Earnings call transcript Q1 2023

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Operator

Good morning. My name is Steven and I will be your facilitator today. I would like to welcome everyone to the UPS Investor Relations First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, there will be a question-and-answer period. Instructions] [Operator

pleasure Cook, floor the Investor yours. my host, to floor turn Ken Mr. Relations to now over the our is It’s Officer. Sir,

Ken Cook

morning, quarter UPS Good to call. earnings first welcome and XXXX the

and are today our CEO; our members Tomé, Joining a team. me additional Carol few leadership Brian our Newman, CFO; executive of

our for want or laws Form of you today begin, are that file to statements forward-looking Before other results and are the the our the of performance I within These company. we subject securities described we to risks statements are which Securities the some in and Commission. to and remind with reports XX-K uncertainties, federal operating or furnish address expectations make our future Exchange comments we’ll XXXX and

UPS filed, website our discussion when are Relations the Unless the results. adjusted on available stated Investor SEC. reports, refers otherwise, from and These to

results of with diluted transformation reconciliation on quarter of the after-tax results is along Investor and XXXX, the per call. today’s $X.XX webcast include or available UPS charges GAAP Relations other share. GAAP million financial website For of the to third A $X

question [Operator take Please our the remarks, via those ask allow teleconference. many we that Following joining to prepared only us from questions participate. may will we one as so possible instructions] as

You the queue additional opportunity for may the question. rejoin to ask an

Carol. over And to now, call turn I’ll the

Carol Tomé

morning. and Ken, good you, Thank

Service our team it I’m by make Let UPS. and who priority. customers. to begin thanking is me defines key to service one again UPSers a continue once our our industry-leading It for of proud values of delivering

year safe education in safety. the is and training. of dollars UPS in among value driving safest Another millions the every industry and invest are we company drivers

their more or Congratulations total around program Honor, X,XXX have on Our the than achievement. bringing of these year recognizes more UPS to inducted we drivers to years XX,XXX the more who Circle accident-free globe. into drivers Circle driving. of the This of drivers XX achieved Honor than

Turning year. volume proving relative to be saw shift February, our in is interesting retail base in to plan, higher in in our our and was we to an moved than U.S., expected the we contracted plan as our sales a March then close and In than results. significantly consumer lower spending. XXXX plan to January,

example, ago. goods compared is services. from household reached income U.S. a grocery as For food of away budgets couple in and sales percentage years and are X% sales first to X% of discretionary the a to quarter consumable lagging disposable shifting

we negatively agility, international the with attractive price. activity on of parts we stayed strategy. managed productivity controlling penetration which and Outside in revenue remained We Asia In of in network the We we increased response, We weak, export could supply both U.S., on chain the what disciplined remained impacted solutions. market. in and on out of control. the we most focused drove

XX.X%, Looking XX.X% at was $XX.X revenue margin was XXX operating billion, year, was down consolidated of our decrease and of profit quarter first financial Operating billion, consolidated a results $X.X a points. last basis X%. decline versus

focus on relentless both operating with short line were base productivity margin a plan. in plan fell base due profit our revenue operating While to of and our

like Starting growth to in strategy, investments Driven to experience customer our Innovation SMBs investing People improve strategic through Key healthcare. are drive the and are driving First, Moving here and our Customer we Led, efficiency. customer Customer update, targeted with segments First.

track this total first DAP to billion our $X invest up and or we revenue. countries around expansion XX in Access we year. XX.X% the DAP compared of have generate last Digital the are We DAP. quarter, SMBs, producing at In revenue to in was revenue to continue year, international Looking DAP Program now on

X,XXX through a locations about DAP in strategic packages more Did U.S., than stores enters the U.S. every of store out you the network one UPS know that our assets. four with are in UPS

In fact, online points they’ve network, customers entry they buy. the of miles ultra XX% returning customer whether store, UPS giving XX or of a item population convenient item within shipping to sold and a an is they’re U.S. the in SMB

stores, strategic the leaning are investments customer improve importance to we Given of these into the here experience.

stores out customers no box For self-service returns enable kiosks counter example, the that to the shipments even with when and no are they have rolling or bypass returns, label.

and store. make to the of X,XXX by it customers out rolled the kiosks year easier get so for stopping of nearly we’re and We’ve These this end get October far and in we’ll XXX out not there. kiosks deploy

shipper. hassle an claims online UPS a for area to to specifically designed weeks which claims With store to about both now process, portal, needs this resolved take gains. an the franchisees. the used focus average that’s Another March, and all used portal is customers that be In the of for resolution of improving the for within of launched store two are claims locations U.S.

made comment first in our quarter, is consecutive volume. it’s the This of up than final highest XX.X% SMBs. seen the total penetration years. of seven we’ve quarter increased platforms level SMB One more on U.S. SMBs including XXth and In the

facility of expanded sensitive range temperature shipment, healthcare. opening our the customers location Its our X by a facility to space, square first healthcare nearly global provides Germany handling of the quarter Turning million customer center and In the first feet healthcare fast connects growing market. of including solutions. our of XXXX, broad we European in Germany. in dedicated footprint This

air leverage our in of enabling facility the is to and speed hub closed customers our reach Cologne, network. European to global The also

date, cost As in the of target. running are and and XXXX, fourth of ahead acquisition the quarter a reminder, we of synergy to Group completed Bomi revenue

which to now continuing countries year. added in four is expansion in invest XX with this Premier, the to more global be UPS of available are we Further,

$X.X generate world billion reached billion total portfolio in to is quarter, this healthcare who $XX XXXX. our first provider open healthcare help goal seven logistics expect Our we dedicated in healthcare revenue complex the and number facilities to year. plan become In get from us to there a one of in to revenue the healthcare the over

to Teamsters good and discuss me our Led, Together, at of progress progress negotiations contract on key made supplemental on with five has the set areas been to faster. the let of underway Negotiations of move take our to subcommittees the are national the local Teamsters. Turning on with we’ve bargaining contract, agreements. enables many a new table People up the which us

on summer We are for delivery ways needs to our several solving deliveries package heat aligned mitigate key the and staffing like issues vehicle. the weekend in

UPS great of reach noise a hear agreement to by win-win-win the Teamsters I confident expect negotiation, is that we that contract of during the and remain deal very and will achievable end July. the a While

to of our Driven. Innovation last leg strategy move Now the let’s

ever We improvement integrated and and in network. comes better. operate the global even best, in efficient more we the most Today, with we have productivity, to world, are it agility cycle getting about our than network we network of creating relentless virtuous when before, our a are

addresses total network For which running predictable plan, last delivered since example, a improvements has service continued productivity our introduced on-time year. being

and declining have complex when even highly been when productivity driven generates historically, But Our increases. naturally plans, drop, total it’s volume efficiency with productivity volume volume. harder service we levels network massive generate improvement. With to

productivity quarter, U.S. as even declined by volume In improved which the ours in resulted further, first per X.X%, hour. measured but by pieces declined

the RFID than XXX Smart U.S. in we’ve end accelerated in plan last across investment Facility As we’ve buildings the quarter, Smart Package of by more our and solution to discussed October. deployment complete

reduces and technology, and has employee which around to originally improve, to stronger In packages, customer where process, this packages one-in-X,XXX of we and and Throughout improves, learn the continued which the from results we’ve cut the enabled the costs expected. X-in-XXX miles, it frequency we but facilities than experience. have we’ve misloads handles

also our to Innovation efficiency. combining integrated is driven customer capabilities digital and about with experience improve network the

of large onboarding retailer, opportunity we which we boxes. to gives Our in us of density the This can second this UPS early match with upstream days checks delivery national network our customers. participating solution density still increase initiative. both It’s volume as month, are orders more

we As to happy the we rate and adjust learn, are results. the with we algorithm match continue

XXXX moving driven innovation our neutrality goal. us initiatives towards our carbon Lastly, are

X XX than XXXX, vehicles. X.X% emissions X, on our supply alternative and COX from alternative We more technology fuel the In fuel than years by and in declined XX,XXX XXXX. been are of focused more chain. Scope X, decarbonization investing our advanced and operate for global We’ve

of UPS fleet. our XX California. electric the These fully are X are class run trucks and to delivery in quiet semi took in they semis trucks we first Recently, zero emission

Our can report you April is was This XXXX find it sustainability and on our published XX. XXst report, sustainability about.ups.com. on annual

financial Moving last outlook our target. a for we XXXX, XXXX our provided to range quarter, for

in we’ve non-U.S. discussed, deceleration growth markets remain there’s certain in been U.S. retail a As challenged. sales

now we at result, to our operating profit expect of provided and a end previously the low be margin range. revenue As

market the making managing fall three led and making detail of In pitfalls power wrong a it’s the before trap Brian of for the right the the will I’ve more short-term. I’ve easy in conditions, decisions to share decisions. uncertain business difficult of seen the times and moment. into

we we control, on control stay strategy. While also will we what will can

have past and we come am industry, of a faster, Over I we competition. in because will three lead of the fundamentally best out business wider cycle getting just stronger, and them, improved this are started. UPSs aspect are with our nearly years, and convinced our the every the on of we

thank the over With you turn Brian. I’ll listening, for that, and to now, call

Brian Newman

and next environment, In areas, comments, Thanks, macro Carol, the good I’ll quarter shareholder first cover our returns, I’ll morning. cash outlook financial I’ll lastly, review updated for results, four my and cover with and starting our then XXXX.

U.S. quarter let’s the March first rate perspective. environment for was commercial the from macro and was and manufacturing The In down a challenging quarter, with Okay, fell X.X% production throughout consumer in start a year-over-year. the macro. growth both

factors like items five services On to good consumer in February bucket, to economy, on purchased spending, volume the be from on These the contributed store. within to spent the U.S. growth groceries, on in more our point March in sentiment reduction of goods a plus and continuing side tend the rate levels. outpace is rate consumer which consumer the growth drop essential the to spending

Europe responded control recession. customers a on In remained to controlling of U.S. the focused and in bottom narrowly our the for deliver great winter service with and agility we while shareholders. all the we Asia face Outside results remain quarter, avoided exports for could what first weak line this,

however, we points billion, year slightly and decrease expectations. of XX.X%, was below quarter, In from achieved of margin to plan our a $XX.X a basis revenue operating compared year. last operating billion, XX.X%, X% last $X.X decline base our profit. was was Operating base profit the Consolidated XXX down consolidated plan first

share same quarter, was per the XX.X% For first the from earnings year. $X.XX last diluted down period

levels. revenue Now, in while by quickly responded at the adjusting volume let’s service initiatives offset and quality U.S. end costs eliminate accelerated Domestic, the quarter, network volume nearly the decline as our we our segments. look toward in In the the business decrease industry of maintaining leading to

quarter, decline average to first X%. expected the daily we X% In volume and between

average in the down volume year-over-year, than For was because X.X% we expected. primarily quarter, daily volume lower moved March

volume the in industry lower average returns, year-over-year. compared Looking and X.X%. in bright quarter, quarter In first we ago. volume largest BXB all and at up retail declined was declined last mix BXB quarter, was from from saw BXB volume the the our in declines with sectors X.X% high-tech. which X.X% XX.X% BXC spot was first volume, average the daily year, across year daily of A unchanged which a represented to

and in the in in product. mix took cost our product the made first advantage fourth the ground leveraged of network to speed in customers that saw made and the shift continued as quarter ground XXXX from of our quarter tradeoffs SurePost improvements we Additionally, further we air

average down grew Compared X% XX.X%, volume and of to X.X%. ground within quarter air year, daily first declined SurePost total last ground the was

daily than first of significantly mix, quarter. points year-over-year. including basis Looking declined less of at platforms volume U.S. the our enterprise customer in our an increase average total made customers up SMBs, volume, XX.X% XXX SMB

per nearly keep For generated The base packages revenue from increase. mix growth X.X%, the rate piece Remaining the by rates basis revenue rate weights. growth per general per $XX the the drove piece and of points volume. in our increase by basis lighter air offsetting by driven rates XXX package Revenue mix revenue of basis product down factors quarter, strong Fuel decline penetration. ground the reduced negative combination X.X%. revenue SMB growth XXX of points increase rate XXX customer and Domestic and combination driven the per by with billion increased piece outpacing rate of U.S. points increased piece growth

or in effect over increase X.X% volume. in Turning an the was network of cost that out with flat from to wage pay went Teamster $XX annual to benefit of Domestic expense cost, total primarily the increase relatively lower a first XXXX. of and by into job union Higher union did in U.S. $XXX increased increase million, August average million the an for team driven employees rates X.X% expense wage rates response our in quarter. excellent pulling The by

than down benefit these hours and more actions the average X.X%, in rates. decline. Together, than as managed quarter We we which reduced volume, million, in daily headcounts the reduced the $XXX rates was and volume partially by offsetting expenses wage more throughout decrease increase growth

Additionally, by reduced was million, primarily loads X.X% the depreciation. same by driven year. from to Ground UPS last from drivers we to variance continued support factors reduce and period enabled feeder purchase remaining utilizing maintenance optimization efforts, compared which including transportation Fastest $XXX our by trailer us Ever to per day multiple and The

base our quarter was XXXX. XX.X% delivered domestic plan X.X%. in segment billion compared margin operating was down first the and U.S. operating The And profit, above of which to slightly $X.X

our and it be environment segment, to the Moving expected bumpy we to was. international macro

Asia, off gradually Europe, at to than offset quarter, in at the started expected, relative activity macro lunar to little our environment base export a the a we holiday. weak we due but through plan. was than Asia recovered helped Year which weakness very the New the Looking anticipated. In better slower extended pace It

down average high average market In quarters basis volume the daily retail as daily year-over-year. a and declines volume X.X% Domestic export average in came Total by daily X.X% international was total X.X%, volume down of first year-over-year daily quarter, was declined expected total tech demand. and driven three the average drove on decline. which in volume

Asia export included the volume decline China average to a year-over-year on U.S. down was and X.X% XX% lane. daily

X.X% by decline quarter, in due dollar. and customers. international than match $X.X agile and million down flexed first volume the the billion, export first decline hours revenue network U.S. a delivered more remained a revenue to demand. Asia to In $XXX impact last from quarter, service we the Through and we negative year our was the Asia in to volume from the excellent stronger Reduced block

increase moving per decline year-over-year, of there outperformed but were related XXX currency surcharge Revenue mix of surcharges. of points fuel basis was GRI parts basis relatively combination and piece due the volume. basis XXX the in rate favorable offset including number a decline points increase product an as a an XXX export a points a from by of These flat a demand to due XXX high points and volume were basis domestic keep to and

of in the $XX million, profit margin $XXX million from a $XX Operating international first same exports period a and million to segment surcharge operating due was down XX.X%. in $XXX profit the Operating the decline quarter currency. was million included related and from out last negative year, the impact revenue reduction demand in primarily Asia in

the billion, first million was at $X.X looking year-over-year. Now chain supply In quarter, solutions. down revenue $XXX

rates profit. global down Looking and at in market softer demand, drove volume of drivers. key operating In resulting revenue lower Asia, forwarding, out and especially

in taken steps and buy/sell spreads We to are this have reduce to manage business. continuing operating costs

clinical In margin chain business Logistics gains operating and an growth supply quarter, generated the $XXX by we income of of through the operating of first and the in expense. profit and driven interest an statement, increased rest profit. operating of logistics had trials revenue million X.X%. XXX healthcare our delivered million Walking solutions

tax we than other plan was rate and from stock was awards. income quarter impacts to tax million our Our due effective employee anticipated for less first the XX.X%, base our pension which $XX was our in lower

our completed issued are distributed that first $X.X flow we Now we In period the of we first share was from Free in to $X.X billion $X.X first in made we first quarter, for billion, generated in $X.X billion the the in cash using debt in debt pay quarter. long-term operations. UPS that pension to and contributions in billion and off XXXX. let’s turn Also, returns. million in $X.X And the including annual maturing billion in shareholder the quarter, cash cash quarter, $XXX buybacks. dividends

Moving XXXX. environment to especially in volume we the challenging saw the environment continued to range our for driven XXXX conditions behavior. financial Since deteriorated, a our targets macro and then, In has outlook full for time. the by year U.S., that changes January, in at due uncertain macroeconomic provided the we consumer

year result, low of the previously and end full revenue at margin range. a to the we As operating expect be provided

year margin revenues and full In we we to XX.X% billion XXXX operating anticipate and down growth operating $XX we around full the U.S. In of revenue XX%. in yearly around to we year expect For X% coming be the XX%. both around consolidated and half around X% our XXXX, second decline revenue expect of expect offsetting versus margin around by with to of of the of and operating decline international, around year. consolidated to about the margin domestic, an expected profit per XX% operating volume is be with volume in volume piece generate

around expect XX%. chain we And year supply expected around solutions, be to in revenue $XX.X and operating is full to margin billion, be

have our environment. We adapt in dynamic to ability a proven

have and on by we we leading quality. many pull control and to will industry can levers delivering cost service what disciplined remaining We on to the side control continue revenue

will like will Package DAP, healthcare out growth and stronger. of facility, also initiatives investing economic and help and cycle Smart this efficiency us continue faster which We come smart in international

executing enables is to our we network, U.S. maximize downside costs. at now reduce plan our our in day our Including which hours flights, out semi flows us two-day our and on next we of utilization trending volume air adjusting Specifically, the that to the range, are are in block operation. fixed to variable package take

our in U.S. and buildings potentially enabling reduce On ground the are building large more the could consolidation us in more overall hubs, to regional in the into we Driving footprint buildings. pulling our volume the us sorts allow eliminate those smaller on automation ground, leveraging to further

if volume couple volume opportunities manage over the quickly Across our to flights expect. with on And business, quarters, costs based ensuring overhead, returns technology. the add further than leveraging where strongly maintain of reduce we while in in see reduced volume levels. continue network we agility to the we’ve to headcount more we global scheduled market lower flights levels will further demand terms by to Internationally, of reflect last we needed

Now to allocation. turn capital let’s

changed. Our plans have not

to to to out be logistics platform. expect We and We’ll of will square space Smart feet the including this of investments billion, growth our long-term our U.S., still $X.X the add Smart global make expenditures XXXX to capture we’ll internationally coming healthcare year. strategy cycle. of in complete about and first million capital our service X.X continue DAP network phase logistics in the a investments of this automation, support as expand Facility also building deployment out continue and Package We

our We subject shares. in around And to planning year full to is the billion out around XX.X%. expected plan dividends We $X.X Board for our rate tax to still effective around back approval. pay lastly, buy in XXXX billion still of $X to be are

In despite provide strategy. continue service leading to on backdrop, industry to the and closing, our will will stay we customers challenging we macro

investing efficient of us to value our to and to more network even this make growth are out coming We enable strengthen cycle. proposition our capture to customer

lines. And Thank operator, please open you. the

Operator

conduct question-and-answer you. We’ll session. Thank now a

ahead, Vernon come of of Our from the first question David will sir. Please Bernstein. line go

David Vernon

to follow around volume. wanted I in Carol, your the on productivity up So commentary lighter

Can better now, say you are going Thanks. in outlook of XXXX, us if reductions able Brian get sort just performing volume the might guys of XXXX, maybe be able are pull then next productivity of into the some environment, against is magnitude be As right volume is those what give the the a off couple years? how And for that lower to of held? a sense way gains that think be to about here facility confident business you follow-up. you a you we to

Carol Tomé

Well, question. David, thank you for your

one markets and the to business relates productivity, productivity virtuous a find not drive we’re cycle it our the well Nando Productivity down That’s plan total and up markets. operate going forever. service as introduced as our UPS. as opportunities First, in to we is year. last done. team to here And at way continue to That’s

Brian Newman

question, of of future, the a half Dave We and really days. the the of consolidate a part in of of early the the scope of the called consolidation, until network that nice facility building team planned terms project do cetera, second to the still Nando the in some the XXXX in on doing job And are et timeframe. opportunity doesn’t year, quarter of back second XXXX, ramp have that but in sales up working terms

Carol Tomé

color building a how more build a and think you if Just perhaps and spun then up company, up building. facility, we grew up a would we bit a build we we on as a off off if little that another facility spin about

into way. automated team As service have we we some drive that, at highly time, able looked not lose in drive productivity huh, Nando it, those any found our impact to be any his and and not buildings, consolidate might customer negative of spinoffs

So it’s that, looking pretty at we’re exciting.

Brian Newman

But side. it outside think non-op don’t is the a change Carol, in of culture. buildings closed actually we’ve I

So it’s focused. a be and pivot to optimized more

Operator

Mehrotra next of line of Amit from question the go ahead. Please Our Bank. come Deutsche will

Amit Mehrotra

Brian. Thanks, and morning, Carol operator. Good

So Brian, to the and the is the seem environment accelerated weaker – have of the towards seems quarter. obviously end weakness volume

So that just achieving trying volume confidence of in to we I’m the I’m end guidance. now? to of obviously you’re mean, the confident they’re obviously I understand, uncertainty. the the about just are low where understand, – context trying

it’s bellicose. I a achievable, could, but then is the like a follow-up is if think great rhetoric that And win-win-win you just as really still Carol, getting

color And wondering costing gives dynamic that Delivery on like some acquisition because Solutions you to seems now. that if I an I’m guys you contingent some a made year right give access know lot it with volume capacity. it’s you’d last And of so, you

against rhetoric, let want. in it you but however you’ve the I’ll answer So talk made. There’s you win-win-win lot there, investments a the the about against Thanks.

Brian Newman

pivoted base of in volume. to volumes case versus X% of were the downside down the of in downside looking change down terms biggest We The Yes. is now base and we’ve X%. the the at case,

a little was bit March January, where about trail evolution an was off. quarter the lighter, we February expected first but in The

and the devolve. And manufacturing [ph], deteriorate, we like macros have at to so things we’ve those IP look seen ESMO continued as to

the And half of so the first volume basically for outlook we’ve adjusted the year.

year reasons, two the we’re confident case at XX%. be so will the And domestic in the of full business that

year. have related can the conversations And of in trough that more cost but summer more We come and will we we the volume which help deliver take and middle control U.S. to will the confidence the the of back will part some that customer macro post think into the ability go also detail, to in our semi-variable XX% the out of cost us

Carol Tomé

And question I’ll maybe on and just a your color little Teamsters. about more volume, then go to

As Brian us acceleration March. because in in March as rate were the in pause down decline – the around in – we February January, year-over-year detailed, and X% X% caused of we X%

at As stabilized March. we we to exited how look April relative has April,

we with look and feel plan to stabilized. decline the U.S. a million macro year-over-year nearly at due has the we X of attribute that decline decline If packages XX% little a XX%, So today, volume good largest our very the over would in we customers. over

agreed mutually We’re declining a with in them way.

macro here the confidence that and a of volume really stabilized. the Brian’s then, volume To half will us back see gives that what it’s we’re the come the point, year. So back story has in delighted to

our representing negotiations to all by relates you strategy. which with volume. customers first with the strategy update is diversion, point is keep high as Teamsters And and one meet very wasn’t about to role with It customers, volume in impact third share sales. starts them us. this our to quarter. XXX keep the with them over a executive high on The the We’ve of to assigned about the total our of with way much executives ongoing it our impact your to XXX I’ll multifaceted

the a have The plans confident of stoppage. we And our not next our that protect. in the counting event, is in work we But to are contingency getting element unlikely because of on we’re do event protect strategy unlikely we’re contract.

any third volume wouldn’t of any have we back we volume strategy for has that The to expect it is for would that that be has our leg some diverted. did win diverted. have unreasonable And to

We because back are they’re told going to it coming they’ve us win back.

that on the a they’re one fact, In just have customer handshake. once back we line signed dotted coming

to The third is continue sell. to

and the environment selling through want are close those We and in sell pull and new to customers. we

is the then And finally work pipeline.

a now And of it than that it we’re once at That’s have hard We we’ve never Teamsters going before into to to a deal. hard But that go billion. in sell $X are be and because will go we going have way to that’s we pipeline using because greater handshake that right negotiation. done at we our dynamic way architecture model. that a customers base very This a are for we different for modifiers because Using tomorrow to model done before. to UPS. haven’t propositions is we market customer of pricing creates it’s value pricing creating win our that which the created, win the go our our to for we’ve price

this in morning. competent So that we the you with how getting shared projections we’re that’s really volume

to comment we There out to the beginning noise about you it on going Teamsters. It was – supplemental noisy just be be and agreements. that me told about let to the true. But rhetoric. turning the your question Now from recent was some that’s

supplemental the Teamsters. We agreements have over with XX

progress. with the have agreements good Teamsters faith good made very and supplemental in negotiating been those have on We

In both UPS given week, D.C. opening leadership in in the Washington fact, and Teamsters last leadership Master comments were agreement. regarding

So our I a accomplish feel win-win-win. like we to much are to on timeline very as track

call. aligned our it’s a And thriving, And are and for UPS of can on an had you it’s about about on competent on public And all, growing is some win-win-win? first Northstar, we the earnings are worked Northstar else very the when been good we talked Teamsters, a Well, it’s that the is we Northstar. why good for everything of the good issues for out UPS am And I people. last aligned get have about. that time Teamsters the

aligned. We’re

that about Because all agree week. Teamsters out. working I a we we in like instances, like six need that’s don’t to We work stakes from go we it For model table that. is Teamsters in it’s operating contract, what don’t have an our doing that example, days expecting. of that weekend restrictions some that. we perspective, all agree consumers are delivery because how

you If fine don’t, that’s you you. to week, a if but work shouldn’t me, we with six force days want

negotiation, going [ph]. I’m and we’ve issues we to just a like So to had work way. But got get highly out. a to to my that’s sales a that husband the was strategy And puppy. But going there and get out. us I that’s confident customers deliver they’re are it’s confident because we’re around that it this going here. be the noisy it’s like making our when why of the case arms sure few with bumps impact high negotiation, our number about any we’ll argument win-win-win in our And to a I are way the of to any executives we table, work we’ll go and a agreement. a with that other figure noisy, just stuffy And along out contract. It these it putting be certainly bargaining back their was case comfortable to

Amit Mehrotra

you. it. with Got luck puppy. Thank the Good

Carol Tomé

you. Thank

Operator

from Poliniak go Our Wells of the next Please of Fargo. question comes ahead. Allison line

Allison Poliniak

Hi, good morning.

in some I deployed volumes the go spread cost narrowed to to certainly hours going the know deployed, certainly productivity about that and this forward. want the back talked quarter. the some stabilization Just outs April you and side between hours

that Just as spread? expand any half the think of the positive maybe year? get Thanks. remain of how back on we it should color Should towards and we

Brian Newman

Yes.

a a going mid-single three a U.S. ago. It’ll X% me the I if out and was wages CPP. going were about double-digit had expected big in four to would’ve you going be volume down cost to told – be year. take but up something we’re digit reduction or need years in X%, were to like to candidly, And Allison We be look So balance CPP

Nando the quarter, of that digits that X% we done and we driving in expecting for have team extraordinary low-single saw balance the job the but the are of year.

you headcount. and CPP, One, it’s hours more think than total As to about talked the come service areas. Carol about managing that’s and from reducing volume going that four plan,

volume on error, We consolidate with side, network. our efficiency automated the deal really and as and you there. sorts is second The we in do how ground focus the ground know, and facilities, closed and both

the they one in changing exit fact, network. at expect first flows quarter X% block were down utilize we the the to quarter, package Xx second it’s side, the On to day better And air in would about hours [indiscernible] domestic the

to we’re to jobs is side that group technology third the and delivering as do piece efficiency on lastly, fuel. volume And allow overhead to The our on efficiently non-op following technology warrants. will more headcount continue and focused us the reduce

be XH. We double-digit in year-over-year down XQ expect to of balance prices the fuel and year the

So But in those of a combined will and CPP. things a CPP high year. RPP drive balance both that confidence four digit low-single reduce amount a

Allison Poliniak

color. the for Thanks Understood.

Brian Newman

Yes.

Operator

line next the UBS. comes ahead, sir. go Our of Tom from of question Wadewitz Please

Tom Wadewitz

forward helpful, Brian, a looking revenue of Yes, That framework, for – terms you environment’s in per commentary good per up. morning. a some comparable just And thought really some also have on kind the holding how of was the on cost piece maybe do piece? pricing

your think pretty capacity. cutting cutting you’re margins, and well. good as managing I Obviously, a doing primary competitor’s cost, capacity job cost focused on

pricing good And of also a potential how that? lot but just Thank of per we thoughts environment, piece. the there’s on a about So any for revenue drivers you. think I think

Brian Newman

I assume We talking business. the domestic happy you’re to. And Tom, about had guide…. Yes. I’m

Tom Wadewitz

Yes. Domestic, thanks. Yes.

Brian Newman

quarter. around we XXX decline of bps about by in holding growth Originally RPP was a bit are in and fuel Tom to of flips to That tailwind year. RPP driven in that year we the X% double-digit mentioned we’re composition, softer, in the RPP fuel end that to saw X% back the where but this in a expect actually volumes RPP growth an about close the coming on Carol first price.

that the the So digit bps That decline XXX the gets product right from did points. the us and think X% into the headwinds into We the see range. back quarter, a And as about moderate QX that’ll have way be mix to go of X in ground that, the the we’ll mid-single should then some that mix, GRI end fuel. in we piece, air about first that year. in customer about I

composition. the that’s So

Carol Tomé

XX%. on the environment, keep rate is it’s the States. north GRI higher In Yes. the as May a the be outside United the of just United It’s the pricing States, it’s on comment even of been. high

Tom Wadewitz

Okay. Thank Great. you.

Brian Newman

Thanks, Tom.

Operator

question Please sir. of Our of Sachs. the comes next go Alliger line Jordan Goldman ahead, from

Jordan Alliger

Hi. Yes.

purchase of little some the but to cost maybe what’s back little drive the after You talked piece going per bit buckets trying other is going a most. to expense Just more year, it’s talk get about impacted notably a about it – a Thanks. for you higher transport? the and to was opportunity where sense bit what a can bit specific quite that be

Brian Newman

getting the Yes. after you from of out look at [Indiscernible] end a the lot certainly non-operating year And was of as costs. we we’re take were cost the another perspective, able to of that. back

of consulting business. out taking We’re the spend

business. out headcount taking We’re the of

to of we’re X% driving something cost a non-ops a perspective. a closer down So really perspective from revenue to from

Carol Tomé

are Brian, to a It’s expense that finance Software-as-a-Service. rather maybe item we And a you’re look move, because moving expect. to does person than depreciation’s right, other move comment item the but going out just here, of it sorts, on line it’s into line

Brian Newman

right. That’s exactly

Carol Tomé

difference technology little what deployment there’s Software-as-a-Service a you bit your if versus build. So have of you a for

Brian Newman

Transition buckets. of

Carol Tomé

you. Thank

Brian Newman

Yes.

Jordan Alliger

talked about it. the Got perhaps but follow-up, the in that just gives confidence And now? that business? stabilization that, there export about a right domestic front anything then Asian April, a a lot what Thanks. quick little on Is environment and

Carol Tomé

here’s year-over-year masterful seeing of team still we’re through XX% year-on-year, slowly a business, better her this better. out coming decline down managing of it’s quarter. of week it’s week the almost Kate It’s are Well, negative what in after that. but And first and doing the in job

business taking [ph] X.X%, outside network. the the quarter she’s to you were our block second XX% Asia down In and just out in look hours export States, optimize down fact, more if United block productivity VR with even our improvements at hours

Jordan Alliger

you. Thank

Brian Newman

Jordan. Thanks,

Operator

America. go from Hoexter line comes Bank the Ken of of ahead. of Our Please next question

Ken Hoexter

Hey, good Brian. morning, Carol and

this XX% before in mix You structurally thoughts more stabilization you decline you you that change maybe seem international, shifting seen your in Thanks. change sharp Brian high. you’ve maybe versus XX% the I were some and little a talked the bit had environment where inventory but that little getting like Did a goes margin it the that, pre-COVID then seems talk international, something think we’ve on to about about floor XX%. or backdrop, and operating lower? that Maybe is decline new sharp to still mid-February. the guess the a on

Brian Newman

Yes, start. to Ken, happy

on the last mix I business the XX.X% Kate’s I But of terms the with think network on out a XX%. guided has about floor, had we years managing changed we’re in that with don’t of couple since in she’s know a running international, agility and the but international, comfortable we world’s a a airflow the the the first, ago went then. piece to taking when three-year obviously lot You guidance

You’ll see consistently margin QX can that XX% fairly QX. through

comfortable we about So feel the of in terms how that evolves. business

Carol Tomé

volume the question, again, on back goes to And strategy. it our sales

into We pretty have pipeline. the visibility good

it’s through. days to In get going we today’s contract out but we’re completion, it XXX about just to when pull handshake hard negotiation pull of that with a deal. the pipeline through that going it get pulled through, environment kind We’re to to

Ken Hoexter

Brian. Thanks, Carol. Thanks,

Brian Newman

Ken. Thanks,

Operator

Our next of Group question ahead. comes line from of Wolfe. Scott the go Please Mr.

Scott Group

then sort guidance, volumes down what half Is margin. thanks. course flat And year, you. Hey, back follow-ups how a the Brian, Good down positive? for about How couple the we year? the just volumes to QX? morning. does is throughout And of were Thank trend expecting? the you’re should of think that the the that on the – XX% X% U.S. the

Brian Newman

terms profit the in prepared – Yes. helps. our second referenced shape, We the coming in help remarks, shaping that I say full XX% of half of but year company. manage I for the you Scott, don’t to would operating quarters, year, the the in maybe in

year-over-year you ADV business, improve bottom your and look rates from there to If to expect I’d in U.S. point. domestic QX the then growth at

both actions and And costs on actions and semi margins throughout. we CPP. PPG improve we’re will that RPP taking in Fuel about then and the as relates variable margin, – the to we’re think sequentially QX reduce will

material I quarter than in better expect be the to margins operating but a not profit second first. it’s impact would the in So

will year. to international improve the marginally in have chain. around a quarters margin we’ll through year the next three And side, On the balance as year. the of it’s full I in you supply gradually Revenue margin. QX, XX% op QX I than and the better that can finally should of And hold for ADV then consistency of op XX% be mentioned, as think see the

Scott Group

you. Thank

Brian Newman

Yes.

Operator

question ahead, go will next the Our sir. with Stifel. line of from come Please Chan Bruce

Bruce Chan

Yes, and thanks, morning, good everyone.

major, changes think, to upcoming able you’re want actually seeing on qualify if your here you’re negotiations, I wondering ask quantify operational think I the even been there’s I’m seeing. issue what ask Appreciate focus on but your service I of share attrition largest business just wins. if you’re just based your and on at pretty because or lot to Just And shift investments that the any it. a some are competitor.

Carol Tomé

We environment. I for to a sales our definitely to – team this I’m are give And seeing business selling have off wins. hat through

Why? We changing. of But give delivering a Because delivered packages large industry. business anecdotes is that some best see you is their helpful. our we I are for never if And the is can service existing that in customers that’s customers few with our we’ve before. what the long-term

same-store row a in their the of our customers negative sales. month positive in same-store every of is had reports sales. March publicly and same-store who One month large quarters This XX a sales for customer saw

well One has sales customer both of to their our a has who stores. shift online from seen behavior customers online as in other as in-store shopping sales

So warehouses, sense inside they’re their for make which shutting shifts them. of down

volume, So sidelines just winning uncertainty faster they just and to behind sit Customers win generally we the of macro and we’re but going behavior the to change to in faster we’d the you’re receive with go a us. and Teamster consumer like I’m we got till our on we’re convinced impacting quite is done. ship win negotiation. you, will when say,

we And we to So need just done. will. get

Operator

of Morgan. line Ossenbeck will the question next J.P. come Please Our from go sir. ahead, of Brian

Brian Ossenbeck

the morning. good for Thanks taking Hey, question.

perhaps anything parcel just seeing any of and Are going some on commentary the So volume Do from to gave from you destruction disruptions that? capacity Carol, surcharges fuel? to would some demand some about that with the of constraints, you with the weakness volume attribute some you customers. of of attribute the rates trends including you up

And then a more bit Brian, you maybe elaborate can returns. on

for some for perhaps largest charging if being. in to floating you. future. that for the of a returns be was see idea some the should that consideration pretty pretty also You to of good I at in least volume think what driver good terms in driver, that the quarter, time Thank we mentioned which one, the about it was but customers seems do a could wanted growth your

Carol Tomé

volume first don’t question, disruption product of however. because see We your we see pricing. to change do So

our transit. to air air in at looked ground. see We you If ground. out improve than the product down time Why? Well, more worked was our we’ve moving quarter, of it to customers really year-on-year, in

And your looking So the got before. we’ve fastest for go needs where to it value. now, transit time package get are than so in people can quicker you

watch way. I air quarter, almost customer the So by in X%. SurePost, to SurePost customer is out up the can of moving by

Brian Newman

that to it’s have returns the on going first great And on the a returns a easy with for UPS is e-comm as in volume The great business, that of X% over X,XXX it’s big business. those out. of attractive. a stores across piece the stores, are the Carol – mentioned growth we the pursues. country. margins consumers quarter saw And called as And in stores. I originates economy are positive the way We the

feel every about we’re capability something and building that in we good day. So

Carol Tomé

And from returns. convenience matters

the want U.S. get population with you credit to into back XX% that a miles back near convenient. you return. of of were package extraordinarily get U.S. wallet, the XX want population XX% so you our convenient place your of to within If And locations

Operator

question sir. the of line Citigroup. of Please Our ahead, Wetherbee go from Chris comes next

Chris Wetherbee

Yes. sort and progresses wanted on the Hey, year about on cadence hit just guidance. again how to of you maybe the question this

by outpacing $X.X guess Is of that the cost I back you have CPP see any of around international? billion of CPP Just we sure about the sight? the sort more how line guidance include a RPP, make understand the between and around volume And are that then just thoughts XQ. do so just you thinking year function? the or on profit of implies a back I I year? that. a RPP might function? end on point, step up think to a half Does of XX% would the or the flip the domestic outperforming And Brian want in guys of to Is

Brian Newman

longer we’re term, to you. So as we’ve Chris, talked

for RPP CPP. drive always to outpace We’re going to

now macros We’re they extraordinary right an are. everywhere of a with bit environment and the

have we on guide. year this margin don’t the expansion based So

So to taking come see likely that and But cost good digit you back. about the down feel low won’t as does we CPP until XXXX. single RPP return

about second that. the okay math then you’re way. the fairly doing feel your quarter, So And the is squeeze right accurate in

Chris Wetherbee

very Thank much. Okay. you

Brian Newman

Yes.

Operator

Our next Suisse. Ari ahead. question comes Please from the go line of of Rosa Credit

Ari Rosa

morning, morning, Good good Brian. Hey, Carol.

do gives discussion? how I Thanks. to or your impacting leverage more Is you little So on you there easier a a understand, any union? dimension the think which it just wanted the bit with bit about economic potentially maybe softer discussion environment negotiations vis-à-vis that little makes

Carol Tomé

our is growing and we So interest the go look we we where UPS, UPS best Teamsters, people. out look – thriving don’t both in want moment. to of out and We for look as the current in

all current the environment, So about is the our are but economic negotiations it future. is, it what

Operator

question from Helane line Becker Please Cowen. of TD the Our come ma’am. go next of ahead will

Helane Becker

like, wonder, if feel operator. time. could business what your bit thank you one are their much, And very hinting Brian, much the very I Thanks about – were you margins stores everybody. in the you little talk Hi like a lines. profitable I at for of most

So that. wondering some I’m more you color to of put kind could if

Brian Newman

So volume for talking the UPS You’re origin. about stores? it’s great a foundation

our into in stores as from volume royalty a comes stream that UPS. generates far what have grows, as the grows. We a relationship that royalty royalty that And income as comes

Carol Tomé

We stores. at profitability Because old the retailer. I’m do an I’m look of curious,

I our that But against if that stores every are are royalty margin comes great highest would the about at a franchisees very XXX expenses fee stores we’ve means terms some against of the look small got. And stores new there’s add into fee, profitable? happy. the We margin in company, it’s is own. you that this because are business to profitable, that. royalty say, year, which The the So business

Ken Cook

more question. Excellent. for one Steven, time we have

Operator

of Moore line go Jefferies. Our ahead last Stephanie ma’am. come of from question Please will the

Stephanie Moore

certainly it what’s I fluid to understand ability is expected? hit wanted deteriorate were and pretty guys guidance, of a the outlook of good very color updated you it’s and volumes still your for executing you it. margin volatile about that just environment little than Thank you kind outlook. to on additional a talk your you Thank you. through year? margin volumes Bryan. framed of But takes worse at your you your the maybe look your It you. Carol Hi, kind how Hi, to and morning. relates as particularly And puts bit as to a target could that and in consolidated looked What control. in kind appreciate of

Brian Newman

to we two happen first Yes, of continue of the year. we and went know And the to. to beginning at macros with the going happy deteriorate year what in the the the didn’t macros reason to is out was the half whole scenarios with

executing So we our was the fuel. had pulled the scenario. the and ground a the air, downside We which that network the playbook off overhead TSP, shelf changes for and the

which so largest what And downside of is we but it what the is perspective, that feel in said big years, sales good five control XX.X billion. is, got we’ve line that we’ve of got a pipeline the Carol line we’ve for very from sight a number, scenario. in the $X top the about had I about Obviously,

labor on line. confidence And negotiation so top our the posted that ability gives the to pull with that in us

Carol Tomé

of and variable, you the variable split Well, fixed. might share semi

Brian Newman

Yes.

anymore, Carol. fixed anything’s sure not I’m well, So

XX% about semi we’re So do and the in bucket on fixed the we a really and redefining variable third that. the

have closing don’t the bunch selling years table a se, has there the history in been buildings a world a because we of located per new a XXX on around. earlier, of but over or buildings everything’s talked we As growth of

drive, ability some no Carol have Nando’s to off will very make positioned when we’re going shut match returns volume a we to return would be The because positioned this way. so and to and good volume cost mistake, will volume. cash, add throw And structure I the well to is, one thing the sorts business, down we’ll in and go

Ken Cook

call. talking that I quarter. today’s morning. this to joining Thanks, Brian. Look to us And concludes And next you thank forward want to for everybody

United Parcel Service (UPS) 25 Apr 232023 Q1 Earnings call transcript