Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2025 was $21.4 billion, with an operating profit of $2.1 billion and an operating margin of 10% [4][15] - Year-to-date free cash flow reached $2.7 billion, showing improvement from previous quarters [4][23] - Diluted earnings per share were reported at $1.74, with $0.30 of EPS attributed to a sale leaseback transaction [15][16] Business Line Data and Key Metrics Changes - U.S. average daily volume (ADV) declined by 12.3%, primarily due to the planned reduction of Amazon volume and a focus on revenue quality [5][16] - U.S. revenue per piece increased by 9.8%, marking the strongest growth rate in three years [18] - International ADV grew by 4.8%, with export ADV increasing by 5.9%, marking the fifth consecutive quarter of growth [6][21] - Supply Chain Solutions revenue was $2.5 billion, down $715 million year-over-year, largely due to the divestiture of Coyote [22] Market Data and Key Metrics Changes - The international segment saw a decline in U.S. imports, particularly a 27.1% drop in ADV from China to the U.S. [21][46] - SMBs represented 32.8% of total U.S. volume, showing a 340 basis point improvement compared to last year [17] - The healthcare logistics segment experienced strong revenue growth, driven by UPS's portfolio of healthcare solutions [6][22] Company Strategy and Development Direction - The company is undergoing a significant network reconfiguration aimed at reducing costs by approximately $3.5 billion this year [24][26] - UPS aims to become the number one complex healthcare logistics provider globally, with an acquisition of Andlauer Healthcare Group expected to close in early November [8][13] - The focus is on capturing high-value market segments and onboarding customers with complex logistics needs [13][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tariff changes and highlighted the importance of agility in the international network [4][6] - The company anticipates consolidated revenue of approximately $24 billion for Q4 2025, with an operating margin of 11% to 11.5% [13][28] - Management noted that the operational strategy and commitment to excellence are expected to lead to a strong peak season [12][28] Other Important Information - The company has successfully implemented automation in 35 facilities, with plans for further deployment [12][26] - UPS has paid $4 billion in dividends year-to-date and expects to pay around $5.5 billion in dividends for the full year [23][28] Q&A Session Summary Question: Domestic margins and future outlook - Management is pleased with revenue quality and progress on the Amazon glide down, with updates on 2026 expected in January [30][31] Question: Cost per piece and USPS collaboration - Cost per piece is on a tough comparison, but production metrics are strong, and savings from the driver voluntary severance program will materialize in Q4 [32][35][37] Question: SMB performance and trade policy impact - SMBs showed slight declines but performed better than expected relative to the market, with ongoing support for navigating trade policy changes [40][42] Question: International trade flow analysis - Permanent changes in trade flows are expected, with a target of mid to high teen margins for international operations [66][68] Question: Impact of government shutdown on operations - No significant impact on peak season has been factored in, but management is monitoring the situation closely [70]

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $21.5 billion, a decrease of 0.7% year-over-year, aligning with expectations [7][30] - Consolidated operating profit increased by 0.9% to $1.8 billion, with an operating margin of 8.2%, up 20 basis points from the previous year [7][30] - Diluted earnings per share rose by 4.2% to $1.49 [7][30] Business Line Data and Key Metrics Changes - U.S. Domestic segment operating profit increased by $164 million year-over-year, with an operating margin expansion of 110 basis points [8] - Total U.S. average daily volume (ADV) decreased by 3.5%, with ground ADV down 2.5% and air ADV down 9.6% [32] - International segment ADV increased by 7.1%, with export ADV growing by 9.3% year-over-year [38][39] Market Data and Key Metrics Changes - SMBs accounted for 31.2% of total U.S. volume, the highest concentration in ten years, driving changes in overall volume and revenue quality [34][19] - U.S. import volume is approximately 400,000 pieces per day, representing less than 2% of total global ADV [21] - Revenue from China to U.S. trade lanes represented 11% of total international revenue, with other trade lanes to the U.S. accounting for 17% [21] Company Strategy and Development Direction - The company is executing a significant network reconfiguration, including 164 operational closures, to optimize capacity and reduce dependency on labor [14][43] - The strategic focus includes improving revenue quality and expanding in healthcare, international, B2B, and SMB markets [18] - The company aims to achieve $1 billion in savings through the Efficiency Reimagined initiative, which targets process improvements and cost reductions [17][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain market, emphasizing the agility of their integrated network [28] - The company is not providing updates to the full-year outlook due to market uncertainties but is focused on executing strategic and financial goals [27][50] - Management highlighted the importance of modeling different scenarios to adapt to rapid shifts in business conditions [26][50] Other Important Information - The company plans to close 73 buildings by June 2025 as part of its network reconfiguration [43][48] - The first quarter saw $2.3 billion in cash from operations and $1.5 billion in free cash flow [42] - The company is leveraging next-gen brokerage technology to assist customers in navigating tariff changes [25] Q&A Session Summary Question: Cost savings from the $3.5 billion target - Approximately $500 million of the $3.5 billion cost savings was realized in Q1, with expectations for ramp-up in subsequent quarters [60][78] Question: Automation and efficiency initiatives - The company is exploring automation in various operations, aiming for significant cost savings and reduced labor dependency [70][74] Question: Impact of tariffs on SMBs - SMBs are facing challenges due to tariffs, with many being single-sourced from China, leading to uncertainty in the marketplace [80][81] Question: International volume growth outlook - The company anticipates a shift in trade flows, with potential growth opportunities outside the U.S. despite current uncertainties [89][90] Question: Domestic business performance and pricing strategies - The GroundSaver product has seen an intentional decline in volume as the company adjusts its cost structure and focuses on revenue quality [94][95]