Ryder Reports First Quarter 2021 Results

First Quarter 2021

• GAAP EPS from continuing operations of $0.97 versus a loss of $(2.09) in prior year due to improved results in fleet management solutions
• Comparable EPS (non-GAAP) from continuing operations of $1.09 versus a loss of $(1.38) in prior year
• Total revenue of $2.2 billion and operating revenue (non-GAAP) of $1.8 billion, both up 3%, primarily reflecting higher revenue in supply chain and rental

Full-Year 2021 Forecast

• Increased GAAP EPS forecast to $5.65 - $6.05 from $4.18 - $4.68
• Increased comparable EPS (non-GAAP) forecast to $5.50 - $5.90 from $4.15 - $4.65
• Expect to achieve adjusted ROE (ROE) of 12 - 13% exceeding our interim target of 11%

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:

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Ryder System, Inc. employees work at one of the company's e-commerce fulfillment facilities. Ryder offers its customers the ability to deliver direct to 95% of U.S. consumers in two days or less, a critical capability that is helping to drive outsourcing trends. (Photo: Business Wire)

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 said, "Our team delivered strong first quarter results surpassing our initial guidance. FMS results were significantly better than expected in lease and rental as well as used vehicle sales, driven by a robust freight environment and our actions to improve returns. We’re pleased with the improvement in used vehicle pricing resulting from a stronger market and the expansion of our retail sales capacity. We continue to make significant progress on our longer-term return initiatives, including optimizing our lease pricing and reducing our maintenance costs. We expect improving economic and freight conditions to continue at least through the balance of the year. As a result, we now anticipate achieving ROE of 12 - 13% this year, while generating strong free cash flow.

"From a strategic growth perspective, we saw record first-quarter sales activity in supply chain, as well as strong sales in our dedicated business. Increased focus on supply chain resiliency is driving a robust sales pipeline as companies seek strategic partnerships that can provide end-to-end solutions with flexibility and scale. In addition, we're seeing significant expansion of our Ryder Last Mile solution driven by increased consumer demand for home delivery. Technology has also moved to the forefront of supply chain sales conversations, becoming a key driver in the sales process. Our customers want visibility and the ability to collaborate, which our RyderShare platform delivers. It is proving to be a strategic differentiator, enabling us to win new business and larger deals.

"We also continue to deliver on our corporate responsibility commitments to reduce environmental impacts, invest in new technologies, and advance diversity, equity and inclusion in the workplace. During the quarter, we published our Corporate Sustainability Report highlighting significant accomplishments including our ongoing efforts to reduce the environmental impacts of our operations and those of the customers we serve. Employee health and safety remains a top priority for us and is paramount to keeping the supply chain moving for our customers and local communities. In support of this commitment, we recently announced paid time off for Ryder employees to get the COVID-19 vaccination."

Outlook

"Given our outlook for a strong freight environment, we expect continued favorable performance in FMS driven by lease, rental, and used vehicle sales. We anticipate lease to benefit from our pricing actions, increased sales activity, and improved operating performance. We also expect pricing in rental and used vehicle sales to remain strong. Although we anticipate some delayed truck deliveries this year, we expect the impact will be offset by higher lease sales activity and vehicles placed in service during the first quarter, as well as higher rental utilization and pricing.

"In SCS and DTS, we are on track to meet or exceed our revenue growth targets. We have assumed there will be some impact to supply chain earnings due to the semiconductor shortage impacting our automotive customers. SCS and DTS returns are also anticipated to be impacted by strategic investments in new technologies and our Ever better^TM brand awareness campaign. These investments leverage secular outsourcing trends and position us for continued growth.

"In 2021, we now expect to achieve ROE of 12 - 13%, above our prior expectation of approaching our interim target of 11%. Assuming current market conditions and tax policy continue, we believe we are well positioned to realize our long-term ROE target of 15% in 2022. Our forecast for 2021 free cash flow of $400 - $700 million is unchanged and we expect leverage to decline to the bottom end of our target range."

First Quarter Business Segment Operating Results

Fleet Management Solutions: Higher Earnings Primarily Reflect Improved Results in Used Vehicle Sales as well as Stronger Rental Performance and Increased Lease Pricing

In the Fleet Management Solutions (FMS) business segment, total revenue remained flat as 8% higher rental revenue was offset by the discontinuation of the lease liability insurance product line and lower fuel revenue. Operating revenue was up 1% primarily reflecting higher rental pricing, partially offset by lower SelectCare and other revenues.

FMS EBT increased by $178 million reflecting higher gains on used vehicles sold and a declining impact of depreciation expense from prior vehicle residual value estimate changes, which together totaled $92 million. Used vehicle pricing on trucks and tractors increased 35% and 25%, respectively, from the prior year, and ending inventory levels declined by 47% to 6,200 vehicles. Lease results benefited from the redeployment of non-revenue earning vehicles and higher pricing on new leases. Rental results benefited from a 9% increase in pricing and better utilization. Rental power fleet utilization increased to 73% (up from 64% in the prior year) on a 12% smaller average power fleet. Benefits from lower maintenance costs and bad debt expense also contributed to higher results. FMS earnings before tax as a percentage of FMS operating revenue is below the company's long-term target of high single digits, reflecting depreciation from prior residual value estimate changes.

Supply Chain Solutions: Higher Earnings from Increased Pricing and Volumes Were Partially Offset by Higher Overheads Including Strategic Investments

In the Supply Chain Solutions (SCS) business segment, total revenue and operating revenue increased primarily due to new business and higher volumes. Operating revenue growth reflects double-digit percentage increases in retail, consumer packaged goods, and industrial revenues, partially offset by lower revenue in high tech. Automotive revenues were largely unchanged reflecting the negative impact of the semiconductor shortage and weather this year and COVID-19 impacts in the prior-year.

Higher SCS earnings before tax reflects higher pricing and volumes, partially offset by higher overheads including continued investments in marketing and technology. 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 but is within the target range for the trailing twelve-month period.

Dedicated Transportation Solutions: Improved Results Reflect Better Operating Performance Partially Offset by Higher Insurance Costs

In the Dedicated Transportation Solutions (DTS) business segment, total revenue declined from lower subcontracted transportation. Operating revenue was in line with the prior year as new business and higher pricing were offset by lower volumes.

DTS earnings before tax increased primarily due to improved operating performance and was partially offset by higher insurance 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 but is within the target range for the trailing twelve-month period.

Corporate Financial Information

Unallocated Central Support Services

In the first quarter of 2021, unallocated CSS costs were $18 million as compared to $9 million in the prior year, primarily reflecting higher incentive compensation-related expenses due to significantly improved company performance.

Income Taxes

Our effective income tax rate from continuing operations for the first quarter of 2021 was an expense of 26.6% as compared to a benefit of 4.0% in the prior year. The tax rate in the first quarter of 2020 was impacted by the reduction in earnings due to the accelerated depreciation charges and the COVID-19 economic effects. In addition, the prior year tax rate was impacted by a $13 million valuation allowance in the UK. The comparable effective income tax rate (a non-GAAP measure) from continuing operations for the first quarter of 2021 was an expense of 26.0% as compared to a benefit of 20.6% in the prior year.

Capital Expenditures, Cash Flow, and Leverage

First quarter gross capital expenditures increased to $407 million in 2021 compared with $392 million in 2020 as higher planned investments in the rental fleet were partially offset by lower lease spending.

First quarter operating cash flow was $466 million in 2021, up from $439 million in 2020, reflecting higher earnings. Free cash flow (a non-GAAP measure) was $241 million, up from $111 million in 2020 due to higher proceeds from the sale of vehicles and lower cash capital expenditures.

Debt-to-equity as of March 31, 2021 declined to 280% from 293% at year-end 2020, and is within the company's long-term target of 250 - 300%. The decrease in debt-to-equity from year-end 2020 was driven by lower debt as a result of higher free cash flow. Assuming current market conditions and tax policy continue, we now expect debt-to-equity to be at the bottom end of our target range.

Supplemental Company Information

First Quarter Net Earnings

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 the COVID-19 pandemic on market conditions, e-commerce trends, freight environment, earnings, depreciation, commercial rental demand and utilization, and used vehicle sales volume and pricing, expected benefits from our strategic initiatives and our multi-year maintenance cost-savings initiatives; expected benefits of lease pricing initiatives; implementation of our asset management strategy; performance, including sales and revenue growth, in our product lines and segments; residual values and depreciation expense; used vehicle inventory; rental utilization; free cash flow; operating cash flow; capital expenditures; fleet growth; and profitability of our Ryder Last Mile operations. 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-term used vehicle market. Our assessment is subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results related to vehicle residual values to materially differ from estimates include changes in supply and demand, competitor pricing, regulatory requirements, driver shortages, changes in customer requirements and preferences, as well as 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; our ability to adapt to changing market conditions, lower than expected contractual sales, decreases in commercial rental demand or utilization or poor acceptance of rental pricing, 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; lower than expected benefits from our sales, marketing and new product initiatives; higher than expected costs related to our ERP implementation; 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 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, including our depreciation policy; 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.

CONFERENCE CALL AND WEBCAST INFORMATION

Ryder’s earnings conference call and webcast is scheduled for April 28, 2021 at 11:00 a.m. ET. To join, click here.

LIVE AUDIO VIA PHONE

Toll Free Number: 888-352-6803

USA Toll Number: 323-701-0225

Audio Passcode: Ryder

Conference Leader: Bob Brunn

AUDIO REPLAY VIA PHONE

An audio replay of the call will be available one hour after call ends for 30 days.

Toll Free Number: 888-203-1112

USA Toll Number: 719-457-0820

Replay Passcode: 1420126

AUDIO REPLAY VIA MP3 DOWNLOAD

A podcast will be available within 24 hours after the end of the call. Click here then select Financials/Quarterly Reports and the date.

AUDIO & SLIDE REPLAY VIA INTERNET

An audio replay including the slide presentation will be available on the Internet within two hours following the call. Click here then select Financials/Quarterly Reports and the date.

Financial = ryder-financial

USA = ryder-usa

RYDER SYSTEM, INC. AND SUBSIDIARIES

APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED

This press release and accompanying tables include “non-GAAP financial measures” as defined by SEC rules. As required by SEC rules, we provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.

Specifically, the following non-GAAP financial measures are included in this press release:

RYDER SYSTEM, INC. AND SUBSIDIARIES

APPENDIX - NON-GAAP FINANCIAL MEASURE RECONCILIATIONS - UNAUDITED

Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors. See reconciliations for each of these measures following this table.

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