Ryder System (R) 16th Annual Wells Fargo Industrials & Materials Conference summary

Business overview and transformation

• Operates a $13 billion outsourced transportation logistics business, primarily in the U.S., with three main segments: fleet management, dedicated transportation, and supply chain solutions.

• Supply chain is the largest segment, serving nearly 40,000 businesses across North America, with a strong presence in food, beverage, retail, and industrials.

• Underwent a major transformation since 2019, focusing on de-risking fleet management, reducing residual value exposure, raising prices, and improving operational efficiency.

• Achieved $150 million in annual maintenance cost savings, exceeding the initial $100 million target, and expects over $200 million in incremental earnings from pricing and efficiency initiatives.

• Shifted business mix from 40% to 60% asset-light (supply chain and dedicated), improving return on equity to a targeted 17%-18% and increasing cash flow by nearly 60%.

Strategic initiatives and forward outlook

• Expects an additional $70 million in incremental benefits from ongoing initiatives by 2026, with a potential $250 million cyclical earnings uplift as the freight market recovers.

• Used vehicle market has begun to recover, contributing $10 million in 2024, with more gains anticipated over the next few years.

• 90% of revenue is from long-term contractual relationships (3-7 years), providing stability and visibility.

• Organic supply chain growth is projected at low double digits, with dedicated transportation expected to return to high single-digit growth and fleet management to mid-single digits.

• Earnings improvements from pricing are front-loaded in the year, while maintenance savings ramp up in the second half, with benefits realized consistently each quarter.

Market trends and operational metrics

• Q1 saw a notable uptick in customer commitments and sales activity in fleet management and dedicated, reaching levels not seen in 2-3 years.

• Fleet utilization and miles run improved 2%-3% in Q1, though still below historical peaks by high single digits and mid-single digits below normalized levels.

• Customer churn has stabilized, with more lease extensions and fewer bankruptcies, indicating improved market health.

• Fleet growth target remains 2,000-4,000 net adds annually, with potential to exceed during peak cycles.

• Utilization is currently in the low 70% range, below the typical mid-to-high 70s, leaving room for earnings growth before adding new trucks.