Ryder System, Inc.

Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Ms. Kaylene Candela, Vice President, Investor Relations for Rider. Ms. Candela, you may begin.

Thank you. Good morning and welcome to Rider's fourth quarter 2022 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 Fleet 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. I'm extremely pleased with the strong results delivered by the team in the fourth quarter and throughout 2022. Secular trends, favorable market conditions, and continued execution on our balanced growth strategy enabled us to deliver record revenue and earnings in 2022. I'll begin today's call with an overview of our strategic priorities and the significant progress we made during 2022. John will then take you through our fourth quarter results, which exceeded our expectations again this quarter. We will also review our capital expenditures, cash flow, and capital allocation priorities. I'll then introduce our 2023 outlook, review our assumptions, and discuss how we positioned the business to deliver on our targets over the cycle. Let's begin with slide four. In 2022, we made significant progress on our balanced growth strategy, which allows us to balance top-line growth with returns and free cash flow and ultimately increase shareholder value. Our key strategic priorities are focused on de-risking and optimizing our business model, enhancing returns and free cash flow over the cycle, and taking actions to drive long-term profitable growth. As it relates to de-risking and optimizing the model, several years ago, we lowered residual value estimates in FMS to historically low levels to reduce the reliance on used vehicle proceeds to achieve targeted returns. In late 2021, we began adjusting our DTS contracts in order to better insulate us from labor cost variability. At the time, driver wages escalated rapidly and by amounts greater than we could quickly recover under our existing contract terms. We negotiated rate increases with our customers and also began to adjust contract terms to facilitate quicker, more efficient cost passengers in the future. This is a multi-year initiative with approximately 40% of DTS revenue under new contract structure as of year end. Another optimizing initiative was the exit of our sub-performing FMS business in the UK. We announced this decision in early 2022, and as of year end, we substantially completed the exit of business operations and received approximately $400 million in proceeds from the sale of vehicles and properties. These proceeds have been redeployed to higher return opportunities. We also executed important initiatives to increase returns and free cash flow. The pricing initiatives in dedicated and supply chain to address higher labor and subcontracted transportation costs improved returns in both segments in 2022. In FMS, we surpassed our $100 million annual maintenance cost savings target with our multi-year initiative as anticipated. Our lease pricing initiative remains a strong contributor to higher returns in FMS. As of year end 2022, 60% of our lease portfolio had been priced at higher returns. An additional 20% of the portfolio has already been contracted under the new pricing model with vehicles expected to be in service over the next 12 months or so. This initiative is expected to be fully implemented by the end of 2025 with an estimated total annual benefit of $125 million upon completion. Lease growth K inflected positive in 2022 with an increase of 1,300 vehicles. Accelerating supply chain and dedicated growth is a key driver for achieving long-term profitable growth. 54% of riders' 2022 revenue was from supply chain and dedicated, up from 37% in 2015, reflecting secular trends and our initiatives to accelerate growth in these higher return businesses. Supply Chain and Dedicated also generated strong sales of new long-term customer contracts in 2022, which we expect will continue to contribute to profitable growth. Our strong balance sheet enabled us to fund organic growth as well as strategic supply chain acquisitions. In 2022, we executed several targeted acquisitions that support our strategy to accelerate growth in our supply chain business. Whiplash was the largest acquisition in 2022 and significantly grew our e-fulfillment network and scalable e-commerce and omni-channel fulfillment solutions. Our acquisition of Baton, a tech startup, enhanced our new product and technology development capabilities. Our strong balance sheet also enabled us to return over $680 million to shareholders through three share repurchase programs and through quarterly dividends. Overall, we demonstrated significant progress on our balanced growth strategy with plenty of opportunity ahead for increased returns, cash flow, and shareholder value. I'll now turn the call over to John to review our fourth quarter results.