FedEx Corporation

Good day and welcome to the FedEx first quarter fiscal 2026 earnings call. All participants are in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to FedEx Vice President of Investor Relations, Jenny Hollander.

Good afternoon and welcome to FedEx Corporation's first quarter earnings conference call. The first quarter earnings release form 10Q and stat book are on our website at investors.fedex.com. This call and the accompanying slides are being streamed from our website. During our Q&A session, callers will be limited to one question to allow us to accommodate all those who would like to participate. Certain statements in this conference call may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that 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. Today's presentation also includes certain non-GAAP financial measures. Please refer to the investor relations portion of our website at FedEx.com for a reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures. Joining us on the call today are Raj Subramaniam, President and CEO, Giri Kareri, Executive Vice President and Chief Customer Officer, and John Dietrich, Executive Vice President and CFO. Now I will turn the call over to Raj.

Thank you, Jenny. We delivered a solid quarter in line with the Q1 outlook we shared in June, despite significant volatility and uncertainty around the global trade environment. Our results demonstrate the resilience we have built into our network. They also reflect the dedication of our world-class team, who have adapted quickly to serve customers with excellence through an evolving demand environment. I'm very appreciative of Team FedEx. We continue to reduce structural costs while deploying Tricolor, advancing Network 2.0, and improving our European operations. These strategies are enabling us to flex the network faster than ever before and lowering our cost to serve, all while providing our customers with high-quality service. Importantly, we are continuing to win new business in high-value verticals, driven in part by our differentiated digital tools that are enhancing the FedEx value proposition and customer experience. We also continue to make meaningful progress preparing for the spinoff of FedEx Freight, which remains on track. Following the spinoff, Freight will be a separate public company with the best customer value proposition in the LTL market and a proven track record of strong operational execution. Turning to our consolidated Q1 results, revenue is up 3% year over year, driven by strength across our U.S. domestic package services. We achieved our targeted $200 million in transformation-related savings and grew adjusted operating income by 7%. Similar to last quarter, the results at Federal Express Corporation, or FEC, demonstrate the operating leverage that we built into our business. On a 4% year-over-year increase in FEC revenue, we grew adjusted operating income by 17% and expanded adjusted operating margin by 70 basis points. Notably, we achieved this result despite continued headwinds from the trade environment and the US Postal Service contract expiration. Consistent with the industry trends that we have seen in recent quarters, Revenue at freight remained pressure. That said, despite the prolonged weakness in the industrial economy, the LTL market remains rational and we are well positioned with our disciplined approach to strategic growth. I'm proud of the results our team is delivering across the enterprise despite industrial economic weakness. While an industrial recovery is not required for long-term value creation at FedEx, and confident that we'll unlock significant upside across the enterprise when the demand environment improves. Last quarter, I spoke about the degree to which we flexed our networks to better match the demand environment amid global trade shifts. As policies and demand evolved throughout the first quarter, we further adjusted capacity thanks to our tricolor strategy. For example, We reduced our purple tail trans-Pacific Asia outbound capacity by 25% year over year and nearly 10% versus the prior quarter. We also decreased our third party or white tail capacity by similar percentages. At the same time, we shifted capacity to capture profitable revenue on the Asia to Europe lane. With the full removal of the de minimis exemption in the United States late last month, we have been working closely with our customers, helping them maintain effective and efficient access to the vital U.S. market. Given a significant portion of our de minimis volume exposure previously came from China, we were able to use learnings from experiences in May to help shippers elsewhere navigate the more recent exemption elimination. This level of connectivity extends to how we're advancing the elements of our transformation that are unique to FedEx. The Network 2.0 rollout is progressing well, and customer feedback, especially when it comes to the consolidated pickup experience, remains very positive. In the first quarter, as planned, we optimized approximately 70 additional U.S. stations. Our total optimized station count across the U.S. and Canada is now approximately 360, enabling us to exit September with nearly 3 million in average daily volume flowing through Network 2.0 optimized operations. Looking beyond Network 2.0, Improving profitability in Europe remains a top priority, and I am especially pleased with the team's year-over-year improvements in labor and on-road productivity metrics. Q1 also marked our best new business quarter in Europe in the last two years, driven by express parcel growth on both the intra-European and transatlantic lanes. Importantly, this business was well balanced between B2B and B2C customers, demonstrating our focus on growing in premium B2B and longer-haul export B2C segments. This commercial strategy, combined with our rigorous focus on cost management, led to a meaningful contribution to our year-over-year FEC profit improvement. I talked earlier about how our tricolor strategy enabled us to flex the network to adapt to changing demand patterns. Tricolor is also driving greater densification and reduced unit costs across our purple, orange, and white networks. The strategy is simultaneously focused on enhancing service quality and mitigating congestion at major sort locations. Our execution on this important initiative is bolstering end-to-end solutions for global customers as we grow profitably in the global air freight market. This strategy supported an impressive 14% year-over-year Q1 revenue growth in international priority and economy freight with high flow-through. Data and technology remain foundational to our business, but we are entering a new chapter in how we leverage them. Our founders' vision more than 45 years ago that information about the package is as important as the package itself has proven prescient. Today, FedEx operates an advanced digital twin that goes beyond tracking. It is becoming an intelligent system that anticipates disruptions, provides optimized route information in real time, and creates predictive customer experiences. We move 17 million packages through our network daily, generating two petabytes of data and 100 billion transactions across software applications. But the real value isn't in the volume. It is in the unique nature of this data. Our position at the intersection of global commerce gives us an unmatched view of physical supply chain patterns seasonal demand shifts, and emerging trade corridors. This real-world operational data platform cannot be replicated by any competitor or a tech solution. Simply put, FedEx owns one of the richest logistics intelligence assets in the world. I'm excited to welcome Vishal Talwar, our new Chief Digital and Information Officer and president of FedEx DataWorks, who joined us last month. As the former chief growth officer at Accenture Technology, Vishal brings deep expertise in enterprise AI and understands how to leverage our unique physical digital assets into next generation AI-led capabilities. Under Vishal's leadership, we will continue accelerating two key priorities. scaling AI across the enterprise, from enterprise function to how we operate and serve our customers, and exploring new revenue models that leverage our unique assets. We're also strengthening our cybersecurity posture to protect our strategic advantages. Before I turn the call over to Bri, I'd like to update you on our expectations for the remainder of the fiscal year. Based on our current assumptions, we expect full year adjusted earnings to be $17.20 to $19 per diluted share. This reflects a range of scenarios in what remains a dynamic global operating environment. As it continues to evolve, we will remain focused on executing on our commercial priorities, dynamically matching capacity with demand, and delivering on the $1 billion in transformation-related savings we shared previously. Bri and John will provide more details on the key variables and underlying assumptions for this outlook shortly. We have made tremendous progress on our transformation, and there is much more to come. To that end, we are excited to announce that our next FedExCorp Investor Day will be held in Memphis. on February 11th and 12th, 2026. I look forward to seeing many of you there, where we will provide more detailed updates on our strategic initiatives and our longer-term financial targets. Now, over to you, Bri.