Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended June 30 as follows:
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Ryder is a leader in supply chain, dedicated transportation, and fleet management solutions.
(In millions, except EPS) | Earnings Before Taxes | Earnings (Loss) | Diluted Earnings (Loss) Per Share | ||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Continuing operations (GAAP) (1) | $ | 44 | 338 | $ | (18 | ) | 240 | $ | (0.39 | ) | 4.72 | ||||||
Comparable (non-GAAP) | $ | 237 | 308 | $ | 170 | 226 | $ | 3.61 | 4.43 | ||||||||
(1) Includes $(3.90) impact from one-time, non-cash cumulative currency translation adjustment charge from the UK exit. | |||||||||||||||||
Total and operating revenue for the three months ended June 30 were as follows:
(In millions) | Total Revenue | Operating Revenue (non-GAAP) | ||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||
Total | $ | 2,884 | 3,034 | (5)% | $ | 2,326 | 2,307 | 1% | ||||||
Fleet Management Solutions (FMS) | $ | 1,459 | 1,621 | (10)% | $ | 1,254 | 1,307 | (4)% | ||||||
Supply Chain Solutions (SCS) | $ | 1,179 | 1,174 | β% | $ | 865 | 798 | 8% | ||||||
Dedicated Transportation Solutions (DTS) | $ | 440 | 450 | (2)% | $ | 327 | 306 | 7% | ||||||
CEO Comment
"Our strong second-quarter results and increased full-year earnings guidance demonstrate the progress made on our balanced growth strategy to de-risk the business model, enhance returns and drive profitable growth," says Ryder Chairman and CEO Robert Sanchez. "All three business units met or exceeded their pre-tax earnings targets, and ROE of 24% remained above our high-teens target.
"Achieving these results against a backdrop of weakening freight conditions and declining used vehicle prices highlights the effectiveness of our transformative changes. Ryderβs operations are more diversified with expanded capabilities across three scaled businesses, which has enabled us to deliver outstanding service to our customers, outperform prior cycles, and create long-term value for our shareholders.
"Our strong balance sheet continues to provide us with ample capacity to support organic growth, pursue strategic acquisitions, and return capital to shareholders through share repurchase programs and dividends. The recently announced 15% increase to our quarterly dividend is also supported by our confidence in the long-term earnings generation of our model."
Second Quarter 2023 Segment Review
Fleet Management Solutions: Strong Earnings Despite Weaker Used Vehicle Sales and Rental Market Conditions
(In millions) | 2Q23 | 2Q22 | Change | ||||||
Total Revenue | $ | 1,459 | 1,621 | (10)% | |||||
Operating Revenue (1) | $ | 1,254 | 1,307 | (4)% | |||||
Earnings Before Tax (EBT) | $ | 180 | 286 | (37)% | |||||
EBT as a % of total revenue | 12.3% | 17.6% | (530) bps | ||||||
EBT as a % of operating revenue (1) | 14.4% | 21.9% | (750) bps | ||||||
Trailing 12-months EBT as % of total and operating revenue | 2Q23 | 2Q22 | Change | ||||||
EBT as a % of total revenue | 14.4% | 16.1% | (170) bps | ||||||
EBT as a % of operating revenue (1) | 17.2% | 19.0% | (180) bps | ||||||
(1) Non-GAAP financial measure excluding fuel service revenue. | |||||||||
- FMS total revenue and operating revenue decreased 10% and 4%, respectively
- Total revenue reflects lower fuel revenue passed through to customers and lower operating revenue
- Operating revenue reflects a 4% negative impact from UK exit; North America remained unchanged as higher ChoiceLease and SelectCare revenue was offset by lower rental demand
- FMS EBT decreasedto $180 million
- Reflects lower used vehicle sales and rental results
- Lower used vehicle gains due to a 34% and 41% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes; sequentially from first quarter of 2023, used truck and tractor pricing decreased 14% and 15%, respectively
- Rental power-fleet utilization was 75%, down from record level of 85% in prior year, on a 1% smaller average power fleet
- Rental results benefited from a 2% increase in power-fleet pricing
- FMS EBT as a percentage of FMS operating revenue is above company's long-term target of low double digits for the second quarter and trailing 12-month period
Supply Chain Solutions: Strong Earnings Reflect Operating Revenue Growth
(In millions) | 2Q23 | 2Q22 | Change | ||||||
Total Revenue | $ | 1,179 | 1,174 | β% | |||||
Operating Revenue (1) | $ | 865 | 798 | 8% | |||||
Earnings Before Tax (EBT) | $ | 76 | 62 | 23% | |||||
EBT as a % of total revenue | 6.4% | 5.3% | 110 bps | ||||||
EBT as a % of operating revenue (1) | 8.7% | 7.8% | 90 bps | ||||||
Trailing 12-month EBT as % of total and operating revenue | 2Q23 | 2Q22 | Change | ||||||
EBT as a % of total revenue | 4.3% | 3.9% | 40 bps | ||||||
EBT as a % of operating revenue (1) | 6.0% | 5.6% | 40 bps | ||||||
(1) Non-GAAP financial measure excluding fuel and subcontracted transportation. | |||||||||
- SCS total revenue wasunchangedand operating revenue grew 8%
- Increase in operating revenue primarily driven by new business, higher volumes, and increased pricing
- SCS EBT grew 23%
- Increase primarily due to higher operating revenue and lower incentive-based compensation costs, as well as higher prior-year customer accommodation charges
- Partially offset by lower volumes in the omnichannel retail vertical
- SCS EBT as a percentage of SCS operating revenue is in line with company's long-term target of high single digits for the second quarter but below target for the trailing 12-month period
Dedicated Transportation Solutions: Strong Earnings Driven by Growth and Improved Labor Productivity
(In millions) | 2Q23 | 2Q22 | Change | ||||||
Total Revenue | $ | 440 | 450 | (2)% | |||||
Operating Revenue (1) | $ | 327 | 306 | 7% | |||||
Earnings Before Tax (EBT) | $ | 33 | 23 | 43% | |||||
EBT as a % of total revenue | 7.6% | 5.1% | 250 bps | ||||||
EBT as a % of operating revenue (1) | 10.3% | 7.5% | 280 bps | ||||||
Trailing 12-months EBT as % of total and operating revenue | 2Q23 | 2Q22 | Change | ||||||
EBT as a % of total revenue | 6.8% | 4.0% | 280 bps | ||||||
EBT as a % of operating revenue (1) | 9.5% | 5.7% | 380 bps | ||||||
(1) Non-GAAP financial measure excluding fuel and subcontracted transportation. | |||||||||
- DTS total revenue decreased 2% and operating revenue grew 7%
- Total revenue reflects lower fuel revenue passed through to customers
- Operating revenue increased due to inflationary cost recovery and higher volumes
- DTS EBT grew 43%
- Increase primarily due to operating revenue growth and improved labor productivity
- DTS EBT as a percentage of DTS operating revenue is above the company's long-term target of high single digits for the second quarter and at the high-end for the trailing 12-month period
Corporate Financial Information
Unallocated Central Support Services (CSS)
Unallocated CSS costs declined to $20 million from $24 million in the prior year, primarily due to lower professional fees and incentive-based compensation costs.
Tax Rate
Our effective income tax rate from continuing operations was 140.8%, as compared to 29.0% in the prior year, due to a one-time, nondeductible cumulative currency translation adjustment loss from the exit of the UK in the second quarter of 2023. Our comparable effective income tax rate (a non-GAAP measure) from continuing operations was 28.6% as compared to 26.8% in the prior year.
Capital Expenditures, Cash Flow, and Leverage
Year-to-date capital expenditures increased to $1.8 billion in 2023, compared to $1.3 billion in 2022, reflecting higher investments in the lease fleet partially offset by lower investments in commercial rental.
Year-to-date net cash provided by operating activities from continuing operations increased to $1.2 billion, as compared to $1.1 billion in the prior year, driven by higher cash earnings and lower working capital needs. Free cash flow (non-GAAP) of $16 million, compared to $551 million in 2022, primarily reflecting an increase in capital expenditures and lower proceeds from used vehicle sales.
Debt-to-equity as of June 30, 2023 was 211%, compared to 216% at year-end 2022, and remains below the company's long-term target of 250% to 300%.
UK and Currency Translation Adjustment Charge
We completed the exit from the UK business as of June 30, 2023. As a result, we recorded a $183 million cumulative currency translation adjustment in our net earnings as a one-time, non-cash charge during the second quarter of 2023. The cumulative currency translation adjustment charge had no impact on our consolidated financial position or cash flows.
Outlook
"We continue to execute in a challenging market as reflected in our increased earnings and ROE guidance," says Ryder Chief Financial Officer John Diez. "Accelerated timing of OEM deliveries is expected to increase our ChoiceLease fleet growth and related capital expenditures, which should reduce free cash flow in 2023. Our ability to perform in various market conditions reflects the fundamental changes we've made to enhance returns and drive profitable growth."
Full Year 2023 | |
Total Revenue Growth | ~(2%) |
Operating Revenue Growth (non-GAAP) | ~2% |
FY23 GAAP EPS (includes ~$3.96 cumulative currency translation charge for UK exit) | $7.95 - $8.45 |
FY23 Comparable EPS (non-GAAP) | $12.20 - $12.70 |
ROE (1) | 17% - 19% |
Net Cash from Operating Activities from Continuing Operations | ~$2.5B |
Free Cash Flow (non-GAAP) | ~100M |
Capital Expenditures | ~$3.2B |
Debt-to-Equity | ~200% |
Third Quarter 2023 | |
3Q23 GAAP EPS | $2.82 - $3.07 |
3Q23 Comparable EPS (non-GAAP) | $3.00 - $3.25 |
ββββββββββββ | |
(1) The non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided in the Appendix - Non-GAAP Financial Measures at the end of this release. | |
Supplemental Company Information
Second Quarter Net Earnings (In millions, except EPS) | Earnings | Diluted EPS | ||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Earnings (loss) from continuing operations | $ | (18 | ) | 240 | $ | (0.39 | ) | 4.72 | ||||||
Discontinued operations | β | (1 | ) | (0.01 | ) | (0.02 | ) | |||||||
Net earnings (loss) | $ | (18 | ) | 239 | $ | (0.40 | ) | 4.70 | ||||||
Year-to-Date Operating Results | Six months ended June 30, | |||||
(In millions, except EPS) | 2023 | 2022 | Change | |||
Total revenue | $ | 5,836 | 5,888 | (1)% | ||
Operating revenue (non-GAAP) | $ | 4,672 | 4,523 | 3% | ||
Earnings from continuing operations | $ | 122 | 416 | (71)% | ||
Comparable earnings from continuing operations (non-GAAP) | $ | 303 | ||||
