Good day, everyone, and welcome to the FedEx Corporation's Third Quarter Fiscal Year 2020 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn things over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good afternoon and welcome to FedEx Corporation's third quarter earnings conference call. The third quarter Form 10-Q, earnings release and stat book are on our website at fedex.com. This call is being streamed from our website where the replay will be available for about one year. Joining us on the call today are members of the media. During our question-and-answer session, callers will be limited to one question in order to allow us to accommodate all those who would like to participate. I want to remind all listeners that FedEx Corporation desires to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call, such as projections regarding future performance, may be considered forward-looking statements within the meaning of the act. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. Please refer to the Investor Relations portion of our website at fedex.com for reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman; Raj Subramaniam, President and COO; Alan Graf, Executive Vice President and CFO; Mark Allen, Executive VP, General Counsel and Secretary; Rob Carter, Executive Vice President, FedEx Information Services, and CIO; and Brie Carere, Executive Vice President and Chief Marketing and Communications Officer. And now Fred Smith will share his views on the quarter.

Thanks for participating on this call. As we announced last June, FY '20 would be a year of challenge and change. And beginning in early January, the coronavirus entered the picture for FedEx. FedEx addressed this issue decisively with our team members' safety as our number one priority, and our extensive planning and execution. Let me thank and praise profusely all those at FedEx who have kept our system operating to the great benefit of our customers. FedEx is proud to have played a significant role in supplying medical supplies, both donated and commercial, to and within China in concert with China Post and globally. We continue to work with relief organizations worldwide. With the curtailment of passenger flights across the Atlantic, we will provide the lift required to keep vital commerce moving. As was the case in Asia, our FedEx team members in Europe and the Americas are dealing with this crisis competently and with great dedication. Again, their safety is our first consideration. Regarding broader issues, we remain very confident and focused on these strategic issues, as previously announced: improving FedEx Express margins and completing TNT integration; becoming the most successful North American package delivery company, particularly for e-commerce shipments; and completing the retirement and replacement of 159 very old and inefficient aircraft by the fourth quarter FY '22 after which we will be able to significantly lower go forward CapEx while still funding profitable growth across the enterprise. We also continue to work on several entrepreneurial initiatives such as the FedEx SameDay Bot Roxo, sensor based shipping and new digital services which we think have great potential. Let me now ask Brie, Raj and Alan to provide their comments, after which we will take your questions. Brie?

Thank you, Fred. Good afternoon, everyone. I would normally begin my remarks with our economic outlook. However, given the uncertainty in the current environment, we have temporarily withdrawn our economic forecast. Rather, I will provide an update on our commercial response to the coronavirus. Then I will discuss how we are continuing to evolve our commercial strategy to adapt to a changing marketplace and deliver innovative solutions for our customers. The coronavirus and the efforts to contain it represent an unprecedented challenge that we are evaluating and addressing daily. As the coronavirus broke in China, we implemented a global response plan and began managing through this crisis with the strength of our global network and unparalleled logistics expertise. We are uniquely positioned to lead in both the relief and the recovery efforts. We have been on the front lines of the relief efforts, prioritizing the handling of medical and humanitarian supplies for our customers and non-profits, while also supporting our existing customers. We are protecting our customers' base volumes to the greatest extent possible, demonstrating our continued business partnership with our customers. This is especially important to the millions of small businesses who depend on us. We will then manage incremental demand and new customers. In February, we managed the influx of shipment requests to China amid limited capacity by implementing a temporary peak surcharge for U.S. outbound freight shipments and adjusting our transit commitments to China to maximize our capacity utilization. We have also dynamically adjusted spot prices to and from China. Total air cargo capacity reduction to and from Mainland China from early February to early March is estimated at 40% year-over-year. Wide-body belly capacity contributed to 82% of this decline. In China, we have seen a rebound week over week since the week of March 3. With…

Thank you, Brie, and good afternoon. Our global team has been working tirelessly to mitigate the effects of the coronavirus on our business and assist in relief efforts. We are first and foremost focused on safety in support of more than 475,000 global team members and our customers who need our assistance. FedEx is one of the few companies in the world that has the network and capabilities to keep commerce and aid moving during this time. We are keenly aware of this fact and the role we play. And we view it as our duty and responsibility to continue supporting our customers and communities in a safe and effective manner. We are laser focused on preparation, mitigation and relief response. We have countless remarkable examples of ways we are working with customers to combat the virus on multiple fronts, both in the US and worldwide. In addition to our extensive relief efforts in China over the last few months, we are providing support within the United States, including the delivery of test kits, masks, gloves, and personal protective equipment to hospitals, labs, testing centers and homes. As part of a public-private partnership with many of our healthcare customers, we are working to rapidly deploy medical supplies to labs and clinics nationwide. For example, over the weekend, we worked with Roche Diagnostics to deliver critical products to designated testing labs across the United States. This is just one of many Herculean efforts under way. Time is of the essence when it comes to getting test kits and medical supplies to healthcare providers who flatten this curve, contain the virus and save lives. And our team members are working around the clock to respond to this global pandemic. We're keeping their safety at the forefront of our operations and have suspended…

Thank you very much, Raj, and good afternoon, everyone. Our third quarter operating results declined due to a number of factors, including weak global economic conditions, including the impact of the coronavirus pandemic, higher self-insurance accruals, an unfavorable variable compensation comparison, increased FedEx Ground costs from expanded service offerings, the loss of the Amazon business, a continuing mix shift to lower-yielding services and a more competitive pricing environment. Prior to the outbreak of the coronavirus, commercial volumes and revenues were somewhat underperforming our December expectations. The coronavirus pandemic magnified the global economic weakness. A reversal of our corporate annual incentive compensation accrual in the third quarter of last year drove a negative year-over-year comparison of approximately $115 million. The variable compensation comparisons is expected to be a modest benefit in the fourth quarter. Higher self-insurance accruals negatively impact Ground margins by approximately 180 basis points. The combination of headwinds of the expansion to six and seven-day delivery and the loss of the Amazon volume negatively impact Ground margins by approximately 190 basis points. These factors were partially offset by residential delivery volume growth at FedEx Ground, an approximately $100 million benefit from additional operating week day, an 11% increase in revenue per hundredweight at FedEx Freight which helped drive their best third quarter operating income ever, the shifting of Cyber Week into December and the benefits of cost containment activities, which has lowered our year-to-date FedEx Services expenses allocated to our transportation segments through intercompany charges. Our third quarter effective tax rate increased to 25% versus 20.6% last year, primarily because last year's net income included a tax benefit in the recognition of certain loss carry-forwards, which was partially offset by tax expense attributable to the enactment of a lower tax rate in the Netherlands. We are suspending our fiscal…

[Operator Instructions] We'll hear first today from Ken Hoexter with Bank of America.

I don't know if this is for Raj or Alan. I guess I'll just leave it a general question. But as you look forward on your canceled outlook, what worries you most here? Is it the scale of the recession? Maybe you can give some insight into what made you cancel the outlook. Is it kind of the rates - the increase in air rate not offsetting the decline in demand and the scale of that demand decline? Maybe just give some parameters on it. Thanks.

Ken, this is Raj. I think if you think - the last couple of weeks, we have seen, as I said earlier, an increased demand from Asia. We've seen strong demand for FedEx Ground here in the US and especially home delivery and even the commercial volumes have been quite stable. And we - what we do not know now is how this pandemic evolves and what happens to demand. For instance, we do not know how Europe demand is going to come through here as a lot of their manufacturing is starting to shut down there. So there are so many unknowns at this point. And as Alan said, the first two weeks of March have been good. But there is no way for us to project forward what the next a few weeks hold for us.

I think, as you probably heard from a lot of people out there, Ken, if it's a V-shape it's one thing, if it's a U-shape, it's something else completely. We are really managing this business almost on a day-to-day basis. We certainly think we know what's going to happen in the next week. But I have to tell you every 24 hours something new happens. Europe had been doing well. Now it seems that Europe and UK are starting to shut down a little bit more and the demand is probably going to be less than I would have told you it was three days ago. We can't tell you about Asia is the same thing, is this a bubble or is this going to continue. I do know that we have great plans in shape from the cost side to go either way and that's the best we can tell you right now because it is just so uncertain out there.

We'll move next to David Ross with Stifel.

Just a question on the transition of SmartPost bringing in-house to Ground. Given everything that's going on now, are you slowing the migration away from the postal service or speeding it up? And then once it's all within the Ground segment, what happens to the SmartPost product?

David, I think we are continuing the process of moving SmartPost into FedEx Ground as we have previously discussed and this was a purely an economic decision. That's all it was. And the reason we're doing it is with a few reasons. One is of course density. Matching stops and adjacency drives significant stop efficiencies for us. And then second is our enhanced technology. With our Dynamic Route Optimization, it maximizes productivity opportunities in route planning. So we've put that together and we are continuing at pace and we are roughly halfway there and we'll continue to keep moving forward for the rest of the calendar year. In terms of the product, I'll have Brie answer that question.

Yes, it's a great question. We continue to believe that we need two distinct products. We will have our home delivery product as well as what is currently the SmartPost product. It will be rebranded in the future. We will give sub-pound volume to the post office as that makes sense. But we believe we need two separate products because the slower economy product we will flex that transit as required and we will also flex that transit for peak. We really do you think there are two distinct markets that we can grow into with this portfolio.

And from JPMorgan we'll hear next from Brian Ossenbeck.

I just wanted - Alan, if you could ask - if you could give a little bit more detail rather on the cost initiatives. It sounds like you're doing some things we've heard of before, retiring the fleet, doing TNT, doing the Ground to Express. But what else is on the radar realizing it's uncertain at this point? Can you commit to anything else given the outlook has been pulled and there's a lot of moving parts out there? Thank you.

Well, I do want to emphasize, Brian, that and also to the last question, as we continue to grow Ground and grow its densities, we are lowering those costs at a rapid clip and that is a big part of what's going to I think benefit Ground greatly as we look at - look going forward. That's not a Q4 comment. That's just where we need to be strategically. The same thing with the amount of flat hours that we've taken out right now as we continue to right-size the intercontinental air network at Express. Those two are the big giant buckets. But everywhere else with technology and productivity, we - if we can - as we continue to grow, we think that we will be taking out a lot of additional costs just from efficiencies. We've frozen and reduced our overhead. I have a number of scenarios, good and not so good, where we will know what steps to take as we go through this. And as I've said, this is a day-to-day and week-to-week look right now and we're managing as we go. And I'm confident that we'll be successful in doing that short of some really bad outcome that I don't know that anybody is projecting at this point.

We'll move next to UBS's Tom Wadewitz.

And I want to say congratulations, Alan, on your announced retirement. I have covered the Company a long time and you've always been the CFO. It's been great to work with you over the years. Congratulations to Mike as well. The - let's see, wanted to ask you on the Express B2C shipments that are going to be delivered in Ground. Maybe if you could offer some thoughts on kind of time frame for how long it takes to roll it out. And how do we think about the magnitude of cost savings? It seems it could be large, but it also might require reengineering of the pickup and delivery routes in Express to realize the cost savings. I wondered if you could offer some thoughts on that. Thank you.

Tom, this is Raj. So yes, we have started this process in March, as I said before, and the rollout is fully under way. We will be in the rest of the country by in the next 12 months and I already talked about the markets that will be in April. So it's a fast-moving program and it's - as we - as the market grown for B2C there's an opportunity to rationalize the last mile optimization, specifically on the residential side. At this point we're not going to be able to tell you the quantification of the benefits and there is a lot more to come here. And for good reason, I don't want to also talk about what comes next in this regard.

There are, Tom, thank you for those kind remarks. I appreciate it. Mike is going to be - doing a great job. You all are in good hands with him. A couple of things. Express is going to grow and it's going to be delivering items that require aviation and are going long distance that are time-sensitive. So, we will manage that at the same time, we're managing the flow of the slower moving pieces that have been in Express to Ground because they can make the delivery time. That's just a normal evolution that we couldn't do a couple of years ago because we didn't have the technology to do it. Now we have the technology to do it. And as Raj says, we're about halfway through that. And as we continue to ramp up our technology investments, we've got other things on the horizon as well. So there is a complete program of how we're transforming the operating networks of FedEx Corporation to what we think the future market is going to be, which is a lot more e-commerce, hopefully we'll have international growth again and that's where we're moving to.

From Goldman Sachs, we'll hear from Jordan Alliger.

Question, you had obviously pretty strong growth in Ground in the quarter and maybe with all that's going on, it will continue to be pretty solid as people order from home. You also mentioned a few headwinds, notably the six and seven-day delivery, Amazon, I guess the self-insurance maybe in there. Realizing there's still costs ahead to roll that out, sort of - pretty load sort of for the growth. I mean, do you expect a diminishment in the magnitude of the headwinds as we move forward into the next quarter or do they stay sticky for the near term?

No. I expect the headwinds to diminish. There's a lot of things that we piled upon Ground from a strategic standpoint. We are going to wait later till Sunday. We said, no, let's get it going. We took the Amazon traffic out for strict strategic reasons, as you understand. On our PLPD, it's been very frustrating. We're working every day to improve our safety in every one of our companies. At Ground, in particular, we are rapidly expanding our use of cameras and video recorders, and where we do that we see the severity and the frequency of accidents decline significantly. But we have a backlog of old claims that has continued to harness a bit, and we had to take another significant charge in Q3. Hopefully that's behind us. We're learning how to manage this much better in today's litigious society. And I think we will improve both the severity and the frequency and how we handle these things. And I hope that we can put that behind us as well. I'm very excited about what I know is going to be our cost structure at Ground, particularly in the next 12 to 18 months. And we have to get to the low-cost producer, and we are committed to do so.

And if I can add to that, Jordan, is that the customer demand is very strong. As the value proposition that Brie talked about earlier, we are now the market leading player in e-commerce in the United States, and the demand we are seeing from small, medium and large is very good. And now we have a very, very diversified customer base and we can leverage off of that.

We'll move on to Scott Group with Wolfe Research.

So lots of concerns in the market broadly about balance sheets, cash flow. Maybe Alan, what are you guys doing to support the balance sheet? What's the level of flexibility on CapEx for next year? And then separately, just generally on the Express, can you just clarify, did you still take out the 7% of the capacity you talked about last quarter and any way to think about fuel in this environment? I know that's a few questions. Thanks.

Yes. A little more than one. So let me hit the big one. I mean, obviously we've got all kinds of scenario planning for cash flow, right. I mean, you've got to have liquidity. That's what everybody is looking for. We're part of the A4A group that submitted our request, via them to the government about some liquidity support. We have a doomsday scenario where we can definitely cut as much CapEx out of '21 as we need to. I don't think we're going to hit that. I think our cash flows are going to be strong, but I can't tell you that until we get through the coronavirus. And nobody knows when that's going to be. So we are managing the heck out of it right now. We have a - we just increased our revolver. We have many, many, many unencumbered beautiful new aircraft that we could use if we needed to for liquidity. So, I think as compared to my friends in the passenger business, we are in really good shape in that regard. As to fuel, if it stays down here, it should have somewhat of a benefit. But the fuel surcharge is just one of the surcharges that we use in managing our business. So we'll just see how that goes. We had committed to you I think 6% to 8% of flat out reduction in Q4. I would say, today, we're not there because we're flying more in Asia than we had expected to, but we're pretty close to that range.

Moving next to Allison Poliniak with Wells Fargo.

Just going to your comments on Asia and manufacturing. A number of industrials are talking about the increasing need for speed of the supply chain. I know you were talking - I think you had mentioned you're back to capacity there. How quickly can you evolve or add incremental capacity in there to maybe supply the increased demand over the next few weeks? Any comments there?

Yes, that's the value of our FedEx network. And we are able to flex up or down as needed. In this particular case, as we talked about the flight hours earlier, our planned flight schedule is to be down 7.5%. However, we are tactically deploying excess sections as we see the opportunity to move like additional profitable business in this capacity constrained environment. So, that's again, we are a key player in connecting the global commerce, and this fact becomes ever more evident in this current circumstances, especially out of China right now.

From Credit Suisse, we'll hear from Allison Landry.

So, just considering the prospects for a global or US recession or a severe downturn, how should we think about the decremental margins at Express relative to what you've done in the second half of fiscal 2009? And specifically, could you frame the structural changes you've made in the business during the PIP and even in more recent years that maybe could result in some downside protection relative to historical decrementals? Thank you.

I've been through a few of these in my four year career at FedEx and I think we've always rebounded very well from and always managed them very well. Obviously, you're talking about like one of our scenarios, it's way down on the realm of likelihood and possibility as of today, but we still have to have it. So it's all the normal levers that you would imagine it would be. But, as probably from my point of view, a company that's best positioned to continue to keep global supply chains up as we fight this virus and then rebound from it, I think we're in great shape in that regard. So it just depends on how long it lasts and how much demand there is. But there is going to be demand. People are going to be needing medical supplies; people are going to be needing to eat; people that can run businesses are going to run businesses, and they're going to rely on us to help them with their supply chains, and we're confident in that.

We'll move next to Brandon Oglenski with Barclays.

So I guess I just wanted to ask the strategic rationale behind bringing SmartPost in house. You're trying to drive delivery density obviously to residential stops. But at the same time, from a purely analytical perspective, isn't this potentially diluting the revenue base with the $5 product effectively now being served by an $8 network. Or is that overly simplifying the issue?

Well, I've talked about the cost part, and I'll turn it over to Brie to talk about the dilution part. Every time we have a match or a near match of the SmartPost package in our Ground network, our costs are significantly below the postage for SmartPost. So it's just math. And the more of those we get out there, the more productive then our independent service providers can be with everything else that they're delivering. So it has a wonderful effect on the productivity and the cost per package across the entire network. And it's working extremely well. I'll let Brie talk about the marketing part.

Sure. As I mentioned before, there is a couple of different nuances from a features or service perspective, but they are important. The first from a home delivery perspective, it is a guaranteed product. The SmartPost product is not a guaranteed product. So if you need that peace of mind you're going to pay for it. And we continue - as I mentioned earlier, we have studied this with a lot of rigor and a lot of in-depth analysis our two distinct markets there. In addition to that, we have a variety of different features of service on the Home Delivery product. There are different features of service from a consumer perspective. We call them consumer delivery options that are available on the Home Delivery product. They're not available on the economy product. And as I mentioned earlier, we do believe that a portion of the product, the sub-pound, will continue to be delivered by the post office. We've studied this. We think this is the right portfolio, and we're very confident in that decision.

Moving on to Jack Atkins with Stephens.

Can you talk about what you're seeing in terms of business trends among your core B2B customers? It certainly sounds like B2C traffic has been strong over the last couple of weeks. But what's happening with that core B2B base? Have you seen a change there over the last two to three weeks, given the virus impact? And as you think about your leverage to small and mid-sized businesses, how do you think those particular customers are going to trend as we look out over the next few weeks?

Yes, it's a great question. Let me talk about our B2B base because it does vary around the world. Here in the United States, as Raj mentioned, from a commercial business, we see that currently to date, it is quite stable. From an Asia perspective, we're actually quite optimistic. From a stock replenishment perspective, we have seen throughout the month of March really day-over-day, week-over-week improvements from a volume, and the vast majority of what we have coming out of Asia, the vast majority actually is commercial traffic. What we talked about this morning actually when we looked at the Chinese recovery, what we have seen is 90% to 95% of large manufacturers in China are now back to work in some capacity. Closer to 65% to 70% of small businesses in Mainland China are coming back to work from a manufacturing perspective. So we believe output is in around 65% to 75% and we are seeing that rebound. So from an Asia perspective, we feel really good, large customer leading, small customer coming back from a China perspective. Europe, right now we can't predict because it has had the most change, I would say in the last 24 to 48 hours. You've all seen the media. We do anticipate by the end of the week to be incremental manufacturing closures in Europe. So we are anticipating more softness there in Europe, but the US is strong and Asia is in really good shape as we speak today.

And from Cowen we'll hear next from Helane Becker.

Thanks very much, operator. Alan I can't believe it, an end of an era for you and for me. It's very sad but congratulations and best wishes on your retirement. My question is really for Fred. There was a lot of change in the world in 2019 that affected you guys with the trade wars and so on. Could you just talk about how you think this whole coronavirus will change the way the world does business, if at all? Thank you.

Well, Helane, it is indeed an end of an era. I tried to talk Alan out of it. I have told him, we were just getting started here, but I think he's got his priorities right with Susan and his family. But he is still the CFO till September the 21st at midnight. And then I'll have a lot more to say about Alan on the next couple of calls. So, Helane, I think one of the things that we've been in the midst of and it's been a bit of a disappointment to the SMC and me in particular that we haven't gotten across to people how fundamentally changed the world was before the coronavirus. I mean we were the first people in the fall of 2018, in fact, it was on one of these analyst calls that basically we said Europe is essentially moving into a business recession because when the trade war began in March of 2018 when the President famously said trade wars are good and easy to win, people missed the point that it wasn't just China that was in the sights, it was Europe. And it was a ricochet bullet that hit Germany. So by the fall of 2018 we began to see that. And if you look at the PMIs from that point forward, really until the last couple of months of 2019, they look like a ski slope and then they flattened out. So we've done a wonderful job, I think, of trying to deal with that. We were hopeful that it was going to be a China deal on the trade side in the spring of 2019 and in fact we were told that was the case. It didn't happen. We would probably done some different things have we not been…

Moving next Citi's Chris Wetherbee.

Want to come back to Ground for a moment and maybe try to better understand what we think the cadence of sort of improvement in the margins might be. I understand it's very difficult to provide guidance in the circumstances we're at now. But just given the progression that we've seen so far pre-virus, it would seem like there has been a little bit of a stagnation of the ability to kind of move that margin back up. You called out 370 basis points of specific impacts was kind of get this closer to flattish from an EBIT perspective despite significant revenue growth. So maybe it's SmartPost, it's maybe just a matter of time before that build density drives better incremental margins. But if you could just give us a sense of what that trajectory might look like? What needs to happen to get those margins to start moving back just given how robust the top line is right now?

Well, I don't know how to tell any better than I have so far, Chris. I can't really give it to you about Q4. I can tell you that, as I said, we got out there with Saturday and Sunday because we made the strategic move to get out there and do it. I think that will pay off in a big way and we start to lap that next fiscal year. We are halfway through of our technology implementations on our route optimizations and our scheduling. We're growing the densities as we grow the business. Every one of those things is driving down cost per package. We did get out with some of the Tier 1 closed zone pricing anticipating that we would over time get our cost down there so those would be more profitable. And so, yes, that's part of it as part of the strategy. But as the way I said it before, I mean, I know where the costs are heading. I know what we're doing to get closer to customers on both sides of the equation where the traffic has an origin or where it has a destination. We're doing a great job with that. We talked about the regional sort facilities that we're putting up. So there are so many things under way and more to come, as, again, we're completely transforming Ground. We're not having the yields overall on a total standpoint because we don't have the B2B traffic we thought we would have. But we're managing through that and we'll get back on pace on that as well.

And just one thing to add, Alan. The good news here is the customers are, they are taking into service, and we are taking share, especially in the e-commerce space. And I think when you put the two factors together, it results in a positive outcome for Ground.

We'll move next to Ben Hartford with Baird.

And Alan, congrats on your retirement. Raj, just some further perspective on air freight and load factors and how it's most likely to play out, given presumptive B2B business headwinds in Europe and the US to come, but specifically Europe. How long do you think this demand to supply in-equilibrium with these high load factors to persist out of Asia? How long do you think that will be? Until we start to see the market respond with more freighter and perhaps some of the belly space capacity come back online with some risk economically in some of the more developed markets? Any way to kind of describe as you see it right now, how long we should be riding this very, very robust load factor that we're experiencing in Asia at the moment?

I'm not sure how best to answer the question other than to kind of go through what we just went through. The demand we are seeing out of Asia right now is quite robust. And if you look for - the intra-Asia load factor is at a record, which is also very interesting - Asia to Europe and Asia to US. And the manufacturing capacity is coming back online, and the capacity of airfreight is down. So net-net, we are seeing the demand, and we should see that go forward. As far as Europe is concerned, very, very early to tell. We're dealing with information that's literally 24 hours old. And trying to project that out is impossible. One thing that I know though is that 60% of the transatlantic traffic went on belly capacity. And as that capacity comes down, the capacity is going to be severely constrained. That much I can tell you. As far as the demand, we have to wait and see, and it's too early for me to say anything about that right now.

We'll hear now from Bascome Majors with Susquehanna.

Could you update us on how far along you are with your ground delivery partners negotiating the contracts that are going to build the SmartPost and Express last mile integration? Any thoughts in areas where you've already got that structure in place? Have you seen the volume and density economics change favorably as you expected? Thanks.

So, nearly half of the SmartPost volume currently is delivered by ground service provider business and we expect to be virtually complete by the end of calendar year 2020 and with some of the exceptions that Brie talked about earlier. As to the contractual relationship with our independent service providers, these are great partners. They run very efficient businesses. They love the additional volume that they're getting. We work with them on a continuous basis to make sure that we're giving them everything they can. We're helping them with their scheduling, helping them build their density so they can make their business more profitable. So it's a great relationship.

And at this time, I'd like to turn things over to Mickey Foster for any closing remarks.

Thank you for your participation in FedEx Corporation's third quarter earnings conference call. Feel free to call anyone on the Investor Relations team if you have any additional questions on FedEx. Thank you. Bye.

And again that does conclude today's conference. We do appreciate you joining us today.