Fedex Corporation · NYSE:FDX
Fedex — Non-Deal Roadshow (December 2023)
54 slides from Fedex's roadshow presentation, Dec 19, 2023
Slide 1: FedEx Corporation Investor Relations
FedEx Corporation Investor Relations December 19, 2023 1
Slide 2: 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, the planned consolidation of operating companies, future financial targets, business strategies, manage
Slide 3: Unmatched Global Network
Unmatched Global Network Links More Than 99% of World’s GDP • Over 220 countries and territories, including every address in the U.S. • 719 aircraft and more than 210,000 motorized vehicles • More than 5,000 operating facilities; more than 650 airports served worldwide • Delivers ~15.0M shipments pe
Slide 4: Broad Portfolio of Services
Broad Portfolio of Services FY23 Revenues: $90.2 billion Employees: More than 500,000 Countries and Territories Served: More than 220 $42.7 Billion 47% Express $33.5 Billion 37% Ground $9.6 Billion 11% Freight $4.0 Billion* 4% Other & eliminations* FedEx Express, FedEx Ground, and FedEx Freight show
Slide 5: Bundle of Solutions
Bundle of Solutions % of Revenue • Our portfolio of solutions creates a strong value proposition FedEx Express • 96.8% of U.S. revenue comes from (FXE) 0.9% customers of two or more operating companies FXE+FXG FXE+FXF 17.2% All 0.1% • We manage service offerings as Opcos a portfolio for the benefit
Slide 6: 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 Unmatched capabilities with differentiated portfolio FedEx FedEx FedEx FedEx FedEx F
Slide 7: … 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 7
Slide 8: Reaffirming FY24 adjusted EPS outlook
Reaffirming FY24 adjusted EPS* outlook Sept 2023 Dec 2023 Low-single-digit Commentary: Approximately Revenue percentage • Reaffirming adjusted EPS* outlook flat decline despite weaker demand environment reflects Adjusted EPS* $17.00-18.50 $17.00-18.50 transformation benefits • Remain committed to $1
Slide 9: Illustrative operating income bridge based on FY24 adjusted EPS outlook
Illustrative operating income bridge based on FY24 adjusted EPS* outlook $1.8B $6.3B $0.5B ($0.8B) $5.4B ($0.6B) FY23 adjusted Revenue, net International Variable comp DRIVE FY24E operating of cost export yield adjusted income* increases pressure operating income* *Non-GAAP financial measure; see Ap
Slide 10: Framework
Framework Our people, values and culture Technology-enabled, data-driven FedEx Customer Surface Network Air Network & International Network 2.0 G&A 10
Slide 11: 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 12: Executive Sponsors
Executive Sponsors Brie Carere Customer Chief Customer Officer Surface Network Network 2.0 Air Network & International G&A John Smith Richard Smith Karen Reddington John Dietrich President & CEO, U.S. and Canada Ground President & CEO, Airline and President, Chief Financial Operations at FedEx Expre
Slide 13: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 13 13
Slide 14: 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 growth • Target segments generate high margins comes from e-commerce* • Well-positioned to
Slide 15: 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® 15 15
Slide 16: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 16
Slide 17: Surface Network Initiatives to deliver $1.2B in cost savings in FY25
Surface Network Initiatives to deliver $1.2B in cost savings in FY25 Ground linehaul Ground dock Ground P&D Express U.S. operations operations operations surface operations $450M $300M $150M $300M Safety Improving outcomes 17
Slide 18: Network 2.0 - Interoperable network eliminates redundancy
Network 2.0 - 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
Slide 19: 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 20: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 20
Slide 21: Positioned to deliver transformational improvement
Positioned to deliver transformational improvement Global Air Network Europe ~$700M in FY25 ~$600M in FY25 Tracked through KPIs that monitor Cost per Cost per available Asset success (key indicators) pound ton mile utilization 21
Slide 22: Global Air Network: Lowering cost to serve through structural improvements
Global Air Network: 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 adopti
Slide 23: 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 23
Slide 24: Europe: Strong progress on identified opportunities
Europe: Strong progress on identified opportunities ~$600M in FY25 • Restructuring the networks Domestic • Improving route planning, sort processes, and P&D work force management • Optimizing load plans Road • Segregating freight and parcel to improve load factors • Right-sizing fleet by removing, r
Slide 25: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 25
Slide 26: G&A - Building momentum with significant value potential
G&A - Building momentum with significant value potential Procurement Functional excellence Technology $600M in FY25 $400M in FY25 $500M in FY25 26
Slide 27: Realizing functional excellence across the enterprise
Realizing functional excellence across the enterprise Leaner, Tech-enabled Streamlined nimbler optimized functions leadership processes supporting operations Right “shape” of Tech-enabled processes Greater efficiency the enterprise driving execution efficiency through right-shoring transactional cap
Slide 28: Value creation framework through FY25
Value creation framework through FY25 Expected ($B) FY25 savings* Highlights Surface Network $1.2 • Moving swiftly to execute; measuring from FY23 baseline 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 enabler with value cr
Slide 29: Financial framework
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 growth •
Slide 30: Capital allocation priorities
Capital allocation priorities Unwavering focus on efficient and responsible capital allocation $2.0 Share repurchases 7.6% of 6.8% of <6.5% of $3.3* Dividend revenue revenue revenue FY24E capital ($ in billions) return $1.3 FY19-FY22 FY23 FY25 Target Lowering capital spend through FY25 Enhanced capi
Slide 31: FedEx Business Trends
FedEx Business Trends Meeting E-Commerce Demands • Year-round, seven-day-per-week U.S. residential delivery by FedEx Ground • Significantly later pick up times offered with FedEx Extra Hours Service • Widespread retail convenience network with Walgreens, Dollar General, and our own FedEx Office loca
Slide 32: 94% of People in the United States are within 5 miles of a FedEx hold location
94% of People in the United States are 94% of People in the United States are within 5 miles of a FedEx hold location within 5 miles of a FedEx hold location • Customers want to drop off or pick up at places convenient to their everyday lives — the FedEx retail convenience network offers more than 5
Slide 33: Pricing Strategy: Improving Revenue Quality
Pricing Strategy: Improving Revenue Quality • Focused on long-term profitable growth • Utilizing capacity for highest yielding customers • FedEx Express and FedEx Ground shipping rates will increase by an average of 5.9% in January 2024 • FedEx Freight shipping rates will increase by an average of 5
Slide 34: Strong Portfolio of Residential Package Services
Strong Portfolio of Residential Package Services FedEx Express FedEx Ground FedEx Ground • 1–3 days transit time Home Delivery: Ground Economy: • Time-definite • 1–5 days transit time • 2–7 days transit time • Money Back Guarantee • Day-definite • No declared value • Declared value up • Declared val
Slide 35: FedEx Ground Revenue Market Share Has Grown to More Than 30%
FedEx Ground Revenue Market Share Has Grown to More Than 30% $110 50% $100 Revenue ($ Billions) $90 40% $80 Market Share $70 30% $60 $50 20% $40 $30 $20 10% $10 $0 0% CY98 CY99 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 FedEx Gr
Slide 36: FedEx Freight
FedEx Freight Competitive Advantages • The only nationwide LTL that offers Priority and Economy services from one network • Priority: Fastest published times of any nationwide LTL* • Focused on improving margins with a better balance of volume, pricing, and capacity • FedEx Freight Direct service ad
Slide 37: LTL Industry Revenue Market Share
LTL LTL Industry IndustryRevenue RevenueMarket MarketShare Share 30% FedEx Yellow XPO TFI ODFL ABFS Saia 25% 20% 15% 10% 5% 0% CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 Source: FedEx Analysis 37
Slide 38: FedEx Commits to Goal to Achieve Carbon-Neutral Operations by 2040
FedEx Commits to Goal to Achieve Carbon-Neutral Operations by 2040 Key steps toward reaching the carbon neutral goal include: Vehicle Electrification. By 2040, the entire FedEx parcel pickup and delivery (PUD) fleet will be zero–tailpipe emission electric vehicles. We are also installing charging in
Slide 39: Environmental, Social, and Governance
Environmental, Social, and Governance Our Planet • Through FedEx’s collective emissions reduction efforts, we decreased carbon dioxide ( CO2e ) emissions intensity - on a revenue basis – by 48.9% from FY09 through FY22. • FedEx’s fleet modernization efforts saved over 150 million gallons of jet fuel
Slide 40: Corporate Social Responsibility - Awards & Recognition
Corporate Social Responsibility - Awards & Recognition • World’s Most Admired Companies 2023 – FORTUNE • This is the 22nd consecutive year that FedEx has ranked among the top 20 in the FORTUNE Most Admired Companies List. • World’s Most Ethical Companies 2023 – Ethisphere • Blue Ribbon Companies 202
Slide 41: Corporate Operating Margin
Corporate Operating Margin 8.0% 7.4% 7.3% 7.0% 6.7% 7.0% 6.0% 6.0% 5.4% 5.0% 4.5% 4.0% 3.5% 3.0% 2.0% 1.0% 0.0% FY20 FY21 FY22 FY23 GAAP Adjusted Non-GAAP reconciliations are included herein. See Appendix. 41
Slide 42: Earnings Per Share
Earnings Per Share $25.00 $20.61 $19.45 $20.00 $18.17 $15.48 $14.96 $15.00 $14.33 $10.00 $9.50 $4.90 $5.00 $0.00 FY20 FY21 FY22 FY23 GAAP Adjusted Non-GAAP reconciliations are included herein. See Appendix. 42
Slide 43: Capital Expenditures
Capital Expenditures (% of Revenues) 10.0% 9.5% 9.0% 8.7% 8.5% 8.5% 8.0% 7.9% 7.5% 7.2% 7.0% 7.0% 6.8% 6.5% 6.0% 5.5% 5.0% FY18 FY19 FY20 FY21 FY22 FY23 43
Slide 44: Dividends Per Share
Dividends Increased at a 5-Year CAGR of 18% $5.00 $4.60 $4.50 IN LAST 5 YEARS, $4.00 WE HAVE RETURNED TO SHAREHOLDERS $3.50 Dividends Per Share $3.00 $3.00 $2.60 $2.60 $2.60 $4.0B $2.50 in dividend payments $2.00 $2.00 $1.60 $1.50 $5.2B $1.00 in share repurchases $1.00 16% $0.80 $0.56 $0.60 $0.48 $0
Slide 45: APPENDIX
APPENDIX
Slide 46: Non-GAAP Financial Measures
Non-GAAP Financial Measures Our fiscal 2024 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments and estimated costs related to business optimization initiatives in fiscal 2024. Our fiscal 2024
Slide 47: FY23 Reconciliation for FedEx Corp.
FY23 Reconciliation for FedEx Corp. Op Op Income Net Diluted Dollars in millions, except EPS Income Margin1 Taxes2 Income3 EPS GAAP measure $4,912 5.4% $1,391 $3,972 $15.48 MTM retirement plans --- --- (157) (493) (1.92) accounting adjustment4 Business optimization 273 0.3% 64 209 0.81 costs5 Goodwi
Slide 48: FY22 Reconciliation for FedEx Corp.
FY22 Reconciliation for FedEx Corp. Dollars in millions, except EPS Op Op Income Net Diluted Income Margin Taxes2 Income3 EPS GAAP Measure $6,245 6.7% $1,070 $3,826 $14.33 Mark-to-Market Retirement Plans --- --- 379 1,199 4.49 Accounting Adjustments4 Business realignment costs7 278 0.3% 64 214 0.80
Slide 49: FY21 Reconciliation for FedEx Corp.
FY21 Reconciliation for FedEx Corp. Dollars in millions, except EPS Op Op Income Net Diluted Income Margin Taxes2 Income3 EPS1 GAAP Measure $5,857 7.0% $1,443 $5,231 $19.45 Mark-to-Market Retirement Plans --- --- (281) (895) (3.33) Accounting Adjustments4 Loss on Debt Extinguishment --- --- 96 297 1
Slide 50: FY20 Reconciliation for FedEx Corp.
FY20 Reconciliation for FedEx Corp. Dollars in millions, except EPS Op Op Income Net Diluted Income Margin Taxes2 Income3 EPS GAAP Measure $2,417 3.5% $383 $1,286 $4.90 Mark-to-Market Retirement Plans — — 211 583 2.22 Accounting Adjustments4 Goodwill And Other Asset Impairment 435 0.6% 19 416 1.58 C
Slide 51: FY24 earnings per share forecast
FY24 earnings per share forecast Dollars in millions, except EPS Adjustments Diluted Earnings Per Share Earnings per diluted share before MTM retirement plans accounting adjustments (non- $15.35 to $16.85 GAAP)9 Business optimization costs 550 Income tax effect2 (130) Net of tax effect $420 1.65 Ear
Slide 52: FY23 operating income reconciliation for FedEx Corporation
FY23 operating income reconciliation for FedEx Corporation Dollars in millions, except EPS Operating Income GAAP measure $4,912 MTM retirement plans - accounting adjustment Business optimization costs 273 Goodwill and other asset 117 impairment charges Business realignment costs 36 FedEx Ground lega
Slide 53: FY24 outlook midpoint operating income forecast
FY24 outlook midpoint operating income forecast Dollars in millions, except EPS Operating income (GAAP measure) $5,750 Business optimization costs 550 Adjusted operating income (non-GAAP) $6,300 53
Slide 54: Footnotes for Non-GAAP Reconciliation Slides
Footnotes for Non-GAAP Reconciliation Slides 1 – Does not sum to total due to rounding. 2 – Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction. 3 – Effect of “total other (expense) income” on net income amount not shown. 4 –The MTM retirement plans