UPS (UPS) 47th Annual Raymond James Institutional Investor Conference summary

Strategic transformation and operational changes

• Executed significant reduction in Amazon-related volume, shedding $5 billion in revenue and 2 million pieces per day over two years, with further reductions planned for 2026 to improve network efficiency and profitability.

• Undertook the largest network reconfiguration in company history, closing 93 buildings in 2025 and announcing 24 more closures in H1 2026, while investing in automation for a leaner, more productive network.

• Outsourced a portion of the Ground Saver product back to USPS after operational model changes, impacting service and prompting a shift in volume management.

• Implemented the Driver Choice Program to accelerate workforce reduction, offering lump sum payouts to drivers and targeting 30,000 position cuts in 2026.

• Focused on growing in higher-value segments such as SMB, B2B, and healthcare, leveraging digital solutions and the Digital Access Program to drive accretive growth.

Financial outlook and margin trajectory

• Guidance for 2026 reiterates slightly up revenue and flat EPS, with H1 facing incremental costs and H2 expected to see revenue growth in the low single digits and margin recovery.

• Domestic margins under pressure in H1, with recovery expected in Q2 and a 100 basis point margin improvement in H2; long-term goal is a return to double-digit margins by 2027-2028.

• International business faces margin pressure due to trade lane shifts and mix changes, with mid-teens margins expected to improve as network is reallocated and trade stabilizes.

• Revenue per piece (RPP) growth driven by base rate increases and favorable mix, with 6.5% full-year growth expected in 2026, normalizing to 2.5%-3.5% base rate improvement over time.

• Cost per piece (CPP) expected to normalize alongside RPP, supporting margin expansion as the network becomes more efficient.

Capital allocation, cash flow, and investment priorities

• Operating cash flow remains strong at just under $9 billion, with a focus on maintaining dividend coverage and leveraging margin recovery for upside.

• CapEx guided to $3 billion, a 10-year low, reflecting network consolidation, automation investments, and reduced need for new vehicles and facilities.

• Maintains a 2.5x debt-to-EBITDA target, supporting a strong balance sheet and strategic flexibility.

• Dividend payout ratio currently above target due to transition, with no increase planned for 2026; aim to return to 50%-60% payout ratio over time.

• Capital allocation prioritizes business investment, with recent M&A focused on healthcare logistics and ongoing commitment to shareholder returns.