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 both the quarter and year-to-date periods primarily due to a decline in Forwarding and Logistics revenue, partially offset by an increase in our other businesses.

Within our Forwarding businesses, revenue decreased $583 million for the quarter (down $1.1 billion year to date), primarily driven by the impact of the third quarter 2024 divestiture of Coyote, which contributed $539 million of revenue in the 2024 second quarter ($1.1 billion in the 2024 year-to-date period). Revenue within our other Forwarding businesses also declined by a total of $45 million during the quarter (down $36 million year to date), primarily driven by demand softness from changing trade policies and tariff uncertainty, particularly on our China-to-US trade lane, which negatively impacted both our volume and rates.

Within our Logistics businesses, revenue decreased $70 million for the quarter (down $40 million year to date). Revenue in our Mail Innovations business decreased $109 million (down $55 million year to date), driven by volume declines resulting from initiatives to improve revenue quality. The declines in Mail Innovations revenue were partially offset by $41 million of revenue increases in our healthcare logistics business for the quarter (up $29 million year to date), due to our January 2025 acquisition of Frigo-Trans and year-over-year growth in other healthcare businesses.

Revenue from our other businesses within Supply Chain Solutions increased $59 million for the quarter (up $112 million year to date) primarily driven by growth in our digital businesses, which increased $61 million for the quarter (up $109 million year to date) primarily driven by volume growth from Roadie as well as UPS Capital.

Total operating expenses and non-GAAP adjusted operating expenses within Supply Chain Solutions decreased for the quarter and year-to-date periods for the reasons described below. Non-GAAP adjusted operating expenses within our Forwarding, Logistics and other Supply Chain Solutions businesses exclude expenses related to financial systems and other projects undertaken as part of our transformation strategy as shown in the table above.

Forwarding operating expenses, and non-GAAP adjusted operating expenses, decreased $565 and $574 million, respectively, during the quarter (both decreasing $1.1 billion year to date), driven primarily by the impact of the third quarter 2024 divestiture of Coyote. Operating expenses, including non-GAAP adjusted operating expenses, in our other forwarding businesses decreased $43 million for the quarter (down $30 million year to date), primarily due to a decrease in market rates for third-party air and ocean transportation.

Logistics operating expenses and non-GAAP adjusted operating expenses decreased $28 and $16 million, respectively, for the quarter (up $107 and $159 million year to date, respectively) primarily driven by volume declines and lower purchased transportation costs in our Mail Innovations business. This was partially offset by increases across our other Logistics businesses. Year to date, expenses associated with our Mail Innovations business increased primarily driven by higher purchased transportation rates during the first quarter, resulting from the expiration of a contract with our primary vendor. These cost increases began to dissipate in the second quarter of 2025 as we started utilizing alternative vendors. We also took action to address the revenue quality in this business, and experienced improvements therein. Non-GAAP adjusted operating expenses within Logistics in the second quarter of 2024 excluded a $41 million write-down related to certain trade names.

Operating expenses and non-GAAP adjusted operating expenses in our other Supply Chain Solutions businesses increased $3 and $28 million, respectively, for the quarter (up $23 and $49 million, year to date, respectively). Within our digital businesses, operating expenses increased $39 million during the quarter and $52 million, year to date, primarily due to volume growth at Roadie. During the second quarter, non-GAAP adjusted operating expenses in our other Supply Chain Solutions businesses exclude a $20 million gain on divestiture and year to date non-GAAP adjusted operating expenses exclude a $39 million impairment charge, both related to a business within UPS Digital. Non-GAAP adjusted operating expenses in these businesses in the prior year periods exclude a $5 and $45 million expense related to a regulatory matter in the 2024 second quarter and year-to-date periods, respectively.

Transformation strategy costs reflected within Supply Chain Solutions during the quarter and year-to-date 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 during both periods. Within Fit to Serve, we incurred severance costs in both the second quarter and year-to-date periods of 2025 and 2024 as we right-size our business. Within Efficiency Reimagined, we incurred costs related to end-to-end process redesign during both periods. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP adjusted financial measures.

As a result of the factors described above, total operating profit decreased $4 million for the second quarter (down

$82 million year to date), with operating margin increasing 150 basis points to 8.8% (down 40 basis points to 5.2% year to date). On a non-GAAP adjusted basis, operating profit decreased $32 million for the second quarter (down $152 million year to date) with non-GAAP adjusted operating margin increasing 50 basis points to 8.0% (down 140 basis points to 5.8% year to date). Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above.