FedEx (FDX) 21 Mar 242024 Q3 Earnings call transcript

Good day, and welcome to the FedEx Fiscal Year 2024 Third Quarter Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to [ Jenny Hollander ], Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to FedEx Corporation's Third Quarter Earnings Conference Call.

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

limited session, us to all who be accommodate participate. to X would question During our like will to Q&A those callers allow to

forward-looking to Litigation Certain statements. defined in as uncertainties statements forward-looking Reform of factors cause considered Act statements that in subject such those this differ actual be conference or statements XXXX. other and results forward-looking Such Private implied by risks materially call Securities are expressed may could the from to

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

us and Joining Vice Customer today Chief President Subramaniam, Vice and President Carere, Raj Officer; CEO; are Brie Dietrich, and and CFO. Executive Executive President the John on call

Now the to call Raj. I over turn will

and at earnings your to FedEx. Thank first Jenny, you, welcome call

team. on you leading are to happy We have the Investor board, Relations

FedEx and FedEx served the I innovative, CIO him numerous Rob like in immensely upcoming his has people-focused XX retirement. [ data-driven last wish his him for grateful establishing Before well his we discuss the the thank an quarter, service modernizing over ] upcoming and We as leading Carter infrastructure. announced FedEx to a years, to He would in IT week. Rob and in as on to dedication I'm congratulate retirement, we company. last our years, which contributions for his for

customers initiatives. the advancing FedEx exceptional results, delivering superior by QX providing to work service Thank while our their for transformation in and team for strong also you all

margin industry. in and transformation within progress dynamic declining environment. income sustainable progress We're consecutive X delivered our strengthening clear the revenue very third This demonstrates and we quarter, long-term through expansion what's our goals supports For profitability. customer This our in is manage our It operating value ability expansion improving growth our and unique value the positive a and experience our on a a improvements in increasing stockholders. for to proposition for margin creation ROIC and DRIVE. control

Now the to turning details.

transformation margin operating is compared driven a at level, margins Our at the Adjusted as growth expansion continued per declined adjusted ground prior X%. enterprise and continued by delivered driving share. year. operating income income XX income, we and of Express. basis operating revenue adjusted and improvement was even in improvement in At improvements the points adjusted earnings strength XX% to

ground, increased from results with to XX% the of including particularly level, the DRIVE. XX% At adjusted and I'm in pleased X% adjusted This segment the quarter. income revenue continued yield management expenses on effective progress margin growth over reflects the controlling improved and ramping operating benefits where operating

and margins remove on income operating At where and our levels enabled exceptionally demonstrating cost Express, challenges. remain Freight, our progress increased We're profitable making capabilities. ability by high, continued costs. adjusted strong execution delivered year-over-year mitigated the growth focus also team's volume to at management Service differentiated structural

to the range $XX.XX EPS Looking narrowing fiscal 'XX a ahead, while reaffirming district our to we of $XX.XX. are midpoint range the

past significantly over of we to midpoint is the to June expect In above now deliver revenue This of expectations shared that months. earnings have full year clear adjusted execute. ability the deteriorated we last X evidence the despite fact, range our

air to demand to full environment make unlock top with my changes the opportunity. Express the our align the and profit to priority evolving Turning is network continue necessary business. an It to

we are utilization, to continued cost areas progress made at accelerate address improvement; have mix, order to in While other we aggressively this headwinds. and profit network are working several inflation Express there service quarter,

We're international e-commerce a the where to towards customers. for global are many clear respect More growth This critical this with of mix. First, market offering solutions rapid seeing are service customers, shift is a of enabler we on our how in tied our shift unique deferred addressing of trade, part shorter. to services. we mix

international constrain weakness demand trade in than for expected. global which has Second, continues business, longer to in challenged remained our

to realign continuing our proactively capacity we're network demand. such, match air to As to

experienced just Express network I opportunities offset with on us pressure quarter, year-over-year this management. significant inflationary third, for utilization. The responsible of benefits to headcount a this basis. million well outlined DRIVE as over create We our And from dynamics $XXX as improve

quarter, the efficiency the market-leading strategy. improve in surface right network market continental enable profitably system. the will freight of right introduced to premium right Tricolor Put air including this our our Ultimately, and structure, network, in design United of in the us product advantage FedEx and we Last LTL utilization the Freight entire FedEx taking asset market. networks at penetrate new and Europe cost our States the segments the network

execution this key forward, with our success. to element and be managing discipline the will rigor of move of a the we are As we Tricolor DRIVE, and

execution. to improve Moving Europe, area another to we on of In our service and opportunity. commercial levels focus continue

further in progress to context, and However, fiscal making remains generate savings this the 'XX optimization challenged. $XXX environment BXB million DRIVE of we are on profit seeking year opportunities. track And on in

we volume previous reduced United headwind Service, service the we As has fixed. obligations Postal calls, to have which continued revenue drawdown, this USPS for are Despite States mentioned experiencing our the volume. and also a in remain

for we offsetting way enabler both from and as DRIVE business, areas identify cost delivered cost reductions. Express the In we near the term long profitability, revenue structural we and improved pressures. declines change QX, of of of million across work key the the benefits in impact and and the $XXX a remains DRIVE,

operations categories. and of $XXX international million by and $XXX million encouraged G&A. all in in X across air network, progress our $XXX includes million I'm network the This savings of surface

our in $X.X permanent billion fiscal and 'XX. $X.X goal deliver benefits we year cost have Given from the confident we in reduction are and year this progress billion fiscal made of year-to-date DRIVE the will on highly additional

doing The for planning with DRIVE work are also helping is advance Network X.X. we

quarter, our ground operations their operations we will This structure, business operational overall and levels. all rolled out for and respective service responsible insights this execution accountability Under greater all new new the Express and will and facilities into with in teams leaders at distractions. leadership and This package regions structure. package be divisions, their enhance offer

the X.X have and locations we expect reminder, dozens to broadly, April now of Canada in we And service. implemented in while outstanding of begin this to More a by complete October maintaining follow over with in all more calendar as XXXX, XX transition Network XXXX. rollout will

operating of companies Express, X as on Ground creating are part and transformation, streamlined of XXXX, as consolidate consolidation In Express FedEx FedEx And operation. our efficiencies the into June simplified we complete organization enterprise. a Services Federal FedEx to into will we build stronger, profitable track and more FedEx

The and work cause we efficient weather customer our delays is a improvements in offering of direct across are domino flexible, it service hits, intelligent and into doing create our can more and effect translating reduced profitability. network. levels a to network When severe

events data networks. to proactively our While predictive across planning, works of enhances data process assess storm-bound analytics our effect and the teams we always to divert volumes engineering our used capabilities weather by playbook new and developed by have weather contingency the leveraging

February with physical of power we hit a the mitigated predictive the our longer XXXX, the of storm and event recovery having our combining hub digital that our the was location. January By Despite origin ground our impact the freight at network, Memphis operations effectively Express year's analytics by Memphis this Express Memphis, insights to twice volume event to shifting fast. when winter in impact in as compared weather to down network

help a deliver that we visibility integrated connects XX returns. day. we provide and a packages FDX, data-driven business, entire real-time initiative, will leveraging significant analytical grow also the journey their platform announced from our customers fully It and demand our data every quarter, optimize from capabilities million the This customer to to commerce

Digital Sriram we of and network as driving company. through our knowledge as have critical July insights, track become to for ], forward to optimization data-driven, X. excited proven innovation record moving will data be a I'm Information deep serving his with Officer Kriosami digital-first of effective His [ FedEx combined Chief and and business the

results across look and clear are business our I As financial signs these there of the progress transformation. on

we supporting for our placed maintain well Our position are improving our financial to of generating long-term our focused and delivering results, long-term significant we Together, and committed strategy remain value the creation stockholders. while leadership is outcomes. to goals,

turn With the over call me that, Brie. to let

you, everyone. and afternoon, Thank good Raj,

team First, season. during FedEx want strong to for our the peak I performance thank

As offering and again once in a delivered industry. work hard we of result commitment, the service best their the

service. on priorities commercial our on quality execute our to with continue while revenue maintaining industry-leading focus a We

second majority profitable from we took the to rates of continue we the of we gained volume result, the retain a As in in market XXXX. half at vast quarter the and share UPS

proposition Our in has industry. recent and wins aerospace unmatched value semiconductor, the health high-value enabled care

strategy and to high-margin will our continue We compete grow of further market. in areas to the execute the commercial

a the geography. Ground, execution. internationally, in third softness. revenue modest continue At improvement was been United we have by volumes. a revenue at year-over-year yield conditions to however, States, Taking performance about In we on now than commercial by focused look remain quarter strong And We, up FedEx Looking on weaker X% see anticipated. flat very segment.

the the mix proposition with best growing offering the and in on disciplined remains team Our right customers industry. value while

declined revenue X%. Freight, At FedEx

decreased weight offset surcharges by volume on fuel was year, although a also last base basis. partially lower sequential a affected compared moderated decrease the per and yields. shipment, to was decline While decline the year-over-year higher negatively by Revenue in

profitably was e-commerce deliver lower business and shift our service by revenue and driven Express, and demand Raj The actions products. to down allow surcharges towards X% continuing will this year-over-year. softness, a to for us continued outlined FedEx at customers. And excellent while mix volume fuel grow deferred

export are a X% to Turning declined, year quarter. we market a shipments demand is lap we volume stabilizing which, from a course, the monthly during the quarter, moderate volumes but XX% Freight by economy, ago. International growth reset of driven to continued expected. as speaking, our in increased Broadly international they weaker in trends sequentially.

headwind volumes a were the in postal quarter. mentioned, Raj As

contract Postal States current the Service United Our on September expires with XX.

the to for We, would us reliability We have while and service new agreement you in service negotiations let operational provide contract we have progress more more the transformation of our our them overall allow decades. It efficient than we have network to with course, that to plan multiyear a better network X a adjust with markets. for know outstanding significant USPS made new with delivered ongoing providing when update. fewer for A would network an will demand. aligns

We continue rational a but environment. operate competitive in market to

and surcharges what were yields At in a segments. increasing due trends the of the yield quarter, and of across products. capacity mixed international remaining was export market. last we the demand to also deferred FedEx dynamics Yield similar to pressured increased with pressured an saw During Express, quarter remained mix e-commerce lower-yielding tapering by

by weight. per percentage driven fuel of yield offset by that partially offset down surcharges At economy. FedEx out shipment weight able And to a Ground, to was a relative ground the GRI. year. capture by been Higher we we've FedEx per and January, favorable X%, package and prior revenue customer rate X% importantly, increase. delivery, Freight, rolled lower segment In increased mix at home driven lower And high lower fuel X.X% a surcharge

our peak, profit. million offset respectively in peak us higher enabled to $XXX holiday delivering surcharges costs, During residential

the We balancing place and are have very yield strategy growth. confident both in volume right we

and that our offerings. network experience best-in-class are of simplify digital We data-driven solutions future the strengthen customer customer building with and further the our

offering capabilities network. other For life-saving to more health we example, volume prioritize care month, care our with this critical above within health enhanced shipments earlier the powerful

that need options. as level. cover now and have service do now shipment the Express They health are vaccines, we to speed they to intervene, able monitoring with and more it this select such more and temperature we includes identifiers customers ability the so care package care do specific categories precision. and Health at requirements to Each intervention if

increase and offering And it enable companies them connects and streamline conversion, entire to with to FDX solutions, by demand, optimize the optimize to The enhance of merchants returns. the FDX help making will business. course, in January, relationships platform end-to-end grow announced their Commerce for fulfillment customer FDX e-commerce journey easier our of all long-standing platform. us we their grow sizes

later feedback, on We incredibly a I brands and preview And select retailers. have launch am based official the about their private opened year. excited this for

deliver am how I our over outstanding market. closing, global our as navigate with dynamic team a to entire cover proud in detail. and we John continue very And to In financials I'll of very they more turn that, it to service

Brie. Thanks,

our as reflect initiative as results our ongoing revenue quarter progress third DRIVE focus on continued quality. well and Our on service

challenging quarter result declining expansion for operating revenue third these growth in row As delivered margin environment. and in the of a a efforts, a we despite income market

closer income at quarter and a the $XXX level, operating and look enterprise in increased and basis offset points. performance At Taking date The DRIVE the points. XX by lower by revenue. million $XXX Express, by a an adjusted XXX margin at expanded on additional adjusted our year-over-year adjusted basis operating adjusted operating initiatives basis margin million more than income increased and operating benefits expanded of operating

and was dock cost slightly the At points improved Despite productivity ground volumes delivered strong operating improvement. environment, and by mile margin due line-haul reductions team first and $XXX costs. an expenses year-over-year increased per package inflationary higher lower lower and basis offsetting Ground, quarter in flat and with last expanded cost adjusted results. to income another million yield of Adjusted by operating XXX

operating at basis by of lower And points operating reduced partially $XX declined by additional million an the during last $XX shipment declined surcharges, and reflect offset margin quarter. benefit income strong, the lower while also results driven the weight and lapping day year, facility gain operating by shipments. remained XXX These Freight, a by million margin of per fuel operating

weather Looking an year-over-year at quarter had immaterial profitability. on effect overall, the

to Before G&A. more I'd to spend initiatives, reduction few specifically, turning our like the cost updating DRIVE including moments you and on outlook, a

as with an responsible our the and forward of and As management, workforce last our move additional over nearly expect initial by XX,XXX as the transformation. matter, we headcount reduced opportunities future year in have we part

efficient, to approach like we areas changes significant more led we so technology make how to continue that and a procurement we digitally G&A, organization. are Within

$XXX In million I'm third we in savings opportunities. provides including million achieved quarter. addition, of global have the functional alignment pleased that savings $XXX G&A year-to-date,

structure and look new closer discrete entire spend third-party a the organization most function leaders we've already a with we'll regional have across about in the procurement, centrally enterprise. strategies centralized place, global procurement that to identified developing we're manage leaders. segregated sourcing at and and a XX Taking sourcing from in continued that and cooperation With manage will to functional new category categories evolve

By will strategies very in and full $X.X our savings will leverage level I'm significant and year. at buying for new drive have savings. enterprise-wide generate power spend implementing with enterprise oversight progress pleased scale and better these the billion fiscal tighter we cost this the quarter our deliver Overall, will

prior on of And reaffirming adjusted to for the range to to narrowing range, the Raj our Now turning narrowed as continue EPS outlook. we the outlook range to single-digit a year-to-date year, we performance fiscal and At year full percentage $XX.XX the in our of rest view low our the $XX $XX.XX. year. based the the $XX.XX assume revenue shared decline of of current from earlier, our our are to midpoint while of midpoint

closely As revenue. inflation other global including we'll demand expected our global view and trade, always, of monitor restocking, inventory environment and the trends, key informs which e-commerce overall factors,

outlook as quarter in the quarter structural certain fourth our profit year-over-year expectations, lapping to onset Ground. range, implied executed benefits expect of and fourth regard With last Express improvement year's we despite by at our

Freight. the a lower on the segment we're Looking improvement modest typical Ground maintaining for but basis, level, margin our at year-over-year year-over-year and quarter our adjusted leap full contraction in margin adjusted Express, year At margin strong seasonality. at sequential at third expectations day affects the a

our additional across our unlock at every European taking value to we optimization to to looking business, and look we're opportunities. businesses confident as our all Express, the and At a opportunities more continue at aspect including fresh we're ability at of Express business improve seek in

in shows full our elements bridge embedded outlook. year Our profit operating the

equivalent outlook $X.X midpoint our billion EPS the the use illustrative to purposes, of adjusted adjusted we $XX.XX of as narrowed operating range. profit For to of continue

billion assuming fiscal million from variable operating product up To shifting mix the midpoint, now as income adjusted than a of increase are is by yield net XXXX in that the would $X.X increases bridge walk single-digit XX% revenue experienced of despite structural operating to continues pressures more international we that million low $XXX percentage. deferred, diminished DRIVE. savings and these approximately $X.X compensation offset revenue million surcharges declining billion adjusted by by $XXX profit, pressure At of we expect to increases toward we're export peak that cost $XXX cost and

capital on on on we prior our stockholder improving invested and continuing I've balance increased As allocation discussed calls, capital reducing as intensity and focused prudent maintaining to remain return provide a capital. as well strong returns sheet

efficiency, on modernizing optimizing priorities will our be investment network. and capital improving facilities Our

Capital expenditures of which over last anticipate of million CapEx $XXX the now year and our for down from billion is billion, $XXX we were from billion. $X spend year for the bringing $X.X million full forecast $X.X year-to-date capital and quarter $X.X to down billion, prior

the X.X also revenue in reduce year returns, $XXX capital billion in while our expect for $X.X our dividend additional we increasing with completed of paying the our total a the quarter common quarter fiscal repurchases and fourth our goal to X expect in year fiscal expect a in We bringing repurchases $X continue an CapEx to accelerated fiscal stated first billion, to footprint stock will share to with transaction return facilities we QX. Consistent plan. total decline bringing the line in stockholder $X $X share in declining for have million CapEx We billion, our to repurchase 'XX third the billion of also previously 'XX. repurchase year communicated, months we to which of approximately And CapEx And as annual we up as future will previously retire through aircraft-related currently quarter. of aircraft percentage keep XX more year aircraft last beyond is 'XX. fiscal continue jet lower we XX% to X Network and plan parked as MD-XXs from

has augments which of returns. authorization. long-term program, stockholder $X repurchase for support remains authorized to This billion billion new our repurchase XXXX I'm commitment that that share the the available announce also our a pleased $XXX million Directors $X under Board to reinforces

to in want and in challenging acknowledge continuing thank revenue a I Overall, their environment. team efforts the to improve for entire profitability

seen focus to customers value. stockholders greater but encouraged even more our We the and to our I'm I've from have and advance commitment with do, provide and work teams by transformation our

questions. open let's up for it that, With

Today's Jordan with from comes Alliger Instructions] [Operator first Sachs. Goldman question

are of I about this for for where the you If Can to I'm to sort G&A? think the go DRIVE. stuff? money left year. just air, -- of where think on buckets quarter on the update actually which I you curious going savings there's math how surface is or fiscal surface of right, final this Thanks much talk maybe XX Express million the that to surface tied to And did so also side, the

the Jordan, regard safe raised are operating except to committed to fiscal John. you to across I'm our specifically the say So of to spread year. of number the the billion that's for It's we the $X.X And think assume thank all you, remainder year companies. for to speak And question. on I with the not DRIVE that to going it's

on towards we migrate work as to teams. But being X.X Network continue by there's And of complementary initiatives, a that's to together your regard our surface, with lot ground. done it's predominantly question the and DRIVE through

Express are realized and So those both savings being at Ground.

with Wadewitz is The Tom next question from UBS.

you into comments. wondering, $XXX in about a the was you headwind. trajectory we also than X And characterized we Europe think just And did been some I fiscal I of I bit I'm specific visibility think Yes. think I million that on that's items quite the postal $XXX how bit would a think go that ask should expected. to as And how that? better as kind a do quarter million you margin of Express 'XX? just the the wanted about Express on that about February and to go think had mention, where improvement one, you

items. some to numbers? some reasonable the say just on $XXX that bigger of it of is million kind Express you anyway, back to the broader that's So and comments add So

at Yes, we've It's again. made Great. the quite and Thanks, Express John Tom. expansion. the pleased with we're margin progress

for we're to and As us continue you committed that of $XXX ours, million mentioned, all about Europe, be that DRIVE. that area are expansion, focus focus is of a regard will primary the to to excited With mentioned. the this opportunities Raj and that in key lie our we ahead

both negotiating were And Service, as beneficial if sides. the deal, would deal to towards that the Postal materialize, expect certainly, it's that we're you mutually for

sector as looking soon that So at ability bringing as And to will of our to forward all we're contribute our to expand at margins closure to that to largest continue Express. possible. our

is next Jonathan question Evercore. with from The Chappell

competitive relates a as market and mentioned it yields. rational you to Brie, but environment pricing

been quarters your demand And downturn competitive are We directly issues there's in course, some business. into here. several of the

to we Do at internationally, pricing to kind waver As look we bottom stabilization but if along States. this a Does or of forward, maybe before to demand need think reacceleration more we specifically on can you bounce tailwind the macro continue all I really a see United environment of the start bit? a yield?

environment, organization. Jonathan, I I think rational we don't competitive feel competitive, yes, environment competitive to We're yield, the I'm particularly the for When discipline the to and from actually the that's the focus think our does a team. pricing sales me. the with it of quite very both perspective, is market at look but different pleased a used and industry. in

one our yield improvement remove of FedEx across each on have If fuel we and segments, the low Ground kind Express, base. the headwind single-digit you of

team I on execute is think to our revenue quality the So strategy. continuing

headwind in to then, surcharge, headwind and fiscal is this if year. from momentum to perspective, year. of about repeat air be you that headwinds And less some 'XX, from not going XX% yields between year freight we FY have but especially perspective, an next think air of than next the this market. will the a do freight international decreased 'XX calendar And an XX%. course, a from in market will continue international it year, year a demand diminish overall That

comes question next Bascome Majors Susquehanna. The with from

report of complete financials July? will the starting the manage we'll How a 'XX and how of get deep track as financial operating you'll and integration how the the operating and data you it One us stats assurance in you change operating you further some to So a in into you how in look the stats? And give consolidation that that you get us comparable Service will FedEx business Can of June, and of change part at and your can your legal Express, 'XX? effort. side give operational progress as history help XXXX, Ground

let this. Bascome, add John on me start, then to and can

First of track has all, already are well X consolidation we of and been on work FedEx This our simplified operating complete has great lot streamlined to a companies. of been done and into organization.

kind I describe X think this X is effectiveness. is words X the move, efficiency, of other

we the to over to transformation profitability on this the I John about that the us the I'll long us to at end forward to it structure think moves are think looking And of set improved day, efforts fronts. the drive and I term. up actually performance both it. of talk will give forward rest

say forward. reporting break out provide more by for Yes. volume the the in all continue those we we'll think I both we currently and ground regarding and do. frankly, to as you standpoint, business new Thanks, structure service fair continue a performance sufficient providing go to data to Raj. and as segments. to and we'll And monitor express be reporting details But that it's from yield

comes question next Bernstein. from with The David Vernon

market? I the don't up going the I'd this guess freight a the strategy talk open more after maybe you So talked always assumption how some premium Raj, led Tricolor and that the you today? to market. that about in guys your actually Could air realignment remarks, is? little what premium you about prepared airfreight part does been you And of access revenue to have the that bit

opportunity. I Tricolor to about here I'm talk David, minute a well, think I take good it's think a to because going

I'm take here. to So time bear with me for going the

Tricor of a overall be capacity redesigner And the capacity will to improve margin. to will fundamental first flex Firstly, ROIC, better our demand our us operating demand. and the environment utilization our our Tricolor and determined allow mass network profitability foremost, to is by of our assets, and

reducing idea networks, move in it, cater it purple, and traffic. in break orange right that serve. that we'll geographies. our network value will designed product cohorts parcel priority international the a the optimized X leaner white, The different while Now capacities, different to right call and The network the purple protects volume when network a cost to highly we the within proposition to be into that to of and is move

Now better per service have improve proposition this now parcel-centric revenue becomes the significantly density, density but flight. that and will more network and much also revenue will

Now turning premium will which And the FedEx are orange to will things. network, freight system, from that that the cater allows cycle plain purple these off X to operate the traffic.

trucking Firstly, leveraging existing maximize to the also U.S. utilization. capacity hubs in our once again, density a noted it truck networks and service. it fully asset us that this Europe. in the And in the fly most the allows serve. importantly, cost It ability, context, are and allows you decongest improve and But model to truck reduces be should we that

really will but hold shipments 'XX, any already change, moved fiscal to market-leading FXF it [ LTL take for in we in ]. here. to freight begun Prior And now our with it's international network haven't Tricolor,

able doing target freight "global term, think premium to is about. LTL serve, are of the going air a we the what I'm more by we reduced so, cost it to And segment." segment. it and of to new as So That's the call this

answer Now to go ask, rightly and up no. profit, a is low are we adding as yield you capacity

readily is XX% We the freight focus to primary air which about model drive will work We're the shipments weight, the the target also global I overall on XX% with be are that freight of by going should get demand. to for going forwarders. approximately the noted XX% that a of premium other capacity the described.

billing capacity primarily then deferred and use passenger of track. white e-commerce is the So network move to lower-yielding

in So these networks orchestration we call is with high Tricolor. concert working what X technological

And makes again improves and it to efficient. more productivity. execution the Let baseline entire the our manage we're the me utilization drive going ensure just reinforce and Tricolor of helps success. the existing asset to that of It with system rigor

for question. the thanks again, So

next JPMorgan. with Brian Ossenbeck The from comes question

Obviously, quarter. tailwind as come understand a back better and a incentive pieces the for fuel, I bit from Just that was moving during bit a some but of compensation, little there's quite well. a wanted as times often think, changed the to maybe strong result, impact Express here,

-- that maybe was you network. but didn't and it the significant Raj, as mentioned, really it like a pretty weather, seems then affect So was it surprise as considering difficult

on if an it Raj, unpack to you then as isn't if network if can of impact comment of just forward? maybe, of going the So durability you be going And weather the big some pieces? moving John, can the

it's Brian. weather a I into for what I'll ability Thanks, worth of on to to our be Memphis piece, immaterial impact us. our that adapt poor in some that the Yes. an on had here to repeating start was substantially strategies rerouted which allow with think point last in ties weather manner digital because and

So was on reductions. parts expect, levers flight there both focus at Express, lot And positive you'd and of negative. moving a the of as the DRIVE

purchases example, you're additional certain engines had whether you're what's from of X% Air for green ops is forth. managing cost that its your flying able side some we benefits called avoid in an not limiting that job you're when time The that flight using team to available, because on airplanes, fewer doing your inventory are costs. For and quarter. cost are so there exceptional aircraft the maintenance undergrounded, And hours flow on

we're the midst So Raj Brie where about. and it's of talked seeing in headwinds that all there, some really revenue across gamut the improvement

and on focused to keep our costs. going head So our we're to down continue

posted I'd at to of still One journey, a say the this and our a a and destination, have further keeping primary long not Express, way to forward you focus go look we is on to improvements. and is it like things

about. John think what has talked don't much to I to Brian, add have And I

I we in able to able digital FedEx move network overarching we our that are the look idea us. tools the think and notion and things latest greatest now and helps at an as that use to

get and course, around, got just see that that to Of the very the in work regard. I'm continue this time weather with we but you've this we'll impossible did pleased patterns to to better as are predict,

question comes Kauffman Partners. Vertical Jeff next from The Research with

one curious Tricolor. in Real you're on place. for with forward with quick, doing you It's the what of plan always with I'm DRIVE. the working network at think X.X meeting and analyst I about How doesn't around, this and years to puck you're this moving began with changed back this goals the just almost thank and since welcome. And the stay detail DRIVE Look announced But alluding ago. this to your you're of when drive you. from Jenny, design ago. what, kind perspective. completed the some process? We has years you X

think last put conference just in I I in the And here. we're design Tricolor think speaking introduced Well, being call. as place we is this

'XX. of terms talked had XX% FY the by than FY those 'XX and we we which in part right, will it, by billion billion commitments, And and X.X, numbers, course, $X the in and originally where And DRIVE track for other $X said FY about again, for FY FY 'XX, so hit of less 'XX underway. we on Network 'XX, is of that's

whole digital progress. tools, what have FedEx redesigns made we've said. with but work network our with all the the more we we add idea X with is got we as good John reductions play. to And some have are the the we are And working. cost sure portfolio that forward do, in to just structural going So making moving I focus on think I that on to

Yes.

is, And environment, think this. delivering than we as on think delivering what and your being the going weekly we're to not to going of the are add stop. part looking expected changing I fill That's that of would environment. programs to an than we less kind And going we that's well a are to on And meet adapt teams are that to us I and to always we're culture speaks some our opportunities. expected, more changing additional And some that I help that ongoing there are there DRIVE comment that project, well to programs forward. pipeline but forward. move about as as will

comes The of America. next with question from Ken Bank Hoexter

seasonal moves, here of seasonal terms the was and but bit So what Express programs shifted we're be your points nothing occurred the yet maybe the talked there so Was Express the or execution? so Express, saying given year-over-year. what that results DRIVE quick speed near of wondering a I Raj which other messaging. has at from and quarter going significantly XXX from on but really what should Because speed a targets, guess massive or the declines the you're shift it Last basis I'm in to much like sounds up changed, I'm this in you of just seeing it improvement? intra now quarter, I -- love breakeven down at about by confused an

then be about sorry, Did Canada say to thought already -- that side out And with said a Canada was you was I'm just clarification. you Alaska, because I had rolled done. Hawaiian just

to So -- I just wanted maybe I that. clarify

rolled it's more Brie talk in QX, not with John. to last been has things. that one. that soft, about were of Ken, a were as combination solid cost I start the and quality strong. be to there we're the can were earlier, We But out. earlier. minute. other alluded about a revenue, the was and It's It saw completed mentioned And focused controls revenue levers on was while some I'll

see, for As down. you is can variable comp, example,

a resulted these So our focus results taken But things that contributor. and our on together QX. was improving in for all

on And Yes. done, will beginning we integration we clarify Alaska begin and Hawaii and Network peak, changed. plan the a this the and from and Canada are in perspective, I'm has that to are Canada just before done not April, rollout X.X track. happy the be it's Ken, will of

with Oglenski comes Barclays. Brandon The from next question

about and into that little some how and operations bit Ground X.X, more follow-up talk the made mentioned plays I surface Express long-term quick U.S. on management you Maybe that Network maybe a there think on changes Can integration? Raj, you've both a in you

Yes. Thank you, Brandon.

a just Network first think all, on and take is I we step track here. back of X.X

more structure truck plan X leadership and the it's $X that by and we rolled X to streamlined the said end structure putting just recall You'll and our much neighborhood the a in and with goal approach. of and States, essentially of we in 'XX, we deliberate we much out that obviously structure effective fiscal billion savings United action. more new designed as And into and measured deliver taking are

X.X P&D cost as We initial maintained by we're model and reduction the are levels. shed far on strong the the has whole XX% service seeing Network in very early encouraged so well in results approximately rollout

greater talked tech-enabled more become regard, about, better it to have say Canada focused deliver pickup also already service excited about we even will a DRIVE implementation improvements. And a As customer we in before I'm of this Network as on from are perspective happy auto experience. we that X.X we'll because peak. I'm very And

our and on go. to some track again, on are we So way ways

question next Wolfe The is Group from with Scott Research.

John, and $XXX So talked $X.X year offset. you've billion is this about savings, of DRIVE million of

of profit. about actual So $XXX million

think Or one's the 'XX, billion fiscal just about think improvement and the you no part savings? of the think we biggest should And be you actual offsets 'XX? DRIVE another that by material then year of $X.X yet, do As to Ground the far closer do about profit just DRIVE it's in separately, -- asked of there's fiscal business.

Ground? improvement I So go at this to one. Do margins can think if you The margin year. XX% just further there's ask

pressures continue through, that goal saying have lot on start all outside for control, that we're to of that understand certain with Scott, are our to expected and we're of there certainly to seeing have by while let a focus are our And and on things we to That's flow going a control. while. things today within continue but those be that to realistic the me our billion. $X.X

as keeping through to the speed And much that, we when our up on look so bottom possible, is goal to you next and forward pass we talk line including in to June. as to have

grow exceptional business expand believe are there's With Ground, and margins. performance allow to that still number exceptional team and sustainable, in us I those and that pipeline a to of story, margins from those regard the projects the to continue

be focus going that's our as to again, well. So

comes question next Cowen. TD from with Helane Becker The

have, up the quite business in noticed them? structuring your was I are redesign year? than question for Raj. on the lot that about network back calendar willing May of the into as you're you you've the questions. that A business Why credit changes release. whole is a think you after investors everything collapsing rather business stock you've speedily second part have to aftermarket And guess, maybe investors skeptical and I year and way aren't for a thought lot my push is me made and you the the business at to give so the maybe of One X made a the and the of shifting staying deserve fiscal you of plan earnings one, the to as I about do

Thanks, first Helane. the the calendar on I'll start year. part on

towards and place that One there's certainly on, of this next it's you'd posted June I to keep going legal us through share, exercises migrate that, to with my X As radar take can But accounting to including on expect, date and towards you everything on need get developments period, that. we'll FedEx.

have we else. that moving have question, that than the that have a but And the here. one say a are can started at opportunity the industry, opportunities early have Helane, story all convinced deployed. your as part anybody unique we to at as the thing, a industry within we We is very strategies we, much in I won unique second we FedEx is that of team, because

runway And longer the top line. a better both competition, performing because our are identified. opportunities have on than we we the We bottom have and the of

sometimes or run long-term X, is next years. X all And it's it, we in Any we of will off, people try quarter the where at and so we are. possibly strategy educate and particular believe good stages as strategy you be going possible of sound, and just but to many throw early we FedEx. we seeing to can as kind in what's the are But our on X a the

Stanley. from is question next Morgan Shanker The Ravi with

the I you also off being? 'XX? dimension that share you do would the And if of contract expect volume much that ends come of kind contract, net has new something how of FY in 'XX, missed regarding this, kind the Can reach when of Is up Apologies much USPS fruition? but you happened how already? with that that kind

the very table. eagerly. working Ravi, it's more USPS are the We're From In said can't a Both we I Brie. I short, about than say positive contract, earlier. at are really negotiations. parties already feeling

we if have contract, months. shared knowing from have away weeks we current will And or contract on September days are a ends their not as previously, we think XX. I

And soon. contracts. details our very certainly to very, know I'm about talk at will the liberty we So not of future

from is question with next Jefferies. The Stephanie Moore

market and you in maybe color to as investments implemented or X.X. of Canada. terms on to investments of color enter little from maybe integration some should particularly you Network be in was like could order Hawaii integration, Alaska the as expect you larger Canada? that lessons in see in the in execute in your and a I appreciate to terms a of learned be much hoping color execution And you made the I what incremental Any of the then we have on provide bit

that to Yes. way. Stephanie, consolidating be facilities, able John. facilities going particularly footprint along there's there's some investment Yes, it's upside facilities also the reduce in certainly, you're you're sort to required when but your

benefits overall far So really involve all the that. will end of and that will analysis and that here, far network. planning and our will footprint But excited game processes some investment certainly exceed -- efficient the actually contribute that is the and about a to we're

we date the very methodical, have able are being and We're be will good to customers team into I Raj's we've of benefits from being well a that service from to their giving as go as perspective. really we honestly, lessons seen feels advanced the kind notice about execute we point, disciplined. anticipated I we And as execution team the P&D seen think say market. are to we the very learned,

we piece being the want the even of deliver customers, was though that one are the That service as with of notification. they able we combined organization feedback as do level individual, for to anticipate same

that point, customer are to are the single the small of emphasize course, that segment, about our I we how we notification. important and close giving we, gap UPS so that been on only cannot to segment. to Raj's it. advanced in had pickup This positive customers And has is And to feature

pretty excited So I'm that. about

The Chan next from with Stifel. is question Bruce

are John, to it, that's know it, Brie, pretty the last especially Ground call welcome Jenny, you've had if don't where a bit, as push. levels kind year Can of cost Raj, today? improvements, just really talk that? you're we've savings result service that been pricing service a material you about core the and that DRIVE and but despite have talked of at then opportunity mix do a the the you here. to what you've levers are hearing I about What And pulling? some maybe the that little so, over or

toughest service confident, are delivery John our I QX I Scott we quarter crushing perspective, should back went better Not we and we a am and we question. love it. say, quarter I toughest this only faster, When the standards Ray deliver the Smith looked at year, calendar quite awesome -- from QX on are had also to higher service. reliability. those

It's morning. How across team and are It's Promoter leadership to integrated and not we our Revenue We now well the with operators And at day appreciative the more on week Net talk Committee. service be every day our expect they single coverage, about discipline. network, could our Management every I they're this? just the doing doing. and in of Score Raj's that service extend execution. metrics out to at look entire how absolutely We organization,

she holds question because that day. their feet to to every fire I answer the wanted single Brie

heard So directly you from that that I'm glad answer Brie.

The Cunningham Conor next Research. question is with from Melius

with opportunity business. the just you hoping talk return was see I the you could e-commerce about

network. a you focus. about the Is there's a You've a been with asked, obviously report been in reason The larger obviously, reengaging Amazon. a of lot press big player there. I now why been But there's changes that

Just would be any thoughts there helpful.

Happy Sure. to.

you market. as best-in-class. transportation I looked best well our look at portfolio returns we returns the when did is our think it see And FedEx Ground growth. portfolio we've solution, the as coverage January some retail When our at in numbers, healthy the got

comprehensive only to provider physical very the going the capability. You FDX we not layer digital but only that that new announcement capabilities, are on platform. our of with the be has a

website, communications It's process and to And are offering. and their powerful exchanges, inventory, be that? I on their branded merchants integrate going able manage brands to really retailers, what a mean tracking returns their manage their all help the We by do to customers.

we're customers. preview, the some sharing to our earlier, mentioned forward preview look names and I we with We've private we big pretty more started once As this results launch in what do in to fall. some full calling got the later I

enthusiastic think I there. stop I'm this. about I'll

this I set say even integrator just can those program the of cohort policy. customers, I'll there's no and No. when up I returns can environment, the

can So if I can do do that, anyone it.

from is question Schneeberger with next Oppenheimer. Scott The

of days think could hoping Everyone, follow-up a it's X XXXX And kind basically give I have Bruce. One I for overview of calendar if X takeaways we was peak peak. an then calendar season of learnings. the Brie, to less kind questions. is you

So condensed you. X% mile improved manage it's in a then you're Ground second going to that as of But cost and any last the things much question time in the of learn And ahead for just just quarter you productivity, season? second offset cited first down quarter, and and package, last per flat cost. this here and was mile fiscal in was and higher it first more

we Just should curious there. read if there's into anything

Yes.

I think profitability really a pleased a and perspective, we're from customer with managing a service, we're a from peak from perspective. how from peak

to peak. what already First And and talking by foremost, for We peak what are that? this the requirements are for team coming do year. I customers about their starts next mean literally now

XXX basis. advanced and and then, take weekly have are the John managing as planning top closer a customers, that on peak, Scott forecast and so of we we course, And to get we

should so not passed some over, which doing we be we've with has information. have is our real-time integrated largest we of actually but waiting for incredibly I that think are DataWorks helpful customers, some incredibly of the been visibility planning into got that also real-time helpful. We're spreadsheets

anticipate need year, capture. the was that that -- recruited again, we different we And getting this don't that with drive in surcharge ensuring pleased us we're more doing the for but peak really I investment I also cost. So same. much of customers the December, the really are

So we feel good.

on line a that's external Yes. transportation. purchase ongoing piece. drivers and of haul And line-haul rates Network of margin And And and ground I optimization lower a And of scheduled optimization cost broader the And in the lower of line-haul result, moved planned was this at think into spend the to. all taking a expansion and ground is X.X. to place alluded through the one I achieved the network and as high-cost we I'll speak expense part network. control ad DRIVE hoc lot that our through

capacity those part do volumes that also every have of the incremental at aspect, and that And so that. first additional be leveraging have. we even the And in additional mile and we're cost. we ground some And last no absorb network can will capacity

that as So should help well. improve margins

This the concludes to our back question-and-answer session. Subramaniam for I would like remarks. to turn any Raj conference closing over

saw we operating and third is evidence income continued clear DRIVE operator. this working. for consecutive revenue the expansion you, despite Thank that quarter, lower is margin closing, In growth,

results me are and most world's maintain build and to proud network work. efficient encouraging, our service. for I'm priority it accomplished dedication the that let is our time way thank of and to we FedEx to flexible, their our hard top work network. momentum these delivering members Thank have Once work we outstanding transform continue While again, for the customer to we as and and the really attention intelligent your today. continue team you

now The you conference today's for Thank concluded. presentation. has attending

may your disconnect lines. You now