FedEx Corp at Deutsche Bank Transportation Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Richa Harnain - Deutsche Bank AG - Analyst : Yes. All right. Yes. A lot of exciting things happening in FedEx, and I hope to get into that. But maybe we can kick off with zooming in on the macro outlook, right? You said you serve 3 million customers, over 200 countries across the globe. So many tend to look at FedEx as a barometer for the state and the health of the global economy. Therefore, in broad strokes, maybe you can start with telling us how you think the consumer is doing, how are businesses feeling based on the trends out there today in FedEx's business and what you're sensing in terms of B2C versus B2B dynamics, SMBs, et cetera. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 1:00PM, FDX.N - FedEx Corp at Deutsche Bank Transportation Conference

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Okay. So a lot there I'm going to come back to you, but maybe we can go from there into your outlook. You chose to withhold full year guidance. I thought that was pretty prudent in light of all the uncertainty out there that you spoke about in global trade, in particular, which you facilitate. So -- but you did provide an update on the quarter. And John, before I get into the question, kudos to you, I think, since you're appointed CFO, our analysis shows that FedEx outperformed the broader transport landscape on earnings provisions and five over the past seven quarters. So your team has been doing a better job than average and not only doing what you say you're going to do. So again, good job there. But just now to the questions on the outlook for Q1, competitor of yours recently reported and spoke to weakness in China being severe. I know you spoke to this as well. You said it's contemplated in your guidance at $170 million, right? You said that things continue to remain under pressure. I believe you said in July, got --

Question: Richa Harnain - Deutsche Bank AG - Analyst : Yes. So any updates to your view on Q1? Are you -- how are you tracking there? .

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. But you -- in the domestic market, so again, 75% of what you do just on a direct basis is you do domestically, right? You have been -- there's been a nice share growth story there. Your volumes, for instance, in the last quarter domestically were up 6%. And at that point, it sounded like based on the trend then, you're talking to like the high end of the guide. So just in light of what's happening REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 1:00PM, FDX.N - FedEx Corp at Deutsche Bank Transportation Conference in the domestic market, maybe more specifically, should we -- like maybe the midpoint of the guide contemplated some sort of weakness, which is kind of what you're speaking to on the B side softening, but maybe talk through that a little more.

Question: Richa Harnain - Deutsche Bank AG - Analyst : All right. Fair enough. So maybe we can switch gears and talk about de minimis. The exception seem to be removed beyond China. What risk do you think this presents? What were your learnings from the initial round of de minimis exceptions going away? And how have those prepared to do for this?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. So maybe we can switch gears and talk about the competitive backdrop. Pricing has been flat in the parcel industry. Recently, a number of increases, peaks -- you just announced your peak surcharge. It was good. We also now have David Steiner start as postmaster general at the USPS. He's supposed to come at the conference, by the way, but had a scheduling conflict. But again, he's one from the business community, did some great things at as management. I know he's sort of on the FedEx Board as well. So you would expect him to maybe lead USPS as a more rational competitor. UPS has shown a strong commitment towards improving as well. So talk us through maybe what you make of the competitive landscape, and if the pricing trends of late that have been more positive are enough for you feel good about your ability to generate a fair return.

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Let's talk about capacity. So you've been rational about capacity. I know more so with the Network 2.0, and I'm excited to talk to you about that. Peers have been as well for the most part. But a common concern out there is that capacity reductions, UPS and you are making are perhaps being backfilled by Amazon, the threat of Amazon and some new entrant carriers that we hear about such as [LaserShip] are quite significant. So maybe you can present your latest thinking there, how you get comfortable around new entrant capacity and things like that.

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Good enough. All right. So regarding the concept of recently, you talked about this prioritization of network utilization and anything that's led to some of the good results. But I wanted to offer you an opportunity to comment, maybe clarify any potential misconceptions about that. Our understanding is FedEx aims to maximize network fill while maintaining or enhancing overall profitability, right? Like we've observed this in recent quarters. I think last quarter, revenue was up 1%, and it was primarily driven by deferred services. But EBIT was up 9%. So you're seeing that benefit of filling in your network and nooks and crannies, if you will, with those deferred offerings. Does that accurately summarize your perspective on utilization prioritization? Or how would you describe it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 1:00PM, FDX.N - FedEx Corp at Deutsche Bank Transportation Conference

Question: Richa Harnain - Deutsche Bank AG - Analyst : Yes. So I was going to ask about the Amazon business, that relationship being turned back on, talk about that being higher-yielding business for you. Want to further elaborate there?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Right. Great. So maybe we can pivot there, FedEx Freight. You talked about that large -- we had some of your large public competitors in the industry report and discussed a pretty muted June offset by better July. Did you see the same dynamics? How is this business doing? And how is the addition of salespeople going, work for the spin-off?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. And then just on that note, can you just touch on your decision to delay enforcement of the NMFC updates until, I think, December of the year, right? Elaborate on the easening there.

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. All right. Now let's get into the fun stuff. I know there's energized if you talk about the stuff that's within your control, right? Network 2.0 to start. 15% or so, give or take your network now is integrated, I believe, but how is that plan progressing?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Would you be willing to share like kind of some tangible examples, biggest challenges you've come into as you execute Network 2.0 versus things that maybe went smoother than you thought? .

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. So we can talk now maybe about Tricolor. That was one of the stars. I think the last quarter, right, along with you quickly adapt, flexed capacity in response to rapidly changing demand, especially on the international side. So talk to us about what exactly this initiative entails. It took you a while to get there and like what exactly you're doing, how it's going, what's to come?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Yes. [That] should continue, right?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. So DRIVE savings. Interesting, you said it was a great success. It was. But it seems like there's still some left to do there, right? $1 billion you talked about for 2026. But that's DRIVE plus Network 2.0 after $2.2 billion last year. On DRIVE specifically, what's left to do here that you're most excited about? And if things go right, because that's surprise to the upside. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 1:00PM, FDX.N - FedEx Corp at Deutsche Bank Transportation Conference

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. So that leads well into my next question, which is on Europe. A lot of excitement there recently around momentum. We talked about customer wins. Maybe give us like a more fulsome update. Can we look forward to more median metrics maybe at the Investor Day also? Q1 next year, right, we're going to have an Investor Day, sort of your business here, profitability improvement stats or anything that allows investors to follow along with eminent progress that you've shared.

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. One quick follow-up. Just like how do you take this one to get here? Is it just -- now you feel like you've gotten this momentum on the domestic side and so you have that leverage to let them borrow your team in Europe and just yes, like --

Question: Richa Harnain - Deutsche Bank AG - Analyst : All right. Very good. Okay. So technology now. I know when you and I and Raj on the road, something that was very exciting of a topic for you all to talk about, so this concept of a FedEx Digital Twin. And so based on our time together on the road, you talked about the value unlocking this. Maybe you can elaborate for the group here some new things FedEx is doing on the technology side, how are those initiatives yielding results to the bottom line?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. All right. So I guess like putting it all together, and Raj started this transformational planning, I think back in 2022. It was built off this premise that FedEx didn't have a revenue problem as much as it had a cost problem that needed to be addressed, right? And the team did a good job addressing it. You talked about DRIVE, Tricolor and now you're doing Network 2.0. And we thought it was interesting this past quarter, FedEx's overall Express business, you had a margin that was 200 basis points better than UPS' domestic business despite years as a total apples-to-orange kind of comparison because you have the international built in there, and that's probably being held back by Europe in the most recent quarter. And I know there's some seasonality. But maybe just talk about the next phase at some of the positive changes you're making this season? What do you think margins at Express could go could look like in like medium, long-term scenario?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Again, something maybe we can look forward to for the investor --

Question: Richa Harnain - Deutsche Bank AG - Analyst : Last one, capital allocation. So you talked about you did a great job last quarter -- or sorry, last year, rather. And yes, so as a percentage of market cap, you've had some of the highest capital returns in transportation. So what are the latest priorities on cash flow, balance sheet targets and the like?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Okay. Real quick follow-up because you're an airplane guy. So I'm going to give you an opportunity on the -- you talked about the aircraft piece and how it's important that we maintain -- FedEx maintains this modern fleet. So yes, I think the fact that your CapEx has come down so much over the last 10 years is because FedEx already has one of the best fleets in the industry. So maybe talk about that more, how do you feel about the fleet today and where can it be optimized?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Nice. All right. Well, thank you so much for your time, and that great conversation. Everyone found it helpful.