10-QPeriod: Q3 FY2021

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 4, 2021For Securities:UPS

Summary

United Parcel Service (UPS) reported strong financial results for the third quarter and the first nine months of 2021, demonstrating robust revenue growth driven by increased average revenue per piece across its segments. Despite a slight decrease in average daily package volume in the third quarter, primarily due to a shift from business-to-consumer to business-to-business activity and the lingering effects of the COVID-19 pandemic on international operations, the company's strategic focus on revenue quality and customer mix improvements significantly boosted top-line performance. Operating profit saw substantial increases, reflecting effective cost management and favorable segment contributions, particularly from the International Package and Supply Chain Solutions segments. The company successfully completed the divestiture of its UPS Freight business, which contributed positively to year-to-date results. UPS also made strategic acquisitions, including Roadie, Inc., to enhance its same-day delivery capabilities. The company maintained a strong liquidity position, ample cash from operations, and executed its capital allocation strategy, including significant share repurchases and dividend payments, indicating confidence in its ongoing financial health and future prospects.

Financial Highlights

54 data points
Beta

Revenue

$23.18B

Net Income

$2.33B

10.0% Net Margin

EPS (Diluted)

$2.65

Total Assets

$65.74B

Cash & Equivalents

$10.21B

Free Cash Flow

$2.41B

Financial Statements
Beta
Revenue$23.18B
Operating Expenses$20.29B
Operating Income$2.90B
Interest Expense$177.00M
Net Income$2.33B
EPS (Basic)$2.66
EPS (Diluted)$2.65
Shares Outstanding (Basic)875.00M
Shares Outstanding (Diluted)879.00M

Key Highlights

  • 1Revenue increased by 9.2% to $23.18 billion for the third quarter and 16.4% to $69.52 billion year-to-date, driven by strong revenue per piece growth across all segments.
  • 2Operating profit surged by 22.6% to $2.90 billion in Q3 and 16.4% to $8.92 billion year-to-date, demonstrating effective cost management and revenue quality initiatives.
  • 3Net income rose by 19.0% to $2.33 billion for the third quarter and by 108.9% to $9.80 billion year-to-date, with diluted EPS of $2.65 and $11.16 respectively.
  • 4The company divested its UPS Freight business in Q2 2021, contributing $848 million in cash proceeds and a $35 million pre-tax gain year-to-date.
  • 5Acquisition of Roadie, Inc. completed in October 2021 to bolster same-day local delivery services.
  • 6Cash flows from operating activities increased significantly to $11.76 billion year-to-date, reflecting strong operational performance and improved working capital management.
  • 7UPS maintained a healthy liquidity position with $10.6 billion in cash, cash equivalents, and marketable securities as of September 30, 2021.

Frequently Asked Questions

Revenue growth was primarily driven by increases in average revenue per piece across all segments, particularly in U.S. Domestic Package and International Package. This was due to revenue quality initiatives, customer and product mix improvements, base rate increases, and higher fuel surcharges. Despite a slight decrease in overall package volume, a shift towards business-to-business activity and growth in Small and Medium-sized Businesses (SMBs) also contributed positively.

The divestiture of UPS Freight in April 2021 resulted in cash proceeds of $848 million, which were used to reduce debt. For the nine months ended September 30, 2021, the divestiture contributed to a year-to-date gain of $35 million and reduced year-over-year operating expenses and compensation costs, impacting comparability but strengthening the focus on core package and supply chain solutions.

Operating expenses increased primarily due to higher fuel costs (jet fuel, diesel, gasoline) and increased employee benefit costs, including contributions to multiemployer plans. While employee compensation costs remained relatively flat year-over-year due to productivity gains offsetting wage increases, the company anticipates that overall costs may continue to increase in the fourth quarter due to market factors such as labor availability and cost.

UPS is focused on its 'Customer First, People Led, Innovation Driven' strategy, enhancing capabilities like speed and ease of access to services. Recent initiatives include expanding weekend delivery services, acquiring Roadie, Inc. to enhance same-day delivery, and continuing to invest in facility automation and network capabilities. The company also aims to optimize its capital structure through debt management and disciplined capital allocation to shareholders.