United Parcel Service, Inc. · NYSE:UPS
United Parcel Service — Q1 2020 Earnings Presentation
31 slides from United Parcel Service's earnings presentation, Apr 28, 2020
Slide 1: 1Q20 Earnings Announcement
1Q20 Earnings Announcement April 28, 2020 © 2020 United Parcel Service Inc., UPS, the UPS brand mark, the color brown and photos are trademarks of United Parcel Service of America Inc. All rights reserved.
Slide 2: Scott Childress, Investor Relations Officer
Scott Childress Investor Relations Officer 2
Slide 3: UPS Speakers
UPS Speakers David Abney Chairman and CEO Brian Newman Chief Financial Officer Additional Q&A Participants: Kate Gutmann Nando Cesarone Chief Sales and President, International Solutions Officer George Willis Juan Perez President, U.S. Operations Chief Information and Engineering Officer Scott Price
Slide 4: Forward-Looking Statements and Non-GAAP Reconciliations
Forward-Looking Statements and Non-GAAP Reconciliations This presentation, our Annual Report on Form 10-K for the year transition to any other interest rate benchmark; our ability to maintain the image of ended December 31, 2019 and our other filings with the Securities and Exchange our brand; breac
Slide 5: EPS vs. Adjusted EPS
EPS vs. Adjusted EPS* 1Q20 1Q19 $0.11 $1.39* $1.28 $0.04 $1.15* $1.11 $1.00 $1.00 $0.50 $0.50 $0.00 $0.00 1Q20 EPS Trans. Charge 1Q20 Adj. EPS* 1Q19 EPS Trans. Charge 1Q19 Adj. EPS* * Non-GAAP financial measure. See Appendix for reconciliation to GAAP financial measure. 5
Slide 6: David Abney
David Abney Chairman and CEO 6
Slide 7: Coronavirus response
Coronavirus response • Safety of our employees and customers is our highest priority. • Designated by governments around the world as a Critical Infrastructure Business. • UPS is focusing on our customers, ensuring liquidity and positioning the company for additional opportunities as conditions impr
Slide 8: Keeping critical healthcare and other supply chains moving
Keeping critical healthcare and other supply chains moving • Assisting federal and state agencies and supporting 3M, Qiagen, Henry Schein, McKesson and SanMar. • Partnering with GM and Ventec Life Systems to provide logistics and transportation for their advanced-technology ventilators. On-time perf
Slide 9: Ensuring capacity where needed
Ensuring capacity where needed • As China began to recover, UPS added capacity to keep critical supply chains and commerce flowing. • As part of FEMA’s Project Airbridge and other healthcare-related missions, in April UPS increased the number of flights by over 200 to transport critical life-saving
Slide 10: Focusing on our Strategic Growth Imperatives
Focusing on our Strategic Growth Imperatives • Healthcare • Expanding UPS Premier. • UPS Flight Forward, in cooperation with the FAA, will begin delivering prescriptions for CVS in The Villages in Florida. • Assisting customers through our new healthcare unit. • E-commerce • Digital Access Program h
Slide 11: UPS liquidity and financial condition remain strong
UPS liquidity and financial condition remain strong • The coronavirus pandemic is having an impact: • Seeing a dramatic shift in consumer shopping behavior. • Major U.S. and global economic indicators forecast declines. • Unable to predict the business impact of the pandemic, or estimate financial p
Slide 12: Prioritizing CapEx spending
Prioritizing CapEx spending • Continuing to make investments that best position the company to seize future opportunities as conditions improve. • Prioritizing investments and spending that yield the greatest long-term benefits to the company. Reducing CapEx by $1 billion in 2020. 12
Slide 13: Welcome to Carol Tomé
Welcome to Carol Tomé • 12th CEO of UPS. • Has served on the UPS Board for 17 years. • Brings a vast understanding of retail, e-commerce, strategy, and an extensive finance background to UPS. • The right person to guide UPS at this time in our history. 13
Slide 14: Brian Newman
Brian Newman Chief Financial Officer 14
Slide 15: Rapid changes during the quarter
Rapid changes during the quarter Asia Average Daily Volume* Y/Y % Change 20% 10% Total International Average Daily Volume* Y/Y % Change 0% 4% -10% -20% 0% Jan-20 Feb-20 Mar-20 Europe Average Daily Volume* -4% Y/Y % Change 4% 0% -8% Jan-20 Feb-20 Mar-20 -4% -8% * In Local Days -12% Jan-20 Feb-20 Mar-
Slide 16: Businesses were affected differently throughout the quarter
Businesses were affected differently throughout the quarter • Difficult for customers to know how to respond and make adjustments. • March commercial deliveries down 8.9%. • Many SMBs had limited alternatives. • Customers migrated online. • Impact across sectors varied: • E-commerce and healthcare v
Slide 17: 1Q20 Financial Summary
1Q20 Financial Summary • Generated $18B in revenue. • Net income was down $146M, and adjusted net income was down ~$200M* driven by three after-tax items: • The impact of the coronavirus was a drag of ~$140M. • Casualty self-insurance accruals were higher than anticipated by ~$110M. • One additional
Slide 18: 1Q20 U.S. Domestic
1Q20 U.S. Domestic B2C Volume 60% B2C 2019 B2C 2020 • Average daily volume across all products up 8.5%. • Commercial deliveries declined. 55% • In late March, B2C grew to nearly 70% of total volume. 50% • Headwinds: coronavirus impact, higher than anticipated casualty self-insurance and pension disc
Slide 19: 1Q20 International
1Q20 International • International executed well through various peaks and valleys as the coronavirus pandemic spread across the world. • Average daily volume was down 6.5% in March. • Business closures and stay-at-home restrictions led to a decline in commercial volume. • Managed costs and reduced
Slide 20: 1Q20 Supply Chain and Freight
1Q20 Supply Chain and Freight • Revenue was down less than 1%. • Some positives emerged: • International Air Freight tonnage was up more than 15% in March, primarily on Asia-outbound lanes. • Logistics grew operating profit. • Marken grew revenue and operating profit by double-digits. • Headwinds: i
Slide 21: Disciplined and balanced approach to capital allocation
Disciplined and balanced approach to capital allocation For the quarter ended March 31, 2020: • $2.6B in cash from operations and $1.6B* of adjusted free cash flow. Liquidity position: • $3.5B debt issuance in March more than satisfies 2020 debt obligations. • Taking a strict approach to working cap
Slide 22: Three stages of the global situation
Three stages of the global situation • Pre-coronavirus pandemic • Stay-at-home restrictions • Recovery UPS is focused on keeping our employees safe, serving our customers and ensuring liquidity. 22
Slide 23: April trends
April trends • International • Asia appears to be stabilizing; Europe is in transition. • Average daily volume is down ~8%. • U.S. Domestic • B2C continues to be ~70% of weekly volume. • Healthcare is growing. • Total average daily volume is up mid-single digit, led by Ground residential and SurePos
Slide 24: Rapidly changing U.S. market
Rapidly changing U.S. market • Miles driven and delivery stops are elevated. • Delivery density declining. U.S. 2020 Delivery Density Y/Y Change January February March 24
Slide 25: Recovery phase
Recovery phase • Prioritizing investment and operational decisions that best position UPS for the recovery. • UPS transformation initiatives are delivering: • more automation. • increased network flexibility. • new technology-enabled solutions for customers. 25
Slide 26: Questions & Answers
Questions & Answers 26
Slide 27: Reconciliation of GAAP and Non-GAAP Financial Measures
Reconciliation of GAAP and Non-GAAP Financial Measures Reconciliation of GAAP and non-GAAP Financial Measures Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. dollar revenue, revenue per piece and operating profit by the current
Slide 28: Reconciliations
Reconciliations Reconciliation of GAAP and Non-GAAP Income Statement Data Reconciliation of GAAP and non-GAAP Income Statement Data (in millions, except per share amounts): (in millions, except per share amounts): Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Transformation Tra
Slide 29: 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 March 31 2020 2020 2019 Currency As-Reported As-Reported % Change Currency Neutral % Change (GAAP) (GAAP) (GAAP) Impact (Non-GAAP)
Slide 30: Reconciliations
Reconciliations Reconciliation of Non-GAAP Pension Discount Rate Neutral Operating Profit and Margin (in millions): Three Months Ended March 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-GAAP)
Slide 31: Reconciliations
Reconciliations Three Months Ended March 31 Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash Preliminary 2020 Cash flows from operating activities $ 2,550 Cash flows used in investing activities (934) Cash flows from financing activities 2,167 Effect of exchange rate changes on
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