Fedex Corporation · NYSE:FDX
Fedex — Investor Day (April 2023)
66 slides from Fedex's investor day presentation, Apr 5, 2023
Slide 1: Investor Update
Investor Update April 5, 2023
Slide 2: Mickey Foster
Mickey Foster Vice President, Investor Relations 2
Slide 3: Forward-looking statements and non-GAAP financial measures
Forward-looking statements and non-GAAP financial measures Certain statements in this presentation may be considered forward-looking statements, such as statements regarding expected cost savings, planned consolidation of operating companies, future financial targets, business strategies, management
Slide 4: Agenda
Agenda WELCOME Welcome Mickey Foster Strategy review Raj Subramaniam Customer Brie Carere Surface Network and Network 2.0 John Smith Richard Smith Air Network & International Karen Reddington G&A and financial outlook Mike Lenz BREAK Q&A R. Brad Martin Concluding remarks Raj Subramaniam 4
Slide 5: Raj Subramaniam
Raj Subramaniam President & Chief Executive Officer 5
Slide 6: Key messages
Key messages Transforming unmatched network to operate with more flexibility, efficiency and intelligence Consolidating operating companies into one organization, facilitating DRIVE and Network 2.0 Unlocking stockholder value through cost savings generated by DRIVE transformation Providing a revised
Slide 7: Creating a smarter, more efficient global network
Creating a smarter, more efficient global network Profitable growth Structural cost reductions Target strategic market segments Expand margins through lower cost to grow revenue and profit to serve. Sustainably improve capital efficiency Digital DNA Customer experience Culture 7
Slide 8: One vision | One team
One vision | One team
Slide 9: Streamlining organization to achieve long-term strategy
Streamlining organization to achieve long-term strategy Current Structure Moving from individual operating companies … Vast global network result of 50 years of strategic FedEx Corporation development and investment FedEx FedEx FedEx FedEx FedEx FedEx FedEx Unmatched capabilities Express Ground Frei
Slide 10: … to the future: One FedEx
… to the future: One FedEx One FedEx Facilitates execution of DRIVE & Network 2.0 Reduces cost to serve and improves capital efficiency Streamlined structure increases visibility One FedEx will be a leaner, more agile company 10
Slide 11: Framework
Framework Our people, values and culture Technology-enabled, data-driven FedEx Customer Surface Network Air Network & International Network 2.0 G&A 11
Slide 12: Building momentum with significant value potential
Building momentum with significant value potential To date, DRIVE Network 2.0 Implementation of all has identified represents programs will generate in cost savings in cost savings in FY27, with significant in FY25 in FY27 upside as programs scale One FedEx represents significant cost savings creati
Slide 13: Positioned to create stockholder value
Positioned to create stockholder value One FedEx transforms our operating model, enabling a 1 more flexible, efficient, and intelligent global network Moving with urgency to deliver $4B DRIVE cost reduction in FY25 2 with path to $6B in FY27; demonstrating tangible progress Significant margin expans
Slide 14: Executive sponsors presenting today
Executive sponsors presenting today Brie Carere Customer Chief Customer Officer Surface Network Network 2.0 Air Network & International G&A John Smith Richard Smith Karen Reddington Mike Lenz President & CEO, U.S. and Canada Ground President & CEO, Airline and President, Chief Financial Operations (
Slide 15: Brie Carere
Brie Carere Executive Vice President & Chief Customer Officer 15
Slide 16: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 16
Slide 17: Key messages
Key messages Creating the world’s smartest logistics network, enabled by flexibility, efficiency and intelligence Creating differentiation to maintain market-leading yields Improving profitability through targeted growth 17
Slide 18: Well positioned to capture opportunity in a large and growing market
Well positioned to capture opportunity in a large and growing market E-commerce remains the growth B2B higher-margin verticals demand engine of parcel volume top-tier service • ~90% of expected parcel industry • Target segments generate high growth comes from e-commerce* double-digit margins • Antic
Slide 19: Building on our market-leading value proposition
Building on our market-leading value proposition Deliver Differentiation Data-driven, Market-leading outstanding for premium personalized yields experience segments service 19
Slide 20: Deliver outstanding experience
Deliver outstanding experience Best visibility experience in the market • Estimated Delivery Date and Estimated Delivery Time Window enhancements Enable easy, self-serve problem resolution • Self-serve solutions can reduce calls related to tracking, which make up 70% of call volume Improving the rec
Slide 21: Differentiation for premium segments
Differentiation for premium segments Focus on high-value segments Market leading value proposition for SMB Business-to-business (B2B) Weekend coverage Faster service Healthcare Loyalty program Earned discounts Small and medium businesses (SMB) Modern FedEx Ship Manager® 21
Slide 22: Data-driven, personalized service
Data-driven, personalized service Balancing digital sales strategy Building new capabilities for Digitizing and physical interactions digital customer interactions customer journey Onboarding Shipping Receiving Payment Claims Relationship Digital customer journey KPI: Reducing commercial costs as a
Slide 23: Market-leading yields
Market-leading yields General rate Rigorous surcharge Win with Dynamic pricing increases implementation the bundle technology 23
Slide 24: John Smith
John Smith President & Chief Executive Officer, U.S. and Canada Ground Operations (Elect) at FedEx Express 24
Slide 25: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 25
Slide 26: Key messages
Key messages Optimizing operations to drive near-term efficiencies and respond to demand changes Structurally adjusting the network to improve asset utilization and efficiency Enhancing network planning and leveraging technology to further drive economies of scale and customer experience Creating tr
Slide 27: Initiatives to deliver $1.2B in cost savings
Initiatives to deliver $1.2B in cost savings Ground linehaul Ground dock Ground P&D Express U.S. operations operations operations surface operations $450M $300M $150M $300M Safety Improving outcomes 27
Slide 28: Linehaul / network domain example: Increase use and efficiency of rail
Linehaul / network domain example: Increase use and efficiency of rail Actions we’re taking: • Increasing use of company-owned intermodal containers for 90% of rail volume Destination hub Origin hub Linehaul • Increasing miles on rail transport from ~8% to ~15% 6% 36% Lower rates for volume Lower ra
Slide 29: Dock domain example: Improve labor efficiency via staffing and productivity
Dock domain example: Improve labor efficiency via staffing and productivity Actions we’re taking: • Improving labor planning, staffing, sourcing and scheduling Increase in-station volume forecast • Implementing new precision technologies and processes to improve productivity Enhance labor plan Impro
Slide 30: P&D domain example: Service provider visibility to key operational data
P&D domain example: Service provider visibility to key operational data Actions we’re taking: • Building tech interface to increase visibility and communication with service providers • Developing capabilities to better inform real-time decision making 30
Slide 31: Express U.S. surface operations domain example
Express U.S. surface operations domain example: Improved asset utilization and efficiency Actions we’re taking: • Adapting flight schedule to drive structural improvements to our ground network • Consolidating sorts and delivery routes to improve productivity and on-road performance Increased aircra
Slide 32: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 32
Slide 33: Interoperable network eliminates redundancy, generating $2B in permanent cost reduction in FY27
Interoperable network eliminates redundancy, generating $2B in permanent cost reduction in FY27 Enable one van, Eliminate Capitalize on Optimize between one neighborhood redundant linehaul efficiency benefits air and surface and reduce of consolidated modes to balance empty miles sort operations ser
Slide 34: Network 2.0 will provide structural cost reductions across surface operations
Network 2.0 will provide structural cost reductions across surface operations Pickup & delivery interoperability Facilities footprint consolidation Now 2.0 Now 2.0 P&D duplication One van, one ~70% of buildings Moving to a network neighborhood are within 20 miles design that results in deployment ta
Slide 35: Richard W. Smith
Richard W. Smith President & Chief Executive Officer, Airline and International (Elect) at FedEx Express 35
Slide 36: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 36
Slide 37: Key messages
Key messages Lowering cost to serve, optimizing operations and enhancing network flexibility Reimagining unmatched air network, streamlining fleet and creating a more effective network Accelerating digital capabilities, underpinning network design and global operations Eliminating $1.3B of cost from
Slide 38: Positioned to deliver transformational improvement
Positioned to deliver transformational improvement Global Air Network Europe ~$700M ~$600M Tracked through KPIs that monitor Cost per Cost per available Asset success (key indicators) pound ton mile utilization 38
Slide 39: Evolution of the FedEx Air Network
Evolution of the FedEx Air Network 39
Slide 40: Lowering cost to serve through structural improvements
Lowering cost to serve through structural improvements ~$700M Key cost-out drivers: in FY25 • Focusing flying on balanced lanes, consolidating for density and executing Global Partner Network as an adaptive capacity layer Fuel • Leveraging more efficient aircraft types and adopting best practices in
Slide 41: Air domain example: Consolidating flights over Pacific
Air domain example: Consolidating flights over Pacific to densify, rebalance and leverage partners Actions we’re taking: • Reducing frequencies, More surface optimizing our network by conveyance consolidating volumes • Increasing use of commercial alternatives, -30% +10 More point- enabling asset re
Slide 42: Air domain example: Reducing maintenance footprint to match fleet strategy
Air domain example: Reducing maintenance footprint to match fleet strategy Actions we’re taking: Maximized • Shifting the way we do asset maintenance, matching utilization our assets to the current and future needs of our modernized fleet Synergistic cost • Increasing our asset reductions \ utilizat
Slide 43: Providing transformative improvement across the lifecycle of a package
Providing transformative improvement across the lifecycle of a package SHIPMENT CREATION PICK-UP ORIGIN STATION TRANSFER ORIGIN RAMP AIRCRAFT RECIPIENT DELIVERY STATION TRANSFER DESTINATION RAMP AIRCRAFT CLEARANCE Global air operations Express operations Clearance services Optimizing fleet and Strea
Slide 44: Karen Reddington
Karen Reddington Regional President of Europe, FedEx Express 44
Slide 45: Optimizing profitability across European networks
Optimizing profitability across European networks Focusing Europe on execution and enhancing profitability Air Road P&D Domestic >750 flights 28 road hubs and >600 stations Lowering per week >50K connections across 32 cost to serve per week countries 45
Slide 46: Strong progress on identified opportunities
Strong progress on identified opportunities ~$600M in FY25 • Targeting profitable revenue growth Domestic • Restructuring the networks • Improving route planning, sort processes, and P&D work force management • Optimizing load plans Road • Segregating freight and parcel to improve load factors • Rig
Slide 47: Mike Lenz
Mike Lenz Executive Vice President & Chief Financial Officer 47
Slide 48: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 48
Slide 49: Key messages
Key messages One FedEx eliminates overlapping expenses and activities Lower cost by leveraging our full scope and scale Streamlined structure enables technology estate simplification 49
Slide 50: Building momentum with significant value potential
Building momentum with significant value potential Procurement Functional excellence Technology $600M $400M $500M 50
Slide 51: Driving global sourcing excellence
Driving global sourcing excellence Comprehensive review to standardize and simplify major spend categories Analytical and strategic approach to supplier engagement and innovation Leverage global scale to reduce third-party spend 51
Slide 52: Realizing functional excellence across the enterprise
Realizing functional excellence across the enterprise Leaner, Tech-enabled Streamlined nimbler optimized functions leadership processes supporting operations Right “shape” of Tech-enabled processes Greater efficiency the enterprise driving execution efficiency through right-shoring transactional cap
Slide 53: Technology as a key enabler for the future
Technology as a key enabler for the future Simplified Develop common Centralized tech Upskilled agile infrastructure platforms management workforce Optimizing technology Consolidating Improving hardware Strengthening a capabilities for a application footprint and software asset world-class simpler a
Slide 54: Value creation framework
DRIVE Value creation framework
Slide 55: Value creation framework through FY25
Value creation framework through FY25 Expected ($B) FY25 savings* Highlights Surface Network $1.2 • Moving swiftly to execute; will measure from FY23 baseline moving forward Air Network & International 1.3 • Network 2.0 to unlock $2B of cost savings in FY27 G&A 1.5 • One FedEx is a key execution ena
Slide 56: New financial framework
New financial framework Potential tailwinds: • Normalized e-commerce growth • Improved Asia-Pacific trade flows Revenue Adj. operating • Europe stabilization margin* • Growth increases in key segments CapEx as a % of revenue of Sustained ROIC Potential headwinds: improvement • Timing of demand growt
Slide 57: Aligning capital returns and performance with long-term stockholder interests
Aligning capital returns and performance with long- term stockholder interests Committed to lowering capital intensity in FY24 and FY25 Raising fiscal 2024 dividend per share Modifying executive compensation program to include 57
Slide 58: Q&A
Q&A 58
Slide 59: R. Brad Martin
R. Brad Martin Vice Chairman of the Board 59
Slide 60: Raj Subramaniam
Raj Subramaniam President & Chief Executive Officer 60
Slide 61: Thank you.
Thank you.
Slide 62: Appendix
DRIVE Appendix
Slide 63: Evolving the framework for One FedEx
Evolving the framework for One FedEx New framing of our DRIVE domains Domain Executive Sponsors Surface Network Network 2.0 Air & International Network G&A Customer (U.S. & Canada) John Smith Richard Smith Karen Reddington Mike Lenz Brie Carere • Safety • Network 2.0 • Air Network • Europe • Procure
Slide 64: Appendix
Appendix Our fiscal 2023 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes fiscal 2023 mark-to-market (MTM) retirement plans accounting adjustments, estimated costs related to business optimization initiatives in fiscal 2023, and fiscal 2023 business realignment c
Slide 65: FY23 earnings per share forecast
FY23 earnings per share forecast $M, except EPS Adjustments Diluted Earnings Per Share Earnings per diluted share (non-GAAP)1 $13.80 to $14.40 Business optimization costs 250 Income tax effect2 (60) Net of tax effect $190 0.74 Business realignment costs 20 Income tax effect2 (5) Net of tax effect $1
Slide 66: Footnotes for non-GAAP reconciliation slides
Footnotes for non-GAAP reconciliation slides 1. The MTM retirement plans accounting adjustments, which are impracticable to calculate at this time, are excluded 2. Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction 66