UNITED PARCEL SERVICE INC

Supply Chain Solutions

(1) Amount represents the change in currency translation compared to the prior year.

Revenue

Total revenue in Supply Chain Solutions decreased for the quarter, primarily driven by the impact of the third quarter 2024 divestiture of Coyote within our Forwarding business. These reductions were partially offset by growth in Logistics and certain of our other businesses.

Within our Forwarding businesses revenue decreased $554 million for the quarter, primarily driven by the impact of the divestiture of Coyote, which contributed $563 million of revenue in the 2024 quarter. Revenue across our other Forwarding businesses was relatively flat.

Within our Logistics businesses, revenue increased $30 million for the quarter. Revenue in our mail services business increased $55 million, driven by rate increases, partially offset by revenue decreases in our other Logistics businesses.

Revenue from our other businesses within Supply Chain Solutions increased $53 million for the quarter. This was primarily driven by growth in our digital businesses, including a $38 million increase driven by volume growth at Roadie.

Total operating expenses and non-GAAP adjusted operating expenses within Supply Chain Solutions decreased for the quarter for the reasons described below.

Forwarding operating expenses, and non-GAAP adjusted operating expenses, decreased $548 million and $547 million respectively, driven by the impact of the divestiture of Coyote in the third quarter of 2024. Expenses in our freight forwarding businesses increased for the quarter, primarily due to higher market rates charged for third-party ocean transportation. Non-GAAP adjusted operating expense in our Forwarding business excludes expense related to financial systems and other projects undertaken as part of our transformation strategy as shown in the table above.

Logistics operating expenses increased $135 million for the quarter and, on a non-GAAP adjusted basis, increased $175 million for the quarter. Operating expenses in our Mail Innovations business increased $175 million primarily driven by higher purchased transportation rates which resulted from the expiration of our contract with our primary vendor. We are evaluating additional vendors for this business. We are also addressing the revenue quality in the business. Operating expenses within our other logistics businesses were relatively flat for the quarter. Non-GAAP adjusted operating expenses within Logistics in the first quarter of 2025 exclude the impact of $7 million primarily related to projects undertaken as part of our transformation strategy as described below. Non-GAAP adjusted operating expenses within Logistics in the first quarter of 2024 included a $41 million write-down related to certain trade names and $6 million related to projects undertaken as part of our transformation strategy as described below.

Expenses in our other Supply Chain Solutions businesses increased $20 million for the quarter and, on a non-GAAP adjusted basis, increased $21 million for the quarter. Within our digital businesses, operating expenses increased $21 million primarily driven by volume growth at Roadie. In the first quarter of 2025, non-GAAP adjusted operating expense in our other Supply Chain Solutions businesses excluded $39 million related to the impairment of certain assets related to a business within UPS Digital. In the first quarter of 2024, non-GAAP adjusted operating expense in these businesses excluded a $40 million impact related to a regulatory matter.

As discussed above, non-GAAP adjusted operating expenses within Supply Chain Solutions excluded the impact of transformation strategy costs, which were $13 million for the first quarters of 2025 and 2024. Transformation strategy costs reflected within Supply Chain Solutions during these periods are related to our Fit to Serve, Transformation 2.0 and Network Reconfigurationand Efficiency Reimagined programs. Within Transformation 2.0, we incurred costs related to financial system investments in Forwarding. Within Fit to Serve, we incurred severance costs as we right-size our business. Within Efficiency Reimagined, we incurred costs related to end-to-end process redesign. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.

As a result of the factors described above, total operating profit decreased $78 million for the quarter, with operating margin decreasing 220 basis points to 1.7%. On a non-GAAP adjusted basis, operating profit decreased $120 million for the quarter with non-GAAP adjusted operating margin decreasing 320 basis points to 3.6%. Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above. The macro environment is highly uncertain due to changing trade policies and tariff uncertainty, the eventual outcomes could result in pressure in some parts of our business.