Ryder System, Inc.

Good morning and welcome to the Rider System third quarter 2021 earnings release conference call. All lines are in a listen-only mode until after the presentation. Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce the call to Mr. Bob Broon, Senior Vice President, Investment Relations, Corporate Strategy, and New Product Strategy for Rider. Mr. Broon, you may now begin.

Thanks very much. Good morning and welcome to RIDER's third quarter 2021 earnings conference call. I'd like to remind you that during this presentation, you'll hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political, and regulatory factors. More detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest GAAP measure is contained in this morning's earnings release, earnings call presentation, and in Ryder's filings with the Securities and Exchange Commission, which are available on Ryder's website. Presenting on today's call are Robert Sanchez, Chairman and Chief Executive Officer, and John Diaz, Executive Vice President and Chief Financial Officer. Additionally, Tom Havens, President of Global Sleep Management Solutions, and Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation, are on the call today and available for questions following the presentation. At this time, I'll turn the call over to Robert.

Good morning, everyone, and thanks for joining us. On today's call, I'll begin with a strategic update and then cover the investments that we're making in innovative technologies to accelerate growth in our supply chain and dedicated businesses. I'll also discuss today's announcement of our plan to acquire Midwest warehouse and distribution system. John will take you through our third quarter results, which exceeded our expectation again this quarter and review our disciplined capital allocation strategy focused on returns. I'll then discuss our updated 2021 outlook. Let me start with some key highlights about the market and our results. Long-term transportation and logistics outsourcing trends continue to support our growth strategy and investments. Trends in warehousing and distribution, as well as in e-commerce fulfillment and last mile delivery of big and bulky items, have continued to accelerate since the pandemic began. Our strategic investments remain focused on leveraging these favorable outsourcing trends. Unprecedented challenges impacting labor, supply chains, and truck production are providing us with additional growth opportunities because they help drive companies to make long-term outsourcing decisions. We're seeing record new contract wins in supply chain and dedicated, which we fully expect will contribute to long-term profitable growth. FMS is also benefiting as companies are looking to source truck capacity in this extremely tight market. Consistent with our discipline capital allocation strategy, we're investing in our higher return logistics businesses through our planned acquisition of Midwest Warehouse and Distribution System, which adds multi-client warehousing capabilities and supply chain and accelerates growth. We also announced plans to return capital to shareholders over time through discretionary and anti-dilutive share repurchase programs. Use of the new discretionary program is anticipated to occur over time, dependent on several factors, including balance sheet leverage, the availability of quality acquisitions, and the stock price. We now expect to achieve ROE in the range of 18% to 19% for the full year. The team has done an excellent job of leveraging favorable pricing trends in used vehicle sales and rental, resulting in outperformance in both these areas. In addition, we've continued to increase lease pricing, resulting in improved portfolio returns and a 4% increase in revenue per average active lease vehicle. We expect additional benefits going forward as leases are renewed and repriced and as we utilize data analytics to further segment customer pricing based on application, equipment type, and other key drivers of lease returns. Moving to cash flow, we generated strong year-to-date free cash flow of over 800 million and have increased our full year free cash flow forecast to a billion to a billion one up from our prior forecast of $650 to $750 million. Our full year forecast reflects an estimated cash flow benefit of $400 million from deferred capital expenditures due to OEM delivery delays, as well as record proceeds from the sale of our used vehicles. With balance sheet leverage currently well below our target range, we have additional capacity to enhance shareholder value by deploying capital consistent with our disciplined capital allocation strategy. Slide five provides an overview of the investments we're making to drive accelerated growth in supply chain and dedicated, a key element of our strategy to generate higher returns. Developing new and enhanced products such as Rider Last Mile, e-commerce fulfillment, and freight brokerage provides opportunities to leverage profitable growth areas. Innovative technology enables us to deliver value-added logistics solutions that are in high demand. Last quarter, I highlighted Rider Last Mile offering. This quarter, I'll discuss RiderShare, our real-time freight visibility and collaboration tool that has proven to be a key differentiator in winning new business. Sales and marketing are key to our brand awareness and ensuring customers are aware of our full array of supply chain capabilities. Our ever better campaign and the increased digital marketing presence have driven a significant increase in qualified sales leads. We're also expanding our sales force and investing in their capabilities to drive additional growth opportunities. Strategic M&A opportunities, such as our planned acquisition of Midwest, are focused on adding new capabilities, geographies, and or industry verticals. These opportunities are an important way to accelerate growth, especially in supply chain and dedicated. Rider Ventures, our corporate venture capital fund, aims to invest $50 million over five years through direct investment in startups. Our investments here advance strategic relationships where we typically are working together to develop new products and capabilities that benefit our customers and solidify our position as an industry leader. We've made investments in numerous exciting areas such as e-commerce micro-fulfillment and digital driver staffing, and are working with these startups to address important customer needs. We also recently announced strategic alliances with several autonomous technology firms, which enables us to leverage our expertise in asset management, maintenance, and transportation, positioning us as an innovative leader in this emerging space. Slide six takes a closer look at RiderShare, an innovative digital product that combines riders' nearly 90 years of logistics experience with best-in-class technology. RiderShare provides users with real-time freight visibility throughout the lifecycle of an order, as well as the opportunity to share information between suppliers, carriers, and shippers on one platform with Rider's team of supply chain experts managing exceptions. RiderShare users benefit from improved service for their customers, increased employee productivity, and the ability to readily access information from one source for decision making. Almost 70% of Rider's transportation volume and supply chain at Dedicated now runs through RiderShare. The platform has processed over 4.4 million transactions and has over 5,300 users to date. We're also excited about our recent launch of RiderShare for Warehouses. This enhancement makes Ridershare the only visibility platform that connects transportation with warehousing. We expect this will be a key differentiator in winning new business. I'll turn the call over to John now to briefly cover our third quarter results and review our capital allocation strategy.