FedEx Corporation · NYSE:FDX
FedEx — Non-Deal Roadshow (April 2023)
53 slides from FedEx's roadshow presentation, Apr 14, 2023
Slide 1: FedEx Corporation Investor Relations
FedEx Corporation Investor Relations April 14, 2023
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, planned consolidation of operating companies, future financial targets, business strategies, management
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. • Over 700 aircraft and more than 215,000 motorized vehicles • More than 5,000 operating facilities; more than 650 airports served worldwide • Delivers more than 15M
Slide 4: Broad Portfolio of Services
Broad Portfolio of Services FY22 Revenues: $93.5 billion Employees: More than 530,000 Countries and Territories Served: More than 220 $45.8 Billion 49% Express $33.2 Billion 36% Ground $9.5 Billion 10% Freight $5.0 Billion* 5% 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 • 96.5% of U.S. revenue comes from (FXE) 1.0% customers of two or more operating companies FXE+FXG FXE+FXF 15.5% All 0.2% • 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 FedEx FedEx FedEx FedEx FedEx FedEx FedEx Express Ground Frei
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
Slide 8: Framework
Framework Our people, values and culture Technology-enabled, data-driven FedEx Customer Surface Network Air Network & International Network 2.0 G&A 8
Slide 9: 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 10: 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 Mike Lenz President & CEO, U.S. and Canada Ground President & CEO, Airline and International President, Chief Financial Officer Operati
Slide 11: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 11
Slide 12: 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 engine of B2B higher-margin verticals demand top- parcel volume tier service • ~90% of expected parcel industry growth • Target segments generate high double-digit comes from e-commerce* margins • Anti
Slide 13: 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® 13
Slide 14: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 14
Slide 15: 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 operations Ground P&D operations Express U.S. operations surface operations $450M $300M $150M $300M Safety Improving outcomes 15
Slide 16: 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 redundant Capitalize on efficiency Optimize between air one neighborhood linehaul and reduce benefits of and surface modes to empty miles consolidated sort balance
Slide 17: 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 18: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 18
Slide 19: 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 success Cost per Cost per available Asset (key indicators) pound ton mile utilization 19
Slide 20: 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 • Leveraging more efficient aircraft types and adopting be
Slide 21: 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 21
Slide 22: Europe: Strong progress on identified opportunities
Europe: Strong progress on identified opportunities ~$600M in FY25 • Targeting profitable revenue growth Domestic • Restructuring the networks • Improving route planning, sort processes, and work P&D force management • Optimizing load plans Road • Segregating freight and parcel to improve load facto
Slide 23: Framework
Framework Customer Surface Network Air Network & International Network 2.0 G&A 23
Slide 24: G&A - Building momentum with significant value potential
G&A - Building momentum with significant value potential Procurement Functional excellence Technology $600M $400M $500M 24
Slide 25: Realizing functional excellence across the enterprise
Realizing functional excellence across the enterprise Tech-enabled Streamlined Leaner, nimbler functions leadership optimized processes supporting operations Right “shape” of the Tech-enabled processes driving Greater efficiency through enterprise execution efficiency right-shoring transactional cap
Slide 26: Value creation framework through FY25
Value creation framework through FY25 Expected ($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 27: 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 28: Illustrative example
Illustrative example $ in billions Key considerations • Revenue environment remains $2.7 $(5.5) uncertain $1.5 $10 $3.5 $1.2 • Planning for continued, but $1.3 moderating, yield improvement $5.3 10% • Inflation impact remains key Adjusted Operating variable to watch, expecting margin normalization o
Slide 29: 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 29
Slide 30: Positioning for Long-Term Growth
Positioning for Long-Term Growth • E-commerce, including B2B e-commerce, is increasing demand for our services • 90% of expected parcel industry growth to come from e- commerce • Anticipate U.S. Domestic e-commerce volume to grow at a 4-5% CAGR CY22-26 • Continuing to transform and optimize the inte
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 within 5 94% of People in the United States are within 5 miles of a FedEx hold location 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 nearly 60,0
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 increased shipping rates an average of 6.9% in January 2023 • FedEx Freight increased rates an average of 6.9% to 7.9% in January
Slide 34: Strong Portfolio of Residential Package Services
Strong Portfolio of Residential Package Services FedEx Express FedEx Ground FedEx Ground • 1–2 days transit time Home Delivery: Ground Economy: • Time-definite • 1–5 days transit time • 2–8 days transit time • MBG • Day-definite • No declared value • Declared value up • Declared value up • Lighter-w
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 Competitive Advantages
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 Industry LTL Industry Revenue Revenue Market Market Share 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 * UPS Freight acquired by TFI on April 30, 2021
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 fleet will be zero–emission electric vehicles Sustainable Fuels. FedEx will continue to invest i
Slide 39: Corporate Social Responsibility
Corporate Social Responsibility Environmental Impact • In FY21, through FedEx’s collective emissions reduction efforts, we decreased carbon dioxide ( CO2e ) emissions intensity - on a revenue basis – by 45% from FY09 through FY21. • Through FY21, FedEx Express has improved vehicle fuel efficiency by
Slide 40: Corporate Social Responsibility - Awards & Recognition
Corporate Social Responsibility - Awards & Recognition • World’s Most Ethical Companies 2023 - Ethisphere • America’s Greatest Work Places for Diversity 2023 – NEWSWEEK • Blue Ribbon Companies 2023 - FORTUNE • World’s Most Admired Companies 2023 - FORTUNE • This is the 22nd consecutive year that Fed
Slide 41: Corporate Operating Margin
Corporate Operating Margin 8.0% 7.5% 7.4% 7.3% 7.0% 7.0% 6.7% 6.4% 6.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.0% 1.0% 0.0% FY19 FY20 FY21 FY22 GAAP Adjusted Non-GAAP reconciliations are included herein. See Appendix.
Slide 42: Earnings Per Share
Earnings Per Share $25.00 $20.61 $20.00 $19.45 $18.17 $14.33 $15.52 $15.00 $10.00 $9.50 $4.90 $5.00 $2.03 $0.00 FY19 FY20 FY21 FY22 GAAP Adjusted Non-GAAP reconciliations are included herein. See Appendix.
Slide 43: Capital Expenditures
Capital Expenditures (% of Revenues) 10.0% 9.0% 8.5% 8.7% 8.5% 7.9% 8.0% 7.2% 7.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% FY17 FY18 FY19 FY20 FY21 FY22
Slide 44: Dividends Per Share
Dividends Increased at a 5-Year CAGR of 18% $5.00 $4.60 $4.50 $4.00 IN LAST 5 YEARS, WE HAVE RETURNED $3.50 Dividends Per Share $3.00 $3.00 $2.60 $2.60 $2.60 $3.4B $2.50 in dividend payments $2.00 $2.00 $1.60 $1.50 $4.7B $1.00 in share repurchases $1.00 16% $0.80 $0.56 $0.60 $0.48 $0.52 $0.50 $0.22
Slide 45: Appendix
APPENDIX
Slide 46: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 bus
Slide 47: FY22 Reconciliation for FedEx Corp.
FY22 Reconciliation for FedEx Corp. Dollars in millions, except EPS Income Net Op Income Op Margin Taxes1 Income2 Diluted 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 costs6 278 0.3% 64 214 0.80
Slide 48: FY21 Reconciliation for FedEx Corp.
FY21 Reconciliation for FedEx Corp. Dollars in millions, except EPS Income Net Diluted Op Income Op Margin Taxes1 Income2 EPS3 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 49: FY20 Reconciliation for FedEx Corp.
FY20 Reconciliation for FedEx Corp. Dollars in millions, except EPS Income Net Diluted Op Income Op Margin Taxes1 Income2 EPS GAAP Measure $2,417 3.5% $383 $1,286 $4.90 Mark-to-Market Retirement Plans Accounting — — 211 583 2.22 Adjustments4 Goodwill And Other Asset Impairment 435 0.6% 19 416 1.58 C
Slide 50: FY19 Reconciliation for FedEx Corp.
FY19 Reconciliation for FedEx Corp. Dollars in millions, except EPS Op Income Net Diluted Op Income Margin3 Taxes1 Income2 EPS GAAP Measure $4,466 6.4% $115 $540 $2.03 Mark-to-Market Retirement Plans Accounting --- --- 902 2,981 11.22 Adjustments4 TNT Express Integration Expenses5 388 0.6% 74 314 1.
Slide 51: FY23 earnings per share forecast
FY23 earnings per share forecast $M, except EPS Adjustments Diluted Earnings Per Share Earnings per diluted share (non-GAAP)9 $13.80 to $14.40 Business optimization costs 250 Income tax effect1 (60) Net of tax effect $190 0.74 Business realignment costs 20 Income tax effect1 (5) Net of tax effect $1
Slide 52: FY23E operating income reconciliation
FY23E operating income reconciliation Dollars in millions Operating income (GAAP) $5,030 Business realignment expense 20 Business optimization expense 250 Adjusted operating income (non-GAAP) $5,300 52
Slide 53: Footnotes for Non-GAAP Reconciliation Slides
Footnotes for Non-GAAP Reconciliation Slides 1 – Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction. 2 – Effect of “total other (expense) income” on net income amount not shown. 3 – Does not sum to total due to rounding. 4 –The MTM retirement plans