R - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Ryder System Second Quarter 2019 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation. Today's call is being recorded.

If you have any objections, please disconnect at this time.

I would now like to introduce Mr. Investor Strategy President, for Product Vice Ryder. Brunn, Relations, and Corporate Strategy Bob Mr. begin you sir. Brunn, may

Bob Brunn

in much. uncertainty morning, to based statements very forward-looking Securities earnings and during Thanks Litigation Good expectations presentation, on statements conference and quarter Ryder's this subject circumstances. of of are call. management's XXXX within second Reform the current I'd the hear Act are like you'll remind changes meaning that and you to some welcome Private to These XXXX.

Actual regulatory may these these includes certain due detailed This results filings this materially differ expectations measures. Ryder's the financial competitive, non-GAAP about in in with to from Commission. business, conference economic, Securities morning's call market, changes and Exchange earnings factors information factors. also in is contained political release and More and

each our in measure which You'll measures find the is at this reconciliations website available investor.ryder.com. accompanying written of nearest to call, the GAAP on non-GAAP presentation

Presenting Parker, and on today's call Officer Financial Vice and Executive and Officer. Chairman Chief Executive Chief President are; Robert Sanchez, Scott

Cooke, President of Transportation call John Dedicated and the of Sensing, are questions Dennis and for the presentation. Solutions Management following Fleet available Steve Chain President of Solutions Diez, President today Solutions; on Global Global Supply Additionally,

call This time, I'll the Robert. over turn to

Robert Sanchez

initiatives business, and highlight morning, Good our the of we'll everyone, progress recap quarter the morning, outlook on open questions. we'll current our strategic and us. second our for This then thanks call for joining discuss XXXX for some results,

second XXXX, X% an lower year, offset continuing operating were results. earnings used prior by from Comparable results, let's of primarily operations turn quarter down partially to the for vehicle per With of overview performance. the reflecting second our that, improved from $X.XX share quarter

expected of quarter. in results performance than expected Comparable $X.XX, offset slightly conditions better sales and began our reflecting above $X.XX late in the than that to rental by vehicle in contractual operating lower midpoint demand largely used our forecast businesses, of the range were

earnings and lower pre-tax of of were $X million related Comparable depreciation vehicle to reflecting used adjustments headwinds valuation million higher pricing. down X%, $XX

delivered all fuel growth and $X.X by well in Sales remained quarter. subcontracted Operating driven a excludes XX% which transportation, as second solid secular and we to trends, activity increased billion for by strong as revenue, our and sales marketing outsourcing revenue initiatives. segments, the record

X includes Page XX% information up second supply year, was from reflecting contractual million, and dedicated the additional the of the prior financial from contribution Comparable quarter. chain for earnings growing business. $XXX portfolio lease, our EBITDA

XX.X down average prior diluted million million,, The of number for February in the shares a under slightly year. repurchase We from shares began share XXXX. quarter was repurchasing of X.X the outstanding program anti-dilutive two-year

we XXX,XXX approximately quarter, at of price an the brought $XX.XX. average During shares

other down the the second year's comparable Excluding from pension items, costs rate. tax slightly of was for XX.X% and quarter XXXX, the rate prior

was capital XX%. the year, on points, sales basis reflecting lower approximately from primarily points was XX results. return XX prior vehicle on The equity down basis Return spread spread in used

anticipated vehicles quarter on benefited fleet X% by we all the growth organically I'll prior this lesser earlier OEMs. and fleet segment. rates vehicle ChoiceLease quarter. driven trends increased a business now increased higher due excludes from lease The during turn Solutions revenue saw the to X% product Fleet lease replacement operating that in primarily vehicles. deliveries in fleet which and from key by page to to discuss X Management extent Growth lines. X,XXX increased in fuel, from growth revenue, than each the the year,

approximately year-to-date the market non-outsourced penetrate fleet from We growth with continue effectively XX% to new coming customers to of outsourcing.

track the fleet vehicles, sizes. to least year to be for which new We achieve organic remain also from lease see XX,XXX a expanding would of customers record fleet We growth this continue growth on their company. at

average higher and Commercial The and SelectCare driven full prior by preventive nearly revenue X%, revenue vehicles grew rental increased by fleet year. up service SelectCare X%, demand XXX the was ancillary activity. pricing. reflecting maintenance from higher

utilization Global down XX.X%, on XX.X% expected on was rental year, from reflecting XX% strong the in a prior-year and demand power prior than primarily units average Rental up X% lower and up was very fleet tractor was pricing demand larger comparisons. X%.

capture driven the for to the strategy heavy-duty we Our utilization for which remains prior-year demand, higher quarter, for softer quarter Late trucks very medium-duty strong track. demand tractors, however, second impacted in e-commerce comparisons. on against saw

discuss residual were reflecting higher from results earnings adjustments quarter FMS in the of decreased, and separately $X valuation higher for minute. results of depreciation down I'll Overall, used results, value a including those changes vehicle million. Used million lower year-over-year. vehicle $XX

impacted negatively debt, of extent standards. than adoption higher lesser including and the the to also levels the were overheads, bad a accounting from lease impact new normal higher Results by of

Results used from lower growth. cost primarily the a earnings results. year, FMS as And FMS prior points XXX benefited maintenance our operating from tax reflecting from Earnings were vehicle revenue before lease down X.X%, benefits XX%. decreased basis initiative. in sales of percent

summarizes key Used used for results increased than inventory. were were and higher as the volume vehicle on X Page offset results larger vehicle pricing more for by down, sales. quarter valuation adjustments

quarter used during versus our target quarter, X,XXX Used end, of which vehicles vehicles. the X,XXX up sequentially. vehicles X% X,XXX the vehicle inventory, X,XXX X% up totaled and vehicles range is sold prior We year to at within

vehicle greater for And the X% increased a by per compared sequentially, for compared Inventory tractors year. to up down year coming trucks Proceeds this XX% prior expected. reflecting a increased vehicles of units vehicles ago. sold, lease number were year XXX and as to X,XXX off

in pricing year. of in the pricing comparisons quarter from quarter that levels XXXX. we tractors of last benefited, Year-over-year the line for improvements was market fourth realized with pricing Tractor in this quarter began third

weaker truck to X%. on conditions was X% page the quarter X. Supply in quarter, demand now from Solutions up pricing down tractor first reflecting, Chain Sequentially, was while I'll turn late the pricing

up XX%, And improved pricing driven were XX%, tax, by and by driven and grew performance. Total increased business, revenue earnings, grew X%. Chain growth revenue Supply operating before new volumes. revenue operating higher

X.X% growth, with percent up total were basis up revenue a business On from quarter, XX%, XX revenue tax strong page Dedicated of for revenue prior our operating revenue before the up XX%. X, achieved points and operating the year. earnings Segment as

growth this outsourcing sales driven was trends Favorable expansion challenging market, strong very DTS quarter. again driver with results, and including a business new existing by to Revenue contributed customers.

also This to for ongoing continue business. and opportunity, see a lease We services significant outsourced customers relationship to their by expanding adding solutions. Ryder, be Dedicated growth into the driver dedicated with moving continues

to revenue basis and up operating points DTS a operating performance. XXX before Segment this tax Earnings prior the of improved due quarter, Increased were from XX.X% percent as earnings growth, revenue year.

cover our spending. capital Parker, the starting he turn with this to several At items CFO, point, Scott I'll over call

Scott Parker

Thanks, Robert.

higher Turning XX, expenditures, contractual around from planned the totaled gross up fleet. and refresh to This year-to-date grow investments $XXX million year. to page capital billion, approximately prior lease increase the reflects $X.X

increased the Proceeds million, property. growth. expenditures of were million, $XXX million, $X Net of nearly million to up from capital sale due under lease just to contractual a $XXX reflecting $XX $XX by primarily billion,

page, cash lower The Turning of million to approximately year-to-date, activities And up billion by $X driven cash-based capital the operating next over earnings. from generated higher primarily working XX%. increase needs. we $XXX was or

operating billion $X.X cash from payments expenditures million cash, $X.X billion. generated increased We higher prior of $XXX $XXX reflecting for Cash year, the to about sale. a up just by capital property million, and approximately proceeds from over total

increased year and negative of $XXX lease spending, from the the flow, $XXX cash reflecting to negative prior year-to-date, lease replacement level normalized and was down million capital primarily of free rental a million, Company's grow fleet spending.

equity, XXX% Debt the XXX% full-year to quarter, end fleet billion, growth from of $X.X forecast reflects for free reflecting in unchanged the flow significant capital at growth. remains Our of end XXXX. cash at to primarily spending. investment the And second at negative the our increased

end range XXX% Our XXX%. balance to sheet of leverage the is toward of our top

expected in second half decline is leverage year-end XXX%. forecast the to around our remains Our and

current point, this Robert hand over cover our to At back to I'll outlook. it

Robert Sanchez

healthy as a we at in ongoing Supply Dedicated Scott. also environment continue sales we contractual a and the with revenue businesses, contractual by across -- pleased on with and initiatives strategic encouraged our lease, products time, new Thanks, launch ongoing Chain and Overall, strength to freight We're potential. strength drive demand markets environment growth the to activity. earnings higher softer progress strong our despite we're over see longer-term

performance and in target their businesses, We long-term Dedicated pre-tax within resulting operating in Chain expect our Supply strong range. margins continued

DTS, rate we remain favorable, expect below comparisons levels. growth to revenue XXXX In although, first half

robust negative previously-announced year, remain primarily target in that's pipeline encouraged pre-tax below sales record only levels. Dedicated, second are but of expect range. comparisons lost we within We year's to by to half Chain Supply expect year-over-year to a Solutions, the for the due last margins slightly also In business, revenue turn

lower to is In with our due Heavy-duty e-commerce by truck than tractor our forecast primarily prior medium-duty rental, strategy driven to growth, higher track. four on is demand capture demand, softer somewhat rental Commercial carriers. activity

asset expect management by However, to other actions. mitigate impact largely capabilities taking our and cost we this leveraging

fill of the expect in OEMs the in latter year During the with the at should lease year, the received lower-than-originally than the second to forecasted from year. be full beginning should around part by used rather This anticipated CapEx being vehicles more earlier offset in resulting of which we original CapEx than new half result equipment, the lease of the year, contracts forecast.

we more $X.XX we're as light $X.XX our to tractor expect wholesale sales, our revising used year to channel, In June sales vehicles saw our forecast, to to of pricing EPS to prior sold lower factors, beginning vehicle primarily being manage used to versus vehicle below demand $X.XX to now due inventory $X.XX, levels. full of range and tractor In be forecast previous the in results. these lower reflect primarily comparable we

to third $X.XX in comparable to $X.XX the is year. EPS Our $X.XX prior quarter compared forecast

to XXXX reflecting negative age. negative negative to earnings impact expected is Third reflects $X.XX negative accounting year. compared from XXXX in the year of quarter lease The prior from method. the lease accounting estimated decline quarter share lease $X.XX to by comparisons now $X.XX $X.XX from third year-over-year the full as to benefit in impact in approximately accounting, prior The accounting expected fleet lease include XXXX a $X.XX to impact per reduce in to impact a $X.XX $X.XX negative positive compared an an

provide I'd to brief on the like with initiatives. our you making on XX. strategic a of slide progress to we're some update Turning

continue to forecast growth focus exceed we record XX,XXX growth. this First, meet contractual year. track or profitable fleet to We our lease remain of on vehicles driving on

improve to residual assumptions we made leased additional returns previously As and to being beginning on in vehicles lease discussed, continue returns. our improve steps new to to changes value evaluate XXXX,

sales and see Supply capital total expect invested. the XXXX more be Additionally, Chain activity we and and revenue contractual in continue for sales streams multi-year Dedicated provide periods deals. year delivering Chain to of These contracts new third highest Dedicated on and earnings stable lease over Supply to strong contractual returns company

our is new to making revenue strategic able consumers. fulfillment U.S., want directly for U.S. provides and to also throughout services in growth. is products solution these three investments rollout and fully that We're that e-commerce long-term fulfillment that of strategically sell to new reach for to brands with avenues earnings initiatives A order new the delivery. Among are Canada two-day track the operational facilities XX% located with provide on

sharing first its the Ryder, interest by continue are by the Florida COOP commercial expanded We we into vehicle and strong customer market to platform platform. see encouraged of the kind, this with

to savings full the multi-year efficiencies on achieve lower cost-reduction future. cost expected opportunities from track maintenance we're Finally, additional expect our and initiative cost year drive to and the in

targets, and expectations financial and expected DTS revenue due growth the in beat to for come this XXXX. are below to expected primarily three-year we target to our FMS as lost operating their trends laid SCS XXXX early reflecting is their previously-announced year, in to provides business. initiatives. XX compared revenue other results out secular Slide targets

to in and issue ahead anticipate to look this beginning at expect more lap XXXX the second we of that As time. normalized half growth returning rates we

three-year to revenue growth Our be this CAGR year. for is XX% expected operating

over Supply remain pipeline beat business, Given over X% to in confident new reflecting remain to primarily from percent EBT performing X% due EBT year, the to impacts the expected within is vehicle to segment's ability target used to the Chain remain time. range balance or long-term is range, benefits X% in Chain ongoing below target meet the our improvements FMS our of revenue of the accounts. the target in is expected growth sales. X% the Supply of operational to we our previously from under target, currently

this to Dedicated's We've return addressed from challenging green the We XXXX percent yellow for have for business. forecast status. start-up are that improved year improvements prior operational raising our and made outlook our EBT

Our expected this is vehicle return due our revised used now year spread on to outlook. capital breakeven to

remain Finally, range we our of expect XXX%. leverage to XXX% within target to

the over it an each. morning. one yourself I'll to open turn That for concludes line operator At up our to please everyone prepared this remarks question to give to questions. time, the order this limit opportunity, In

as welcome and you're as questions, we'll additional back Operator? queue we in the calls have take can. to get you If many

Operator

question [Operator Thank Matt you We go from with will Please our first Brooklier Instructions] take Buckingham ahead. Research.

Matt Brooklier

good there, but the Yeah. little you what this you on first the you're how than ways, if grow I could that the -- as into a we the your Thanks about deceleration the half? thoughts thinking can is talk Are on bit want expectations your to the are less size and about things fleet bit And rental a little of XXXX? some maybe we're a business look year? then, of about thoughts and know, rental Maybe but potentially in morning. talk fleet there you

Robert Sanchez

Yes.

we it of relatively It was in where there kind Let And from demand where me really primarily you a is demand. driven, for a just quarter what's maybe really tractors, changed a the would just give a I say, area, level rental for-hire by ago. was saw slowdown market, tractors. around carrier contained rental overview of high less

So order though, side, I track upsized in tractors, less demand, expect we'd demand to second half, we've well. in tell of in the going you truck more now driven fleet business on to downsize we of The fleet that the capture medium-duty and area. would expect we're rest on and the e-commerce where the the it's going that the especially around would

little give I more Dennis, know want if So, don't a to color? you him

Dennis Cooke

originally demand tractor X%. be realized had to you look QX, -year -over we Yeah. we Matt, at about when XX% year up expected and add, just I'd

point year-over-year. it still what's were about little from even we actually had rate than slower is are We just we good a robust. We So tractors but growing feel increase expected truck but view, happening a more, XX% at expected. Trucks a pretty demand realized softer. of still

Matt Brooklier

Okay.

like guys on feel there are year? the side, some good -- tractor this side sounds fleet for this little tailwinds the in different I cycle size softness a is So incremental it secular guess you bit is on truck that's offsetting potentially fact that the and pretty the the about

Dennis Cooke

When and we're right. when strong. but remaining good. while was a actually front, downturn, we the the the little feel reducing tractor you side, truck year we see QX XXXX in this was XXXX we on Yes, stronger weaker, second in Obviously, QX compare very that than fleet trucks this to saw half, the

Matt Brooklier

between And what's and tractors now Okay. mix rental in the fleet? trucks the right

Dennis Cooke

Yes.

the we have So, tractors got is XX% of fleet and trucks. XX% is

Matt Brooklier

it. Got

appreciate I it. Okay.

Robert Sanchez

change add pace grow So, really of, I Matt that though our really strategy lease. we've to our would view it about too grow goal line we the to complementary it and product long-term lease that, said, is really a as is doesn't we rental at

on think sized asset policies I'd fleet the So, that I will period the say remains track. solid good we're is, a wouldn't right management in of -- that, and implementing, time. I And that news that that got some strategy short say get again, we've

Matt Brooklier

time. helpful. I That's the Okay. appreciate Robert.

Robert Sanchez

Matt. Thanks,

Operator

question take with from [Operator Please next Scott Research. go Group our Wolfe ahead. Instructions] We'll

Scott Group

Thanks. guys. Morning Hey.

last think losses values. I quarter pricing so too worse didn't for in that about a this $X.XX if about number you're as XXXX used give Can the price? can number in does what that guidance maybe give you us 'XX? well? on year I back 'XX, hear truck again, then, 'XX, headwind talked the got and but used I half truck And updated And and thinking So, year-over-year, then, residual guys now of lower the sequentially make then, for the in from sales you you and

Robert Sanchez

half used from majority the side. in reduction the guidance of address of really the the year. truck is me second The Let

adjustments be can the whether – discussed that's argue of it's that losses at valuation, we accelerated incremental, to that just you those So or $X.XX depreciation, year. will incremental the beginning the

it it late forecast. on As really into we a pricing beginning it To mean volume slowdown we've that the relates guidance, I the in believe saw adjustments is the put some assumptions in to context, June. we based made quarter, of what prudent that build we've some to made that

pretty which clipping a is had I we the June. broader what saw June, saw, at been with pricing in we June had really volume in also think we in markets level we along So, saw and the off, a decent drop

pricing of July on take So did is used we kind issue, with based to where trucks, the assessment a our down pricing our tractor the align We that about in market. for and class pricing. tractor down This a of A tractor environment we saw tractor our brought issue. XX% really

into in. the – built we as that's as next half of second the into we go year, So go

have the that can, we that want in wholesale. of retail in addition but going to volume that, as and most saw June, that half, know forecast that we in assumed In the that of we we volume to sell softness the given more to we to second much we is be

see that. you why disproportionate impact that's So, a maybe from more

So, inside fact month based doesn't level felt take much from we everything retail was sales of expanded can on to uncertainty, that at as sales and that we commit – of and felt to but it only that level. the that that we're force doing away given the we one seeing really level as prudent we it can,

would too As still early tell. to you, tell XXXX, it the to relates it's I

we – either that have truck used that. you gains and you from if to impact as change much or Policy more probably wouldn't rolling wouldn't probably the we – as the have losses accelerated. amount into wholesale or should five-year would but average, continues, pricing think I decline do does of trend if that probably XXXX, the policy go materializes, see impact

to remains lot seen. still So, be

steep how happen. the materialize, and does slowdown will if it if materialize, really decline of a the it does duration does is then it one go, Number

really, one because for this. of challenging of call had us kind time impact forecast it, and of now, month month only half seeing a we it's really and a a maybe to really the So do

view we we same, as the we can to retail is is strategy information possibly to to have, that try our that on as but best based the try So vehicles give we our to again goal many the stays you clearly, can.

Scott Group

Just give we'll assuming guys year? about does that likely in then, it $X.XX were additional guess, understand, I now so again depreciation that accelerated I you XXXX, headwind when that? And originally do take more next to you or feel have talking were

Robert Sanchez

less a was larger year more assuming then accelerated accelerated and were We adjustment depreciation in policy XXXX. next

several So than before, but would be to more I there to three little color, hard remains such Scott, under had again, if that If argue we what but short prudent probably you frame, take will months better settle seen. number gave be tell to down, accelerated, experience months. think, have I'd you give able this of belt we to before we bit be it a pricing a the exactly market I time next the but had I comes think still was will given here, where forecast, I in my it's a tried

Scott Group

Okay. Thank you.

Robert Sanchez

Okay.

Operator

Ossenbeck ahead. We'll take JPMorgan. go Please Brian our question with next from

Brian Ossenbeck

things into side? in so the tractor on us Thanks and in in morning. but bit of know, Good the specifically on into July for an last just seasonality June question. can you market, the I a rental line particularly things got how there's in coming give of Maybe both trends follow-up you little questioning July the summer, softer on in taking Hey. far, June. trended on vehicles, mentioned the used from update specifically tractors,

Robert Sanchez

Yeah.

we're around behave side, rental specifically I trend seeing think seasonally the expect. way on you'd the tractors, the

the it's consistent Around built tractor have month, the what forecast. of we I which end June, in was our in too what So, early vehicle would in activity, the changing saw with both pricing, was the talk. again, used into lots. at still our sales, more we've rental and got to in say, sales at we seen really lot the sales but inside A come with of

early the more forecast, So, still I'd obviously tell on retail balance good that. say, but activity year to too would for be again, it's of

Brian Ossenbeck

so it I of year-to-date far here, are the guys market but and And for America. a year? the seeing it's be then can export in you North Okay. specifically huge rest not expecting a the know swing, factor What

Robert Sanchez

Yeah.

been outside at going levels the the some During because with this same of tough dollar what's that in demand and cycle, we've we markets, it's other haven't seen strong the seen times. U.S. emerging of on the

would I So it's in demand. still terms somewhat say limited, of

of used relatively been vehicle to at the it's used I kind -- sales trucks because if supply So part it's based it's look market think of forecasting be interesting in forecast demand. over think The pretty what's several the I tough the easy that really is last will on years. built you

And soften volumes for-hire the for-hire rates break XX happened as come months. the the begin in last over -- months what several you've market you've seen to last seen with begin down,

these But into you will plays all that demand flip around see vehicles. more pretty up, less everything this you seeing way the economy moving picks thing goes quickly. think -- some you start I just the stuff fewer and as if for of could other

I of So still the I it. what what from to think truck uncertainty would balance say in expect other the what's of we and be year. really heard prudent softness we're in certainly the a are it's then volume seeing this that market in -- you've about But around in space of June trying terms for companies there's we're used lot

Brian Ossenbeck

Is the just when I at split split we're guess specifically And right. a there a is Thanks. one big caps? backlog. day speakers quick and -- looking tractor in follow-up between there All big

Robert Sanchez

to have we sell? That

Brian Ossenbeck

last versus with caps? Yes. year What's material there? at when Is sale? mix in difference for speakers held day you different year in now what's really there the look a Any and

Robert Sanchez

Yes. XX-XX. No, About XX-XX. about it's

Brian Ossenbeck

Okay. for morning. All you time right. this Thank the

Robert Sanchez

Brian. All right.

Operator

our with Todd next from Capital go Fowler question ahead. Markets. KeyBanc take Please We'll

Todd Fowler

morning. Great. Thanks and good

Robert Sanchez

Hey, Todd.

Todd Fowler

you've you units. around talk this year mean coming little pipeline? and visibility had XX,XXX strong that more pretty Can the talk you – good Robert, can a been obviously confident you I just about hey, little lease a bit morning. into

first You in that the half. booked of a now lot

you're I just baseline forward? can we of do As talk about of think you about a a guess XXXX what X,XXX look half you've as over into expectations the kind out little you into think the cadence how bit side And talked about and lease going seeing additions? the on I second

Robert Sanchez

all you Well, a say of lease I'll strong. it contractual and across it's our businesses the tell statement remains sale very would I

for last look because a year, in of down where for in the going here at end and contractual we're we're them best be record company. the of the in year But to history our all Now of you year year business I versus terms year from even would sales. it was ChoiceLease last if last say sales should third businesses

still companies So a wanting to outsource, Dedicated very wanting the outsource logistics. healthy truck pipeline lot to outsource more of demand wanting to lease

in So growth. and year don't for last trends down. it those activity economic see going less are of level Obviously them see there's secular trends swing full still was as but than is we forward necessarily those slowing good we overall the

or would year's maybe we're looking about at expect was this so. Last XX,XXX. I XX,XXX Now growth year now

and XX%. relative would year lot just down be have a will given fewer of Next the this growth also maybe our expect be OEM production I folks if forecast to expect which information will. to that down you we

rental get have new. this new of as of That leases more less and would October I should in based a of year and equipment, CapEx of impact redeployment be -- we management lease equipment end into activity through that our some will the scheduled also I continue or to late fleet versus in reduce to actions redeploy we used asset taking our mostly reduction to fulfilled we're with in I next locked into would that sales XXXX as go our expect in November. on expect reduce lot But we'll growth. year as already beginning to addition in that still more are

Todd Fowler

to you've I you're follow-up revenue breakout medium seen medium is the is there are Okay. those profitability market That's the units a shift kind about on the duty then tractor versus seeing in secular that there. meaningfully between side do just the if profile duty that would see the different And or demand mean margin that profitability? in side? I helpful. on continued of shrink two impact the to How different? rental as that think the the tractor per an we we relative think classes

Robert Sanchez

Yes.

you look profitability the think tractors. overall will be trucks it at The step if look overall. I you on better returns and at the if on back than the

part I So lease tractors think necessarily the our part it's not of, portfolio. are but of obviously, that portfolio

up over at provide So some that move but to you're rental the going just truck see of down also point. good cycle will -- us. both for in and demand returns tractor But them demand like

So that's really the I'd move the characterize. to way I'd a I tractors say, returns. from not And for is say, thing truck bad would

Todd Fowler

Okay.

returns, maybe a cycle at we're you makes where but some tell it impact standpoint. to the For sense, from in margin

Robert Sanchez

Correct. Correct.

Todd Fowler

That’s helpful. time. I’ll Thank get back in line. for the

Robert Sanchez

Thanks, Todd.

Operator

will our Capital Loop take Kauffman Markets. with ahead. next from Jeff We question go Please

Jeff Kauffman

particular particularly a fuel a you. was Good alternative Nikola called out side. direction on to coming go fuel morning, Thank cell their want table the product. Scott. with about and the In Good everybody. company morning, I different talk some of growth the on initiatives

project going are be a is and you're to capital understanding also My little fueling this fairly on you kind a cell years. to the partnering initial the of the going one talk next build-out customers, number to be leasing there of trucks over companies hydrogen expectations returns? the of couple might or fuel You’re this about product of Can but be to of just expensive customers? bit and their leasing their in what not of them these stations

Robert Sanchez

Right.

-- Nikola with we are ago. announced years partnership now a our of couple We

Scott Parker

Correct.

Robert Sanchez

in looked alternative And new fuels. innovators and companies and that engine gone technology and out we've are start-ups for

partnership arm Nikola and with and goal sales will service is their or in America. our and North really So sales service our here network if you

going they phase a a in to when a role provide and development us point at bigger where trucks. maintenance That's through really move they into and of for for them play and as once So they're production production their to start be a being and terms avenue avenue will to deliver, also delivering in Ryder sales can they're them. service

But innings, will we're process. in early still I you that if think

years I still a roll-out earliest at still we're from think several now. looking

work of technology. by interesting an do a it's encouraged lot to into it, production. We're So still to get but

Jeff Kauffman

think by their Expo, with later they given be when you and going will be just They to and a XXXX. owning first But the I purchasing delivered think then out probably roll them to year, the follow-up. at had the leasing larger those leases expire? bearing this in I will marketplace ACT out presentation them trucks to customers those you said, are trucks, a to customers be risk and

Robert Sanchez

will out, put of that how these working address will vehicles, say… piece. them clearly we be exactly is partnering on with Nikola A there on types but together lot No, around details be upfront to that we will Yeah. significant I a be with be those. is expenditure that would capital how worked to on the of still

Jeff Kauffman

yeah. All right. It’s so exciting,

Robert Sanchez

It's early, early. still still it's

Jeff Kauffman

know. Okay. wanted what Thank I you. That's to

Robert Sanchez

you. Thank

Operator

Our will go with from Please Benjamin next SunTrust. ahead. come question Stephanie

Stephanie Benjamin

end Hi. range environment I you baked pricing the you give know afternoon. the to bit your to just at of of end and the XX% on guidance? took Can in? wanted back what's down year I pricing used you on what about kind what of with the color, June. and circle Thanks. of you of through to the then conversely walk you get the based still guidance broad a Can kind for guidance EPS, for high little low Good that in truck your your a reduction. happens mentioned full saw expectations levers

Robert Sanchez

that that give could tried yet. where in wholesale XX% put about on the to don't a wholesale, retail in we're things color because fact the I could indication a certainly I with to we in was more, you place -- we And be it the market, range sell give a to don't given only tractors to wanted will vehicles I range we have Stephanie. little going be some and want the go. already built that we exactly but amount then uncertainty have in, wholesale. incremental bit be And lot XX% wholesale, you to what's that built and to to we've have Yes, that decline of prescriptive gives of then of we know of totally still

to going know we be. the do what be not We get more. price retail the may Hopefully, That is way we retail don't there.

to too do I and made if and a view this don't with you and we've I right we the be upside then prudent we exactly think results gives truth could is where of that There good don't the numbers the or would want be, we adjustments. think to don't adjustments prescriptive but certainly the So we impact obviously assumptions of get know precise we're better, making. market is want because the

Stephanie Benjamin

Understood. No.

that. that And think makes a just sense. I follow-up to lot then of

of reduction programs that wholesale decline kind what In retail. have to retail other else walk might perspective that there accelerate switch force from vocal pretty know anything Is Just out you you your you've to internally I you've pull? terms just to a cost to been of to been from through build on initiatives, doing sales cost or some well? as offset maybe of this of overall be levers able either or the some to

Robert Sanchez

Yeah.

year about target for and on good that. cost maintenance of I We're by for making seeing components the initiatives. really talked very this cost we're progress think, reduction, progress really and we ongoing look, good the encouraged that,

So encouraged by we're that. very

based as continues of be budgeting Zero process. foundation a budgeting our to

could continue the levers to So we that pull. those are

more would -- our efficiencies our into tell used I operation at you continuing with that, looking beyond also drawing inside find of inside sales board and that, We also we're to sales. leads vehicle sales within

it our online. continued to really We and website attract people are buyers buy making easier make to for enhancements on more

people the website then more coming to really at about. our some us and easier got we've we've transact now encouraged us which we're So some to facilitate could and them in got that for help with making coming changes year the end it bringing changes in of

think I on. the that going we're work are things to big those So,

started continue We last leases talked at right? the of We beginning would year de-risk we also our year, last reduce looking about are you, -- to also, I we -- residual tell assumptions over or few reduce the value of we've leases residual been value, with impacted last with all which -- to years. on really risk associated obviously that improve really final our the the

But sector. to on. very maybe getting granular continue returns new reduce about putting to by look that reduce for to risk, So going it's we're Whether right? residuals our that we're leases industry ways to of the continue more we good feel about the more the leases

returns. and have that So, maybe are don't have returns better which better industries we the

that. continue going to So, we're to refine

have capital sure where we to is be capital allocation that really goes growth think about amount make getting improved targeted with now capital not the only also precise be I being deploy. able in our important this of and extremely to business And more we're to more able that time over returns.

Stephanie Benjamin

Great. Really much. appreciate the color. Thanks so

Robert Sanchez

you, Stephanie. Thank

Operator

question go next ahead. with Ross our Stifel. take We'll Please from David

David Ross

morning, Good Yes. everyone.

Bob Brunn

Good morning, David.

David Ross

about comment what in policy a there? Can talking at of end those XXXX. answers there you Bob, you one about you're the adjustment bigger just explain a of quick made

Bob Brunn

the Yeah. losses in accelerated with where and as we No. What we guidance that sales similar vehicle forecasted impacts meant in truck have a we XXXX used would and used saw gains if at XXXX from impact remained levels similar year, this which pricing XXXX XXXX $X.XX. have and would we of that said, in we XXXX, originally policy is of some the is we combination the I beginning at or gave

pricing if below explain So, drop would XXXX what I in or I still it if, we're call ahead then into was that if getting you trying whether which truck of were that losses remained ourselves to it is And those more, assumption. accelerated level, us levels, obviously to have and as to at really making big expect depreciation. used XXXX, get I that a if

forecast your XXXX would more lower, average it had originally say a would rolling the I be in then would adding five-year would lower would be that somewhat have than that average, headwind five-year you mean probably from which -- depreciation that. we rolling year

to need context would were just a a say, XXXX and But of vehicle But and and we lot still there hey, than I pricing had forecast. come truck on then. now pressure that little in down happen to and wanted hypothetical, things Yeah, between stay used again bit used sales originally XXXX down? to that's to put of there's more be

David Ross

at three been XX last it's achieved range of And think margin for only then XX%, the the target years. FMS XX% the I to

And do you XXXX would see of So, why in think be? range? that what the odds you in falling range realistic long-term the in that target

Bob Brunn

Yeah.

I stayed to think for used is XXXX. this it out, XXXX where truck stays where in way the was modeled in average we've it was pricing

that I to start on Clearly it I getting used think the that of -- truck bottom end range XXXX. pricing and it push can puts with more. it think pressure pushes you it it going down, by out some

returns below of vehicle our pressure put number would that's earnings. there's So, been average. And we've amount a on on expect certain that years over the what's used unfortunately that last several we normally

methodology coming get beginning we're think the there, to get currently what business down start is I to us Our five-year average the you rolling in. see now to new once you And seeing. of then returns

time. step for to of So, doing long business been goes the we're long down in numbers back been -- and and time business vehicle there of numerous during time, suppliers should this period cycles entire that demand used a where up up, go able a we've countless lease down, we've has goes And and demand been move. pricing

losses to pricing you're returns, to in better and going and suffer depreciation going have does accelerated this And in years earnings. impact an our change case. bad you're That years, good in to from

has normal, new adjusting more you down a pretty XXXX happened the was over if a to. in that kind to what's us last think brought drop there significant a that as we're few -- of I will years,

policy of whether a cycle. it's to bit might using a stabilize or little But new then methodology going we normal accelerated get what and our in need the little that the when going when down, over ultimately to of will better just where years. And we're And normal less, And to are years. here bit gains next couple in more is the couple the you're times during our is market see then market is up. the next depreciation more

way should a tractor has This And decide. really can't we again, model the really that been that's the work. issue. And

So, making that's to levels. get get, see forward. going this we we stabilized you think back I that's sure But in done, up when really to once time thing on honed that you those the start

David Ross

Thank Great. you.

Operator

from Please come Bank. Deutsche will with question next go Our Amit ahead. Mehrotra

Amit Mehrotra

Thanks. a I on Hey values. used if Robert, follow-up, could quick just

said I higher rolling guess policy X-year just it simply was hypothetical XXXX what very based on the to clear, before So pricing? guess to does I new think guess accounting and on on beyond pricing loss the does kind depreciation? based against to revisions But now get in the out I XXXX you're neutralized this I or that when of assumptions the pushed become -- the you making scenario. related

Robert Sanchez

by couple the you at saw during -- end of vehicle over what mean happens XXXX. through we right? year to depends normalizes years, I it year with next the If Remember Yes. of on what vehicle used pricing last last end used of get pricing the

If it's take it little a goes goes down, up longer. going you're sooner. If going to there to get it

happens couple the is issue the the the years. used So just of timing with vehicle next over what of market

the say can't the dictate six next You two are months going to years. next

it time really So -- values look book at where with of is. to it will over is when normalize really you've got -- to the market where a what that the understand period longer

Amit Mehrotra

kind to neutralizes. out pushed of of multiyear that revision you've facing this And at kind then guess this XXXX XXXX. Right. Right. headwind though Could just been even… of your down I with gets into guess point based kind you best on that that

Robert Sanchez

If down up on could it's back it comes that time. with you -- like period before. could better depends. where mean cycle, with vicious end happens it the stayed during end were It than it -- you What said you cycle. up if you of depends Amit were what you up I all before

I year, because looking the next in the fewer then built the next that's there to sell that to of few XXXX's years the of we XXXX which of when be a during come there's of that in a but people going are shortage there most certainly in be or units months was in next the model time. supply period pressure think at years might hey, couple saying oversupply

So...

Amit Mehrotra

No. No.

have of guess. cycle we'll gains take to Then I a Sorry.

Robert Sanchez

forward Looking to to that, forward that. looking

Amit Mehrotra

too. too. too. Me exactly. Me Me Yes

then the obviously ask and you end Let big obviously brought about of needed But profitability. nicely I new talk that investments step-up question initial the online. contract to just to last wanted Dedicated. up me you positive on on a you the in bring are kind of ramping at quite that business impact the year of one net saw

the of X% pretax year. be this So are half profile mean, margin you that not end could kind guys I talk to that of to just where just XQ back in X% would performance, the you'd margin pretax of assume kind strong year? full mistaken, relative that if I'm the better margin the and I given about expect lower you tracking

John Diez

Diez So Amit, John here.

half. the second give prior to to Just from year. perspective on We bit a be do you little elevated expect

have some was around a quarter If last we quarter start-ups. But of the an headwinds for some from performance clean business. really operating year did you second recall the new really

business start-ups quite we and online new brought that well. the performed the had We

of also better the levels fleet also historical to with -- the improved portfolio returns. vehicle get which we and base the the kind to of back We saw our regards reduced age

obviously We've starting the last also labor to been margins over has candidly, seen also a an in the recover. on market which drag and XX improvement months that's

into to next and half year to market So us the momentum year as new into from we seeing get there. fleet good we the business see activity brought online is sales good we're the into next refreshed good going seeing help the and better. labor second leverage We and prospects we're this year, the

should overall, think year, be again. level from we heard plans at like X% you that with And ,we're of be I to to delivering year. going line Robert next in the So X% long-term this kind then

Amit Mehrotra

I to don't mean be…

John Diez

ahead. Go ahead, go

Amit Mehrotra

high the expect guess? the like don't the success given to this, full more that trying year just and the half I'm X-ish of of to of i.e. of percent to but I first should above mean, X% for we from I year-to-date the high-end understand X% kind mean you're mean I the specific back end plan overly on I be the your year. half just

John Diez

Yes.

quarter. on third based fair mind, assessment quarter keep in I a think typically our just where it's mid-year. second we're quarter and at And that's second strongest

also then And will well. very perform So see quarter third quarter you it taper off. fourth will

Amit Mehrotra

right my appreciate Thanks All for taking Okay. I questions. guys. it.

John Diez

All right, you. Amit. Thank

Operator

Our go ahead. from question come Long with will next Please Stephens. Justin

Justin Long

rental. a follow-up Thanks. with on to And wanted question

demand the of decremental as business? if sorry, to and offset for help margin I'm you a for talk rental in demand specifically reallocate rental equipment how think could to on we curious, your missed profile adjust decline, can change you're business you the about I'm about what what's the I the view second also just potential assuming but in So environment. the year-over-year much it, the And weaker half?

Robert Sanchez

asset what I'll tell decline you some that -- this between of we're that. management that cost of your is we give question actions But expecting would the me we let Let and actions just fleet you part I color Dennis majority on and last offset took. the vast also reducing have the

is you rental. It's a more part rental let I'll primarily balance year -- of happen with the forecast. specifics to vehicle But the very would I So used the small of story. on overall around we're Dennis tell takedown what expecting

Dennis Cooke

Yes.

it mix, power really got QX, up going expect we And be in in that driving are you you well got the demand be got flat It'll trucks So year-over-year. X% and that year-over-year. you have to doing be headwinds. QX expecting that. then for be we're And Justin, tractors to trucks to

Justin Long

help back you And you've us where between get And XXXX? of in into wholesale for for what you about on Okay. But assuming then split guidance updated we the maybe back like units were half sales think the That's this the year. what that can you retail used, really helpful. and year? of talked that understand wholesaling looks in normalizes certainly then the previously more as

Robert Sanchez

get put where up. -- we prescriptive, we was I that of estimate is to we but really scenario balance don't currently we to again about going XX% the forward with of of retail our the in were kind the the wholesale units. too Again, things the think a Yes. sell. what Obviously, to forecast going year what's more of incremental to want are so end forecast original

on price in year can. is up get of belief going bit more the But our we into won't back what into process again the end the a go be is I half than that, is retail we to but the retailing to So push exact unknown here as my market. of we're this, price And just we'll is with in as that that as much probably discovery a side. the retail point

Justin Long

leave for I'll the that. at great. it time. Okay, Thanks

Robert Sanchez

Thanks Justin.

Operator

from now We'll with a follow-up Scott Group go Please take Wolfe Research. ahead.

Scott Group

thanks Hey, follow-up. the for

to discussion years. these more accelerated single every headwinds continued this just question. this a Robert got get quarter? So, depreciation more stop used more several do I philosophically for through to a having wanted we you don't and ask just Why write-down, that visibility We've aggressive aggressive same just

Robert Sanchez

feel have and It the operation. Scott change, and that time write just for and as take Yes, a expense. your down I -- right? can't pain that's part is work valuation is as challenge you accounting way depreciation it accounts And over I then of really rules us the those the to you your in new residual vehicle residuals think

as been that's get challenge every the haven't that's fourth This our is obviously to you've really able these residual way and to get got one to you're it of right soon goal bad vehicles assumptions. news it been as as we us. So, to possible time go into we that and treat have and got the you've the year, out because we behind treat

nothing time. of assumptions we estimate more what residual the than sell are think vehicle over for These will an

now. to are years be seven going sold vehicles going years be of some in next these from the Some to are sold

tractor is brought helped that five-year XXXX. The set precipitous get really years. of to in pricing methodology this happened into many So rolling Ryder that has the averages we challenge drop for in

went up obviously now increase at And too little pricing drifted really bit have That a we our the up to and a between had them pricing XXXX drop say. values would drift I after Never increase XXXX gone. that. the first after would forward and the little was it to vehicle like used then high Recession went up big Great the and as in precipitous really residual they

the Now, we're But that that to way this way on new be what new there's we really a stuff to way this to drifting them to XXXX. has and point If more all get the look through to to the them through continue that answer quicker, And try and appears normal is to we're that done. get with the through it. methodology be with just we're we Scott, to of this our is math process the get going working with by do elongated normal, a now down. been if we'll says this this at continue done this

Scott Group

just second you talked continues? Okay. a bad customer in quick that quarter couple about some of And the think is expense you then And do debt other that things, the just bankruptcies?

the lines, market then starting here. that capacity are you those seeing And we're in Anything early along a to spike tells terminations, cancellations? that you see like really that exit

Robert Sanchez

terms No, unusual in Yes. of it's of a with. I was customers challenges of would it They that. of handful It that for-hire say in trend an to carriers, of was but changed. I happen really ratings a it expect be had. be just our to don't we and credit terms was an ongoing credit standards actually that quarter It credit one or we group -- profiles quarter just unusual our wasn't we them mean them had an have

Scott Group

Okay. All Thank right. you.

Operator

from another JPMorgan. take we'll follow-up Ossenbeck with And Brian

Brian Ossenbeck

for wanted on just thanks time. Hey I the please. if things two I could quick additional your get thoughts to

show terms obviously, going softer market Supply more some you current with the the still up little the competition the in Dedicated competition good and the Just to pipeline have back bit seen half in activity year. the on uncertainty, a of that's is Chain in pretty but of

of want rest year and get next thoughts your to year? the look this So into into just that as you on

Robert Sanchez

business think talk main outsourcing. competitor, probably trend players, this outsourcing think more necessarily Brian, tell will I us, but more our think, secular talk only our any -- has And the players a intense, type to there's large I businesses that are of any businesses, of do you from number contractual I the same of there contractual thing. that do they are you these to we groups. think gotten more all don't three of certain I competition all in you benefiting can

growth say opportunities. terms to a relatively that, we market. see continue rational of It's good a I in would market So

really the the and and learned Chain about are different ChoiceLease deals last in these I the think the last on industry to good what encouraged and customer and Chain opportunities where over across side, -- couple we're across add in of how seeing provider. for Supply way I the think over Supply do really sectors the also the value And market they we're good has a new the both for really especially, in Dedicated. decades

Brian Ossenbeck

about three that Okay, you you've in and e-commerce facilities. looks got the scale some the mile rate. increasing And the on you it. then it typically now final Clearly, I have put industry. speeds shipping with talk run side, like size got are when fulfillment across know the

So what's and it there, characterized how think mile, you the could of I feel you're Ryder customer reception give inclusive size past? do is on in you like positioned an final like been the update us if you've how the which relative

Robert Sanchez

which the parcel Remember, Last without home bulky business, components, two that fulfillment after initiative, Yeah. the there targeting e-retailer. is and delivery type go to through is more there there the Mile, want business, big e-commerce companies then getting which and direct an Ryder is is going to consumer really is

more supply ramped that well encouraged mile as and our we're by into Last for Ryder seeing, We sell Mile, well, we're up of activity our opportunities an that is option. the companies So ramping sales looking more cross-selling going leveraging sales also chain business. see cross we've the -- last to operated force very we're up really

So we're going what's encouraged by on there.

the color that's let around a I'll innings, give got e-fulfillment, we're Steve the in really pipeline little a more but growing, bit e-fulfillment. On you early more

Steve Sensing

DTS. the Pipeline as say seeing operational, through that, attention across of up and so I'd sales Robert functional. and said, three inside fully right a lot and marketing stood up buildings we've Yeah is FMS healthy, and efforts, also are we're now, our they

a We customers here few recently. signed have

begin say team about operations of would the for is excited the back we'll but that solutions. half the having I So, the year, them in

to continuing discussions. Our have customers are

through forward go strong we we into really executing year as the So, really and look this getting on implementation to XXXX. the pipeline

Brian Ossenbeck

it. Appreciate Okay. details. Thanks for extra

Robert Sanchez

Thanks, Brian.

Operator

remarks. there time, the additional questions. Sanchez I'd are Mr. to turn over back And at Robert this call no like closing for to

Robert Sanchez

end to as Okay. Well, again. look as the the when and you market in forward certainly ramp guys out of so think, seeing I up of at thanks get things we everyone end at the here July, August, we we’re

have take a So care. safe And day.

Operator

your concludes all And today's for you Thank participation. that conference.

Ryder System (R) 30 Jul 192019 Q2 Earnings call transcript