Ryder Reports Third Quarter 2023 Results

Continues to Deliver Strong Returns in Weak Freight Environment; Raises Full-Year Guidance

Third-Quarter 2023 Highlights

• GAAP EPS from continuing operations of $3.44 compared to $4.82 in prior year
• Comparable EPS (non-GAAP) from continuing operations of $3.58, as compared to a record $4.45 in prior year, reflecting weaker market conditions in used vehicle sales and rental, partially offset by strong Supply Chain Solutions (SCS) results
• Total revenue of $2.9 billion compared to $3.0 billion in prior year
• Operating revenue (non-GAAP) of $2.4 billion, up 1%, reflecting contractual revenue growth across all segments, partially offset by lower commercial rental revenue in Fleet Management Solutions (FMS)

Full-Year 2023 Forecast

• Increasing comparable EPS (non-GAAP) forecast to $12.60 - $12.85 from prior forecast of $12.20 - $12.70
• Increasing adjusted ROE (ROE) forecast to 18% - 19% from 17% - 19%
• Reaffirming operating revenue (non-GAAP) growth forecast of 2%
• Reaffirming net cash provided by operating activities from continuing operations forecast of $2.5 billion and free cash flow (non-GAAP) forecast of ~$100 million

Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended September 30 as follows:

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Total and operating revenue for the three months ended September 30 were as follows:

CEO Comment

"Our strong third quarter performance and increased 2023 guidance demonstrate the ongoing effectiveness of our balanced growth strategy despite a challenging freight environment,” says Ryder Chairman and CEO Robert Sanchez. “ROE of 21% remained above our high-teens target and all three business segments achieved their pre-tax earnings targets during the quarter.

"The transformative changes we’ve made to de-risk the business model, enhance returns, and drive profitable growth are contributing to our significant outperformance versus prior cycles and are providing us with additional opportunities to increase shareholder value. Our recently announced agreement to acquire Impact Fulfillment Services supports our strategy to accelerate growth in our supply chain business. The transaction is set to add contract packaging and manufacturing capabilities that complement our existing suite of port-to-door logistics services, allowing us to expand with existing customers while adding new brands to our extensive customer base.

"Our enhanced asset management playbook is also leading to improved returns over the cycle. We reduced our tractor rental fleet by 18% year over year to align with lower market demand by redeploying vehicles into longer-term lease, dedicated, and supply chain applications. In addition, our expanded retail sales capacity has allowed us to sell a higher number of used vehicles through the retail channel and maximize proceeds.

"The stronger earnings profile of the business and our disciplined capital allocation provide ample capacity for organic growth, strategic acquisitions, and returning capital to shareholders through share repurchases and dividends. Our board recently authorized new discretionary and anti-dilutive share repurchase programs, as well as payment of our 189th consecutive quarterly dividend, demonstrating that returning capital to shareholders continues to be a key priority for us.

"We remain confident that our transformed business model is set to deliver a stronger, more resilient return profile while remaining well positioned to benefit from a cycle upturn."

Third Quarter 2023 Segment Review

Fleet Management Solutions: Strong Earnings Despite Weaker Used Vehicle Sales and Rental Market Conditions

• FMS total revenue and operating revenue decreased 6% and 3%, respectively
  • Total revenue reflects lower fuel revenue passed through to customers and lower operating revenue
  • Operating revenue reflects lower rental demand and 2% negative impact from UK exit, partially offset by higher ChoiceLease and SelectCare revenue
• FMS EBT decreased to $169 million
  • Reflects lower used vehicle sales and rental results
  • Lower used vehicle gains due to a 30% and 31% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes; sequentially from second quarter of 2023, used truck and tractor pricing decreased 6% and 8%, respectively
  • Rental power-fleet utilization was 75%, down from a record level of 83% in prior year on a 7% smaller average power fleet
• FMS EBT as a percentage of FMS operating revenue is at the high end of the company's long-term target of low double digits for the third quarter and above the target for the trailing 12-month period

Supply Chain Solutions: Higher Earnings Primarily Reflect Operating Revenue Growth

• SCS total revenue decreased 1% and operating revenue grew 9%
  • Decrease in total revenue primarily reflects lower subcontracted transportation passed through to customers, partially offset by higher operating revenue
  • Increase in operating revenue primarily driven by new business and increased pricing
• SCS EBT grew 14%
  • Increase primarily due to higher operating revenue and lower incentive-based compensation costs, partially offset by lower volumes in the omnichannel retail vertical
• SCS EBT as a percentage of SCS operating revenue is within the company's long-term target of high single digits for the third quarter but below target for the trailing 12-month period

Dedicated Transportation Solutions: Strong Earnings Results Despite Weak Freight Environment

• DTS total revenue decreased 1% and operating revenue grew 3%
  • Total revenue reflects lower fuel revenue passed through to customers, largely offset by higher operating revenue
  • Operating revenue increased primarily due to inflationary cost recovery
• DTS EBT is generally in line with prior year
• DTS EBT as a percentage of DTS operating revenue is within the company's long-term target of high single digits for the third quarter and at the high end for the trailing 12-month period

Corporate Financial Information

Unallocated Central Support Services (CSS)

Unallocated CSS costs declined to $20 million from $21 million in the prior year, primarily due to lower professional fees.

Capital Expenditures, Cash Flow, and Leverage

Year-to-date capital expenditures increased to $2.6 billion in 2023, compared to $2.0 billion in 2022, reflecting higher investments in the lease fleet and accelerated timing of OEM deliveries, partially offset by lower investments in commercial rental.

Year-to-date net cash provided by operating activities from continuing operations was $1.8 billion, consistent with the prior year, as lower working capital needs were offset by reduced earnings. Free cash flow (non-GAAP) of $32 million, compared to $887 million in 2022, primarily reflects an increase in capital expenditures and prior-year proceeds of approximately $300 million from the FMS UK exit.

Debt-to-equity as of September 30, 2023 was 214%, compared to 216% at year-end 2022, and remains below the company's long-term target of 250% to 300%.

Share Repurchase Programs

In October, the Board of Directors authorized two new share repurchase programs. Under a new discretionary repurchase program, Ryder management is authorized to repurchase up to 2.0 million shares of common stock at its discretion. Under a new anti-dilutive repurchase program, Ryder management is authorized to repurchase up to 2.0 million shares of common stock issued to employees under the company’s employee stock plans since August 31, 2023. Both programs commenced October 12, 2023 and expire October 12, 2025. Our previously authorized discretionary repurchase program was completed in September, and our anti-dilutive repurchase program expired in October.

Outlook

"Our business model transformation is enabling us to achieve our earnings and return targets throughout the cycle," says Ryder Chief Financial Officer John Diez. "Despite weakening freight conditions and used vehicle pricing that peaked over a year ago, we have demonstrated the ability to deliver strong results in a difficult environment. We remain confident that the continued execution of our balanced growth strategy will drive long-term value creation and shareholder returns."

Supplemental Company Information

Business Description

Ryder System, Inc. is a leading supply chain, dedicated transportation, and fleet management solutions company. Ryder's stock (NYSE: R) is a component of the Dow Jones Transportation Average and the S&P MidCap 400^® index. The company's financial performance is reported in the following three, inter-related business segments:

• Supply Chain Solutions – Ryder's SCS business segment optimizes logistics networks to make them more responsive and able to be leveraged as a competitive advantage. Globally-recognized brands in the automotive, consumer goods, food and beverage, healthcare, industrial, oil and gas, technology, and retail industries rely on Ryder's leading-edge technologies and world-class logistics engineers to help them deliver the goods that consumers use every day.
• Dedicated Transportation Solutions – Ryder's DTS business segment combines the best of Ryder's leasing and maintenance capabilities with the safest and most professional drivers in the industry. With a dedicated transportation solution, Ryder helps customers increase their competitive position, reduce risk, and integrate their transportation needs with their overall supply chain.
• Fleet Management Solutions – Ryder's FMS business segment provides a broad range of services to help businesses of all sizes, across virtually every industry, deliver for their customers. From leasing, maintenance, and fueling, to rental and used vehicle sales, customers rely on Ryder's expertise to help them lower their costs, redirect capital to other parts of their business, and focus on what they do best – so they can grow.

For more information on Ryder System, Inc., visit investors.ryder.com and ryder.com.

Note: Regarding Forward-Looking Statements

Certain statements and information included in this news release are “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including: our forecast; our expectations regarding market trends and economic environment, such as decreasing rental demand, challenging freight environment, weakening used vehicle sales, and declining volumes in our omnichannel retail vertical; our expectations regarding total and operating revenue, earnings per share, comparable earnings per share, adjusted ROE, earnings before income tax, net cash from operating activities from continuing operations, debt-to-equity, capital expenditures, operating cash flow, and free cash flow; our ability to execute our balanced growth strategy; anticipated impact of inflationary pressures; our expectations with respect to ChoiceLease and SelectCare growth; our expectations regarding commercial rental demand and utilization and used vehicle sales volume and pricing; our expectations regarding long-term profitable growth; our expectations with respect to the timing of OEM deliveries; our expectations with respect to our actions to increase returns and long-term value creation; our ability to outperform prior cycles; and our ability to support organic growth, make strategic investments and acquisitions, including the timing and completion of our anticipated acquisition of Impact Fulfillment Services, and return capital to shareholders, including through share repurchases and dividends. Our forward-looking statements also include our estimates of the impact of residual value estimates on earnings and depreciation expense. The expected impact of residual value estimates is based on our current assessment of the residual values and useful lives of revenue-earning equipment based on multi-year trends and our outlook for the expected near- and long-term used vehicle market. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors.

All of our forward-looking statements should be evaluated by considering the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Important factors that could cause such differences include: changes in general economic and financial conditions in the U.S. and worldwide; ongoing supply chain and labor challenges and vehicle production constraints; the effect of geopolitical events; our ability to adapt to changing market conditions, including lower than expected contractual sales, decreases in commercial rental demand or utilization, poor acceptance of rental pricing, declining market demand for or excess supply of used vehicles impacting current or estimated pricing, and our anticipated proportion of retail versus wholesale sales; declining customer demand for our services; higher than expected maintenance costs; lower than expected benefits from our cost-savings initiatives; our ability to effectively and efficiently integrate acquisitions into our business; lower than expected benefits from our sales, marketing, and new product initiatives; setbacks in the economic market or in our ability to retain profitable customer accounts; impact of changing laws and regulations; difficulty in obtaining adequate profit margins for our services; inability to maintain current pricing levels due to, for example, economic conditions, business interruptions, expenditures, labor disputes such as the United Auto Workers strike, and severe weather or other natural occurrences; competition from other service providers; changes in technology and new entrants; professional driver and technician shortages resulting in higher procurement costs and turnover rates; impact of supply chain disruptions; higher than expected bad debt reserves or write-offs; decrease in credit ratings; increased debt costs; adequacy of accounting estimates; our ability to effectively and efficiently integrate acquisitions into our business; higher than expected reserves and accruals particularly with respect to pension, taxes, insurance, and revenue; impact of changes in our residual value estimates and accounting policies; unanticipated changes in fuel and alternative energy prices; unanticipated currency exchange rate fluctuations; increases in inflation or interest rates; our ability to manage our cost structure; and the risks described in our filings with the Securities and Exchange Commission (SEC). The risks included here are not exhaustive. New risks emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Note: Regarding Non-GAAP Financial Measures

This news release includes certain non-GAAP financial measures as defined under SEC rules. Refer to Appendix - Non-GAAP Financial Measure Reconciliations at the end of the tables following this press release for reconciliations of the most important comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. Additional information regarding non-GAAP financial measures as required by Regulation G and Item 10(e) of Regulation S-K can be found in our most recent Form 10-K, Form 10-Q, and our Form 8-K filed as of the date of this release with the SEC, which are available at http://investors.ryder.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Ryder’s earnings conference call and webcast is scheduled for October 25, 2023 at 11:00 a.m. ET. To join, click here.

LIVE AUDIO VIA PHONE

Toll Free Number: 888-204-4368

USA Toll Number: 323-994-2093

Audio Passcode: Ryder

Conference Leader: Calene Candela

WEBCAST REPLAY

An audio replay including the slide presentation will be available within four hours following the call. Click here then select Financials/Quarterly Results and the date.

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