113 annotations
let's get through the second quarter, and then we'll come back and give you more color. I'd like to get this going. I'd like to get some of it into the network. We've modeled it out. I want to actually see how it performs.
So we'll give you more color at the end of the second quarter.
more colour on H2
Transcript
2024 Q1
24 Apr 24
Carol, just back to your DAP comment from the beginning of the call. I know that's big part of your SMB growth efforts.
You said you grew 3% in the first quarter. And I can't help but notice that that's materially [indiscernible] said the plan was over $3 billion and then at the Investor Day, you said materially over $3 billion.
So I just want to know if there's something happening that's driving a slower growth outlook for DAP.
Carol Tomé
Yes. Thanks for the question. And I think I got it, you broke up a bit, but it's generally about DAP.
So last year, in the first quarter, our DAP revenue grew 51% and our volume grew 61%.
So we didn't expect to repeat that kind of growth in the first quarter of this year.
And so we were very pleased with how the DAP portfolio performed in the first quarter because it was in line with our expectations.
We had anticipated a slower growth in the first quarter because there were a couple of our partners that we were working on amending the teens and fees.
So we expected the growth rate to be slower and then to pick up as we move into the second quarter and the rest of the year. The projections for the DAP around the world, and we're seeing great growth outside the United States, by the way. The projections for the DAP portfolio by the end of the year is in excess of $3 billion.
dap smb revenue
Transcript
2024 Q1
24 Apr 24
As you work on cash flow with the pension strategy stuff you've talked about that we might hear more about late this year, can you talk a little bit about the dividend.
If you look at your payout guidance, it implies roughly $13 in earnings at the dividend level that you're paying now. Is there an opportunity to start to raise it more meaningfully before the earnings power of the business gets there? Or do you think we need to wait and get more increases like we saw this year until the business is supporting that more literally?
Carol Tomé
We have a disciplined approach when it comes to capital allocation.
The first use of our cash, as you know, is to invest back into our business and the second is to pay our dividend.
We have a targeted dividend payout ratio of 50%.
We are higher than that. It's our intent to earn back into a 50% payout ratio over time.
We have no intent to cut the dividend just to make that math work. We're going to earn back into it and the dividend is an important part of the value proposition.
So we just raised the dividend and we look to -- of course, subject to board approval, we look to raise the dividend every year. Any color you'd like to add here?
Brian Newman
Just, Carol, this year marks the 15th consecutive year we've increased the dividend, and we're committed to a stable and growing dividend.
So we will earn back into that, but certainly committed to it.
plan to grow dividend
Transcript
2024 Q1
24 Apr 24
Just curious on your expectations for -- I mean, sorry, you talked a little bit about volume inflecting soon. And can you just talk about your expectations in terms of volumes as you move from first half to second half.
I think previously, you were talking about flat to up 2% in the U.S. domestic market, then you came in a little bit ahead.
Just trying to understand how the back half are to look outside of just comps being pretty easy.
Brian Newman
So from an ADV perspective in domestic, I think that's where you're headed with a little bit of a slight tick up in positive volume in the second quarter, will likely finish low single-digit decline in the first half, second half we'd expect that to be low single-digit increase.
And you can look at it through various different lenses. We're building momentum ever since August, each month is basically getting sequentially better each quarter from Q3, Q4, Q1 improves. We'd expect to see slight pod volume trends in the second quarter. And then just from a comp standpoint, I mean if I go back from a trend perspective, over the last 10 years, our Q3 is generally about close to 300,000 ADV better than Q1.
So even if we assume flat from a Q3 to Q1, that would be 4.5% growth.
So any way you cut it, we see the back end of the year and most important, it's the visibility on the sales pipeline that we're pulling through and the volume levels we're seeing going into Q2.
back half improvement in volumes
Transcript
2024 Q1
24 Apr 24
And just a comment on the capacity at our investor earnings day, we said there was about $12 million ADV excess capacity in the market, and that equilibrium is about 6 million, you need about 6 million.
So really, the excess capacity is around 6 million pieces a day, and we think that will be fully absorbed by 2025.
excess capacity in the market
Transcript
2024 Q1
24 Apr 24
I think ADV in domestic, we're expecting Q2 to be slightly positive. RPP should be consistent with what we saw flattish in the first quarter as we move out of the headwinds from a mix perspective. And as Carol said, fuel and the PSS in the back end of the year will help us.
Cost per piece will get better in Q2 -- I'm sorry, in Q3 when we anniversary the cost of the labor contract, but somewhat similar from a Q2 perspective in the U.S. And then from an ADV perspective, internationally, Kate is looking to see that business improve as we sequentially move over the course of the year.
So I guess I would steer you towards the 20% to 30%. We've been very consistent on that from a profit standpoint for the first half and you can squeeze it.
colour on Q2 guide
Transcript
2024 Q1
24 Apr 24
We expect to see RPP growth as we head towards the back half of the year. Why? Well, first of all, fuel prices were a drag on the RPP in the first quarter. The projection for fuel is that is going to increase. we are also announcing a fuel surcharge later today.
So those 2 components of fuel will be a bonus to RPP as we head towards the back half.
rpp will go up due to fuel surcharge
Transcript
2024 Q1
24 Apr 24
We still expect revenue per piece to outperform cost per piece. And lastly, in U.S. domestic, we expect to exit the year at a 10% operating margin.
guide : rev pp>cpp, and exit 2-24 with 10% us dom pkg mgn
Transcript
2024 Q1
24 Apr 24
We still expect revenue per piece to outperform cost per piece. And lastly, in U.S. domestic, we expect to exit the year at a 10% operating margin.
guide : rev pp>cpp, and exit 2-24 with 10% us dom pkg mgn
Transcript
2024 Q1
24 Apr 24
For the full year 2024, on a consolidated basis, revenues are expected to range between $92 billion and $94.5 billion, and we expect to generate a consolidated operating margin ranging from approximately 10% to 10.6%.
Looking at the shape of the year. In the first half of the year, we expect consolidated operating profit to be down between 20% and 30%. And in the back half of the year, we expect volume and revenue growth to accelerate as we lap the diversion we experienced as a result of our labor negotiations.
guidance, H1
Transcript
2024 Q1
24 Apr 24
Now let's turn to cash and shareholder returns. In the first quarter, we generated $3.3 billion in cash from operations. Free cash flow for the period was $2.3 billion. We finished the quarter with strong liquidity and no outstanding commercial paper. Also in the first quarter, UPS rewarded shareowners with $1.3 billion in dividends.
fcf and dividend payout
Transcript
2024 Q1
24 Apr 24
he revenue per piece growth rate by 240 basis points. This was offset by a couple of factors.
First, changes in customer and product mix due to growth in SurePost combined with changes in package characteristics, decreased the revenue per piece growth rate by 180 basis points.
And second, changes in fuel prices decreased the revenue per piece growth rate by 90 basis points.
rev per piece
Transcript
2024 Q1
24 Apr 24
Looking at product mix, and in line with recent trends, we continue to see a shift from air to ground as customers prioritize cost savings over transit times by taking advantage of our ground services.
Compared to the first quarter of 2023, total air average daily volume was down 8.3%, ground declined 2.3%. And within ground, SurePost volume grew 10.8%
shift to low cost services
Transcript
2024 Q1
24 Apr 24
And in terms of health care revenue, in the first quarter, revenue from our health care portfolio reached $2.6 billion.
Outside the United States, we're continuing to enhance our network to grow our premium international business.
health care revenue at 2.6bn
Transcript
2024 Q1
24 Apr 24
Under this contract, we will move most of the USPS air cargo within the United States. The USPS air cargo business fits beautifully with our strategy to grow our B2B business. To win, we put together an innovative and differentiated solution that leverages our integrated network and existing assets
usps air cargo contract
Transcript
2024 Q1
24 Apr 24
There were 2 elements that contributed to beating that 40%. One, on the top line, we did see positive volume momentum going into the end of the quarter.
In fact, the last couple of weeks were basically breakeven from a volume perspective.
I think the last week was about 0% thereabout.
So sequentially, we were seeing improved volume. But the bigger component was just some cost trading between April and March, things like occupancy and maintenance cost shift in terms of when they hit the P&L between March and April.
So no change from a guide perspective, still down 20% to 30%, some cost timing at the end of the quarter there, but the positive was the trajectory of volume momentum.
why the beat the down 40% guide on investor day
Transcript
2024 Q1
23 Apr 24
Looking at cash flow and capital spending.
For the full year in 2024, we still expect capital expenditures to be within our target of around 5% of revenue or $4.5 billion. We're reviewing certain aspects of our pension strategy, and so we expect free cash flow to be within a range of approximately $5.9 billion to $6.7 billion before reflecting any pension contributions.
fcf guide 5.9 to 6.7
Transcript
2024 Q1
23 Apr 24
We are reaffirming our previously announced 2024 consolidated financial goals. In 2024, we expect to generate consolidated revenue ranging from approximately $92 billion to $94.5 billion and a consolidated operating margin ranging from approximately 10% to 10.6%. Versus last year, we still expect first half earnings to decline and second half earnings to grow as we lap the first year of the Teamsters contract, and we still expect to exit the year with the U.S. operating margin of 10%.
As we move forward, we are staying on strategy and under our better and bolder approach, we are pursuing our declaration to become the premium small package provider and logistics partner in the world.
With that, thank you for listening. And now I'll turn the call over to Brian.
maintained FY outlook
Transcript
2024 Q1
23 Apr 24
As we laid out at our Investor Day, our long-term target is to grow our U.S. SMB volume penetration to 40%. DAP, our digital access program is 1 of the tools we will use to reach this target. Recently, we enhanced our DAP pricing capabilities by launching a solution we call fast lane. With fast lane, we can optimize rates and target attractive volume growth whether it be by partner, by product or by customer segment, all of which can drive revenue per piece growth.
We can even target volume growth by geography to drive density. Prior to fast lane, rate and other adjustments in depth could take months.
Now we can make them in a matter of days or even hours.
In terms of results, in the first quarter, DAP revenue grew by 3% year-over-year. And in 2024, we expect to generate over $3 billion in global DAP revenue.
3bn in DAP target for 2024
Transcript
2024 Q1
23 Apr 24
Our operating profit performance was a bit better than we expected due to higher productivity.
op profit better than expected
Transcript
2024 Q1
23 Apr 24