United Parcel Service, Inc. · NYSE:UPS
United Parcel Service — Q4 2020 Earnings Presentation
32 slides from United Parcel Service's earnings presentation, Feb 2, 2021
Slide 1: 4Q20 Earnings Call
4Q20 Earnings Call February 2, 2021 1
Slide 2: Scott Childress, Investor Relations Officer
Scott Childress Investor Relations Officer 2
Slide 3: UPS Speakers
UPS Speakers Carol B. Tomé Chief Executive Officer Brian Newman Chief Financial Officer © 2021 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. 3
Slide 4: Forward-Looking Statements and Non-GAAP Reconciliations
Forward-Looking Statements and Non-GAAP Reconciliations Forward-Looking Statements health and/or pension benefits; potential additional U.S. or international tax liabilities; potential claims or litigation related to labor and employment, personal injury, property damage, business practices, environ
Slide 5: Diluted EPS
Diluted EPS 4Q20 4Q19 $3.00 $0.75 $2.66* $3.00 $5.63 $0.04 $0.10 $2.11* $2.00 $2.09 $2.00 $1.00 $1.00 ($3.75) ($0.12) $0.00 $0.00 -$1.00 -$1.00 -$2.00 -$2.00 -$3.00 -$3.00 -$4.00 -$4.00 -$5.00 -$5.00 4Q20 EPS Defined Benefit Transformation & 4Q20 Adj. EPS* 4Q19 EPS Defined Benefit Transformation Leg
Slide 6: Carol Tomé, Chief Executive Officer
Carol Tomé Chief Executive Officer 6
Slide 7: Thank You UPSers
Thank You UPSers © 2021 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. 7
Slide 8: Full Year Consolidated Results
Consolidated Results GAAP Adjusted In $ Millions % In $ Millions % 4Q20 4Q19 4Q20 4Q19 (except per share) Change (except per share) Change Total Revenue $24,896 $20,568 21.0% Total Revenue $24,896 $20,568 21.0% Q4 Operating Profit $2,167 $2,133 1.6% Operating Profit* $2,870 $2,278 26.0% Operating Ma
Slide 9: U.S. Peak Season
U.S. Peak Season • Close collaboration with customers and disciplined execution • Industry-leading service • Attracted SMB customers • SMB volume growth of 28.5% in Q4 • Above 99% service for COVID-19 vaccine deliveries © 2021 United Parcel Service of America, Inc. UPS, the UPS brandmark, and the co
Slide 10: Operationalizing Our Strategy
Operationalizing Our Strategy Through a Better Not Bigger Framework • Speed: Accelerated completion of Weekend and Our Fastest Ground Ever • Ease: Expanded Digital Access Program; revenue up more than 360% Customer First Net Promoter Score • Increased “Likelihood to Recommend” score (+13%) • Creatin
Slide 11: Everything is Under Review
Everything is Under Review Better Not Bigger • We entered an agreement to sell UPS Freight • Divestiture is expected to improve overall company margin and return on invested capital • Proceeds will be used to pay down long-term debt © 2021 United Parcel Service of America, Inc. UPS, the UPS brandmar
Slide 12: Looking Ahead to 2021
Looking Ahead to 2021 • We are optimistic about the future • Revenue-quality and productivity initiatives should result in: • Operating margin expansion • Increased ROIC • We are not providing revenue or EPS guidance due to continuing uncertainty on vaccine rollout and macro-environment © 2021 Unite
Slide 13: Brian Newman, Chief Financial Officer
Brian Newman Chief Financial Officer 13
Slide 14: Dynamic Macro Environment
Dynamic Macro Environment Shift in Buying Patterns Offset Weak Macro Conditions 4Q20 Global GDP expected U.S. non-store retail sales to finish at -1.7% at 20.9% of total retail sales in 4Q20 U.S. industrial production -4.7% in 4Q20 Shift in buying patterns generated elevated demand for residential d
Slide 15: Consolidated Revenue and Operating Profit Grew
Consolidated Revenue and Operating Profit Grew GAAP Adjusted In $ Millions % In $ Millions % 4Q20 4Q19 4Q20 4Q19 (except per share) Change (except per share) Change Total Revenue $24,896 $20,568 21.0% Total Revenue $24,896 $20,568 21.0% Operating Profit $2,167 $2,133 1.6% Operating Profit* $2,870 $2
Slide 16: U.S. Domestic: Success Driven by Revenue-Quality Efforts
U.S. Domestic Success Driven by Revenue-Quality Efforts and Disciplined Execution Customer Mix Improved, with SMB Volume Up 28.5% 4Q20 Monthly B2C ADV (Y/Y) • B2C grew 19.9% • Split was 67% B2C 80% +8.9% vs. Last Year 60% 40% +1,972 20% 25,000 0% In Thousands +43 +31 25,155 4Q20 23,000 Monthly B2B A
Slide 17: U.S. Domestic: Revenue Increased 17.4%, Driven By Ground Residential
U.S. Domestic Revenue Increased 17.4%, Driven By Ground Residential Revenue Per Piece increased 7.8%, Driven By Customer Mix and Surcharge Revenue U.S. Revenue Per Piece (Y/Y) 10% +7.8% +17.4% vs. Last Year 5% 0% $15.7B $16.0 -5% $1.1 -10% $15.0 1Q20 2Q20 3Q20 4Q20 In Billions $1.2 $14.0 Revenue q
Slide 18: U.S. Domestic Generated Record Adjusted Operating Profit in Q4
U.S. Domestic U.S. Domestic Generated Record Adjusted* Operating Profit in Q4 Operating Profit (In Millions) $173 GAAP $1,247 $1,074 Adjusted* cost per piece increased 8.2% 4Q19 Operating Profit Performance 4Q20 Operating Profit driven by: Operating Margin: $150M of credits in 2019 that did not
Slide 19: International: Exceeded Volume Expectations, ADV Up 21.9%
International Exceeded Volume Expectations, Average Daily Volume Up 21.9% B2C ADV Increased 104.1%; While B2B ADV Grew 2.0% Asia Monthly ADV (Y/Y) Europe Monthly ADV (Y/Y) 30% 60% 10% 20% -10% -20% -30% Americas Monthly ADV (Y/Y) U.S. Export Monthly ADV (Y/Y) 40% 40% 20% 20% 0% 0% -20% -20% -40% © 2
Slide 20: International Generated Record Operating Profit and Margin
International International Generated Record Operating Profit and Margin Operating Profit (In Millions) Revenue was up 26.8% to $4.8 billion +$349 Added 365 flights above normal GAAP $1,148 schedules to service high demand $799 Asia export volume up 45.0%; Europe 4Q19 Operating Profit Performa
Slide 21: Supply Chain and Freight: Strong Market Demand Drove Revenue Growth
Supply Chain and Freight Strong Market Demand Drove Revenue Growth Operating Profit (In Millions) Forwarding supported high demand out of Asia $260 ($488) GAAP Healthcare had its best quarterly top- and ($228) bottom-line growth ever 4Q19 Operating Profit Performance 4Q20 Operating Loss Operatin
Slide 22: UPS Cash Flow Remains Strong
UPS Cash Flow Remains Strong Cumulative Cash from Operations of $10.5B and Free Cash Flow* of $5.1B $12.0 Capital Expenditures* $10.0 $8.0 (In Billions) 1Q - 3Q 4Q20 2020 In Billions Buildings & Facilities $1.7 $0.9 $2.6 $6.0 Aircraft & Parts $0.7 $0.5 $1.2 $4.0 Vehicles $0.4 $0.6 $1.0 IT $0.6 $0.2
Slide 23: The UPS Dividend Is a Hallmark Of Our Financial Strength
The UPS Dividend Is a Hallmark Of Our Financial Strength $4.04 $4.00 $3.84 $3.64 $3.50 $3.32 $3.12 $3.00 $2.92 $2.68 $2.48 $2.50 $2.00 $1.50 2013 2014 2015 2016 2017 2018 2019 2020 © 2021 United Parcel Service of America, Inc. UPS, the UPS brandmark, and the color dark brown tone are trademarks of U
Slide 24: Outlook for 2021
Outlook for 2021 We are not providing revenue or diluted earnings per share guidance at this time Some things to consider: Transformation 2.0 expected to reduce non- operating costs by more than $500M in 2021 We expect the sale of UPS Freight to close in 2Q21 We will face more difficult co
Slide 25: 2021 Capital Allocation
2021 Capital Allocation Expect CAPEX to be about $4B Dividends expected to grow, subject to Board approval Expect to pay off $2.5B of funded debt No plans to repurchase shares or access the debt capital markets in 2021 Effective tax rate is expected to be ~23.5% © 2021 United Parcel Servic
Slide 26: UPS Investor Meeting
UPS Investor Meeting UPS Investor Day Wednesday, June 9 Investor Day © 2021 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. 26
Slide 27: Questions & Answers
Questions & Answers © 2021 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. 27
Slide 28: Reconciliation of GAAP and Non-GAAP Financial Measures
Reconciliation of GAAP and Non-GAAP Financial Measures Reconciliation of GAAP and non-GAAP Financial Measures Pension discount rate-neutral operating profit is calculated by discounting the value of benefits attributable to employee service in the current period utilizing the prior year discount rat
Slide 29: Reconciliations
Reconciliations Reconciliation of GAAP and Non-GAAP Income Statement Reconciliation of GAAP and Non-GAAP Income Statement Data (in millions, except per share amounts): (in millions, except per share amounts): Three Months Ended December 31, 2020 Three Months Ended December 31, 2019 Transformation De
Slide 30: Reconciliations
Reconciliations Reconciliation of GAAP and Non-GAAP Revenue, Revenue Per Piece, and Adjusted Operating Profit (in millions, except per piece amounts): Three Months Ended December 31, 2020 2020 2019 Currency- As-Reported As-Reported % Change Currency Neutral % Change (GAAP) (GAAP) (GAAP) Impact (Non-
Slide 31: Reconciliations
Reconciliations Reconciliation of Non-GAAP Pension Discount Rate Neutral Operating Profit and Margin (in millions): Three Months Ended December 31 2020 As-Adjusted 2020 2019 Pension Discount As-Adjusted As-Adjusted % Change Rate-Neutral % Change (Non-GAAP)(1) (Non-GAAP)(1) (Non-GAAP) Pension (Non-GA
Slide 32: Reconciliations
Reconciliations Reconciliation of Free Cash Flow (Non-GAAP), Adjusted Free Cash Flow (Non-GAAP) and Adjusted Capital Expenditures (Non-GAAP) (in millions): Twelve Months Ended December 31, 2020 Cash flows from operating activities (GAAP) $ 10,459 Capital expenditures (5,412) Proceeds from disposals
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