FedEx Corporation

Good day and welcome to the FedEx fourth quarter and 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 fourth quarter earnings conference call. The fourth quarter earnings released in Statbook are on our website at investors.fedex.com. This call and the accompanying slides are being streamed from our website. Today's earnings release includes segment results for FedEx Freight given the separation occurred on June 1st after Q4 FY26 ended. Additionally, as a result of the spinoff, we will not cover FedEx Freight results in detail in our prepared remarks or Q&A session. FedEx Freight will host a separate earnings call on June 25th. 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 GAAP measures. Joining us for prepared remarks on the call today are Raj Subramaniam, President and CEO, Brie Carere, Executive Vice President and Chief Customer Officer, and Claude Russ, Enterprise Vice President and Interim CFO. Now I will turn the call over to Raj.

Thank you, Jenny. And a heartfelt thank you to Team FedEx for a very strong finish to FY26. A year of tremendous value creation. Each quarter of this fiscal year, we delivered on our financial commitments while supporting our customers with excellence. Our results demonstrate that we are growing revenue in the most premium segments of the global economy. As trade patterns evolve, we flex our network to keep supply chains moving. Our network transformation via Network 2.0, Tricolor, and Opportunities in Europe is driving better density and efficiency. This progress combined with a sharp focus on structural cost reduction enabled us to exceed the $1 billion transformation related savings target that we shared at the start of the fiscal year. And our data and technology advantage is helping us win new business improve the customer experience and create new value. The momentum you are seeing across our business is proof that our strategy is working. It's translating to favorable financial outcomes, including very strong free cash flow and FY26 results that far exceeded our initial FY26 outlook. Our results also surpassed the high end of the revised outlook range we provided in March. Additionally, we completed the spin-off of FedEx Freight on June 1, positioning both companies for success as separate, focused industry leaders. I want to thank the teams that executed the spin-related work to achieve this milestone, especially given how well They also maintain focus on our day-to-day core operations. I'm confident FedEx Freight is extremely well positioned as an independent company, and I wish John Smith and the freight team the very best. Now turning to our full-year consolidated results on a year-over-year basis. We grew both revenue and adjusted operating income by 8% with significant adjusted operating income growth at Federal Express Corporation, or FEC, partially offset by a decline at FedEx Freight. At FEC, we grew full-year revenue by 9% and adjusted operating income by 17%. With 60 basis points of year-over-year adjusted margin expansion, we delivered a 7.7% adjusted operating margin, the highest margin rate in four years, reflecting the structural improvements we have made to the business. What also stands out is that we achieved these results despite several significant headwinds, particularly global trade policy changes and the grounding of our MD-11 aircraft fleet. We began safely returning the MD-11s to service last month, working in lockstep with Boeing, the FAA and the NTSB. I appreciate the efforts of our flight operations, technical operations and airline safety teams whose work enabled four MD-11s to resume flight to date. we expect to have the full fleet back in service before peak. In Q4, on a consolidated basis, we grew revenue 13% and adjusted operating income 3% led by FEC and partially offset as expected by decline in adjusted operating income at freight. At FEC, revenue increased 14% driven by yield and volume strength across almost all of our services. This demonstrates our deliberate strategy to grow in the higher yielding segments of the market. Fuel for adjusted operating income at FPC increased 13%. The revenue strength I just mentioned offset the impact of higher fuel costs and variable compensation. Against this backdrop, today, We are initiating an outlook for calendar year 2026 as we transition to a December 31 fiscal year end. Based on our current assumptions, we expect calendar year 2026 adjusted earnings from continuing operations to be $16.90 to $18.10 per diluted share. This range implies 20% adjusted EPS growth in the June through December transition year, highlighting the momentum in our business. We remain firmly on track to achieve our investor day commitments for 2029 with clear proof points in the quarter. B2B services drove the majority of our quarterly revenue growth, supporting high profit flow through. I'm especially encouraged by our progress and pipelines in the key healthcare, automotive, aerospace, and data center verticals. Brie will share highlights shortly. We successfully advanced Network 2.0 in Q4. By the end of this month, about 45% of eligible volume will flow through nearly 490 Network 2.0 optimized stations, rising to 65% before peak. At that point, as we have done in the past two years, we will pause implementation until early 2027, helping us set up for a very strong peak. We remain on track to achieve nearly $1 billion of Network 2.0 and associated one FedEx savings by the end of this calendar year and the full $2 billion by the end of CY27. In Europe, we achieved our 12th consecutive quarter of international revenue share gains driven by our strong value proposition and improving service levels. Leveraging our US surface playbook in Europe, we recently announced a strategic investment to expand our technologically advanced and strategically located road hub in Duyven, Netherlands, supporting continued growth in the premium international parcel and freight markets. We believe Europe remains our largest international profit improvement opportunity, and our transformation plans remain on track. Across the globe, supported by our tricolor strategy, we continue to see strong international air freight growth as we further increase our share in this $90 billion global market. You've heard me speak about the strength of our data on transporting more than $2 trillion worth of goods each year and delivering nearly 18 million packages each business day. We have embedded AI into our drive process, enhancing the rigor with which we work, our data, and how we deploy it. is helping to drive significant innovation across the company, driving differentiation and improving the customer experience. Our ability to leverage this data has earned us the distinction of being named to Fast Company's Most Innovative Companies list for 2026 for our efforts to reshape global trade, simplify the cross-border experience, and many more. Our FY26 results demonstrate the power of our unique global industrial network, strong value proposition, and an outstanding execution of our profitable growth strategy, which is translating to strong free cash flow and value creation. I have never been more confident on our path ahead, and I'm excited to build on this momentum in the weeks and months ahead. Now, over to Brie.