National Catholic Development Conference Postal Update September 29, 2017 Stephen Colella Vice President Postal Affairs The Calmark Group

Discussion Topics Postal Leaders and Board of Governor Update USPS Financial Review Update on Postal Reform Legislation PRC Review of PAEA Postage Increase-January 21, 2018 2018 Promotions Move Update/Change of Address Assessments USPS New Product-Informed Delivery Questions

Postal Leadership Postmaster General and Chief Executive Officer — Megan Brennan Deputy PMG and Chief Government Relations Officer — Ronald Stroman Chief Customer and Marketing Officer and Executive V.P. — Jim Cochrane Sales and Customer Relations Senior V.P — Cliff Rucker Product Innovation V.P. — Gary Reblin Marketing V.P. — Steven Monteith Chief Operating Officer and Executive V.P. — David Williams Chief Financial Officer and Executive V.P. — Joseph Corbett Chief Information Officer and Executive V.P. — Kristin Seaver General Counsel and Executive V.P. — Thomas Marshall

USPS Board of Governors Postmaster General and Deputy Postmaster General 9 political appointees Nominated by the president Confirmed by the Senate-Any Senator can put hold on nominee All political appointee positions unfilled Last governor’s term expired December 8, 2016 Major decisions can’t be made except by governors “Temporary Emergency Committee” approving rate increases No nominations yet in the new Congress

USPS Finances through Quarter 3 2017

Total Volume: FY2017 June YTD vs. SPLY June YTD has one less delivery and retail day compared to SPLY. * Other primarily consists of USPS & Free Mail at ~287M pieces for FY2017 YTD. FY2016 116.9B FY2017 114.0B FCM Single-Piece Presort Letters & Other Marketing Mail Total Shipping & Package International Other * (incl. Periodicals) 2.9B

“Our financial problems are due to the restrictive laws than prevent us from fully responding to the changes in consumer behavior.” Postmaster General Patrick R. Donahoe testifying before a House Committee Wednesday April 17, 2013

The Postal Accountability and Enhancement Act (PAEA) Signed into Law December 20, 2006 by George Bush Replaced the 1970 law which had made USPS self supporting, independent agency of the executive branch Key Changes in the Law include: Defining UPSP to mean: “the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation, or other functions ancillary thereto.” Requires prepayment of Future Retirement and Health Care Costs (escrowing $5-$5.5B/year-USPS has not made payment since 2009 when Congress deferred all but $1.4Billion of that year’s $5.4 billion to end of payments Split Products into two categories-Competitive and Non Competitive Rate increases capped based on 12 month rolling CPI average Expedited rate case-requires only 2 months instead of 10 months Increase financial and operational transparency including reports on progress in meeting delivery service standards Allows USPS to file for exigent rate increase in addition to annual increases-4.3% Case expired April 10, 2016 PRC is required to review the market dominant regulatory system to determine whether it is achieving the statutory objectives mandated by Congress. The PRC is empowered to modify the system or create a new system as necessary to achieve the objects. The obligation to conduct the review arises 10 years after the enactment of the PAEA .

Postal Legislation 2017 Key Points in new legislation Requires USPS retirees to use Medicare for primary medical coverage Open new product areas such as the delivery of alcohol Revised how pension liabilities calculated-using postal demographics Permanent 2.15% price increase (half of the 4.3 exigent price increase) Status Congressman Chaffee (R-UT) and Congressman Cummings (D-MD) introduced basically the same 2016 bill Oversight and Government Reform Committee (OGC) approves bill by voice vote with bi-partisan support Congressman Chaffee resigns as Chari of OGC Congressman Trey Gowdy becomes new chair however reform not a priority at this time CBO estimates provides positive score stating enacting H.R. 756 would reduce direct spending by about $6 billion over the 2017-2027 period House and Ways Committee still needs to be convince bill will not add to the deficit

PRC Ten-Year Review of Rate Making Process Review began December 2016 Comments due to PRC by March 20 PRC expected to release first findings in September 2017 If PRC findings show the present rate making process does not provide “adequate revenues” the PRC would most likely ask for new comments before mandately any changes Most likely this process will not complete in 2017 Any postage increases due to the review would likely not go into effect until mid 2018 at earliest

2018 Postal Price Increase Rates to increased on January 21, 2018 Most products will increase will be around current CPI 2% (+/-1) Nonprofit increases will be ABOVE average Narrow letter drop ship as required by PRC Commitment to reduce pass through by at least 10% In 2017 Destination entry discounts when down: NDC Entry discounts from $35/M to $26M SCF Entry discounts from $44/M to $39/M So the Postage Tiers your mail falls in will drastically impact the actual rate of increase you see

CPI Slide Place Holder Add latest CPI as published by PRC

2018 Rates (to be approved by PRC) Slide Place Holder Add rates

PROMOTIONS 2018 No Promotions will be announce unless there is at least one Board of Governor available to approve the promotions USPS was going to offer much of the same promotions that have been offered in the past

Move Update/COA USPS requires all addresses in a mailing meet one of the move update options within 95 days of the mailing NCOA is one the most common pre-mailing compliance methods Presently compliance is checked by MERLIN equipment prior to mailing Beginning January 21, 2018 USPS will use census method checking each piece as it moves through USPS processing equipment Beginning January 21 the USPS will set the compliance threshold at .5% Beginning January 21 the USPS will access an 8 cent per mail piece penalty for the total quantity over the threshold Mail Owners can view COA errors on their scorecard or can work with their MSP to get their scores Mail Owner can request IMb that are not in compliance from Postal One Help Desk Using IMb unique number mailer can identify address not in compliance

Sample of Mailers Scorecard

INFORMED DELIVERY™ GET A DIGITAL SNAPSHOT OF INCOMING MAIL Informed Deliver Testing started in Northern VA about 4 years ago Test was expanded to New York City and Bordering Areas in CT in late 2015 USPS completed nationwide rollout in April 2017 Sign up at https://informeddelivery.usps.com

What is Informed Delivery™? Informed Delivery™ is a consumer-facing feature that enhances hardcopy mail delivery by providing consumers daily mail images via email and online dashboard Informed Delivery™ is a consumer-facing feature that enhances hardcopy mail delivery by providing consumers daily mail images via email and online dashboard

Sample Uploaded Images

Informed Delivery Industry Concerns Impact on physical response rates Privacy concerns Mail owners cannot Opt out-image of their mail piece will be included in emails regardless Mailings testing now underway Use different URL on physical mail piece than one on image uploaded-understand which piece individual is responding Share data with USPS

Informed Delivery Registered Households: 4.74MM Registered Users: 5.50MM Email enabled Users: 770M Participating Mailers: 38 Campaigns: 259 Average Open Rate: 73% Campaign Portal-soft launch on September 9 Official Launch October 2017

Testing-Pre Campaign Report Place holder for updated reports

Testing-Post Campaign Report Place holder for updated reports

Informed Delivery Sign up at https://informeddelivery.usps.com Need to set up usps.com account Can have multiple users at one address but each user must have a usps.com account Consumer Opts in no cost Informed Delivery approved for Mobile Shopping Promotion

2017 MOBILE SHOPPING PROMOTION Registration Period: June 15 through December 31, 2017 Program Period: August1 – December 31, 2017 Discount Amount: 2% of eligible postage on outbound mailing Eligible Mail: Standard Mail letters and flats Nonprofit Standard Mail letters and flats Mailpiece Contents: All qualifying mail must contain a barcode or other technology that allows the user to engage in an electronic shopping experience. Mobile Optimized Website: Required Directional Copy on Mailpiece: Required

Sale of Services and Charitable Donations In some instances the sale of services and charitable donations may qualify for the promotion discount provided a financial transaction occurs at some point during the scanning of the mailpiece. One of these options must be done to qualify for the promotional discount. These mailings must meet all other promotion requirements (https://ribbs.usps.gov/mailingpromotions/documents/tech_guides/2017MobileShoppingPromotion.htm) and: an item such as a hard copy certificate, thank you note or voucher is mailed to the recipient upon purchase via the US Postal service (does not include invoices, billing statements or receipts), or the mailpieces contain a Business Reply Mail (BRM) or Courtesy Reply Mail (CRM) or Share Mail™ ( Alternate Postage) enclosures. Using Informed Delivery is qualifying method for mobile shopping promotion. Requires pre approval by both the Informed Delivery and the Mobile Shopping Program Managers

Questions Thank You