Good morning. My name is Steven, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the UPS Investor Relations Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise, and after the speakers' remarks, there will be a question-and-answer period. It is now my pleasure to turn the floor over to your host, Mr. Scott Childress, Investor Relations Officer. Sir, the floor is yours.

Good morning and welcome to the UPS third quarter 2018 earnings call. Joining me today are David Abney, our CEO; Richard Peretz, our CFO; along with Chief Operating Officer, Jim Barber, Kate Gutmann, our Chief Sales and Solutions Officer; our Chief Information and Engineering Officer, Juan Perez; and Scott Price, our Chief Strategy and Transformation Officer. Before we begin, I want to review the Safe Harbor language. Some of the comments we'll make today are forward-looking statements, and address our expectations for the future performance or results of operations of our company. These statements are subject to risk and uncertainty, which are described in detail in our 2017 Form 10-K and other reports filed with the Securities and Exchange Commission. These reports are available on the UPS Investor Relations website and from the SEC. During the quarter, UPS recorded a pre-tax charge of $97 million. The charge resulted primarily from transformation-related activities. The webcast of today's call, along with the reconciliation of non-GAAP financial measures are available on the UPS Investor Relations website. Unless stated otherwise, today's financial discussion will refer to adjusted results. Webcast users can submit live questions during today's call. We will attempt to answer questions of a long-term strategic nature. Callers are asked to submit only one question so that we may allow as many as possible to participate. Thank you. And now I would turn the call over to David.

Thanks, Scott, and good morning, everyone. I'm pleased to be with you today to provide an update on our results, our core business strategies and to reinforce our optimistic outlook for the business. We've had another productive quarter of continued growth with solid margins and strong free cash flow. In a moment I will discuss our progress on transformation and core business strategies. First, I'll provide a brief summary of the quarter's highlights which show positive and sustained momentum. The U.S. Domestic segment produced strong yield improvement as the initial impact of our disciplined pricing and improved customer mix lifted our performance. We continued to incur near-term expenses for the extensive upgrade to our U.S. network where we are opening a record amount of new highly automated capacity. The International segment in Q3 of this year generated higher revenue even on top of last year's exceptional growth level. Margins remained at industry-leading levels and we recorded our second highest Q3 operating profit ever, even with commodity headwinds and changing trade policy. Finally, the Supply Chain & Freight unit continued to deliver strong performance. These businesses benefit from revenue diversification, focused growth strategies and profitable market share gains, each contributed to the record segment results this quarter. As a reminder, we're using a structured transformation process to free up resources in order to enable and speed execution of three transformative business strategies. First generating higher quality revenue and improved customer and volume mix. We are focusing on growth with B2B customers in the most attractive market segments like SMBs, healthcare, e-commerce and high-growth economies. Second, using technology to increase efficiency in our global network operations and support staffs. And third, instilling a culture of continuous transformation to adopt new ideas, processes and speed our progress. We are driven to increase operating…

Thanks, David. I want to echo your recognition of UPSers involved in our extensive facility expansions and upgrades this year. The added capacity is a big boost to our peak readiness and they've done tremendous work on an accelerated timeline. As in years past, we expect record demand between Black Friday and New Year's Day. We have developed the most comprehensive plan ever and it's the product of a highly coordinated effort across operations, engineering, sales and many other parts of the UPS organization. Our plan fully considers the unique needs of those customers who like UPS flex their networks by up to nearly double to take advantage of this important time of the year. At the same time, we are keenly focused on our other customers who rely on UPS for reliable service to ensure healthcare, critical inventory, urgent repair parts or other important deliveries arrive on time. The strong economic environment is expected to drive retail sales higher this year with the U.S. market up between 4.3% and 4.8%, according to the National Retail Federation. We anticipate delivering nearly 800 million packages during the period. This year, we are preparing to deliver more than 30 million packages on 19 of 21 operating days. We expect to deliver more than 37 million packages worldwide on our peak operating day. The wave of volume we will manage requires about 100,000 seasonal employees and we've made great progress on the recruiting and hiring process. In fact, on October 19, we held Brown Friday and for the first time held simultaneous hiring events in 170 cities throughout the U.S. And we had strong interest from applicants who are excited to join UPS. Word is getting out about the opportunity that comes with a seasonal job at UPS. More than one-third or about…

Thanks, Jim, and good morning. UPS is taking actions to better serve our customers and enhance the financial performance of the company. This quarter's results reflect progress and our strategies focused on improving revenue quality and increasing efficiency across the company. These actions are creating higher levels of free cash flow and greater value for shareholders. Other highlights in the quarter include revenue quality improvements across all three segments, with total revenue up 8.4% on a currency-neutral basis. Overall revenue per piece increased 4%, and adjusted for currency it was up 4.5%. Supply Chain & Freight delivered another outstanding quarter. International, once again, produced industry-leading margins, and the U.S. Domestic segment generated sequential improvements in operating leverage. This quarter a transformation charge was recognized and it was more heavily weighted towards the International and Supply Chain & Freight businesses. The gains from the business this quarter combined with new transformation initiatives yet to be launched gives us great confidence in our ability to improve operating leverage in the business. The third quarter results benefited from several discrete items including tech that helped to offset unplanned international headwinds primarily from fuel and currency. Now I'll review the segment details. In the U.S., revenue growth was strong, up more than 8% with contributions from all products. Revenue per package was up about 5% with fuel surcharge adding around 190 basis points. Base rates expanded nearly 4%. Product mix improved during the quarter and continues to be a priority as we make progress on the core business strategies. Average daily shipments were up 3.3% as all products grew in the quarter. U.S. Domestic third quarter operating profit was $949 million as planned higher pension expense and project-related costs continued to weigh on the results as we expand our network. Importantly, the segment made…

I will now turn the program over to IRO Scott Childress to start the Q&A segment. Please go ahead, sir.

Thank you, Steven. So, our first online question comes from Brian Ossenbeck of JPMorgan. And Brian's question is, are there any new developments or progress made along the four strategic imperatives and efficiency initiatives outlined in September?

At the Transformation Conference, we talked about the four strategic imperatives and we put a lot of emphasis on the new one which is small and mid-sized businesses. So, to review the four, Scott and Kate, if you guys would talk about that.

Absolutely. This is Kate. I'll begin. We definitely saw continued improvement throughout the quarter tied to the strategic imperatives and the impact on customer mix as well as quality revenue, which to reinforce is what those strategic imperatives are focused on. We're proud to be the leader in SMB and investing to go even further for them. I'll give a couple of examples. We've expanded My Choice now to 112 countries worldwide, so taking that SMB globally connecting them easily to more consumers. And then also healthcare customers find a great application to that as well with home healthcare. E-commerce, B2B focus as well and we talked about My Choice for business which as you can see the reception rates (26:10) of the 51 million tied to the consumer side, we expect the same coming in the first quarter releasing the B2B application, again that global aspect of all of these to increase our revenue quality and our customer mix.

Thanks, Kate. The role of transformation is to provide the funding for investments in initiatives and platforms to support those four growth initiatives. So, in the area of e-commerce, David mentioned Ware2Go. I'd add to that the fact that in 12 months we're now able to offer 100% coverage to our customers with two-day service. In the area of growth markets, the announcement today around India which will allow us to take control of our destiny in that critical market moving forward. We have a multiyear program of initiatives that will bring both short-term/mid-term and as well long-term projects and look forward to making further announcements in future quarters.

Well, we've got another online question here. This question comes from Jack Atkins of Stephens. Can you walk us through what is driving the high free cash flow guidance for 2018 with the reiteration of your profit guidance?

Sure, this is Richard. And I think one of the great things about UPS is we're a great engine at cash generation and the ability to continue to not only create the cash of almost $9.4 billion in cash from operations year-to-date, but also the initiatives we took on around working capital and the almost $1 billion improvement. And we're continuing to work our initiatives around working capital, expect to continue to improve that. And that's all driving this improvement in free cash flow. It's important to remember in our business the way the business runs, there is seasonality to the free cash flow. And historically around somewhat near 95% of our free cash flow is earned in the first nine months. But we're excited about the initiatives and what they're doing to the cash generation of free cash flow and we expect that that will continue. Thank you.

We have a online question from the line of Mr. Ken Hoexter of Merrill Lynch. Please go ahead.

Great. Good morning. So, just looking at the network transformation, you detailed $97 million or you noted $97 million in costs during the quarter. Can you kind of detail what those were? And now that the Union contract is in force, are there any additional details you can provide on the transformation program or goals maybe that you were holding back at the conference given the ongoing vote?

Thanks, Ken. Scott here. So, let me just reiterate the comment that Richard made that this quarter the $97 million was mainly focused in our international markets. As you recall, we took a charge for the U.S. for the voluntary retirement program. The international area is really focused now upon realignment of our resources across markets. But we will continue to invest in technology that would help us modernize our back office initiatives, reducing the cost of the business allowing us to invest in our growth initiatives.

And, Ken, there is a schedule out that shows the distribution of the charge. And if you recall during the investor conference, we kind of laid out the range of charges that would occur over the next few years as we implement this. Because the local regulations across the globe are different, the impact of timing on the International was slightly different than the Domestic. But I think that they're all a part of ensuring that we have the incremental EPS growth of $1 to $1.20 that we laid out long term.

And are there any additional program goals that you're setting? Just to follow up on that part of the question.

So, Ken, we laid out the $1 to $1.20 and in that are the different – these are all a bunch of different actions in many different locations. And so it's a holistic to International and Supply Chain. They're all NPV positive and they all have the upfront cost as well as the paybacks that we expect. And they're around the modernization that Scott talked about and they're all part of that plan to get that $1 to $1.20.

Thanks for the time.

As we do business, there's continuous transformation, there will be more to come throughout the year next year and you will get more information as we develop and from that more of the initiatives. Thank you for the question.

Tom Wadewitz of UBS, please go ahead.

Yeah. Good morning. I wanted to see if you could – probably for Richard, if you could offer some thoughts on the magnitude of facility startup cost in fourth quarter. Obviously, you've got a lot of new sorting facilities coming online. And then, how do we think about that as a factor in 2019 for the Domestic Package margin? Do new facilities continue to be a headwind to the margin? Do you transition to having a tailwind to Domestic Package margin with maybe shutting some capacity at older facilities? So, I guess, some thoughts along those lines and new facility impact.

All right. So, let's start Richard, you're answering that. And then, Juan, I'd like for you to talk about the benefits of some of those same facilities and what they're going to do for us.

So, in terms of the fourth quarter, we recognize that we have benefits as some of these larger facilities do come online. But we also recognize there's one less operating day, and that less operating day is worth $60 million to – or $65 million to $70 million. So, overall, we do expect to see a continued improvement, but we have to recognize the change in operating day as well as some of the initial startup cost and training cost are layered into the fourth quarter. So, we're real comfortable at the 15% margin that we've given for the total enterprise and in that is the investment dollars as well as the benefits we're going to get. But it's all about the multiyear plan for these investments. Juan?

Yeah. Thanks, Richard. Thanks for the question. Just a couple of additional points there. Every one of these investments decisions we've made have been made on the basis of significant improvements in productivity. And what we've seen with prior automated facilities we built and the ones that are coming online now is anywhere between a 30% to 35% productivity improvement versus equivalent manual sorts. So, at the end of the day, when we go through these implementations, we do see two benefits to the organization. One is we bring that needed capacity to satisfy our customers' needs. But second, we see definite productivity improvements that are shown on our operating performance day in and day out. Thanks for the question.

We're going to take another online question here. This comes from – we've got a number of questions combined here. Please discuss how you think about the U.S. Domestic Package margins and factors that influence that as we move into the next year.

So, again, this is Richard and I think Tom's question also went to this point. And I think the important thing to remember on the fourth quarter is that as a total enterprise, we have taken into account that having a good peak, one less operating day during peak, and the investments in the network projects. At the same time, internationally, as I mentioned in the talk, we expect to see solid improvement. And we also recognize that emerging market currencies will have an impact. But we're going to overcome those with different initiatives and actions that we've already put in place in the business. And that's why we feel comfortable with the 15%. When you get to 2019, we're in the middle of finalizing our 2019 plans. It's a little early to give you the guidance on that. But I can tell you we're focused on improving our operating margin. And it's both in the actions we're taking on the top line, and you've seen the evidence of that this quarter as well as the smart logistics network investments and the returns we're getting out of that combined with transformation initiatives.

Our next online question, it's multiple analysts that ask it, can you discuss your core pricing trends in both the U.S. ground and International business?

So, this is Kate. The U.S., I'll start with, experienced strong revenue growth of 8.1% as our high demand was shown for our solutions. And tied to that we also generated strong yield improvement as a result of our sales and revenue management actions which we've been talking about. You've seen the last three quarters now moving from near 3% to now 4% base pricing increase this quarter. So, definite demonstration of continued alignment of our value, our cost and our pricing for our customers. Turning to International as well, we've seen revenue per piece currency-adjusted at 5% supported by that strong base pricing. And so our actions are resonating in the market. Our solutions and the value that we provide to our customers are catching hold as we've demonstrated over the last three quarters.

David Vernon of Bernstein, please go ahead. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Hi. Good morning, guys. Wanted to ask about the International segment, obviously the currency and emerging market impact in 3Q kind of brought in the number below, I think, what distributors are broadly expecting. How should we expect the next couple quarters to roll from that? Should we be expecting operating profit to be up on an adjusted basis as we kind of look over the next couple of quarters? Or is that going to take more time? And then, maybe as a secondary question to that as well, how do you get comfort that this emerging market risk isn't just the initial sign of a broader international slowdown that may make it harder to actually grow operating profit into 2019 in that segment?

Yeah. So, I'll start, David, and then I'll give it to Jim. But I think the first thing you have to remember is the biggest and the majority of the impact was around currency and fuel. And there are already actions that we're taking. One of the important points on – in a place like Turkey where you saw a 60% devaluation of its currency about during the quarter and it started midway through the quarter is that our export shipments are tied to the dollar. So, every month even though we bill in lira, we're billing it in equivalent USD. And so we've taken some other actions around the emerging markets and initiatives to ensure that we can overcome that and that's one of the reasons we've called out the guidance for the total company to remain where we expect it to be even given this new headwind. The other side of what you ask about is because of that we know that fourth quarter will improve over last year. We expect it will continue that way. And another important point is about 70% – just under 70% of our international revenue is volume and revenue that moves across the world is really not coming into or out of the U.S. And those were all parts of the diversification of the portfolio that helps – gives us confidence that as these things happen we see customers making changes. Jim?

So, David, I'd just hit right out of the gate, our confidence in the international hasn't changed one bit based upon the quarter we just reported. There's some unique headwinds, Richard talked about those. Recall last year there were some market conditions in Europe that gave some lift to that big piece of our business that we're having to wrap that comp. But quite frankly, the fundamentals and the growth through the emerging markets across this world doesn't change at all. You mentioned risk and no question about that that comes with the expansion of a business to certain parts of the world. But that's why our network is also flexible to move and is designed to go where the trade patterns go. And obviously we may talk about that tomorrow in the call, but we really do feel like the international focus on top of and with the emerging market strategy is one that's going to live for us for many, many years in the future and one quarter doesn't change our outlook on that.

We're going to take an online question here. This question comes from Kevin Sterling of Seaport Global. Any impact positive or negative with the U.S. pulling out of the Universal Postal Union?

Yes. This is David. And I would say especially when you look at those from the perspective of the U.S. small and mid-sized business, this is big, big news for them. We do believe the administration took the right step to address the UPU terminal due system of inequities. Foreign postal operators should not have any kind of government-approved advantages in a competitive market. It's one of the reasons we've been advocating for the administration to impose self-declared rates. And self-declared rates would mean that the foreign shippers would have to pay the same rates once the package entered into the United States that domestic small and mid-sized shippers have to pay. And we really believe that's leveling the playing field for them and we think it's a step in the right direction.

We're going to take a online question. This is from two analysts that had similar questions, Ben Hartford of Baird and Helane Becker of Cowen. Are you witnessing any inventory pre-planning or a pull-forward ahead of any of the planned tariffs?

I guess, Ben and Helane, I'll start and then Kate can add on a couple of comments. I think the short answer is yes. The question is, the order of magnitude and how far it goes. If you look at U.S. Census Bureau data for all of the months this year, sequentially since about February the inventories have built up, last couple of months have been the highest month-over-month sequential growth rates. In addition – and you can see also obviously in the inventory to sales ratio numbers and the movement there. But we are – in working with our customers largely in Asia right now, we are seeing some movement in decisions around where they're actually manufacturing and moving supply chains in anticipation of what January may bring. So, the best-case scenario is they have options. They can move that and our job is to make sure our supply chain is set. So, the answer is yes, and I'll have Kate add a few comments as well.

Yeah, thanks. And I'll just reinforce our global network and our solutions approach enables these discussions. And the discussions have increased. Our optimization studies are up that help customers to determine where to put the locations of either their – where their sourcing occurs or where their distribution occurs. But the network allows them to also expand into new markets. So, Richard talked about some of that revenue diversification that we have. Our customers work to try to have that same security and that's we assist them with. We are, as Jim indicated, having also discussions and seeing mostly in the industrial manufacturing space some pre-advancement trying to beat the January tariff change. But that again, really we're seeing it just flow between our services. Thanks.

We have a question from the line of Allison Landry, Credit Suisse. Please go ahead. Allison M. Landry - Credit Suisse Securities (USA) LLC: Good morning. Thanks. In terms of the domestic, express and specifically Next Day, but I guess this – also for the deferred business, you've seen quite a number of quarters consecutively in terms of strong volume growth which I think indicates secular trends driven by e-commerce. So, I wanted to ask about your ability in that specific market to maybe push price even more than perhaps you have already.

Yeah. Thank you for the question, Allison. This is Kate. So, first of all, I'll reinforce that the demand for our services was across all of our products. Next Day Air certainly was leading, but followed closely by our ground products. And the majority of our customers, 95% actually use ground and air. So, we don't find a single customer using a single service that often in our customer base. But we have continued to work customer-by-customer as well as via the industries to increase the pricing as we've seen in the last three quarters in all of our products. And then the second point I would make is we're seeing that growth coming from all industries. So, healthcare is actually growing quite a bit in our Next Day Air product as our reliable service helps them to take care of their critical product. So, thanks for the questions.

So, we've talked about the demand and the ability to price. Obviously, the other part of that is to service that additional volume and to give our customers a very positive experience. Jim, why don't you talk about what we're doing from an air standpoint?

No problem, David, like to. Obviously, we haven't talked yet about peak. I'm sure we will, if not before this call is over or after certainly. But ultimately our integrated network has to go hand in hand ground with the air network. And over the last year, we have invested, as most would know, on the 747-8s to cascade back to the U.S., but we've also opened a number of regional facilities from a capacity perspective. So, as Kate talked about the top line, we also have a real obligation from an operating leverage perspective to get the efficiencies through the network. And as we enter this peak season and where our air service is performing right now, it is a service which we're proud of at UPS and our customers are telling us that which is a great indication of one of the angles you look at in your preparation for peak season. So, it is the top line, the bottom line and the service altogether in the air, but it also drives right in the ground network. So, we look at it altogether obviously.

We've got another online question from Lee Klaskow from Bloomberg Intelligence. Can you please provide some more details about the India acquisition that you announced on the call today?

Yes. Thanks, Lee, for the question. So, we see again India as a great example of investing into our growth market imperative. It leverages the enormous power of our U.S. platform. We're not number one outside the U.S. and we see that as an enormous opportunity. So, as we control our destiny now with 100% ownership of the India business, we'll continue to build out that market as a significant part of our growth moving forward.

And this is Jim. Let me add on to that. A few years ago you would have taken a list of us creating the Indian subcontinent, Middle East and Africa regional business unit. And the setup of that was in anticipation of us taking the step at some point in the future. And as Scott says, it is certainly a unique day for us. We've been there for 30 years. We've had the ownership rights of our supply chain, but the express business we've been wanting and moving towards this. And so it really does allow us to actually look at the air and the ground network again like we normally do from an integrated perspective and we're looking forward to growing that business. As India and an economy continues to grow, we participate in it.

So, you can tell there is a lot of passion here. But this is – as they have said, this is a two-step process. First is we have control of our operations there and we believe there's even more we can do for our customers. And then second is what we decide in the future to add on to our capabilities. And that's where in this fast-growing economy that there's just a lot of potential and it is aligned directly with our global markets initiative or imperative. Thanks for the question and...

We're going to take another online question here. This question is from Keith Schoonmaker from Morningstar. It's a question about automated sorting. The new Atlanta hub is large and highly automated. Within a couple of years, what portion of your U.S. volume will flow through automation?

Hey, Keith. Thank you for the question. This is Juan Perez. Really an important aspect of our strategy has been to build these automated capacity across the network. And quite frankly, we're well on our way in building our smart logistics network. And our people are extremely busy and they're in building and operating these new facilities. Really excited to see what's happening across the network. And let me just put it in perspective. At the end of 2017, 50% of the eligible ground volume was going through automation. By the end of this year, we will be at 70% approximately of our eligible volume going through automation in the organization. This year, we've opened automated facilities in Texas, in South Florida, in Phoenix, Atlanta – you mentioned that in your question -Salt Lake City, in California, in the Northwest, and many other locations. And our strategy to build automation hasn't stopped only here in the U.S. We've also gone internationally with opening automated facilities in London, in Paris, in Eindhoven and most recently in Montreal. So, the strategy to automate is alive and well. It's critical to the build-out of our smart logistics network and we're excited about the future capacity and capabilities that this automation will bring to the company. Thank you for the question.

We're going to take another online question. We've had a number of questions come in around peak. So, let me paraphrase a little bit here, Brian Ossenbeck, Helane Becker as well as Chris Wetherbee from Citi. What is the next evolution of managing a successful peak season in the U.S.? And how has the hiring process been so far in the preparation?

So, this is Jim. Let me start and I think it's appropriate given some of the comments about this being the most comprehensive peak plan ever and obviously between David's comments and mine about coordinated efforts across operations and sales and so on and so forth. I think that if you talk about the next evolution, I think the answer to that is we're in it right now in this peak season. We've taken a look obviously as we would as UPSers, that the last couple, we've been constructively dissatisfied and our goal and commitment is to have this peak be the peak we all wanted to be first through the eyes of our customers. And it's about giving them the service that we commit to every week of the year and we plan to do that. The two key differences and because – in my mind there are about six or seven of them, and I think it's appropriate. I'll take a couple, Juan will take a couple and Kate, because not only would you as investors ask us what's different, our customers ask us what's different. And the first and foremost situation is we've recognized very clearly that we must match demand to capacity and capacity in a different way than we have in the past. And we have done that at the origin and destination. And secondly, our air network must be running at an optimal level as we enter peak and those situations have taken place. And we feel like we're in a great place. We mentioned in some of the opening comments that the 100,000 employees, we're 60% to 70% of where we will be at the end and it's exactly where we want to be. We held our first-ever Brown hiring last Friday. Our applicant flow went up fivefold on the day and it will take us a couple of days and a week or so to process all the applicants, but it was a great, great success for us. And so those kinds of first steps start to frame in my mind the next evolution of peak. And I'll let Juan and Kate add from their perspective a couple of other key points.

All right, Jim. Thank you. I'll add a couple to really position how we're using technology and automation to help us through peak. I already talked about the capacity that we're adding in terms of automated facilities throughout 2018. That domestic ground sort and package car capacity is significantly higher than last year. David and Jim mentioned already that we're adding 350,000 packages per hour here in the U.S., 400,000 packages per hour in total across the world in terms of our sort capacity throughout the network. So, that definitely is going to help. Our service is strong. We intend to carry that momentum into the peak season period that will definitely help us as well. And we're implementing a number of new technology enhancements to support peak season and execution in all aspects of the business, definitely in delivery, in sortation and in planning. The planning process at UPS for peak season is a year-round effort and, of course, execution is also something that needs to happen throughout the year to support peak. We're strong going into peak season this year; that will help. And in terms of our technology, we're also making a number of enhancements to our customer technology from a visibility standpoint and also from a capability standpoint. And we've mentioned My Choice before, but I will tell you that we're really proud of the fact that we now have 52 million My Choice customers. And those subscribers will get great capabilities in terms of managing their shipments throughout peak season. So, excited about those things and, Kate, I know you have a few other things to add.

Absolutely. I'll talk about – we've mentioned customer collaboration before, but the difference of this year is we are now capturing 80% of the volume during peak season through the collaboration this year. That's up 13% from last year, so distinctly different. And it is including both origin and destination lanes in the forecast. I will tell you also working with Juan's team, we have new tools to control the pickup equipment and assets to ensure volume management on critical days that we know are market constrained and also then saying yes and how to our customers on days where there is more market capacity and available capacity at UPS. Our customers are absolutely bought into this. They understand the impact that over time costs have on their operations, and we are working together to shift to those days where available space is available. And then also I should reinforce the peak surcharge that we put into place to ensure that our value during this critical time aligns with our cost to serve and that is in our pricing and we've worked through with our customers those needed levels. So, we are looking forward to a successful peak season.

Well, we got another online question here, this one is around the new product offering Ware2Go. What is the addressable market size for Ware2Go? And what UPS services do shippers on this platform typically utilize?

Thanks for the question. This is Scott. It's a very exciting market. We value it at $26 billion. And to me that's a starting point. 58% of small and medium-sized B2B sellers have told us that in the next five years they're looking to outsource their fulfillment. And from a UPS perspective, this really represents our ability to vertically create platforms that create much more valuable SMB business. I'll refer to it as the Airbnb of warehousing. There is a lot of underutilized warehouse space in the United States with fulfillment capability. We match our customers to that capability, giving them one more flexibility. It requires less working capital, it improves their service levels. And for us it improves the amount of SMB B2B business that we're building into our network growth. So, it's really – it's an exciting opportunity as we look forward into the future of our growth imperatives.

We've got another online question here. This question comes from Dave Ross of Stifel. Can you provide an update on Coyote Logistics as well as the Supply Chain & Freight business?

So, this is Jim. I think, first of all, I'd like to say we're really proud of last quarter's results all the way around on behalf of all the stakeholders in Supply Chain & Freight, obviously a focus here of operating profit up 30%. Year-over-year this garners attention. But it does remind me quite frankly having the great opportunity to lead both international express and supply chain of where supply chain is on the maturation and they are moving in the great direction. You can see it in forwarding, you can see it in logistics and obviously freight. Underneath all of that, obviously, are our two most recent acquisitions of Coyote and Marken to add into – to bring us into a very large market on the tail of Scott's comments on distribution of truckload brokerage and it's large and it is – we are exceedingly proud of the team of Coyote and Jonathan running that team today and entering into the space. They also help us immensely at peak season. So, we couldn't be more bullish on the Coyote acquisition. And Wes and his team at Marken are adding on to our healthcare suite of opportunities lead through clinical trials. So, the whole Supply Chain segment had a great quarter. And it like International for us, remember lot of global in there as well. That's a lot of emerging market potential and for our customers to move their supply chains, I think we're going to see some good improvement continued into this like we had at International in the past. So, appreciate the question.

We've got one more question here. This will be the final question we'll take. Any increase – given the increased number of senior executives that have been brought in from outside UPS, how do you balance the mix between the outside perspective and the internal?

Yes, Brian, this is David. The keyword is balance. And we have felt like the business is changing so much and all businesses are that we did need to bring in some best outside talent which we have and to combine that with this just a great reservoir of talent that we have within our company. And so we've promoted some new people as we've had retirements and we changed Jim's job. And so it is really going to be in the future just a balance between the two. And as we have each position that we need to fill, we will take a look at it and – but very happy with the way that this team has gelled and blended together. And I know that this is the team that's going to successfully transform UPS. I mean, we're really excited about being able to share that with our investors and those on the call over the coming months and years ahead. So, thank you.

That concludes our Q&A for today. I will now turn the program back over to Mr. Childress. Please go ahead, sir.

Thank you very much, Steven. David, any final comments?

Yeah, so I will make a few. And we can't close the session without talking about transforming. And we are transforming to better enable our strategy, high-quality revenue and more efficiency. And we've made great progress this quarter, and revenue yields improved across all segments led by the U.S. Domestic, which I thinks says a lot. We opened our second largest highly automated ground hub just recently along with many other facilities that's going to certainly play a key role in our peak this year. We continue to see strong growth opportunities throughout our four strategic imperatives. As we help our customers with value-added supply chain solutions that cover the globe, we're focused on executing these new peak strategies that benefit our customers and shareholders. And we'd like to thank everyone for joining us on the call today.

Have a wonderful day. You may now disconnect.