Good day, and welcome to the FedEx First Quarter Fiscal 2026 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to FedEx Vice President of Investor Relations, Jeni Hollander.

Good afternoon, and welcome to FedEx Corporation's first quarter earnings conference call. The first quarter earnings release, Form 10-Q and Stat Book are on our website at investors.fedex.com. This call and the accompanying slides are being streamed from our website. During our Q&A session, callers will be limited to 1 question to allow us to accommodate all those who would like to participate. Certain statements in this conference call may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that 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. Today's presentation also includes certain non-GAAP financial measures. 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. Joining us on the call today are Raj Subramaniam, President and CEO; Brie Carere, Executive Vice President and Chief Customer Officer; and John Dietrich, Executive Vice President and CFO. Now I will turn the call over to Raj.

Thank you, Jeni. We delivered a solid quarter in line with the Q1 outlook we shared in June, despite significant volatility and uncertainty around the global trade environment. Our results demonstrate the resilience we have built into our network. They also reflect the dedication of our world-class team who have adapted quickly to serve customers with excellence through an evolving demand environment. I'm very appreciative of Team FedEx. We continue to reduce structural costs while deploying Tricolor, advancing Network 2.0 and improving our European operations. These strategies are enabling us to flex the network faster than ever before and lowering our cost to serve, all while providing our customers with high-quality service. Importantly, we are continuing to win new business in high-value verticals, driven in part by our differentiated digital tools that are enhancing the FedEx value proposition and customer experience. We also continue to make meaningful progress preparing for the spin-off of FedEx Freight, which remains on track. Following the spin-off, Freight will be a separate public company with the best customer value proposition in the LTL market and a proven track record of strong operational execution. Turning to our consolidated Q1 results. Revenue was up 3% year-over-year, driven by strength across our U.S. domestic package services. We achieved our targeted $200 million in transformation-related savings and grew adjusted operating income by 7%. Similar to last quarter, the results at Federal Express Corporation, or FEC, demonstrate the operating leverage that we built into our business. On a 4% year-over-year increase in FEC revenue, we grew adjusted operating income by 17% and expanded adjusted operating margin by 70 basis points. Notably, we achieved this result despite continued headwinds from the trade environment and the U.S. Postal Service contract expiration. Consistent with the industry trends that we have seen in recent…

Thank you, Raj. I'm very proud of our entire global team for how they are supporting our customers in the current trade environment. Our strong value proposition, including superior weekend coverage, supported 3% year-over-year revenue growth across the enterprise. This is the highest quarterly rate we have seen since the pandemic. At FEC, revenue was up 4%, driven by U.S. domestic package revenue strength. This was a direct result of profitable share growth in the U.S. domestic market. This strength was partially offset by continued weakness at FedEx Freight due to the continued pressure for the industrial economy. Our value proposition is helping us deepen our customer relationships and win business. For example, in Q1, Best Buy names FedEx as their primary national parcel carrier. Leveraging our advanced visibility tool, Best Buy will provide real-time tracking data and customer order communication, improving their customers' experiences. By providing customers with more timely and accurate updates, the company also expects to reduce support calls, cancellations and reship costs. We are excited to partner with Best Buy to create a smarter, more reliable supply chain that further strengthens their customer trust. We were pleased to deliver a 5% increase in U.S. domestic ADV year-over-year, with growth across the majority of our services. In line with our expectations and consistent with the trends we saw in May, international export volumes declined, particularly on the China to U.S. lane. Knowing our strongest international lane would be under pressure. We pivoted the commercial team, and they have done a tremendous job capturing demand out of Southeast Asia and Europe. This provided a partial offset against the headwinds to demand on the China to U.S. export lane. The team has also done a great job maximizing U.S. outbound capacity. We are seeing improving trends in both outbound…

Thanks, Brie. Our Q1 results reflect the tenacity and agility of the FedEx team in providing outstanding service while delivering on our strategic initiatives and increasing stockholder returns. We executed very well in Q1, with results above the midpoint of our adjusted EPS outlook range. We also maintained our disciplined approach to capital expenditure, continue to repurchase stock and grew our quarterly dividend. Turning to our financial results. On a consolidated basis, in the first quarter, we delivered $3.83 in adjusted earnings per share, up 6% year-over-year. And we delivered these positive results despite significant headwinds from reduced international export demand and the expiration of the U.S. Postal Service contract. Overall, we delivered revenue growth of 3%, which supported 20 basis points of adjusted margin expansion and 7% adjusted operating income growth. As Brie mentioned, our yield management and strong commercial execution resulted in higher revenue growth from U.S. domestic packaged services, which contributed to our year-over-year adjusted operating income improvement. We grew adjusted operating income by approximately $90 million despite the $150 million headwind from the global trade environment, $130 million of headwind from the U.S. Postal Service contract expiration and continued softness at FedEx Freight. As a reminder, will lap the expiration of the Postal Service contract at the end of this month. Additionally, our Q1 results reflect a higher-than-expected Q1 GAAP tax rate of 27.3% and which was unfavorably impacted by a nonrecurring income tax expense related to the examination of prior year tax return filings. Turning to performance by segment. At FEC, adjusted operating income increased by $168 million, up 17% and adjusted operating margin expanded by 70 basis points. This marks the fourth consecutive quarter of year-over-year adjusted margin expansion for FEC. This was driven by higher yields, continued cost reduction efforts and increased U.S.…

[Operator Instructions] The first question comes from Jordan Alliger with Goldman Sachs.

Thanks for the color on the midpoint. I'm curious on the low and the high end of your EPS range. Is it simply a function of where it comes out in that revenue range? Or is there other things that could help impact where it winds up sitting?

Yes. Thank you, Jordan. It's John. I'll start by saying it's really important to note that we're basing this outlook on the information available today. We did center on the midpoint of our range and I think it's fair to say that where we ultimately land will be determined by a variety of variables. And I touched on them in some of my prepared remarks, including the evolution of global trade and its impact on demand, the health of the industrial economy, U.S. domestic demand and so forth. So it's not any one factor. It's a variety of factors, and we're going to be monitoring those closely. It's going to be a very dynamic environment that we intend to capitalize on.

The next question is from Ken Hoexter with Bank of America.

And thanks for the details on the cost there. I just want to dig into that a little bit to understand because if I look at the incremental margin growth of 4% to 5% -- 4% to 6%, yet the incremental operating gains are not keeping pace. So is that because of those the headwinds that you ran through, maybe, John, maybe you can refine that a little bit on the $1 billion cost, the $300 million headwind on the trade expenses? I just want to maybe parse that out a little bit further.

Sure. Yes, there will be pressure. I mean, what we're talking about here is $1 billion of headwind as a result of some of the environmental impacts. So our full year assumption, it does include the removal of the de minimis exemption for the rest of the world that went to effect in the end of August. But I think it's fair to say that, that $1 billion will be something that we'll be focused on, but something that will be a challenge for us as we go forward.

If I can add to that, Ken, I think that is a big headwind for fiscal year '26. We're doing everything in our power to make sure that we can improve our customer experience and mitigate the costs as we move forward. The underlying business is very strong as we move into '27 and beyond.

The next question is from Bascome Majors with Susquehanna.

Raj, you leaned a little further into the data side of the business post the hire Vishal I know we just started a month ago. I don't know if he's on the call or could talk a little bit high level about strategy, particularly where you're talking about finding new revenue models to monetize that part of the FedEx story? Or if not him, just a little more thought on where you're heading in that and how big a business that might be for FedEx going forward?

Well, thank you, Bascome, for raising that question. One of the things that we are clear about is the value of the data that we have. We move 17 million packages a day, 2 petabytes of data. As I said earlier, it's not just the volume of the data. It's the value of the data, especially in the dynamic world that we live today. The important thing is that we started this work back in 2020, and we started organizing and engineering this data on a platform basis for some time now. And that's what gives us the edge, especially as AI has now evolved and is moving quickly, the fuel for AI is data. And have engineered data and the high-value data of what we have is now super critical as we move forward. It's already bearing fruit. It's bearing fruit in our operations as deep learning models are enhancing our predictability. We couldn't have done Network 2.0 without the data platform that we have and the technology we have. It's already bearing fruit from a differentiation perspective. We have premium monitoring and intervention tools for our customers and the health care business that Brie's team is winning, 40% of them or on the around platform, which is essentially based on the data platform and AI tools that we have. We also launched the commerce platform FDX, and that essentially is now becoming a workflow tool for our customers or orchestrating their supply chains. And especially in this complex trade environment, those kind of -- it's the added value as we improve our value proposition for moving things across borders and being predictive using GenAI to create value from HS classifications and so on. That area is quite nascent, and we have a long road in runway ahead of us. So our mission and vision has evolved to make supply chain smarter for everyone. It begins with our data platform and the insights that we have on supply chain and the role of AI and the tools that we have. So I think as you look ahead, we'll talk more about this in February as it becomes an enabler for our operations, a differentiator from our customers' point of view, and new revenue models that we can create based on this. So thank you again for that question.

The next question is from Scott Group with Wolfe Research.

So any color on the magnitude of sequential earnings growth that you'd expect? And then just -- that was for Q2? And then just bigger picture. If I think about the last couple of years, we've heard we're reducing costs and growing earnings despite lower revenue. And then whenever we get the revenue growth the operating leverage is going to be really strong. And now we've got 5% revenue growth and $1 billion of cost reduction and buyback, but earnings are flat. I guess, why aren't we seeing the better operating leverage? I get the global headwind, but you're still -- you're growing revenue 5% even with that $1 billion global headwind.

So Scott, thanks for that. Let me start with the Q2. And we have focused our commentary on the full year guidance and are not giving Q2 guidance. But that said, as Brie mentioned, we're cautiously optimistic about peak season demand. And we do expect consistent with last year's sequential earnings improvement in Q2 and versus Q1 383, but we're not guiding to Q2 being up or down on a year-over-year basis. We expect continued benefits from our transformation-related savings and large trade-related OI headwind than in Q1 of the $150 million. But just pivoting to your second question on kind of the flow-through. I'll repeat what I said before, we're facing a $1 billion headwind due to the trade environment. In Q1, we experienced $150 million of that to adjusted op income primarily driven by reduced demand out of China on the U.S. lane. And so for the full year, and just to give a little bit more detail, we're assuming a material revenue headwind from the global trade environment. Operating income at the midpoint of the range will require us to execute, but there's going to be pressure. So the flow-through is not as great, given some of the pressures. The $1 billion is embedded in lost opportunity in our FEC volume net of cost line. The direct trade-related expenses for things like customers clearance and staffing and base expense increases. So there's a fair amount of pressure there from which we intend to deliver on and we'll be focused on staying in the range.

The next question is from Tom Wadewitz with UBS.

John, I guess it's maybe a little more on that same topic that Scott was just asking about. The global trade headwind, I still feel like I don't really understand what it is. If I look at your international export revenue, I think, was up a little bit in 1Q. And then I think on one of your slides you were pointing to some nice reduction in hours in flight hours on Asia, U.S. and both purple tail and white tail. So I guess it's not clear to me what that $150 million in 1Q is. It doesn't seem to be revenue. It doesn't seem to be clear where the cost impact is. So I really just wanted to see if you could just help us understand that a little bit better? And also why that gets meaningfully worse on a full year basis to like $1 billion instead of versus the $150 million in 1Q?

Tom, it's Brie. I'll take the top line question and then certainly let John kind of add in the color on the expense increase. So what we saw in the first quarter is the vast majority of that $150 million was impact from reduction in top line revenue. Specifically, the majority of that is de minimis impacted in coming out of the China lane. We anticipate that, that will continue to flow through the year. In addition to the $150 million per quarter as we are planning for incremental pressure because of the global de minimis change, which took place at the end of August, we've got $100 million of bottom line pressure throughout the year. And then we have $300 million of incremental expense. So to be really clear that $1 billion of headwind is predominantly an impact of top line revenue reduction because China to the U.S. is a very profitable lane for us. John?

Yes. No, Brie, just to add what I mentioned before, I mean, you touched on the direct trade related expenses of the $300 million for additional custom clears and related capabilities and also running through the base expense increases that coupled with the top line that you mentioned.

The next question is from Jonathan Chappell with Evercore ISI.

I think we're all trying to get to the same place here. So I'll just layer on top of Tom and Scott. If this is all the top line impact from the global trade $150 million in the first quarter, yes, [ $850 million ] for the rest of the year, which is close to $300 million. So it's almost doubling the impact in fiscal 2Q,3Q and 4Q. You have to get to the midpoint or even the low end of the full year revenue guide, the rate of change will have to accelerate from the 3% in the first quarter and your year-over-year comps and even 2-year stock comps are more difficult. So can you just help us bridge where the revenue acceleration comes from if this anomalous headwind is intensifying, potentially doubling? Is it all from price and yield? Are you expecting some significant volume pickup at some point absent the global tariff headwinds in de minimis?

Jonathan, it's Brie. So great question. So yes, we were very pleased with the 3% revenue growth in the first quarter. To get to the midpoint of 5%, first of all, we do expect the majority of trends will continue. So right now, what we're seeing in September looks a lot like August with a continuation of trend with a couple of really important notes. Number one, in the first quarter, we had a $280 million top line headwind because of USPS. That goes away in Q2 and beyond. Two, we are still onboarding some of the wins from Q1 -- or Q4 of last year and early Q1. And as I mentioned, as an example, Amazon is still onboarding and it had very little impact in Q1. There are several other examples of onboarding. And then in the back half of the year, we do expect FedEx Freight to have modest yield improvement and better than the first quarter or the first quarter and the second quarter from an expectation perspective. So we do think the midpoint is very realistic, and we're clear-eyed about how to get from Q1 to the rest of the year's range.

The next question is from Brandon Oglenski with Barclays.

Brie, I appreciate all those details. I was wondering if maybe you could walk through the outlook for domestic volumes on the package side again. And it's no secret that your largest competitor is shrinking here. So can you talk about maybe the competitive landscape? What's presenting for market share opportunities and pricing?

Great question. So from a domestic perspective, we're not -- and I'm speaking specifically to parcel. We're not expecting a massive trend chain. We are expecting, as I mentioned, the onboarding. I think you'll see the mix look very similar from a different package profile. A couple of things, the team has done a really good job from an execution perspective. We've had the best momentum in SMB in the last quarter that I've seen for a while, so that's helping our yield growth. From a yield -- the other thing to note is, of course, fuel was very helpful in the first quarter, and that will continue through the year. In addition to that, we executed some price changes that came in, in the middle of the quarter. and those will be helpful Q2 and beyond. So net takeaway, I don't see a massive trend change. This is self-help, if you will. This is market share, strategic profitable market share acquisition and we expect it to continue. To your point on price, we're really focused on winning with the value proposition. We're winning in health care. We're winning in small business. We're winning because of our 7 day. I think you all heard the Best Buy example. Pricing is improving in the market and I think very rational, competitive but rational.

The next question is from Chris Wetherbee with Wells Fargo.

I guess maybe I just wanted to ask about the range. So 4% to 6% on the top line and $17.20 to $19 on the bottom line. Midpoint is 5% of revenue for the midpoint of the EPS. Should we assume that 4% revenue growth lines up with 17.20 and 6%? Is it the $19 side? And then maybe just a quick clarification point. What exactly is the $300 million of direct related expenses on the trade side? Just want to get a sense of what that is?

Yes. Chris, it's John. I would not make that direct connection between the factor you described on the 4% leading to on the low end. As I said before, this is a dynamic environment. There's going to be a lot of puts and takes as we go forward here, and we're going to be aggressively monitoring and managing it. That was just -- we just gave one scenario. As we mentioned when we talked about how we get to the midpoint, there could be a number of others as well. With regard to your second question, I'm just trying to recall if you could -- the $300 million, yes, I'm sorry. That was customs clearance and related staffing and related administrative expenses as a result of adapting to the current trade environment.

The next question is from Richa Harnain with Deutsche Bank.

Okay. So regarding the top end of your guidance, you said it's predicated on the continuation of strength in domestic. I guess this question for Brie. You saw some of the best conditions you said since like COVID period, your pricing was certainly the best, we believe, since 2022. Volume growth third consecutive quarter of mid-single-digit plus growth in domestic volumes. Brie, you said SMB best momentum you've seen in while. So maybe you can help us understand what's really driving the share gain what do we need to see to make it sustainable? And then regarding the onboarded the business you're onboarding, what does it look like? What's the profitability profile, et cetera?

Thanks for the question, Richa. Honestly, from an execution perspective, we're really focused on strategic segments. SMB, we are selling direct. Our primary competitor sells through more platforms and third parties, and we've really seen some just outstanding execution momentum. We have a loyalty program that is highly effective and we've been very focused on making sure customers are aware and engaged in loyalty program, and that is working from a health care, that's why you're seeing the premium volume momentum that we have seen over the last 2 quarters essentially. So we're pleased with that. Health care is very sticky revenue. It is high service expectations very, very custom SOP and who it is profitable, but it's also very sticky. And then, of course, from an e-commerce perspective, you have seen that HD ground economy bundle working. We are growing there. We are faster than our primary competitor. We have rural coverage that they don't have. And of course, we now cover about 65% of GDP on Sunday. So really pleased with the team's focus, equally pleased with their revenue quality. We've been pulling pricing levers as appropriate and that definitely benefited us in the first quarter, and we anticipate that we'll get a high capture throughout the year. Of course, we're also planning very rigorously for peak surcharges are in place. They are working. The team has got a very, very focused plan for peak that I'm excited about.

The next question is from Ravi Shanker with Morgan Stanley.

A two-parter, if I may. On the de minimis, kind of what has been the customer reaction to the expiry of the rule? And do you think that is a new normal going forward? And also, does it feel like there's been much pull forward in international volumes that may have benefited you in fiscal 1Q? And kind of what does that kind of normal run rate look like for the next kind of several quarters as well?

Thanks for the question. I'm certainly not going to speculate on the future trade environment. But I will tell you, obviously, from a customer perspective, it has been a very stressful period. I'm really proud of our clearance operations team and our commercial team because they are lockstep with customers and has been particularly challenging for small exporters because they do not have the expertise and the staffing, and that's where our teams have come in and really partnered with them to help, as Raj talked about, automate some of their clearance inputs from a digital perspective. So we're very, very focused from a partnership perspective, but it has been -- it has been really tough on small customers and exporters. As far as the pull forward, I will remain optimistic the American consumer from our numbers has been resilient. We do not see any indication in either airfreight or our domestic parcel business that this is all forward. I will absolutely acknowledge July was quite strong for us, especially the Prime Week. We saw a lot of U.S. retailers sales in market, and they were affected. We saw strong volumes in July, but I don't necessarily see that as a pull forward. And like I said, right now, from our forecasting, we both peak in the back half, we're confident in the range we put out from a top line perspective.

Next question is from Brian Ossenbeck with JPMorgan.

Maybe Brie, just to start off by elaborating a bit more on the peak. It sounds like some of its visibility to maybe some of these new contracts that are onboarding, some of it's more of a the macro. So maybe you can separate just how much of the peak strength is FedEx related versus what you see in the underlying market? I think that would be helpful. And also maybe a little bit of context on freight. We didn't get too much color on that, but certainly a tough market and tough quarter, but it sounds like you expect things to stabilize and improve pretty significantly from here. So I wanted to get some additional thoughts on what's embedded in that outlook.

Okay. I think I got it all, Brian, but stop me if I don't hit all of it. From a peak perspective, yes, when we look at kind of the number of operating days in the season of peak, we are expecting kind of from an ADV perspective, sort of a low to moderate growth from an ADV, but total volume will be up because we have that extra day. I do think a relatively significant portion of this volume growth is our acquisition that we took in the back half of last year. And so you're going to have that lapping benefit for us from a peak perspective, I anticipate our numbers will be slightly elevated versus market. I also, from a performance perspective, we do see this driven by large B2C retailers and brands. That's definitely heavy from a peak perspective. Rest assured, we have the revenue quality strategy and the peak surcharges in place. The team has done really good job or lockstep with Scott Ray and the surface team to manage capacity and service. So we feel very good from a peak perspective. But to your point, I don't necessarily think that it is an indicator of overall market performance. From a FedEx Freight perspective, you've all tracked the pressures on the industrial economy, we are the FedEx -- where FedEx is the market share leader in the LTL industry. And so of course, we are feeling that pressure. The team's #1 priority at FedEx Freight and take this responsibility very seriously is revenue quality. We will have the benefit of the lapping in the back half. So we do anticipate that yields will increase in the back half, but we remain very disciplined and very focused.

The next question is from Bruce Chan with Stifel.

Maybe just one on the broader airfreight market. We've been hearing about some potential supply constraints as the global fleet sort of ages here. I guess, first, are you seeing signs of that? And then so how do you think about the flow-through with Tricolor. I imagine you've got some good flexibility to shift volumes sort of between the purple tails and third-party capacity.

Yes. From an airfreight perspective, again, we're a relatively small market share participant from a global airfreight perspective. We are being selective and really focused on premium freight I am particularly proud of the airline team this quarter. They shifted capacity and equally proud of the commercial team. We knew because of the trade environment that our China to U.S. lane, and we are the market share leader there would be pressured. And so we pivoted. We are growing between Asia and Europe, which is a large lane. We're being selective there. And then equally important on the Purple tail that we balance capacity, and the team did a really good job from a U.S. perspective. I'll give the health care team a shout out almost 50% of the weight growth from a U.S. expert perspective came from health care, airfreight, so our health care strategy is working there, too.

Bruce, if I can jump in on this Tricolor, if you remember the conversations that we have had before, the idea was to decongest the hubs and to have a truck-fly-truck network so that it links all our networks together optimally and densification of our network. All those are being tracked at KPI level very carefully, and I'm happy to report that the team has done a tremendous job and it's working. And that's what enables us to provide the value proposition to our customers to strategically and profitably grow in these segments. So again, we are in early innings on Tricolor, but the implementation has been stellar.

The next question is from Jason Seidl with TD Cowen.

This is [ Elliot Alper ] on for Jason Seidl. So in terms of Network 2.0 and heading into peak season, are you planning for any changes in the process like putting some stations on hold in busier markets as you work through peak. Could that affect any timing in terms of the cadence of the $1 billion in cost savings or anything to think about there?

Well, thank you for the question. We are very encouraged by the progress on Network 2.0. The Canada transition is complete and the service levels there are very strong. We're obviously moving forward in the U.S. market underway as we planned. There is no change to the plans that we have set in place. We have exiting Q1 with 18% of our U.S. ADV running through the Network 2.0 model. We have close to about 140 facilities and integrated 360 stations in the process. And at the end of the day, I want to -- that's pretty much as planned, and that's what we will continue to execute going forward. You had rumor that Network 2.0 is an efficiency story, but also a growth story as we improve our customer value and customer experience that this becomes what efficiency part of the equation and also ability for us to grow in this segment.

I think it's important to note, we never plan for a new optimization in the middle of peak. So our rollout schedule it's a given that, that just doesn't happen in peak because service is our top priority for our customers.

The next question is from David Vernon with Bernstein.

So John, I wanted to kind of come back to this question on operating leverage and try to help better understand the bridge that you laid out here. When we think about first quarter, is there anything in the comp on a year-over-year basis that may be added to the leverage, whether it's incentives or anything like that? And then as we think about the remainder of the year, right, obviously, there's a lot of things happening on trade and things happening top line, bottom line. Is the answer here of why we're not getting more leverage just that the mix is shifting to less profitable traffic? I'm just trying to kind of really understand this thing at a high level, like if we've got $1 billion worth of costs taking out that would offset the headwind and then we got 5% of revenue growth, like why isn't there more falling to the bottom line?

Yes. As I mentioned before, there's a variety of factors in play here, including kind of the opportunity cost of the hit to revenue as a result of the change in the trade environment. Mix shift is a factor to lower-yielding mix. But I should say it's profitable, it's profitable mix, I want to be clear on that. But that is certainly a consideration. But there's a whole dynamic environment of factors that are putting pressure on us that run the range that are factored into that $1 billion.

The next question is from Ari Rosa with Citi.

So just on the revenue growth target, maybe you could help us understand how much of that is coming from new business wins because I don't think that's been totally clear. So like is there a way to segment how much of the 4% to 6% is driven -- is organic versus kind of new business wins? Anything you can give us on kind of the margin contribution of that? And then if I can squeeze one other one in the $600 million of Freight spin costs, maybe you could just give a little bit of color on what that is?

Well, I'll start with the Freight spin costs and then turn it over to that like with any large transaction, there's a significant amount of cost that's incurred it's largely driven by the IT and the systems and enhancing the systems have freight to improve the customer experience. There are some staffing costs, but I would say those are small in the scheme of things. We talked about the sales force and so forth but largely IT-related and systems-related.

Yes. As far as the revenue range, it's a combination of factors, as I talked about. We've got execution from a share gain perspective, we've got execution on getting the right business in and the yield. The one thing that I can emphasize that as we look at the difference between the Q1 and Q2 through Q4, the domestic momentum. One of the larger factors there will be continued onboarding, but we'll also be pushing on yields.

This concludes our question-and-answer session. I would like to turn the conference back over to Raj Subramaniam for any closing remarks.

Well, thank you, operator. In closing, our Q1 results demonstrate our ability to support customers through this dynamic environment and I'm incredibly proud of the FedEx team for their outstanding commitment to our customers and for driving such strong performance in this quarter. I'm confident that the momentum we have established positions us well for the peak season ahead. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.