Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

Selling, General, and Administrative Expenses (SG&A) [USD, Millions]

Research and Development (R&D) [USD, Millions]

Depreciation and Amortization (D&A) [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

Earnings Per Share (EPS) - Basic [USD, Units]

Earnings Per Share (EPS) - Diluted [USD, Units]

9091cce0eb1e6fc686db69b0c5d82074072814f67f3759e31bfb59eb9d92373a

| Metric [USD Million] | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| U.S. Domestic Package | **18,252**  **[0001090727-23-000003_exhibit991-q42022earningsp.htm:0]**  | **14,987**  **[0001090727-23-000021_exhibit991-q12023earningsp.htm:0]**  | **14,396**  **[0001090727-23-000035_exhibit991-q22023earningsp.htm:0]**  | **13,660**  **[0001090727-23-000050_exhibit991-q32023earningsp.htm:0]**  | **16,915**  **[0001090727-24-000004_exhibit991-q42023earningsp.htm:0]**  | **14,234**  **[0001090727-24-000024_exhibit991-q12024earningsp.htm:0]**  | **14,119**  **[0001090727-24-000041_exhibit991-earningspressre.htm:0]**  | **14,450**  **[0001090727-24-000057_exhibit991-earningspressre.htm:0]**  |
| International Package | **4,950**  **[0001090727-23-000003_exhibit991-q42022earningsp.htm:0]**  | **4,543**  **[0001090727-23-000021_exhibit991-q12023earningsp.htm:0]**  | **4,415**  **[0001090727-23-000035_exhibit991-q22023earningsp.htm:0]**  | **4,267**  **[0001090727-23-000050_exhibit991-q32023earningsp.htm:0]**  | **4,606**  **[0001090727-24-000004_exhibit991-q42023earningsp.htm:0]**  | **4,256**  **[0001090727-24-000024_exhibit991-q12024earningsp.htm:0]**  | **4,370**  **[0001090727-24-000041_exhibit991-earningspressre.htm:0]**  | **4,411**  **[0001090727-24-000057_exhibit991-earningspressre.htm:0]**  |
| Supply Chain Solutions | **3,831**  **[0001090727-23-000003_exhibit991-q42022earningsp.htm:0]**  | **3,395**  **[0001090727-23-000021_exhibit991-q12023earningsp.htm:0]**  | **3,244**  **[0001090727-23-000035_exhibit991-q22023earningsp.htm:0]**  | **3,134**  **[0001090727-23-000050_exhibit991-q32023earningsp.htm:0]**  | **3,396**  **[0001090727-24-000004_exhibit991-q42023earningsp.htm:0]**  | **3,216**  **[0001090727-24-000024_exhibit991-q12024earningsp.htm:0]**  | **3,329**  **[0001090727-24-000041_exhibit991-earningspressre.htm:0]**  | **3,384**  **[0001090727-24-000057_exhibit991-earningspressre.htm:0]**  |

e2b21896f1fd6eec7b2239cc6c246f21b89a4fff4fcff9d3a567deb1b153abe7

United Parcel Service, Inc. (UPS) is a leading global package delivery company and provider of supply chain management solutions **[0001090727-24-000008_ups-20231231.htm:132]**. The company operates through two main reportable segments: U.S. Domestic Package and International Package, collectively referred to as global small package operations, and Supply Chain Solutions **[0001090727-24-000008_ups-20231231.htm:132]**. UPS's services include transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance **[0001090727-24-000008_ups-20231231.htm:4]**. The company also operates one of the largest airlines and fleets of alternative fuel vehicles globally **[0001090727-24-000008_ups-20231231.htm:4]**.

1. **Global Small Package Operations** - Provides time-definite delivery services for express letters, documents, small packages, and palletized freight via air and ground services. This segment includes:
   - **U.S. Domestic Package** - Involves the time-definite delivery of letters, documents, and packages throughout the United States **[0001090727-24-000008_ups-20231231.htm:132]**.
   - **International Package** - Covers delivery to over 200 countries and territories worldwide **[0001090727-24-000008_ups-20231231.htm:132]**.
2. **Supply Chain Solutions** - Offers transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services **[0001090727-24-000008_ups-20231231.htm:4]**.

2fb6bde9b08e19c2298802d431730fce03f5812138b73cf12b3f67754ad05481

Average Daily Package Volume Growth (%)

Business-to-Consumer Volume Growth (%)

Business-to-Business Volume Growth (%)

Ground Residential Volume Growth (%)

Fuel Surcharge Revenue Change ($ Million) Q3 2023

Fuel Surcharge Revenue Change ($ Million) Q1 2024

Fuel Surcharge Revenue Change ($ Million) Q2 2024

SurePost Volume Growth (%)

fb9a4455f43fd2108b475411cb5476523cede7422294c9754be5cc92c4ff8951

7527c8010aa7b47fcad9d9a1337ad4a20486150582fe159afeeaf66ca69eb13b

1. With the completion of 45 operational closures and the removal of about 1 million ADV per day of capacity, how will this reduction affect your ability to handle increased volumes during the compressed peak holiday season, especially given the expected surge on December 18? 

2. Revenue per piece in the U.S. Domestic segment declined 2.2% year-over-year, impacted by factors like lighter weights and shorter zones; what strategies are you implementing to sustain revenue quality improvements amidst these ongoing pressures?

3. Considering the sale of Coyote and the acquisition of Frigo-Trans, how do these moves align with your long-term growth strategy in Supply Chain Solutions, and what are the anticipated impacts on your operating margins in this segment?

4. Given the macro environment was worse than expected, with slowing online sales and lower manufacturing activity, how confident are you in achieving your updated full-year revenue of approximately $91.1 billion, and what contingency plans are in place if economic conditions deteriorate further?

5. As union wage rate growth slowed to 5.2% and productivity initiatives offset 50% of the wage increase, can you provide more detail on how you plan to continue driving cost efficiencies without compromising service levels, particularly as you execute additional projects in 2025?

050718c57af916328a0909f209362730e7d41fb72d63113191d70412f87cabdb

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

fad806796cd06006977aac506f1538e8c843f9c866d502207ac0b62c6c01f21f

5fc2c8d6aea9e8d343f502230a02a9b3d04746f5ad847a4bf4cba37f151f7224

08442196093084857d0a3ec5ea7d7396877445b690fb88551093254fb80b30a1

9b9c837aaeb214069b2e54111c8dd4c2a0038868752e495afcbcb32b681a40ec

01c90cb0551f49cd747f15424780253b3b4805a80283d7a84a47f3f296ac59d5

U.S. Domestic Package

International Package

- Domestic

- Export

- Cargo and Other

Supply Chain Solutions

Total Revenue

f2da3be8902feb5e073ce9990b1cd3ddff6b1048a28ddd57e32621432ef23763

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024 and FY 2024
- **Guidance**:
  - **U.S. Domestic Segment**:
    - Q4 revenue expected to increase by **1.5%**.
    - Q4 operating margin expected to be approximately **9.5%**, exiting the year slightly higher than **10%**  **[UPS_3403609_6]** **[UPS_3403609_7]** .
  - **International Segment**:
    - Q4 revenue growth expected to be mid-single digits year-over-year.
    - Q4 operating margin expected to be around **20%**  **[UPS_3403609_6]** .
  - **Supply Chain Solutions**:
    - Q4 revenue expected to be around **$3.3 billion**.
    - Q4 operating margin expected to be approximately **9%**  **[UPS_3403609_6]** .
  - **Full Year 2024**:
    - Free cash flow expected to be around **$5.1 billion** after a **$1.4 billion** pension contribution.
    - Capital expenditures expected to be about **$4 billion**.
    - Dividends expected to be around **$5.4 billion**, subject to Board approval.
    - Tax rate expected to be between **23% and 23.5%**  **[UPS_3403609_6]** .
  - **Consolidated Level**:
    - Full year revenue expected to be approximately **$91.1 billion**.
    - Consolidated operating margin expectation lifted to approximately **9.6%**  **[UPS_3403609_5]** **[UPS_3403609_3]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: Second half of 2024 and FY 2024
- **Guidance**:
  - **Consolidated Revenue**: Approximately **$93 billion** for the full year  **[UPS_3393939_3]** .
  - **Consolidated Operating Margin**: Approximately **9.4%**  **[UPS_3393939_3]** .
  - **U.S. Operating Margin**: Expected to exit the final month of 2024 with a **10%** operating margin  **[UPS_3393939_3]** .
  - **International Segment**:
    - Revenue growth in the second half expected to be mid-single digits.
    - Operating margin in the second half anticipated to be approximately **20%**  **[UPS_3393939_7]** .
  - **Supply Chain Solutions**:
    - Revenue in the second half expected to be over **$7 billion**.
    - Operating margin in the high single digits  **[UPS_3393939_7]** .
  - **Tax Rate**: Approximately **22%** for the remainder of the year  **[UPS_3393939_7]** .
  - **Free Cash Flow**: Expected to be around **$5.8 billion** before any pension contribution for the full year  **[UPS_3393939_7]** .
  - **Capital Expenditure**: Forecasted to be about **$4 billion**  **[UPS_3393939_7]** .
  - **Dividends**: Plan to pay out around **$5.4 billion**, subject to Board approval  **[UPS_3393939_7]** .
  - **Share Repurchases**: Plan to repurchase approximately **$500 million** of shares in 2024  **[UPS_3393939_7]** .
  - **Volume Growth**:
    - U.S. Domestic average daily volume expected to grow by mid-single digits in the second half  **[UPS_3393939_6]** .
  - **Revenue Per Piece (RPP)**:
    - Expected to decline by about **1.4%** in the third quarter and **0.4%** in the fourth quarter  **[UPS_3393939_16]** .
  - **Operating Profit**:
    - U.S. Domestic operating profit expected to grow by double digits in the third quarter  **[UPS_3393939_6]** .
  - **Peak Season**: Anticipated strong peak driven by volume growth and demand surcharges  **[UPS_3393939_6]** .

### Q1 2024 Earnings Call
- **Issued Period**: Q1 2024
- **Guided Period**: FY 2024
- **Guidance**:
  - **Full Year 2024 Consolidated Financial Targets**:
    - **Revenue**: Expected to range between **$92 billion and $94.5 billion**  **[UPS_3380261_5]** **[UPS_3380261_3]** .
    - **Consolidated Operating Margin**: Expected to range from approximately **10% to 10.6%**  **[UPS_3380261_5]** **[UPS_3380261_3]** .
  - **First Half of 2024**:
    - **Consolidated Operating Profit**: Expected to be down between **20% and 30%**  **[UPS_3380261_5]** **[UPS_3380261_3]** .
  - **Second Half of 2024**:
    - **Volume and Revenue Growth**: Expected to accelerate as they lap the diversion experienced due to labor negotiations  **[UPS_3380261_5]** .
  - **U.S. Operating Margin**:
    - Expected to exit the year at **10%**  **[UPS_3380261_3]** .
  - **Capital Expenditures**:
    - Expected to be around **5% of revenue**, approximately **$4.5 billion**  **[UPS_3380261_6]** .
  - **Free Cash Flow**:
    - Expected to be within a range of approximately **$5.9 billion to $6.7 billion** before reflecting any pension contributions  **[UPS_3380261_6]** .
  - **USPS Air Cargo Volume**:
    - Expected to benefit operating margins at both the consolidated level and within the U.S. Domestic segment  **[UPS_3380261_6]** .
  - **2026 Targets**:
    - **Revenue**: Aimed to grow to between **$108 billion and $114 billion** by 2026  **[UPS_3380261_6]** .
    - **Consolidated Operating Margin**: Expected to expand to more than **13%** by 2026, with the domestic operating margin expanding to at least **12%**  **[UPS_3380261_6]** .

### Q4 2023 Earnings Call
- **Issued Period**: Q4 2023
- **Guided Period**: N/A
- **Guidance**: The documents do not contain information about the guidance provided by UPS in their Q4 2023 earnings call.

7e4f2619b650b6036bd571bee1accb060cb035040059ecebb57be7f05ada64b7

| Name                  | Position                                                                 | Start Date | Short Bio                                                                                                                                                                                                 |
|-----------------------|--------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Carol B. Tomé         | Chief Executive Officer                                                  | June 2020  | Carol B. Tomé has been serving as the CEO of UPS since June 2020. She was previously the CFO of The Home Depot, Inc. from 2001 until her retirement in 2019  **[0001090727-24-000018_ups-20240318.htm:23]** **[0001090727-23-000015_ups-20230320.htm:23]** .                                      |
| Norman M. Brothers, Jr.| Executive Vice President; Chief Legal and Compliance Officer and Corporate Secretary | 2020       | Norman M. Brothers, Jr. is the EVP, Chief Legal and Compliance Officer, and Corporate Secretary at UPS since 2020. He was previously SVP, General Counsel, and Corporate Secretary from 2016 to 2020  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** . |
| Nando Cesarone        | Executive Vice President; President, U.S.                                | 2020       | Nando Cesarone has been the EVP and President, U.S. at UPS since 2020. He was previously the President of UPS International from 2018 to 2020  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** .                                                     |
| Darrell Ford          | Executive Vice President; Chief Human Resources Officer and Chief Diversity, Equity and Inclusion Officer | 2022       | Darrell Ford has held his current position since 2022. He was previously the Chief Human Resources Officer from 2021 to 2022  **[0001090727-24-000008_ups-20231231.htm:151]** .                                                                        |
| Matt Guffey           | Executive Vice President; Chief Commercial and Strategy Officer          | 2024       | Matt Guffey became the EVP and Chief Commercial and Strategy Officer in 2024. He was previously SVP, Global Strategy from 2020 to 2023  **[0001090727-24-000008_ups-20231231.htm:151]** .                                                              |
| Kate M. Gutmann       | Executive Vice President; President International, Healthcare and Supply Chain Solutions | 2022       | Kate M. Gutmann has been in her current role since 2022. She was previously the Chief Sales and Solutions Officer and EVP, UPS Global Healthcare from 2020 to 2022  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** .                               |
| Laura Lane            | Executive Vice President; Chief Corporate Affairs, Communications and Sustainability Officer | 2020       | Laura Lane has held this position since 2020. She was previously the Chief Corporate Affairs and Communications Officer from August 2020 to October 2020  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** .                                         |
| Brian Newman          | Executive Vice President; Chief Financial Officer                        | 2021       | Brian Newman has been the EVP and CFO at UPS since 2021. He was previously the CFO and Treasurer from 2019 to 2021  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** .                                                                               |
| Bala Subramanian      | Executive Vice President; Chief Digital and Technology Officer           | July 2022  | Bala Subramanian joined UPS in July 2022. He was previously the Chief Digital Officer at AT&T Inc. from 2018 to 2022  **[0001090727-24-000008_ups-20231231.htm:151]** **[0001090727-23-000006_ups-20221231.htm:146]** **[0001090727-23-000015_ups-20230320.htm:42]** .                                                                          |
| Brian Dykes           | Executive Vice President and Chief Financial Officer                     | 2024       | Brian Dykes became the EVP and CFO at UPS in 2024, bringing over 25 years of multinational experience with the company  **[UPS_3393939_1]** **[UPS_3393939_4]** .                                                                           |

4b23e26102701b45f20496cddad94f438a919b213eef5d94173b4c4441d92fc8

| Program Details          | Program 1       | Program 2       |
|--------------------------|-----------------|-----------------|
| Approval Date            | August 2021  **[0001090727-24-000064_ups-20240930.htm:26]**  | January 2023  **[0001090727-24-000064_ups-20240930.htm:26]** |
| End Date/Duration        | Terminated January 2023  **[0001090727-24-000064_ups-20240930.htm:26]**  | Ongoing as of September 30, 2024  **[0001090727-24-000064_ups-20240930.htm:26]** **[0001090727-24-000064_ups-20240930.htm:84]**  |
| Total additional amount  | $5.0 billion  **[0001090727-24-000064_ups-20240930.htm:26]** | $5.0 billion  **[0001090727-24-000064_ups-20240930.htm:26]** |
| Remaining authorization amount | N/A        | $2.3 billion as of September 30, 2024  **[0001090727-24-000064_ups-20240930.htm:26]** **[0001090727-24-000064_ups-20240930.htm:84]**  |
| Details                  | Terminated  **[0001090727-24-000064_ups-20240930.htm:26]**   | Active, aims to repurchase about $1 billion annually  **[UPS_3393939_3]**  |

9afe0e0c74026e8798793399e4ebf07f735b5e8dfc868d2839d23343d2a98512

1. **Q4 Profit Improvement**  
   **Q:** How will you achieve the significant profit improvement in Q4?  
   **A:** To reach the low end of our guidance, we need an additional **$800 million** in profit over Q3's **$665 million**.  **[UPS_3362123_7]**  This improvement is driven mainly by increased volume and better revenue quality.  **[UPS_3362123_7]**  From August to October, average daily volume increased from **16 million** to **19 million** pieces, a step-up of **2.7 million** pieces compared to **1.5 million** last year.  **[UPS_3362123_7]** 

2. **Volume Recapture**  
   **Q:** How much of the lost volume have you recaptured?  
   **A:** We have recaptured over **600,000** pieces per day of the volume that was diverted during the labor negotiations.  **[UPS_3362123_8]**  About **50%** of this recaptured volume is coming from our largest competitor.  **[UPS_3362123_8]**  The momentum is accelerating as we continue to win back customers before peak season.  **[UPS_3362123_13]** 

3. **Margin Outlook**  
   **Q:** When will domestic margins improve?  
   **A:** The new labor contract is front-end loaded, impacting margins in the near term.  **[UPS_3362123_16]**  However, once we move past this initial phase, margins will grow significantly.  **[UPS_3362123_16]**  We expect substantial margin improvement after the first year, as cost pressures ease and productivity gains take effect.  **[UPS_3362123_16]** 

4. **International Margins**  
   **Q:** What are your expectations for international margins in Q4?  
   **A:** In Q3, international margins were **15.8%**.  **[UPS_3362123_15]**  We anticipate margins to improve to the mid-range between the **18%** in Q1 and **20%** in Q2.  **[UPS_3362123_15]**  Effective cost management, including adjustments to block hours and headcount, will support this margin expansion.  **[UPS_3362123_15]** 

5. **Consumer Demand**  
   **Q:** How is weaker consumer spending affecting volumes?  
   **A:** Consumers are shifting spending from goods to services, impacting some of our large retail customers who are experiencing declining online sales.  **[UPS_3362123_19]**  This shift affects our volume, but we are focusing on growth areas like health care logistics and returns to drive future growth.  **[UPS_3362123_18]** **[UPS_3362123_19]** 

6. **Acquisitions**  
   **Q:** What are your recent acquisitions?  
   **A:** We are acquiring MNX and Happy Returns for a total of about **$1 billion**.  **[UPS_3362123_21]**  These acquisitions enhance our capabilities in health care logistics and consolidated returns, providing better value to retailers and improving our delivery density.  **[UPS_3362123_18]** **[UPS_3362123_21]** 

7. **Revenue Guidance Confidence**  
   **Q:** What is your confidence level in the new revenue guidance?  
   **A:** We are confident in the narrowed revenue range, now within **$1 billion**.  **[UPS_3362123_10]**  The key factor between the high and low end is the retail outlook during the holiday season.  **[UPS_3362123_10]**  Close collaboration with our top customers, who represent **86%** of peak volume, provides good visibility.  **[UPS_3362123_10]** 

8. **Recapture Costs**  
   **Q:** Are there costs associated with recapturing volume?  
   **A:** There are no material costs associated with recapturing volume.  **[UPS_3362123_8]** **[UPS_3362123_16]**  Customers are returning due to our superior service, and while we may assist with transitioning from long-term contracts, it doesn't involve significant discounts.  **[UPS_3362123_16]** 

9. **2024 Margin Recovery**  
   **Q:** How will margins recover in 2024?  
   **A:** Higher average daily volume and benefits from pricing actions will help margins recover in 2024.  **[UPS_3362123_10]**  The first half may be more challenging due to cost overhangs from the labor contract, but we expect improvements in the back half as inflation eases.  **[UPS_3362123_10]** 

10. **SMB Growth Impact**  
    **Q:** How is growth in small and medium businesses impacting revenue?  
    **A:** Our small and medium business (SMB) mix has grown from **23%** in 2019 to **29%**.  **[UPS_3362123_20]**  This shift has increased our revenue per piece from **$9.99** to **$12.54**.  **[UPS_3362123_20]**  By enhancing customer experience and focusing on revenue quality, we are achieving better pricing.  **[UPS_3362123_20]** 

3f4592ae582c42e9fa313b5d0980a2c80d9f873bd76669873001a6cbbe9ba17a

1. **Margin Outlook**  
   **Q:** What drives the expected profit increase into Q4 and impact on 2025?  
   **A:** The profit increase from Q3 to Q4 is driven by a focus on revenue quality, pricing initiatives, and acceleration of **Fit to Serve** and **Network of the Future** productivity programs. We expect the domestic margin to be around **9.5%** in '24 and to exit the year slightly higher than the **10%** previously guided. We'll provide more details on 2025 after peak season.  **[UPS_3403609_7]** 

2. **Revenue Per Piece Trends**  
   **Q:** How are domestic revenue per piece trends progressing?  
   **A:** Domestic revenue per piece showed positive momentum from Q2 to Q3, with base rate impact improving from **90 basis points** to **170 basis points**. We expect revenue per piece to turn positive in Q4, driven by pricing actions enabled by our **pricing architecture of tomorrow** and adjustments like modifiers.  **[UPS_3403609_18]** 

3. **Cost Improvements and Initiatives**  
   **Q:** How are cost initiatives impacting per-piece costs, and what's the outlook?  
   **A:** Third-quarter cost performance was outstanding, with wage inflation decreasing from **12%** in Q2 to **5.2%** in Q3. We’ve accelerated **Fit to Serve** and **Network of the Future** initiatives, closing facilities and improving productivity. In Q4, we expect cost per piece to increase about **1%**, still less than revenue per piece growth, maintaining a positive spread.  **[UPS_3403609_9]** 

4. **USPS Contract Impact**  
   **Q:** How is the USPS onboarding affecting operations and profitability?  
   **A:** The USPS volume is now fully onboarded after initial mismatches in Q3. We're seeing positive performance, with resources aligned as planned. We absorbed over **50 million cubic feet** into our network in Q3, and the fourth quarter will reflect all volume being integrated.  **[UPS_3403609_11]** 

5. **Pricing Environment**  
   **Q:** Are you experiencing increased price competition in the market?  
   **A:** While the industry is price competitive, we see rational pricing. We focus on winning through service and capabilities like **RFID**, leading to growth in enterprise and SMB commercial volumes. These capabilities help drive revenue per piece growth despite competition.  **[UPS_3403609_19]** 

6. **Largest Customer Volume Decline**  
   **Q:** How is the glide down with your largest customer affecting volumes?  
   **A:** Our largest customer continues to reduce air volume with us, contributing to a **6.5%** decline in air volume in Q3, entirely attributable to them. They are trading down from air to ground and shifting some volume to their own network, creating opportunities for us elsewhere.  **[UPS_3403609_20]** 

7. **Capacity Adjustments**  
   **Q:** Do you see excess capacity, and how are you adjusting resources?  
   **A:** We've proactively reduced capacity by closing **45 operational facilities**, removing about **1 million packages per day** from the market. We continue to adjust resources to match demand, adding for peak season but aligning overall capacity with the current environment.  **[UPS_3403609_15]** 

8. **Peak Season Hiring**  
   **Q:** Why increase peak hiring despite softer volume expectations?  
   **A:** We're hiring **125,000** seasonal employees this year, up from **100,000** last year, as our average daily volume will be positive. We hire based on need and have the flexibility to adjust quickly. We're also increasing helper teams with drivers by about **10%** to optimize delivery during peak.  **[UPS_3403609_22]** 

9. **Negotiations with USPS**  
   **Q:** What's the status of the USPS delivery service agreement negotiations?  
   **A:** We're working to finalize a mutually agreeable contract with USPS, moving quickly and hoping to conclude soon. We'll share more details during our fourth-quarter earnings call.  **[UPS_3403609_13]** **[UPS_3403609_14]** 

10. **International Business Performance**  
    **Q:** How is international business performing amid macro weakness?  
    **A:** Despite softer macro indicators, our international business expanded revenue, profit, and margin, posting an **8%** margin. We've held cost per piece flat, delivering operating leverage, and plan to continue these strategies into next year.  **[UPS_3403609_10]** 

9d971b9ee92a778755f772ec1ae9c0122e96c4d29adbdb4f80e5ab3163bef886

**Quarterly guidance for Q4 2024:**
- **U.S. Domestic revenue**: 1.5%  **[UPS_3403609_6]** **[UPS_3403609_7]**  (no prior guidance)  
- **U.S. Domestic operating margin**: 9.5% (exiting the year slightly higher than 10%)  **[UPS_3403609_6]** **[UPS_3403609_7]**  (no prior guidance)  
- **International revenue growth**: mid-single digits  **[UPS_3403609_6]**  (no prior guidance)  
- **International operating margin**: 20%  **[UPS_3403609_6]**  (no prior guidance)  
- **Supply Chain Solutions revenue**: $3.3B  **[UPS_3403609_6]**  (no prior guidance)  
- **Supply Chain Solutions operating margin**: 9%  **[UPS_3403609_6]**  (no prior guidance)  

**Annual guidance for FY 2024:**
- **Consolidated revenue**: $91.1B  **[UPS_3403609_5]** **[UPS_3403609_3]**  (lowered from $93B  **[UPS_3393939_3]** )  
- **Consolidated operating margin**: 9.6%  **[UPS_3403609_5]** **[UPS_3403609_3]**  (raised from 9.4%  **[UPS_3393939_3]** )  
- **Free cash flow**: $5.1B (after a $1.4B pension contribution)  **[UPS_3403609_6]**  (raised from $5.8B before pension  **[UPS_3393939_7]** )  
- **Capital expenditures**: $4B  **[UPS_3403609_6]**  (no change from prior guidance of $4B  **[UPS_3393939_7]** )  
- **Dividends**: $5.4B  **[UPS_3403609_6]**  (no change from prior guidance of $5.4B  **[UPS_3393939_7]** )  
- **Tax rate**: 23% to 23.5%  **[UPS_3403609_6]**  (raised from 22%  **[UPS_3393939_7]** )  

9337d4eba7c45aeaee6e0dd3b357a85a8cf65f9a7e4f2737a0abd93ee3d110d1

| Name                  | Start Date | End Date | Reason for Change |
|-----------------------|------------|----------|-------------------|
| Deloitte & Touche LLP | 1969  **[0001090727-24-000008_ups-20231231.htm:77]**    | Present  | Current auditor   |

a1010277bd90d36d81a22d779f07b0c18904acb4926bd3889be93bcca33ae7a6

- Total Revenue: $22.245B (+5.6% YoY)  **[0001090727-23-000054_ups-20230930.htm:30]** **[0001090727-24-000064_ups-20240930.htm:30]**   
- U.S. Domestic Package: $14.450B (+5.8% YoY), driven by **+7.7%** in Ground revenue  **[0001090727-23-000054_ups-20230930.htm:30]** **[0001090727-24-000064_ups-20240930.htm:30]**   
- Supply Chain Solutions: $3.384B (+8.0% YoY), with "Other" sub-segment at **+40%** YoY  **[0001090727-23-000054_ups-20230930.htm:30]** **[0001090727-24-000064_ups-20240930.htm:30]** **[0001090727-23-000054_ups-20230930.htm:52]**   
- Operating Income (EBIT): $1.985B (+48% YoY)  **[0001090727-23-000054_ups-20230930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:30]**   
- Net Income: $1.539B (+36% YoY)  **[0001090727-23-000054_ups-20230930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:6]**   
- EPS (Diluted): $1.80 (+37% YoY)  **[0001090727-23-000054_ups-20230930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:30]**   

660e592afb8af72fd71d99e60da148f0ab0133587b69b40559dec7b1771bfa5d

- **UPS is strategically shifting its focus to high-growth, high-margin segments such as healthcare, SMBs, and B2B**, expecting significant growth in these areas. For instance, **UPS plans to increase its healthcare revenue from $10.5 billion to $20 billion by 2026**, tapping into a **total addressable market of over $80 billion**.  **[UPS_3413716_15]**
- **By accelerating the reduction of volume from its largest customer, which is highly dilutive to margins**, UPS is able to reconfigure its network, reduce costs, and improve profitability. This action enables UPS to focus on more profitable customers and services, leading to margin expansion.  **[UPS_3413716_10]**
- **UPS expects to expand its U.S. Domestic operating margin in every quarter of 2025, with the full-year operating margin approaching 9%**, and aims to achieve a **12% U.S. operating margin by the fourth quarter of 2026**. These projections demonstrate UPS's confidence in its strategic initiatives to improve profitability and drive shareholder value.  **[UPS_3413716_7]**

08ef62d292ff44d663b62d43ed97fd8b0d57783dd47cd68145948a98af629b89

- **Significant Volume Reduction from Largest Customer**: UPS is accelerating a significant reduction in volume from its largest customer, reducing their volume by more than **50% by the second half of 2026**. This accelerated glide down is **5 times faster** than previous efforts, potentially leading to a decline in revenue and challenges in offsetting the lost volume.  **[UPS_3413716_17]**
- **Dependence on a Single Large Customer and Future Uncertainty**: There is uncertainty regarding the remaining **50%** of the volume from the largest customer, as questions arise about whether this volume may also decrease in future contract renewals. This dependency poses a risk to UPS's revenue stability.  **[UPS_3413716_17]**
- **Potential Earnings Stagnation Despite Margin Improvements**: While UPS expects to improve operating margins through cost reductions and efficiency initiatives, there is concern that overall earnings may not grow due to the decline in volume and revenue. The company acknowledged the need to provide more details on earnings growth expectations for **2026**, indicating potential stagnation or decline in profit dollars despite higher margins.  **[UPS_3413716_16]**

c3c7b11c2a613d01f7fc333d4e1b493f48f9d25ca4450116383d90dfd15f8beb

1. **Amazon Volume Reduction**  
   **Q:** How will the Amazon volume reduction impact margins?  
   **A:** UPS is accelerating the glide down of Amazon volumes by **more than 50% by June 2026**.  **[UPS_3413716_8]**  Amazon is the largest customer but **very dilutive** to U.S. Domestic margins.  **[UPS_3413716_8]**  As volumes decrease, UPS will remove fixed costs by reconfiguring the network, closing facilities, and adjusting assets, leading to **margin expansion**.  **[UPS_3413716_8]** 

2. **Margin and Earnings Outlook**  
   **Q:** Can you grow margins and earnings in 2025 and 2026?  
   **A:** Yes, UPS expects to expand domestic operating margin every quarter in 2025, ending at **10.8%**, an increase of **130 basis points** over last year.  **[UPS_3413716_10]**  Profit dollars will grow, not just margins, with further acceleration in 2026 as cost reductions continue  **[UPS_3413716_10]** ,.  **[UPS_3413716_16]** 

3. **Future Growth Without Amazon**  
   **Q:** How will you grow without Amazon volume?  
   **A:** UPS plans to take market share in a **slow-growing** small package market excluding Amazon, focusing on **SMBs**, increasing SMB revenue from **29% to 32%** in 2025.  **[UPS_3413716_10]**  They are expanding in **healthcare**, aiming to grow healthcare revenue to **$20 billion by 2026**.  **[UPS_3413716_15]**  Opportunities also exist in **international diversification** and **complex logistics**.  **[UPS_3413716_15]** 

4. **Pricing Discipline Amid Volume Drop**  
   **Q:** Will you maintain pricing discipline despite lower volumes?  
   **A:** Yes, UPS is not chasing volume to fill capacity; they are adjusting capacity to match new volume levels.  **[UPS_3413716_17]**  They will continue strong pricing discipline, expecting revenue per piece growth of **6%** in 2025  **[UPS_3413716_16]** ,.  **[UPS_3413716_23]** 

5. **Network Reconfiguration and Cost Reduction**  
   **Q:** How will you adjust the network to lower volumes?  
   **A:** UPS will reconfigure the network by reducing fixed assets like buildings, vehicles, and aircraft.  **[UPS_3413716_8]**  They've already closed **5 facilities** in January and plan to have **140 active projects**, with **61 going live this year**.  **[UPS_3413716_8]**  This aligns the fixed cost base to new volume levels.  **[UPS_3413716_8]** 

6. **SurePost Insourcing Impact**  
   **Q:** What is the impact of insourcing SurePost volumes?  
   **A:** UPS insourced **100%** of SurePost volumes previously delivered by USPS due to USPS increasing costs and potential service deterioration.  **[UPS_3413716_9]**  The transition has gone well, with **no material impact** on the business; they have more delivery stops per car but aren't driving more miles.  **[UPS_3413716_9]** 

7. **Risk of Losing Remaining Amazon Business**  
   **Q:** Will the rest of Amazon business disappear?  
   **A:** UPS doesn't expect the remaining Amazon business to go away.  **[UPS_3413716_13]**  They will continue to provide services where there is mutual benefit, such as returns through **5,200 UPS Store locations**  **[UPS_3413716_13]** ,.  **[UPS_3413716_18]**  Amazon will remain a customer after the volume reduction.  **[UPS_3413716_13]** 

8. **Capital Allocation and Share Repurchases**  
   **Q:** Is it prudent to repurchase shares given high payout ratio?  
   **A:** UPS has strong liquidity and plans to repurchase **$1 billion** in shares, mainly to offset dilution from compensation plans.  **[UPS_3413716_22]**  Despite a high payout ratio due to non-cash pension expenses, they have sufficient cash flow to support dividends and buybacks.  **[UPS_3413716_22]** 

9. **Returns Business and Competition**  
   **Q:** Is there a risk to your returns business from Amazon?  
   **A:** UPS continues to see growth in returns through UPS Store, with a strong footprint of **5,200 stores**.  **[UPS_3413716_18]**  They've added digital options like **Happy Returns**, offering best-in-class solutions.  **[UPS_3413716_18]**  While Amazon is trialing in-house returns, UPS believes their service and convenience will retain customers.  **[UPS_3413716_18]** 

10. **Peak Season Operations Without Amazon**  
    **Q:** How will peak season be affected without Amazon volume?  
    **A:** UPS will operate peak season as usual but won't need as many leased assets.  **[UPS_3413716_19]**  Variable costs like renting equipment, aircraft, and temporary facilities will be reduced, improving efficiency.  **[UPS_3413716_19]** 

0f8ac9ac9c5e464d7627c42a408b08766cb4b7c38cf8a7f3b7a2b0532fc0e61e

UPS Q4 2024: Focusing on higher-margin segments, aiming to double healthcare revenue to $20B by 2026. Despite cutting Amazon volume by 50%+, UPS projects margin expansion in every 2025 quarter and targets 12% U.S. margin by Q4 2026—poised for stronger profitability.

07f7d26110e2b18ae3ce4e3461aee9aec67bfa13f676196dd8cd8488da42e541

**Annual guidance for FY 2025:**  
- **Revenue**: $89B  **[UPS_3413716_6]**  (lowered from $91.1B  **[UPS_3403609_3]** **[UPS_3403609_5]** )  
- **Operating margin**: 10.8%  **[UPS_3413716_6]**  (raised from 9.6%  **[UPS_3403609_5]** )  
- **Free Cash Flow**: $5.7B  **[UPS_3413716_7]**  (raised from $5.1B  **[UPS_3403609_6]** )  
- **Capital Expenditures**: $3.5B  **[UPS_3413716_7]**  (lowered from $4B  **[UPS_3403609_6]** )  
- **Dividends**: $5.5B  **[UPS_3413716_7]**  (raised from $5.4B  **[UPS_3403609_6]** )  
- **Tax Rate**: 23.5%  **[UPS_3413716_7]**  (raised from prior range of 23–23.5%  **[UPS_3403609_6]** )  
- **Share Buybacks**: $1B  **[UPS_3413716_7]**  (no prior guidance)  
- **U.S. Domestic Operating Margin**: 8.8%  **[UPS_3413716_6]**  (lowered from slightly above 10%  **[UPS_3403609_6]** )  

1eef7ad06fcf8ff00b36a0675b1e2b38bad0422739bcf54ca7da5fac41dc6945

3bd5693213c6723ec44c23a8029a59d02b4c3a3c0c73c6b45e9802c19b708af7

| Year  | Amount Due (in millions) | Debt Type                      | Interest Rate | % of Total Debt                           |
|-------|--------------------------|--------------------------------|---------------|-------------------------------------------|
| 2024  | $1,606                   | Current Maturities of Long-Term Debt, Commercial Paper, and Finance Leases | N/A           | 7.3% = (1,606M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2024  | $699                     | Current Maturities of Operating Leases | N/A           | 3.2% = (699M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:5]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2025  | $1,999                   | 3.900% Senior Notes            | 3.900% **[0001090727-24-000064_ups-20240930.htm:19]**| 9.1% = (1,999M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2026  | $499                     | 2.400% Senior Notes            | 2.400% **[0001090727-24-000064_ups-20240930.htm:19]**| 2.3% = (499M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2027  | $997                     | 3.050% Senior Notes            | 3.050% **[0001090727-24-000064_ups-20240930.htm:19]**| 4.5% = (997M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2029  | $1,146                   | 3.400% Senior Notes, 2.500% Senior Notes | 3.400% **[0001090727-24-000064_ups-20240930.htm:19]** 2.500% **[0001090727-24-000064_ups-20240930.htm:19]**| 5.2% = (1,146M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2030  | $1,519                   | 4.450% Senior Notes, 7.620% Debentures | 4.450% **[0001090727-24-000064_ups-20240930.htm:19]** 7.620% **[0001090727-24-000064_ups-20240930.htm:19]**| 6.9% = (1,519M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2031  | $88                      | 5.500% Pound Sterling Notes    | 5.500% **[0001090727-24-000064_ups-20240930.htm:19]**| 0.4% = (88M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2032  | $557                     | 1.500% Euro Senior Notes       | 1.500% **[0001090727-24-000064_ups-20240930.htm:19]**| 2.5% = (557M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2033  | $895                     | 4.875% Senior Notes            | 4.875% **[0001090727-24-000064_ups-20240930.htm:19]**| 4.1% = (895M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2034  | $893                     | 5.150% Senior Notes            | 5.150% **[0001090727-24-000064_ups-20240930.htm:19]**| 4.1% = (893M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2038  | $1,486                   | 6.200% Senior Notes            | 6.200% **[0001090727-24-000064_ups-20240930.htm:19]**| 6.8% = (1,486M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2040  | $985                     | 5.200% Senior Notes, 4.875% Senior Notes | 5.200% **[0001090727-24-000064_ups-20240930.htm:19]** 4.875% **[0001090727-24-000064_ups-20240930.htm:19]**| 4.5% = (985M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2042  | $369                     | 3.625% Senior Notes            | 3.625% **[0001090727-24-000064_ups-20240930.htm:19]**| 1.7% = (369M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2046  | $492                     | 3.400% Senior Notes            | 3.400% **[0001090727-24-000064_ups-20240930.htm:19]**| 2.2% = (492M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2047  | $1,138                   | 3.750% Senior Notes            | 3.750% **[0001090727-24-000064_ups-20240930.htm:19]**| 5.2% = (1,138M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2049  | $1,432                   | 3.400% Senior Notes, 4.250% Senior Notes, Floating-Rate Senior Notes | 3.400% **[0001090727-24-000064_ups-20240930.htm:19]** 4.250% **[0001090727-24-000064_ups-20240930.htm:19]** Floating Rate **[0001090727-24-000064_ups-20240930.htm:19]**| 6.5% = (1,432M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2050  | $1,810                   | 5.300% Senior Notes, 5.125% Pound Sterling Notes | 5.300% **[0001090727-24-000064_ups-20240930.htm:19]** 5.125% **[0001090727-24-000064_ups-20240930.htm:19]**| 8.3% = (1,810M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2053  | $1,083                   | 5.050% Senior Notes            | 5.050% **[0001090727-24-000064_ups-20240930.htm:19]**| 4.9% = (1,083M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2054  | $1,087                   | 5.500% Senior Notes            | 5.500% **[0001090727-24-000064_ups-20240930.htm:19]**| 5.0% = (1,087M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2064  | $590                     | 5.600% Senior Notes            | 5.600% **[0001090727-24-000064_ups-20240930.htm:19]**| 2.7% = (590M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |
| 2049-2074 | $1,755               | Floating-Rate Senior Notes     | Floating Rate **[0001090727-24-000064_ups-20240930.htm:19]**| 8.0% = (1,755M / 21,930M) * 100 **[0001090727-24-000064_ups-20240930.htm:19]** **[0001090727-24-000064_ups-20240930.htm:19]** |

9375373440d7f349398d4b4f8d783eb14464a67a270e35a0d01e9dfa3dcd62c3

7c8fa16a89703731c3fd95b81ec37b38f2d3a2663920124af6ac092520f5f43c

- **Tempered Peak Season Volume Expectations**: UPS's customers have lowered their volume forecasts for the upcoming peak holiday season. External forecasts for the fourth quarter have decreased from about **5%** to approximately **3%**, indicating potential softness in demand. This reduction is partly due to only **17 shipping days** between Thanksgiving and Christmas, leading customers to possibly favor in-store purchases over online shopping.  **[UPS_3403609_8]**
- **Uncertainty in Negotiations with USPS**: UPS is still negotiating the delivery service agreement with the United States Postal Service (**USPS**) for services like **SurePost** and **Sunday delivery**. Any challenges or delays in reaching an agreement could impact UPS's operations and ability to effectively serve customers relying on these services.  **[UPS_3403609_13]**
- **Industrial Economy Weakness**: UPS has acknowledged weakness in the industrial economy, which could impact their domestic margins and volume growth. Despite efforts to manage costs and drive productivity, continued softness in industrial production may limit UPS's ability to expand margins without improvement in the macroeconomic environment.  **[UPS_3403609_2]**

596fc17e35083161e827f184ce87d0e641b3d999a4b88d95efd2ce1033b83d26

- **UPS achieved significant cost reductions and efficiency gains in Q3 through initiatives like 'Fit to Serve' and 'Network of the Future', leading to a 4% decrease in cost per piece in the U.S. Domestic segment**.  **[UPS_3403609_10]**  The company expects these cost improvements to continue into Q4 and into 2025, with additional benefits from automated facilities and productivity initiatives.  **[UPS_3403609_9]**
- **UPS is seeing positive trends in revenue per piece, expecting it to turn positive in the U.S. Domestic segment in Q4**.  **[UPS_3403609_18]**  This improvement is driven by a focus on revenue quality, pricing strategies enabled by their 'Pricing Architecture of Tomorrow', and effective use of surcharges and the General Rate Increase.  **[UPS_3403609_18]**
- **UPS's International segment is performing well despite macroeconomic softness, achieving an 18% operating margin in Q3**.  **[UPS_3403609_11]**  The company continues to enhance capabilities like automated hubs—**60% of volume goes through automated hubs**—and is the only carrier offering standard Saturday delivery at no charge in 8 markets in Europe, driving growth and increased customer share of wallet.  **[UPS_3403609_11]**

22bded15982d1662cabc020f33a6614af923329bcdea870d3d9d62d07867a857

- **Significant Margin Pressure Due to Increased Labor Costs from New Teamster Contract**: UPS experienced a $500 million expense related to the new Teamster labor contract in Q3, causing U.S. Domestic margins to drop to **4.9%**.  **[UPS_3362123_16]**  The contract is front-end loaded with **46% of the costs in the first year**, leading to continued margin pressure in the near term.  **[UPS_3362123_16]**
- **Uncertainty in Volume Recovery Amidst Challenging Macroeconomic Conditions**: Despite efforts to recapture diverted volume, UPS now expects U.S. Domestic average daily volume to decline by **low single-digit to mid-single-digit percentages in December** compared to the prior year, rather than achieving flat volumes as previously hoped.  **[UPS_3362123_12]**  The pace of winning back customers may slow down, and macroeconomic headwinds and retail demand uncertainties pose risks to volume recovery.  **[UPS_3362123_11]** **[UPS_3362123_12]**
- **Revenue and Mix Pressures from Customers Trading Down and Largest Customer Declines**: UPS is experiencing shifts from higher-yielding air services to lower-yielding ground services as customers trade down, and is also guiding down with its largest customer.  **[UPS_3362123_20]**  These trends may negatively impact revenue per piece and overall mix, exerting pressure on revenue growth and profitability.  **[UPS_3362123_20]**

b0610b78ca02a03883f87a01ceabb39263aabb9eee1c4cdcaf76e657416aa0f0

- **UPS expects to generate $1.3 billion in savings from the Fit to Serve program in 2024, which is ahead of schedule and will significantly boost operating profit starting in Q2.**  **[UPS_3380261_9]** **[UPS_3380261_17]**
- **The company is achieving record levels of productivity and efficiency, with higher packages per hour and improved cube utilization, driving profit uplift through operational excellence.**  **[UPS_3380261_10]**
- **UPS is steadily increasing its penetration of Small and Medium-sized Businesses (SMBs), reaching about **29%** in Q1 and projected to exceed **30%** by year-end, contributing to revenue growth.**  **[UPS_3380261_22]**

1768bf27b7fbf8b1adc332699bd2f5b548e900d5cf4a1970a31687c8d58c8bcc

- **UPS is experiencing a shift in customer preferences towards lower-yield services**, with customers trading down from air to ground and from ground to SurePost, which pressures revenue per piece and margins.  **[UPS_3393939_9]** **[UPS_3393939_17]**
- **B2B volume is down year-over-year**, as customers who left during the contract negotiations have not yet returned, impacting higher-margin segments of the business.  **[UPS_3393939_9]**
- **Industry oversupply and negative yields suggest a lack of pricing power**, which may hinder UPS's ability to improve margins despite peak season surcharges.  **[UPS_3393939_12]**

45126a911cb288240affaee213002f53fa5b73c72d54de5157fd6fd54f7131c0

1. **Domestic Package Volume and Mix Effect**  
   **Q:** What's happening with domestic package volume and mix, and how will it improve?  
   **A:** We observed two significant impacts on our domestic volume in Q2. First, customers favored our more economical products, shifting from air to ground, and within ground, from ground to **SurePost**. Second, new e-commerce entrants with different models extensively leveraged our **SurePost** product. We expect this mix to rationalize towards the end of the year, as indicated in our forecast, and we're actively working to balance our product mix in the second half.  **[UPS_3393939_8]** 

2. **Margin Outlook and RPP Trends**  
   **Q:** What is the margin outlook for the upcoming quarters, and how are RPP trends impacting it?  
   **A:** We anticipate our U.S. domestic package EBIT to increase by **10% to 15%** in Q3, with growth moderating in Q4 as comparisons level out. **Revenue per Piece (RPP)** growth is expected to moderate from negative **2.6%** to near breakeven by year-end. We have confidence in achieving our second-half forecast due to a strong volume pipeline and cost efficiencies from our **Fit to Serve** program, which has reduced **11,500 resources**, or **90%** of our target.  **[UPS_3393939_10]** 

3. **Peak Season Surcharges and Pricing Power**  
   **Q:** Are we at an inflection point to push prices more aggressively with peak surcharges?  
   **A:** This year's peak season is highly condensed, with only **17 days** between Thanksgiving and Christmas. We expect **December 18** to be the highest volume day ever. To service this demand efficiently, we must charge appropriately. The peak surcharges reflect this need and are set to stick due to the tight demand environment. Additionally, we're moving from the art to the science of pricing using new tools, allowing us to provide value to customers while enhancing our margins.  **[UPS_3393939_12]** 

4. **Focus on Value Over Volume**  
   **Q:** Has UPS shifted focus from value over volume by accepting lower-value volume growth?  
   **A:** We're not chasing volume. We accepted new customers with certain volume expectations that exceeded what we anticipated. While their demand was higher, we're committed to focusing on segments that value our end-to-end network. Our **"Better, Not Bigger"** strategy remains intact, and we'll manage through this by leveraging the increased volume to drive productivity improvements throughout our network.  **[UPS_3393939_13]** 

5. **Adjusting Network and Fixing Profitability**  
   **Q:** How will you adjust the network and fix profitability at current levels?  
   **A:** We're accelerating our **Network of the Future** initiative. We've closed **35 operations** this year and plan additional closures in the second half. We're also launching **23 new projects** to drive automation and efficiency. Internationally, we've flattened our structure, eliminating a layer to speed up decision-making and improve margins. These actions will enhance productivity and reduce costs, contributing to improved profitability.  **[UPS_3393939_15]** 

6. **Managing Largest Customer and Returns Business**  
   **Q:** Will you meter growth from new e-commerce customers, and what's the size of your returns business?  
   **A:** We continue to optimize our relationship with our largest customer, representing **11.5%** of total revenue, consistent with last year. For new e-commerce entrants, we focus on serving segments that respect our end-to-end network. Our returns portfolio, including the integration of **Happy Returns**, is a unique offering that drives growth in our B2B segment, leveraging both digital capabilities and our physical **UPS Store** footprint.  **[UPS_3393939_11]** 

31c8a4ebd3362d8430dfd38fa9d10992618c275d15d69bed4d20d7c04f183151

- **UPS expects strong volume growth and operating profit improvements in the second half of 2024**, including double-digit growth in U.S. Domestic operating profit in Q3 and exiting the year with a **10% operating margin** in the U.S. business.  **[UPS_3393939_12]** **[UPS_3393939_10]**
- **The pending acquisition of Estafeta in Mexico** will significantly enhance UPS's position in North America, creating a **$1 billion-plus business**, covering **95% of the population in Mexico** with 145 facilities, and supporting the company's near-shoring strategy.  **[UPS_3393939_18]**
- UPS's focus on high-growth areas like healthcare and SMBs is yielding positive results, with the **Digital Access Program (DAP) revenue growing 7.7% year-over-year**, now with **38 partners worldwide and over 5.8 million shippers**.  **[UPS_3393939_11]**

dff521a9e498e5f721eed0104167880a0ced91f7f1c1f3c4a934fe9c1252b6b1

- **International margins were lower than expected in Q1 2024**, with a **one-time item affecting margins** that was not initially disclosed, and **demand was down** in the international segment.  **[UPS_3380261_11]**
- **Revenue per piece (RPP) in the U.S. was flat in the first quarter**, and anticipated RPP growth relies on **fuel surcharge increases** rather than underlying pricing power, indicating potential pricing pressures.  **[UPS_3380261_9]**
- A **mix shift towards SurePost**, a lower-revenue product, is causing a **drag on revenue per piece**, suggesting challenges in product mix and competition in higher-margin segments.  **[UPS_3380261_12]**

9a64b330653fd1324e1390fddf0fd49bae3f48558045e32bb7f1587ffedc8d88

1. **USPS Air Cargo Contract**  
   **Q:** Did UPS win the USPS air cargo contract profitably?  
   **A:** UPS won the air cargo business from the USPS with an innovative solution using their integrated network, allowing them to optimize block hours without purchasing new aircraft. This contract will be **margin accretive and EPS accretive beginning in year one and through the life of the contract**.  **[UPS_3380261_8]** 

2. **Volume Outlook for Second Half**  
   **Q:** How are volume expectations shaping up for the second half?  
   **A:** UPS expects **slight positive volume growth in the second quarter** and anticipates a **low single-digit increase in the second half**, driven by improved sales pipeline visibility and sequentially better trends since August.  **[UPS_3380261_15]** 

3. **EBIT Improvement Drivers**  
   **Q:** What are the key drivers for EBIT improvement in Q2 versus Q1?  
   **A:** The EBIT improvement will be driven by **marginal volume growth**, natural accretion from maintaining volume levels, and the ramp-up of the **Fit to Serve program**, which will generate **$1.3 billion in savings**, with significant benefits starting in Q2.  **[UPS_3380261_9]** 

4. **Productivity Initiatives and Cost Savings**  
   **Q:** What actions are driving profit uplift aside from volume and headcount reductions?  
   **A:** UPS is enhancing productivity through record levels of **cube utilization**, improved **packages per hour**, and reducing turnover, which leads to higher productivity. They are closing sorts, moving volume to automated facilities, and running a safer, more efficient operation.  **[UPS_3380261_10]** 

5. **Fuel Surcharge Increase**  
   **Q:** How will the increased fuel surcharge impact pricing and the market?  
   **A:** With rising fuel prices, UPS is adjusting its fuel surcharge, which is expected to stick despite not affecting all customers. The company believes the pricing environment remains rational, and excess capacity is being absorbed, supporting the surcharge increase.  **[UPS_3380261_14]** 

6. **International Margins and One-Time Items**  
   **Q:** Why were international margins lower, and what is the outlook?  
   **A:** After adjusting for a one-time item, the **international margin would be 17%**. The first quarter is usually the lowest margin quarter, and UPS anticipates international business margins to be in the high teens as planned.  **[UPS_3380261_11]** 

7. **USPS Contract Accounting**  
   **Q:** How will the USPS contract affect domestic margins?  
   **A:** While the USPS contract revenue comes through Supply Chain Solutions, the use of U.S. assets means allocated costs will positively benefit the domestic margin.  **[UPS_3380261_11]** 

8. **Volume Improvement Drivers**  
   **Q:** What drove volume improvements as the quarter progressed?  
   **A:** The improving volume trends are largely due to the sales team's efforts in winning new business and increasing penetration with existing customers, meeting them where they want to be, despite a challenging market environment.  **[UPS_3380261_19]** 

9. **SMB and DAP Growth**  
   **Q:** How is the progress on SMB and Digital Access Program growth?  
   **A:** SMBs now represent about **29%** of UPS's business, expected to reach over **30%** by year-end. Internationally, UPS has a **62% share** in SMBs, and the DAP is resonating well, with projections exceeding **$3 billion** in revenue by the end of the year.  **[UPS_3380261_21]** 

10. **Pricing Environment and GRI Effectiveness**  
    **Q:** How effective has the General Rate Increase been this year?  
    **A:** UPS expected a **50% keep rate** from the GRI and realized about **250 basis points** in the first quarter, aligning with expectations. The base rate is expected to continue over the year, contributing to revenue per piece growth.  **[UPS_3380261_22]** 

11. **Returns Business Profitability**  
    **Q:** How does the returns business contribute to profitability?  
    **A:** Returns are treated as a **B2B business** where consumer returns are consolidated at UPS Stores and returned to shippers, offering attractive margins due to increased density.  **[UPS_3380261_13]** 

12. **Pension Contribution Strategy**  
    **Q:** What is the current approach to pension contributions?  
    **A:** UPS's pensions are over **90% funded**, allowing the company to pause and reassess its asset liability and funding strategy. They're exploring strategic options but have not made any decisions yet.  **[UPS_3380261_14]** 

13. **Second Quarter Guidance**  
    **Q:** Can you provide more color on second quarter guidance?  
    **A:** UPS is maintaining its first-half guidance of a **20% to 30% decline in profit**, expecting slight positive volume in Q2. Cost per piece will improve in Q3 after anniversarying the labor contract costs.  **[UPS_3380261_12]** 

14. **Productivity Savings Progress**  
    **Q:** Where does the company stand on the $1 billion productivity savings?  
    **A:** The productivity initiative is **progressing slightly ahead of plan**, with over **80%** of resource reductions to be complete by Q2. UPS is on track to achieve the **$1 billion** savings this year.  **[UPS_3380261_16]** 

15. **DAP Growth Slowing**  
    **Q:** Is there a slowdown in Digital Access Program growth?  
    **A:** The first quarter saw DAP revenue grow **3%**, which was expected after a **51%** growth last year. The slower growth was due to amending terms and fees with partners, with growth expected to pick up in the second quarter and beyond.  **[UPS_3380261_20]** 

16. **USPS Contract Volume Onboarding**  
    **Q:** Are there minimum volumes in the USPS contract, and how will volume be onboarded?  
    **A:** There are **minimum volume commitments** in the contract to protect both UPS and USPS. The goal is to onboard all volume before peak season, and teams are working closely to ensure a smooth transition.  **[UPS_3380261_17]** 

51c24024e93d9f12766431dc3078b8d41b491d76cff1530b6b2a49db40062b4f

- **UPS has significantly improved revenue quality by focusing on small and medium business (SMB) customers**, increasing SMB mix from **23%** to **29%** since 2019, and raising net revenue per piece from **$9.99** to **$12.54**.  **[UPS_3362123_20]**
- **UPS is rapidly winning back customers and expects to regain lost volume before peak season**, with approximately **40%** of the **1.5 million** diverted packages already recaptured.  **[UPS_3362123_12]**
- **UPS is investing in strategic acquisitions like Happy Returns and MNX to drive growth**, with the healthcare business projected to generate **$10 billion** in revenue this year with **double-digit margins**.  **[UPS_3362123_18]**

8e50b4a1c4d111644fda142882e7aca6cdc4f5cee1555f142bf25bcd531c550a

United Parcel Service Inc (UPS)

Financials