United Parcel Service, Inc. (UPS) Earnings Call Transcript & Summary

Good morning. My name is Matthew, and I'll be your facilitator today. I'd like to welcome everyone to the UPS Third Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. P.J. Guido, Investor Relations Officer. Sir, the floor is yours.

Good morning, and welcome to the UPS Third Quarter 2026 Earnings Call. Joining me today are Carol Tome, our CEO; Brian Dykes, our CFO; and a few additional members of our executive leadership team. Before we begin, I want to remind you that some of the comments we'll make today are forward-looking statements and address our expectations for the future performance or operating results of our company. These statements are subject to risks and uncertainties, which are described in our 2025 Form 10-K and other reports we file with or furnished to the Securities and Exchange Commission. These reports, when filed, are available on the UPS Investor Relations website and from the SEC. Unless stated otherwise, our discussion refers to adjusted results. For the third quarter of 2026, a GAAP results include a net charge of $279 million or $0.32 per diluted share, comprised of after-tax transformation strategy cost of $130 million as well as a $182 million charge associated with a goodwill impairment in Supply Chain Solutions, partially offset by a gain on sale of MD-11 assets of $33 million. A reconciliation of non-GAAP adjusted amounts to GAAP financial results is available in today's webcast materials. These materials are also available on the UPS Investor Relations website. Following our prepared remarks, we will take questions from those joining us via the teleconference. [Operator Instructions] And now I'll turn the call over to Carol.

Thank you, P.J., and good morning. I'd like to begin by celebrating some important milestones that demonstrate the strength of our global integrated network. This year, UPS celebrates 50 years in Europe, 40 years at our Cologne air hub in Germany, 35 years in Mexico, and 25 years of flying into China. These milestones represent decades of service, commitment and progress. to UPSers across these markets and around the world, thank you for delivering for our customers, strengthening our company and moving UPS forward every day. Moving to our results. The third quarter marked another quarter of strong performance that exceeded our expectations. Revenue grew across all 3 segments driving consolidated revenue to $22.9 billion, up 6.7% from last year. Consolidated operating profit was $2.1 billion. The U.S. Domestic segment delivered its second consecutive quarter of strong year-over-year operating profit growth, increasing over 14% versus the third quarter of last year. In the U.S., we are now past the inflection point on several key elements of our strategy with clear evidence in our volume, operating profit and operating margin performance. Average daily volume from SMB and enterprise customers increased 1.8% year-over-year. And for the second consecutive quarter, revenue per piece growth outpaced cost per piece growth contributing to 60 basis points of year-over-year operating margin expansion in the third quarter. In international, we returned to year-over-year operating profit growth for the first time since the 2025 U.S. trade policy changes. The momentum we saw in the second quarter across the China to U.S. and Asia to Asia trade lanes continued in the third quarter, supported by investments we've made across the region. In addition, U.S. inbound volume rebounded in September, further strengthening our third quarter performance. And in Supply Chain Solutions, both forwarding and logistics grew revenue year-over-year, driven by demand from customers and high-tech, health care, manufacturing and automotive. Taken together, these results show that our strategy is working. We're driving more premium growth, improving revenue quality and mix and creating greater operating leverage through a more efficient network. All of this is strengthening the underlying performance of our business. As many of you saw, in September, we announced a new global operating model. Under our new model, Matt Guffey leads our U.S. domestic businesses, including small package and growth enablers like the UPS store, UPS Capital, Roadie, Happy Returns and mail innovations. [Alfredo Ramos ] is responsible for international small package, global health care and our forwarding and logistics business. And Nando Cesarone drives our global network, leading global air network automation and surface transportation operations that power our integrated network. This new model enables UPS to serve customers with greater consistency, agility and scale. Under this approach, UPS is standardizing critical operational processes across geographies and while maintaining the flexibility necessary to meet the unique needs of local markets. We believe this structure will unlock new synergies across our businesses and accelerate premium growth. A good example of this alignment can be seen in the UPS store, Happy Returns and UPS capital. Approximately 10% of total U.S. small package volume originates through the UPS store network and that volume has grown by roughly 6% annually since 2024. Through Happy Returns, SMB and enterprise customers can offer consumers a convenient no box, no label returns experience. And every Happy Returns package flows through the UPS small package network. By the end of this year, Happy Returns volume is expected to have more than tripled since we acquired them in 2023. UPS Capital extends our value proposition beyond transportation. Through solutions like UPS Secure Commerce, we use data and AI to help customers reduce fraud, protect high-value shipments and make smarter, more informed supply chain decisions. Outside the U.S., we're focused on helping customers solve increasingly complex global supply chain needs while expanding our premium B2B business. On October 15, we officially opened our new air hub at Clark International Airport in the Philippines, improving transit times across more than 1,100 trade lanes and enabling next business day connectivity between key markets in Asia Pacific, India, Europe and the United States. This investment strengthens our ability to serve customers in premium global industries such as manufacturing, high tech and health care. In Europe, we recently added a 129,000 square-foot multifunctional facility to our network. Strategically located in Amsterdam, the facility brings freight forwarding, customs brokerage and health care cold chain capabilities together under roof. We designed this facility to support our high-value B2B customers. Before we turn to peak, let me highlight our third quarter performance in 2 important growth areas, health care and SMBs. First, health care revenue exceeded $3 billion for the third consecutive quarter with year-over-year growth in every segment. Second, SMBs, including platforms represented 35.1% of total U.S. volume in the third quarter, up approximately 240 basis points from last year. In the U.S., SMB average daily volume grew 3.7% year-over-year, driven by continued momentum in our digital access program, known as DAP. And global DAP revenue reached $1.4 billion. Importantly, the debt mix continued to shift toward more premium volume. For the first time, air services and ground commercial represented nearly 30% of total DAP volume in the third quarter. Turning to the holiday season. U.S. consumers remain resilient, and the outlook for holiday demand is strong. Industry forecasts for holiday online retail sales project an average increase of approximately 9% compared to last year. A little over 100 U.S. customers account for approximately 80% of our peak surge. And based on their forecast, we expect average daily volume to increase approximately 25% from the third quarter to the fourth quarter. That sequential increase is consistent with last year. However, fourth quarter U.S. average daily volume is expected to be lower year-over-year, reflecting the deliberate actions we took earlier in the year to reduce Amazon volume. As we head into peak, our network is more automated, more efficient and better positioned than ever to handle the holiday surge. We'll add variable capacity where needed. But the investments we've made in our network enable us to operate with fewer vehicle rentals and aircraft leases and nearly 70% of all packages will flow through an automated process. As we've discussed, we are moving from a scanning to a sensing network. Our RFID capabilities are increasing productivity with little to no scanning while improving package visibility and on-time delivery. By the end of the year, we expect to have delivered more than 4 billion RFID-enabled packages. Beyond being ready operationally, we're also finding new ways to make the holiday experience better for our customers. We recently launched protected delivery, which adds an extra layer of security for high-value shipments by requiring a pin before the package is released. And we're adding a little holiday spirit with special holiday themed express packaging. In short, we are ready for peak. And while on-time service is important to every day of the year, it matters even more during peak when our customers are counting on us to deliver for their customers. We've been the industry leader in on-time service during peak for the past 8 years. And with our network, our know-how and the commitment of UPSers, we're ready to make it 9. As I wrap up, let me share our updated outlook for the year. We expect the momentum we've built to continue, giving us the confidence to raise our full year outlook. For the full year 2026, we now expect consolidated revenue of approximately $92.6 billion and consolidated operating profit of approximately $8.75 billion. Brian will provide more details on our outlook in a moment. Let me close with this. We'll change takes courage. It takes courage to pivot when the path you've been on is familiar. It takes courage to make difficult choices when you know there will be pain along the way, and it takes conviction to stay the course before the results are fully visible. We've experienced all of that. But now we're seeing the strategy come to life. We're seeing the proof points in our business, and we're proving something we believed in from the beginning, better, is truly better than bigger. We still have work to do, but we've moved through an important inflection point. We know where we're going. We have momentum behind us, and I couldn't be more confident in the future we're building for UPS. Our performance over the last 2 quarters demonstrates that our premium growth strategy is working, positioning us to return to revenue, operating profit and EPS growth for the full year 2026. With momentum building, we expect continued progress ahead. So with that, thank you for listening. And now I'll turn the call over to Brian.

Thank you, Carol, and good morning, everyone. This morning, I'll cover 2 areas. Starting with our third quarter results, then I'll review our outlook for the full year, including capital allocation and our expectations for the fourth quarter. Our results in the third quarter demonstrate that our strategy is translating into stronger financial performance by growing premium volume, improving revenue quality and running a more efficient network, we are strengthening the underlying performance of the business. In the quarter, revenue growth was strong in all 3 segments, and we delivered operating profit and margin expansion in our small package businesses. In the third quarter, consolidated revenue was $22.9 billion, an increase of 6.7%, and operating profit was $2.1 billion. Consolidated operating margin was 9% and diluted earnings per share were $1.69. Our third quarter results included gains from asset sales, partially offset by related expenses. On a net basis, these items were not a significant driver of the outperformance versus our expectations. Looking at the segments. In the U.S., our strategy is delivering results. We grew premium volume, improved revenue quality and converted that growth in the higher operating profit and expanded operating margin. For the quarter, year-over-year average daily volume growth from SMB and Enterprise customers exceeded our expectations, increasing by more than 200,000 pieces per day. When looking at ground, SMB and enterprise customers increased ground ADV by 2.1% versus the third quarter of last year, and air average daily volume from SMB and enterprise customers was flat year-over-year. Looking at total ADV in the U.S., it was down 3.3% versus the third quarter of last year, reflecting the deliberate actions we took earlier in the year to reduce Amazon volume. Demand from SMB customers was strong with average daily volume up 3.7% year-over-year, with growth coming from nearly all industries, including health care. And in the quarter, SMBs represented a record of 35.1% of total U.S. volume. Our B2B customer mix is becoming more diversified with health care, high-tech, manufacturing and automotive representing a larger share of total U.S. volume. This is a deliberate shift we have been working toward. More premium volume from industries and customers that deliver better overall economics. Moving to revenue. In the third quarter, U.S. domestic generated $14.9 billion in revenue, an increase of 4.5% year-over-year, overcoming the 3.3% decline in average daily volume. Revenue per piece increased 6.1% compared to the third quarter of last year with about half the growth coming from base rates and customer mix improvements, with higher fuel rates contributing to the rest. Turning to costs. In the third quarter, total expense in U.S. domestic increased 3.9% versus the third quarter of last year, with the increase primarily coming from fuel and purchase transportation. Also in the third quarter, we wrapped up the final phase of the Driver Choice program with approximately 1,500 participants exiting the company, mostly at the end of the quarter. In the third quarter, the growth in revenue per piece was 60 basis points higher than the growth in cost per piece, continuing the positive spread between the 2 and reflecting our focus on revenue quality and productivity delivered by our network reconfiguration efforts. The U.S. Domestic segment delivered over $1 billion in operating profit, a 14.3% increase from last year. Operating margin was 7%, an increase of 60 basis points compared to the third quarter of last year. Moving to our International segment. In the third quarter, International delivered strong revenue growth and returned to year-over-year operating profit growth for the first time in 6 quarters. While total international average daily volume declined 8.7% compared to the third quarter of last year, primarily due to geopolitical tensions. Our improved financial results were driven by strong revenue quality and a favorable geographic mix. Volume trends strengthened as the quarter progressed, with the year-over-year rate of decline improving each month and September volume finishing well above July levels. Inbound U.S. volume, which represents many of our most profitable trade lanes, returned to year-over-year growth in September. And Asia to Asia export volume increased for the third consecutive quarter, up 8.4% in the third quarter compared to last year. International generated $5 billion in revenue, an increase of 7.1% year-over-year. Revenue growth was driven by a 15% year-over-year increase in revenue per piece with around half of the increase coming from fuel rates. Our fuel surcharges helped to offset higher fuel expense in the quarter and preserve operating profit. Operating profit in the International segment was $746 million, an increase of $55 million year-over-year. International operating margin in the third quarter was well above our expectations at 14.9% and slightly above the third quarter of last year. Now moving to SCS. Supply Chain Solutions delivered strong revenue growth year-over-year, driven by a focus on premium volume from high-tech, health care, manufacturing and automotive customers. Total Supply Chain Solutions revenue was $3 billion, an increase of $459 million versus last year. Forwarding revenue increased 17.5% year-over-year driven by higher rates in international air freight and ocean freight. And Ocean also grew shipments in the quarter. Logistics revenue increased 17.2% year-over-year, driven by strong growth in healthcare logistics partially offset by a decline in our Mail Innovations business. MUPS Digital, which includes Roadie and Happy Returns, delivered revenue growth of nearly 50% compared to the third quarter of 2025. In the third quarter, Supply Chain Solutions generated an operating profit of $274 million and operating margin was 9.2%. As a reminder, SES' third quarter 2025 results included a $330 million gain from a sale leaseback transaction. Lastly, looking at cash and liquidity. We Year-to-date, we've generated $6 billion in cash from operations and free cash flow of $4.2 billion, which includes onetime payments for the Driver Choice program. We ended the third quarter with $6.8 billion in cash on the balance sheet and no outstanding commercial paper. And so far this year, UPS has paid $4.1 billion in dividends. In the third quarter, we successfully issued $1.3 billion in debt to refinance maturity, and to complete a pension contribution of $450 million of UPS bonds to our pension asset portfolio. The contribution of UPS bonds to the pension further strengthened the plan's funded status and supported our pension investment strategy of reducing volatility. Moving to our 2026 financial outlook. At the beginning of the year, we laid out a plan that contemplated a meaningfully stronger second half, including a fourth quarter that targeted revenue and operating profit growth, operating margin expansion and EPS growth. Our third quarter performance exceeded our expectations and gives us greater confidence in the trajectory we established at the start of the year. As a result, we are raising our fourth quarter revenue and operating profit expectations and lifting our full year outlook. Starting with full year 2026, we now expect consolidated revenue of approximately $92.6 billion and consolidated operating profit of approximately $8.75 billion. This implies full year diluted earnings per share of approximately $7.28. And for the fourth quarter, we now expect consolidated revenue of approximately $25.7 billion, up approximately 5% year-over-year and consolidated operating profit of approximately $3.3 billion. Now let's look at our expectations for the segments in the fourth quarter. Starting with U.S. domestic. We expect revenue to be up approximately 3% year-over-year in the fourth quarter, driven by revenue per piece and premium volume growth. We expect an operating margin of approximately 10.5%. In terms of peak, the market outlook for strong holiday demand that Carol discussed, combined with the forecast we have from our largest customers, gives us confidence in a strong peak season. We expect momentum we've seen with SMB and enterprise customers to continue as seasonal volumes ramp up in line with last year. Peak volumes will move through our most automated, efficient and flexible network in history. And while we are ready for the holiday surge, what matters most is the service we deliver. We've been the industry leader in on-time service during peak for the past 8 years, and we intend to make it 9. Turning to international in the fourth quarter. We expect a similar macro environment to the third quarter and we expect the strong inbound U.S. volume we saw in September to continue. With that backdrop, we expect fourth quarter revenue in international to be up approximately 7% and operating margin of approximately 20%. And in Supply Chain Solutions, in the fourth quarter, we expect revenue to be up nearly 13% and operating margin to be approximately 12.2%. Lastly, for modeling purposes, in total, below the line in the fourth quarter, we expect approximately $190 million in expense, and we expect the tax rate to be approximately 23% in the fourth quarter. Turning to our expectations for cash in the balance sheet. For the full year 2026, we now expect free cash flow to be approximately $6.1 billion, which includes payments made for the Driver Choice program. Our free cash flow expectation is higher than we originally anticipated due to the outperformance of the business and the pension contribution we made using UPS bonds. Capital expenditures are still expected to be around $3 billion. We are still planning to pay out around $5.4 billion in dividends in 2026, subject to port approval, and we expect the tax rate for the full year to be approximately 23%. As we close out 2026, our business is performing the way we intended to perform, grow premium volume, operate a more automated integrated network and drive operating profit growth. The momentum we're building across the business positions us to deliver a strong fourth quarter and an industry-leading peak. Looking ahead to 2027, the new global operating model Carol discussed will help us move faster unlock additional efficiencies and more fully leverage the strength of the UPS network to support profitable growth over the long term. With that, operator, please open the lines for questions.

[Operator Instructions] Your first question is coming from Ari Rosa from Citigroup.

Congratulations on some strong results here. Brian, I wanted to ask you about free cash flow expectations. I love seeing the improvement in the guide on free cash flow. If we think about the Driver Choice program and take those costs out, it would imply a big step up or maybe not big, but solid step-up in free cash flow for 2027, recognizing you guys haven't given guidance yet for the year ahead. Just give some indication on kind of how you're thinking about what free cash flow could look like or what the magnitude of that step-up could look like for 2027 and just safety around the dividend or coverage of the dividend?

Sure, Ari. Thank you for the question. Yes, so we did step up free cash flow. Remember, part of that is the business performance, which a business is performing better than our initial expectations. Part of it is also the pension contribution in the form of bonds rather than cash which is good for our pension plan. It was also very good for our issuance. We had a very successful issuance in the quarter. As you think about how that rolls into next year, you're absolutely right. The Driver Choice cash requirement goes away, which will drive an improvement in free cash flow. Depending on how we fund the pension, we may then have to offset the $450 million in there. And then obviously, look, we've always talked about the fundamental driver of free cash flow is getting the domestic margin start moving in the right direction. I think we're showing the structural changes that we're putting in place are getting us there. That's helping to drive a free cash flow improvement in the second half and will help us as we go into 2027, where we expect free cash flow continue to move up and improve our dividend coverage as we grow back into the dividend payout ratio that we've talked about for a long time.

So clearly Ari, our dividend is safe and secure.

Very helpful. Can you remind us quickly what the magnitude of the Driver Choice spend is there for this year?

$4 billion this year.

Your next question is coming from Chris Wetherbee from Wells Fargo.

Maybe kind of a big picture question, Carol, you noted kind of getting through some of the big initiatives that you've been working on. And then maybe getting to a sort of better opportunity for consistent growth over the longer term. I guess if we could zoom out, I know it's a little early to talk about '27, but what do you see as the growth algorithm for UPS as we go forward? Now that the glide down is done, you're focusing on B2B, pricing is good. Kind of how do we think about all of that? And what does it mean for earnings growth over the long term?

Let's start with the addressable market. As we think about our addressable market, we actually think about it from manufacturing floor to the front door because we serve that entire supply chain as One UPS and if you then roll that up to what we think is addressable, it's about $922 billion. Now clearly, we're focused on the premium side of that addressable market. So around the world, the premium opportunity is about $535 million. And then here in the United States, if we just want to narrow it down to the premium opportunity here in the United States, it's about $150 billion. So you can see there's a lot of market for us to grow into. And the mathematical equation of what this means for our earnings is that we expect volume growth. We expect our RPP to grow faster than our cost per piece so that we have margin expansion. We expect that not only in the United States, but we expect that in our international small package business as well. Then in Supply Chain Solutions in our forwarding business, as you saw, we had good growth, really solid growth in the third quarter with our forwarding business up 17%. If you look at the drivers of that, it was really in the premium space. Health care as well as high tech. And with the explosion of data center growth here in our country, the logistics opportunities are enormous. In fact, we estimate the logistics opportunities associated with data centers alone, is $15 billion. And to bring that real for the United States. In the third quarter, our high-tech small package business grew 30% year-on-year. Now on a small base, the 30% year-on-year. So the mathematical equation is set for us to continue to drive earnings. We're not going to give guidance today. We're going to do that at the end of the fourth quarter, like we always do. But the mathematical equation, given the addressable market we have, gives us really a solid foundation to grow earnings. And I should add one more thing. We're doing it on a network that is so much more efficient than it was. And with our new global operating model, we're going to make it even more efficient.

Your next question is coming from David Vernon from Bernstein.

So Brian, I wanted to maybe dig in a little bit on the carryover from the cost programs and efficiency efforts. And Carol, I'd love to hear your thoughts here, too. But if we're looking at sort of second half margins, around 8.9%. I think that, that should be a base for 2027. I'm just wondering, as you think about the follow-through from all the cost actions you've taken, how does that set you up for incremental margins looking forward? I'm just trying to get a sense for -- I'm trying to see if you can help us put some guardrails around what the incremental profit outlook should look after all this noise for Amazon is behind us.

Yes. So Dave, so I absolutely believe that the changes that we're making are driving durable margin improvement here, these are structural, right? And I start with the volume base. In the third quarter, we -- our core volume, the volume outside of Amazon grew nearly 2%, as Carol mentioned, and I said 200,000 pieces day. That is structurally different volume than what we have been growing with over the last several years. That's going to provide a better foundational base, not just for revenue quality, but also to help us drive a better cost per piece outcome. The second piece, as you mentioned, we've completed now the network reconfiguration. We finalized the Driver Choice program in the third quarter. We've completed the building restructurings, and we've had the hours come down commensurately with the volume. So we're on track for that completion of that program. That's going to drive this structurally better margin improvement than we saw in the third quarter and gave us the confidence to improve our fourth quarter guide. We expect that to carry over. Those are structural changes. And look, and as we talked about, this kind of range of 50 to 100 basis point spread between RPP and CTP will help us continue to drive improvement in the margin as we go forward.

On the productivity side, it's a virtuous cycle here at UBS. Yes, we had a lot of Amazon specific-related activity that we have delivered. But there's more to do on the productivity side, and I'll narrow and look at just our RFID initiative. Here, as you know, we're moving from a scanning to a sensing network, which is eliminating billions of scans and driving productivity, not just inside our operations but with our drivers. We are moving, as you know, upstream to put the RFID labeling at the customer location, which is good for the customer because it expands the visibility of their chain of control. It's also good for us because it reduces the amount of confusion over miss pickups and that sort of thing. We have RFID labeling at the customer location in 315 customer locations. It's about 3 million packages a day. That's growing to 6 million packages next year. So that initiative is working very, very well. And we'll continue to look at ways to drive automation and productivity in our worldwide network.

Our next question is coming from Tom Wadewitz from UBS.

And yes, it's nice to see the traction on some of the initiatives on the volume side in general. Wanted to ask you about kind of how much visibility you have to that. So kind of specifically, SMB volume growing I think you were saying SMB and enterprise or B2B, that growing as well. So is that something that you say, okay, if we see that in a you can extend that into first half next year? Or just kind of visibility on that piece? And then I guess, when we think about like CPP versus RPP next year, do you assume that you get kind of let's say, 3% base price and then you get some favorable mix on top of that, like a point of mix on top? Just trying to think about the kind of what keeps you above CPP next year and what are the pieces?

Well, I'll start with the visibility and the growth opportunities for us. So we were very pleased with the growth that we saw in enterprise and SMB customers in the third quarter, and we expect to see that in the third quarter and into next year. Why? Well, one reason is our churn has shown dramatic improvement. Our team is doing an excellent job of keeping the volume that we have by meeting our customers where they need us to be. We're also growing into new opportunities by, first, understanding what the needs are of those industry segments and meeting those customers where they need us to be. And most importantly, I think, is that the consumer is resilient. It's really interesting to look at what's happening with the consumer spend. It's a bit of a taker for sure. If you have assets you're spending, if you don't, you're stretched. But as long as the employment rate stays fairly stable, and it appears to be fairly stable in our country, consumers are going to spend because they have assets. And that, of course, is an important part of how you grow volume is to make sure that consumers are spending. So it's the capabilities that we are investing in, the reduction in churn and a good consumer environment gives us confidence about the visibility to grow. Now in terms of the spread...

Yes, Tom, on the RPC RPP, spread, I think you're thinking about it right. Look, you'll notice that over the course of this year, the RPP level has been coming down. And we've always talked about the components of RPP, right? In the third quarter, it was 6.1% growth, about half of it was fuel. The other half is base rate and mix, right? As we wrap the Amazon declines, that mix benefit will come down, and it will normalize to something that's closer to historic levels. However, we continue to see a strong pricing environment. We announced our GRI earlier this week. That's consistent with prior years. We continue to see the ability to price for the value that we provide to our customers in these premium segments, as Carol has outlined. And so we expect to continue to get that kind of 200 to 300 basis points base rate pricing and mix benefit as we go forward. Because while we're not deciding Amazon as volume, we are still growing premium volume, which helps to drive a positive product and customer segment mix going forward. Just at a slower pace than what we've seen in the last 18 months.

Your next question is coming from Scott Group from Wolfe Research.

So I just want to make sure I'm getting a big picture message on margin, right? So if you look, U.S. margins for the last 3 years, they've been sort of right around 7.5%. It sounds like you think we're going to see margin improvement next year. I just want to understand, like, are there big opportunities for margin improvement? Like can we break out of this range and -- could we get back to -- can we ever get back to like a double-digit margin? Or should we look at Q4, you're saying U.S. margins are going to be up 30 basis points or so? Is that sort of the right magnitude of margin improvement to think about sort of going forward?

So it's Scott. So we absolutely think that we will be able to show steady improvement in margin as we move forward. What you see going from Q2 to Q3 and into Q4 is consistent margin improvement year-over-year. as we lap into next year and we get past a lot of the noise on Amazon, yes, look, this kind of 50 to 100 basis point spread in RPP and CPP is going to help us continue to drive consistent margin improvement. There are no step changes, but we will be moving up out of the range as we continue to improve the business mix and drive productivity with some of the initiatives Carol outlined.

So that's the way you should think about it is every year, improving margin every year, improving the margin. No, go from 7.5% to 10% in a year, but every year, improve the margin because we're going to continue to lean into premium, the premium opportunity is big. We're going to continue to drive productivity. So every year, margins should get better.

And I think, Scott, the level of discipline that we've created around the business on what volume it was right for our network and important for us. and the pricing associated with that volume will allow us to drive consistent margin improvement as we go through the next several years.

Your next question is coming from Ken Hoexter from Bank of America.

Great. Maybe just following up on some of the questions. Your thoughts on inflection to volumes, when do you expect them to turn positive? I guess do we still carry the negative comps of the Amazon through the first half? And should we then -- Brian, it sounds like from your last answer, you see underlying pure pricing continuing? And then I guess, I don't know if you want to impact that, it sounds like your international margins are actually accelerating, right? I think you said over 20%. So instead of gradual, that sounds like a bigger step up on the international side. So maybe some thoughts on all those.