FedEx Corporation

Good day and welcome to the FedEx Third 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 touchtone 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 Jenny Hollander, Vice President, Investor Relations.

Good afternoon, and welcome to FedEx Corporation's Third Quarter Earnings Conference Call. The Third Quarter Earnings Release, Form 10-Q, and Statbook 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 investors.fedex.com for a reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable gap measures. Joining us for prepared remarks on the call today are Raj Subramaniam, President and CEO, Brie Carreri, Executive Vice President and Chief Customer Officer, and John Dietrich, Executive Vice President and CFO. Now, I'll turn the call over to Raj.

Thank you, Jenny. First, I want to extend a sincere thank you to Team FedEx for delivering very strong results this quarter, supported by an exceptional peak, our most profitable yet. The team's commitment to make every FedEx experience outstanding and their consistent execution drove our strong Q3 financial performance. I also want to express my gratitude to our team members in the Middle East. Their safety and security is our top priority. We are closely monitoring the situation, have implemented contingencies, and are operating in alignment with local authorities as we continue delivering the best possible service to our customers. Our strong Q3 results were largely driven by Federal Express Corporation, or FEC, demonstrating the power and resilience of our global industrial network. As we recently outlined at our investor day, the entire FPC organization is aligned and making progress across our four strategic priorities. Growing in high margin verticals, transforming our network, and building on our data and technology advantage while delivering ongoing efficiency gains. Our strategy enabled us to deliver sequential and year-over-year adjusted EPS growth for FedEx Corp ahead of our expectations coming into the quarter. This operational performance combined with our CapEx discipline is translating to strong adjusted free cash flow. Additionally, our plans to spin off FedEx freight on June 1 remain on track. We are confident that the separation will unlock meaningful long-term value for our stockholders. Turning to our consolidated Q3 results, revenue was up 8% year-over-year driven by yield and volume strength across nearly all our package services. And we delivered a 7% increase in adjusted operating income year-over-year as we successfully managed headwinds tied to changing global trade policies a challenging LTL demand environment, and the grounding of our MD11 fleet. We also effectively overcame significant weather-related service constraints. At FEC, we grew revenue 10% and expanded adjusted operating margin by 50 basis points. This marked our sixth consecutive quarter of margin expansion. allowing us to grow adjusted operating income 18%. This is a clear proof point that our commercial strategy to move up the value chain is working. At the same time, we are executing on our transformation and cost reduction priorities. As anticipated, freight results remain pressured as a result of ongoing LTL industry trends along with increased separation-related expenses. Importantly, we are laser-focused on revenue quality. As a result, higher weights and revenue per shipment at FedEx Freight help mitigate lower shipment volumes. Given the strength of our consolidated Q3 results and updated assumptions for Q4, we are raising our FY26 adjusted earnings outlook to $19.30 to $20.10 for diluted share. Bree and John will detail the outlook assumptions shortly. Revenue share gains in our priority B2B verticals were an important driver of our Q3 performance. Similar to Q2, nearly half our revenue growth were driven by B2B services, an important enabler of increased profitability. Our transformation to one integrated intelligent network is well underway. By the end of this month, about 35% of eligible volume will flow through nearly 400 network 2.0 optimized facilities. We remain on track for about 65% of our eligible volume to be flowing through network 2.0 facilities by next peak. And we continue to expect $2 billion in cumulative savings from Network 2.0 and associated One FedEx initiatives by end of 2027. This was our first peak with meaningful volume flowing through Network 2.0 facilities, and the results speak for themselves. Data-driven solutions continue to support the Network 2.0 rollout and played a crucial role in enhancing service during peak. We recently introduced our unload trailer prioritization tool, which uses real time data to intelligently sequence yard operations based on trailer content. As Network 2.0 facilities scale, this capability becomes increasingly important, enabling us to better understand a trailer service mix, especially during morning sorts. This tool supports strong service levels by helping prioritize our most time-critical packages even more efficiently. Internationally, we continue to flex our air network in response to global trade policy changes. We reduced trans-Pacific outbound purple and white tail capacity by approximately 15% and 25%, respectively, during the quarter. Asia to Europe and intra-Asia, where we are reallocating some of our purple tail capacity, continue to drive strong revenue growth. In a quarter with significant package volume growth, we reduced net capacity, jet fuel usage, and vehicle fuel usage, signaling our success in densifying this network. The team continues to focus on transformation in Europe, where we achieved our 11th consecutive quarter of international revenue share gains. In January, we shared plans to transform our ground operations in France with the goal of improving the experience for employees, contractors, and customers. As part of this effort, we plan to simplify our domestic footprint, optimize our road network, streamline our value proposition, and leverage digital capabilities to enhance France's competitiveness. More specifically, We are optimizing the hub and spoke network with fewer better place hubs and reducing our overall station count by over 40%. Last month, we also announced our participation in a consortium, making an offer for all shares of InPost. As I discussed at our recent investor day, high value B2B verticals are a core priority within our profitable growth strategy. At the same time, our commitment to provide excellent service to consumers around the world remains unchanged. InPost's strong presence and highly profitable track record in Europe's out-of-home delivery segment complements our strategy, allowing us to focus on our core strengths. This transaction is expected to be accretive to our earnings in year one, up or close, which is targeted for the second half of calendar year 2026. Upon completion of the transaction, we will enter into commercial agreements that are expected to yield benefits to both parties. Importantly, FedEx and InPost will not integrate operations, and we will remain competitors, each operating in their respective markets and segments. At our invest today, we highlighted the role of FedEx digital intelligence as our force multiplier, reshaping how we plan, operate, serve customers, and create new services. A great example of new value creation for our digital intelligence is our strategic collaboration with Dun & Bradstreet. Together, we will be launching the Dun & Bradstreet and FedEx DataWorks Retail Momentum Index, an early warning system designed to detect crucial inflection points in U.S. retail supply and demand. Combining vast amounts of shipping intelligence and business data insights, we can provide a near real time aggregated view of US retail supply and demand. This intelligence can help business leaders detect inflection points before they appear in traditional economic reports like monthly retail sales or inventory data. We plan to release this index monthly beginning this spring, marking the start of growing collaboration to develop additional joint insights for the market. Physical AI is another critical element of our longer-term strategy, which will complement and strengthen our extensive and indispensable industrial network. Unloading trailers is one of the most physically demanding tasks in our package operations. Last month, we announced the implementation of a new autonomous robotic system from Berkshire Gray, the Scoop robotic package unloader. This collaboration nicely complements our partnership with Dexterity, which provides robots for trailer loading. Both collaborations are in the pilot phase and expected to be further deployed later this calendar year. This work signals our commitment to both the safety of our team members and to innovation that improves the efficiency and profitability of our operations. In closing, we delivered a strong quarter. while successfully navigating a dynamic environment. We grew in high margin verticals. We continued to transform our network. We leveraged our data and technology capabilities to enhance execution and value creation. Team FedEx performed exceptionally well, delivering great service for our customers during the critical peak season and beyond. I'm truly grateful for their performance. Now, over to you, Bree.