FedEx Corporation (FDX) Earnings Call Transcript & Summary

Hello, everyone. I'm Richa Harnain, DB's lead transportation analyst, and welcome to day 2 of our Transportation Conference. So mainly one-on-ones and small group meetings today, but we have one special fireside, and that's with John Dietrich, CFO of FedEx, a leader in transportation and logistics. So we also have with us today Matt DeBerry and Stephen Hughes from the Investor Relations team. So maybe to start, I'll kick it off to Stephen to make some introductory comments, and then we'll get right into it.

Great.

Thank you, Richa. Certain statements may be considered forward-looking as defined in the Private Securities Litigation Reform Act and subject to factors that could cause actual results to differ materially from those expressed or implied. For additional information, please refer to our press releases and filings with the SEC.

Great. Well, thank you for that, Stephen. Richa, thanks so much for having us here. We're delighted to be here. I thought I'd open with some remarks before we get into the Q&A, just kind of give you some high-level overview, if that's okay.

Yes, lets do it.

And as I think we all know, we continue to be in an uncertain market environment. That said, from a FedEx standpoint, there's a lot of exciting things happening, and we're focused on executing on those things within our control. And when you look at the global marketplace, we're right in the thick of all of it with 3 million customers carrying roughly $2 trillion of goods every year. We're closely involved and also closely watch everything that's happening in the marketplace. We also happen to be in the midst of a massive transformation, and I think there's a lot of idiosyncratic benefits we have in the competitive space in which we operate, which we'll talk more about throughout the morning here, including Network 2.0, that's all part of One FedEx, our Tricolor initiatives and other strategic initiatives that we've been working on. As I reflect on the last couple of years actually, but FY '25, particularly, we're pleased with the results that we've delivered in this environment. We had 2 years of earnings growth. In FY '25 was the second year of earnings growth despite some headwinds, the market environment, of course, but also the termination of the U.S. Postal Service contract that we experienced. And when you factor in 2 fewer operating days, we feel good about that growth. And then, oh, by the way, throw the tariff environment and the market uncertainty into the equation to have that growth in that environment was pleasing to us, but there's still a lot more to go. DRIVE was a success. We'll talk more about DRIVE and our journey in DRIVE going forward. But we set out on a goal of $4 billion of DRIVE cost, structural cost takeouts and delivered $1.8 billion of that in FY '24, and we said we're going to get $2.2 billion of that in FY '25, and we delivered on that. So we're pleased with that. We advanced Network 2.0, and we'll talk more about that. That's going to continue to yield results as we go forward. From a capital standpoint, I'm also pleased that we delivered significant value back to our shareholders. The total when you take our share buybacks and dividends, $4.3 billion of returns, all in an environment that's as challenged as we talked about. So being able to deliver all that in FY '25 was satisfying. That said, we don't rest on our laurels. We still have a lot to go. We've set a marker out for FY '26 of an additional $1 billion, largely made up of DRIVE savings and some Network 2.0. We have as well as that our freight spin, which we'll talk about, which is going to be a significant focus area of ours as we go forward here. And then all the other strategic initiatives we talked about Network 2.0 being a primary one.

Yes. All right. Yes, a lot of exciting things happening at 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 our business is 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.

So I'll start with the B2B environment. We've seen the softness continuing. If you look at the ISM PMI index has been below 50 for roughly 31 of the last 33 months. So that B2B market has been somewhat soft and is continuing. Conversely, on the B2C market, that's been stronger. We saw strength, particularly in June and the first part of July, but that's starting to soften a little bit as well as the latter part of July and August. On the international front, there's been the impact of the tariffs for sure. As we said, we're facing for Q1 about $170 million of headwinds from the tariffs, largely the result out of China. So it's been a challenged environment, but again, one in which we continue to focus on those things in our control to deliver results. On the international export front, again, we're starting to feel the impacts of that. But we're monitoring that very closely.

Okay. Okay. So a lot there that I'm going to come back to, 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 appointed CFO, our analysis shows that FedEx outperformed the broader transport landscape on earnings revisions in 5 of the past 7 quarters. So your team has been doing a better job than average and always doing what you say you're going to do. So again, good job there. But just now to the question just on the outlook for Q1, a 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 potentially.

Starting to soften in the back half of July, yes.

Yes. So any updates to your view on Q1? How are you tracking there?

So I'll start by saying we continue to operate in an uncertain environment. But I think you hit it on the head what we talked about. The B2B softness has continued. We haven't seen any change to that. On the B2C lanes, we have, as I said, we saw strength in through to about the mid-July time period, but that's starting to soften. So we're taking a close look at what we're going to see in August and for the remainder of August and look forward to keeping you posted on that as we go forward.

Okay. But you -- in the domestic market, 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 trends then, you're tracking to like the high end of the guide. So just in light of what's happening 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 B2C side softening, but maybe talk through that a little more?

Yes, I'm not really going to talk about where we expect to fit within the guide. But what I can say is with regard to the B2C volumes, again, we saw strength in the first part of the quarter, I guess, the first half of the quarter. And as we look forward into August, we're going to keep a close watch on that and look forward to keeping you posted when we deliver our earnings in September.

All right. Fair enough. So maybe we can switch gears and talk about de minimis. The exceptions soon to be removed beyond China to Hong Kong. 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 you for this?

Right. So you hit it correctly. Public data reflects that about 75% of de minimis volumes come out of China. And I think that's a nice proxy for our business as well. And I think it's reasonable to expect once it applies to the rest of the world, we will feel some impact of that. What I can say, though, is I think we are state-of-the-art in terms of a leader in how we're helping our customers manage this environment to minimize the impact of that, leveraging our global network, our clearance capabilities and our technology. So we feel really good about where that is. But I think it's reasonable to expect there to be some additional pressure beyond just the 75% reflected from the China volumes.

So maybe we can switch gears and talk about the competitive backdrop. Pricing has been a bit of a bright spot in the parcel industry recently, a number of increases. You just announced your peak surcharge that was good. We also now have David Steiner started Post Master General at UPS. He was supposed to come to the conference, by the way, but had a schedule conflict. But yes, he's one from the business community, did some great things at Waste Management. I know he served on the FedEx Board as well. So you would expect him to maybe lead for USPS as a more rational competitor. UPS has shown a strong commitment towards improving his revenue quality 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 to feel good about your ability to generate a fair return?

Sure. So I'll first start with David. I'm quite sure he's very busy now. I ran into him at a social event and he was describing the significance of the role in the U.S. Postal Service operation, which is no surprise. And I think it's good for our nation that someone like David with his great experience and business acumen will be serving at the Postal Service. So I'll start there. From a peak season standpoint and a pricing -- competitive standpoint, you mentioned our peak season surcharge that will compensate us for the additional cost and work in managing our peak volumes. We also have recently and it's reflected in our guidance, there are some fuel table increases as well as some adjustments. So I think it's fair to say it's still a competitive and rational pricing environment that reflects the work that we're doing in the marketplace. Still competitive, still rational. But again, we've been able to pass along some increases along the way. With regard to the Postal Service, I'll just say one of the things from a competitive standpoint, I think there could be some structural uplift in the pricing environment if they are not subsidized by our taxpayers. It's one of the things, particularly in the parcel business, one of the things we've said consistently, the Postal Service operates at a significant loss and a lot of that loss comes from moving parcels. So to not have that further subsidized by the taxpayer, we think would be favorable to the competitive pricing environment.

Okay. All right. Let's talk about capacity. So you've been rational about capacity. I know more so with the Network 2.0, and we're excited -- 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 on new entrant capacity and things like that.

Well, I'll start by saying we always pay attention when any new capacity comes into the marketplace. But I think it's also important to note the differentiation between what we do and what others are doing. And I'll use Amazon as an example. I mean they're a very good company, no doubt about it. But effectively, they're a retailer that delivers. And from our standpoint, FedEx has built a network over many, many years that is an end-to-end logistics provider. And so that's an important distinction. And I'll use as an example in our ground service on balance, roughly 30 -- or excuse me, 70% of our ground volumes travel 300 miles or more and 30% travel 600 miles or more. I think those numbers are pretty close.

Yes. So half would be from origin the destination for 600 miles.

That's right. And by comparison, for example, Amazon is a retailer who delivers, they're in proximity is about 100 miles, right? So that's a significant difference. So we continue to leverage our strengths. We continue to leverage our global network and deliver our quality service for our customers. And I'll get back to the pricing environment for a moment. I think it's another differentiator for us. We continue to get a yield premium for the great service that we offer, and I think we've earned that. And we'll focus on continuing to leverage our capabilities there.

Okay. Good. All right. So regarding the concept of -- recently, you talked about this prioritization of network utilization, and I think 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 selling 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?

Yes. No, I think that's a fair assessment. That said, our focus is always on revenue quality. And the nooks and crannies are important to fill in a large network like we operate, that's important. But it's also important to focus on the higher-yielding volumes as well. And I think the Amazon volumes is a good example, heavier, more dense, larger packages. That's one of our strengths in being able to carry that and it generally comes with higher yields as well. So from our standpoint, yes, we want to fill the network. Yes, we want to focus on the B2B, the higher yielding. But while that remains soft, it's important to take advantage of the highest yielding revenue quality in the B2C because not all the B2C is created equal, and we're focused on that, which is the highest yielding.

Yes. So I was going to ask about the Amazon business, that relationship being turned back on. You talked about that being higher-yielding business for you. Do you want to further elaborate there?

Yes. No, that's exactly what we just described. It's generally some of the higher-yielding, larger, heavier packages that we can do, frankly, better than anybody and make money doing it. So we look forward to ramping that up.

Great. So maybe we can pivot there to 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 business -- how is this business doing? And how is the addition of salespeople going upward for the spin-off?

Yes. So yes, the LTL business is performing slightly lower than we expected. And that I think it's probably fair to say in line with the industry or what the industry is experiencing. It's important to remember that 90% of our freight volumes are related to B2B. So it feels the effects of when the B2B business is soft. So I would say that we're very well positioned for when the market recovers for sure. I talked about the freight spin in my introductory remarks. We're moving forward, making a lot of progress there, getting the executive team together. We made some public announcements of the CEO and the Chairman of the Board. We have a CIO, and we're filling all the rest of the management spots. So that all -- that work is progressing and look forward to keeping you all updated. We do plan to effectuate the spin in June of '26, as we talked about. That hasn't changed. So look forward to keeping you posted on that.

Okay. And then just on that note, can you just touch on your decision to delay enforcement on the NMFC updates until, I think, December of this year. Yes, elaborate on the reasoning there?

Yes, that was really kind of a customer-friendly gesture on our part to be able to -- we receive feedback that our customers were looking for a little bit extra time. We certainly subscribe to and support the more simplified density-based classifications, of course, and any customer who can get on board sooner. But based on feedback we received and the willingness to accommodate our customers, that was really what went into that decision.

Okay. All right. Now let's get into the fun stuff. I know it was energized you just talk about the stuff that's within your control, right? Network 2.0 to start. 15% or so, give or take, of your network now is integrated, I believe. But how is that plan progressing?

Yes. So Network 2.0 is progressing. You're spot on. We've got 15%, roughly 15% of our ADVs is being handled now by Network 2.0 stations. We closed about 100 stations and reconfigured about 290 stations as part of this. Canada is effectively completed and now we're working on the lower 50. So yes, the work is progressing. It's really important work. And again, I think as we look towards Investor Day in Q1 of next year, we look forward to giving more comprehensive briefing on that.

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?

Yes. The way I like to break it down is really 3 major categories, right? You've got your people, facilities and technology. And any time people are involved, of course, it's going to be behavioral change and change that needs to be managed. So I think it's fair to say that's probably the more sensitive item of the big 3 on my radar. I think you got to treat our people fairly throughout this and manage that, all while making sure we're not at all adversely impacting our service. And I think from that standpoint, it's going pretty well. On the facility side, we keep learning more and more every facility we alter and make into a Network 2.0 facility. We have a team of people dedicating significant resources to doing kind of debriefs and downloads, what went well, what did not go so well. And of course, the technology is an important piece of it, too. Route efficiency is critically important in a Network 2.0 environment. And as you may recall, we recently purchased a company which we had done business with for many years called RouteSmart. We had done business with them for many years, which was largely a ground route planning tool that we think effectively works in a Network 2.0 environment. So we've adopted that as our technology going forward, among other technologies. And as you'd imagine, it's a pretty comprehensive list of technologies. But I'd say people on the forefront is top of mind. And using as an example, behavioral change, our couriers who are used to day definite may have some time-definite requirements on them. And so working together with them on how they can best manage and handle our priority products most efficiently and there's opportunities for them to make more money, too. We've been reconciling our compensation programs for our contractors and our couriers and so forth, again, to have the most positive outcome and deliver for our customers.

Okay. So we can talk now maybe about Tricolor. That was one of the stars, I think, of last quarter, right, allowing you to quickly adapt, flex capacity in response to rapidly changing demand, especially on the international side. So talk to us about what exactly this initiative entails. It took me a while to get there on like what exactly you're doing, how it's going, what's left to come?

Sure. And you touched on one piece of it. The Tricolor initiative really allows us the network flexibility to adapt to a changing demand environment, but also to point of phrase, kind of put horses to courses in terms of our assets, right? And with regard to the flexibility, for example, with the decline in volumes out of Asia, we were able to bring our Asia to U.S. flights down by roughly 25% during the kind of the impact of the tariffs and redeploy those assets to other markets where we didn't see demand drop and/or saw demand improve. And our Tricolor really, we call it Tricolor for 3 colors, Purple, Orange and White. And the Purple is really designed to utilize our assets, our aircraft for that, which it was designed to do for speed of the priority products and to use the aircraft and our hubs most efficiently to maximize our profits on our most highest yielding business. So that's the purple piece of it. And then you have the Orange network that's designed to take advantage of a market. We really haven't tapped as much as we could on the air freight market, the heavy air freight market and to utilize the extra time we have with our Orange, also our aircraft, utilize the extra time we have to maximize density in those aircraft on the heavy freight market, but not bring that freight into the hub to burden hubs like Memphis, for example, but to find alternate points to distribute the airfreight into our expansive ground network. So it's really a service offering that's unparalleled that we can do in-house that, for example, the freight forwarding community needs to contract multiple services to accommodate what we believe we'll be able to do with our Orange network. And then the last one is the White. And again, built in some opportunity with the White network, which is really belly capacity of commercial carriers that you gauge your demand level, and this is one where we can get at a lower cost. It brings our cost to serve down using the belly networks for some of the higher volume, lower-yielding products. And that you can flex based on your forecasted demand on how much belly capacity and not be burdened by the cost of the asset. So we're excited about that. I talked about the Orange network on the freight. You mentioned one of the shining stars, contributed an additional $200 million of operating income for us in the fourth quarter. So we feel good about that trajectory and still a lot of markets to tap into the Orange network.

[indiscernible] should continue, right?

Yes.

Okay. So DRIVE savings. It's 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+ 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, could that surprise to the upside?

So DRIVE, I don't -- it's worth repeating, we feel really good about the $4 billion, the $1.8 billion in FY '24 and the $2.2 billion in FY '25. And what that did, in addition to achieving our results, it also instilled in the organization a mindset that, hey, this works. We can do this. And so we set our next target, as you said, at the $1 billion. The way we view DRIVE, the way of doing business, it's kind of a, from our perspective, a journey, not a destination. And so a lot of opportunities in some of the things we've already done, route planning, there's some back-office opportunities we have. Europe will be a big focus for us on DRIVE. We're pleased to have delivered the $600 million we set out for in Europe, but there's more to be done there.

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

Sure. So we do look forward to Investor Day to elaborating further. What I can say is Europe is a primary focus and an area where we have more runway of opportunity. We feel good about the progress we've made. Our service levels have improved, which has allowed us to gain market share. This is another area that I think can benefit from further back office restructuring, if you will. And we talked about a number of $150 million eventually. It takes sometimes in Europe a little bit longer to adjust your back-office structure under the European rules. But that $150 million, we expect by FY '27. Route planning, package efficiency, condensing our stations, in-station efficiencies, all these things are being looked at and implemented. We also are focused on more ground capabilities. In fact, you may have heard us say we've redeployed some of our U.S.-based ground expertise and redeployed them to Europe. I think we're second to none in what we do here in the U.S. So we want to leverage that expertise and bring it to Europe. So those are some of the things that are in play in Europe and recognizing that from a competitive standpoint, our competitive juices are flowing here. We want to do better in Europe.

Okay. One quick follow-up. Just like how did it take this long 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...

So you know, I wasn't here during that period, but what I can say from my perspective, looking back in time, there were a number of things. I think as I reflect on it, we had two major traumas to Europe. We had the cyber event and also a significant damage to one of our 4 facilities in Europe. I also think as you look back, there was, from my perspective, such a customer focus to not change and disrupt that at some point, it was harming us more than helping us in terms of bringing the networks together. So sometimes change is challenging. And when you're bringing two organizations together like we did in Europe with PMT, there were challenges and hindsight is always 2020, but what I can say is we're excited about what lies ahead.

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 unlock from 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?

Yes. Yes. So this is something that we're passionate about. Our CEO is very passionate about this and really two main categories from my perspective. One is how can we operate more efficiently and leverage technology to do even better than we do today. And SenseAware is one feature. FedEx Surround is another feature where we're leveraging technology to not only create a better value proposition for our customers, but also to be able to get further yield and get paid for that technological investment. The other piece of this, too, is when you consider the significant amount of data we gather on a daily basis, it's extraordinary. And just to reflect for a moment, we had a memorial service for our founder who passed away just earlier this week and there was a little segment that was featured back from the mid-'90s that talked about FedEx as a technology and an information company, all the information we gather. So dating back to even the mid-'90s, we're focused on leveraging technology and the information. And now in this current environment, we're just looking to take it to the next level. How can we leverage AI and how can we leverage technology not only to help our operations, but how can we monetize and unlock the value of the significant data that we collect on a daily basis. And we just talked about the 3 million customers, $2 trillion worth of goods, but that translates into 17 million packages a day. And who's shipping? Where are they shipping to? Why are they -- there's just all kinds of data that we have available to us that we're looking to leverage.

Okay. All right. So I guess like putting it all together, when Raj started this transformational plan, I think it was 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 yours 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 of some of the positive changes you're making season. What do you think Blue Sky margins at Express could go and could look like in like a medium, long-term scenario?

Yes. So what I can say is margin expansion is a significant focus of ours, right? It's certainly a significant focus of mine. And I hope you find it's reflective in a lot of the actions we've taken. We talked about some of the network efficiencies of Network 2.0, DRIVE, Tricolor, all that is focused on margin expansion. Our CapEx program and the successes we've had in bringing our CapEx down as well, that's all focused on margin expansion. I'm not going to give any specific numbers other than to say we want to be best-in-class. We want to be the highest margin, most profitable company in our space.

Again, something that we can look forward to for the investor.

We'll be talking more about that at Investor Day.

Yes. Last one, capital allocation. Though you talked about you did a great job last quarter -- 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?

Yes, we're going to continue to invest in the business. As we talked about Network 2.0, roughly $700 million of our CapEx budget for next year is attributable to facilities, redesign and/or Network 2.0 new facilities. From an aircraft standpoint, we set out a target to bring our CapEx down from roughly run rate north of $2 billion a year. Our target was to be at $1 billion roughly by FY '26 and for the subsequent years. We're on track to achieve that. So I think that's a shift in how the company has managed its assets. That's not to say we're not going to order new airplanes at some point in the future. We'll need to keep a modern efficient fleet. But we brought our CapEx down considerably. And you tie that in, as you said, I think our CapEx in FY '25 was the lowest it had been in 10 years or since the company was -- the FedEx Corporation was founded. So a lot of focus on that and bringing our CapEx down. And then finally, returning to shareholders, right? We're looking to return capital to shareholders kind of in line with and parity with our free cash flow.

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 meaning that already has one of the best fleets in the industry. So -- can we talk about that more? How you feel about the fleet today? And where can it be optimized?

Yes. Thank you for that. The tension that the aircraft investment received in prior years, I understand. But the 777 is the best airplane out there for what we do. And the company, I think, was very bold and had the foresight to invest in as many as we did. Now I think we're at a point where we were able to take advantage of that investment and kind of harvest those investments. Of course, we'll need to look to the future for the ultimate retirement of our MD-11s. Those are getting older and more expensive to operate. So we'll be doing that. We'll be looking at our ground -- excuse me, our domestic fleet as well. I think there's opportunity to further compress the size of our fleet when we look at our 757s and our A300s that we operate here domestically. We've done some of that already. I think we've kind of retired roughly 29, 30 airplanes in that neighborhood over the last 2 years, maybe even more. And I'm focused on that as well. That said, as new equipment opportunities come up, we're going to be closely scrutinizing it, don't necessarily always have to buy new. Although those give great returns, we have a strong balance sheet, so we get them for a reasonable price. We have buying power at FedEx, as you'd expect, one of the largest fleets in the world. So we take advantage of that, but look forward to keeping you posted on the fleet expansion and/or contraction as we go forward.

All right. Well, thank you so much for your time and that great conversation. Everyone found it helpful.

Great. Thank you, Richa. Appreciate it. Thank you all.

Thanks.