UNITED PARCEL SERVICE INC

International Package

(1)Net of currency hedging; amount represents the change in currency translation compared to the prior year.

Revenue

The change in revenue was due to the following:

Comparative results were impacted by one less operating day in the first quarter of 2025. We expect overall revenue to decrease for the second quarter driven by uncertainty surrounding global trade policies and lower demand-related surcharges.

Volume

Average daily volume increased for the quarter, driven by increases in both our domestic and export products.

Domestic volume increased for the quarter driven primarily by growth within Canada as well as moderate growth across several European markets. Retail customers drove growth within Canada and increases across the European markets were largely driven by retail and professional services customers.

Export volume increased for the quarter driven primarily by growth in the intra-Europe and Asia trade lanes. The increases were slightly offset by declines in Canada to U.S. transborder trade, primarily as a result of changes in trade patterns. Improvements in the intra-Europe trade lanes were driven by volume growth from enterprise customers within the retail, healthcare and auto industries. Growth in the Asia to U.S. trade lanes was driven by increased SMB volumes primarily as a result of anticipated tariff changes.

Export premium products increased 10.4% for the quarter driven by Worldwide and Transborder Express products. Worldwide Express product volume increased as a result of accelerated U.S. inbound services in anticipation of tariff changes. Export non-premium product volumes increased 11.5%, primarily driven by Transborder Standard products from retail SMBs.

Revenue Per Piece

Total revenue per piece decreased 2.6% for the quarter primarily due to non-premium product growth outpacing premium products, decreases in demand related surcharges and unfavorable currency fluctuations. These decreases were partially offset by the impact of base rate increases. Currency had a negative impact of 190 basis points on revenue per piece. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.

Domestic revenue per piece decreased 1.4%, primarily due to unfavorable currency movements, partially offset by the impact of base and accessorial rate increases. Currency had a negative impact of 460 basis points on domestic revenue per piece.

Export revenue per piece decreased 4.4%, primarily due to non-premium product growth outpacing premium product growths and decreases in demand related surcharges, partially offset by the impact of base rate increases. Currency had a negative impact of 140 basis points on export revenue per piece.

Fuel Surcharges

The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel. The fuel surcharges for ground services originating outside the U.S. are indexed to fuel prices in the region or country where the shipment originates.

Operating expenses increased for the quarter. Pickup and delivery expenses increased $87 million, driven by increased volumes and the impact of the implementation of weekend operations within Europe. Costs of operating our integrated air and ground network increased $40 million primarily due to increased air charters and block hours as we aligned our network to meet higher volume demands. This was partially offset by lower average fuel prices and the impact of currency movements.

Our non-GAAP adjusted operating expenses exclude the impact of activities associated with our transformation strategy, which were $13 and $24 million within the International Package segment in the first quarters of 2025 and 2024, respectively. Transformation strategy costs reflected within the International Package segment during both periods were related to our Fit to Serve program. The first quarter of 2025 also includes transformation strategy costs related to our Efficiency Reimagined program. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

As a result of the factors described above, operating profit decreased $15 million for the quarter, with operating margin decreasing 70 basis points to 14.7%. Non-GAAP adjusted operating profit decreased $28 million and non-GAAP adjusted operating margin decreased 100 basis points to 15.0%.

During the quarter, we completed the liquidations of all operations in Russia. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.