Ryder System, Inc.

Good morning and welcome to the Rider System Third Quarter 2024 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 Ms. Kayleen Candela, Vice President, Investor Relations for Rider. Ms. Candela, you may begin.

Thank you. Good morning, and welcome to RIDER's third quarter 2024 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 Riders' filings with the Securities and Exchange Commission, which are available on Riders' 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 Fleet Management Solutions, and Steve Sensing, President of Supply Chain Solutions and Dedicated Transportation Solutions, 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. The Rider team delivered another quarter of solid results, despite an ongoing freight recession and market conditions in used vehicle sales and rental that remain weak. A key driver of our outperformance relative to prior cycles continues to be earnings growth in our contractual lease dedicated in supply chain businesses, which continues to demonstrate the effectiveness of our balanced growth strategy. I'll begin today's call by providing you with key strategic updates. John will then take you through our third quarter results, which were in line with our forecast. I'll then review our outlook and discuss how we are well positioned to benefit from the cycle upturn. Let's begin on slide four. Turning to slide four, contractual earnings growth resulting from our business model transformation and execution on our balanced growth strategy continues to drive out performance. Across all phases of the current freight cycle, our earnings and return profile has been higher than prior cycles. Secular trends that favor outsourcing, large addressable markets, and the value that our solutions bring to our customers continue to support long-term growth opportunities in all three of our business segments. Our initiatives are focused on further enhancing returns over the cycle. Adjusted ROE of 16% over the trailing 12-month period is in line with our expectations Our contractual businesses continue to perform well, demonstrating the enhanced quality of our portfolio and increased resilience. The current phase of our balanced growth strategy is focused on creating compelling value through operational excellence, investing in customer-centric innovation, further improving full cycle returns, and generating profitable growth. We remain confident that continuing to execute our strategy while positioning ourselves for the cycle upturn will result in further enhanced full cycle returns. The earnings power of our contractual portfolio is providing us with increased capital deployment capacity, which we expect to use to support profitable growth and return capital to shareholders. Our board recently authorized a new discretionary 2 million share repurchase program, which replaced the prior 2 million share program that we completed in September. Year-to-date, we have returned $382 million in cash to shareholders through our share repurchases and dividends. Our full-year 2024 forecast for free cash flow is unchanged at positive $150 to $250 million. We're encouraged by our solid performance in the third quarter and year-to-date and believe that executing on our balance growth strategy will continue to deliver higher highs and higher lows over the cycle. Slide 5 is one that you are likely familiar with if you've been following our business model transformation. It clearly shows how our key financial and operating metrics have improved since 2018, reflecting the execution of our strategy. In 2018, prior to the implementation of our balanced growth strategy, we generated comparable EPS of 595 and ROE of 13%. This was during peak freight cycle conditions. At that time, the majority of our $8.4 billion of revenue was from FMS. Supply chain revenue had a three-year growth rate of 16% and operating cash flow of $1.7 billion. Now let's look at what we're expecting from Rider today. In 2024, a year that should represent trough conditions for used vehicle sales and rental, we expect our transformed business model to generate meaningfully higher earnings and returns than it did during the 2018 peak. Our 2024 comparable EPS is expected to be 1190 to 1210, double 2018 comparable EPS of 595. ROE is expected to be up 300 to 350 basis points to a range of 16 to 16.5% above the 13% generated during the prior cycle peak when market conditions were strong in rental and used vehicle sales. Through organic growth, strategic acquisitions, and innovative technology, we have shifted our revenue mix towards supply chain and dedicated with approximately 60% of our 2024 revenue expected to come from these asset-like businesses compared to 44% in 2018. Supply chain three-year growth rate is also expected to increase to approximately 20%. As a result of profitable growth in our contractual lease, supply chain, and dedicated businesses, operating cash flow is expected to be 2.4 billion in 2024, 40% higher than it was in 2018. As shown here, the business is outperforming prior cycles, even when comparing prior peak to an expected trough. We are proud of the results of our transformation thus far, and we are confident A continued execution and momentum from multi-year initiatives positions us well for 2025 and beyond. I'll now turn the call over to John to review our third quarter performance.