FedEx Corporation · NYSE:FDX
FedEx — Investor Day (June 2022)
54 slides from FedEx's investor day presentation, Jun 29, 2022
Slide 1: Investors Meeting June 29, 2022
6/28/22 Investors Meeting June 29, 2022 1 Mickey Foster Vice President Investor Relations 2 1
Slide 2: Investor Relations Team; Forward Looking Statements
6/28/22 Investor Relations Team Mickey Foster Elizabeth Allen Steve Hughes Jeff Smith Matt DeBerry Robyn Moye 3 Forward Looking Statements and Non-GAAP Financial Measures Certain statements in this presentation may be considered forward-looking statements, such as statements regarding future financi
Slide 3: Agenda
6/28/22 Agenda WEDNESDAY, JUNE 29 8:30 AM Presentations Lunch Q&A 1:00 PM Buses depart to airport & hotel 5 Investors Meeting June 29, 2022 6 3
Slide 4: Raj Subramaniam: Our Strategic Outlook and Vision
6/28/22 Raj Subramaniam President & Chief Executive Officer 7 Our Strategic Outlook and Vision 8 4
Slide 5: Our global network is unmatched
6/28/22 Our global network is unmatched Global scale and complexity Unrivaled access Flexible, multi-modal asset base 9 The largest express transportation company in the world Supporting cost-effective business and residential package shipping Priority and economy less-than-truckload (LTL) freight s
Slide 6: Intersection of physical and digital
6/28/22 Intersection of physical and digital Evolve the way we utilize our network Enhance customer experiences Unlock new revenue streams 11 Our focus today 12 6
Slide 7: Highest priorities to achieve strong TSR by FY25
6/28/22 DELIVER I N N OVAT E F O R TO DAY TO M O R R OW ► Drive yields through service ► Enable intelligent ► Expand margins through supply chains lower cost to serve ► Lead in sustainability ► Elevate returns through ► Empower our people capital efficiency COMPETE COLLECTIVELY | OPERATE COLLABORATI
Slide 8: Disciplined execution targeting to deliver by FY25
6/28/22 Disciplined execution targeting to deliver by FY25: Stable, sustained revenue $105B - $110B Revenue growth in attractive segments (4 - 6 % CAGR) 10% adjusted consolidated Expand margins and profitability operating margin* Lower our capital intensity and 11.5%+ ROIC* increase our ROIC focus 2
Slide 9: We will continue our industry leadership in ESG
6/28/22 We will continue our industry leadership in ESG OUR TOP PRIORITIES INCLUDE: 1. Converting delivery fleet to zero-emission electric vehicles 2. Launching carbon neutral shipping 3. Transforming facilities to become energy efficient 4. Leading in the market in sustainable solutions To reach ou
Slide 10: Brie Carere: Global Commercial Strategy and Market Backdrop
6/28/22 Brie Carere Executive Vice President & Chief Customer Officer 19 Global Commercial Strategy and Market Backdrop 20 10
Slide 11: Commercial strategy
6/28/22 Commercial strategy Clear view of the market Grow in the right segments Small/Medium Business, B2B, Intra-Europe, and Intercontinental Deliver premium service and differentiated portfolio Achieve top-of-market and inflation+ pricing TARGET REVENUE GROWTH: 4 - 6% FY22 - 25 CAGR How will we de
Slide 12: Operating in a durable market
6/28/22 Operating in a durable market DOMESTIC ADV GREW +30% IN COVID, 3X THE TREND +10% +31% 84M 79M 60M 55M 50M 46M 2016 2017 2018 2019 2020 2021 PRE - COVID COVID U.S. Domestic Parcel Market ADV 23 E-commerce drives significant opportunity for FedEx Ground CAGR OVER THE PAST DECADE: 116M EXPRESS
Slide 13: FedEx will power the democratization of e-commerce
6/28/22 FedEx will power the democratization of e-commerce NON-AMAZON MARKET WILL CONTINUE GROWING AT STABLE RATES: ADV +4% +4% 67M 57M 2021 2025 (est.) U.S. Domestic Parcel Market ADV (Excluding Amazon) 25 Service is the cornerstone of our value proposition Purple Promise: I will make every FedEx e
Slide 14: Differentiate through Digital
6/28/22 Differentiate through Digital CONTINUOUSLY INNOVATING IN OUR OFFERINGS: Estimated Delivery Date (EDD) and Estimated Delivery Time Window (EDTW) Picture Proof of Delivery (PPOD) launching in US prior to peak New online shipping platform FedEx Ship Manager 27 Focus on high-value segments: Smal
Slide 15: Focus on high-value segments
6/28/22 Focus on high- value segments Win B2B, gaining share via bundled offering & service excellence Best parcel LTL bundle Visibility, monitoring, and intervention Vertical expertise with specialized solutions 29 Finding the right customer mix D E E P LY E M B E D D E D O P E R AT I O N S W I T H
Slide 16: Yield premium with product differentiation
6/28/22 F DX Y I E L D 1 P R E M I U M O V E R U P S +9% FDX +15% +7% Yield premium +14% UPS with product differentiation and service delivery FY19 FY20 FY21 FY22 1. Represents Domestic Composite Ground and Express 31 Pricing playbook in action General rate increases Continuously revisit contracts R
Slide 17: International features large, growing markets
6/28/22 33 International features large, growing markets DEMAND IN M TONNES Positioned to win 4.2 key markets 3.6 Transpacific market leader Competitive European offering Leverage Asia-Pacific strength 2.7 into Europe FY19 FY21 FY25 ASIA TO EUROPE TRANSPACIFIC TRANSATLANTIC 33 Clear-eyed on the retu
Slide 18: Focused on Execution
6/28/22 Focused on Execution COMMERCIAL STRATEGY WILL DELIVER 4 - 6 % REVENUE GROWTH FY22 - 25 CAGR G R O W I N TA R G E T C U S T O M E R S E G M E N T S P R I C E P R E M I U M BY P R O D U C T D I F F E R E N T I AT I O N HIGHER SERVICE STANDARDS 35 Investors Meeting June 29, 2022 36 18
Slide 19: Mike Lenz: Financial Initiatives, Outlook, and Targets
6/28/22 Mike Lenz Executive Vice President & Chief Financial Officer 37 Financial Initiatives, Outlook, and Targets 38 19
Slide 20: FY25 execution targets drive strong total shareholder returns
6/28/22 FY25 execution targets drive strong total shareholder returns F Y 2 5 TA R G E T S Stable, sustained revenue $3B - $4.5B growth in attractive segments $105B - $110B Revenue Adj. Op. Profit 4 - 6% CAGR improvement1 Expand adjusted operating margins OVERALL1 GROUND1 EXPRESS1 FREIGHT1 14 - 19%
Slide 21: Enterprise transformation
6/28/22 Enterprise transformation MODERNIZATION INITIATIVES Business services Modernized customer at scale support infrastructure Advanced digital Specialized centers capabilities of excellence WILL DRIVE $1B OVERHEAD REDUCTION IN SUPPORT OF OPERATING MARGIN TARGETS 41 Efficient capital allocation w
Slide 22: New era of lower capital intensity
6/28/22 New era of lower capital intensity C A P I TA L E X P E N D I T U R E S Operational, technological, and digital innovation 7.9% to maximize utilization of revenue 7.2% of revenue 6.5% of revenue Rigorous 'ROIC lens’ to all new capital outlays FY18 - FY21 FY22 FY25 Target Steady reduction ove
Slide 23: Dividend payout to increase to 25%+ by FY25
6/28/22 Dividend payout to increase to 25%+ by FY25* IN LAST 5 YEARS, WE HAVE RETURNED $4.60 $3.4B $3.00 Target payout in dividend payments ratio: 25%+* $4.7B 21% in share repurchases 16% FY22 FY23 FY24 FY25 *Non-GAAP financial measure; see appendix for more information; dividend payout ratio calcul
Slide 24: Balanced commitment to driving TSR
6/28/22 Balanced commitment to driving TSR 4 - 6% Executive long-term incentives R E V E N U E E X PA N S I O N linked to TSR going forward TSR1 10 - 11% Balanced growth and focus on margin expansion 18 - 22% M A R G I N E X PA N S I O N 4 - 5% Rigorous ROIC lens to CASH PAYOUT YIELD 2 all capital a
Slide 25: John Smith: FedEx Ground
6/28/22 John Smith President & Chief Executive Officer FedEx Ground 49 FedEx Ground: Achieving Sustained Double-Digit Margin 50 25
Slide 26: Achieving sustained double-digit margin
6/28/22 Achieving sustained double-digit margin PATH TO 11 - 12% ADJ. OP. MARGIN* with upside beyond Targeted growth in high value segments Reduce cost to serve Improve asset utilization *Non-GAAP financial measure; see appendix for more information 51 E-commerce growth has changed the market 90% in
Slide 27: We have invested to develop a future-ready network
6/28/22 We have invested to develop a ‘future-ready’ network DELIVER DELIVER DELIVER MORE BETTER SMARTER +73 facilities Over 72% of Home Route optimization since FY19 Delivery packages technology increasing delivered in < 2 days service provider stops 6/7 day per hour by 7.5% operations Vehicle safe
Slide 28: Investments and flexibility have positioned the business
6/28/22 Investments and flexibility have positioned the business to enable long-term success INVESTMENT IN OUR PEOPLE Higher labor retention and staffing FLEXIBILITY OF OUR MODEL Flat P&D costs over past 3 years DELIVER TODAY 55 Positioned to sustainably deliver double-digit margins PRODUCTIVITY AND
Slide 29: Annual cost savings reach $1 billion in 3 years
6/28/22 Annual cost savings reach $1 billion in 3 years Productivity Gains Asset Utilization Modernizing dock operations Maximizing physical capacity Optimizing linehaul Increasing digital insights Operational Expense Controlling liability costs Optimizing staffing and recruiting Evolving service pr
Slide 30: Lance Moll: FedEx Freight
6/28/22 Investors Meeting June 29, 2022 59 Lance Moll President & Chief Executive Officer FedEx Freight 60 30
Slide 31: FedEx Freight: Continued Focus on Profitable Growth
6/28/22 FedEx Freight: Continued Focus on Profitable Growth 61 FedEx Freight – accelerating improved financial performance F Y 2 2 YoY in a dynamic market 17.4% +22% O P. M A R G I N REVENUE 12.8% 8.2% +18% 8.1% 7.2% 7.2% REVENUE QUALITY* 6.1% 1,663 1,005 490 615 580 +460 bps 421 371 OP. MARGIN INCR
Slide 32: Leveraging our unique portfolio to deliver
6/28/22 Driving 20 – 22% adjusted operating margin by FY25 Improve revenue quality Pricing discipline and profitable share growth Invest in our people and network Deliver outstanding service Continue to innovate Dimension in Motion and RFID Technology *Non-GAAP financial measure; see appendix for mo
Slide 33: We have earned the right to win the market
6/28/22 We have earned the right to win the market in coming years 20 - 22% F E D E X F R E I G H T A DJ U S T E D O P E R AT I N G M A R G I N TA R G E T B Y F Y 2 5 * Continued focus on profitability and share growth Strategically invest in our people and network Profitably grow differentiated Fre
Slide 34: Richard Smith: FedEx Express
6/28/22 Richard Smith President & Chief Executive Officer-elect FedEx Express 67 FedEx Express: Profitability Through Lower Cost to Serve and an Integrated European Network 68 34
Slide 35: Express priorities and financial objectives
6/28/22 Express priorities and financial objectives Diversify revenue streams by leveraging into high-value segments Lower cost to serve through enhanced network flexibility and operational optimization 8 - 9% ADJUSTED OP. Drive profitability with an MARGIN BY FY25* integrated European network *Non-
Slide 36: How we win
6/28/22 How we win PAT H T O 8 - 9 % A D J . O P. M A R G I N * Optimizing our assets and modernizing our processes Leveraging FedEx Logistics to manage third-party linehaul Increasing network collaboration Integrated Europe network capabilities *Non-GAAP financial measures; see appendix for more in
Slide 37: TNT closed the biggest gap in the FedEx portfolio
6/28/22 TNT closed the biggest gap in the FedEx portfolio > 50% EXPRESS GLOBAL TRADE REVENUES TOUCH EUROPE; FEDEX FOOTPRINT WAS SMALL TNT DELIVERED SCALE… …THAT REDUCED COST TO SERVE X 4.8 - 50% INTRA-EUROPE ECONOMY MARKET SHARE ROAD COST PER LB Pre-TNT Post-TNT 73 Building a comprehensive network a
Slide 38: Primed with a fully competitive commercial proposition
6/28/22 Primed with a fully competitive commercial proposition INTRA-EU Value over volume in the air Leverage freight/parcel bundle to capture market and drive yields INTERCONTINENTAL DOMESTICS Differentiated proposition; Swap out domestic capacity for fastest to the US higher international yields 7
Slide 39: Lean into our strengths and optimize our assets
6/28/22 Lean into our strengths and optimize our assets to sustain profitable growth FOCUS ON HIGH VALUE SEGMENTS A DJ U ST E D O P E R AT I N G IMPROVED ASSET UTILIZATION & MARGIN NETWORK COLLABORATION TA R G E T * 8 - 9% FULLY INTEGRATED NETWORK IN EUROPE *Non-GAAP financial measure; see appendix
Slide 40: Network 2.0
6/28/22 Network 2.0 $2B+ FUTURE VALUE UNLOCK BY FY27 ANNUAL ~ $2B ONE-TIME EXPENSE INITIAL GOALS BY FY27 100 FEWER STATIONS THAN TODAY 10%+ P&D ROUTE EFFICIENCY VS. TODAY OPTIMIZED LINEHAUL NETWORK 79 79 Operating collaboratively in action Raj Subramaniam John Smith Richard Smith Lance Moll Presiden
Slide 41: Operating collaboratively
6/28/22 Our networks present an opportunity to operate collaboratively, unlocking value and efficiencies FXE Station FXG Station FXF Station 81 Operating collaboratively in action FedEx Ground FedEx Freight FedEx Express 82 41
Slide 42: Rob Carter, Chief Information Officer
6/28/22 Investors Meeting June 29, 2022 83 Rob Carter Executive Vice President & Chief Information Officer 84 42
Slide 43: Unlocking Potential with Digital
6/28/22 Unlocking Potential with Digital 85 Modernizing to deliver today Full architectural transformation powered by: Cloud-enabled data services Composable software Machine learning and AI 86 43
Slide 44: Moving to cloud-enabled, zero data center environment
6/28/22 We are moving to cloud-enabled, zero data center, zero mainframe environment Secure Flexible Resilient Saving $400M in annual run rate 87 ► Secure Saving ► Flexible $350M ► Resilient in annual We are activatingrunnetwork rate insight to extract new value CUSTOMERS DATA IS AT THE CORE OPERATI
Slide 45: Dataworks makes supply chains smarter
6/28/22 Dataworks makes supply chains smarter Open new revenue streams and move up in e-commerce EXTERNAL DATA ECOSYSTEM Digitize our customers' supply chains CUSTOMER DATA Fuel internal optimization and collaboration FEDEX DATA 89 Our Operational Insights Platform connects decisions across opcos an
Slide 46: FedEx Surround and retailer partnerships
6/28/22 Leveraging package fingerprint, we built FedEx Surround FEDEX SURROUND Package Fingerprint 91 We partnered 1:1 with large retailers to uncover new paths to value across the e-commerce ecosystem 1:1 e-commerce collaboration Time in Advisories Same Day Fulfillment Order Trailer Performance Roo
Slide 47: Enabling a collaborative network through advanced digital systems
6/28/22 Enabling a collaborative network and quality returns through advanced digital systems New Ground technology capabilities Breakthrough SenseAware tracking transformation Dataworks’ smarter supply chain evolution Open e-commerce ecosystem enablement Robots, autonomous vehicle, and electric fle
Slide 48: Investors Meeting Q&A
6/28/22 Investors Meeting June 29, 2022 95 Q&A Suggestion 1 96 48
Slide 49: Investors Meeting
6/28/22 97 Investors Meeting June 29, 2022 98 49
Slide 50: Appendix: Reconciliations of Non-GAAP Financial Measures
APPENDIX RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES Fiscal 2022 and 2021 Financial Measures FedEx reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP” or “reported”). We have supplemented the reporting o
Slide 51: ROIC and adjusted dividend payout ratio definitions
and total current liabilities as of May 31, 2022 and May 31, 2021 under “Full-Year Fiscal 2022— Return on Invested Capital” below. We believe ROIC is a meaningful measure of how effectively we are deploying our key assets and using capital to generate profits. Numerous methods exist for calculating
Slide 52: Full-Year Fiscal 2022
Full-Year Fiscal 2022 Diluted Operating Income Net Earnings Dollars in millions, except EPS Income Margin Taxes1 Income2 Per Share GAAP measure $ 6,245 6.7% $ 1,070 $ 3,826 $ 14.33 MTM retirement plans accounting adjustments3 — — 379 1,199 4.49 Business realignment costs4 278 0.3% 64 214 0.80 FedEx
Slide 53: Full-Year Fiscal 2021
Full-Year Fiscal 2021 Diluted Operating Income Net Earnings Dollars in millions, except EPS Income Margin Taxes1 Income2 Per Share11 GAAP measure $ 5,857 7.0% $ 1,443 $ 5,231 $ 19.45 MTM retirement plans accounting adjustments3 — — (281) (895) (3.33) Loss on debt extinguishment — — 96 297 1.11 TNT E
Slide 54: Reconciliation notes
7 – Represents the hypothetical interest expense implied within rentals expenses the company would incur if property under operating leases were owned or accounted for as finance leases. Estimated using the weighted-average discount rate for operating leases, which was 2.85% for 2022, applied to the