pandemic, certain We

precise people we’ll to operate. worked as operation our through eternal network. a we And national the forward All is confidence an FedEx pretty and that this. to have places when engineered tirelessly of I service world-class of difficult on for it’s challenges some that you have Ground going This run ones transit continue highly provide are all customers. trying

the in and the in going of to on I to we would and that they issue the cheap for the to going are are Thanks. to we of in have you for is have pretty these and forward in that XXXX. diligent not rates We I this. specifics be invest say fact in very network the maintain devote when Ground. already Brie out growth FedEx facilities the SmartPost. gave essentially past something capacity – that, footprint. going can those about Ground. we capital squeeze existing we I growth That’s any been included and able once Notwithstanding this made ecommerce On are but can Ground as network about XX now CapEx, almost growth We SmartPost more is we that comment invest daily we consider are network, can of repurposing the got you for buildings to assure that that you a between at work ongoing ground you

Operator

Baird with question. Hartford Ben our has next

Ben Hartford

Thank and you. Good career evening, on congrats your retirement. Alan, and

about we different liquidity and how forward. you perspective bit CapEx an you operating leadership. Mike’s management quarter. just bit to Express over from cash a a kind provide little of got free this environment transition about of thinking you’ve Just We’ve follow-up little going of standpoint, got a cash a on as Can are

over How of pay of years down, and uses cash you plenty the hand. liquidity think on et do flow cetera? next cash few on debt and got about You’ve hand, free CapEx needs incremental

Alan Graf

the question. Appreciate

repair and we a to were here, have first did back you had of are We can we in sitting when money sheet. going no significant to tell in that our of what But March, borrowed expect. we of fortunately table We’ve I liquidity in anticipation amount needs not idea foremost to balance have. around

And got we prepared could. so, as we the best

to over flow. improved have see Obviously, expect today. of liquidity could billion you cash comments, think we have from free I we my $XX

frozen while about a return haven’t are over years, we bought today looks right shareholders. agreement price it that sheet, now repairing Recall dividend balance looked good to with so, $XXX, a so because of pretty but we which forgot of And good And number a obviously, the of our have significant March. a about banks. our we in we at of than amount shares

at be repair. and our will balance looking is we foremost those, first all of sheet So, the

Operator

Amit Mehrotra with Deutsche Bank question. our next has

Amit Mehrotra

to was a squeezing it. Thanks you me be there SmartPost significantly. appreciate costs transportation Raj, be I per cost or hoping a up refers we’ve business, given noticed doing and one should – guys an to shipment go on expectation transportation moderate shipments potential have for that least there per that for the continued Ground on at as on to thing redirect, are can what basis be it to

of cost you structure. – the So please piece

economy environment, of structure more is how growth have XX% in not level, as the we balanced this year well. negative Ground address then, obviously secular Thank heard and is sitting here a next in that think in the business I hopefully growth address benefits, because to the it’s towards or maybe are pivoted is services just it. perpetuity. it’s important we sustainable September is time be vaccine in to I worth higher in XXXX, And goods volume, profitability the of and you you. that if August understand if a but can

Raj Subramaniam

all is I’ll drivers. company-owned We have by mean, with the is equipment. I volume. purchase of Purchased Ground. employee FedEx transportation transportation don’t address Well, trans driven purchased our question. We don’t have

volume the transportation are purchased going goes up. costs go So, as up, to

deliver employee paid that some numbers micro formerly something the We in can the network the the because were treated XXXX instantaneously that will obscuring I numbers highly think at react and with businesses faster corporate based are it variable of with the volume, to a any volume They of something work We Ground, SmartPost highly volume. as scale than Ground both done us almost employees. changes the the Ground out now contract is down. because with maybe to new north XXX,XXX office in changes flexible. postage, of can see We level post settlement. small part transit and be that That of structure end on of headquarter in scale see the could somewhat exceptions. much October there by down up. packages of The we and they up any of operating is

something through up been through mean, not is this I So, we’ve down before. and that we haven’t cycles. been cycles

we particular we us takes COVID-XX out to like come we bit this ramp But take little assure can in that see if it of the longer event. network if really have this don’t up Sometimes cost it quick you to. I’ll a

Operator

from to Hoexter. of And America, Ken we’ll Bank go

Ken Hoexter

dollar afternoon. Maybe the Good beginning on thanks question to delineated over of from parcel Phenomenal packages for just then, it, going phase Ground. terms kind margin on mentioned you’ve also on size and Can your on to Alan, Raj, Express just talk a my that the have thoughts or transition but great. the Express maybe Hey, of you and I the the comments side? you know, surcharges Henry quarter, Alan, volume benefits how over from in clarification, for Ground, benefits congrats past scale? about two And is just decades. the of next side you on moving margin is talked

Alan Graf

all flow the pieces of it’s one one part we orchestra I’ll conductor giant second, together. and because and haven’t, the all Well, answer no,

Raj Subramaniam

BXC to opportunity they sure, us and one, first between make the to the allows optimize volume me on definite the just And grow, are let the residential continues networks. as

optimize the network residential from move other it to and to – packages and rural as a able as one the we So, are service.

you I monitor a And few will goes. go we And markets. as as we So, told we forward it it launched have where we here. see in will

Operator

for remarks. Foster time, to And to at back things closing turn this I’d Mickey like

Mickey Foster

Okay.

Fred have some by comments Smith. We final

Fred Smith

Sure.

As Alan a remarks. I the microphone over couple said of to beginning, was to going at to make the I give

family in and outstanding of Let strategic years the Alan business leadership me said endeavors, the in XX of thank plus many said the been I at in and of several of so Chairman great me about Alan we accomplishments could evening philanthropic for behalf half at management regard. involved in our heavily bringing establishing the to the table He a in Meeting start Susan the as microphone this here on contributions spend the who is in and comrade and he man, where only has company. this have in say what but University over of reiterate committee, colleagues turn closing and here that Memphis, But earnings remarks call, what very the wants house not his Board the FedEx Alan? at talking Alan, to for he I more make an I’ll will say let – I next and Monday then meeting. said, so Shareholders’ making

Alan Graf

I thanks, in for a Well, year had despite of XX the When amount chance a what strategically. great I he how a proven, significant should amount the very long-term Fred. XXXX, been he be. took grain me was against has That partnership clear he ever bring no basis might since. always on advice old Among for other it our and a that a me treasurer fall was me and in communicate he of confidence told pressure seasoned Fred always wanted In said me Fred of to matter CFO. the tremendous challenged things, think thought the job, and

for have am expect to these bad. matter around I be or how As questions about was news optimistic where asked. out calls earnings very enjoyed I you want always have preparing the excellent looked calls, I forward the to strategic are of I good thought or thoroughly I well no not, if the about it XXX of future FedEx. Believe few I finished thoughts we in and my last give to mind a

answer While I from a questions, occasional the these see I to did viewpoint impart transparent bantering. description often and do not a I I see. what always get you hoping to enjoy endeavored to strategic penetrating questions help deep insightful

organization, teammates accomplishments serve. years, extremely of the am optimistic been to with finance to to world-class honor future an and incredible attributed but to an not dedicated to it an I just any I about unbelievably me the of Over XXX,XXX talented am team FedEx. my truly has all and belong whom referring

reliability. Over high and the of chains building keeping years, are physical moving the we unmatched with networks supply have levels invested in technological very that world’s

be SmartPost additional facilities operations to week handle to delivery network SmartPost moved into maximizing the volumes been optimization I repurposed existing serve that higher these questioned, and providing yielding that will capital route certain Ground case FedEx the the investments significant sometimes the lives past end every have indication Ground increasing a the advanced allowing on our Although packages. strategic of the customer am added broader By per and FY capacity. that us using have strong decision home forward. quarter handle We and provides We We large packages stops moving returns five of away to seven are address a population XXXX, we XX% a to ecommerce. market. focus made in hour. increasing on moved within day moved U.S. We technology, to drop-off We a go the of pickup all miles in location. or the and U.S. from route efficiencies

handle in We fleet hubs, air additional lower our are volume. modernizing and cost major

We the business international benefits accelerate. are acquisition to our are and transforming TNT the of beginning

a our and place We executing have strategy level. right team is at the high in

future will the superb strategic a We has Lenz. has He FedEx during excited and on forward energy CFO And and he tenure the and to the his Fred, the my been been now, and to I daughters luck success. look our and I Mike’s outstanding you I management grateful will health. full am ride are good wife you and hand enjoy watching and farewell. love your and and your FedEx. I enjoy and I everything. wish Susan, will be my Carey thank And my for families, patience my Thank cornerstone. support Bridget everyone my been of performance Directors are offense. be at the for Board To time and organization of you – at always him. committee. good have and Mike great I miss forever confidence teammates, a manual high It has to we’ll

Fred Smith

are You here.

Mickey Foster

additional the Thank much. about call. Corporation’s FedEx anyone to you first FedEx. feel Relations team call Thank you conference Bye. if your free participation quarter questions very for earnings on have Investor in you Please

Operator

does again, conclude for joining Thank And you conference. all that today’s us.

FedEx (FDX) 16 Sep 202021 Q1 Earnings call transcript