R - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to the Ryder System Second Quarter 2020 Earnings Release Conference Call. [Operator Instructions]. I would now like to introduce Mr. Bob Brunn, Vice President, Investor Relations, Corporate Strategy and Product Strategy for Ryder. Mr. begin. may you Brunn,

Robert Brunn

XXXX. Commission, are Parker, due earnings More with differ political measure presentation and within Good Conference GAAP may market, available welcome Act business, remind Financial President Call. financial presentation, are forward-looking are during regulatory factors much. these information Securities Robert management's the and Quarter expectations and Litigation factors. changes Officer. each in you to Ryder's based a the measure XXXX detailed are this statements some is website. hear on and Earnings I'd Executive contained you'll Exchange Chief materially current contained reconciliation Executive Scott and meaning in morning, very non-GAAP and Securities of call competitive, results Officer; of of to today's Private Reform and are release, which -- in Presenting Second that the filings nearest Thanks like to and circumstances. uncertainty Vice Actual on expectations these Sanchez, this call to the economic, subject and These statements Ryder's about on changes in Chief earnings from Ryder's and Chairman morning's to

presentation. joining Additionally, President call and thanks the today John Solutions; of this Management and morning, to us. everyone, Diez, Sensing, I'll Transportation President questions Robert. time, call are on over and the of and Global following Solutions Steve At Global for turn Fleet Good for Dedicated Supply the Chain available

proud and the difficult with provide customers moving quarter we've how flow goods COVID-XX results returns as our a morning, safe of has friends you, and our hope to to of pandemic. keep taking an extremely this outlook, your economy, result work and workforce of seen services we're closely an to that and on our me our Let actions saying provide we'll continues this start update during impacts allocation and that the healthy the On I'm improve this our overview the priorities during Ryder pandemic. by and time. call performed are We'll our the second over capital throughout of period. I family

our of used second compared estimate value value Following quarter the $XXX resulted is prior open quarter year, depreciation to questions. a of from triggered to This second to automotive XX% led billion changes, $XX.X information expected policy chain quarter from quarter versus lower for now changes. increased the in view Comparable in supply turn the second the from depreciation from impact included brief million million the COVID-XX-related by X Results The and higher $X.XX down previously in from review activity $XX $XX related EBITDA our as the reduced savings driven the to totaling we'll of of automotive that the shares our Comparable per due depreciation and rental approximately by additional diluted market COVID-related remaining of continuing results from impacted million, and business. by prepared by year, that, partially conditions. year. million, decreased by primarily valuation quarter in by in on offset lower Page as is the The remarks, $XXX impact quarter. let's demand costs COVID-XX's million, residual results. announced lower for accelerated to driven medical includes outstanding lower for of $X.XX which some average totaling -- negatively and of rental profit estimates down review number a $XX million in X% prior on residual recovery from commercial cost Operating With the COVID-XX in prior call by $XX overview effects million was driven also $XX a a end revenue million was million. used year. $XX an to results. our as likely. chain, second customer well vehicle based commercial adjustments loss the a residual of prior was declines delay earnings share rental $XX.X market million financial supply vehicle operations $X.X conditions

was impacted lower revenue. key including that Fleet segment. items, business an driven operating residual trends related was XX.X% changes demand activity. benefit compared effects. other Management offset lower as decreased was XX.X% on in commercial saw performance turn power positive rental rate The earnings and now to a depreciation of utilization down Rental in in X to lower current revenue by prior I'll X%, choice we discuss Excluding the the down COVID was equity comparable year. units the pension due estimate quarter Page of in depreciation and impacts, reflecting by year. prior to by year, to in XX% the each COVID-XX in was Rental higher XX% on return the Solutions a decline Adjusted to automotive partially higher down from the quarter, COVID-XX lease revenue, XX. costs higher rental in and rate XX%, expense by revenue tax from X.X%, reflecting and from prior a to value expected due earnings negative XX.X% lower

ChoiceLease expected larger year fleet XX% reflecting ending X%, by market pricing on increased by lower fleet and fleet average declined vehicles, and rental to Our actions down rental prior compared mileage-based revenue. higher was demand. by new with align the offset sequentially, partially X% a the revenue to commercial driven size lower

further flow been from of XXXX realized pretax $XXX million to reduced free conditions. $X and year-over-year of impacts redeployment light additional proceeds, Rental-related to $XX in FMS that value approximately for the and $XXX results mid-XXXX. down view of of expected In lowered continue, quarter. expense well over quarter. vehicle resulted were trucks changes and $XX due estimates, second Scott pricing our savings the other contracts estimates mid-XXXX quarter, for vehicles are costs used ChoiceLease million. discuss call $X.X and we on be of million. be COVID-XX to sales recovery residual of vehicles billion not depreciation partially residual as COVID-XX capital depreciation in in cash estimate by our expected the tractors impacting to Based inventory depreciation lower policy have resulting view COVID-XX by effects much for XXXX, held depreciation. in we an between used the $XX additional additional now $XX some in year expect COVID-XX together of and the rental experienced lower impact earnings valuation as in resulting a in million, in as loss well delayed also vehicle Although that weaker and impacted in a factors by additional lease by our triggered values the billion and result sold primarily materially expenditures $XXX which these resulting primarily value This longer-term during of sale, turn fulfill million million. adjustments value cost impact extent, to lower for These resulting the sales we to lesser the in will accelerated due earnings economic medical Lower extended review a pretax to as through the residual $XX wrote million reflecting we actions offset to totaling we after I'll to expect XXXX. COVID-related depreciation on to COVID-XX, a sell of quarter. of effects, a activity million

Scott Parker

used in The through policy residual tractors the estimates XXXX Based are depreciation X used triggered extent, policy purposes, that of an for we and and seen the pricing current on and, sales life our depreciation chart estimated purposes increase recognized need review, on over trucks least next our be outlook to seen for for years, tractors residuals XX% change those percent at of on impact lesser of for remaining in vehicles. anticipated COVID of market of at vehicle to estimate to pricing depreciation order beginning a for prices maintain for improved Thanks, 'XX depreciation their of and review residual These as to lowered The on on we've U.S. outlook. for reflect morning. estimated Robert, value XX% and will our for achieve level good that improve current to the relative purchase over the revised XXXX The trucks. similar we original residuals we residuals residual a X a levels levels similar historical Page to approximately estimates. tractors of illustrates and to policy higher the from trucks value trucks this in estimates. vehicle Based updated conditions cost. levels

Moving combined second mid-XXXX changes depreciation, based pool to value by of of primarily sell as for made on the Management additional we and to conditions for we negatively, views in the to weaker from Page In requiring Residuals right and current and increased on X value resulted a by by the adjust, expected purposes depreciation. impact in XXXX, And include changes XXXX the levels details accelerated of well COVID. both first for management's or market positively In sell residual depreciation. the values to expect XXXX, reflect for regarding used first the estimate to X lowered may in column impact if quarter accelerated we current expected accelerated market vehicles, vehicle estimates. year view depreciation. made expect the as estimates residual periodically XXXX the vehicles accelerated accelerated conditions. depreciation mid-XXXX. depreciation quarter and in conditions by change, the time quarter vehicles as the were of at policy to we residual quarter residual reduced accelerated of of trough we expanding result

to can year you in expected significant the headwind thereafter. and earnings see, As XXXX is is each estimated decline most

a I'll the come back on the the of Robert note on the now chart, discuss our residual vehicle we during new sales gains in values, XXXX. result in to than $XXX from higher the As Please hand quarter. depreciation would changes million of sale impact P&L. it show new earnings shown performance gray prices to if benefit vehicles below in to vehicle that expected box is sales in year-over-year

Robert Sanchez

Thanks, target above used during X,XXX range vehicle We the prior the end, of at vehicles. for XX% Scott. the X,XXX used quarter Used results up vehicles sequentially. sale up from XX% to up prior vehicle and global year and held XX,XXX versus sales for our the year quarter, sold quarter. was Page in X highlights X,XXX vehicles X,XXX inventory

approximately Slide and pricing XX%, a truck downsizing and by XX% of age the unchanged. of reflected compared for are year-end we a quarter, in off-lease mileage which X% reflecting in Proceeds increased XX,XXX was U.S. X, down and in reflecting adjusted impacted X%, vehicles. a quarter sold the of trucks proceeds in X. Tractor inventory greater current trucks rental sequentially, Sequentially, mileage. Inventory weakness. for up the fleet. We and the the number unit, older which were pricing Slide as for age is on of vehicle not vehicles expect sold down continued around materially was was when higher tractors normalized and for actually the in units When of were per calculation X,XXX volume by tractor normalized truck chart on for market to down year pricing ago, coming

million, Turning to on supply with also impacted offset pricing segment's performance. in to earnings EBT quarter, COVID-related the expense residual COVID target due partially the million. These high partially were automotive digits. long-term by production revenue supply volume to XX. chain. single XX%, cost and the and Page actions was estimates shutdowns, as estimated $XX X.X% lower totaling reductions consistent offset impacts Earnings by impacts for SCS operating year operating improved negatively sector. industry revenue reflecting decreased by a down value percent automotive primarily primarily higher versus in of pretax prior lower were were Operating medical $XX XX% used vehicles of SCS the COVID-related related of on chain

the segment's dedicated. and percent quarter, for over of of million reflecting Moving from decreased vehicles lower dedicated X%, Page high turn a to a EBT DTS down $X capital Operating the to activity. revenue operating used was value tax the call on XX. versus primarily for earnings before due to prior estimates X.X% to the $X sales with target revenue million, back Scott digits. by impact residual year I'll and was DTS consistent as leverage. long-term discuss single

Scott Parker

Thanks, Robert.

Turning prior XX. lower gross vehicles. rental This just decrease down Page and the investment in economic Weaker to conditions nearly Year-to-date billion year. capital $XXX under lease reflects COVID equipment million, spending $X.X lease were contracts to lower new expenditures Use also capital are XXXX. in to reduced result due in capital fulfill lease lower activity result expected in sales to and will expenditures. of redeployed from

of reflecting the cash to sale expenditures in nature $XX primarily million. Net billion million. $X free range of of our billion $XXX in XXXX expected to of year, gross due countercyclical expecting from by to model. cash Our expenditures prior to business $X.X flow prior pre-COVID forecast $XXX $X.X year We're now XXXX below below billion. and now billion, approximately capital $X.X of of billion, over were Proceeds our capital is billion below $X $X.X XXXX sales billion decreased of $X.X property million for

billion page. year. Turning next total to the for from up of $X.X the prior the cash over year, X% just generated We

our and and At higher to depreciation turn Free value to XXX% needs capital ratio increased returns. back to more increased to COVID-related outlook by by estimate XX $X.X points. liquidity the than a earnings. was our Debt-to-equity to as $XXX as the capital this second call update I'll balance spending. well from of COVID reflecting impacts. end percentage point, due reflecting increase We quarter carrying debt-to-equity earnings, to an in cash response lower provide increased lower discuss the million, billion are changes approximately prior over and residual at approximately cash higher Robert year, lower up the lower flow positive offset actions working on As this the

Robert Sanchez

Thanks, Scott.

COVID-XX not from impact, uncertainty time. the Ryder providing economic Given and resulting this the is guidance financial at

conditions guidance resume to expect stabilize. issuing business We when

retail We vehicle to serviced of expect to expected result inventory our XXXX. our XX,XXX and due used fewer sales second vehicles to to to be expand initiatives capacity as units around of year-end in a the rental reduce half out at

quarter wholesale channel used continue vehicle levels. each also the inventory utilization will the trough in rental We levels from to improve to We were encouraged use to April. during address see month

continue levels We seasonal XXXX. but remain to for balance expect utilization improve of typical to the below

No point of fleet vehicles expected with fleet to and pretax levels The approximately to balance at in be For business our to expected are be $X.X the the a impact approximately estimate $X million supply chain billion change lower of from we in expected every customer COVID-XX down approximately assuming We've to XXXX, reflecting dedicated no for sales demands. monthly defleeting chain rightsized automotive activity non-automotive earnings $X pre-COVID XX,XXX third is by impacts meet lowered for billion. or activity. in utilization, is forecast ChoiceLease capital material is Supply percentage disruption. market the until XXXX. expenditure customers to quarter, additional ChoiceLease,

We for strategy. to comparable earnings XXXX, continue XX% allocation XX a to illustrates rate due our of reflecting lower expect tax depreciation approximately COVID impacts. Slide full and capital year

and is a to XX% target. financial A cycle. primary our on return ability focus of discussed, over our reaching on approach disciplined adjusted the in plays we As capital reach role equity to this allocation our target improving critical returns

over expected free our to cycle. is we bring FMS capital balance they and cash to are accelerate and, pretax discretionary and of dividend, our for earnings intended in chain strategy in to businesses, to target. XX our of free this moderating forward, debt growth business. return order pay is repurchases. strategy growth Increased invest growth the and leverage time, and components revenue dedicated XX% operating into over to ROE pay to as our Going new shows long-term in target flow higher range, us outlined, initiatives Page key achieve capital-intensive is growth supply Segment improving financial share while and earnings cash our previously our innovation returns target here, primary goals in our acquisitions down a continue This allocation are flow. to allow achieving allow shown

reaching As target. ROE the target long-term match XX%. reaching our is highlights drivers of XX% only adjusted to Slide interim of we've our equity cost ROE mentioned XX key for of before, an our

target As anticipate on towards we we XXXX depreciation and make expect related this made higher to to past illustrated in significant as ROE moving of value estimate residual XXXX. our progress levels changes chart,

demand of to the support to additional addition, provide and In achieving utilization cyclical target. improvement expected rental is our

We XX time. over the X lease expect maintenance percentage the combined been increase return XX targeted and leveraging between is from reach depreciation impact and multiyear percentage several come grow have point or cyclical remaining diminishing The expected ROE XXXX recovery since returns; XX improve plan to which of businesses. with increasing dedicated to of will headwinds to to by and XXXX on ROE trends chain our needed target the outsourcing primarily secular pricing to points from our improvements supply ahead inception; including of our higher initiative, result cost and initiatives, rental

Turning to Slide XX.

unprecedented broad growth the RyderShare. earnings the visibility we're The as actions accelerating collaboration e-commerce aimed about encouraged range time our initiatives by secular support well and We've platform, trends launched return chain to over term, in national dedicated our capabilities, strategic we're and market advertising in continue transportation of the promote logistics favor and launch challenges a returns also will at our near we're strategic taken campaign businesses. a making awareness outsourcing. goals logistics of We're to transportation increasing campaign services. to including currently higher and of progress supply the logistics shoring, increase riders' recently setback near that present facing While various as our on to to

the while delivery increasing they delays Last profitable glove from as and performance continues Our We've installation gains. our to the business, white FMS, Ryder in benefit to returns line continued move increased home resulting pretax and initiatives new actions single-digit price from the compared improvement include the of from for together increase Mile, already mid-single-digit benefiting in revenue furniture appliances. per outlook with In to efficiency long-term and this the in percent revenue supply we customers goods encouraged business. a derisk as unit year. large realize lease through on track business. provides profitability expected high capabilities demand operating by real-time range costly home chain, for This chain business delivery. We're to overall which supply for focused ChoiceLease in manage are earnings for to our working platform's prevent of for increases and everything remain to to the prior the target These

at are lead sites. of reduced annual savings early $XX million expected our expansion April, track our We're savings and used also of multiyear In making used pricing action In progress expand adding important segmentation our this temporarily to significant year. sales track investment and took inside of locations data program-to-date in and furlough XXXX new realizing enhance aimed as employees customer result rates leveraging also We vehicle $XX at our on on better optimize on initiative, bringing by delivery our sales allocation. analytics use grow We're using digital capacity continuing we're closer buyers discretionary sales, million. initiative achieve capability, XX sale spending. our shop capital sales to to us locations by an to conversion our to to a getting FMS including maintenance capabilities. We're over to retail vehicle vehicle online also to we from leads

an lower incurred quarter. spending of the recur do to $XX a furloughs million FMS, benefits savings quarter. expenses anticipate savings addition, combined discretionary second We lower that July, from in in reductions, temporary which These expected medical $XX most per headcount-related In the headcount going in in items transitioned not to in estimated permanent cost resulted of result are of medical the will quarter. In we forward. we primarily million estimated in

That manufacturing the mile and we goods pandemic of the trends fulfillment, delivery effects Although month big we're chain operations. for Ryder to and morning. believe transportation to compelling challenging, believe our towards are bulky this ahead prepared outsourcing opportunity the and supply and this final of expect capitalize concludes a that to we and on remain accelerating strongly remarks e-commerce presents logistics on-shoring near-shoring this positioned opportunity. We and of

go to balance the note segment performance into XX-Q also addition this items. provide operator feedback, sheet investor we selected such Instructions]. the them to the new appendix we of investors insights The week. based our of open quarter. up a later These and please to to our we it presentation. discussion to expect we've this to a This like file the EBITDA management's that and over evaluations I'll began in that is questions, intended disclosures to segment on slide added in is are disclosure questions. note segment time, metric to performance. reporting Before I'd last with for of disclosures the additional At further further [Operator transparency turn line item,

Operator

with We'll take Instructions]. from SunTrust. question our [Operator Benjamin first Stephanie

Stephanie Benjamin

footnote to, does I'm place Clearly, help guess, improve the focus I cost tractor ROE lot And whether just in strategies in to wanted on be a big in it's solutions, on supply changes. for part that or back now X guess, clarify depreciation. greater I I of positive for maybe step-up a with, talking would savings but to depreciation just and here. it's I pricing. the and tailwinds your us guys and wanted about improvement assume going there's guess you truck XX% of I that right expectations on improvement chain in to XX% improvement Slide a your a

through comfortable, So another of decisions gives down? it that what of kind should would be you going for thought is depreciation did from we're not to Why see in forward helpful. process confidence? these when making XQ, XQ? a kind So maybe Why like, This reduction. of your levels these you be step just choose going kind we

Robert Sanchez

long-term Scott sales you best just let these will estimate the our is for But you. think the more of policy thank residual be Stephanie, give proceeds vehicles. remember, color. Yes, estimate we of I'll what

think we where sold for. they'll So be

X, chart kind the that we percent XX-year original XXXX. gives proceeds at to indexed as back -- investments of you see a of on the gave look Page of can a historical you as operating that percent on So

policy So we've set you is levels now in near trough long-term the really can saw back see that the that we where XXXX.

gives just a we're But I'll at I an if historically pretty idea -- setting Scott look bit let you it that, you more little color. them give levels. So historically, lower look, low

Scott Parker

Yes, Stephanie. Robert. Thanks,

I think the just projecting prospective. was historical -- policy -- to long-term take consideration we our as we're mentioned when into well what we Robert levels, both need as that clearly

And current trough recovery bit so we this extended these sales. below kind a policy the we're of stay into levels. what built little things in That sense the second kind gives for to quarter a XXXX of at of our you was into expecting that

XXXX, So and in showed trucks, levels the were we or quarter, that level. below we're at or for at the is accelerated And below was trough third in tractors, for trough that XXXX, our in policy which tractors.

of tractors, those at factored that levels, are. we the we saw what Robert's we improvement to kind at we you which XXXX wanted XXXX, saw. look started levels But of levels we're context give XXXX we then the as when trucks, And looking to of levels the kind point, around those kind sensitivities, for if year. -- at at or So in looking and you

context a of over of couple expectations that the So gives you little years. policy next for

Robert Sanchez

Right.

years, think, I tractors. any to have trucks just more it and us for for couple order not of was to get to where pricing would back be the over in policy, last So

there's other because big So -- that's a what of it's here such move, things, but drop to it's COVID again, a not been have would couple happen. huge of a and

Operator

[Operator Instructions].

with on, go Moving to Fowler KeyBanc Markets. Capital we'll Todd

Todd Fowler

Great.

So depreciation last to assumption off accelerated of mid-XXXX, Is side. make to truck the coming next but today used going on truck to there need I see want And accelerated comment there very similar vehicles that forward? question is a where where X, ask being you're to assumption vehicles depreciated, Understanding we're from for accelerating would the that into pricing Robert, by too? year going are X.X Stephanie, lease extra today's years? at your improve value? I'm Slide it's any your to used kind isn't depreciation over those is a going ask on question. that additional to an to on similar Or depreciation What is we at sure of what

Robert Sanchez

clear, between just the is Okay. that going are be now Well, you Todd, to XXXX. mentioned and accelerated to middle those sold for vehicles be of

extended out. below are It's Those really historical it levels. basically or X-year say, a to, at window. residuals set would I So trough we

So we lower haven't where is. policy but it's exactly given where that is, the than

else So the next going kind levels for If Scott, anything that that's now, we're we're is what at at we're there's of assuming of we've to stay those we're that those years. the to but see type at going recovery, to stay start there you'd gains, X that set any add? at. you'll

Scott Parker

I No, think that's clear.

Operator

Next, Hartford we'll go to Ben with Baird.

Benjamin Hartford

look market's expect data firmed at improvement mean, said, as you through half sense. of makes we spot trucking you below Robert, points, the some year. the But just it quite remain as bit. a interested Utilization utilization, back and up the broader the in your levels, rental historical still if the quarter perspective in to such on is I

utilization, here rental And from has a the it you of regard firm more to get think demand spot environment with a been or what to demand a quarters, perspective? can do as does over supply if to back issue? defleet as remain several you it's to the So targeted extent next levels

Robert Sanchez

first that Yes. is going first right? speed leading the rental slow back think That's you a things the down. our of picked trucks if market, things And It's typically, transportation when good trucks the indicator on question. come up. up sort when in of what's Look, remember, get I that

of getting of so idle up you'll shutdown to been start that it, once I COVID-XX has there's during rental step. just guess, running this pickup. have many and they assets, then Now customers the been of general, then first base most our in And the units see sort

a bit little lag of So here. there's a

increase I why the at target a utilization we see certain quarter, month level. during you seeing it you're during give we color bit now that level of kind think an -- at John seeing more the little and off what that's some but is as a saw let not levels. I'll did

John color. let I'll give you So that

John Diez

you Okay. of the Ben, to give color quarter. happened just a bit what of little during

from your I specifically behaved the we're there rental the the in view. what similar and And of not much class, seeing that the with demand, tractor on was trucks, April of same the about question point in tractor May. to lockdown, think moving did class kind we see a

March finished bit XX%, as ticked just up. come A we low-XXs. we tractors little May, portion in mentioned, good were above June, to was we In low-XXs. utilization you the saw a So that, of on the when XX%. seeing up are we then April, so XX%. And

similar to But would in level the the you, what quarter. you're off seasonally the July, that's we're what expect third tell in in high to and in expect to -- we we because mid- I XXs, So spot we're seeing that market.

So we have seen a pickup.

the a next on off side, of we improvement on over some couple of utilization called that here front, level months. just We the of seen the pickup kind that driving out I tractor have that but to expect

Robert Sanchez

Yes.

some bit. benefit some we to things say where in begin right I we to think, going just we up get slow little of based see what's shutdowns pick if more you're the a expect. more economy, It's these Ben, any there you things country on have down seeing now don't had, really you the could than as on in of parts difficult

Benjamin Hartford

Robert. that, fleet from perspective improving the a just What supply related even of hope here? on That's a Any helpful. side. down do and from demand help get There's to follow-up remaining above to can you or within to a if lot improve around rental ifs could demand I denominator work the stable that beyond? And utilization quick

Robert Sanchez

got there one into the saw Big wasn't job fleet quarter, got from down. in just is lease but activity, applications. get And got they're a down as -- quarter, -- been it his John that down difficult redeploying did Yes. X%. general, in rental you fleet our we really And a vehicles to of able a lot it really and the what's team there the good

year-over-year. fleet's XX% think I down the

probably is fleet need the continued would we there to that to biggest driver. out activity, our add? there fleet John, else get the But really, to So is anything have down we of that rental do leasing

John Diez

right. that's No, I think

redeployment think going part the a are amount that flexible I customers good of continue lease of seen our looking We've equipment. a on to for we're our with efforts. acceptance shorter-term

rates, equipment terms redeploy expect on-ground to and that at been for able continue. we've good shorter we So to

Robert Sanchez

I areas, do think the rental is also, in it's Ben, some April just behind activity. terms thing important whether that worst we other the the of believe or automotive we just type was believe, us, of or of to disruption month would to if challenging we as expect then don't most go we barring things the We really saw backwards. improve. that as other any definitely and is have long -- improvement continue, we

the is we really, of to having to at one And it's able improvement reasons And time happen. hard here. that's just tell which that So going guidance. the the pace think tough we're being really why unknown to a provide

Operator

to with next, Research. Scott Wolfe go we'll And Group

Scott Group

black apologize. Well, going moving line, there, -- go that But assumptions. way think is is it's to So up black growing? above just can back is the I'm used so I'm right? here, thought and still this -- current to the is start I right? was Is confused just I'm which prices like But confused, that about I policy pretty we this X, looks to Slide because the

Scott Parker

one. we in in Yes, was very second and quarter, the you're second decline. right had low. Scott, Robert John the last think call May seen And April a the where market quarter, the that the on in of wholesale that mentioned quarter, I second That's kind mentioned

So which the retail the of That's for normalized we remainder mix, levels we in sales inventories of back go to our normal led And of quarter, expectation as wholesale that retail of level the the to given year pickup the have. had we kind a higher than there. the assumption.

Scott Group

I yes. guess --

So black the -- Robert, go line, it sorry. is ahead,

Robert Sanchez

up mix the No. Yes, line go fact the what due that than in we -- trucks wholesale Scott to as but primarily expect. it's the the black for did mentioned, higher we quarter, was normally retail

wholesale of the in shut down -- got market we April. kind So

over So we did a lot retail more time.

UBS good overall news, the is would the news volumes the been strong. have I tell So in good you,

being over volumes definitely lead increases. a indication. could time, the price is So good strong to And

analysis that in done We are continues assuming that, we've not the here.

is over we're will it what numbers in residuals assuming -- here and down that actually come is that back will Obviously, this to have lower, and were pricing quarters But below continue gains we've it continue would the trajectory. that. have next be that we if would So done several trajectory, these pricing we some.

Scott Group

So give is just underlying prices saying is take, x? used current then want are blue that you're understand, -- to used prices what to the Is x? or where call XX%, below where would you of relative blue that sort

Robert Sanchez

saying prices XX%. to x, not going below used No, we're that No, be current XX%. not somewhat blue are

Scott Group

Okay.

And just... sorry

Robert Sanchez

current mix. say I normal for and wholesale retail prices, normalized normal rental for when And used

Scott Group

Right.

Okay. And thing. then just last

used let's pricing So say, hypothetically, better. gets truck XX%

but better, get gains better. sales? reporting Will on So you gets it XX% doesn't it start XX%

Robert Sanchez

Yes.

Scott Group

much how does improve start used guess reporting need gains to on to sales? I

Scott Parker

to expecting That gain the like looking to couple accelerated on page. next that in report if level the is the currently you're x be order below Scott, on that's sell of In that sales, quarters. would assets we're at, blue pool, this the

accelerated So that our setting for levels. we're at residuals trough

So if see in if assets you those we're levels. pricing that came short currently, up from would selling term, on gains up they're the current

Scott Group

So if here, from sales? in improvement any we'll truck pricing on reporting we gains used see start

Scott Parker

timing a based is depreciation. bit It's the on some the Yes, little answer on yes. of

a answer would it issue. just a the But change So would -- it's yes. be be timing generally,

Operator

from with Next, we'll Ossenbeck hear Brian JPMorgan.

Brian Ossenbeck

a like clear on just sound the selling how only Just also one from you're be there's effect, index, not it and the the -- follow-up does the again, attractive, on but just type because residual it. class to mixed

that's for So recognizing bit been truck. in quarter, Last of shift you wholesale had normalized. a retail a

retail as earlier, more are into you mentioned You channels. pushing,

on be that looking of of you when to mentioned not making over be next retail, on wanted XX% tailwind? if bigger X, you Slide increases the that just kind bit clear assumptions? years XX% little these you're the of which a look at, counting a shift the include So little a are Or couple does would towards of and bit a

Robert Sanchez

is me way. the assumptions help if saying to really I either not quicker. What get making number We're we're Yes. more, the overall to obviously, proceeds, that's going retail combination, the

next So will, of as selling up term, channel, would -- In for residual higher. wouldn't is clear, much. through But the much, able term. retail pricing, In retail I those marketplace XX% if seeing we go assume we That's to to question. the the term, up of be the we're next what percentage -- now. to you're was short earlier were to then would the to pricing, Scott's go to in think X short -- our the very be vehicles right, blended we're you are have that the it XX% if has -- that the for the gave that because values the we're so years, we're just it of within long -- close overall what increase sensitivity the

to should just So that if -- inventory. gains. start it a see don't goes you up, lot you're to to start going know have We we -- yet because we of know we see

XX,XXX we As inventory. show, we've units got in

to And So there's that lot in know overall, year. move. of a we to in the market, vehicles a move of we the the have of balance lot vehicles

we're on units, So that that, pressure have to could and some we create pricing. going know more some to wholesale

If made a things we way, So why in continue volume. assumptions. That see could could we've bigger, strength we other really in of to and come gains. see and lot go that's the these

Scott Parker

Okay.

other clarification I'd to chart. on like The the make

age The other mileage. clarification is, this is normalized and for for

basis, on units we're retail looking miles of wholesale, on selling. also quarterly but P&L the the you're at there's mix age and the when between the impact So and a

into So accelerated of we're of part around by give kind our that's it depreciation. And the age and how a this quarter-to-quarter But doing. the to a of kind miles basis, market the of is index on impacted will be directional is trying selling. units -- incorporated

Brian Ossenbeck

just for tractors. similar the Scott, mentioned chart you -- on follow-up Then it. a for Got quick you, Okay.

a it's change give But little stands, a think can just that that. I context if understanding accelerated where make of bit below too didn't your as old of us much Probably now. to residual. is quarters couple where you that for

maybe thought gives trend little are value make on even there's the big was that at tractor seeing a I the something you need confidence look tractor. So little that seeing realized though last you the there when of you as soft side? impact a an per What on not bit to quarter more you're to adjustment with

Scott Parker

Yes.

think about mentioned. a I John little what bit it's

action side. So on the second was predominantly the truck the on quarter

the we kind tractor made mentioned we there. when so quarter, picked were third we assumptions side, And of the that the we on the action to kind close in tracking of

quarters. kind last on do modification was really of slight of change a We the did But accelerated the they side been the the have tractors. policy stable for So on couple side.

Operator

Our Kauffman question Loop next with Capital from comes Jeff Markets.

Jeffrey Kauffman

a detailed outlook I of just kind question. a and question more longer-term wanted to ask of

kind be for we XX,XXX that can look trying end mentioned Where are through on at You you an XQ. year, think you the Just us ChoiceLease where give fleet vehicle that the to needs the of a get and approach to as you you year-end? commercial XQ down view to of of get would And fleet the by the of idea so rental vehicles. far? progress accounts

Robert Sanchez

expect activity as primarily fleet That's period, defleeting Yes. softer during and make of color the do XX,XXX ChoiceLease be units. We to definitely our sales the of kind that. holding some I'll reflection slower investments. to a those been there's John you give let been on have off down types economic companies customers of

really down I'll that's And of vehicles. color. natural John give flow the let So some you

I'll little As rental give the XX% down But on I our of is mentioned, already fleet the balance more a him color year. you year-over-year. let John?

John Diez

Yes.

of quarters. decline to X at of we the as So next remarks, that couple rental would we're down I fleet, to sequentially continue expect looking X in the to percentage points the XX%, each highlighted

now demand to approach So that. at we looking the fourth need on potential units adjustment another that's the we needed. to make. X,XXX that's of back side. range monitor comes the right that may range And if as you're the But we going X,XXX to probably quarter, in as kind that continue we're looking Obviously, back at that to pull we're demand

Jeffrey Kauffman

where a that's vans there's know you All a were right. an agreement electric a I step is your I splash technology us There exclusively company, on to areas? for can then an your give view for not exclusively. back maintenance the are and want made some kind going Ryder's you and to power what to was those Nikola, Hey, and had take in big emerging demand strategy that announcement kind Workhorse switch alternative those of and coming and this step of customer gears. provide public, into fleet. vehicles we reached expectations bring

Robert Sanchez

Sure.

play America. presence continue understand contacts that to customers where I going forward, We technology the with here vehicles we're North really positioned those on breadth we important to to and can types evaluate that is able uniquely have we and of certainly of Jeff, fleeting an in pretty in going. our think, be based role think

So of been different these start-ups, early adopters along in traditional some into getting vehicles the OEMs. we've with with and relationships more

see there's progress. -- technology. research being for So we type that of I we a and put globally mean in of see lot in do investment money

We have been working with numerous customers.

vehicle where which taking smaller, mentioned lighter duty You probably think are type bringing them. They step the a you more of recently, is see of Workhorse is van technology one market and off. to really first we

a So that probably And but going I that's technology switch that vehicles into additional lease a we're about and vehicles of customer have be going where now fleet. think going there, think to But starting advanced. and is some bringing don't to progress generation specifically Workhorse to on over our be is we that light newer again, I slow we're it's time, with migration day, turn everybody seen see already. vehicles their the we rental with we've a convert, with more one excited the duty going the to it's lighter progressing.

Operator

David And with next, to we'll Stifel. go Ross

David Ross

are of fleet. show stadium are conference the this in I the What rental is no no what still only there is there follow-up would concerts, events your significantly, year. because happening conferences, utilization coming typically rental event fleet percentage rest being call down to probably XXs. there are the of on wanted trade business with I the And no business

XX% that if really until doesn't for? business is So XXXX, we prepare have normal your what just to XX% to of exist

Robert Sanchez

customer But it on I'll let some John? John -- That end biggest been decline the the drivers. is give in hasn't by driver, I'll color. let type, of color by you Yes. John the -- some give customer. one industry you

John Diez

Yes.

customers, to It's be to that I be continue and rental specific and a address they're So impact figured regards folks, we your absolutely question. going group I out it's That progress. certainly, across gradual to improvement. segment our of the represents and the base of right. David, as they're online. mid-single reinvent as you, themselves to going longer tell to to kind and both event as suggested van remarks. feel your back or us coming portfolio. that to well foodservice food With service impact in continues rental coming for That impact. would way we rentals, expect the customers the back events felt to The online digits Whereas you're has think just category have a -- folks I foodservice think now. have the term, you And in seen the customer

David Ross

just quickly Last the on then And business. Mile Ryder

operations, Why mentioned I in guess, due outlook outlook other? business. increased better margin raised profitability, demand, pricing, was single-digit that, to on You to the high optimistic I a guess, the, change more maybe

Robert Sanchez

seeing than bit great team couple tell been item growth business. really in and But business. very better prospects just the We're is expected. performance the But think One I'll COVID the clearly, a and little we're a that the you more the impacts extremely even let the overall post-COVID that's prospects I things. definitely of the Steve we're we're there. look originally we for a David, seeing of give I with what of world, more has We've positive profitability color well. think performing I'll certainly seeing seeing activity Yes. what important a that growth had the continued for of got there. there

to got give there. you Steve, So color him some

John Sensing

Yes, David.

through So we control measures cost some year. back earlier the went in

benefiting at that certainly we're think this I point. So from

very, said, Robert cylinders. on is really As Sales is all strong. team very it hitting pipeline

the and a volume months. over X lot coming the got or pipeline last business then into new here So X we've of

we profitability continue density continue build grow. that each about is one business trucks, to these density. So all that this optimize And and as see of to we

as is operations well. So executing team

spot really a So now. in just good

Robert Sanchez

way What beyond you our which automotive expects around even level full at kind think if dedicated high. shut is resiliency and I really Last the difficult business, Ryder just of look which business, mean don't our did. to look has I like business had business I David, industry performance, a in even were shutdown, the entire down the would but Mile, got add beyond been you this extraordinarily that anybody rental, it the chain quarter, ChoiceLease contractual even of of of headwinds it the there, during extremely we supply showed all an because the very

big from this And next this COVID-XX. this year. of really were -- even of just that now year, continued laid a I look then look But additionally there. this you chunk charts ultimately, business. those behind normalized part position if the -- at it's circumstances if then and look the So you coming at earnings at prudent you challenge vehicle out, us with that the chunk behind taken And charts, gets depreciation, we've values, extraordinary the much stuff, which think another I on these we've used a gets residual more

when COVID-related those I you business you overall, how items. step think -- it's at got back the and performed look take So to just well out

Operator

go And Justin to with we'll Stephens. next, Long

Justin Long

Ryder, picture having the big bigger We Is it's a of on in cycle? on going a can been yes, If And to take to a to question. more that's some the on if on implementing model. flow there you a this cash that. love cash focused the see answer the managing forward? business swings maintaining historically, you're that's based strategy incentivize to where shifting wanted historically ask would been we I differently think and focus back know growth, And instead focus through of positive is to changes flow countercyclical Robert, that a the about cycle. are step I

Robert Sanchez

Yes.

it's a we capital question. of in good the had to think allocation strategy, kind I our presentation, and about that's We adjustment that. page a precisely talk our

achieve to for the our is XX% company ROE. all, the goal of #X First

hyper-focused getting where really So there. we're on that's

Some going to require of that growth. is

costs. -- our chain to But ripping get from to growth dedicated out return. have higher going supply coming can't want like that we you're and the growth just of not -- businesses you more feel we where You the a

a CapEx at of which business, some there maintenance the think, improving couple cash driving business growth. very the of had maybe years which large very ways flow, that investors. returns side in I and some increases, really other limiting capital-intensive, we're free negative with of more is really, lease the ultimately, On standpoint, We public to of challenges a cost reductions, looking price shares, from company creates efficiencies for

So that moderate some. we want growth to

every to growth, -- XX,XXX, we're by XX,XXX not going I'm free years. you're to are in of is certainly the single And last going positive more some the cash flow not saying to at seen XX% -- have be Certainly, be negative able going to and to cash over free seen. that, cycle. have the flow year in to but that unit cash And we're clearly, able few be free we've that level each to not positive, get going to to doing but years be the ROE. we've the seeing going years positive So flow most not years. have positive big the

on you a to get So progress we've clear good with there making see those initiatives. path waterfall. We're got as that

which a do of uncertainty, lot but still think depreciation been to -- a equity really again, of get create to we I XXXX. some beginning behind that XX%. trying But I this capital you, said several to get in we quarters, the XXXX. our our the by just XXXX. post-COVID, capital getting we this a even by lot go to tell we Even can things As our to cost of if think our here of pre-COVID, quarter, path can I return to that lot us, of way, is over would get on of we going get at of of above we've could is think XX% we said there's cost last And what

Justin Long

X-year frame can on Great. there a Is XX% And is you target, that. quick put That of kind target, target? any around X-year a time that follow-up just it?

Robert Sanchez

could long-term it's over economy the what do the you on But No, or our depending So later. get there again, goes, sooner think is XXXX. cycle, I target how right? by

move on, capital. get can think we to years, up we X our then range. that And of that point able into XX% cost in be to So from

next amount a get So in -- of behind should between if again, look of year, now the there's over a really able we're strong be depreciation year at But there's starting just a then. just position us of still to really unknowns going lot in and to we and be XXXX. that progress this I to lot make

Operator

go J. We'll Goldman. to Mack David with

David Mack

that order heard confusion from you returns. a you in you'd And greater go you're need to the XX% though, would you values risk if I whole pricing move has into here additionally, that your and years, trucks into I is uncertainty up few The pricing that things next that think need how be, What into in use values to far a values? trucks just then you that's to they charges. beyond a I the are, that in long-term few seems does want any correct? to with going to think factor about on leases discussion if then would that targets? selling when clarify market is of charges Because time improvement are that use where you're XX% your returns. additional assume to use has further gains. be significant out residual recognize great if selling I've frame, have the I for a this is that the going that, up leases. your factor because One, charges, risk so into for how going to pricing take you're impact to XX% correct, not And take from create

Robert Sanchez

tell use I'll are right? point. first, So that's you, historically today, starting the Well, Yes. levels values David, trough

close If levels trucks, tractors, at to trough you 'XX levels at were levels trucks trough we're we're which look, or for levels, whether tractors, trough XXXX. it's and for or trucks which were for

that at it is by year. we years. stays of beginning for pricing levels, from levels So those which trucks X basically improve that will next the assuming trough the we're XX% Then those at the that we're trough had this assuming

when the have. volatility it improvement. that small used So It's improvement relatively vehicle a you at isn't big a prices look

that back it the had was 'XX, and For which, for we was pricing of tractors, to that then we're assuming over years. time, It trough again, two next it level. stays not at And moderate just peak these gets more levels 'XX in period type the pricing pricing.

So that's we're assuming. what

the levels have pricing the of In of there, we're those or we're that on at out assuming terms pricing on we leases. below what

So that you gives understanding you give where -- some of that's I will at.

we're So trough at -- assuming not be we're pricing levels not stays forever. just to assuming clear,

would that of think be explain. kind difficult I to even

couple to continue be lows next So expect market, we we're of and to a over believe and cyclical years. coming this will it here, of we low off move the up

David Mack

now. decline X number I'm we've about years a like of so. I in use So just years guessing the been volatility talking because, for news so values really, or understand

XXXXs, ones I was it gotten the it's engines, the with it First, the hasn't new guess, any and better.

any in So that to mind built that how just a in is of obsolescence your and greater a risk on shortening trucks for period environment trucks technological the older deflationary many we were fuel and are due potentially advances there economy are equipment?

Robert Sanchez

Yes.

the X for we're buying X vehicles -- -- if a pay $XX,XXX this that is selling And for that that specifically selling the assume a person in probably I I around to you the more tractors. $XX,XXX is old. buyer sell, selling going we our tractors, vehicle vehicle. On example, we're environment to one and of to years buyer look talking for a you're tractor, vehicle at think we're

out the So same one go or old vehicle for out can and a buy is a buy $XX,XXX. not for go $XXX,XXX X-year buyer for that new that can a and

all end is afford the but So what market, of and vehicle. is efficiency can is of fuel who that is And go out day, I of vehicle to to segment and which a owner-operator the vintage buy. buy an at going it's nice, there typically the our

across the believe just where gone down if at older few sustained. look don't vehicles board hasn't used the Pricing equipment over on has and the been I cycle been you it -- So really has vintage down. gone last years, the has pricing and

to up, And see market. every gone really So up years It's supply like the economy when pressure. and pressure. you down, demand the we it's when lot of you'll some -- it do goes When a economy market. things also supply things X earlier, going believe demand a improve. And if And get you're has picks down, get you because also. improve slows see built vehicles do were

of is do is So we a supply-demand more more -- issue, so this not issue. this believe a technology much secular a of

David Mack

And point on finer put to a it. just

haven't point happen, years you're are in variables XX%? would you of offsetting risk XX% So up to we're and there Or to from there saying it's doesn't if really is a really, if we talking X get still dollars that reach allow lot to $XX,XXX, XX%? if that then about that values not where that a gone here. But

Robert Sanchez

and we've that right? can That's right? been talking Yes. There's initiatives can -- what all good business the always out The it, got making about offset focused on $XXX things variables, initiatives, There's that other do. we progress that offsetting always of cost-cutting really we that's been we've we've maintenance million there's these what there look, on. with in

continue to we're bring we the to improvement if would look going take can into to continue that yes, point opportunities we had got -- we So for we efficiencies to business. more, the and

all And initiatives. So that's why this we that's have these is what about.

be about "Well, If is used chart." with that with that think on vehicle pressure on some now showed trucks, that going you third should we on that there with down, pricing chart. call, There vintage pressure the quarter you'd values say, chart

fact initiatives And out really maintenance However, better. are that is maintenance pressure have is in the helping that offset by number. around that coming all these we that

to exactly quarter. in pretty the still is chart third that So looked like what it valid

the not that's one So -- equation. way in the it's multiple variable variables. just It's

of price. this it's One only ones. not vehicle is the But variables again, used the

David Mack

issue, values, next if not for this, And two if one. a last the recognizing the values I know years, do my is there's decline use further, hammer gains. this next just you but years, And to use mix and Okay. should two start for

happen and any selling if uptick that we start to and going have So about years, to years. on those kind use to discussion in two you're this that two of again you see noticeable going going what's that's gains reporting values again Anything have we're we're units? in should over now,

Robert Sanchez

variable improvement. the move more without as Yes, the right. Actually, only get towards of the exactly is can not actually yes. but you a mix, yes, moves other lot long big fair retail there Again, But assessment. mix a wholesale a retail, there, as even retail there's that's you're

Operator

question Stephanie SunTrust. with follow-up And final our will a from Benjamin be

Stephanie Benjamin

I to their chain little or -- any supply that just a this the about of but wanted chain. talked of COVID? some you big seeing disruption last in a customers see on your are dedicated have call, supply demand additional you pretty Maybe services for seen bit because

particular have see Just trying been that segments. to those any able if positives for there's from to come

Robert Sanchez

give I'll that in tell But what COVID, is I'll encouraging disruption all happened chains with very you, you let on on new the general Yes. with is there's that Steve that. focus supply color some a for in April. us

last primarily I with move Ryder and is focused is increase, between in and the awards activity on-shoring the and North issue going think near-shoring the tariff this think really to I year America. COVID,

Last here, think going that. the think U.S. and in from capabilities e-fulfillment to you're and also. Ryder here that have seeing are in to and well stuff of which we onshoring all -- near-shoring, have going along expertise you So the more is the Mexico, very our have And benefit we I for see think the when around initiatives the I in especially we're with Mile bodes Canada. we of E-commerce, about

you color customers hearing time. on some real let he's So what seeing give and I'll with Steve

John Sensing

Certainly, highlighted. think it's little kind that year. to months, Robert the areas the last Stephanie, on and is over bit or X Yes, X sequentially of quarter-over-quarter Steve. e-comm deeper significantly last just I a Yes, over dig up

of mix there, to seeing So a of opportunities increase. lot good continue volumes and

from earlier and that customers interest Mile. We a Last of existing front. little So a on lot bit new talked about

to to mid-double quarter-over-quarter grow saw we versus last year, expect digits. continue and were We up that

Robert help pipeline pipeline. think at is levels. the the we with So expect week in on about I historical And here chain marketing build the launch next talked will campaign good record supply a sign. And that then so, that that's or our that to

on new opportunities that be So in. we going only grow top that's to more can and

focused. So our team and is very excited

Robert Sanchez

this really That's that the ad word chain out launching on supply can a as how it's us we opportunity the get think in to we and for we're capabilities national companies. help why great campaign have we

Operator

to over closing Mr. Sanchez turn call like remarks. Robert the for to I'd back

Robert Sanchez

you. little hour. top All bit the a past the right. Thank We're of

hopefully, for all look seeing person, you, you if all the forward we some we'll of joining. to you virtually thank to see safe, conferences. And Thank So and continue in not at stay you you.

Operator

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

Ryder System (R) 29 Jul 202020 Q2 Earnings call transcript