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The first quarter turned out as we expected, starting with a decline in average daily volume.
U.S. average daily volume, or ADV, declined year-over-year, but the rate of decline slowed as the quarter progressed, ending with March down less than 1%. And on a sequential basis, the ADV decline rate in the first quarter showed marked improvement compared to the fourth quarter of 2023. This improving performance is primarily due to the efforts of our sales team to win and pull through new volume into our network. Outside of the U.S., the ADV decline rate also improved sequentially compared to the fourth quarter of last year and we saw pockets of export growth in certain markets in lane.
us adv declindd kess thrigh the Q,ended down 1% in March
Transcript
2024 Q1
23 Apr 24
To date, we've won back roughly $600,000 ADV of diverted volume, and we are working to win back all diverted volumes by the end of the year.
won back 600k of diverted volume
Transcript
2023 Q3
5 Dec 23
As we discussed on our last call, we ended the second quarter with average daily volume in June, down 12.2%.
As contract negotiations became later and louder, we saw more volume diverse than we anticipated. August represented the low watermark when average daily volume was down 15.2% year-over-year. Post ratification, we exited the third quarter at half that rate, and we are continuing to see our week-over-week volume levels improve despite a challenging retail backdrop.
In the U.S., in the third quarter, average daily volume was down 11.5%. And we estimate the impact of volume diversion reduced our volume by approximately 1.5 million packages per day.
colour on vol declines by month
Transcript
2023 Q3
30 Oct 23
f you go back to 2019, our volume is about the same as the third quarter as it was back in 2019. But our SMB mix has moved from 23% to 29%, and our net revenue per piece has moved from $9.99 a to $12.54.
So we've been laser-focused on improving the revenue quality in our business. And we will continue to do that. Value is defined by what the customer is willing to pay for, and we are improving our experience every day. A good example of that is delivery photo. We're now 92% of all of our residential drops or photograph, which creating a better experience for our recipients, for our customers and for us candidate, and is like.
We're leaning into simplifying the experience of how it is to work with us so we talk to you about the widgets that we have with DAP or the improvements that we've made in our claim process. We see our Net Promoter Score now in the high 40s.
So we are need of that experience because it helps grow the revenue quality, and we're going to continue to do that.
Q3 vol similar to Q3 volume in 2019 bur rev per piece much higher. smb share helps
Transcript
2023 Q3
28 Oct 23
Our health care business will be $10 billion this year against an addressable market that's over $100 billion. We're going to grow that market. It's got double-digit margins. We're going to grow it because we need to grow it. It's important for the world. It's important for humanity. And we are the best in the world at this.
So that doesn't require any consumer spending. That's just leading into a market share capture with the capabilities that we are investing in, be it cold chain capabilities and more.
healthcare growth
Transcript
2023 Q3
28 Oct 23
So as we look at the small package volume in the United States, what we're seeing is basically a reversion to the mean.
So we're at pre-pandemic levels. And I think our learning, all of our learnings as the [indiscernible] volume spikes because of the event, things are going to revert back to the mean.
If you look at the growth rates projected for the small package market in the United States, it's low single digits for the next couple of years.
mean reversion-- lsd growth in small pacjages for next couple of years
Transcript
2023 Q3
28 Oct 23
I guess maybe just a very simple question, I guess, is when do we return to margin expansion in domestic. I mean RPP, CPP spread was really negatively wide in the third quarter. I assume it's still negative, albeit less so in the fourth quarter. Can we get to a situation where we get back to year-on-year margin expansion in early next year? Or do we have to wait until August when the labor really inflation really steps down?
Carol Tomé
Well, maybe just an observation on the U.S. margin in the third quarter. Recall that we had $500 million of expense related to our Teamster contract in the third quarter. We backed that out, the U.S. margin would have been 8.5%. 8.5% on volume down 11% is not a bad margin.
So we've got a bit of pressure on the margin that we shared with you because of our new contract. The contract is front-end loaded.
We're bearing the pain of up front-end load for a 5-year contract that's very attractive. The compounded annual growth rate on the 5 year is 3.3%.
So once we get through this first front-end load, with 46% of the cost in the first year, once we get through that, the margin is going to grow. It's going to grow in a big way.
So hopefully, that's helpful.
margin expabsion in domestic again? 46% of the cost in the first year
Transcript
2023 Q3
28 Oct 23
while consumer spending has been resilient in 2023, headwinds are mounting for the consumer in the fourth quarter. And looking at estimates for holiday retail sales this year, increases range from over 4% to 12%.
cons spending headwinds
Transcript
2023 Q3
28 Oct 23
As a result, we've lowered our full year guidance and have provided a range to reflect the uncertainty in the market. We now expect consolidated revenue to be between $91.3 billion and $92.3 billion and consolidated operating margin to be between 10.8% and 11.3%.
guidance
Transcript
2023 Q3
28 Oct 23
Supply Chain Solutions.
supply chain solutions
Transcript
2023 Q3
28 Oct 23
And lastly, we incurred higher labor costs associated with the new contract and added headcount earlier than normal to ramp up for peak so that we can ensure we maintain our industry-leading service levels.
higher labour costs ad peak costs
Transcript
2023 Q3
28 Oct 23
International segment
international segment
Transcript
2023 Q3
28 Oct 23
In terms of customer mix, in the third quarter, SMBs, including platforms made up 28.5% of our total U.S. volume, an increase of 20 basis points year-over-year.
smb rev mix
Transcript
2023 Q3
28 Oct 23
we continued to see customers shift volume out of the air onto the ground. Total air average daily volume was down 15.8% year-over-year, with about half of the decline coming from our largest customer as anticipated. Ground average daily volume was down 10.7%.
customers shifting to ground from air (lower cost)
Transcript
2023 Q3
28 Oct 23
In the third quarter, we saw lower volumes across all industry sectors with the largest declines from retail and high tech. B2C average daily volume declined 13.4% compared to last year and B2B average daily volume was down 9%
b2c down more than b2b
Transcript
2023 Q3
28 Oct 23
In the U.S., in the third quarter, average daily volume was down 11.5%. And we estimate the impact of volume diversion reduced our volume by approximately 1.5 million packages per day.
impact of
Transcript
2023 Q3
28 Oct 23
Let me quickly touch on DAP, our digital access program.
We are continuing to grow SMB volume with that. In the third quarter, we launched 10 new partners in time for fees. In the first 9 months of this year, we generated $2.1 billion in GAAP revenue, and we expect to deliver $3 billion in GAAP revenue for the year.
DAP colour -- still on track for $3 bilion
Transcript
2023 Q3
28 Oct 23
UPS has been a technology company since our founding, and we are adding transformative technology in our operations that will increase efficiency and improve the employee experience. Smart Package, Smart Facility, our RFID solution is one way we're driving efficiency. And I'm pleased that we are wrapping up our Phase 1 rollout in our U.S. facility. The improvements we are seeing in our preload operations are even better than we expected, with nearly 200 of our buildings seeing this low rates in 1 and 2,500 packages or better. Deployment of Phase 2 is already underway, which equips our packaged cars with RFID readers. Over time, this will allow us to virtually scan smart packages during pickup and eliminate delivery scans during bulk delivery stuff, both of which will enhance customer visibility and make our drivers more efficient.
tech investments
Transcript
2023 Q3
28 Oct 23
Last year's acquisition of Bomi and our recently announced pending acquisition of MNX Global Logistics are 2 examples of bold moves in health care. MNX is an industry leader in time-critical and temperature-sensitive logistics, tailor-made for the complex needs of global health care. By combining MNX with UPS Express Critical and our global integrated network, we will enhance the speed and reliability of our health care portfolio. With MMX, UPS will be able to reach new health care markets like in Asia and new customers like the radiopharmaceutical sector.
To further support our health care strategy, this year, we've opened 7 dedicated health care facilities in Europe and in the U.S. And the acquisition of Bomi further strengthened our health care footprint in Europe and Latin America. Since 2020, we have more than doubled our health care distribution space globally. These efforts and more are keeping us on track to reach our $10 billion health care revenue target this year, and we're just getting started.
health care expansion
Transcript
2023 Q3
28 Oct 23
ugust proved to be the most challenging as some customers waited for the ratification of our Teamster contract before returning volume to our network. Since contract ratification, we've been gaining volume momentum.
We exited the last week of September with U.S. average daily volume, or ADV, down 7.4%, a marked improvement from the rest of the quarter.
improved through the quarter -- august by teanster contract discussions
Transcript
2023 Q3
28 Oct 23