Ryder(R) - 2024 Q2 - Quarterly Results

Financial Highlights and Outlook Ryder's financial performance and future projections Second Quarter 2024 Highlights Ryder's Q2 2024 results show strong revenue growth and a significant GAAP EPS turnaround, despite comparable EPS decline due to market conditions Q2 2024 Key Financial Results (in billions, except EPS) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3.2 billion | $2.9 billion | +10% | | Operating Revenue (non-GAAP) | $2.6 billion | $2.3 billion | +10% | | GAAP EPS from continuing operations | $2.83 | $(0.39) | N/A | | Comparable EPS (non-GAAP) | $3.00 | $3.61 | -16.9% | - The decrease in comparable EPS was attributed to weaker market conditions in rental and used vehicle sales, which was partially offset by higher earnings in the company's contractual lease, supply chain, and dedicated business segments[37] - The significant year-over-year increase in GAAP EPS was primarily due to a non-cash charge in the prior year related to the exit from the FMS U.K. business[37] Full-Year 2024 Forecast The company forecasts full-year 2024 comparable EPS between $11.90 and $12.40, with operating revenue growth and positive free cash flow Full-Year 2024 Financial Forecast (in millions/billions, except percentages and EPS) | Metric | Forecast | | :--- | :--- | | Comparable EPS (non-GAAP) | $11.90 - $12.40 | | GAAP EPS | $11.15 - $11.65 | | Operating Revenue Growth (non-GAAP) | ~8% | | Adjusted ROE | 16% - 16.5% | | Free Cash Flow (non-GAAP) | $150 million - $250 million | | Net Cash from Operating Activities | ~$2.4 billion | Third Quarter 2024 Outlook For the third quarter of 2024, Ryder projects GAAP EPS from continuing operations to be in the range of $3.12 to $3.32, and comparable EPS (non-GAAP) to be between $3.30 and $3.50 Q3 2024 EPS Forecast | Metric | Forecast Range | | :--- | :--- | | GAAP EPS from continuing operations | $3.12 - $3.32 | | Comparable EPS (non-GAAP) | $3.30 - $3.50 | Management Commentary Executive insights on Ryder's Q2 performance, strategic resilience, and future outlook CEO Commentary CEO highlights solid Q2 results, resilient business model, strong balance sheet, and recent dividend increase despite freight downturn - The company's performance is seen as resilient, with an ROE of 16% being in line with expectations for the latter stage of a freight-cycle downturn[40] - Year-over-year earnings growth was driven by contractual lease, dedicated, and supply chain businesses, with FMS benefiting from ChoiceLease and maintenance cost-savings, and SCS benefiting from strong automotive performance[48] - A 14% increase in the quarterly dividend was announced, signaling confidence in the earnings power of the business model[41] - Near-term sales headwinds are present due to the extended freight downturn and economic uncertainty, causing customer fleet reductions and delayed decision-making[60] CFO Commentary CFO discusses solid results from contractual portfolio, positioning for cycle upturn, and revised free cash flow forecast - The business is positioned to benefit from an expected freight cycle upturn, with capacity to fund growth, pay dividends, and return capital to shareholders[68] - The full-year forecast range is contingent on market conditions for rental and used vehicle sales in the second half of the year[68] - The free cash flow forecast has been revised upward due to lower capital spending resulting from softer lease sales activity[68] Segment Performance Review Detailed review of Ryder's Fleet Management, Supply Chain, and Dedicated Transportation segments' Q2 2024 performance Fleet Management Solutions (FMS) FMS saw slight revenue growth but a 26% EBT decline due to weaker rental demand and lower used vehicle sales gains FMS Q2 2024 Financials (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,478 | $1,459 | +1% | | Operating Revenue | $1,276 | $1,254 | +2% | | Earnings Before Tax (EBT) | $133 | $180 | -26% | - Key performance drivers included: - Positive: Higher ChoiceLease revenue and benefits from maintenance cost-savings - Negative: Weaker rental demand and lower used vehicle gains[62] - Used vehicle pricing declined significantly year-over-year, with truck prices down 27% and tractor prices down 19%[62] - Rental power-fleet utilization decreased to 69% from 75% in the prior year, on an 11% smaller average fleet[62] Supply Chain Solutions (SCS) SCS achieved strong Q2 2024 growth with 14% revenue and 13% EBT increases, driven by acquisitions and organic growth SCS Q2 2024 Financials (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,341 | $1,179 | +14% | | Operating Revenue | $989 | $865 | +14% | | Earnings Before Tax (EBT) | $85 | $76 | +13% | - Revenue growth was driven by recent acquisitions and organic growth across all industry verticals[64] - EBT growth was primarily attributed to stronger performance in the automotive sector[64] Dedicated Transportation Solutions (DTS) DTS experienced substantial Q2 2024 revenue growth of 44% due to the Cardinal Logistics acquisition, with EBT up 10% DTS Q2 2024 Financials (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $635 | $440 | +44% | | Operating Revenue | $485 | $327 | +48% | | Earnings Before Tax (EBT) | $37 | $33 | +10% | - The significant increase in both total and operating revenue was primarily due to the Cardinal Logistics acquisition[66] - The increase in EBT was a result of improved operating performance, which was partially offset by costs associated with the Cardinal Logistics acquisition integration[66] Consolidated Financial Review Overview of Ryder's consolidated tax rate, capital expenditures, cash flow, and leverage position Tax Rate Q2 2024 effective income tax rate was 29.1%, a significant decrease from 140.8% in the prior year due to a one-time charge Effective Tax Rate Comparison | Tax Rate Type | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Effective Tax Rate (GAAP) | 29.1% | 140.8% | | Comparable Tax Rate (non-GAAP) | 29.0% | 28.6% | - The high GAAP tax rate in the prior year was due to a one-time, non-deductible currency translation adjustment loss related to the FMS U.K. business exit[53] Capital Expenditures, Cash Flow, and Leverage Year-to-date capital expenditures decreased, free cash flow improved, and the debt-to-equity ratio increased but remains within target - Year-to-date capital expenditures decreased to $1.3 billion in 2024 from $1.8 billion in 2023, reflecting reduced investments in the ChoiceLease fleet[54] - Year-to-date free cash flow (non-GAAP) was $71 million, an increase from $16 million in 2023, due to lower capital expenditures[55] - The debt-to-equity ratio was 245% as of June 30, 2024, which is below the company's long-term target range of 250% to 300%[56][12] Financial Statements and Key Metrics Presentation of Ryder's consolidated statements of earnings, balance sheets, and key operational performance indicators Consolidated Statements of Earnings First half 2024 total revenues increased to $6.28 billion, with net earnings significantly improving to $212 million Six Months Ended June 30 - Financial Summary (in millions, except EPS) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $6,279 | $5,836 | +8% | | Earnings from continuing ops before tax | $292 | $245 | +19% | | Net Earnings | $212 | $121 | +75% | | Diluted EPS (Net) | $4.73 | $2.57 | +83% | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets increased to $16.41 billion, with total debt rising to $7.54 billion Balance Sheet Summary (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $16,408 | $15,778 | | Total Debt | $7,536 | $7,114 | | Shareholders' Equity | $3,081 | $3,069 | Key Performance Indicators Q2 2024 saw ChoiceLease fleet growth, commercial rental fleet decrease, lower rental utilization, and continued decline in used vehicle pricing Q2 2024 vs Q2 2023 Key Metrics | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | ChoiceLease Average Fleet Count | 146,000 | 137,800 | +6% | | Commercial Rental Average Fleet Count | 35,500 | 40,200 | -12% | | Rental Utilization - Power Units | 69% | 75% | -600 bps | | UVS Pricing Change - Tractors | -19% | -41% | N/A | | UVS Pricing Change - Trucks | -27% | -34% | N/A | Appendix: Non-GAAP Financial Measures Explanation and reconciliation of Ryder's non-GAAP financial measures used for performance evaluation Definitions of Non-GAAP Measures Provides definitions for key non-GAAP measures like Operating Revenue, Comparable Earnings, and Free Cash Flow - Operating Revenue: Defined as total revenue excluding fuel and subcontracted transportation, as these are typically pass-through costs with minimal impact on profitability[25] - Comparable Earnings (EBT, Earnings, EPS): Excludes non-operating pension costs and other significant items not representative of business operations to improve year-over-year comparability[30] - Free Cash Flow: Calculated as net cash from operating activities plus proceeds from sales of equipment, less purchases of property and revenue earning equipment. It indicates cash available for debt service and shareholder returns[21] Reconciliation of GAAP to Non-GAAP Measures Presents detailed numerical reconciliations of non-GAAP financial measures to their GAAP equivalents for historical and forecast periods Q2 2024 Comparable Earnings Reconciliation (in millions) | Description | Amount | | :--- | :--- | | Earnings from continuing operations (GAAP) | $126 | | Non-operating pension costs, net | $7 | | Acquisition costs | $1 | | Comparable earnings from continuing operations (non-GAAP) | $134 | YTD 2024 Free Cash Flow Reconciliation (in millions) | Description | Amount | | :--- | :--- | | Net cash provided by operating activities | $1,078 | | Proceeds from sales (primarily revenue earning equipment) | $317 | | Purchases of property and revenue earning equipment | $(1,324) | | Free cash flow (non-GAAP) | $71 | Q2 2024 Comparable EBITDA Reconciliation (in millions) | Description | Amount | | :--- | :--- | | Net earnings (loss) | $127 | | Adjustments (Discontinued ops, Taxes, Interest, etc.) | $158 | | Comparable EBT | $188 | | Interest, Depreciation, Amortization, etc. | $516 | | Comparable EBITDA (non-GAAP) | $704 |