UPS FY Conference Summary Company Overview - **Company**: UPS (NYSE: UPS) - **Industry**: Logistics and Parcel Delivery - **Market Position**: Largest parcel company in the U.S. and a significant global player, handling approximately 6% of the U.S. GDP [1][2] Key Points and Arguments Business Operations - UPS operates a global small package business supported by a large airline and integrated ground network across multiple regions including the U.S., Europe, Latin America, Asia, and the Middle East and Africa [6] - The company is a leader in customs brokerage and healthcare logistics, focusing on complex healthcare supply chains [6] Strategic Changes - In 2025, UPS reduced its volume with Amazon by 1 million pieces per day, with another reduction planned for the first half of 2026 to enhance network efficiency and profitability [7] - The company is undergoing its largest network reconfiguration in history, investing in automation to create a more productive network [8] - UPS is outsourcing a portion of its Ground Saver product back to USPS due to service quality concerns, which is expected to impact revenue and EPS in the short term [9] Financial Guidance - UPS anticipates slight revenue growth in the low single digits and flat EPS for 2026, with a recovery in operating margin expected in the second half of the year [11] - The company aims to maintain a strong balance sheet with a target of $6.5 billion in free cash flow, a $1 billion increase from 2025 [15] Cost Management - UPS is implementing significant cost reductions, including a target to save $3 billion in costs while reducing operational hours and closing buildings [64][65] - The company has closed 93 buildings in 2025 and plans to close an additional 24 in the first half of 2026 [14] Revenue and Pricing Strategy - UPS expects to shed about $5 billion of Amazon revenue over two years, which represents a significant portion of its business [30] - The company is focusing on higher-margin segments such as B2B and healthcare, with a goal of achieving mid-single-digit growth in core enterprise and SMB volume [45][54] International Business - The international segment is facing challenges due to changes in trade lanes and tariffs, particularly with a significant drop in China to U.S. volume [103] - UPS is adapting to these changes by reallocating capacity to more profitable lanes and expects to stabilize margins over time [104] Capital Allocation and Dividend Policy - UPS is committed to maintaining its dividend, with a current payout ratio of 50% of prior year net income, aiming to return to a long-term target of 50%-60% [15][136] - The company is also exploring strategic acquisitions to enhance its capabilities, particularly in healthcare logistics [137] Additional Important Insights - UPS has maintained its position as an industry leader in service during peak seasons, achieving this for eight consecutive years despite operational changes [22] - The company is focused on maintaining cash flow and strategic flexibility, with a strong credit rating and a debt-to-EBITDA ratio around 2.5 times [111] This summary encapsulates the critical aspects of UPS's FY conference, highlighting the company's strategic direction, financial outlook, and operational adjustments in response to market dynamics.

4Q25 Earnings Call January 27, 2026 1 | . | | --- | | . | | . | | . | | • | | . | | •• | | . | © 2026 United Parcel Service of America, Inc. UPS, the UPS brandmark, and the color dark brown tone are trademarks of United Parcel Service of America, Inc. All rights reserved. 2 UPS Speakers CAROL B. TOMÉ Chief Executive Officer BRIAN DYKES Chief Financial Officer PJ GUIDO Investor Relations Officer © 2026 United Parcel Service of America, Inc. UPS, the UPS brandmark, and the color dark brown tone are trademarks ...

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% [7][19] - Year-to-date free cash flow reached $2.7 billion, showing improvement from previous quarters [7][27] - Diluted earnings per share were reported at $1.74, with $0.30 of EPS attributed to a sale leaseback transaction [19] 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 [8][20] - U.S. revenue per piece increased by 9.8%, marking the strongest growth rate in three years [23] - International ADV grew by 4.8%, with export ADV increasing by 5.9%, marking the fifth consecutive quarter of growth [9][25] Market Data and Key Metrics Changes - The U.S. experienced a decline in imports, particularly a 27.1% drop in ADV from China to the U.S. [25][57] - The international segment's operating margin was reported at 14.8%, down from previous levels due to trade lane shifts [26] - Supply Chain Solutions revenue was $2.5 billion, down $715 million year-over-year, largely due to the divestiture of Coyote [26] Company Strategy and Development Direction - The company is undergoing a significant network reconfiguration aimed at reducing costs by approximately $3.5 billion this year [28][31] - The acquisition of Andlauer Healthcare Group is expected to enhance UPS's capabilities in healthcare logistics, with closure anticipated in early November [11][17] - The focus remains on capturing high-value market segments and onboarding customers with complex logistics needs [17][19] 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 [6][9] - The company anticipates consolidated revenue of approximately $24 billion for Q4 2025, with an operating margin of around 11% to 11.5% [17][33] - Management noted that the operational strategy is designed to deliver long-term value for stakeholders amid a rapidly evolving global landscape [17][18] Other Important Information - The company has successfully implemented automation in 35 facilities, with expectations that 66% of volume will move through automated processes in Q4 [16][31] - The Digital Access Program (DAP) generated over $2.8 billion in revenue, reflecting a 20% year-over-year increase [12] Q&A Session Summary Question: Domestic margins and future expectations - Management is pleased with revenue quality and progress on the Amazon glide-down, with updates on 2026 expected in January [36][37] Question: Cost per piece and USPS collaboration - Cost per piece is on a tough comparison, but production metrics are improving significantly, with savings from the driver voluntary severance program expected to materialize in Q4 [42][44] Question: SMB performance and trade policy impact - SMBs showed slight declines year-on-year, but the company is actively helping them navigate trade policy changes [52][53] Question: International trade flow analysis - Permanent changes in trade flows are expected, but the company aims to maintain mid to high teen margins in the international segment [87][88]