Ryder Reports First Quarter 2022 Results

First Quarter 2022

• GAAP EPS from continuing operations of $3.35 versus $0.97 in prior year, reflecting significantly improved results in Fleet Management Solutions and higher results in Dedicated Transportation Solutions
• Comparable EPS (non-GAAP) from continuing operations of $3.59 versus $1.09 in prior year
• Total revenue of $2.9 billion and operating revenue (non-GAAP) of $2.2 billion up 28% and 22%, respectively, reflecting revenue growth in all business segments and Supply Chain Solutions acquisitions

Full-Year 2022 Forecast

• Increase GAAP EPS forecast to $12.83 – $13.83 from $10.40 – $11.40
• Increase comparable EPS (non-GAAP) forecast to $13.00 – $14.00 from $11.00 – $12.00
• Adjusted ROE (ROE) forecast of 23% – 25%
• Net cash provided by operating activities from continuing operations forecast of $2.3 billion; free cash flow (non-GAAP) forecast increased to $550 million – $650 million reflecting expected proceeds from the previously announced FMS UK exit

MIAMI–(BUSINESS WIRE)–Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended March 31 as follows:

Total and operating revenue for the three months ended March 31 were as follows:

CEO Comment

Commenting on the company’s results and outlook, Ryder Chairman and CEO Robert Sanchez says, “Record first-quarter results were significantly better than prior-year driven by improved performance in FMS and DTS. Results exceeded our forecast primarily due to used vehicle sales and rental. We generated record ROE of 25% reflecting truck capacity constraints in the market, which benefited FMS, and from continued benefits from our ongoing initiatives to increase returns.

“We continue to make progress on our strategy to create long-term shareholder value by accelerating growth in SCS and DTS while improving returns in FMS. SCS and DTS now represent approximately 50% of the company’s revenue up from approximately 40% three years ago. We expect the accelerated growth in these segments to continue. In FMS, we anticipate the multi-year lease pricing initiative that we began implementing in 2019 will continue to benefit annual earnings. With approximately 40% of our lease fleet re-priced through 2021, we have considerable opportunity ahead as we expect to renew the remaining leases at higher returns. This earnings improvement is in addition to the $100 million multi-year maintenance cost-savings target that we established in 2019, which we expect to surpass this year.

“Our previously announced SCS acquisitions are performing well and in-line with expectations, and they provide us with enhanced capabilities in fast-growing e-commerce fulfillment and multi-client warehousing. We realized sequential improvement in earnings performance in both SCS and DTS this quarter reflecting the benefits of growth and price increases to address unusually high labor cost increases. We continue to expect SCS and DTS to achieve their high single-digit earnings targets in the second half of the year.

“Looking ahead, we’ve increased our 2022 ROE and comparable EPS forecasts reflecting continued momentum in FMS. Our forecast continues to anticipate that the very strong used vehicle sales and rental market environment will moderate in the second half of the year, with slower freight growth partially offset by ongoing vehicle production constraints.

“Our balance sheet remains strong. We are executing our previously announced $300 million accelerated share repurchase program and have remaining capacity for acquisitions and additional share repurchases. We increased our free cash flow forecast to $550 – $650 million reflecting $300 million in expected proceeds from the previously announced exit of our FMS UK business.”

Fleet Management Solutions (FMS) total and operating revenue increased primarily due to higher rental revenue driven by strong demand and higher pricing. Total revenue also increased from higher fuel prices passed through to customers.

FMS EBT increased by $185 million primarily from improved used vehicle sales and rental performance, reflecting benefits from tight truck capacity and initiatives to improve returns. Higher gains on used vehicles sold and a declining impact of depreciation expense from prior vehicle residual value estimate changes contributed $115 million in higher year-over-year earnings. Used vehicle pricing more than doubled from the prior year and ending inventory levels declined to 3,200 vehicles and remain below the company’s long-term target range of 7,000 – 9,000 vehicles. Rental results benefited from record first-quarter utilization and an 8% increase in power fleet pricing. Rental power fleet utilization increased to 82% (up from 73% in the prior year). Lease results benefited from higher pricing with revenue per average active vehicle up 4%, partially offset by a 2% smaller average active lease fleet, reflecting OEM vehicle delivery delays. FMS EBT as a percentage of FMS operating revenue is above the company’s long-term target of low double-digits for the first quarter and for the trailing 12-month period.

Supply Chain Solutions (SCS) total and operating revenue increased due to acquisitions and strong revenue growth in all industry verticals from new business and increased volumes.

SCS EBT increased primarily due to revenue growth from new business and acquisitions. This increase was offset by lower earnings in the automotive vertical as a result of supply chain disruptions and labor challenges. SCS EBT as a percentage of SCS operating revenue is below the company’s long-term target of high single-digits for the first quarter 2022 and the trailing 12-month period.

Dedicated Transportation Solutions: Higher Earnings Driven by Revenue Growth and Improved Operating Performance Partially Offset by Higher Labor Costs

Dedicated Transportation Solutions (DTS) total and operating revenue increased due to new business and increased pricing. Revenue growth from new business was driven by wins from competitors and private fleet conversions.

DTS EBT increased primarily due to revenue growth, improved performance, and higher gains on sales of vehicles partially offset by increased labor costs. DTS EBT as a percentage of DTS operating revenue is below the company’s long-term target of high single-digits for the first quarter 2022 and trailing 12-month period.

Corporate Financial Information

Unallocated Central Support Services (CSS)

Unallocated CSS costs were $16 million as compared to $18 million in the prior year, primarily reflecting investment income from RyderVentures, the company’s corporate venture capital fund.

Income Taxes

Our effective income tax rate from continuing operations was 30.2% as compared to 26.6% in the prior year. Our comparable effective income tax rate (a non-GAAP measure) from continuing operations was 27.6% as compared to 26.0% in the prior year.

Capital Expenditures, Cash Flow, and Leverage

First-quarter capital expenditures increased to $662 million in 2022 compared to $407 million in 2021 due to higher planned investments in the lease fleet.

First quarter net cash provided by operating activities from continuing operations increased to $466 million, reflecting higher earnings partially offset by higher working capital needs. Free cash flow (a non-GAAP measure) was $108 million, down from $241 million in 2021 due to an increase in capital expenditures, partially offset by higher proceeds from the sale of revenue-earning equipment.

Debt-to-equity as of March 31, 2022 increased to 256% from 235% at year-end 2021 and is in line with the company’s long-term target of 250% – 300%.

Fleet Management Solutions UK Business Update

After completing consultation obligations under UK law, the company still intends to exit the lower-return UK business by mid-2023 as part of its strategy to improve returns in FMS. In April, Ryder UK entered into a definitive agreement with TIP Trailer Services to sell Ryder Trailer Leasing and Mobile Maintenance Services, which includes approximately 4,500 trailers and other vehicles representing 38% of Ryder’s vehicle fleet in the UK. The transaction is expected to be completed in June. The company is continuing to progress discussions with a number of potential buyers interested in acquiring other parts of the Ryder UK business.

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 capability 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, expectations regarding market trends and economic environment; impact of supply chain and labor shortage challenges and vehicle production constraints on our business, market conditions, e-commerce trends, freight environment, expected earnings, depreciation, commercial rental demand and utilization, and used vehicle sales volume and pricing; expectations related to our strategic investments and initiatives, including our recent supply chain acquisitions and initiatives related to maintenance costs savings and improving returns; expected benefits of lease pricing initiatives and our ability to renew leases; our expectations regarding benefits from our accelerated share repurchase program; our expectations related to timeline and cash proceeds from our exit of the FMS U.K. market; our ability to execute our strategy of accelerating growth in certain business segments; performance, including sales and revenue growth, in our product lines and segments, for example e-commerce and multi-client warehousing; residual values and depreciation expense; used vehicle inventory; earnings; free cash flow; tax rate; operating cash flow; capital expenditures; fleet growth; and expected benefits from new contracts and pricing initiatives in our supply chain and dedicated business divisions. Our forward-looking statements also include our estimates of the impact of our changes to residual value estimates on earnings and depreciation expense. The expected impact of the change in 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, the effect of the COVID-19 pandemic, including ongoing supply chain and labor challenges and vehicle production constraints; the effect of geopolitical events, including the impact of the conflict between Russia and Ukraine; 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, and 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 soft economic conditions, business interruptions or expenditures due to labor disputes, severe weather or natural occurrences; competition from other service providers, changes in technology and new entrants; driver and technician shortages resulting in higher procurement costs and turnover rates; impact of worldwide semiconductor shortage; higher than expected bad debt reserves or write-offs; decrease in credit ratings; increased debt costs; adequacy of accounting estimates; 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 prices; unanticipated currency exchange rate fluctuations; 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 non-GAAP financial measures contained in this release to the nearest GAAP measure and why management believes that presentation of each measure provides useful information 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.

Financial = ryder-financial

USA = ryder-usa

Contacts

Media:
Amy Federman

(305) 500-4989

Investor Relations:
Bob Brunn

(305) 500-4053

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