Jim Cochrane USPS Chief Marketing and Sales Officer and Executive

Vice President

Pacific Area Focus Group Meeting Napa, Ca.

March 1, 2016

1 - Estimated.

2 - Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

September YTD (12 Months) FY FY

(Billions) 2015 2014

Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 66.4$

Temporary Exigent Surcharge 1 2.1 1.4

Total Revenue 68.9 67.8

Expenses 2 67.7 66.4

Controllable Income (Loss) 2 1.2 1.4

Retiree Health Benefits Pre-Funding (5.7) (5.7)

FERS Unfunded Liability Amortization (0.2) -

Workers' Comp. Fair Value Adj. (0.8) (0.5)

Workers' Comp. Other Non-Cash Adj. 0.4 (0.7)

Net Income (Loss) (5.1)$ (5.5)$

Financial Results:

Total Revenue

2

Financial Results: FY-15

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

FCM Single-Piece FCM PresortLetters & Other

Standard Mail Other (includesPeriodicals)

Total Shipping &Package

International Mail

21.7

42.1

80.3

6.5 4.0

0.9

20.6

41.9

80.0

6.3 4.5

0.9

Pie

ces

- B

illio

ns

FY2014 FY2015

FY2014 155.5

FY2015 154.2

YTD FY2015 has the same number of weekdays, Saturdays, & Sundays as compared to YTD FY2014.

Volume:

September YTD FY2015 vs. SPLY

-5.5% -0.5% -0.3% -4.5% 14.1% 5.2% % Change

3

Volume: September YTD FY2015 vs. SPLY

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

FCM Single-Piece FCM PresortLetters & Other

Standard Mail Other (includesPeriodicals)

Total Shipping &Package

International Mail

$10.6

$17.9 $17.4

$5.5

$13.5

$2.9

$10.2

$18.1 $17.6

$5.1

$15.1

$2.8

$ B

illio

ns

FY2014 FY2015

FY2014 $67.8

FY2015 $68.9

YTD FY2015 has the same number of weekdays, Saturdays, & Sundays as compared to YTD FY2014.

Includes Exigent Surcharge

Revenue inding Exigent Surcptember YTD FY201

-2.9% 1.2% 1.3% -7.3% 11.4% -5.5% % Change

4

Revenue including Exigent Surcharge: September YTD FY2015 vs. SPLY

Financial Results Quarter 1 FY-16

2

1 - Estimated.

2 - Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

December YTD (3 Months) FY FY

(Billions) 2016 2015

Revenue (Excluding Temporary Exigent Surcharge) 18.8$ 18.2$

Temporary Exigent Surcharge 1 0.6 0.6

Total Revenue 19.4 18.8

Controllable Expenses 2 18.1 17.7

Controllable Income (Loss) 2 1.3 1.1

Retiree Health Benefits Pre-Funding (1.4) (1.4)

FERS Unfunded Liability Amortization (0.1) -

Workers' Comp. Fair Value Adj. 0.4 (0.8)

Workers' Comp. Other Non-Cash Adj. 0.1 0.3

Net Income (Loss) 0.3$ (0.8)$

USPS Market Dynamics and Strategic Response

Remaining

Future-Ready

The rate and amount

of innovation in the

past 30 years has

been greater than in

the previous 30,000

years

Technologies have

given the world quick,

cheap tools to create

the future faster.

Top technologies are

accelerating disruption

and changing

everything

Disruption is the New Normal

Consumer Behaviors are Changing Rapidly

Customers Seek Instant Gratification:

On-demand, Same-day, Next-day Delivery

Customer-Centric Convenience

PROMPT, RELIABLE SERVICES

TRUSTED, SECURE, RESPECTED BRAND

CONNECTING & INFORMING CITIZENS & COMMUNITIES

CONVENIENT, AFFORDABLE UNIVERSAL SERVICE

HELPING BUSINESSES CONNECT & GROW

USPS MISSION:

The Unrivaled Network

11

POST OFFICES PROCESSING CENTERS

VEHICLES EMPLOYEES DELIVERY POINTS

31,000 300+

485,000 153M 210,000

Delivering 40% of the World’s Mail

USPS Global Footprint

PROCESSING EQUIPMENT

8,500

13

Printers & Mailers

E-Commerce Retailers

Logistics

Software Vendors

Mail Service Providers

Advertising

Delivery Ecosystem Global

Market Share Trends

Shipping

14

Research indicates that e-commerce will continue its double-digit

annual growth

Source: McKinsey Forecast April 2015

E-commerce Sales ($BN), Actuals (2005 – 2014) and Projected (2015 – 2019)

Trends Driving Online Sales Growth

• Increased returns • Online grocery • Online / mail-order prescriptions

Trends Eroding Online Sales

• Increased online data delivery (primarily documents) • Decreased B2B and B2C publishing and printing (education and eBooks)

• ship-from-store growth • Increased demand for small parts • Increased B2B healthcare shipments

Key Findings

• Forrester projects e-commerce is to experience CAGR of 10% over the next 5 years, translating to $480B in online sales by 2019

• Forrester expects online retail sales in the U.S. in 2015 to account for for 10% of all sales, totaling $334B

Source: Forrester Research eCommerce Forecast, 2014 to 2019

Overall eCommerce Growth, Projections and Growth

E-commerce Growth: Packages

Source: McKinsey Forecast April 2015

CAGR for Subcategories Projected Growth Rate

Ground 5.2%

Deferred 3.4%

Express -1.8%

Same Day/ Next Day 8.8%

Shipping costs will increasingly play a role in business decision making as online

retailers seek to minimize rising shipping costs

Key Statistics for Projected Ground Shipping Growth

• 50% of shoppers will abandon an online order if it doesn’t qualify for free shipping

• 58% of online shoppers cited “shipping costs made the total purchase more than expected” as reason to abandon online shopping care Source NPD Group, BI Tech, http://www.businessinsider.com/chart-shipping-costs-are-a-top-

reason-people-abandon-their-shopping-cart-2014-7

E-Commerce Growth by Category

Lightweight categories are the fastest growing products within e-commerce

Source: The NPD Group/Consumer Tracking Service, 12 months ending December, 2014; Colography Market Share

Share by weight (FY14 data)

-10%

0%

10%

20%

30%

40%

Year Over Year % Change and Dollars ($BN)

$3.7 $4.3

$33.8

$7.8 $1.3 $2.6 $4.5

$1.1

$14.2

$3.1

$10.3

$1.8

$29.3

Year over year % change

Dollars — 12 months ending Dec. 2014 (proj.)

+4% growth in total market 2012-2014

USPS accounts for 61% of all e-commerce deliveries

Market Share Trends

18

SOURCE: FYDomesticAir-Ground_qtrly_USPS13879

Domestic Package Market by Carrier (FY15) (Delivery View)

USPS FY15 consisted of 4.3B pieces and $14.9B in revenue, with the

largest revenue contribution from 2&3 day air.

Shipping Market FY15

Note: FY2015 ends in September 2014)

9,652,280 10,391,878 10,445,755 11,219,169 12,002,322

Domestic Package Market Share – Volume (Ground Delivery View)

31.12% 31.47% 33.37% 33.35% 35.69%

44.77% 45.98% 43.42% 42.91% 40.92%

22.15% 20.75% 21.42% 22.05% 21.80%

1.96% 1.80% 1.79% 1.68% 1.58%

2011 2012 2013 2014 2015

SOURCE: Colography DQM DomesticAir-Ground_qtrly_USPS13508, FYDomesticAir-Ground_qtrly_USPS13879

USPS has grown its market share year-over-year in each of the past five

years, while UPS share has declined over the same time period.

Package Market Volume

Total

Mkt,

000s

The Delivery Landscape is Disrupting

Crowd-sourced Delivery. Regional and Leisure Carriers. 21

The Media Landscape is Disrupting

MEDIA DOLLARS ARE GOING DIGITAL

Source: MAGNA Global: US Advertising Marketing Growth Forecasts 2013-105

Forrester Research Digital Marketing Forecasts; eMarketer

In 2015, $58.6B in digital advertising - on track to out perform TV by 2019

Media Growth (US$)

2013 2014 2015E

Digital % shift 17% 15.4% 19.1% UP

Mobile % 110.2% 74% 52.6% UP

(incl. in digital)

TV % -0.6% 3% -2.9% DOWN

Radio % -1.2% -3.3% -2% DOWN

Newspaper/ %

Magazines

-7.8% -10.7% -11.2% DOWN

THE GROWTH OF DIGITAL

Source: eMarketer (www.eMarketer.com)

Note: Age 18+ time spent. April 2014.

Media/Daily Time Spent

2010 2012 2014

Digital % time 29.6% 38.5% 47.1% UP

hh:mm 3:11 4:33 5:46

Mobile %

(incl. in digital) hh:mm

3.7%

0:24

13.4%

1:35

23:3%

2:51 UP

TV %

hh:mm

40.9%

4:24

39.2%

4:38

36.5%

4:28

DOWN

Radio %

hh:mm

14.9%

1:36

13.0%

1:32

10.9%

1:20

DOWN

Newspaper/ %

Magazines hh:mm

7.7%

0:50

5.4%

0:38

3.5%

0:26

DOWN

DAILY TIME SPENT ON DIGITAL

THE GROWTH OF DIGITAL

*****Consumers look at their device 125 times/day

Delivering Customer Value

In the Digital Age

25

Relentlessly Focus on the

Customer

Equip, Engage & Empower USPS

Employees

Innovate to Deliver

Value

Invest in our Future

Our Commitment

4 Focus Areas 26

Physical to Digital Mail Promotions

Customized Shipping. Simpler Returns.

Total Real Time Visibility

27

Utilizing Data to Personalize an End-to-End Customer

Experience

Across Channels, Across Industries, Across Physical and Digital Domains

Integrated Industry

Personalized, Robust, Marketing Experience

AWARENESS EVALUATE & SELECT

SHOPPING EXPERIENCE

POINT OF SALE & DELIVERY

SERVICE & LOYALTY

Physical, Tactile Mediums Enhance the Buying Experience

Targeted, Time-sensitive

Promotion

The “Wow” Moment Seamless Buying Experience

Timely Delivery

Measure & Tune

Mail represents a tangible touchpoint.

Take advantage of timely promotions to drive your customers to buy online.

Bridging the Physical and Digital for Ubiquitous Commerce

31

32

Mail has a

100% reach

It amplifies

other media

Mail is a proven

media channel

for campaigns

Maximize our share of the projected Political

expenditures by campaigns of $12.3B

SUPPORT

How We Can Help You Win …

DelivertheWin.com – online platform promoting direct mail through support materials including white papers, case studies, etc.

Political Mail Dashboard (2016) providing real-time processing and delivery visibility, with tools for analyzing and sharing data

Webinars highlighting key political industry topics

Continued Operations Support throughout

Predict when mail will be delivered

Track and analyze mail

Real-time-data on when mail drops to tie to

other campaign activities

Access and customize data to incorporate

into voter files, share with campaign team,

develop reports

USPS POLITICAL MAIL DASHBOARD

What will motivate greater use of mail?

Equip, Engage & Empower

Equip, Engage & Empower USPS

Employees

4 Focus Areas 35

Investing in Our Employees

Training

Business Connect Engagement Program

Highly interactive training to build on the foundation of Premier Office training $310M Employee

Engagement Revenue (Program to Date)

Postmaster Essentials Postmasters EAS 18-20 Training Topics: • Leadership • Operational • Knowledge Application

• Efficiency • Product Knowledge • Courtesy

Innovate to Deliver Value

Innovate to Deliver

Value

4 Focus Areas 37

Next Generation Mailbox

Customized Delivery Markets

Informed Delivery App

Ship from Store (Next Day) 20 customers with over 8,439 stores served

• Trips to the door have reduced from 42% to 12%

• Improves customer satisfaction

Give the recipient a view into what they’re receiving that day

• Amazon Fresh (Grocery Delivery)

• Averaging 5,849 deliveries with over 26,000 per week

INFORMED DELIVERY

39

Pilot Overview New consumer service that enhances hardcopy mail

Informed Delivery is appealing with high levels of satisfaction

Over 90% say...

- They check and view delivery notifications once a day or more

Over 80% say…

- They are “very likely” to continue to use Informed Delivery

Registered Subscribers: 65,000 (23k receive email alert)

Average Read Rate: 78%

Average time open: 1 hour after sent

Participating Mailers

INFORMED DELIVERY: NY UPDATE

41

• Mailer ID on letter size mailpiece

• Image to display for click through

• URL: where customer lands

• Start and end date of image being

used

• Image of flat mailpiece (flats are not scanned today)

• Contact Bob Dixon for assistance

(Robert.E.Dixon3@usps.gov)

Getting Started as a Mailer

Product Simplification: Ideas That Promote Ease

of Use and Revenue Growth for Industry

42

January 2017 • Subtle changes that eliminate redundancy • Structural changes • Mailing standard changes & clarifications • Align with current mail prep and processing operations

Ideas under evaluation • Merge AADC and 3Digit presort auto letters into one category • Move to piece/pound structure in Standard Mail • Create 3rd ounce free for First-Class Mail • Eliminate piece/pound pricing for 3.3 – 3.5 oz weight breaks in

Standard Mail auto letters

Invest in our Future

Invest in our Future

4 Focus Areas 43

Investing in the Future

Informed Visibility From Induct to Delivery – Giving Customer Visibility of Mail

Mobile Delivery Device 225,000 Fully Deployed (Sept 2015)

Small Package Sorting System 31 Total Systems (21 by Peak 2015)

Next Generation Delivery Vehicle Request for Proposals (Sept 2015)

A brand is created through experiences and the people who deliver on it everyday

45

Questions?

46