00:03 Good day, everyone, and welcome to the FedEx Corporation First Quarter Fiscal Year Twenty Twenty Two Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

00:22 Good afternoon, and welcome to FedEx Corporation's first quarter earnings conference call. The first quarter earnings release, Form ten Q 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. 00:43 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. 00:56 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, maybe considered forward looking statements within the meaning of the act. 01:15 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. 01:34 Please refer to the Investor Relations portion of our website at FedEx.com for a reconciliation of the non GAAP financial measures discussed on this call to the most directly comparable GAAP measures. 01:47 Joining us on the call today are Raj Subramaniam, President and COO; Mike Lenz, Executive VP and CFO; Brie Carere, Executive VP, Chief Marketing and Communications Officer. And now Raj will share his views on the quarter.

02:06 Thank you, Mickey, and good afternoon, everybody, and thank you for joining today's call. First and foremost, I would like to extend my sincerest thanks to our global team members who continue to deliver for our customers in an exceptionally challenging operating environment. We are extremely proud and grateful for the manner in which Team FedEx continues to move the world forward. The execution of our strategies continues to drive high demand for our differentiated services despite the disruptive impact of the pandemic to labor availability, industry capacity and global supply chains. As you look at our first quarter results, our performance was highlighted by double digit increases in yield across all our transportation businesses driven by limited capacity, high demand and our revenue management strategy. The impact of constrained labor markets remains the biggest issue facing our business as with many other companies around the world and was a key driver of our lower than expected results in the first quarter. As Mike will share in more detail momentarily, we estimate that the impact of labor shortages on our quarterly results was approximately four fifty million dollars primarily at FedEx Ground. 03:19 Labor shortages have had two distinct impacts on our business. The competition for talent, particularly for our frontline workers have driven wage rates higher and pay premiums higher. 03:32 While wage rates are higher the more significant impact is the widespread inefficiencies in our operation from constrained labor markets. To illustrate this, I'd like to share a brief example from FedEx Ground. Our Portland, Oregon hub is running with approximately sixty five percent of the staffing needed to handle its normal volume. This staffing shortage has a pronounced impact on the operations, which results in our teams diverting twenty five percent of the volume, that would…

10:17 Thank you, Raj, and good afternoon, everyone. Our first quarter commercial results were very strong with fourteen percent revenue growth and double digit yield improvement in our Transportation segment. These results reflect the positive backdrop for growth in the parcel markets, including a very healthy pricing environment. 10:36 For fiscal year twenty two, FedEx revenue was forecasted to pass ninety billion dollars. Further, we are forecasting that the U.S. parcel market will grow to one hundred and one million packages a day by calendar year twenty twenty two, which is year over year growth of twelve percent. These market projections are slightly lower than last quarter as e-commerce percentage as a percentage of retail decline. We saw a shift to in-store shopping and buy online pickup in store and spending in services of course, increased. However, despite this moderate change in e-commerce growth, the secular trend of e-commerce growing as a percentage of retail will continue to drive healthy parcel market growth. 11:17 We are forecasting a ten percent annual growth rate of U. S. domestic market volumes through twenty twenty six. 11:25 At FedEx in the first quarter, total U.S. domestic package volumes increased year over year by one point five percent. At Express, our total U.S. domestic package volume grew seven percent year over year. Total FedEx Ground volumes were relatively flat in the quarter, however, I'm very proud as we proactively manage our capacity for higher yielding commercial and home delivery services. In fact, FedEx Ground commercial volumes grew double digits in the quarter. 11:54 In the first quarter of fiscal year twenty two, FedEx total U.S. domestic residential package volume mix was fifty seven percent versus sixty two percent a year ago. 12:05 U.S. B2B mix improved year over year in the first quarter of…

16:30 Thank you, Brie, and good afternoon, everyone. Our first quarter FY’22 adjusted earnings per share of four point three three seven dollars was negatively impacted by approximately eight hundred million dollars in year over year headwinds. And while Raj covered the operational impacts of these challenges I will detail the financial impacts for the quarter. 16:50 Of these headwinds, the [Indiscernible] year over year cost, the majority of which impacted our FedEx Ground business. As we look into the impact of labor costs on the business I want to break this impact higher wages and the impact of network inefficiencies. And we estimate that two hundred million [Indiscernible] purchased transportation rates. 17:18 This included higher wage rates and pay premiums for team members and higher rates paid for third party transportation and services. 17:27 In addition to the higher wage rates, we estimate that network inefficiencies of approximately two [Indiscernible] fifty million dollars contributed to the total impact of labor shortages on the business. 17:42 These costs include additional line haul, higher usage of third party transportation, cost of repositioned assets in the network over time and recruiting [incentives] (ph) all to address staffing shortages. 17:58 Beyond the labor impacts, our results for the first quarter also included the following headwinds. An additional one hundred and thirty five million dollars in a healthcare costs [Indiscernible] lower utilization a year ago, eighty five million dollars related to investments in the Ground network, which represents the cost of bringing online sixteen new automated facilities and expansions at a hundred facilities which are critical to improving service and adding capacity to meet growth for peak and beyond. 18:32 And at Express, an estimated sixty million dollars in incremental air network costs due to the impact of Covid restrictions on our operations, including…

26:02 [Operator Instructions] And we'll go first to Scott Group from Wolfe Research. Your line is open.

26:24 Hey, thanks. So, guys, it strikes me that everybody in transportation right now has a lot of pricing power. And everyone's dealing with tight labor capacity and inflation, but every other transport companies reporting margin improvement and earnings growth. So, I guess my question is, why do you think you are seeing a bigger impact than anybody else in transportation and outside of just adding more capacity and spending more, what sort of meaningful significant changes do you think you need to make or are you contemplating making to start realizing more sustainable improvement in margin, earnings, returns, all that? Thank you.

27:14 Let me start by saying that we definitely do not see this as an us versus them situation at all. In fact, the Minneapolis Fed noted that firms in every sector reported difficulty in attracting labor and that sixty eight percent of the Fortune hundred companies - supply chain and labor disruptions over the past quarter. 27:34 So the situation is very complex, not just the availability of workers, workers impacted by safety concerns with the Covid, of course, the very really issue of childcare and our labor markets and broader economy cannot function properly and that schools and day care cannot stay open. So our approach to our teams and our people first culture combined with the flexible operating model in Ground has positioned to remain competitive in this market and we are highly confident that the actions we are taking to address the shortage as I outlined in my prepared remarks. 28:07 Let me just also add that we are very confident in our strategy. I mean where the market is growing, we have a differentiated value position, we have a network, an operating model that makes it very - that makes it good for us to succeed. And so we are confident in the long term strategy here. And as Mike said, we expect to see in the calendar year - the new calendar year the labor availability will continue to recover, Mike.

Yeah, Scott, just I would add, I think you can't just characterize all transportation companies in one singular bucket there and assume that everybody has the same considerations in terms of the nature of the business there. We've kind of explained with great specificity how this operationally impacts us and thus the financial ramifications of that. So, look, we fully recognize that the first quarter wasn't what we anticipated. We've taken a number of actions to address that. We will continue to identify further actions but I will fully say if the circumstances don't change as we identify here, we absolutely would need to revisit the pace of the plans that we have. The strategies are sound, but we would absolutely need to think about the pace of things given the environment that we're operating in. So, I think Brie highlighted the characteristics of what growth is and will continue to be in the business. So that remains the underpinning going forward.

30:02 And next we'll go to Brandon Oglenski from Barclays. Your line is open.

30:08 Good evening everyone and thank you for taking my question. Mike, can I just follow-up on that, I think the frustrating card from the investor perspective do you guys have definitely seen pretty substantial growth in the past decade, definitely put the capital behind that, but margins are actually lower now than they were prior peak returns have obviously come down, and we do hear lots of bold actions how to sustain forward growth. But I guess, I’m going to ask the question just the same way like what is being done in a bold way to improve returns and profitability across all these networks. And is there a way to look back and say hey we've been investing in the 777 and seven six seven for you to get Express margins [aren't showing] (ph) those traction, how do we review those prior plans to ensure that they deliver in the future? Thank you.

30:56 So, well, Brandon, let me first, you mentioned about Express investment in the aircraft there. If you rewind roughly a year and a half ago, we were in the midst of talking about parking and reducing capacity in a number of our MD11 fleet. 31:19 Obviously, the market changed radically here and there was the need for the additional capacity and the opportunity there, so we unparked those. Should things change going forward, that remains a flex lever and it absolutely is the case they're having a higher proportion of the newer more efficient aircraft with the seven sixty seven and triple seven are in the fleet will drive improved economics and margins at Express. So, again, we're ongoing looking at these different network initiatives and so that absolutely remains a long term winner in terms of the fleet renewal and we will continue with that. 32:04 What was the second part of – you started off with another aspect?

Well, you Mike, the frustrating thing I think for a lot of your investors is that the growth is very evident, especially in the last few years, it's just that margins have not improved. So there's always a plan to improve margins that doesn't seem to come through. So what are the bold steps that can be taken to improve those outcomes in the future?

Well, let me just step back a little bit. We had record results in twenty one and improved margins. Our guidance albeit lower than what we shared with you three months ago is if you look at the operating earnings in fact is double digit at the low end, we had some discrete tax items there. So, indeed, we are focused on driving improved margins, cash flows and returns and feel that we're projecting another record year on top of a record year. So, again, we are absolutely committed to continuing that trajectory.

33:17 And we'll go next to Chris Wetherbee from Citi. Your line is open.

33:22 Hey thanks for taking the question. I want to ask about costs, Mike, it’d be helpful to kind of run through a number of the items that were impacting the quarter. But if I were to sort of exclude those items and look at sort of the cost inflation on the package business, the Express and Ground package, it looks like I'm getting about nine percent cost inflation on essentially flat volume. So I was wondering maybe if you could help us understand ex some of the items that you've talked about, what's driving the cost inflation at such a high level when we're not seeing the volume growth for those individual segments. And maybe do you expect that to sort of change and do you think margins expand in both of those segments for the full year?

Well, let me let take a swing at that first. So as it relates to the cost inflation and taking that category broadly, let me just clarify what's in our outlook. The network inefficiencies inherently are contributing to that cost increase that you're talking about. We expect those to mitigate and work away. In our outlook that we're giving you here, we're not assuming any change in terms of the current labor market in terms of wage rates and that. So just to give you an illustrative example here, a year ago, our package handlers at Ground, we are paying an hourly rate that is sixteen percent more than previously, at our Express major sort locations the hourly rate is north of a twenty five percent increase. So that is the reality of the labor market right now. And so as Brie highlighted, we are taking a number of actions to recognize and address that; maybe if I help talk through as we go through the year here, I think maybe part of what you - we are also there. So again, like I said, more efficient operations as we go through the year, The pricing actions that we announced yesterday combined with our ongoing efforts, those largely will impact the second half of the year. 35:40 Raj highlighted a number of the adaptations we're making in our operating plans as well as some of the technology and other initiatives we're bringing on to execute more efficiently and then just to tie off some aspects here, we will have some tailwinds in the second half. As you may recall, we had the severe weather situation in the third quarter of last year, variable comp will be a tailwind in the second half of the year. 36:09 And then there was two other items with the frontline bonus program and then the recognition of our [yield] (ph) contribution. So trying to put all that in context for you there. Raj, anything you…

I just going to cap it of course by just saying that we expect in the second half that improve margins in all segments of our business.

And next we'll go to Ravi Shanker from Morgan Stanley. Your line is open.

36:39 Thank you. I do want to follow-up on the last comment because again, some of the items that point to the second half being [Indiscernible] better than the Indiscernible]. So I'm just going to get the sense of how you have this confidence in second half being significantly better than the first half. The reason I’m asking the question is because you [Indiscernible] your full year guidance by approximately [Indiscernible] which doesn’t necessarily imply that you expect to be [Indiscernible]?.

37:25 Ravi, you broke up some there, but I there was a reference to some of these items being non-operational in the second half, I guess maybe I'd turn it around the other way and say if we were fully…

Sorry if I can try again, if I stop [Indiscernible], I was wondering if you could get us a little bit more detail into why you think second half is going to be materially better than the first half because some of the items you quantified, the yield contribution, the variable comp etcetera, those seem kind of non-operational almost one-time [Indiscernible] nature kind of, so again, do you really feel like the top line could accelerate, the volumes are going to accelerate and the reason I’m asking this question is because you basically cut your full year guidance by approximately the magnitude of the first quarter miss, which does not seem to imply that you are expecting the labor cost [expense] (ph) to continue for the rest of the year?

Well, we're not sitting on our hands amidst the circumstances, we're taking actions to mitigate it. So, I wouldn't characterize it as just singularly looking at Q1 and changing as a result of the outcome of that. So we're aggressively managing every aspect there. 38:47 I guess, I might turn it around the other way and say, if you looked at our results in Q1 absent the labor availability challenges, it would be extraordinary and thus we realize the absolute number matters and so we're taking actions on a number of fronts that will make the second half exactly as we outlined. I'll let Brie address your volume question for later as we go through the year.

39:17 Yes. I guess the only thing to add is we're still pretty bullish on the volume growth and our ability to take share both domestically and internationally. The Q1 of our fiscal year is the hardest comp year over year from a growth perspective. So for sure we had to say earlier I think there was a comment earlier about kind of flat volumes. We have to put that in perspective and we have record high volumes within the network right now as we look towards peak. We're going to see growth on what was a tremendous growth at peak last year. So, we are pretty confident in the volumes and again, to complement what Mike shared as a reminder, a lot of our increase [Indiscernible] in January, so we'll [have] (ph) it in the back half, which is obviously a big driver of back half performance and then a couple of things, John’s got some great technology that's coming into market as we head into peak and in the back half. It’s going to help us be more productive, and Karen Reddington and the Europe team has some incredible work going on as they finalize the integration of the Air Network, and we've got some other work going on there to improve European profitability. So, we are pretty confident in the back half of the year.

40:25 And next, we'll go to Ken Hoexter from Bank of America. Your line is open.

40:30 Hi, thanks. So, Raj, I think there was a comment in the release kind of talking about some of the deceleration on some of the e-commerce with ground volumes down ten percent year over year international, domestic down thirteen percent. Is that part of what you're anticipating for labor to improve or maybe just talk about the topline where you were just mentioning still seeing strength and a good network in the peak, but yet these numbers indicate and kind of what we're hearing from the market that we're seeing some of this deceleration as you had in the print, so maybe just talk about the volume side a little more.

41:04 Sure. I'll start and then I'll turn it over to Brie. No, absolutely we are actually seeing very strong volume to add to what Brie just said. The only reason we are seeing a flat volume in the ground segment is because of the economy product we just broke out for you for the first time. And even from a -- the commercial volume is growing strongly and even our HD volume on a very tough year-over-year comp we’re still going on top of that, and International is growing very strong. So, over – the only place we’re not going -- restructuring our international and domestic businesses, but our IP business, our IE business, our export business is very, very strong. So no, the demand for our services continues to be very strong because of the differentiation that we are providing in the marketplace, and we continue to gain market share around the world, so Brie?

41:59 Yes, I think Raj kind of outlined it pretty clearly from a volume perspective as we get beyond. I guess the one thing I should add that maybe it wasn't clear in my opening remarks is that we are constraining demand right now. As Mike and Raj talked about the labor, we are doing everything we can to strike that right balance of growth with service. And I will tell you that as we've done that, you can see where we've constrained it. It's the FedEx Economy product, it's the least profitable product, so it's the right place to constrain growth. And we have made sure that we are not constraining growth in our highest profitable segments, small and medium and at the commercial, and you saw those strong commercial numbers that I referenced earlier. So, I would say number one, we're confident in the secular growth opportunity for FedEx; two, we feel we've been gaining share, my last market share report shows that, and then we are having to constrain because of the labor issues, we are doing so in a very disciplined manner.

42:59 And next we'll go to Tom Wadewitz from UBS. Your line is open.

43:05 Yes, thank you. I Wanted to go back to labor. I mean, it seems like your guide really, in a pretty big way, hinges on that assumption of improving labor availability in the second half. So, I guess just two elements to that. Do you feel like you have much visibility to that improvement and what maybe have you seen that would give you confidence that that's going to happen? And then I guess a component within that if you go into peak, it would seem like if you can't [staff the swords] (ph) ahead of peak, then you have to hire, I don't know your number is fifty thousand people, seventy thousand people that could -- that problem could get worse before it gets better. So, I guess visibility on your labor and being okay during peak as well? Thank you.

43:57 Thank you, Tom. Yes, the number is ninety thousand, and we are well on our way here. Now, we have -- the last two weeks, we have seen pockets of opportunity and positive changes that we hadn't seen in the first quarter, so that uses a little bit of encouragement, and this is a systemic issue, and so yes, we're making some assumptions here in terms of labor availability, but if we staff up for peak, then hopefully in Q3, we will be in good shape. So, we’re making – we’re not making dramatic assumptions here in terms of Q3 and Q4, but we are assuming that Q3 is going to be better than Q2, better than Q1, and the early indication just very early indication is that that's indeed the case. So, I don't know, Mike if you want to add anything to that.

44:51 No, just to reiterate, I broke the labor impact into two pieces. The part that we're assuming that does mitigate as Raj outlined is the impact from the availability. Again, the market wage rate is what it is, and we can assume nothing different than that, and that is what is baked in to the outlook.

45:18 And next we'll go to Brian Ossenbeck from JP Morgan. Your line is open.

45:24 Hi, thanks for taking the question. Just wanted to ask Brie about the trends in pricing. Obviously, we saw the GRI issue that you talked about briefly. We’ve got some new surcharges in place; fuel is going up. But I think you mentioned in your prepared remarks, there's some availability for people, the largest shippers to get capacity now at current rates. So, maybe you can just instil that -- those two factors, what do you feel about getting price in the market to capture? You are ahead on some of these costs, and then maybe if you can clarify the comments on the larger shippers and generally talk about the surges from a volume perspective? Thank you.

46:07 Thanks Brian, good question. To be really clear when we're talking about incremental capacity, one of the key elements of our revenue quality strategy, which has application here in the United States as well as in our intercontinental. As we talked about it, I talked about the six new flights that we launched from an Asia outbound perspective, and that was primarily quite frankly transition from ad hoc to scheduled service to improve reliability, but that allows us to plan and predict and it also allows us to sell differently. As we sold into those flights versus previously a lot of that was kind of catch up in spot rates, we are making sure that we are bringing on customers at current rates, and we are measuring kind of those current rates. So, if a customer had “X” use of our intercontinental lift prior to the last eighteen months, we've contractual terms there. But as we increase the capacity, we give those customers that incremental business, it comes on at a higher rate. 47:05 So, we're really trying to strike the right balance with our customers, give them the predictability that they need and honour our existing contractual terms, as well as, as we expand capacity, give them availability to that capacity at an incremental current market rate, so really trying to strike that right balance. So that's what I was referring to. It's predominantly in the intercontinental side, of course it does have application from a peak perspective. As we brought on new customers this year and we look at our surging customers, they obviously -- those peak surcharges help them get the capacity they need, so they can have a successful peak. I hope that helps answer your question.

47:46 And next we'll go to Jordan Alliger from Goldman Sachs. Your line is open.

47:51 Yeah, Hi. Just on the new ground, buckets that you’ve broken out, can you maybe talk a little bit about the three pieces and would you expect going forward roughly similar trend lines with the commercial sort of outpacing everything, but still positive on the home delivery, and as you mentioned the constraining capacity to keep limiting the last piece of the business?

48:17 Great question. So, for this fiscal year, as we talked about, inventory levels are at an all-time low, and all of the economic indicators that we're tracking is saying that we're going have a very strong commercial year here in the United States as well as in Europe. And of course, that's also going to drive our intercontinental business. So, for FedEx Ground commercial, we are expecting a strong growth here from a home delivery perspective. I do think that you will see, you know we will see moderate growth for home delivery given the lapping of last year's very, very strong growth. So, I think you're going to see some good home delivery growth, and from an economy perspective this particular quarter you saw the thirty percent year-over-year decline. I do not think you will see that trend continue. John and I are working, and we've got some really great new technology coming to market, a new feature called [sort to due day] (ph), which is going to allow us to really move economy through the FedEx Ground system at a different pace and continue to lower the cost. So, I think you'll see us find a better balance of the economy to home delivery, but directionally commercial will grow the fastest followed by home delivery followed by economy as we think about this fiscal year.

49:35 And next we'll go to David Vernon from Bernstein. Your line is open.

49:40 Hey, good afternoon. Brie, just following up on that sort of growth outlook, you put out some numbers out there around ten percent market growth, I think in residential for the next couple years. Is your expectation that that pricing and the operation will be at a point where you can kind of participate at an above-market growth rate from – once you get past the period of volatility or do you intend to kind of grow the ground business maybe a little bit lower than the overall market as some other competitors add capacity at the lower end of the service spectrum.

50:13 That's my favourite question, yes. Our intent, we have the best value proposition in the market. We have the best seven-day transit and coverage in the market. We feel really good about our value proposition. As I mentioned earlier, we are actually right now controlling demand, because we're trying to balance service in the current labor environment. So that is absolutely our intent. The market is growing. We've got a great value proposition. I can't think of a better time to lean in to growth here in the United States.

50:51 And we'll take our next question from Todd Fowler from KeyBanc Capital Markets. Your line is open.

50:57 Hi, great. Thanks, and good evening. Mike, I understand kind of the thoughts around not being too specific about quarterly guidance, but I do think from a street perspective, kind of the volatility from quarter to quarter can be an issue. So, I just want to make sure, are you seeing that in the second quarter you're expecting a similar eight hundred million dollars magnitude of year-over-year headwinds? And then secondly, when we think sequentially the second quarter, operating income is flat or down a little bit from the first quarter. Is that going to be a similar cadence this year? Are there some other things that we should think about just as we move into the second quarter from a seasonal standpoint? Thanks.

51:35 Sure, Todd. Yes, that's a fair characterization when I said the headwinds would be similar to the eight hundred million, look the pandemic and many other factors impacting our market including the supply chain disruptions, I think you have to kind of take pause in terms of assuming typical seasonality across the board. Yes, there is a degree of that that you will see, but I would say we can't just rely upon that because the dynamics are much more fluid than they were, and that’s why we're trying to outline that as best we can, but we're navigating those changes along the way, but we're very confident what we shared with you.

52:29 And next we'll go to Amit Mehrotra from Deutsche Bank. Your line is open.

52:35 I just wanted to follow-up on that last question. So, I just want to understand, so you’re obviously entering peak season, higher B2C mix, margin pressure, density pressure, so you typically see a pretty notable step down in ground margins fiscal 1Q to 2Q. Is that the same cadence? I mean because 1Q is obviously pretty low to begin with, just trying to get understanding of that, and just as a high level, do you think ground margins can be up year over year this year? Thanks.

53:08 So Amit, I'm just going to stick with it. We're not giving a margin forecast. What we outlined was that we expect operating profit to be up in all the transportation segments. So, I'm not going to get into giving a specific margin forecast by quarter. And again, the seasonality is we don't think it's value added to kind of get into trying to parse that at a level of precision given the dynamics of the market right now.

And next we'll go to Helane Becker from Cowen. Your line is open.

53:50 Thanks very much, operator. Hi, everybody and thank you for the time. So, we've been actually doing a lot of work as you know in the China area, and you guys have about thirty thousand people employed there. I think it's getting increasingly more difficult to work there. So, can you just talk about how you're thinking longer term about being in that market versus moving more capacity offshore to places like where you have regional sorts like Japan or back to the Philippines? Thank you.

54:27 Thank you Helane for that question. We actually have twelve thousand employees in China. As you know, we have been in business in China since nineteen eighty four, and we have been serving our customers there in this extremely important market. We value our business in China, and we are committed to continuing to improve our value proposition there. Our growth in the market is very strong, and our operations in our hub in Guangzhou is just going smoothly. We also just opened up new air operations from Beijing. So, China remains a very important market for us, and we are very committed to it.

55:17 And next we'll go to Jack Atkins from Stephens. Your line is open.

55:22 Okay, great. Thank you for taking my question. I guess just to go back to the CAPEX and return discussion for all, and Mike thank you so much for the additional sort of comments around returns and free cash flow. But I guess when you think about sort of the longer-term targets for the business, you guys have always sort of talked about this double-digit consolidated operating margin. We haven't really come close to it since fiscal year sixteen. 55:49 You raised the CAPEX as a percentage of revenue targets and the proxy several weeks ago. Can you talk about why it makes sense to raise your long-term capital spending plans when the business still isn't achieving the long-term targets you've set for it from a margin perspective? Just help us square those two things. I think that's a vested issue that a lot of people are having trouble justifying.

56:19 Right. Well, Jack, First, let me just say, you brought up about ROIC, and I'll expand a little bit about on the remarks I made earlier there. We're obviously referencing to our WACC when we compare our ROIC, which we put in the seven percent to nine percent range, which I think is consistent with what we see in many of your analyses. But when it comes to the ROIC itself, there are a number of different approaches and methods that practitioners use, so this tends to be variability in the absolute as well as the comparative measurements, but that said we're revisiting the various aspects of that so that we can maybe expand the context around our discussion of the topic, but I will say regardless of how you calculate it, our ROIC does remain above our WACC. 57:12 So, since you asked about the LTI plan, look, I am not going to speak on behalf of the Board, but I will give you some context around partly about what I mentioned two, three months ago. So, again, we had record earnings in fiscal twenty one amidst the unprecedented global pandemic and delivering life-saving vaccines around the world. And we’ve talked about the radical changes in supply chains, customer expectations, and all that, so we did indeed accelerate purposefully some investment opportunities for capacity expansion and of course the replacement of the aircraft I mentioned before. So, as I did specifically say on the June call, the FY twenty two to twenty four LTI plan was eight percent to account for these opportunities, and that target is below our historical capital intensity. Fiscal twenty one was seven percent, but that was the lowest in ten years. So, again, there's absolutely a focus on returns, and I think that we will continue to address your considerations there, and I would also highlight because there was the question earlier about ground and investment there, and we're making returns there. 58:41 And we talked a lot about how we're utilizing our assets differently, more efficiently, vesting in smaller units of capacity. We got the one single hub, but there’s no other hubs on the drawing board if ground can generate a higher ROIC at different margin levels than it did probably eight, nine years ago. So, again, that absolutely factors into how we look at these things.

59:16 And next, we'll go to Allison Poliniak from Wells Fargo. Your line is open.

Hi good evening. Brie, I think you had mentioned low-single digit share internationally, certainly unique environment, limited capacity. Can you maybe talk to how you are focused on expanding share, things you're doing there, but more importantly what are you doing to try to retain some of that share you're capturing today, you know once capacity eases at this point?

Great question. So, a couple of things; number one, when we think about our international business, our largest growth opportunity is Europe. So, when we think about what are we doing to gain share, well first and foremost, we're going to complete the physical integration which is obviously critical, but when I think about Europe there's three lines of business. There's the intra- Europe. We bought TNT, and it has a very comprehensive and very unique value proposition, because it's got the parcel and the freight network intra-Europe to grow our cross-border business and we're very pleased with the momentum there. From an international perspective, late last fiscal year, we expanded our intercontinental value proposition between Europe and the United States. 60:26 We now have ninety percent of businesses in EU 17, have access with the fastest overnight services to the United States. So, we have the leading intercontinental value proposition from Europe to the US. It's a great bundle to sell B2B or commercial customers, sell the intra-Europe as well as the intercontinental. And then thirdly, when I think about Europe, we are absolutely underpenetrated in e-commerce both within Europe as well as from Europe to the United States. And we, as I talked about, have launched the FIC product, which is really a very competitive product. It's got quick transit times and it has very different features of service for last mile, so it allows us to lower our costs to serve because the features on the last mile delivery was a lot more like the ground domestic network. So that's our primary focus from a Europe perspective. I will say we are also underpenetrated between Asia and Europe, and we've got great momentum in that lane, similar metrics. We have sped up our service into Europe from Asia. In addition to that, we are launching the FICP product between those countries, obviously Asia into Europe is a very large e-commerce market. And again, we're underpenetrated there, really pleased with the momentum of our FICP product. 61:30 So, I hope that helps clarify. I also wanted to go back. I just looked at my notes, commercial and home delivery here in the United States, as we think about the rest of the fiscal year are going to be neck and neck from a growth perspective. So, as I talked about commercial growing faster than home delivery, we are going to be pretty darn close as we look at the volume growth this year.

62:03 And next, we'll go to Bascome Majors from Susquehanna. Your line is open.

62:09 Good afternoon. When I look at the LTL freight business, it seems to be performing much better relative to at least early expectations compared to parcel. Yes, that's still a manual labor intensive business that requires a lot of drivers, line haul, freight handling, and bodies to do that. Can you characterize why you think that you haven't had these labor driven struggles in that part of your business that seem to be plaguing the parcel businesses particularly domestically, any best practices or lessons you can learn and apply elsewhere? Thank you.

62:51 Bascome, this Mike. So, I'll let Raj address more broadly, but just to clarify within that four fifty number of labor impact, there is an impact there for freight in terms of the same considerations that we talked about there. So, I don't want to have the takeaway or imply that the freight team isn't dealing with similar considerations there. 63:13 But, I'll also highlight as I mentioned to Scott early on there that different networks and different transportation businesses can have different characteristics in that. So, Raj, do you want talk about the great things at freight?

Well, we are extremely proud of the FedEx freight team, and they are also leading with exactly the same set of challenges, and but we have -- the team has done a fantastic job of managing through our revenue quality and operational efficiency despite these challenging circumstances, and we know it's an obviously very, very key part of our portfolio. Having said that, twenty million packages on the ground network per day or the ground US domestic parcel network is a very different – very different set of challenges than dealing with a much smaller set of shipments that go through the freight system. So, your point about sharing best practices and making sure that we do the right thing across our operating companies, that goes on every single day, and we operate collaboratively is a big mantra at FedEx now, and we are definitely doing that. So again, I'm very, very proud of what the freight team has done here.

64:30 And next we'll go to Duane Pfennigwerth from Evercore ISI. Your line is open.

64:37 Hey, thanks. So, just on the two hundred million wage pressure in the two fifty million in inefficiencies that that triggered, but just to dive a little deeper there, was this a turnover issue or an investment for growth issue? Are people leaving at a faster rate or are you struggling to staff to grow? And if it's the latter, given the environment, why grow?

So, I think if I understand the question, it is a staffing availability issue on the two fifty million piece of it. For the two hundred million, it's the rate. So, just to reiterate that, and like I said, we fully expect and are beginning to see some improvement in the availability but should not – should plan to not proceed as we fully expect. And like I said earlier, we would need to obviously reassess the pace of implementing the initiatives there, but the opportunity remains nonetheless. We just need to be mindful of the overall environment.

65:51 Yes, and I would just add one line to that is, if that were to happen, then there’s obviously much broader implications that’s way beyond FedEx.

66:03 And now, I'd like to turn it back to Mickey Foster for closing remarks.

66:09 Thank you for your participation in the FedEx Corporation's First Quarter Earnings Conference Call. Feel free to call anyone on the Investor Relations team if you have additional questions about FedEx. Thank you very much. Bye.

66:26 And it does conclude our call for today. Thank you for your participation. You may now disconnect.