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Our Digital Access Program, or DAP, makes it easy for SMBs to access UPS services and it's an important driver of our SMB growth. In 2020, I challenged the team to turn DAP into $1 billion business. In 2021, DAP generated $1.3 billion in revenue.
dap
Transcript
2021 Q4
27 Sep 23
ast year, of the volume that was started by our hubs in the United States, about 53% went through an automated hub. This year, 57% of the volume went through an automated hub.
automated hubs
Transcript
2023 Q2
20 Sep 23
So let me give you an example of just one of our initiatives, which is Smart Package, Smart Facility. We're now in over about 50% of the buildings in the United States. And 50% of those buildings have misload improvements from 1 in 400 to now 1 in 1,000.
So as the buildings mature, they get better and more productive.
As we think about the next phase of Smart Package, Smart Facility, we're moving from where the pre-loaders are scanning the package to where the car is going to scan package.
sm,art facility
Transcript
2023 Q2
20 Sep 23
We will continue to stay on strategy and invest in both efficiency and growth opportunities. Capital expenditures are still expected be about $5.3 billion, which includes completing the deployment of the first phase Smart Package Marketability in the U.S., continuing to expand our health care logistics footprint globally, expanding DAP internationally and investing in our Logistics-as-a-Service platform.
We are still planning to pay out around $5.4 billion in dividends in 2023, subject to Board approval. And for the full year, we still plan to buy back around $3 billion of our shares.
cap allocation
Transcript
2023 Q2
4 Sep 23
International segment.
INT SWGMENT
Transcript
2023 Q2
4 Sep 23
2C average daily volume declined 11.5% compared to last year, and B2B average daily volume was down 7.7%. In the second quarter, B2B represented 43.7% of our volume, which was an increase of 100 basis points from a year ago. Also in the second quarter, we continued to see customers shift volumes out of the air onto the ground. Total air average daily volume was down 16.5% year-over-year, and ground average daily volume declined 8.6%.
b2c and b2b vo;ume down
Transcript
2023 Q2
4 Sep 23
Now let's look at our business segments. In U.S. domestic, our disciplined approach to revenue quality partially offset the decrease in volume.
As volume declined throughout the quarter, the team did an excellent job adjusting the network to match demand and drive out cost in real-time, all while maintaining industry-leading service levels.
We expected volumes to decline in the second quarter, and it did, but we saw more volume diversion than anticipated as noise levels around our labor negotiations increased.
We estimate the impact of volume diversion, combined with a slowdown in our sales pipeline pull-through, reduced volume in the second quarter by approximately 1.2 million packages per day.
For the quarter, total average daily volume was down 9.9%, with June down 12.2%
us domestic volumes
Transcript
2023 Q2
4 Sep 23
In the second quarter, we further expanded our European footprint by opening our first dedicated health care distribution facility in Ireland, giving us certified health care facilities in 35 countries.
For the first 6 months of 2023, revenue from our health care portfolio reached $4.7 billion.
For the full year, we expect to generate $10 billion in health care revenue.
heath care growth
Transcript
2023 Q2
4 Sep 23
On the digital front, our digital access program, or DAP, continues to grow. We've introduced new plug-and-play technology to make it even easier for e-commerce platforms to connect. In the second quarter, we added 7 new platforms to DAP, including 4 international platforms. In the first 6 months of this year, DAP generated more than $1.4 billion in revenue, putting us on our way to achieving our 2023 DAP revenue targets of around $3 billion.
DAP growth
Transcript
2023 Q2
4 Sep 23
Now in pace with volume declines, some companies might go off strategy or chase unprofitable business, but that is not today's UPS. Today's UPS is focused on the long-term.
During the quarter, we stayed on strategy and continued to invest in the business.
investing in budsiness despite volume declines
Transcript
2023 Q2
4 Sep 23
Yes. Hey, just wanted to you maybe hit on the cadence question again and about sort of how this year progresses on the guidance.
I think 56% of the profit on the back half of the year implies around $2.9 billion or so in 2Q. And just any thoughts around the step up we would might see between domestic and international? And then I guess just Brian on the RPP, CPP point, do you have a line of sight? Does the guidance include a flip back to RPP outperforming or outpacing CPP by the end of the year? Is that a volume function? Is that more of a cost function? Just want to make sure I understand sort of how you guys are thinking about that.
Brian Newman
So we’re longer term, Chris, as we’ve talked to you.
We’re always going to drive for RPP to outpace CPP.
We’re a bit of an extraordinary environment right now with the macros and everywhere they are.
So we don’t have margin expansion this year based on the guide.
So you won’t see that likely return until 2024. But we feel good about the taking cost and CPP down to low single digit as RPP does come back.
So feel okay about that. And then your math is fairly accurate in the second quarter, you’re doing the squeeze the right way.
cpp/rpp
Transcript
2023 Q1
27 Apr 23
One of our large customers reports publicly every month their same-store sales. This is a customer who for 80 quarters in a row had positive same-store sales and in the month of March saw negative same-store sales.
One of our other customers who has both in-store sales as well as online sales has seen a shift in their customer shopping behavior from online to stores.
So they’re shutting down shifts inside of their warehouses, which make sense for them.
So they receive generally macro and a change in consumer behavior impacting our volume, but we’re winning and we just got to go win faster and we will win faster when the uncertainty is behind us. I’m quite convinced of the Teamster negotiation. Customers say, we’d like to ship with you, we’re just going to sit on the sidelines till you’re done.
change in consumer behaviour
Transcript
2023 Q1
27 Apr 23
ut we’re going to need to take cost out balance a year. It’ll be a big reduction in CPP. We were mid-single digit Allison in the U.S. And candidly, if you had told me wages were going to be up 6% and volume was going to be down 5%, I would’ve expected something like a double-digit CPP about three or four years ago.
Nando and the team have done extraordinary job of driving that 6% that we saw in the quarter, but we are expecting low-single digits for the balance of the year.
As you think about CPP, it’s going to come from four areas. One, Carol talked about total service plan, and that’s that reducing hours more than volume and managing the headcount.
The second is our network. We deal with both ground and error, as you know, and in the ground side, how do we consolidate volume and automated facilities, closed sorts and really focus on the efficiency there.
On the air side, it’s changing the package flows to better utilize the one day network. And in fact, domestic block hours they were down about 4% in the first quarter, we would expect to exit the second quarter at 2x [indiscernible]
cpp
Transcript
2023 Q1
27 Apr 23
riginally to an RPP growth of about 3% this year. Carol mentioned volumes are coming in a bit softer, but we’re holding on to that RPP and the RPP composition, we actually saw close to 5% RPP growth in the first quarter. That was driven by a tailwind in fuel about 200 bps that flips around Tom in the back end of the year where we expect double-digit decline in fuel price.
rpp
Transcript
2023 Q1
27 Apr 23
s Brian detailed, the rate of acceleration in the year-over-year decline caused us pause because we were down around 3% in January, 5% in March – February and 7% in March.
As we look at April, April has stabilized relative to how we exited March.
So we feel very good that volume has stabilized. If we look at the year-over-year decline in the U.S. a little over 1 million packages today, we would attribute over 60%, nearly 62% of the decline due to macro and a plan decline with our largest customers.
We’re declining with them in a mutually agreed way.
april stabilized rektivr yp march exit
Transcript
2023 Q1
27 Apr 23
The biggest change in terms of the base case versus downside is the volume. We were looking at volumes of down 1% in the base case, and now we’ve pivoted to the downside of down 3%.
The first quarter was an evolution about where we expected in January, February a little bit lighter, but March was the trail off.
base case /volumes
Transcript
2023 Q1
27 Apr 23
We still expect 2023 capital expenditures to be about $5.3 billion, including investments in automation, and we’ll add 2.3 million square feet of healthcare logistics space to our global network this year. We’ll also complete the deployment of the first phase of Smart Package Smart Facility in the U.S., expand DAP internationally and continue building out our logistics as a service platform.
We are still planning to pay out around $5.4 billion in dividends in 2023 subject to Board approval. We still plan to buy back around $3 billion of our shares. And lastly, our effective tax rate for the full year is expected to be around 23.5%.
no change to plans
Transcript
2023 Q1
27 Apr 23
As a result, we expect full year revenue and operating margin to be at the low end of the previously provided range.
For the full year 2023, we expect consolidated revenues of around $97 billion and consolidated operating margin of around 12.8% with about 56% of our operating profit coming in the second half of the year. In U.S. domestic, we expect full year volume to decline around 3% versus 2022 with revenue per piece growth yearly offsetting the decline in volume and operating margin is expected to be around 11%. In international, we anticipate both volume and revenue to be down by around 4% and we expect to generate an operating margin of around 20%.
And in supply chain solutions, we expect full year revenue to be around $14.3 billion, and operating margin is expected to be around 10%.
guidance detaied
Transcript
2023 Q1
27 Apr 23
supply chain solutions.
supply chain solutions
Transcript
2023 Q1
27 Apr 23
It gradually recovered through the quarter, but at a slower pace than we anticipated. In Europe, the macro environment was a little better than we expected, which helped offset the weakness in Asia relative to our base plan.
asia weaker than expected, europe a lott;e beter
Transcript
2023 Q1
27 Apr 23