Balanced Growth Strategy Drives Strong Earnings

Fourth Quarter 2022 Highlights

• GAAP EPS from continuing operations of $4.06 up from $3.36 in prior year due to higher earnings in Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS)
• Comparable EPS (non-GAAP) from continuing operations of $3.89 up from $3.52 in prior year
• Total revenue of $3.1 billion and operating revenue (non-GAAP) of $2.4 billion, up 19% and 14%, respectively, reflecting organic revenue growth in all business segments and SCS acquisitions

Full-Year 2022 Highlights

• Adjusted return on equity (ROE) of 29%, up from 21% in prior year
• GAAP EPS from continuing operations of $16.96 up from $9.70 in prior year due to significantly higher earnings in FMS and improved performance in SCS and DTS
• Comparable EPS (non-GAAP) from continuing operations of $16.37 up from $9.58 in prior year
• Total revenue of $12.0 billion and operating revenue (non-GAAP) of $9.3 billion, up 24% and 19%, respectively, reflecting organic revenue growth in all business segments and SCS acquisitions
• Full-year 2022 net cash provided by operating activities from continuing operations of $2.3 billion and free cash flow (non-GAAP) of $921 million

Full-Year 2023 Outlook

• ROE of 16% - 18%
• Comparable EPS (non-GAAP) forecast of $11.05 - $12.05
• Operating revenue (non-GAAP) expected to increase by approximately 4%
• Net cash provided by operating activities from continuing operations forecast of $2.4 billion; free cash flow (non-GAAP) forecast of approximately $200 million
• Authorizes new 2-million-share discretionary repurchase program

Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended December 31 as follows:

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Ryder is a leader in supply chain, dedicated transportation, and fleet management solutions. (Photo: Business Wire)

Total and operating revenue for the three months ended December 31 were as follows:

CEO Comment

"Our strong fourth quarter results continued to demonstrate benefits from the execution of our balanced growth strategy," says Ryder Chairman and CEO Robert Sanchez. "Initiatives focused on increasing returns and driving long-term profitable growth contributed to higher earnings in the quarter, despite lower gains on used vehicles sold and inflationary cost pressures. Earnings in SCS and DTS increased 67% and 150%, respectively, reflecting pricing actions and growth in these higher-return contractual businesses.

Our balance sheet remains strong and enabled us to fund organic growth and strategic SCS acquisitions. In addition, Ryder rewarded its shareholders through a combination of cash dividends of $123 million and share repurchases of $557 million in 2022. We generated strong ROE of 29%, above our long-term target of high-teens, reflecting strong market conditions in rental and used vehicle sales and continued benefits from our returns initiatives.

In 2022, we demonstrated significant progress on our balanced growth strategy and believe we are well positioned to outperform prior cycles. We accelerated growth in SCS and DTS, both organically and through strategic, accretive acquisitions. The team successfully implemented pricing actions in SCS and DTS, which improved profitability. In FMS, we continued to price new and renewing leases at higher returns and surpassed our $100 million annual cost savings target from our multi-year maintenance initiatives. We also substantially completed the exit of our sub-performing FMS business in the UK, redeploying the proceeds to higher-return opportunities.

Overall, we are confident in our ability execute on our strategy and expect to leverage our operating momentum and the benefits from our initiatives to drive increased shareholder value."

Fourth Quarter 2022 Segment Review

Fleet Management Solutions: Continued Strong Earnings Reflect Benefits from Declining Depreciation Impact and Rental, Offset by Lower Gains on Used Vehicles Sold

• FMS total revenue grew 6% to $1.6 billion; operating revenue grew 2% to $1.3 billion
  • Increase due to higher rental revenue driven by increased pricing
  • Total revenue also increased due to higher fuel prices passed through to customers
  • Operating revenue increased globally despite a 4% negative impact from the wind down of the UK business
• FMS EBT remained at $255 million
  • Benefits from declining depreciation impact from prior residual value estimate changes and higher rental results were offset by lower gains on the sale of used vehicles
  • Lower gains reflect reduced sales volume and a 6% decrease in used tractor pricing. Sequentially from the third quarter of 2022, used truck and tractor pricing decreased 7% and 2%, respectively
  • Global used vehicle inventory levels increased sequentially to 4,300 vehicles but remain below the company's long-term target range of 7,000 - 9,000 vehicles
  • Rental benefited from a 6% increase in power-fleet pricing and strong power-fleet utilization of 82% on a larger fleet
  • Inflationary cost pressures, including increased variable interest rates, negatively impacted results
• FMS EBT as a percentage of FMS operating revenue is well above the company's long-term target of low double-digits for the fourth quarter and full year 2022

Supply Chain Solutions: Higher Earnings Reflect Increased Pricing and New Business, Partially Offset by Charge Related to Early Termination of a Customer Distribution Center

• SCS total revenue grew 44% to $1.3 billion; operating revenue grew 44% to $883 million
  • Increase due to acquisitions and double-digit organic revenue growth in all industry verticals reflecting increased pricing, new business, and higher volumes
  • Operating revenue grew 22% organically
• SCS EBT grew 67% to $35 million
  • Increase primarily due to higher pricing and new business
  • Partially offset by a $20 million asset impairment charge related to the early termination of a customer distribution center in 2023
• SCS EBT as a percentage of SCS operating revenue is below the company's long-term target of high single-digits for the fourth quarter and full year 2022

Dedicated Transportation Solutions: Higher Earnings Driven by Increased Pricing

• DTS total revenue grew 13% to $456 million; operating revenue grew 10% to $320 million
  • Increase due to higher pricing and volumes
• DTS EBT grew 150% to $30 million
  • Increase primarily due to higher pricing
• DTS EBT as a percentage of DTS operating revenue is in line with the company's long-term target of high single-digits for the fourth quarter and full year 2022

Corporate Financial Information

Unallocated Central Support Services (CSS)

Unallocated CSS costs were $22 million as compared to $15 million in the prior year, primarily reflecting investment income in the prior year from RyderVentures, the company's corporate venture capital fund.

Income Taxes

Our effective income tax rate from continuing operations was 31.4% as compared to 22.8% in the prior year and our comparable effective income tax rate (a non-GAAP measure) from continuing operations was 28.2%, as compared to 22.6% in the prior year. The increases in the rates were due to incremental U.S. tax on higher foreign earnings related to the exit of our UK FMS business as well as a shift in the mix of earnings subject to tax in different jurisdictions.

Capital Expenditures, Cash Flow, and Leverage

Full-year capital expenditures increased to $2.7 billion in 2022 compared to $2.0 billion in 2021 due to higher planned investments in the lease fleet.

Full-year net cash provided by operating activities from continuing operations increased to $2.3 billion as compared to $2.2 billion in the prior year, reflecting higher earnings partially offset by higher working capital needs. Free cash flow (a non-GAAP measure) was $921 million, down from $1.1 billion in 2021, primarily due to an increase in capital expenditures partially offset by higher proceeds from the sale of revenue-earning equipment, including proceeds from the FMS UK business exit.

Debt-to-equity as of December 31, 2022 decreased to 216% from 235% at year-end 2021 and is below the company's long-term target of 250% to 300%.

Share Repurchase Programs

During the fourth quarter, we repurchased 2 million shares for $179 million under our completed 2021 Discretionary program. Additionally, we repurchased 0.9 million shares for $78 million under our 2021 Anti-Dilutive program. In February 2023, the board authorized a new 2-million-share discretionary repurchase program.

Fleet Management Solutions UK Business Update

The company substantially completed the exit of the lower-return FMS UK business. In 2022, Ryder sold more than 90% of vehicles and properties, generating proceeds of approximately $400 million.

Outlook

"Increased demand for resilient supply chains and other secular trends continue to favor transportation and logistics outsourcing," says Ryder Executive Vice President & Chief Financial Officer John Diez. "In 2023, we expect strong but reduced earnings as a slowing macroeconomic and freight environment drive lower results in used vehicle sales and rental. We expect these headwinds to be partially offset by continued earnings momentum in supply chain and dedicated. We are pleased with the progress of our balanced growth strategy to drive long-term profitable growth and increase returns over the cycle. We anticipate ROE will be at our long-term target of high teens. Our balance sheet remains strong, providing us with the ability to continue to return capital to shareholders through a new 2-million-share discretionary repurchase program."

Supplemental Company Information

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; expectations regarding total revenue growth, operating revenue growth, earnings per share, comparable earnings per share, adjusted ROE and debt-to-equity; impact of supply chain and labor shortage challenges and vehicle production constraints on our business, market conditions, e-commerce trends, freight environment, expected earnings, depreciation, commercial rental demand and utilization, and used vehicle sales volume and pricing; expectations related to our strategic investments and initiatives, including our recent supply chain acquisitions and initiatives related to maintenance costs savings and improving returns; expected benefits of lease pricing initiatives and our ability to renew leases; our expectations regarding benefits from the 2-million-share discretionary repurchase program; our expectations related to the exit from the FMS U.K. market; our ability to execute our balanced growth strategy; performance, including sales and revenue growth, in our product lines and segments; residual values and depreciation expense; used vehicle inventory; earnings, including as a result of the macroeconomic and freight environment’s effect on used vehicle sales and rental; free cash flow; tax rate; operating cash flow; capital expenditures; fleet growth; and expected benefits from new contracts and pricing initiatives in our supply chain and dedicated business divisions. 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- and long-term used vehicle market. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and 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 changes in general economic and financial conditions in the U.S. and worldwide; ongoing supply chain and labor challenges and vehicle production constraints; the effect of geopolitical events; our ability to adapt to changing market conditions, including lower than expected contractual sales, decreases in commercial rental demand or utilization, poor acceptance of rental pricing, and 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; our ability to effectively and efficiently integrate acquisitions into our business; lower than expected benefits from our sales, marketing and new product initiatives; 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, changes in technology and new entrants; professional 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; unanticipated changes in fuel and alternative energy prices; unanticipated currency exchange rate fluctuations; increases in inflation or interest rates; 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.

Financial = ryder-financial

USA = ryder-usa