FedEx (FDX) 17 Dec 202021 Q2 Earnings call transcript

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

Good afternoon, and welcome to FedEx Corporation’s second quarter earnings conference call.

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

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

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

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

Rob FedEx and And views Fred President Joining Mark and CFO; Allen, Subramaniam, will are and on FedEx Executive CEO Mike the us Brie Officer; now, the CEO; Colleran, FedEx share Vice quarter. call and Maier, Counsel Fred FedEx Marketing Freight. John CEO of Carere, VP, Smith and Express; Ground; Communications President and Chief Henry CIO; of Executive and Secretary; Smith, of Raj Don President, Lenz, and Smith, President and Chairman on Carter, his today Vice CEO Information President Executive President General Executive and Services COO; VP,

Mickey. you, Thank

and to spatially administrative of then Let in the comment. me we by are room SMC participating with our Due one distanced four the Zoom members SMC the of situation, one five COVID-XX make us. have members

in but clunky little So, we answers, and be the a reason. here for off the may that’s

our life thank protective first have team our need me shipments, was Company. all medicines, transportation the a continued the global transporting what built as gear nearly strong. for ground These rollout and Let daily to helping vital XXX,XXX things priority customers needed world shipments and FedEx moving and this our we the real-time have to vaccines exactly eradicate which of pandemic, customers the members Express technology to to planning our ID visibility amid keep in disease. our team, to of been And vaccines. months new network has we Time-definite BXB rigorous is their SenseAware our Particularly all the acting do. of run role to team network play safely the industries. provides is need time, important air our no and of awful And system, higher COVID-XX recent have effectively transport unmatched of critical proprietary like solutions on and now, experience, on

we’re record-breaking work, our shipping we peak where season, midst volumes. in critical to In expect the this addition of holiday

customers. Our continued their hard the growth is strong the second commitment earnings our of revenue team members quarter another reflection to work and during of and our

confident and FedEx very for We’re optimistic in our strategies future. extremely

his your to Mike, take will ask after which provide our first I’d officially me comments, earnings who like Brie? Let their Raj, to CFO call and Brie, to now as questions. welcome we

Thank and Fred, good afternoon, you, everyone.

in e-commerce. many economic in by the countries, coronavirus its near-term U.S. powered pre-pandemic remains levels In third surge unclear. outlook spending is and the goods With the above gains

should Positive are as capital consumer production. appetite strong vaccine developments Inventory goods spending supporting for growth recovery drivers seeing increasingly front of place. activity are also in a industrial investment. the business in restocking strengthen on We’re the the beyond and

the pent-up rebounded virus and International however, released, volumes latest with firms pre-COVID sector full more short-term pre-COVID headwinds emergency a to Global closed demand surge. levels strong However, remain third China’s from been recovery. recover year leading based growth is around and quarter the and we ends Europe is When containment. trade sector the in is faces has broadly are recovery does goods solid, the calendar East health Sentiment slower the runway. In long with in trade and and services growth growth against ‘XX of surpassed industrial world. Asia. while manufacturing challenged among is becoming uncertainty outperforming faces should virus the short-term merchandise service services. see a production contrast has economy

While increasing outlook. term high, prospects in vaccine confidence medium uncertainty remains the

auto, of As the I growth our has last sales has impact packages day little U.S. grew service and a XXXX, E-commerce more had In million excluding This season retail goods than holiday has that. per year-over-year. the services grew year-over-year e-commerce nine expected of X% The volumes e-commerce more XXXX, XX are up proved from triple XXXX. industry. package traditional first acceleration food on in pandemic the XXX certainly XX% of volumes. to sales gas, profound quarter, by a discussed e-commerce to months accelerated while than million shipping

shipathon, me holiday for heard and shopping season. season On prepared levels the peak last online we this unprecedented the call, as calling of this shipping you as

closely and customers response. early very ship the get incredibly with with to been early, worked we’ve have their shop to We out pleased message our consumers,

residential steps Ground to severely e-commerce, expansion including we the We across has of U.S. convenience Since customers Sunday capacity we this paid available retail the FedEx to entire the their solutions our industry for expanded develop innovative worked constrained, took nearly of The needs prepare growth made have automated than delivery, to residential been with XX capacity we meet in XX% the million and our networks residential have While peak. week proactive certainly investments then, to off. U.S. a September. facilities in X-day delivery Sunday population more deliveries. have of

with that has given X-day volume investment speed from in for Sunday more Our led a XXth. XXth XX% near-impossible increase growth daily match to delivery has without e-commerce our than retail to national of The advantage convenience October in volume to delivery offering. November a is us average record network

We shout are a the and course, our very to customers, job and the FedEx an our out at huge Dollar General and team alliances always of they’re services Walgreens incredible peak. with pleased does providing office who

highs consecutive We have in volume record six new also set the for past months. returns

over thrilled a this XX% with portfolio year-to-date. secret ShopRunner capabilities. at upon pending fiscal we digital we Manager It increased have physical And and incredible FedEx are expand the we in monthly talk to season later. about these intersection to of acquisition. that of success have returns Delivery digital am our us, several e-commerce grown the Raj will proud the next network record of portfolio. superb lies course, With incredibly the digital enrollments highs this I months. e-commerce the our no continue expect year-over-year more than is more how

Turning to revenue quality.

on right customers enabling all We at laser-focused best price, provide the to of our ensuring the capacity for throughout have customers. us remained peak possible is this service for

and strategy yield quality and management, surcharges, customer of requires product revenue course, the balance mix. right of Our

U.S. revenue expenses course, quarter, the quality last of additional played critical in have helping the industry. for offset had strategy of peak, I associated a the are residential total holiday In the ago. FYXX discussed volume volume season with unprecedented our the normal surcharges virus As for QX, our FedEx several XX% surging. versus a surcharges XX% peaks role to and package implementation new this domestic a peak believe the year of

yield on we very in residential of U.S. be residential networks, packages increase QX, several focused and year-over-year. post-peak, more by year-over-year FYXX In domestic mix. been that increased XX% XX% our surcharges modify the SmartPost and effective XXth yields have those we’ve yesterday XXXX. would effective will by than announced January and product With yield We overall we

segment. to Finally, paramount quality our revenue of small growth is the strategy medium our and

our such, customers we and majority medium continue temporary and the to As of SmartPost change the surcharges. protect from small

is segment strongest We growing are segment, market taking medium small year-over-year. the in it our and volume share and

medium continuing despite grow go-to-market have challenges the improve past customer are businesses increasingly our business, while their We digitizing faced experience help the to small strategies to year. and their this they

one in COVID-XX of As of Fred the the FedEx two States. vaccine is proud to discussed, United primary carriers

critical a come. the for to around of vaccines months the play world in will We distribution role

of to the due turn expected to Europe Asia Current by flying. capacity intercontinental me indicate international. let for air year-over-year Currently faster is to passenger recover Europe expected to levels Asia estimates aircraft reduction creating is expected Air pre-COVID XXXX. levels to passenger for to to global recover the cargo U.S. XX% FedEx. as in than is passenger October, pre-COVID U.S. recover that by to XXXX and an lanes, and to opportunity key capacity Now, significant was down capacity demand to cargo market

internationally. goal take share beyond capacity Our the is profitably keep to and market it shortage

small volume protect from reprioritizing such, for medium As from business we that the with stay the business and FedEx will customers, prioritizing and long resellers, term. we are ensuring any

We With profitability strategically embargoed times deferred our services. growing have our capacity, customer are internationally. balancing and constrained base while near-term adjusted transit we

E-commerce international to international per enable will, further lighter market will revenue drive parcels. into it significant We also opportunity. flight. increase however, will lean a to continue as e-commerce international It improved remains density flight

So, year-over-year yields yield pound express QX, international globally. pound digits will ‘XX, increasingly per was In become important double metric. air an per export

positively past remarks. turn quarter. while the with key planning during I’ll that, navigated I’m for So, that it Raj this will to for with pleased for all to years impact over our many business come. summary, in initiatives incredibly our performance We’ve shipathon nimbly And his

Thank everybody. and you, good Brie, afternoon,

by line, team working time. keep are start motion during front thanking in on diligently the me who especially echoing unprecedented global truly our this Let in those world Fred’s the sentiments members, to

strong of we season volumes handle We as are the service record-breaking shipathon peak for midst extraordinary and our with an deliver in customers.

collaborating been peak were levels and our falls preparations the season holiday the ways, many including capacity e-commerce with date. shipping this new we planned innovative We due March through to flexibility at leveraging volume. on service in and and well-positioned our network since deliver year this our facilities December, to our ensure repurpose While making. year, our during we to in throughout of months operating solutions, and November have to meticulously season peak In are customers regular enhancing busiest like

we shipments As in the here wave vaccine also delivering of record these U.S. first COVID-XX we’re handle the volumes,

vaccine Boston, delivery In XXth Center on Boston Express X:XX at fact, to Medical first FedEx in the U.S. am Massachusetts. courier the the made Eastern, December

it team a most around as health most a among proud ready couple This that a effort end resources members is they such be built and of aircraft, comprised scale to who vaccine importantly as of a the And our scale massive world. of important need one the what shipment Our that a in and unparalleled of crisis Simply a hand, to power this is for be have dedicated effort our network requires This network means at nearly global internationally in our will network are to world our very we such safely. this FedEx in to XXX,XXX we the And to do. highlighted, history and most of FedEx they dedicated to of deliver vaccines. as was team our most is Company. Fred between important in work are each any we help distribute critical can of the shipments is of mission quickly of this available. become that and the time-definite shipments vehicles and scale pick And address. the COVID-XX networks world stands these Express distinction And transport honored other part XXX the The pandemic. part matter days. is part delivering XXX,XXX the vaccines. mission of any The network the our precisely additional to part of our put, will up deliver

XX growing last investments prepare will more this across to largely improve to optimize Mike and last growth Ground e-commerce convenience turning improve we foundational a week; density, for were by months network increase building to initiatives items; Ground highlight efficiently of details, have like strategic General, a capabilities quarter. density; would help I market. and critical put Ground integrating in to mile; but provide package over results each the SmartPost the our strong to an yield initiatives. significant decisions of combination office network, course, that Walgreens, for QX our expanding residential These many We the we expanding results real-time many the U.S. the efficiency and own and technologies transportation in enable of These the address QX. place and day and include Now, was us in to delivered volume, of and the the every that volumes increase decisions the delivery of the segments profit into driven peak achieved in FedEx these of the services last network’s of accelerating locations. with Indeed, FedEx quarter critical investing our expansion Dollar our mile large These retail handle season. board.

Now, banner team’s of direct performance laser in operational reflection quarter. had executing TNT turning a global shutdowns to is even fire, excellence. pandemic. Express. remained simply record a on the Express The FedEx They strategy focus our profitable growth during and revenue the physical integration on This

double-digit Freight remains another the leveraging revenue margin. further success a team portfolio, way quality. in on of the benefits growth operating come. for finally, had integration to FedEx We for profitable build Europe focused years quarter Freight continue outstanding to the strong with pave network The to And and

the of was two result ago, positioned nearly are As the QX the a which direct strategy for of we success said, FedEx. and we well started we years of future

our strategic in operating collaboratively; collectively; our shareholder principles shift digitally. long-term operating in which During our is operate innovate another The new meeting, are, future-ready yet principles, and strategy. September step introduced we our compete

about we’re Let Brie and on value a value to these take role when each operating FedEx for as already the turn. proposition we new on powerful me customers. they unleashing delivering collectively is customer vital play core. talk opportunities in a our Each FedEx for each various collectively It touched ways compete offers customers. company Compete expectations. remains our unique unlock brand on moment the in under companies has

important And and so, an principles, for shift I’ll operate new collaboratively strategic innovative focus on the two and collaboratively is FedEx. digitally. Operate

market. the the While right at holistic will and a costs companies and remain networks operating building our the right ensure within independent, that compete that help to expertise dynamic package networks to collaboratively, operating approach in we in the have we By are are likes collaborative our serve. the we right

increase last are We in FedEx elements of just serve. including mile reduce of optimization of and collaboration a ways, couple have different network various discussed of adapting, examples calls, cost utilizing Ground. earnings and collaborating These and ongoing support are previous to FedEx our to The and a efficiency Freight’s and digitally, that many bird’s of on how millions our final team day, our will the customers, network shareholders we principle, every chains members. The deliver size eye the packages innovative transfers is future us global view scale for and and gives of supply trends. we

and infrastructure, our network of physical it’s amount generates significant data. Beyond drives the a that technology our

and We’re and performance, focused drive this relationships on stronger using strengthen customer unlock efficiency. greater data technology to

our Over and the to significant strides innovate journey have weeks we on made digitally. months, recent

of into data First, using works members. digital putting and new team focused and transform to it context FedEx the organizations data physical our the and experience of on customers formation and our

connecting will acquire expand smarter. identify drive digital momentum to follow the allow even base, Microsoft professionals customer to agreement e-commerce and thus recent launches our announced we existing larger and to work by new of brand and improving combined team with This portfolio. and product online ShopRunner’s collect e-commerce our significant SenseAware we a and brands collaboration ongoing as recently our play a in is to to role new ID our ShopRunner. value FedEx to ability experiences. This merchant data immense us shoppers, capabilities shopping will ways of Surround will platform with Second accelerate merchants

it for remain the in as and me over that, Chief inaugural our his Financial to future Officer. FedEx. the Fred let very As Mike? said, we strategies Mike of With confident turn call

afternoon, everyone. good and Raj, you, Thank

as the voice call. the the Before new move highlight a into like to few on financials, points I’d I

world-class legacy ahead. to values I he now guidance build Alan First, me The foundation Graf lead I’d along and exceptional and the in leadership recognize the of like him the years building his and in team thank are to an instilled for standards for upon way. the

what’s for to call important hopefully to meet months opportunity appreciated the the few your the over past many on environment I will ahead. hear forward and more have you perspectives. and in look FedEx, connect that I opportunities and to sharing visible, becoming a post-COVID of Next, ahead with the dialogue years today, continuing with expand the

speak make are we to we we Finally, this vantage in for team from new inspiring have see future-ready team truly environment, as on to say said lies in I what unprecedented the deliver strategies front call been FedEx place to action must has what tirelessly, this before line that excited and point. how my executives it working me it the reinforces in From the ahead. members have

with pleased to the results. I’m very second performance. our Turning quarter

variable include medical services. costs safety costs expenses an security pandemic. members and in COVID the safety through related quantified the operating income and priority XX%, international delivery, to volume excise demand were partially Ground, strong offset team equipment, segments operating operations customers. growth costs adjusted quarter in expense, we from our across increased a approximate And they are limited operating approximate supplies year-over-year, ensure aviation support by additional in initiatives, and $XXX at our million and all network benefit to pricing the margin service transportation have place FedEx surge to reduction compensation Second and to CARES factors costs personnel $XX residential by volume an by of offerings increase due $XX year-over-year primarily and million continued taxes to a U.S. XXX% driven of including provided expanded improvements increased COVID-XX-related that additional package million the higher protective Act. do of personal cleaning contingencies, These and not COVID-XX-related for in These

execution, will strong the $X.X all of margin points, global segment X.X%, Coupled than second our For strong to revenues the more billion. of XXX operational operating a quarter adjusted Driven growth strategies capitalize Ground volume of generated operating e-commerce Express an points basis X.X% quality to up segments increased advance. by million. three pre-tax with The on transportation best Freight the frozen operating mark adjusted of plan. The contribution solid XX quarter, rapid by margin basis cost Pension to stellar under and to to will Express continued incurred million be as $XX Netherlands a in TNT second profit defined of operating record Plan. growth separate posted to loss employees segment results. We our aligning the XXX related a improved $XXX on to the market earning years, margin Benefits a net XX% multiemployer -- affected pension amendments revenue second and focusing quarter Express earned noncash the benefits volumes. begin margin, and

to Our for tax of quarter favorably in tax rate by prior IRS on which million, under $X.X compares and period. by issued million quarter was That tax period, equivalents the and impacted year billion with We year’s a credit the billion substantially our lower with during $X.X This tax year cash effective in benefit quarter. favorable $XXX the to the second attributable prior benefit available facilities. a $XXX guidance earnings. primarily of X.X% rate XX.X% the compared the was included depreciation to ended

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

COVID-XX globally quarter, year continued our adds the the to operating significant to While improve and costs earnings. ability business forecast as clouds current second full as demand well demand forecasts, cases rise uncertainty to current in in

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

to be in If accruals remainder management income anticipated we continue, labor incurred compensation yield to expect trends FedEx is at In variable of Freight and higher operating XXXX. improved contribute current addition, the fiscal to growth and during revenue increased costs FYXX. and our productivity

income first higher the a expect second the rate half half. year of we addition, tax for In the effective versus

During costs Act. from quarter, aircraft we of to third also CARES benefits maintenance expect end headwinds the the the see from and

period. expenses quarter one versus will last fewer have the down million year. We year In second in in weekday from addition, $XX operating prior integration quarter, of TNT third incurred the million the $XX

completion aggregate We expense of FedEx of program expect physical Express through be calendar the in Express $X.X TNT to the XXXX. the integration network integration early billion into

the to and the opportunities addition of not particularly ‘XX, ShopRunner in the As are completion we we and to be Raj further pursuing in existing with Europe. approach physical highlighted in cash and early The will evaluating acquisition, optimize transform the business, FedEx be Express to the will which funded material integration earlier, initiatives international network cost integration balances.

this transaction month. We expect to complete the

We continue capital lower approximately expenditures capital is will billion, year’s $X.X to expect spending. which million than $XXX FYXX last total our

until fourth quarter, finalize Ground our we to capital spending In demand. plan additional versus e-commerce network that in FYXX, While year. surge we in spending by our FYXX our we investments plan capital make FYXX our will won’t increase driven expect this the FedEx

focus will by remains improve strategic from profitably management close I’ll we improvement structure, strong confidence session. demands. increase reiterating package that, tradition and turn CapEx and cost meet the capacity our Our continue on in can our and to benefit market question-and-answer our our efficiency U.S. we opportunities cost the reduce that investments as in rose our and with our markets, and And freight future initiatives. to to excitement international yield

first Instructions] with you. go Thank Please ahead. Our is from David Stifel. question Ross [Operator

side. I all How to investments very everything showing back closer packages know a question should at teens. investments margin, we Ground, margin Ground, the think of and that and helping as couple to wants going the much. the everybody SmartPost there’s consolidation Yes. on about the to Henry, then on to and now, into we for mid years? make over the Insane going margin Ground next the move, a you get about on sure it’s there, incremental delivered. on you lot only get growth of the Thank Right probably a XX%

David. second operating basis points income year-over-year. margins improved Mike XXX said, and in as the Well, improved XX% Thanks, quarter

customer preparation earlier the as impacts potential the different years. to looked on occurred past resource timing resource and our we of of expenses unique COVID and anticipated were very much availability, very leading the up ramp-up environment higher into than Peak the network. Given much prior than volume the it in coming peak, in had

new -- on We handlers. to be are and hiring the continue we have been have package of and been extremely aggressive

In fact, and providers package numbers onboarding speak. challenges we We still we adding are and drivers new as for recognize service record handlers of vehicles.

better peak settlement their the pulled ready by be number we businesses rates enable to peak. for a weeks to forward So, of

of X this things All more are and XX included these facilities, QX. higher capacity preparation we these peak operating handling facilities also associated new automated X variable X affected year’s package or in comparables. with normal and line this than construction shutdowns with facilities number new in in and due year-over-year acceptable shape than came facilities expanded Merits peak later incur permitting to normally and of due stations, large COVID-related of expanding than last is on than automation A sort expenses Investments it spring. new delays years additional for year comp accruals, to equipment. much than past preparation additions in the regional material

think handlers, you sort weeks later last before a acceptable X regional came year. in which have employs X the any been Thanksgiving, would would on if other XXX fact, one than In which to the about weekend about been have facility, line

Sunday automated of quarter, residential service X-day stations. the As exist in of formerly that package we roughly the addition to processing XX we addition facilities, and as on in sorts XX% coverage as population. the well of didn’t U.S. expanded our XX% expansion This the of required stated from second pre-loads

see next to expect Finally, as quarters. each Thanks continue in improvements today, assuming two business margin question. conditions year-over-year we we change them the for of no the significant in

And question we Oglenski will our Barclays. Brandon from take next ahead go go with ahead. and Please

just question. and also or taking into for this want is my a better about everyone, you Can customers comments think basis. tonight, Raj ShopRunner bit talked afternoon, on deeper little retailers you in I you release integrate prepared and Brie. the acquisition? guys to for thanks an with the really how end-to-end Because Good one Hey. Maybe dig the and

there, the even offering play technology So, this incentives user of a retailers the is is this Thank ShopRunner about to the current this or of or is base on more Company? more the you.

Brandon. you, Thank

then I’ll over start, Brie. to me Let it turn

perspective are very the to just Firstly, consumers the connects that in and components fact the technology important. technology this, that it platform merchants brands of and put talent to critical is here, very and the

also and have is combination platform thing with our of and merchants the they more open capabilities FedEx’s important online member together trust create -- shoppers the directly physical and e-commerce combine that a that and checkout, e-commerce infrastructure. brands with established connects we ShopRunner goal that benefits those digital shoppers. and being to is merchants offering The you with capability love seamless And an ecosystem our and benefits that collaborative

our think we So, we it’s with I points as ShopRunner, going don’t marry couple successful the marriage. Brie, capabilities. be and of want to from is very a great a along We this technology know think the there. talent you to add

Raj. Thanks Sure.

Sam team having excited join very ShopRunner his the acquisition us. about and and We’re

interesting is a we have term that able But, the from capabilities ShopRunner We we offering. consumers. and logistics share all first be go-to-market going the ShopRunner existing the I offering the their think, can very work that the create to with the greater their value certainty brands to more the not that make some at details current have near looking with acquisition, at the a product We point. capabilities to efficient to on three reality to I’m we’re as even driver in see things this

and advantage order us brands, optimization. stream earlier. logistics incredible an see Second, is data visibility can a catalog with into from This we their these their

a take post visibility purchase and will experience, catalog the about purchase without we post can that post consumer best-in-class order think you experience. into you when purchase Third, think ShopRunner’s have transit, we

got we’ve the So, question. But, of things the and super come those excited. to Great are gate. first out three lot a more we’re

And we’ll go ahead. Please Susquehanna. question Majors and next go take from Bascome with ahead our

for questions. Thanks Yes. my taking

you’re businesses really results currents we could your not beyond? pre-COVID a still type customer verticals, of that forward, products so year you. I of in now. or driving that and hoping business be some in as about below or Looking space, the was and really the next the challenges there bit FedEx others whether excited quite right cross into deeper many or of Thank good a and baseline year dig are the are parts you talk recovery about and

to me start -- excited segment continue segments let excited actually the see better. at to mean, the business in here. across progress get to [indiscernible] our there’s metrics ratio, making [indiscernible] industrial segment and for just fastest obviously, it it’s and Well, very by of manufacturing. we we systems the all-time just we’re the here, quarter. saying retail, inventory, And density the the for improve But and our opportunity that performance production the about other as to improve it’s continue and look business even about -- sales If and growing recovering are all an that e-commerce. I is is is your performance upside this we going is our point,

should come and the they core as few upside an back restocking over happens then as that the be So the months, well. next to business

international -- space, same we that we segment, is today the that premium. At we’re very in about fast e-commerce filling right space, the time is on made So, are we the the investment progress that actually growing at have -- clearly it. capacity we in are made provide and excited the seeing we into

segment And trends. continue. be We continue recover as of to that advantage expect BXB on the should top our to current back, that businesses and comes

medium short but to you we’re I these want term, expect. we the is going. if Brie, the in term, trends don’t know, So, add optimistic COVID-XX choppy that? that’s about are what And to where immediate

you’ve think, I covered. No,

a from I that other perspective. the we’re add think, there is not yet I from a quite would only BXB recovery detail

where and They That’s We to important from hat’s back. business signs a coming early And have done mix some the has most European perspective. business this Europe. incredible some while of my it’s to off obviously us work strong BXB come out their not seen early, momentum have team. year,

is at right that So, sure. to for additive we’re where now

our Please next ahead. go And and question we’ll Scott ahead Schneeberger from go with Oppenheimer. take

U.S. And how trended stating if has could -- to Brie, growth call on differentiate expect? I you trends you it in value Europe said, segue my great call seeing to just -- you then. hear question, August. a It’s you and between last and Europe I you’re BXB just you in what was that some quarter last had since curious heard

me. and -- and can help Brie Okay. start, Don can we I’ll

started Europe we Across the pandemic it of the side. world, quarter. the behind. you positive at As terms and to over United manufacturing, recovery on of QX the said, at and to strengthened other industrial into back States, the lap leading then China way in crisis here the the and is yes, the and is the as economic lagging coming go direction And started beginning has look BXB production

So, in below still it’s seen is BXC. in the by levels. finally but we’ve And driven the Europe, growth, BXB pre-pandemic recovering but

So, Don, comment on the to segments? want international do you

recover. not No, around other see optimism the of rollout BXB that to we begin economies a on and think open expect volume basis, add and recover when continuing to up, lot the comes helpful Raj, the and vaccines that’s companies than that’s I global as the certainly fact to and back a countries

mentioned to beginning side basis of introduces Brie to optimism well, that’s a the we’re by the signs get see it BXC about European think, on and continues is the to I our some sequential Raj, points, now BXB certainly business well. Only in data as revenue European additive on life certainly to expanded, story. you the right but some growth improve and BXB driven as

anything Brie else? Don. you, Thank Okay.

it. you’ve No, I think, covered

Okay. Thank you.

and ahead go go our Amit question from next take Please with we’ll Bank. Mehrotra ahead. Deutsche And

long we could to of the margins acceleration result several address, expansion? to margin if fantastic, in just negatively has see basis. about be bit but you year-over-year been in hoping To as some impressive, achieved you we see the for the accelerates? a you quarters Mike, last a obviously yield give just were second for in pricing that have can first low in Thanks. the on been Good we’ve you think, the margins little was bottom several initiatives, I fiscal broader the time great should margin guys which the fiscal evening. second last incredibly the are bit quarter But, you that to years is And us bar’s has that of been growth. be around that. talked could able that. some impacted and subside problem Do for half see showing gains expansion It margin in say you year-on-year the With on quarter second Ground might to was Mike, back subsequent a a the that the time. Ground costs it showing, quarters? a that the of now the growth of think And year-on-year the color question as fair, specific is year-on-year the that do you what been improvement on little the

questions lot There’s Okay. of there. a in

incurring and Let as continues business that But very have we of trajectory and are to we look, incremental related in we’re we the the Ground about outlined, highlighted say, place. near-term uncertainty pandemic confident create me initiatives and and to that costs Henry our forecasts. contingencies in the just the try certainly

from mentioned we on Just little facilities the that and of more we’re expansion Ground ones, lever on to capital increase not in improve working margins spending our that and which both, only anticipate a next to be would expenditures I we as profitability. existing -- elaborate automated business in new well further, are that’s facilities, -- have year. as Ground The

further well to enhance technology customers We shipments. where, collaboration optimize that as deeper asset and continue to also as receive deploy we our to will how with the when, productivity,

paint that that of drive So, I’m together for the but all the going are you forecast picture we’re coming not and forward. trying on put point going are that here going things, things initiatives to to to a

we Please go ahead from And UBS. Wadewitz will and go ahead. next Tom our take question with

been very I your to wanted performance - Express has impressive. afternoon. see very, Yes. Good

One air the give You’re and magnitude back concerned If or rate, -- in of measures. you should just as some to doing in might rates? high I half that you something to that could air have opportunity from capturing variety give in freight you benefit we national about? to that that wondering on about international think back strength of a particular, the I freight to about a potential how future? if great be think that of Is of go you headwind really go into the ‘XX fiscal job think if us a in was help the kind

and to you about talk want that Raj Don, or…

Yes.

it Let can Don and off then me kick answer.

in capacity, think, is capacity pointed ahead of and supply course, I for back, and quite that. be in shortfall of us demand the balance runway about the demand a to our some We is Brie remarks to we at point feel will have our the time, us as look of when that for at as the regard. this FedEx And, in capacity will quite there bit out significant premium. be comes

So, let over it turn comments. me to for his Don

the question. and for Thank thanks you, Raj,

obviously derivative to wisdom market don’t marketplace market, supply pre-COVID the XX XX the we a proud So, frame team what demand and let Express’ get back somewhere the of from market it appreciate the freight on range me really When at conventional of quarters. and we past couple the last performance, I the in of comments months. to air of would obviously suggest in forecast that capacity and perspective, for we delivered the look

business demand reason we as So, optimistic do, and is it relates I forward. believe be the about to situation if you true be our that continued to there going to and think supply

and out at recover, faster begin a the Raj economies vaccines to globe the pace capacity roll recover, the believe the continue from to mentioned, As in as than factors I market. around they’ll the

the in go economies is pre-COVID hopefully opportunity the I not recover that? that, pricing XX months creates Brie, prior from to it sure add begin to commercial to if don’t back for want sense environment. you my in marketplace to am XX levels to again, to and So, an we capacity

it, you’ve covered Don. think I

and [Operator ahead. Instructions] Stephens. go We’ll Jack take next ahead question from our with go Please Atkins

lower related barring moving for you guess And one to cash the CARES like on to looks this basis. improvement anticipate There’s been CapEx forward, is year-over-year flow tax don’t payables. mind. you for of related flow question a from now, months The my first broadly, taking significant Act, evening. Is cash perspective? Thanks first you. a Good of on focus operating on then, if six positive this being that payroll unforeseen Hey. Mike. a flows, more of cash I discipline question. I is through something all? free sustainably is increased in good the year guess, It Thank a with macro from that an do holiday accrual portion

back prioritizing flow. And Act. the then, of and pay remains that just this CARES into taxes to capital deferred on $XXX focused million drivers you shows is, from to But, first our contribution of free the pension billion payroll the in plan ‘XX. in first Look, as of we’re payroll improving as year. Act our those a we taxes giving game. And into improving you ‘XX will want I We that, correct, the answer that. point, of Jack, are the of returns the there. definitely two the made CARES half up at under question $X well it the we’ve forecast this fully At efficiency. don’t are big to your benefit of But cash calendar a deferral get and north last stage

and question Sachs. Jordan go Goldman our ahead. Alliger Please go take next we’ll from ahead And with

if margin and Yes. color longer could -- start postal the how the Hi. cetera. Ground of Perhaps side two obviously little next way of where air on ground or Ground and directionally that you could sort residential of amount you around the the that and think about out go? just et in to optimization, likely bringing things higher in-house, I the system, -- doing opportunities wondering sort and year is over on term where good thoughts, you business stay could the of was a packages again, a here, if just curious put -- from you’re the Ground some

Hey is Henry this there. Jordan,

As year-over-year. the I said, two next improvement quarters we margin each expect of

to to real return talked here the our U.S. very initiatives transformational us allowed on population. I’ve is optimization strategic important yet are XX% call that thing has of and a the you I been to these focus on got put have the ones on out X-day great think, this investments. about residential about the the SmartPost We the about spoken we in providers, technology come. year route service think before that to round is, and experience hands the in-sourcing volume rolled of accomplished

by us e-commerce. fixed input we’ve assets the the the our hour example, in-sourcing stops has cost XX% per to year-over-year. in win in a per see SmartPost stop The again X-days per our of stop. by And quarter. year-over-year in miles been X% cost seen trends to XX% all in year-over-year. improvement package of causing you has per a average to seen once reduce we’ve allowed For week, reduced a QX are also reduction These to cost material And need sweat

we from FedEx about Ground tell be I couldn’t future. today, So, that the more you where sit, positive we would

more question You take LMO Brie? the want to

turn From an that perspective, to excited back on. obviously LMO we’re

I the already think, I covered the now. percentage of in right residential that’s network

So that remains an upside opportunity.

for by That’s last XXXX. have million XX the I And gained we’re share XXX opportunities. very, the to the e-commerce of and growth over growth There’s the packages very there. years. share why future some consistently continue significant about We numbers, market room and in those optimistic

FedEx outlook. excited about Ground So, we’re really the

talked And is evidence Can some an I Brie and those those of one already two those a said gave as density add Brie the and expect areas, both here? the Henry that trends just we about. going things second, And of couple revenue forward. Henry is and -- this efficiency. improved it, I quality of mean, one,

volume to about increased optimistic deliver what look are that So, we we with this can Ground forward, get.

Wolfe next go ahead Scott take and with question from Please Research. ahead. Group And we’ll go our

you year opportunity that’s do you a yields margins year? double-digit on and for for get Do the And maybe to to a directly, then, guess trying Ground -- Can guess, X% stick that too yields aren’t to what do further? opportunity get think want the do And even I digits push in margins margins there’s see So, with pricing figure double Ground. you to since the Ground just think growth at you sustainable? Ground? you low-teens yet, I I to -- out. everyone’s

e-commerce. the are So, yield And of on in you necessary with quarter increase in be there’s the residential our quality fundamental that the from this part market. XX% business. continue and shifts strategy SmartPost increase beginning going a to will been a surcharges moving of our pricing execute we’re products for some XX% saw a They believe revenue our a forward a part. and that We think to We strategy.

our value do customer get we We No to by mix. leaning also home is segment are that? market. are for proposition on do and to our what to I else expect our going And X-day. the product to the best a And product in work into delivery continue mean It continue We premium. growth. one can

to We also who customers that expect medium and that that national small cannot share local a speed value drive do will move the to advantage have. operation. market continue And from we they really

FedEx So, strong, yes, continue yield expect trends this Ground to I a the performance some to we’re portfolio. year. change for And that industry confident started have we

months. go out crystal than much more my six doesn’t Scott, ball

of highly into statement I’ll my call margins. So, the I next get debate I know about confident with stand am this to on anybody so. teams, quarters. two a want whether about I double-digit don’t by

go We’ll next with from ISI. Duane Evercore take question and Please Pfennigwerth ahead. ahead go our

how For on volume ran quarter example, you year-over-year? for degree any collaboration. much year of between Thanks. on Express versus the Hey. this Raj a collaboration question period? metrics through Can the Ground segments Maybe the offer ago

residential packages of to Ground over are and mean, Express Ground, are and The packages into the Okay. have million for million of e-commerce ability system, these to packages than lower we These XX system more definite over -- a than us from moved the more primarily. because system. -- have XX definite -- the I rural primarily that

a right that than are we FedEx the we XXX%. right There Ground of driven work as packages, to year-over-year. is up has active. delivered million right numbers, but -- FedEx handled that collaboration cost network done are the more million And They’ve XX Freight were such package XX% in up packages very There for sure serve. miles, several Freight has lot the addition, the making well. In put X.X and

in? Thanks. What say we’re would inning

what say you inning? Did

inning? what Collaboration,

Raj plays cricket.

you But what started, are in innings we that’s yes, getting no, if are just There cricket too. mean.

Landry And Credit from Allison next we ahead. will go Suisse. go ahead and question take Please our with

really major the you’ve and to if in add the to next in stores. want you and could see magnitude to clarity a satellite Thank I guess, pump us Ground would volumes likely tier several second more incremental ‘XX. on the past, just I given you I and years needing in the about out than that come And not growth think, the facilities in give made that importantly, the could investments over mean, capacity, increase start little of bit CapEx therefore, what’s the to leverage shorter the previously I spending? in talked push fiscal more uptick you. you

additional details of that CapEx? sort or on get Thank still increase the just of understand of to to So, nature any sort to in right a sort sort that. way think of is So, clarification it, the about of you. what’s wanted

Hey Allison, it’s Mike.

for margins. in everybody said, to has to So, the highlighted that acceleration I here specific business and tremendous you it midst quickly the have that number as much a the is sustainability and give adapted, that I don’t business as in FYXX. on increase and plans able notice, Brie has we of was of But, residential stay. advanced Ground not to seen shift are, the putting formulating have unquestionably, e-commerce our with we And adjusted this and mix of yet of spoke together

the teams. to the team a the execution on commercial the testament of operational teams, fronts, all So, that’s

coming. keep to going is volume that So,

as going essential might historically not same considered forward, do it’s we you it. have that be So, it’s to certain assets but nature the and in invest configuration going

it’s little let the so a the work elaborate So, I’ll we of kind it. have works, I how that Henry But just nature a better bit it’s of of technology, and facilities, sense more customers. with it’s mentioned, how you on facilities

the edge more the is Thanks, business, this Yes. our the I of invest should to heavily Mike. mile is way going about space. Allison, think we’re think, which much you on last

retailers. are They direct operate inbound do facilities, regional focus tend is an and that hour. to automated go smaller on we in XX,XXX if be you if packages think we so our to XX,XXX what build only existing this, much up costly modify and satellites quicker. is less So, building. about sortation able loaded we going because process are sort get which, volume large much from aware, And They you’re to much about can to we and stations, to be an these we not

get sortation up you They’re In them And about solely of and fact, the bigger you of sortation think in regional months regional, should great the valve ideal pull packages. a time is van, they we direct destination for like advantages And able the of go peak. projects some construction measured here. have can instead The not running other for overnight spillover at as a to through to to had. designed serve lot facility. for one we’ve when years, is they be think about I of the think is mainly. is of levers load a to that relief situation us There can have

us particularly year do, time this peak tools give and we with of mortar. do facilities to the that. to dispatch technology it and the to the a us in facilities require pre brick is heavily will in allow level investing and invest run don’t when annexes ability and lot ability We’re to loads at waive things that at the traditional use dual that now of that mobile is dual in volume us There’s docs

many we that that neighborhood. input so can brick going altogether being load facility the be those to initiatives about are and a I’ve us coming better brick can go we’re but our The bypass the information main we transformational of would have reduce packages deliver business, that’s right what’s to mortar area said, make that to about our decisions talked to intended give costs. so re-handles the and going in mortar all Now, in always and real-time vehicle

answers hope So, that your I question.

that’s Allison, again. density And yet

it You’ve we that again. but yet numerous heard say that us and how times, is density manage

Brian with we’ll go next ahead. Ossenbeck And take JPMorgan. go our and from ahead question Please

Yes. evening. Thanks. Good

with one for versus Can happened. It in everything a make adjustments like another you that’s you, had you how So, peak talk costs, expectation? sounds few to obviously came season just about Henry. they

like give last can of customers us you’re an it. on -- call, on their us I over So, incentivizing update weekend, rest think and talking that. behavior change And were a that handle you that’s update then, well imagine case can bit. to little probably you returns to maybe after possibly the I shift peak the to too, appreciate it an some feels them about give you suited just maybe I’d needing to anymore, not the if the but

me Okay. then, second. I’ll take talk take let the the let first and about I’ll part, Brie But, peak.

everything which other we’ve average, peak of in XX% best of I about volume we accomplish about delivering driving business. year. last in let investments, all, in to one by the in team challenges of be a all On had the and me the has X.X spends the prouder year, had, haven’t just like of day is else network in outlined. been year since we’re the been I average extraordinary. faster challenges than pretty in Ground spite in about talked able XX% saying an ever about year, And conversation and of resources, been in XXXX, it, this I the the Peak extraordinary had that. all All of terms FedEx and to couldn’t really this the begin things days First of of volume and has seasons early, COVID the of spite actually which is a are what transit, midst Ground package capacity, terms we’ve the this they’ve

were year two side shut a this the on building -- down of came I I for governments facilities this the later about much think, timing because were the unknowns. the issues cost and months. year lot on talked most

to So, the though slowed time team even finish and a line facilities the our later in did this get permitting the to here. get and job year came normal. them line we really couldn’t on property lot here a engineering than race up that fabulous running, And

this say not they resources, these rate bring takes on, time I the as a their be. the efficient. handler And you sizable on to case it be productive in handlers, for ramp-up just them two we’re I the mean, X of learn again, In they particularly terms at people got job. things. weeks are of for not very bringing When once is of takes could of would resources workforce X, job. as portion taught there’s handler It their the we’ve a to that And X,

I of distancing. think, for not I said designed facilities the our that on the call are at end social QX

our keeping we’ve can all in buildings way in above in business, a got and man staff we abundance out of So, an caution safe keep such through safety they’re of we these our a people while would is desired at the time we get The that buildings in of outcome or work. all that throughput pre-COVID. the is, don’t unintended these engineered that

the are this. things cost of that material the to those probably So, side are most

market longer had settlement providers. much find. commitments months. the those knew to we in That in earlier procured in said, manufacturing supply. vehicles were question, settlement also down our were the to they shut are to were vehicles service for going to in automotive we be recruitment the rental three new of And two some short adjustments that plants on we were earlier than Once or to and used the impossible for normal. have made we I for again, pulled peak and And vehicles that almost situations right forward challenges costs drivers. of to much meant with As And our that defray providers because now with service recognized try early

just let Finally, one last say me thing.

again based the I have I’ve the stepped a of small up the peak days and an on going way fly ability conditions And on days, to every nothing we they unprecedented and this job truly push the about businesses make delivery what of to them step cetera, short for next done Our peak. flexibility year year. peak business. to differentiator data of track their unbelievable the our at look number day, package we’ve and there’s is the decisions in would those local reinforce like have delivery stop of this is ISPs and et lost days, that had

But on customers again, They’ve density job us our been with worked. the best answer created and incredible job weekend. customers and and equally are Brannon done her capacity the see incentive more they’ll have weekend I incremental strategy an I lose week. great leveraging The to we the do think, a opportunity? require doing forward. throughout us. peak of half we that question, Yes, the or have continue to that peak good team have improve out that opportunity Do the does pulse of use has to capacity. And have moving And just further weekend your sales we productivity is, of Jill the And second just a our to capacity. volume their think believe largest you you partners I

go Wells And our next with take Please ahead Fargo. go Poliniak and question Allison we’ll ahead. from

Hey. Good morning.

pull in it balance of to seeing those volumes December follow Any just -- you’re you’re And give just that I you? going to say, noticeable sounds and terms that better that question, So, noticeable, of like peak. operational guess, of a the to color level about the peak. forward some working there balance your back to would retailers incremental volumes there? with I you November on are was one, in in can was some those

that were really didn’t see completely we change be honest. to Sure. and to We really behavior, shopping hoping

a the and What did more see ground year is team I we’re there’s unprecedented have We the from awareness result, team seen, the consumers think of such far we as having. sales did a educating are earlier the network. Express and the great we job saw that we the customer and result, in a we volume And merchant planning. seeing as a saw lot better volume,

of And were successful before higher the network. So, shop have smoothing within network. in that in into value Henry’s we some the to cyber day move it getting e-commerce able not to successful were was been weekend. We the week all Express we of and successful consumers

So, that remains a goal, let’s just say.

with go go take Please ahead Vernon And David from we’ll next question and our Bernstein. ahead.

you is Are increases right? up it to collaboration, this for it, at I Hey. rate sort are on this wanted leave retailers accepting they thinking more the around stuff will of healthy the stage? side, going Good the of reporting pretty willing or on a going them participate think kind market, about are significant week day afternoon. your as process, You’re XX% some they topic things on How XX% kind that product rate of customer that how about follow the take you or discussion with the residential. that negotiations pretty Brie, BXC for on in deeper help context build the like side? of injection, being And with forward, your they with a you relationship increases. as to

gone how strategy. I they conversations would frankly Logistics their U.S., quite to well. -- The retailers important largest and most the the say, in have FedEx is very growth understand successful general, to in

I so, of as part we’ve to And trading on tremendous the some SmartPost. That’s the a be think clear It do well. strategy. had want big was about I success. out

of the So, been great proposition, our and growth differentiated in did partners, our value our we and you the us those who forward. they’ve understand as don’t customers were can bring, that’s customers that lots numbers, value to value move that. who And for value speed enabled see there

Jill’s a is But -- January, overall, to full one-size-fits-all. that for job a the set a and great I I So, would already January for come. she precedence done as years peak we say have -- has it’s year, into calendar that not for a moves full come this year new had planning we’ve many think team next and has

back session. remarks. to conclude does today’s that meeting turn And over to additional closing for question-and-answer like Foster I’d Mr. any or

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

your participation. We that conference. appreciate again, do today’s conclude Once does

lines. You may disconnect your now phone