United Parcel Service, Inc. (NYSE:UPS) Q4 2022 Earnings Call Transcript

Carol Tome : And maybe just to dimensionalize, that a little bit more, in the fourth quarter alone in the United States productivity reduced our expense by $271 million. I mean, that’s a lot. That’s a lot. I’m really proud of the team. And just on smart package smart facility because I was just so enthralled with this project. We have of the 100 buildings that we’re in, we have 50 buildings, where the misloads are now one in 1,000, that’s six sigma perfection. So we’re really excited about rolling out to the 940 remaining buildings in the United States. And here’s the cool thing. We’re going to roll out the first part of those buildings with wearable devices. But then we got plans to move away from the devices and actually make the car smart.

And last week, I was able to load a package, this is in the laboratory. I was able to load a package onto a smart car and saw that car actually check in the package. No human being did that. So this is way cool technology and we’re excited about the productivity that that’s going to be as a result.

Brian Newman : And to Tom just from a seasonality perspective, that we have planned productivity gains year-over-year in every quarter in ’23. And so now the team will be reducing hours more than volume in the U.S. through the programs, Carol and I just alluded to TSP and the automated capacity. So it’s a balanced program.

Tom Wadewitz : Okay, great, thank you.

Operator: Our next question comes from the line of David Vernon of Bernstein. Please go ahead.

David Vernon : Hey, good morning, and thanks for the time. So if you step back from the guidance at the midpoint, your EBITDA number is down, call it 6% from 2023 levels. And obviously, we are coming into a choppy macro. Carol or Brian, can you talk about, the levers that you need to pull to kind of get reaccelerating growth? And how much of that is going to be sort of macro dependent as we think about the bridge from wherever we end up at ’23 to ’24. I’m just curious to get your perspective on what are the catalyzing agents that would reverse the trend in overall EBIT growth?

Carol Tome : Well, I think there are a number of catalyzing agents. We need to get through this choppy economic environment for sure. But if you think about where we’ve had some huge homeruns, let’s talk about our digital access program. We have seen enormous growth in this. When I started, it was less than $150 million, now over $2.3 billion in 2022 on its way to be $3 billion in 2023. And we’re growing outside of the United States, had been just a U.S. program, now we’re going outside the United States. And this is one area of investments for next year. So that’s a catalyst for growth, because we’re investing in a customer that’s underserved today. Another catalyst for growth is what we’re doing on the customer journey. As we continue to move the needle on improving the experience with us, we see every year increasing penetration in our SMBs. Brian, that’s part of the plan for next year.

Brian Newman : That’s right. So we’ll be adding about 100 basis points, Carol, from a volume mix perspective on the SMB front. So that customer experience translating into continued growth on the SMB front. And from a macro perspective, obviously built into the guide is an improvement in the back half of the year. So we need to see a bit of a pickup in Asia, and the U.S. rebounding somewhat through a backdrop perspective.