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 $1.74, with $0.30 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 a planned reduction in Amazon volume and lower-yielding e-commerce volume [8][20] - U.S. domestic revenue was $14.2 billion, down 2.6% year over year, despite a 9.8% increase in revenue per piece [23][24] - International ADV grew by 4.8%, with export ADV increasing by 5.9%, marking the fifth consecutive quarter of growth [9][25] - Supply Chain Solutions revenue was $2.5 billion, down $715 million year over year, largely due to the divestiture of Coyote [26] Market Data and Key Metrics Changes - The international segment's operating margin was 14.8%, down from the previous year due to trade lane shifts and lower demand-related surcharges [26] - The U.S. experienced a significant decline in imports from China, with a 27.1% drop in ADV [25][57] Company Strategy and Development Direction - The company is undergoing a significant transformation, focusing on high-value market segments and complex logistics needs [17][18] - The acquisition of Andlauer Healthcare Group is expected to enhance UPS's healthcare logistics capabilities [11][32] - The Digital Access Program (DAP) generated over $2.8 billion in revenue, a 20% increase year over year, indicating strong growth in the SMB segment [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tariff changes and highlighted the importance of operational agility in response to evolving trade policies [6][9] - The company anticipates a strong peak season, driven by strategic enhancements and operational efficiencies [15][31] - Fourth quarter revenue is expected to be approximately $24 billion, with an operating margin of 11% to 11.5% [17][32] Other Important Information - The company has closed 93 buildings as part of its network reconfiguration efforts, aiming to reduce costs by approximately $3.5 billion this year [13][28] - The voluntary retirement program for long-term drivers was successfully completed, contributing to cost savings [13][24] Q&A Session Summary Question: Domestic margins and future expectations - Management is pleased with revenue quality and progress on the Amazon glide down, with expectations for sequential increases in Amazon volume during peak [35][36] Question: Cost per piece and USPS collaboration - Cost per piece is expected to improve due to automation investments and the driver voluntary severance program, with benefits materializing in Q4 [42][43][46] Question: SMB performance and trade policy impacts - SMBs showed slight declines year on year, but the company is actively helping them navigate trade policy changes [50][51][52] Question: International trade flow analysis - Permanent changes in trade flows are expected, with a focus on operational adjustments to meet customer needs [88][90]

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 to $1.8 billion, up 0.9% compared to the previous year [7][30] - Consolidated operating margin improved to 8.2%, an increase of 20 basis points year-over-year [7][30] - Diluted earnings per share rose to $1.49, reflecting a 4.2% increase from the prior year [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][38] - 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 all regions showing growth [38] - Supply Chain Solutions revenue decreased by $471 million, primarily due to the divestiture of Coyote [40] Market Data and Key Metrics Changes - 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 accounted for 11% of total international revenue, while other trade lanes contributed 17% [21][22] - SMBs represented 31.2% of total U.S. volume, the highest concentration in ten years [34][19] Company Strategy and Development Direction - The company is executing a significant network reconfiguration, including 164 operational closures, to enhance efficiency and reduce costs [14][43] - The strategic focus includes reducing dependency on Amazon's volume by over 50% by June 2026, while maintaining profitable segments [12][46] - The company aims to improve revenue quality by targeting growth in healthcare, international, B2B, and SMB markets [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic environment, emphasizing the importance of agility in operations [6][28] - The outlook for 2025 remains uncertain due to changing trade policies and tariffs, with no updates provided for the full-year outlook [26][50] - Management highlighted the need to model various scenarios to adapt to rapid shifts in business conditions [26][50] Other Important Information - The company generated $2.3 billion in cash from operations and paid $1.3 billion in dividends during Q1 [42] - The efficiency reimagined initiative is expected to deliver $1 billion in savings by improving operational processes [17][60] 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 [78][79] Question: Impact of tariffs on SMBs - SMBs are facing significant uncertainty due to tariffs, particularly those reliant on single sourcing from China [80][81] Question: International volume growth outlook - The company anticipates that trade flows will shift, allowing for potential growth in international markets despite challenges in the China to U.S. lane [89][90]