United Parcel Service, Inc. · NYSE:UPS
United Parcel Service — Investor Day (2024)
88 slides from United Parcel Service's investor day presentation, 2024
Slide 1: Better and Bolder: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 2: Welcome
Welcome PJ GUIDO INVESTOR RELATIONS OFFICER
Slide 3: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 4: Forward-Looking Statements
This presentation and our filings with the Securities and Exchange Commission contain and in the future may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than those of current or historical fact, and all statements a
Slide 5: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 6: A Better and Bolder UPS
A Better and Bolder UPS CAROL B. TOMÉ CHIEF EXECUTIVE OFFICER
Slide 7: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 8: Our Core Principles
Our Purpose | Moving our world forward by delivering what matters Our Values Our | Integrity, safety, teamwork and service Core Principles Our Strong Financial Condition | To deliver our business and financial goals Our Dividend | 15th consecutive year of an increased dividend
Slide 9: Much Has Changed Since 2021: Healthcare Revenue
Much Has Changed Since 2021 Healthcare Revenue Acquired $10B in 2023 MNX Acquired Bomi Established Group UPS Cold Chain $11 Solutions Revenue (In billions) Launched $10 UPS Premier $9 $10B $8 Acquired Marken $7 $6 $5 $5.1B $4 2016 2017 2018 2019 2020 2021 2022 2023
Slide 10: Much Has Changed Since 2021: SMB Penetration and RPP
Much Has Changed Since 2021 U.S. SMB Penetration and U.S. +RPP Growth ~200 basis points SMB Penetration 29% Revenue Per Piece 2023 SMB Penetration +12% 27% 2021
Slide 11: Much Has Changed Since 2021: Symphony Visibility
Much Has Changed Since 2021 Visibility Pilot $1B of revenue "Symphony" managed under Symphony 2021 2023
Slide 12: Much Has Changed Since 2021: Labor Certainty
Much Has Changed Since 2021 Labor Certainty Teamsters Aircraft Maintenance Technicians Independent Pilots Association Other Global Works Councils
Slide 13: Much Has Changed Since 2021: Pieces Per Hour
Much Has Changed Since 2021 Pieces Per Hour +2.87 PPH vs. 2021 69 67.61 68 Pieces Per Hour 67 66 65 64.74 64.84 4M+ Hours 64 Saved 63 62 2021 2022 2023
Slide 14: Much Has Changed Since 2021: Greenhouse Gas Emissions
Much Has Changed Since 2021 Absolute Greenhouse Gas Emissions (‘000 Metric Tonnes) Lower by 14% since 2021 37 36 35 Metric Tonnes 34 33 32 35.6 31 33.3 30 29 30.6 28 2021 2022 2023
Slide 15: 2023 Progress
2023 Progress Customer First People Led Innovation Driven Customer First Reducing friction in the About the employee Driving more customer experience and experience and making productivity from the meeting customer needs UPS a great place to work assets we own People Led NPS = 44 LTR = 65% * ROIC =
Slide 16: Industry Dynamics
Total U.S. Small Package Market Volume ADV millions ’20-’23 CAGR 108 Projection as of January 2021 +13.4% 97 February 2024 Actual 86 -24M ADV +3.1% 77 83 83 84 59 74 58 2019 2020 2021 2022 2023 Industry Source: Internal Analysis Dynamics Core Consumer Price Index* Index (1982-1984 = 100) 325 315 r e
Slide 17: We Are Disrupting Ourselves
We Are Disrupting Ourselves Sold UPS Freight/Bought Digital Companies Disrupt New Ways of Working or Be Disrupted Coyote Strategic Alternatives Focused Declarations
Slide 18: Our Declarations
Premium Premium Small Package Logistics Provider The UPS Provider Difference #1 40% Customer First Complex U.S. SMB Healthcare Logistics Our Volume People Led Provider Declarations #1 Premium Innovation Premium Logistics Orchestrator International Driven Small Package UPS Digital Provider Growth Ena
Slide 19: Our 1+2 Plan
2024 – 2026 Market demand has reset Pivot toward growth 2026 Consolidated Financial Targets Our Cost growth will ease We will anniversary the 1st Revenue between $108B - $114B 1+2 Plan year of the Teamsters contract on August 1, 2024 Adjusted Operating Margin* We will win with a 1 + 2 plan 13%+ Year
Slide 20: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 21: Market Outlook
Market Outlook MATT GUFFEY CHIEF COMMERCIAL AND STRATEGY OFFICER
Slide 22: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 23: Growth is Returning to Our Core Markets
Growth is Returning to Our Core Markets U.S. Small Package Market Int’l Small Package Market Average Daily Volume (ADV) Average Daily Volume (ADV) Millions Millions +5.5% Base Year +3.5% 98M 93M 84M 88M Base Year 29M 30M 27M 28M Reset Flattish Grow Reset Flattish Grow 2023 2024E 2025E 2026E 2023E 20
Slide 24: Excess Market Capacity Has Emerged
Excess Market Capacity Has Emerged U.S. Small Package Market Supply and Demand (ADV) Supply ≈ Demand Supply < Demand Supply » Demand +6M ADV -6M ADV +12M ADV capacity buffer capacity shortfall capacity surplus Supply Demand 2018 2019 2020 2021 2022 2023 2024E NOTE: Source – UPS SPMM and UPS Capacity
Slide 25: Targeting Premium Parts of the Market
Targeting Premium Parts of the Market U.S. Small Package Market U.S. Target Markets Customer Needs Customer Type Price, Convenience and Service 2026E Market Volume SMB ENT Megatrends U.S. Small Package Market ADV, Millions 35% 65% 98M 3Y CAGR 2026E Market Revenue 88M AMZ Self Delivered 84M Target Ma
Slide 26: Amplifying Our Right to Win
Amplifying Our Right to Win TECHNOLOGY USER UPS SMB Deal Manager Sales Force DATA Digital Access Fastlane Program Partners DIGITAL ECOSYSTEM UNLOCK Customer Value Speed To Market Revenue Quality
Slide 27: Targeting Growing Markets
Targeting Growing Markets Int’l Small Package Market Export Volume Growth by Market Customer Needs Flexibility, Visibility and End-to-End Solutions Historical vs. forecast CAGR Accelerating export growth in ’22 – ’27E Megatrends 2017 – 2022 2022 – 2027E 1 ASEAN 5.2% 1 ASEAN 4.5% Shifting Trade Lanes
Slide 28: Accelerating Growth
Accelerating Growth Re-Imagining Our Go-to-Market Differentiated Value Turbocharge the Core Grow on the Edge Product Portfolio Product New Product Simplification Enhancements Innovation Economy vs. Premium Hyperlocal Consolidated Returns Nearshoring Commercial Roadie XL and XD Network of the Future
Slide 29: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 30: International, Healthcare and SCS
International, Healthcare and SCS KATE GUTMANN PRESIDENT INTERNATIONAL, HEALTHCARE AND SUPPLY CHAIN SOLUTIONS
Slide 31: Our Declarations
Our Declarations Premium Premium #1 Premium International Small Package Logistics Provider Provider Small Package Provider The UPS Difference #1 Complex 40% Customer First Healthcare Logistics U.S. SMB Volume Provider #1 Complex Healthcare People Led Logistics Provider #1 Premium Logistics Orchestra
Slide 32: One UPS: International, Healthcare and Supply Chain Solutions
One UPS International, Healthcare and Supply Chain Solutions 2 International Small Package BUSINESS UNITS Supply Chain Solutions STRATEGIC Leaning Into Healthcare MOVES OUR Capitalizing On Trade Lane Shifts CUSTOMER SUPPLY CHAIN Manufacturing Customs Brokerage Freight Forwarding Distribution Transpo
Slide 33: Healthcare Market
Healthcare Market We are focused on the most complex part of the market where margins are most attractive Total Healthcare Logistics Market $152B Complex Fastest-growing 2026 Projection $82B part of the market for our customers Precision Logistics $9B $6B Clinical Source: Market Size Estimates
Slide 34: Attractiveness of Healthcare Logistics
Attractiveness of Healthcare Logistics Year-Round Demand End-to-End Accretive Margins UPS Integrated Managed Network Transportation Air and Customs Ocean Freight Brokerage UPS Healthcare J F M A M J J A S O N D Healthcare Logistics Marken Clinical and Retail Healthcare and Distribution Cell and Gene
Slide 35: Healthcare Investment Focus
Healthcare Investment Focus Targeted within six growth pillars Projected 2026 Market Size $82B COLD CHAIN Clinical Labs and Pharma Home Medical Advanced Therapies Diagnostics Healthcare Devices Source: Market Size Estimates
Slide 36: Our Declarations: Double Healthcare Revenue by 2026
Our Declarations #1 Complex Healthcare $20B By developing Logistics Provider capability in six key areas … Future Acceleration 1 Cold Chain $10B Premium Logistics Orchestrator 2 Clinical and Advanced Therapies 3 Labs and Diagnostics Historical 4 Pharma 5 Home Healthcare 6 Medical Devices Marken Acqu
Slide 37: Trade Lane Shifts
Trade Lane Shifts Global trade flows are evolving Major companies are restructuring their supply Intra-Asia: chains, exploring new an emergent trend Asia to U.S. the legacy model models that not only reduce cost but also Asia to Mexico: hedge against potential an emergent trend disruption, increasin
Slide 38: Mexico Nearshoring
Mexico Nearshoring The relocation of supply chains to and through Mexico presents a major strategic opportunity for UPS From … To … A fragmented market in which most UPS value capture An end-to-end solution that unlocks value to gain more is only for U.S. last-mile delivery revenue and profit share
Slide 39: Asia Diversification
Asia Diversification Growth Acceleration in Nine High-Opportunity Countries Targeted strategic investments JP to diversify revenue, accelerate KR growth and reduce risk CN TW AE IN VN TH MY Investments Unlock Accelerated Growth Trajectory SG Air Network and Routing Enhancements Portfolio Expansion •
Slide 40: Cross-Border Excellence
Cross-Border Excellence Capitalize on trade lane shifts through continued investment as #1 in Global Brokerage We are simplifying global trade to Next Gen position UPS as the #1 Premium Key UPS Investments in Brokerage Brokerage International Provider •The cross-border transportation landscape is in
Slide 41: DAP
DAP Available in 30 economies Australia Finland Ireland Mexico Singapore Taiwan Austria France Italy Netherlands South Korea Thailand Belgium Germany Japan Norway Spain UK/GB Canada Hong Kong Luxemburg Poland Sweden United States Denmark India Malaysia Portugal Switzerland Vietnam
Slide 42: Supply Chain Orchestration
Supply Chain Orchestration End-to-end visibility powered by Symphony platform Customs Freight Manufacturing Brokerage Forwarding Distribution Transportation Recipient Store Return End-to-End Supply Chain Upstream Downstream UPS SymphonyTM Grow Connected Extend Revenue What Matters Retain Core Busine
Slide 43: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 44: U.S. Domestic
U.S. Domestic NANDO CESARONE PRESIDENT U.S.
Slide 45: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 46: Our Declarations Enablers
Our Declarations Premium Small Package Premium Logistics Enablers Provider The UPS Provider Difference #1 Return to volume growth Complex 40% Customer First Healthcare Logistics by capturing share U.S. SMB Volume Provider People Led #1 Premium Logistics Grow Revenue per Piece (RPP) Innovation Orches
Slide 47: Expand Adjusted Operating Margin to at Least 12% by 2026
Expand Adjusted* Operating Margin to at Least 12% by 2026 12% 2026 9% 2023 *Non-GAAP financial measure. See Appendix for reconciliation to GAAP financial measure.
Slide 48: How We'll Capture SMB Growth
How We’ll Capture SMB Growth Meet them where they are… …with the products and capabilities they need Digital Access Program UPS.com The UPS Store Simplified Portfolio Value-based Pricing My Choice (DAP) Fastlane and APIs Hyper Personalization Single View of Customer Premium and Economy Deal Manager
Slide 49: On-Demand Network
On-Demand Network Speed On- Demand Scale Network Synergies
Slide 50: How We'll Capture Commercial Growth
How We’ll Capture Commercial Growth ...Both SMB and Enterprise Play to Strengths Play Offense Play in New Markets OUR MOVES Leverage superior network built Position new services and capabilities Drive density with multi-piece to support commercial customers (e.g., Happy Returns) offerings to LTL mar
Slide 51: Grow U.S. Revenue Per Piece Faster Than Cost Per Piece
Grow U.S. Revenue Per Piece Faster Than Cost Per Piece Revenue per Piece Cost per Piece +~2.5% > +~1.0% CAGR 2024 – 2026F
Slide 52: Network of the Future
Network of the Future
Slide 53: Network of the Future
Network of the Future What We’re Solving For Creating capacity through productivity with a lower cost per package Enhancing a highly productive network, with less dependency on labor Building additional flexibility to better serve our customers
Slide 54: Automation and Consolidation Projects: Worcester, MA
Automation and Consolidation Projects Worcester, MA Nashua Hub Chelmsford Hub Project Type Hartford Hub | Replacement (build new and expand capacity Leominster Ctr to enable consolidation) Ashland Ctr Worcester Hub Providence Hub Windsor Hub New Enabled project Consolidation build for automation
Slide 55: Automation and Consolidation Projects: Mesquite, TX
Automation and Consolidation Projects Mesquite, TX Independence Hub (Automated) Dallas Hub (Smalls automated) Haslet Hub (Automated) Mesquite Hub Project Type | Hub Modernization Retrofit and Consolidation Lone Star Hub (Automated) Chalk Hill Ctr Automation Nearby facilities Consolidation modernizat
Slide 56: Automation and Consolidation Projects: Albany, NY
Automation and Consolidation Projects Albany, NY Syracuse Hub Albany Hub Project Type | Hub Modernization Retrofit NY Capital Village Center and Consolidation Automation Consolidation modernization
Slide 57: 63 Sites with Major Automation Projects by End of 2028
63 Sites with Major Automation Projects by End of 2028 By 2028 ~$9B Investment ~$3B in Savings
Slide 58: Actions We Are Taking Right Now
Actions We Are Taking Right Now 1 Building and Sort 2 Complete In-flight Closures Automation Projects On path to 3 Operational and Staffing Optimization 12% adjusted* 4 Evaluating Productivity Investments 5 Operator of the Future Roles operating margin and Deploying New Automation and Responsibiliti
Slide 59: Savings Achieved: Network of the Future Timeline
Network of the Future (Productivity Flywheel) Forecasted Timeline Total Savings | 100% ~$3B by the end of 2028 Savings Achieved 76% % of Target 46% Grow Volume per Resource* | 34% ~51 ~59 2026 19% 2023 2024F 2025F 2026F 2027F 2028F *Volume per Resource = ADV / U.S. Employees
Slide 60: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 61: Organizational Agility and Enabling the Business
Organizational Agility and Enabling the Business BALA SUBRAMANIAN CHIEF DIGITAL AND TECHNOLOGY OFFICER
Slide 62: Technology Underpins Our Enterprise Strategy and Goals
Technology Underpins Our Enterprise Strategy and Goals, helping unlock revenue growth and drive cost optimization efforts Modernization of Technology Stack Brilliant Basics Strategic Bets Implement Secure IT Infrastructure Artificial Intelligence and GenAI Introduce Enterprise API Architecture Robot
Slide 63: Significant Strides in Implementing Network of the Future: Current Network
We Have Made Significant Strides in Implementing Network of the Future by implementing tomorrow’s technology today Current UPS Network 63
Slide 64: Significant Strides in Implementing Network of the Future: Future State
We Have Made Significant Strides in Implementing Network of the Future by implementing tomorrow’s technology today Future State UPS Network External Near real-time, scalable, flexible using Data digital capabilities complementing the physical network Expand from component level optimization to syste
Slide 65: Accelerated Network Optimization Program through Robotics and Automation
We Are Driving an Accelerated Network Optimization Program through Robotics and Automation End-to-End Automated Network Digital Automation Customer Network Physical Automation Load and Unload Twin of Twins Engine Big and Bulky Sortation Network Twin Facility Twin Autonomous Mobile Robots and Automat
Slide 66: Moving from a Scanning to Sensing Based Network
Moving from a Scanning to Sensing Based Network is helping drive greater efficiencies for the organization 1 Smart Preload Smart Driver 3 Moving from manual to automated Technology shows driver instantly scanning with new wearable technology where the package is on the car Already implemented Implem
Slide 67: DeliveryDefense Address Confidence
DeliveryDefense Address Confidence TM A first-of-its kind technology that leverages AI to help shippers make smarter, safer shipping decisions, before they even print a label. DeliveryDefense Address Confidence uses complex AI to generate simple, actionable confidence scores that help shippers ident
Slide 68: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 69: Financial Plan
Financial Plan BRIAN NEWMAN CHIEF FINANCIAL OFFICER
Slide 70: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 71: Our Declarations
Our Declarations Premium Premium Small Package Logistics Provider The UPS Provider Difference #1 Complex 40% Customer First Healthcare Logistics U.S. SMB Volume Provider People Led #1 Premium Logistics Premium Innovation Orchestrator International Driven Small Package UPS Digital Provider Growth Ena
Slide 72: 2024 Guidance
2024 Guidance Consolidated Revenue Consolidated Adjusted Operating Profit* FY $92.0 - $94.5 Billion FY $9.2 - $10.0 Billion 1H24 down 1% - 2% YOY 1H24 down 20% - 30% YOY 2H24 up 4% - 8% YOY 2H24 up 20% - 30% YOY *Non-GAAP financial measure. See Appendix for reconciliation to GAAP financial measure.
Slide 73: 2026 Revenue Target Growth
2026 Revenue Target Growth +$114B +$4.6B +$6.0B Inorganic +$2.3B +$10.1B $108B • Orchestration Logistics • DAP • UPS Digital • Asia Diversification • Next Gen Brokerage • Nearshoring • SMB Growth $91B • Grow Select Enterprise Customers • Architecture of Tomorrow Healthcare 2023 U.S. Domestic Interna
Slide 74: 2026 Adjusted Operating Profit Target Growth
2026 Adjusted* Operating Profit Target Growth +$14.9B +$0.9B +$0.5B Inorganic +$3.0B $14.3B $0.6B $9.9B 2023 U.S. Domestic International SCS 2026T 2026T Operating 10.9% 12% 18-19% ~12% 13%+ Margin* *Non-GAAP financial measure. See Appendix for reconciliation to GAAP financial measure.
Slide 75: Path to Profit Growth
Path to Profit Growth Revenue Driven Expense Driven +$14.9B Inorganic $0.6B $14.3B $9.9B 2023 Adj. Volume Revenue Per Piece HC/SCS Orch Wages/Other Fit to Serve Network of the Future 2026T Adj. Operating Profit* Operating Profit* *Non-GAAP financial measure. See Appendix for reconciliation to GAAP f
Slide 76: Capital Investments
Capital Investments Network of the Future IT Growth $6.0B $2.0B 3 Year Total $17B - $18B Healthcare Growth or ~5.5% $1.0B of Target Maintenance Trade Lane Shifts Revenue $8.0B $0.5B Excludes Acquisition Capital
Slide 77: Cumulative Free Cash Flow Generation Target Growth
Cumulative Free Cash Flow* Generation Target Growth • Targeted Cumulative Cash from Operations of $35B • Free Cash Flow* 3-year CAGR of 10.5% ~$7B 2026T $17B - $18B 2024-2026T $5.2B 2023 *Non-GAAP financial measure. See Appendix for reconciliation to GAAP financial measure. Excludes inorganic.
Slide 78: Capital Allocation Policy / Priorities
Capital Allocation Policy / Priorities Reinvest in the Business Stable and Growing Strong Share to Achieve Financial Targets Dividend Balance Sheet Repurchases Targeting $17B-$18B in cumulative Targeted payout of ~50% Target capital structure of ~2.5 times Use excess cash capex from 2024-2026 of pri
Slide 79: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 80: &
&
Slide 81: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~
Slide 82: Appendix
ee Appendix _—
Slide 83: Reconciliation of GAAP and Non-GAAP Financial Measures
Reconciliation of GAAP and Non-GAAP Financial Measures Non-GAAP Financial Measures; Reconciliations Defined Benefit Pension and Postretirement Medical Plan Gains and Losses From time to time we supplement the reporting of our financial information determined under We recognize changes in the fair va
Slide 84: Reconciliations
Reconciliations Reconciliation of GAAP and Non-GAAP Income Statement Items (in millions, except per share data): Twelve Months Ended December 31, 2023 Goodwill & As Asset Reported Pension One-Time Impairment Transformation As Adjusted (GAAP) Adj.(1) Compensation(2) Charges(3) & Other Adj.(4) (Non-GA
Slide 85: Reconciliations: Free Cash Flow
Reconciliations Reconciliation of Free Cash Flow (Non-GAAP measure) (in millions): Twelve Months Ended December 31, 2023 Cash flows from operating activities $ 10,238 Capital expenditures (5,158) Proceeds from disposals of property, plant and equipment 193 Other investing activities (19) Free Cash F
Slide 86: Reconciliations: Adjusted Debt to Adjusted EBITDA
Reconciliations Reconciliation of Adjusted Debt to Adjusted EBITDA (Non-GAAP measure) (in millions): TTM(1) Ended December 31 2023 Net income $ 6,708 Add back: Income tax expense 1,865 Interest expense 785 Depreciation & amortization 3,366 EBITDA $ 12,724 Add back (deduct): Incentive compensation pr
Slide 87: Reconciliations: Adjusted Return on Invested Capital
Reconciliations • Reconciliation of Adjusted Return on Invested Capital (Non-GAAP measure) (in millions): TTM(1) Ended December 31 2023 Net income $ 6,708 Add back (deduct): Income tax expense 1,865 Interest expense 785 Other pension (income) expense 95 Investment (income) expense and other (312) Op
Slide 88: UPS Investor & Analyst Day
Be (te land BOLDER UPS Investor & Analyst Day ~~