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nternational segment,
international
Transcript
2023 Q1
27 Apr 23
U.S. Domestic, revenue quality initiatives nearly offset the decrease in volume and as the decline in volume accelerated toward the end of the quarter, we responded quickly by adjusting the network to eliminate costs while maintaining our industry leading service levels.
In the first quarter, we expected average daily volume to decline between 3% and 4%.
For the quarter, average daily volume was down 5.4% year-over-year, primarily because volume in March moved lower than we expected.
Looking at mix in the first quarter, we saw lower volume across all industry sectors with the largest declines from retail and high-tech. B2C average daily volume declined 5.5% compared to last year, and B2B average daily volume declined 5.4%. A bright spot in B2B in the quarter was returns, which was up 6.8% year-over-year. In the first quarter, B2B represented 42.7% of our volume, which was unchanged from a year ago.
us domedtic -- volumes weaker than expected
Transcript
2023 Q1
27 Apr 23
On the consumer side of the U.S. economy, the growth rate on services spending is continuing to outpace the growth rate on good spending, and within the goods bucket, consumer spent more on essential items like groceries, which tend to be purchased in store. These factors plus a five point drop in consumer sentiment from February to March contributed to the reduction in our volume levels.
cons sopending patterns shifting unfavirably
Transcript
2023 Q1
27 Apr 23
Moving to our outlook for 2023, last quarter, we provided a range for our 2023 financial target.
As we’ve discussed, there’s been a deceleration in U.S. retail sales growth in certain non-U.S. markets remain challenged.
As a result, we now expect to be at the low end of our previously provided revenue and operating profit margin range.
guided towards low end of previous rev, op mgn range
Transcript
2023 Q1
27 Apr 23
In the first quarter, revenue from our healthcare portfolio reached $2.4 billion and we expect to generate over $10 billion in healthcare revenue in 2023.
healthcare guidance
Transcript
2023 Q1
27 Apr 23
healthcare. In the first quarter of 2023, we expanded our global footprint by opening nearly 1 million square feet of dedicated healthcare space, including our first facility in Germany. This facility provides customers a broad range of temperature sensitive and handling solutions. Its location in the center of Germany connects our customer shipment, the fast growing European healthcare market.
investing in healthcare
Transcript
2023 Q1
27 Apr 23
One final comment on SMBs. In the first quarter, SMBs including platforms made up 29.6% of our total U.S. volume. This is the 11th consecutive quarter of increased SMB penetration and it’s the highest level we’ve seen in more than seven years.
smb increasing as share of US volume
Transcript
2023 Q1
27 Apr 23
Looking at SMBs, we continue to invest in the international expansion of our Digital Access Program or DAP. We now have 16 countries producing DAP revenue. In the first quarter, total DAP revenue was up 51.5% compared to last year, and we are on track to generate around $3 billion in DAP revenue this year.
Did you know that in the U.S. about one out of every four DAP packages enters our network through a UPS store with more than 5,100 locations in the U.S., UPS stores are strategic assets.
int expansion of DAP
Transcript
2023 Q1
27 Apr 23
Turning to our results. 2023 is proving to be an interesting year. In the U.S., relative to our base plan, volume was higher than we expected in January, close to our plan in February, and then moved significantly lower than our plan in March as retail sales contracted and we saw a shift in consumer spending.
For example, food as a percentage of household budgets reached 9% in the first quarter compared to 7% a couple of years ago. U.S. discretionary sales are lagging grocery and consumable sales and disposable income is shifting away from goods to services.
jan better, feb ok, mar weak
Transcript
2023 Q1
27 Apr 23
And just on smart package smart facility because I was just so enthralled with this project.
We have of the 100 buildings that we're in, we have 50 buildings, where the misloads are now one in 1,000, that's six sigma perfection.
So we're really excited about rolling out to the 940 remaining buildings in the United States. And here's the cool thing. We're going to roll out the first part of those buildings with wearable devices. But then we got plans to move away from the devices and actually make the car smart.
smart psackage
Transcript
2022 Q4
5 Apr 23
So smart pack smart facility that really drives productivity inside the buildings, but it also improves the customer experience by reducing misloads.
I think misloads today are running about one in 400 posts, the smart pack smart facility will be up in one in 800. And there's a path to something higher beyond that. And then there's accelerating pilots for Phase 2 which is sort baggage car.
misloads/smart invrestment
Transcript
2022 Q4
5 Apr 23
We expect 2023 capital expenditures to be about $5.3 billion.
And here are a few project highlights.
We will invest $2.4 billion in buildings and facilities to add automated storage capabilities and increase efficiency across the network. And we'll add 2.4 million square feet of healthcare logistics space to our global network.
We will invest $1.3 billion in vehicles, including adding more than 2,400 alternative fuel vehicles to our fleet.
We will invest $745 million in our air fleet, including taking delivery of seven 767 aircraft in 2023.
And in terms of IT, we will invest $830 million, which includes accelerating the rollout of smart package smart facility in the U.S., continuing to develop our delivery density solutions, and building out our logistics-as-a-service platform. And lastly, across these projects, and others, over $1 billion of investment will support our carbon neutral goals.
Capex break out -- 2.4bn on automared storsage
Transcript
2022 Q4
5 Apr 23
Sure. On the Amazon front, Ken, we finished up a year ago at 11.7% in terms of the percentage of Amazon as a percentage of our business. That came down to 11.3% in last year.
So it was really a decline of about 40 basis points.
We'll continue on a mutually agreed path to glide that business down in 2023, and that's factored into our guide.
So we feel good about being able to manage that down.
On the international front, Ken, it was the second part of your question.
So we've got an assumption that Asia comes back in the second half of the year.
So that's -- they're going through some challenges right now in the early part of the year. There was a two-week lunar holiday. We had some COVID challenges, particularly out of China.
So Kate and the team, they've done a masterful job in the fourth quarter and also in the beginning of this year in terms of pivoting our air network.
I think Kate took down about 200 flights in Asia, which was really remarkable that they were able to do that in such a short period of time.
So the air network, seeing a little bit of a rebound in China and then getting after the opportunities that we're investing in. International, DAP was one I just mentioned and then going after the premium side of the market.
So lots of encouraging optimism for the back half of the year.
Carol Tome
And agility really is the name of the game, isn't it.
Here it is. It's the end of January. I would say our crystal ball is pretty murky, but I can tell you what we're seeing in the business today. The U.S. is actually doing a bit better than the base case. And International is doing a bit worse because we're in a now a two-week Lunar New Year holidays, who would have thought. But with herd immunity coming, we believe in China, things should get better outside the United States.
Ken Hoexter
And just to clarify, that 11.3.
I think, Carol, you had mentioned that you were targeting maybe less than 11% on Amazon for '22.
So it sounds like maybe it's not drifting away as fast as an accelerating decline.
Carol Tome
No, Ken, it's really is a function of currency. FX impacted our top line by $1.3 billion.
So having not had the pressure on the top line, the percentage would have been different. Does that make sense?
Ken Hoexter
Yeah. Absolutely.
Of course. Thanks for the clarification.
amazon colour
Transcript
2022 Q4
2 Feb 23
Now, some of the investments, international DAP for example, we're investing in the first part of the year, that'll start to pay back latter part of the year. And then the deployment of smart packs, smart facilities, that's probably more of a payback in '24 than '23 as we phase, complete Phase 1, and start to move on to Phase 2.
Carol Tome
And to dimensionalize the investment that we're making in smart package smart facility, it's about $140 million of expense this year, which will not repeat the following year, and about $106 million of capital.
int dap and smsart facilities
Transcript
2022 Q4
2 Feb 23
Putting it all together, we expect to grow revenue per piece at a faster rate than cost per piece, and expand full year domestic operating margins to 12%.
us dom -- rev per peiced will gorw more thsn cost per piece leadsing 12% margin
Transcript
2022 Q4
2 Feb 23
We expect free cash flow to be around $8 billion in our base case. Consistent with our policy of a stable and growing dividend, the board has approved a dividend per share of $1.62 for the first quarter, which represents a 6.6% increase in our dividend.
FCF guide of 8bn in 2023
Transcript
2022 Q4
2 Feb 23
Bringing it all together for the full year 2023, we expect consolidated revenues to be between $97 billion and $99.4 billion and consolidated operating margins to be between 12.8% and 13.6%, with more than half of our operating profit coming in the second half of the year.
back half weiighttyed
Transcript
2022 Q4
2 Feb 23
international in 2023. In our base case plan, we expect a recession in Europe in the first half of the year. And in China, we expect weak demand in the first quarter with recovery beginning in the second quarter.
We are accelerating initiatives like international data to help us gain share and partially offset macroeconomic softness. We anticipate international average daily volume will decline by low-single digit, with volume growth better in the second half of the year compared to the first.
We expect revenue to decline by low-single digits, including reduction in demand related surcharges.
We will continue to manage our costs with agility and expect to generate an operating margin of around 21%.
int guidance -- vol + rev down LSD
Transcript
2022 Q4
2 Feb 23
n the U.S., we expect a mild recession in the first half the year, with a moderate recovery in the second half of the year. In the U.S. domestic segment, we anticipate average daily volume will be down slightly due to our continued volume glide down from our contractual agreements with our largest customer which will be nearly offset with growth from SMB and other enterprise customers. And we expect volume growth to be better in the second half of the year compared to the first.
We also expect the revenue growth rate to be low-single digits.
Us dom guidance -- mild recession, daily volume doen slightly . largest customer down offset with smb growth
Transcript
2022 Q4
2 Feb 23
A few consolidated highlights. Revenue reached $100.3 billion, an increase of $3.1 billion over 2021. This was $1.7 billion below our $102 billion revenue target, but included a $1.3 billion year-over-year negative impact from currency. In 2022, we generated operating profit of $13.9 billion, an increase of 5.4% over full year 2021 consolidated operating margin was 13.8%, an increase of 30 basis points. We increased our ROIC to 31.3%, up 50 basis points compared to last year. We generated $14.1 billion in cash from operations and continue to follow our capital allocation priorities.
2022 highlights
Transcript
2022 Q4
2 Feb 23