Ryder Reports Record Q2 Revenue

Record Q2 Total Revenue Grows 7% to $2.2 Billion

Ryder System, Inc. (NYSE: R), commercial fleet management, dedicated transportation, and supply chain solutions, reports record total and operating revenue in the second quarter. Revenue grew in all three business segments reflecting new business and higher volumes. Second quarter GAAP EPS was up 64% to $1.43, reflecting prior-year tax adjustments and a current-year gain on sale of property. Comparable EPS was down 4% to $1.40, reflecting lower used vehicle sales results (primarily for heavy-duty tractors), partially offset by improved operating performance.

Commenting on the company’s second quarter results, Ryder Chairman and CEO Robert Sanchez says, “Despite a softer freight environment compared to 2018, we delivered double-digit operating revenue growth driven by strong performance in our contractual dedicated transportation, supply chain, and lease businesses. This growth reflects continued outsourcing trends and the impact of our sales and marketing initiatives.

“In dedicated, we achieved solid double-digit revenue growth from both new outsourcing wins and current leasing customers expanding their Ryder relationship to include drivers and related services. Supply chain also delivered solid growth, driven by the consumer packaged goods and automotive verticals.

“Year to date, we’ve grown the ChoiceLease fleet by 8,000 vehicles with approximately 40% of growth coming from customers new to outsourcing.

“From an overall earnings standpoint, we delivered comparable earnings results slightly above the midpoint of our forecast range. We saw better than expected operating performance from our contractual businesses largely offset by lower demand conditions in used vehicle sales and rental that began late in the quarter. The revenue impact of lease accounting was generally in line with our forecast.

“In both dedicated and supply chain, we delivered strong earnings results reflecting revenue growth and a significant improvement in operating performance.

“We continue to return capital to our shareholders and earlier this month announced a 4% dividend increase to $2.24 annually. This marks the 172nd consecutive quarterly cash dividend, marking more than 43 years of uninterrupted dividend payments.

“Turning to our longer-term strategic initiatives, we are on track to achieve our multi-year $75 million maintenance cost-savings initiative. We remain encouraged by strong customer interest with COOP by Ryder™ — a first-of-its-kind asset sharing platform for commercial vehicles — following our expansion into Florida earlier this year. Additionally, the roll-out of our e-commerce fulfillment solution is on track with three fully operational facilities strategically located throughout the U.S.”

Second Quarter Business Segment Operating Results

Fleet Management Solutions

In the Fleet Management Solutions (FMS) business segment, total revenue was $1.39 billion, up 7% compared with $1.30 billion in the year-earlier period. FMS operating revenue (a non-GAAP measure excluding fuel) was $1.18 billion, up 9% from the year-earlier period. Ryder ChoiceLease^TM (lease) revenue increased 9% reflecting a larger average fleet size as well as higher prices on new vehicles. The lease fleet grew sequentially by 3,800 vehicles during the quarter. Commercial rental revenue increased 9% from the prior year due to higher demand and pricing.

FMS earnings before tax were $57.7 million, down 25%, compared with $76.6 million in 2018, reflecting lower used vehicle sales results. Used vehicle sales results declined from the prior year as a result of higher valuation adjustments of $10.4 million on a larger inventory and higher depreciation of $7.6 million due to vehicle residual value changes. Results were also negatively impacted by increased overheads including higher than normal levels of bad debt and, to a lesser extent, the impact of the adoption of the new lease accounting standard. Lease results benefited from fleet growth, reflecting strong outsourcing trends and our sales and marketing activities, as well as the company’s maintenance cost-savings initiative. Commercial rental performance modestly improved, reflecting higher demand and pricing. Rental power fleet utilization was 75.3% for the second quarter, down from 79.4% in the year-earlier period, primarily reflecting lower tractor utilization. FMS earnings before tax as a percentage of FMS total revenue and FMS operating revenue (a non-GAAP measure) were 4.2% and 4.9%, respectively, down by 170 and 220 basis points, respectively, from the year-earlier period.

Supply Chain Solutions

In the Supply Chain Solutions (SCS) business segment, total revenue was up 7% to $649 million and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) was up 12% to $483 million, compared with the year-earlier period. SCS total and operating revenue growth reflects new business, higher pricing, and increased volumes.

SCS earnings before tax of $45.8 million increased 24% in the second quarter of 2019 compared with $36.9 million in 2018, driven by revenue growth and improved operating performance. SCS earnings before tax as a percentage of SCS total revenue and SCS operating revenue (a non-GAAP measure) were 7.0% and 9.5%, respectively, both up 90 basis points from the year-earlier period.

Dedicated Transportation Solutions

In the Dedicated Transportation Solutions (DTS) business segment, total revenue was up 10% to $362 million and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) was up 16% to $248 million, compared with the year-earlier period. DTS total and operating revenue growth reflects new business and customer expansions.

DTS earnings before tax of $27.1 million increased 47% compared with $18.5 million in 2018, due to revenue growth and improved operating performance. DTS earnings before tax as a percentage of DTS total revenue and DTS operating revenue (a non-GAAP measure) were 7.5% and 10.9%, respectively, up 190 and 230 basis points from the year-earlier period.

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