FedEx Corporation

Good day, everyone, and welcome to the FedEx Corporation third quarter fiscal year 2019 earnings conference call. Today's call is being recorded. At this time, I will turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good afternoon, and welcome to FedEx Corporation's third quarter earnings conference call. The third quarter form 10Q, earnings release and stat book are on our website at FedEx.com. This call is being streamed from our website where the replay will be available for about one year. Joining us on the call today are members of the media. During our question and answer session, callers will be limited to one question in order to allow us to accommodate all those who would like to participate. And so we have about one hour to complete the call because Fred will be on CNBC following the call. The answers to the questions we received from analysts prior to today have been incorporated into our opening comments. I want to remind all listeners that FedEx Corporation desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call, such as projections regarding future performance, may be considered forward-looking statements within the meaning of the Act. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. Please refer to the investor relations portion of our website at FedEx.com for reconciliation of the non-GAAP financial measures discussed on this call for the most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman, Raj Subramanian, President and COO, Alan Grass, Executive Vice President and CFO. Mark Allen, Executive Vice President, General Counsel and Secretary. Rob Carter, Executive Vice President, FedEx Information Services and CIO. Marie Carreri, Executive Vice President, Chief Marketing Communications Officer. Now Fred Smith will share his views on the quarter.

Thanks, Mickey, and welcome to all joining our quarterly call. Let me offer sincere thanks to hundreds of thousands of FedEx team members for delivering an outstanding peak season despite weeks of tough winter weather in many areas. Quarter 3 was a challenging quarter. Our FY19 plan envisioned top-line revenue growth of approximately $6 billion. Mostly due to lower economic growth in international regions, we expect the end of the year with about $4.5 billion in increased revenues. Of course, the profit flow-through of the $1.5 billion revenue shortfall would, of course, have been substantial in FY19. Nonetheless, the midpoint of the adjusted EPS guidance is up about 20 cents over FY18. Five-year EPS CAGR using the midpoint of adjusted FY19 EPS guidance, I might remind everyone, is expected to be 17%. Our target for long-term EPS growth rate is 10% to 15%. We have projected FY19 earnings growth despite a major expansion of FedEx ground, including, one, the opening of two major new hubs in Pennsylvania and Connecticut this past fall, two, expanded facilities for the rapidly growing oversized package e-commerce segment, and three, transitioning to a year-round six-day FedEx ground operation. FY19 free cash flow adjusted to exclude voluntary pension contributions and cash expenses related to our voluntary employee buyout program is expected to be approximately $1.5 billion. In addition, we expect free cash flow in the years to come to expand significantly, assuming that we have reasonable macroeconomic gains. situation. While that macroeconomic environment lately has presented challenges relative to our prior expectations, particularly at FedEx Express, we're quite optimistic we'll improve results in FY20 that begins 1 June. We're very enthused about the FedEx same-day bot developed with DECA Research and Development that we unveiled on February 26. While we will have much more to say about this technology, We believe the economics of the FedEx bot are compelling, that regulatory approvals are highly likely over time, and we will enter a substantial new market segment that is a logical extension of FedEx capabilities. Let me now turn to Raj followed by Bree and Alan for further remarks, and then we'll take your questions. Raj.