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

Brian Newman : Thanks, Carol. Yeah, I would just follow up and say we’re putting some OpEx investments, $400 million, into the business this year. We invested in a similar capacity in fastest ground ever and SMBs, et cetera, a couple of years ago. And as I think about the SMB journey by investing in those customer experience points Carol was talking about, those investments are paying off. That’s what gives us confidence. We are seeing 40% higher SMBs today than in 2019 when we started that journey in that investment. And we’re actually — we’ve increased penetration, Carol, for the last 10 consecutive quarters. So it’s a bit of a proof point on the SMB front in terms of the investment and the payoff.

Jordan Alliger : Thank you.

Operator: Our next question will come from the line of Chris Wetherbee of Citigroup. Please go ahead.

Chris Wetherbee : I guess maybe I had a question on volume. I wanted to understand a little bit better sort of the growth outlook for some of the SMBs, the non — sort of Amazon business because it sounds like that’s going to be up. So kind of curious about sort of what gives you confidence there, how much market share you’ve been able to win sort of us around that. And then Brian, a quick point of clarification as well. I think you talked about sort of the first half, second half dynamic of profit being leading to the back half. And then again, in 1Q and 2Q, should we be using sort of similar numbers like 44 — 56 somewhere in that ballpark is a reasonable way to think about that first half as well?

Carol Tome : Maybe on the SMB question, let’s look at our Digital Access Program. It’s been a huge home run for us. Year-over-year, we saw $1 billion of growth in this program. Here’s the important part. It’s 3.5 million customers. It’s — these are very small customers who are shipping with us through the platform, and we see continued growth opportunities ahead for us. In fact, we think our DAP program will be over $3 billion in 2023.

Brian Newman : On the seasonality, yes, so you should consider a similar step-up in mix from a Q1 to Q2 perspective. From a Q1 perspective, Chris, we’ve got some Q4 trends coming out from a consumer and a macro perspective that are challenged. We’re seeing that product mix headwinds, and we’re making some of these investments in the early part of the year. So you should apply that same bathtub effect for Q1, Q2.

Chris Wetherbee : Thank you.

Ken Cook : And then Stephen, we have time for one more.

Operator: Our last question will come from the line of Brian Ossenbeck of JPMorgan. Please go ahead.

Brian Ossenbeck : Hey, good morning. Thanks for the time. Just want to come back to pensions real quick. Brian, can you talk about maybe any changes to the sensitivity? It’s a little bit different than what we thought maybe not as big of an impact to change expected returns assumption or anything along those lines? And then maybe if you can just wrap up with a bit of commentary on pricing and yield and productivity. And how all those really relate and it can trend throughout the year in an environment where you’re seeing volume decelerate. You talked about all the different sort of headwinds or uncertainties, some of which showed up in peak. So really just looking to see if you’re seeing some demand destruction out there. And if you’re able to drive these productivity gains, if the volumes don’t necessarily show up where you think they could and surprised a bit to the downside? Thank you.