Q4 2023 Ryder System Inc Earnings Call

You have any objections. Please disconnect at this time I would now like to introduce MS. Kaylene Candela, Vice President Investor Relations for Ryder Ms. Candela, you may begin.

Thank you good morning, and welcome to Ryder's fourth quarter 2023 earnings conference call I'd like to remind you that during this presentation, you'll hear some forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Good morning, and welcome to the Ryder system fourth quarter 2023 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.

These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances.

Actual results may differ materially from these expectations due to changes in economic business competitive market political and regulatory factors more detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest GAAP measure is contained in this morning's earnings release earnings.

I'd now like to introduce MS. Kaylene Candela, Vice President Investor Relations for Ryder Ms. Candela, you may begin.

Kaylene Candela: Thank you good morning, and welcome to Ryder's fourth quarter 2023 earnings conference call I'd like to remind you that during this presentation, you'll hear some forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Call presentation and in Ryder's filings with the Securities and Exchange Commission, which are available on Ryder's website.

Presenting on today's call are Robert Sanchez, Chairman, and Chief Executive Officer, and John Deers, Executive Vice President and Chief Financial Officer.

Kaylene Candela: These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances.

Additionally, Tom Havens, President of Fleet management solutions, and Steve sensing President of supply chain solutions and dedicated transportation solutions are on the call today and available for questions. Following the presentation at.

Kaylene Candela: Actual results may differ materially from these expectations due to changes in economic business competitive market political and regulatory factors more detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest GAAP measure is contained in this morning's earnings release earnings.

At this time I'll turn the call over to Robert.

Good morning, everyone and thanks for joining us.

I'm extremely proud of our team for delivering strong results again in the fourth quarter and throughout 2023.

Kaylene Candela: Presentation and in Ryder's filings with the Securities and Exchange Commission, which are available on Ryder's website.

Our operating performance continues to demonstrate that the transformative changes we've made to derisk our business model.

Kaylene Candela: Presenting on today's call are Robert Sanchez, Chairman, and Chief Executive Officer, and John Deers, Executive Vice President and Chief Financial Officer.

<unk> returns and free cash flow and drive long term profitable growth of significantly increase the earnings and return profile of the business versus prior cycles.

Kaylene Candela: Additionally, Tom Havens, President of Fleet management solutions, and Steve sensing President of supply chain solutions and dedicated transportation solutions are on the call today and available for questions. Following the presentation.

I'll begin today's call by sharing some key insights from 'twenty to 'twenty three.

Providing you with a strategic update.

John will then take you through our fourth quarter results, which exceeded our expectations again, reflecting better performance in our supply chain automotive business.

Robert E. Sanchez: At this time I will turn the call over to Robert.

Robert E. Sanchez: Good morning, everyone and thanks for joining us.

Robert E. Sanchez: I'm extremely proud of our team for delivering strong results again in the fourth quarter and throughout 2023.

Lower truck maintenance costs, and a lower tax rate, partially offset by volumes and omnichannel retail and rental demand.

Robert E. Sanchez: Our operating performance continues to demonstrate that the transformative changes we've made to derisk our business model.

I will then review our 2020 for outlook and discuss how we are positioning the business for the cycle upturn.

Robert E. Sanchez: Hence returns and free cash flow and drive long term profitable growth of significantly increase the earnings and return profile of the business versus prior cycles.

Let's turn to slide four.

In 2023, we delivered strong returns during a freight cycle downturn and as conditions in used vehicle sales and rental weakened throughout the year.

Speaker Change: I'll begin today's call by sharing some key insights from 'twenty to 'twenty three.

Speaker Change: Providing you with a strategic update.

Fight this backdrop, we generated Roe of.

Speaker Change: John will then take you through our fourth quarter results, which exceeded our expectations again.

Of 19%, which is in line with our target range of high teens over the cycle and reflects the strength of our contractual business and the actions we've taken to improve the return profile of our business.

Speaker Change: Selecting better performance in our supply chain automotive business.

Speaker Change: Lower truck maintenance costs, and a lower tax rate, partially offset by volumes and omnichannel retail and rental demand.

Comparable EPS of 12 95 was above our initial full year forecast, reflecting better than expected performance in used vehicle sales.

Speaker Change: I will then review our 2020 for outlook and discuss how we are positioning the business for the cycle upturn.

Lower truck maintenance cost improved results in our supply chain automotive business at a lower tax rate.

Speaker Change: Let's turn to slide four.

Speaker Change: In 2023, we delivered strong returns during a freight cycle downturn and as conditions in used vehicle sales and rental weakened throughout the year.

These benefits were partially offset by weaker than expected volumes in omnichannel retail and lower than anticipated rental demand comparable EPS in 2023 was significantly above the $5 95 of comparable EPS generated in 2018 prior to our business transformation.

Speaker Change: Despite this backdrop, we generated Roe of.

Speaker Change: Of 19%, which is in line with our target range of high teens over the cycle and reflect.

Highlighting the impact of our balanced growth strategy operating revenue grew 2%, reflecting contractual growth of 7%, partially offset by lower rental and the impact from the exit of our U K business.

Business generated strong operating cash flow of $2 4 billion.

Collecting contractual growth, partially offset by lower rental demand.

We continued to return capital to shareholders through buybacks and dividends.

During 2023, we repurchased three 6 million shares.

Since 2021 we have repurchased approximately 16% of our shares outstanding.

We also increased our dividend by 15% in mid 2023.

We're encouraged by the strong returns generated in 2023 by our transformed business model and believe that executing on our balanced growth strategy is enabling us to deliver higher highs and higher lows over the cycle on.

On slide five I'll provide some key updates.

Executing on our balanced growth strategy has increased our earnings and return profile versus prior cycles.

It has provided us with additional opportunity for long term value creation.

Further advancing our strategy to accelerate profitable growth in our supply chain and dedicated businesses.

We recently closed on two strategic acquisitions.

On November one.

We completed the acquisition of impactful film and services or ISS, which added co packaging and co manufacturing capabilities in SCS.

Earlier in the month, we completed the acquisition of Cardinal logistics, a leading provider of customized dedicated transportation solutions.

I'll provide more insight on the Cardinal transaction shortly.

Our initiatives remain focused on enhancing returns.

Adjusted ROE of 19% for the trailing 12 month period is in our target range of high teens over the cycle and reflects normalizing market conditions in used vehicle sales and rental as well as our initiatives.

These initiatives include pricing and cost recovery actions, which benefited returns in all segments.

F M. S N D T S achieve target EBT margins for the fourth quarter as well as full year 2023, reflecting initiatives to increase returns as well as execution on our enhanced asset management playbook.

Our strong balance sheet and solid investment grade credit rating continue to provide us with ample capacity to pursue targeted acquisitions and investments as well as return capital to shareholders.

During the quarter, we repurchased 420000 shares under our discretionary repurchase program.

We currently have authorization for a 2 million share discretionary repurchase program as well as a 2 million share anti dilutive program with approximately $3 5 million and total shares remaining under these programs.

Our full year 2023 free cash flow was negative $54 million.

Below our most recent forecast of approximately positive 100 million, primarily due to higher yearend working capital needs.

Turning to slide six I am very proud to share the results of this slide because they clearly illustrate the increased earnings and return profile, resulting from the transformative changes that we've made to the business in 2018 prior to the implementation of our balanced growth strategy, we generated comparable EPS of $5 95.

To share anti dilutive program with approximately three and a half million in total shares remaining under these programs.

And Roe of 13%.

This was during peak rate cycle conditions.

At that time, the majority of our $8 4 billion in revenue was from Fms supply chain revenue had a three year growth rate of 16% and operating cash flow was $1 7 billion.

Our full year 2023 free cash flow was negative $54 million.

Below our most recent forecast of approximately positive $100 million, primarily due to higher yearend working capital needs.

Turning to slide six I am very proud to share the results of this slide because they clearly illustrate the increased earnings and return profile, resulting from the transformative changes that we've made to the business in 2018 prior to the implementation of our balanced growth strategy, we generated comparable EPS of $5 95.

Now, let's look at Ryder today in 2023 during a freight cycle downturn, our transformed business model generated meaningfully higher earnings and returns than it did during the 2018 peak comps.

Comparable EPS was $12 95, compared to $5 95 in 2018 and ROA.

ROE of 13%.

It was 19% well above the 13% generated in 2018.

This was during peak rate cycle conditions.

At that time, the majority of our $8 4 billion in revenue was from Fms supply chain revenue had a three year growth rate of 16% and operating cash flow was $1 7 billion.

Organic growth strategic acquisitions, and innovative technology, we have shifted our revenue mix towards supply chain and dedicated with 56% of 2023 revenue coming from these asset light businesses.

Now, let's look at Ryder today in 2023 during a freight cycle downturn, our transformed business model generated meaningfully higher earnings and returns than it did during the 2018 peak.

Paired to 44% in 2018.

Supply chain three year growth rate has also increased to 24% as a result of profitable growth in our contractual lease supply chain and dedicated businesses operating cash flow grew from $1 7 billion in 2018 to $2 4 billion. This year.

Kaylene Candela: Comparable EPS was $12 95, compared to $5 95 in 2018 and ROE.

Kaylene Candela: It was 19% well above the 13% generated in 2018.

As shown here the business is outperforming prior cycles, even when comparing prior peak to current downturn conditions.

Kaylene Candela: Organic growth strategic acquisitions, and innovative technology, we have shifted our revenue mix towards supply chain and dedicated with 56% of 2023 revenue coming from these asset light businesses.

I'm encouraged by the results of our transformation, thus far and I'm confident that our solid execution in 2023 and momentum from multi year initiatives positions us well for 2024 and beyond.

Kaylene Candela: Paired to 44% in 2018.

Kaylene Candela: Supply chain three year growth rate has also increased to 24% as a result of profitable growth in our contractual lease supply chain and dedicated businesses operating cash flow grew from $1 7 billion in 2018 to $2 4 billion. This year.

Moving to slide seven on.

On February the first writer completed the acquisition of Cardinal logistics, a leading provider of customized dedicated transportation solutions.

This acquisition further advances our balanced growth strategy by accelerating profitable growth in our dedicated business.

Speaker Change: As shown here the business is outperforming prior cycles, even when comparing prior peak to current downturn conditions.

TTS growth is an important part of writers strategy to create shareholder value.

Secular trends, including the driver shortage and demand for business intelligence and freight visibility technology, such as Ryder share continue to drive private fleets to pursue an outsourced dedicated transportation solution.

Robert E. Sanchez: I'm encouraged by the results of our transformation, thus far and I'm confident that our solid execution in 2023 and momentum from multi year initiatives positions us well for 2024 and beyond.

In addition, our dedicated business has demonstrated a resilient earnings profile over the cycle.

Robert E. Sanchez: Moving to slide seven on.

Robert E. Sanchez: On February the first writer completed the acquisition of Cardinal logistics, a leading provider of customized dedicated transportation solutions.

During the most recent freight downturn as well as during prior cycles dead.

Dedicated earnings held up well benefiting from favorable driver market conditions, and reduce turnover cost as well as our initiatives.

Robert E. Sanchez: This acquisition further advances our balanced growth strategy by accelerating profitable growth in our dedicated business.

Robert E. Sanchez: TTS growth is an important part of writers strategy to create shareholder value.

Finally, our dedicated business benefits from sales and operational synergies with Fms Upselling Fms pipeline and lease customers to dedicated has been the largest source of new sales activity for Dts for some time.

Robert E. Sanchez: Secular trends, including the driver shortage and demand for business intelligence and freight visibility technology, such as Ryder share continue to drive private fleets to pursue an outsourced dedicated transportation solution.

Dts also benefits from access to equipment asset management, and maintenance services from Fms, enabling dts to deliver increased value to their customers and drive incremental cost savings.

Speaker Change: In addition, our dedicated business has demonstrated a resilient earnings profile over the cycle.

Speaker Change: During the most recent freight downturn as well as during prior cycles.

Building upon this foundation cargoes national footprint and complementary contractual services provides us with opportunity to build scale and density and our dedicated transportation network.

Speaker Change: Dedicated earnings held up well benefiting from favorable driver market conditions and reduced turnover cost as well as our initiatives.

Speaker Change: Finally, our dedicated business benefits from sales and operational synergies with Fms.

This will gain greater economies of scale, and we will have even more flexibility to optimize resources across our network.

Speaker Change: Selling Fms pipeline and lease customers to dedicated has been the largest source of new sales activity for Dts for some time.

Turning to slide eight the.

The integration process is already underway.

On an annualized basis. The transaction is expected to add approximately $1 billion in total revenue and approximately $800 million in operating revenue, which excludes fuel and subcontracted transportation approximately 85% of Cardinal as operating revenue is from their dedicated transportation business and will be reflected in Dts.

Speaker Change: Dts also benefits from access to equipment asset management, and maintenance services from Fms, enabling dts to deliver increased value to their customers and drive incremental cost savings.

Speaker Change: Building upon this foundation cargoes national footprint and complementary contractual services provides us with opportunity to build scale and density and our dedicated transportation network with this will gain greater economies of scale and we will have even more flexibility to optimize resources across our network.

Increasing the scale and density of our dedicated business is expected to drive operating leverage and synergies.

Approximately 15% of Cardinal's operating revenue is generated by their freight brokerage contract logistics and last mile delivery businesses, which will be reflected in SCS.

Speaker Change: Turning to slide eight.

Speaker Change: The integration process is already underway.

<unk> will provide maintenance services for the Cardinal fleet, and we expect meaningful cost synergies as we begin servicing the fleet as well as procuring of disposing of Cardinal vehicles.

Speaker Change: On an annualized basis. The transaction is expected to add approximately $1 billion in total revenue and approximately $800 million in operating revenue, which excludes fuel and subcontracted transportation approximately 85% of Cardinal as operating revenue is from their dedicated transportation business and will be reflected in Dts.

Cardinal owned and leased vehicles will be provided to Dts via inter segment equipment leases with contractual maintenance agreements consistent with other vehicles operated by Dts.

Speaker Change: Increasing the scale and density of our dedicated business is expected to drive operating leverage and synergies.

Inter segment lease and maintenance revenue is eliminated upon consolidation.

Speaker Change: Approximately 15% of Cardinal's operating revenue is generated by their freight brokerage contract logistics and last mile delivery businesses, which will be reflected in SCS.

We expect the transaction to be marginally accretive in 'twenty 'twenty, four and more meaningfully accretive in 2025, after achieving synergies and completing integration efforts.

Speaker Change: <unk> will provide maintenance services for the Cardinal fleet, and we expect meaningful cost synergies as we begin servicing the fleet as well as procuring of disposing of Cardinal vehicles.

We're very excited about the opportunities ahead and believe that dedicated will continue to be an important driver of value creation for rider. The team is focused on a successful integration and realizing the synergies and benefits. We are confident our achievable I'll turn the call over to John to review, our fourth quarter performance.

Speaker Change: Cardinal owned and leased vehicles will be provided to Dts via inter segment equipment leases with contractual maintenance agreements consistent with other vehicles operated by Dts.

Thanks, Robert total company results for the fourth quarter on page nine.

Speaker Change: Inter segment lease and maintenance revenue is eliminated upon consolidation.

Operating revenue of $2 4 billion in the fourth quarter up 2% from the prior year, primarily reflects contractual revenue growth in all three segments.

Speaker Change: We expect the transaction to be marginally accretive in 2024 and more meaningfully accretive in 2025, after achieving synergies and completing integration efforts.

Really offset by lower rental revenue.

Comparable earnings per share from continuing operations were $2 95 in the fourth quarter.

Speaker Change: We're very excited about the opportunities ahead and believe that dedicated will continue to be an important driver of value creation for rider. The team is focused on a successful integration and realizing the synergies and benefits. We are confident our achievable I'll turn the call over to John to review, our fourth quarter performance.

Down from $3 89 from the prior year.

Reflecting expected weaker market conditions in used vehicle sales and rental partially offset by improved supply chain results.

Return on equity our primary financial metric was 19% in line with our high teens target over the cycle.

John R. Cummings: Thanks, Robert total company results for the fourth quarter on page nine.

Year over year decline reflects weakening used vehicle sales and rental market conditions, partially offset by a returns initiatives.

John R. Cummings: Operating revenue of $2 4 billion in the fourth quarter up 2% from the prior year, primarily reflects contractual revenue growth in all three segments, partially offset by lower rental revenue.

Full year free cash flow decreased to negative $54 million from positive $921 million in 2022, due to higher capital expenditures and lower used vehicle sales proceeds.

John R. Cummings: Comparable earnings per share from continuing operations were $2 95 in the fourth quarter down from $3 89 from the prior year.

Normalized timing of OEM tractor deliveries contributed to higher Capex in 2023.

John R. Cummings: Reflecting expected weaker market conditions in used vehicle sales and rental partially offset by improved supply chain results.

Prior year included $400 million in proceeds from the UK exit.

John R. Cummings: Return on equity our primary financial metric was 19% in line with our high teens target over the cycle.

Turning to fleet management on page 10.

Fleet management solutions operating revenue decreased 4% due to lower rental demand, partially offset by higher contractual revenue from choice lease in select care.

John R. Cummings: Year over year decline reflects weakening used vehicle sales and rental market conditions, partially offset by a return initiatives.

Pre tax earnings simply management were $134 million and down year over year as anticipated prior year Fms results largely reflect the impact from elevated market conditions in used vehicle sales and rental.

John R. Cummings: Full year free cash flow decreased to negative $54 million from positive $921 million in 2022, due to higher capital expenditures and lower used vehicle sales proceeds.

John R. Cummings: Normalized timing of OEM tractor deliveries contributed to higher Capex in 2023.

Lower used vehicle pricing in the quarter was partially offset by higher sales volumes.

Rental utilization on the power fleet of 75% was at the low end of our mid to high seventies target range for the quarter and down from an unusually high level of 82% in the prior year.

John R. Cummings: Prior year included $400 million in proceeds from the UK exit.

John R. Cummings: Turning to fleet management on page 10.

John R. Cummings: Fleet management solutions operating revenue decreased 4% due to lower rental demand, partially offset by higher contractual revenue from choice lease on select care.

Lower utilization was partially offset by a 1% increase in power fleet pricing.

Despite a weaker used vehicle sales and rental environment fleet management EBT as a percent of operating revenue was 10, 6% in the fourth quarter within the segments long term target of low double digits.

John R. Cummings: Pre tax earnings and fleet management were $134 million and down year over year as anticipated prior year Fms results largely reflect the impact from elevated market conditions in used vehicle sales and rental.

For the full year it was above target at 13, 2%.

John R. Cummings: Lower used vehicle pricing in the quarter was partially offset by higher sales volumes.

Page 11 highlights used vehicle sales results for the quarter.

John R. Cummings: Rental utilization on the power fleet of 75% was at the low end of our mid to high seventies target range for the quarter and down from an unusually high level of 82% in the prior year.

As anticipated market conditions for used vehicles sales continued to weaken from elevated levels in the prior year.

Compared with prior year used tractor proceeds declined 39% and used truck proceeds declined 33%, reflecting weaker freight conditions.

John R. Cummings: Lower utilization was partially offset by a 1% increase in power fleet pricing.

On a sequential basis proceeds for tractors decreased 12% and proceeds for trucks decreased 11% both generally in line with our expectations.

John R. Cummings: Despite a weaker used vehicle sales and rental environment fleet management EBT as a percent of operating revenue was 10, 6% in the fourth quarter within the segments long term target of low double digits.

During the quarter, we sold 7200 used vehicles up sequentially and versus prior year.

John R. Cummings: For the full year it was above target at 13, 2%.

Used vehicle inventory increased to 8000 vehicles at quarter end and remains in line with our target inventory levels of seven to 9000 units.

John R. Cummings: Page 11 highlights used vehicle sales results for the quarter.

John R. Cummings: As anticipated market conditions for used vehicles sales continued to weaken from elevated levels in the prior year.

Increased sales volumes and inventory levels reflect higher lease replacement and rental de fleeting activity.

John R. Cummings: Compared with prior year used tractor proceeds declined 39% and used truck proceeds declined 33%, reflecting weaker freight conditions.

Although used vehicle pricing decline proceeds remain above residual value estimates used for depreciation purposes slide 26 in the appendix provides historical sales proceeds and current residual value estimates for used tractors and trucks for your information.

John R. Cummings: On a sequential basis proceeds for tractors decreased 12% and proceeds for trucks decreased 11% both generally in line with our expectations.

Turning to supply chain on page 12.

John R. Cummings: During the quarter, we sold 7200 used vehicles up sequentially and versus prior year.

Operating revenue increased 10%, reflecting organic growth from new business increased pricing and higher volumes as well as the Iff's acquisition doubled.

John R. Cummings: Used vehicle inventory increased to 8000 vehicles at quarter end and remains in line with our target inventory levels to seven to 9000 units.

Double digit revenue growth in our automotive consumer packaged goods and industrial verticals more than offset softer volumes in our omnichannel retail vertical.

John R. Cummings: Increased sales volumes and inventory levels reflect higher lease replacement and rental de fleeting activity.

Supply chain earnings increased 35%, reflecting operating revenue growth in the automotive and industrial verticals.

John R. Cummings: Although used vehicle pricing declined proceeds remain above residual value estimates used for depreciation purposes slide 26 in the appendix provides historical sales proceeds and current residual value estimates for used tractors and trucks for your information.

And omnichannel retail year over year comparisons benefited from a prior year asset impairment charge of $20 million.

It was offset by lower volumes in the current year.

Supply chain EBT as a percent of operating revenue was five 8% in the quarter low this segment's high single digit target range.

John R. Cummings: Turning to supply chain on page 12.

John R. Cummings: Operating revenue increased 10%, reflecting organic growth from new business increased pricing and higher volumes as well as the Iff's acquisition doubled.

Moving to dedicated on page 13, operating revenue increased 1%, reflecting the recovery of inflationary costs.

John R. Cummings: Double digit revenue growth in our automotive consumer packaged goods and industrial verticals more than offset softer volumes in our omnichannel retail vertical.

We expected slower contract sales activity in dedicated consistent with a softer freight environment.

John R. Cummings: Supply chain earnings increased 35%, reflecting operating revenue growth in the automotive and industrial verticals.

As we discussed previously we expected 2023 segment revenue growth to finish below our high single digit target range.

John R. Cummings: In Omnichannel retail year over year comparisons benefited from a prior year asset impairment charge of $20 million, which was offset by lower volumes in the current year.

Dedicated EBT remained strong and generally in line with prior year.

<unk> benefited from inflationary rate increases and EBT continues to benefit from favorable driver conditions as the number of open positions and trying to solve for our professional drivers improves.

John R. Cummings: Supply chain EBT as a percent of operating revenue was five 8% in the quarter.

John R. Cummings: Though this segment's high single digit target range.

Dedicated EBT as a percent of operating revenue was nine 4% in the quarter and in line with the segment high single digit target.

John R. Cummings: Moving to dedicated on page 13, operating revenue increased 1%, reflecting the recovery of inflationary costs.

Turning to slide 14, 2023 lease capital spending of $2 6 billion increase from prior year, reflecting higher lease replacement and growth activity.

John R. Cummings: We expected slower contract sales activity in dedicated consistent with a softer freight environment.

John R. Cummings: As we discussed previously we expected 2023 segment revenue growth to finish below our high single digit target range.

As well as the return to normalized timing for OEM tractor deliveries.

John R. Cummings: Dedicated EBT remained strong and generally in line with the prior year.

In 2024, we're forecasting lease spending to decline to $2 5 billion, reflecting lower replacement activity, partially offset by higher growth.

John R. Cummings: <unk> benefited from inflationary rate increases and EBT continues to benefit from favorable driver conditions as the number of open positions in time to fill for our professional drivers improves.

We expect the ending lease fleet to be up approximately 13000 units in 2024, reflecting the cardinal acquisition as well as organic growth.

John R. Cummings: Dedicated EBT as a percent of operating revenue was nine 4% in the quarter and in line with the segment high single digit target.

At the time of the acquisition.

Writers fleet increased incrementally by approximately 2400 power vehicles and by more than 6500 trailers.

John R. Cummings: Turning to slide 14.

John R. Cummings: 23 lease capital spending of $2 6 billion increase from prior year, reflecting higher lease replacement and growth activity.

We expect to realize synergies with maintenance cost and fleet utilization by combining the cardinal and rider fleets.

John R. Cummings: As well as the return to normalized timing for OEM tractor deliveries.

2023 rental capital spending of $438 million was below prior year's plant.

John R. Cummings: In 2024, we're forecasting lease spending to decline to $2 5 billion, reflecting lower replacement activity, partially offset by higher growth.

In 'twenty 'twenty, four we're forecasting rental spending to increase to $600 million, reflecting modest rental growth.

John R. Cummings: We expect the ending lease fleet to be up approximately 13000 units in 2024, reflecting the cardinal acquisition as well as organic growth.

Our ending rental fleet is expected to increase by 8% during 2024, and our average rental fleet is expected to be down by 5%.

John R. Cummings: At the time of the acquisition.

We're 'twenty 'twenty four is the rental fleet is expected to remain below peak levels.

John R. Cummings: <unk> fleet increased incrementally by approximately 2400 power vehicles and by more than 6500 trailers.

In rental we continue to increase capital spending on trucks versus tractors as trucks have benefited from relatively stable demand and pricing trends.

John R. Cummings: We expect to realize synergies with maintenance cost and fleet utilization by combining the cardinal and rider fleets.

At year end 2023 trucks represented 60% of our rental fleet up from 49% in 2018.

2023 rental capital spending of $438 million was below prior year's plant.

John R. Cummings: In 2024 were forecasting rental spending to increase to $600 million, reflecting modest rental growth.

Our full year 2020 for capital expenditures forecast of approximately $3 3 billion is in line with prior year as higher growth is offset by lower replacement capital. We expect approximately $550 million in proceeds from the sale of used vehicles in 2024 down approximately 200 million from prior year reflects.

John R. Cummings: Our ending rental fleet is expected to increase by 8% during 2024, and our average rental fleet is expected to be down by 5%.

John R. Cummings: We're 'twenty 'twenty for the rental fleet is expected to remain below peak levels.

Lower pricing as well as fewer vehicles sold.

John R. Cummings: In rental we continue to increase capital spending on trucks versus tractors as trucks have benefited from relatively stable demand and pricing trends.

Our sales volumes in 2023 reflect higher lease replacement activity and rental de fleeting.

Full year 2024, net capital expenditures are expected to be approximately $2 8 billion.

John R. Cummings: At year end 2023 trucks represented 60% of our rental fleet up from 49% in 2018.

Turning to slide 15, our 'twenty 'twenty four full year forecast for free cash flow is expected to be between negative 275, and $375 million and our forecast for operating cash flow was $2 4 billion.

John R. Cummings: Our full year 2020 for capital expenditures forecast of approximately $3 3 billion is in line with prior year as higher growth is offset by lower replacement capital. We expect approximately $550 million in proceeds from the sale of used vehicles in 2024 down approximately 200 million from prior year reflect.

Show operating cash flow remains strong driven by growth in our contractual lease dedicated and supply chain businesses, which comprise over 85% of riders operating revenue.

John R. Cummings: Lower pricing as well as fewer vehicles sold.

John R. Cummings: Our sales volumes in 2023 reflect higher lease replacement activity.

Our free cash flow profile has changed significantly since the implementation of our balanced growth strategy since 2020, lower targeted lease growth as well as COVID-19 effects and OEM delays resulted in lower capital spending and higher free cash flow.

John R. Cummings: And rental de fleeting.

John R. Cummings: Full year 2024, net capital expenditures are expected to be approximately $2 8 billion.

John R. Cummings: Turning to slide 15, our 'twenty 'twenty four full year forecast for free cash flow is expected to be between negative 275, and $375 million and our forecast for operating cash flow was $2 4 billion.

Proceeds from the exit of the UK estimates business also benefited free cash flow in 2022.

The summary on the right side of the slide illustrates the strong free cash flow generated by the business prior to investing in fleet growth in 2024, although free cash flow is expected to be negative $325 million at the midpoint of our range.

John R. Cummings: As show operating cash flow remained strong driven by growth in our contractual lease dedicated and supply chain businesses, which comprise over 85% of riders operating revenue.

Free cash flow prior to investing in growth capital is expected to be positive $350 million.

John R. Cummings: Our free cash flow profile has changed significantly since the implementation of our balanced growth strategy since 2020, lower targeted lease growth as well as COVID-19 effects and OEM delays resulted in lower capital spending and higher free cash flow.

As a reminder, we expect free cash flow to be positive in most years and positive over the cycle.

Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long term profitable growth and return capital to shareholders.

John R. Cummings: Proceeds from the exit of the UK estimates business also benefited free cash flow in 2022.

Our top priority is to continue to invest in organic growth.

John R. Cummings: The summary on the right side of the slide illustrates the strong free cash flow generated by the business prior to investing in fleet growth in 2024, although free cash flow is expected to be negative $325 million at the midpoint of our range.

Strategic acquisitions have been a key contributor to accelerated growth in SCS and have helped transform our supply chain business in terms of expanding capabilities as well as rebalancing our vertical mix.

John R. Cummings: Free cash flow prior to investing in growth capital is expected to be positive $350 million.

Balance sheet leverage of 232% at year end 2023 was below our 250% to 300% target and continues to provide ample capacity to fund organic growth and strategic investments as well as to return capital to shareholders through share repurchases and dividends.

John R. Cummings: As a reminder, we expect free cash flow to be positive in most years and positive over the cycle.

John R. Cummings: Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long term profitable growth and return capital to shareholders.

With that I'll turn the call back over to Robert to discuss our 2020 for outlook.

John R. Cummings: Our top priority is to continue to invest in organic growth.

Slide 16 highlights key aspects of our 2020 for outlook.

John R. Cummings: Strategic acquisitions have been a key contributor to accelerated growth in SCS and have helped transform our supply chain business in terms of expanding capabilities as well as rebalancing our vertical mix.

In terms of market assumptions, we expect macroeconomic growth to be muted in 2024 weeks.

We expect market conditions in used vehicle sales and rental to continue to weaken in the first half of 2024 with a gradual improvement in the second half.

John R. Cummings: Balance sheet leverage of 232% at year end 2023 was below our 250% to 300% target and continues to provide ample capacity to fund organic growth and strategic investments as well as to return capital to shareholders through share repurchases and dividends.

We are confident that secular trends continue to favor transportation and logistics outsourcing and that our operational expertise and strategic investments will continue to enable us to deliver increasing value to customers and shareholders.

John R. Cummings: With that I'll turn the call back over to Robert to discuss our 2020 for outlook.

We're assuming that U S class eight tractor production declines of approximately 25% in 2024 and that OEM delivery delays for trucks will continue.

Robert E. Sanchez: Slide 16 highlights key aspects of our 2020 for outlook.

Robert E. Sanchez: In terms of market assumptions, we expect macroeconomic growth to be muted in 2024, we.

We expect trough market conditions in used vehicle sales and rental in 2024.

Robert E. Sanchez: We expect market conditions in used vehicle sales and rental to continue to weaken in the first half of 2024 with a gradual improvement in the second half.

Gains from the sale of used vehicles are expected to be below normalized levels of approximately $75 million in 2024, reflecting lower market pricing and fewer vehicles sold.

Robert E. Sanchez: We are confident that secular trends continue to favor transportation and logistics outsourcing and that our operational expertise and strategic investments will continue to enable us to deliver increasing value to customers and shareholders.

We expect rental utilization to be at the low end of our mid to high seventies target range on a 5% smaller average fleet.

Our enhanced asset management playbook has enabled us to outperform prior calls and we expect to continue to leverage and benefit from these actions going forward.

Robert E. Sanchez: We're assuming that U S class eight tractor production declines of approximately 25% in 2024 and that OEM delivery delays for trucks will continue.

In terms of our financial forecast for 2020 for operating revenue is expected to grow approximately 13% above the total company's high single digit target, reflecting revenue growth in all segments, including the impact from recent acquisitions.

Robert E. Sanchez: We expect trough market conditions in used vehicle sales and rental in 2024.

Robert E. Sanchez: Gains from the sale of used vehicles are expected to be below normalized levels of approximately $75 million in 2024, reflecting lower market pricing and fewer vehicles sold.

Comparable EPS is expected to remain strong between $11 50, and $12 50 in 2024, reflecting contractual growth, partially offset by trough conditions in used vehicle sales and rental.

Robert E. Sanchez: We expect rental utilization to be at the low end of our mid to high seventies target range on a 5% smaller average fleet.

Robert E. Sanchez: Our enhanced asset management playbook has enabled us to outperform prior calls and we expect to continue to leverage and benefit from these actions going forward.

ROE is expected to be between 15 and 16, 5% in line with our return expectations during trough market conditions for used vehicle sales and rental free cash flow is expected to be between negative $2 75, and $375 million down from prior year, primarily due to lower used vehicle.

In terms of our financial forecast for 2020 for operating revenue is expected to grow approximately 13% above the total company's high single digit target, reflecting revenue growth in all segments, including the impact from recent acquisitions.

Sales proceeds.

Overall, we expect to deliver solid returns in 2024 amid trough market conditions in used vehicle sales and rental reflecting execution of our balanced growth strategy.

Robert E. Sanchez: Comparable EPS is expected to remain strong between $11 50, and $12 50 in 2024, reflecting contractual growth, partially offset by trough conditions in used vehicle sales and rental.

Slide 17 provides the outlook highlights for each of our segments.

In Fms operating revenue growth is expected to be at the segments mid single digit target due to organic fleet growth and the intersegment revenue from Cardinal vehicles operating in Dts, partially offset by lower rental demand.

ROE is expected to be between 15 and 16, 5% in line with our return expectations during trough market conditions for used vehicle sales and rental free cash flow is expected to be between negative $2 75, and $375 million down from prior year, primarily due to lower used vehicle.

M S EBT as a percent of operating revenue is expected to be in the segments low double digit target range, reflecting fleet growth.

Robert E. Sanchez: Sales proceeds.

Robert E. Sanchez: Overall, we expect to deliver solid returns in 2024 amid trough market conditions in used vehicle sales and rental reflecting execution of our balanced growth strategy.

Benefits from multi year lease pricing and maintenance cost savings initiatives, partially offset by trough conditions in used vehicle sales and rental.

Robert E. Sanchez: Slide 17 provides the outlook highlights for each of our segments.

SCS operating revenue growth is expected to be in the segments low double digit target range, driven by secular trends, the iff's and cardinal acquisitions and our initiatives.

Robert E. Sanchez: In Fms operating revenue growth is expected to be at the segments mid single digit target due to organic fleet growth and the intersegment revenue from Cardinal vehicles operating in Dts, partially offset by lower rental demand.

SCS EBT percent is expected to be at the segments high single digit target range due to growth in pricing actions and D. T. S. Operating revenue growth is expected to be above its high single digit target, reflecting the cardinal acquisition.

Robert E. Sanchez: <unk> as a percent of operating revenue is expected to be in the segments low double digit target range, reflecting fleet growth.

EBT as a percent of operating revenue is expected to be below the segment high single digit target range in 2024, reflecting acquisition integration cost and higher interest expense, partially offset by initiatives.

Robert E. Sanchez: Benefits from multi year lease pricing and maintenance cost savings initiatives, partially offset by trough conditions in used vehicle sales and rental.

Robert E. Sanchez: SCS operating revenue growth is expected to be in the segments low double digit target range, driven by secular trends, the iff's and cardinal acquisitions and our initiatives.

We're confident that the strategic acquisitions, we've made to accelerate profitable growth in supply chain and dedicated and to expand our capabilities will create value for our customers and shareholders.

Robert E. Sanchez: SCS EBT percent is expected to be at the segments high single digit target range due to growth in pricing actions and Dts operating revenue growth is expected to be above its high single digit target, reflecting the cardinal acquisition.

Team is focused on integrating these acquisitions and realizing the expected benefits and synergies.

We continue to manage discretionary spending by leveraging our zero based budgeting process and are not planning incremental spending on strategic investments in 2024, we expect.

Robert E. Sanchez: EBT as a percent of operating revenue is expected to be below the segment high single digit target range in 2024, reflecting acquisition integration cost and higher interest expense, partially offset by initiatives.

To continue share repurchase activity overall, we're excited about the opportunities ahead of us and expect all segments to benefit from profitable contractual growth.

Speaker Change: We're confident that the strategic acquisitions, we've made to accelerate profitable growth in supply chain and dedicated and to expand our capabilities will create value for our customers and shareholders.

Slide 18 provides a chart outlining the changes from 2023 to reach the high end of our 2024 comparable EPS forecast.

EPS headwinds from our transactional businesses reflect expected trough market conditions.

Speaker Change: Team is focused on integrating these acquisitions and realizing the expected benefits and synergies.

Lower gains are expected to reduce EPS by 225.

Speaker Change: We continue to manage discretionary spending by leveraging our zero based budgeting process and are not planning incremental spending on strategic investments in 2024, we expect.

We expect used vehicle pricing to be below prior year and expect sequential declines through the first half of the year with some gradual improvement in the second half.

To continue share repurchase activity overall, we're excited about the opportunities ahead of us and expect all segments to benefit from profitable contractual growth.

Used vehicle sales volumes are expected to decrease reflecting lower replacement activity versus the prior year.

Rental is expected to reduce EPS by 70, <unk>, primarily reflecting lower demand on a smaller average fleet.

Speaker Change: Slide 18 provides a chart outlining the changes from 2023 to reach the high end of our 2024 comparable EPS forecast.

Our 2024 forecast EPS does not include any outsized earnings from gains or rental.

Speaker Change: EPS headwinds from our transactional businesses reflect expected trough market conditions.

Fms contractual and other is expected to contribute a dollar of EPS, primarily reflecting growth and higher lease pricing.

Speaker Change: Lower gains are expected to reduce EPS by 225.

Speaker Change: We expect used vehicle pricing to be below prior year and expect sequential declines through the first half of the year with some gradual improvement in the second half.

<unk> growth in SCS in dedicated is expected to benefit EPS by $1 50.

This increase reflects ongoing secular trends as well as our initiatives to accelerate growth and increase returns in these businesses.

Speaker Change: Used vehicle sales volumes are expected to decrease reflecting lower replacement activity versus the prior year.

Speaker Change: Rental is expected to reduce EPS by 70.

The benefit of a reduced share count from share repurchase activity is expected to offset a higher tax rate and employee compensation costs.

Speaker Change: Primarily reflecting lower demand on a smaller average fleet.

Speaker Change: Our 2024 forecast EPS does not include any outsized earnings from gains or rental.

This brings the high end of our comparable EPS forecast to $12 50, with a range of $11 50 to $12 50 for the year.

Speaker Change: Fms contractual and other is expected to contribute a dollar of EPS, primarily reflecting growth and higher lease pricing.

The transformative changes we've made to the business model are delivering strong results prop.

Profitable growth in our contractual businesses is largely offsetting the negative impact of trough conditions on the transactional parts of our business.

Speaker Change: Profitable growth in SCS in dedicated is expected to benefit EPS by $1 50.

Speaker Change: This increase reflects ongoing secular trends as well as our initiatives to accelerate growth and increase returns in these businesses.

Turning to page 19, we're forecasting comparable EPS of $11 50 to $12 50 versus $12 95 in 2023.

Speaker Change: A benefit of a reduced share count from share repurchase activity is expected to offset a higher tax rate and employee compensation costs.

We're also providing first quarter comparable EPS forecast.

Of $1 55 to $1 80 versus the prior year of $2 81.

Speaker Change: This brings the high end of our comparable EPS forecast to $12 50, with a range of $11 50 to $12 50 for the year.

Historically, the first quarter is the lowest earnings quarter and represents the most challenging year over year comparison in 2024, given where we are in the cycle weaker.

Speaker Change: The transformative changes we've made to the business model are delivering strong results prop.

Weaker expected market conditions in used vehicle sales and rental during the first half of 2024 put additional pressure on year over year earnings comparisons in the earlier part of the year in.

Speaker Change: Profitable growth in our contractual businesses is largely offsetting the negative impact of trough conditions on the transactional parts of our business.

In addition, the size of our average rental fleet in the first quarter is expected to be 12% lower than the prior year in line with lower demand.

Speaker Change: Turning to page 19, we're forecasting comparable EPS of $11 50 to $12 50 versus $12 95 in 2023.

Speaker Change: We're also providing first quarter comparable EPS forecast of $1 55 to $1 80 versus the prior year of $2 81.

Turning to slide 20 in addition to managing through the down cycle. We're also focused on positioning the business to benefit from the cycle upturn.

Speaker Change: Historically, the first quarter is the lowest earnings quarter and represents the most challenging year over year comparison in 2024, given where we are in the cycle.

Although the majority of our revenue is supported by long term contracts that generate relatively stable and predictable operating cash flows over the cycle. Each business segment has opportunities to benefit from the cycle upturn.

Speaker Change: Weaker expected market conditions in used vehicle sales and rental during the first half of 2024.

The majority of our cyclical exposure resides within Fms and rental and used vehicle sales improved freight conditions should increase demand for these businesses and rental we intend to grow the fleet as we approach the cyclical upturn expected in the second half of 'twenty 'twenty four to capture this incremental revenue and margin.

Speaker Change: What additional pressure on year over year earnings comparisons in the earlier part of the year in.

Speaker Change: In addition, the size of our average rental fleet in the first quarter is expected to be 12% lower than the prior year in line with lower demand.

Speaker Change: Turning to slide 20 in addition to managing through the down cycle. We're also focused on positioning the business to benefit from the cycle upturn.

<unk>.

In used vehicle sales, we continue to leverage our expanded retail sales network in order to maximize proceeds with the potential to generate used vehicle gains above normalized levels.

Speaker Change: Although the majority of our revenue is supported by long term contracts that generate relatively stable and predictable operating cash flows over the cycle. Each business segment has opportunities to benefit from the cycle upturn.

An additional opportunity on the horizon for Fms is the potential for pre buy activity ahead of the 2027 EPA engine technology changes the.

Speaker Change: The majority of our cyclical exposure resides within Fms and rental and used vehicle sales improved freight conditions should increase demand for these businesses and rental we intend to grow the fleet as we approach the cyclical upturn expected in the second half of 'twenty 'twenty four to capture this incremental revenue and margin.

The industry is generally expecting some level of pre buy activity given the expected impact on upfront costs and maintenance cost implications.

Just on what we see today pre buy activity could begin as soon as late 2025, as we have historically seen higher levels of fleet growth. A couple of years ahead of the change. We also would expect used vehicle pricing to be supported by demand for the old emissions technology.

<unk>.

Speaker Change: In used vehicle sales, we continue to leverage our expanded retail sales network in order to maximize proceeds with the potential to generate used vehicle gains above normalized levels.

Increased engine complexity and cost generally favor the outsourcing decision, which would benefit lease sales activity.

Speaker Change: An additional opportunity on the horizon for Fms is the potential for pre buy activity ahead of the 2027 EPA engine technology changes.

In dedicated improved driver availability and lower recruiting and turnover cost benefited 2023 earnings but have been a headwind for new sales and revenue growth as the freight cycle strengthens and the driver availability becomes more challenging we expect to see incremental sales opportunities and improve revenue.

Speaker Change: The industry is generally expecting some level of pre buy activity given the expected impact on upfront costs and maintenance cost implications.

Speaker Change: Based on what we see today pre buy activity could begin as soon as late 2025, as we have historically seen higher levels of fleet growth. A couple of years ahead of the change. We also would expect used vehicle pricing to be supported by demand for the old emissions technology.

Growth in D. T S as private fleets seek solutions to address this pain point.

And supply chain weaker volumes in our Omnichannel retail vertical were a headwind to revenue and earnings. During 2023, we continue to believe in the long term growth prospects for our e-commerce fulfillment and last mile delivery of big and bulky goods and have expanded our footprint to support this business.

Speaker Change: Increased engine complexity and cost generally favor the outsourcing decision, which would benefit lease sales activity and.

Speaker Change: Dedicated improved driver availability and lower recruiting and turnover cost benefited 2023 earnings but have been a headwind for new sales and revenue growth as the freight cycle strengthens and the driver availability becomes more challenging we expect to see incremental sales opportunities and improve revenue.

As we.

We expect supply chain results to benefit as omnichannel volumes recover and the incremental footprint is leveraged.

We've been pleased with the overall businesses outperformance during this down cycle and have appropriately positioned all three business segments to benefit from the cycle upturn.

Speaker Change: Growth in Dts as private fleets seek solutions to address this pain point.

Turning to page 21, writer is delivering value to our shareholders with more to come since implementing our balanced growth strategy. We have generated strong returns during each phase of the cycle.

Speaker Change: And supply chain weaker volumes in our Omnichannel retail vertical were a headwind to revenue and earnings. During 2023, we continue to believe in the long term growth prospects for our e-commerce fulfillment and last mile delivery of big and bulky goods and have expanded our footprint to support this business.

We achieved higher highs during the 2022 upcycle and generated significantly higher returns during the 2023 down cycle relative to prior downturns in.

Speaker Change: We.

Speaker Change: We expect supply chain results the benefit is omnichannel volumes recover and the incremental footprint is leveraged.

In 2024, we expect ROE to outperform prior cycles. Despite trough conditions in used vehicle sales and rental we continue to see significant opportunity for profitable growth supported by secular trends, our operating expertise and ongoing momentum from our multi year initiatives, we remain committed to.

Speaker Change: We've been pleased with the overall businesses outperformance during this down cycle and have appropriately positioned all three business segments to benefit from the cycle upturn.

Speaker Change: Turning to page 21, writer is delivering value to our shareholders with more to come since implementing our balanced growth strategy. We have generated strong returns during each phase of the cycle.

Vesting and products capabilities, and technology that will deliver value to our customers and our shareholders.

Before we go to questions I'd like to remind everyone that we're planning an investor day for June 13th in New York City. So please mark your calendars for planning a half day event that would include a leadership luncheon and our solutions showcase where in person attendees can learn more about the innovative technologies and services.

Speaker Change: We achieved higher highs during the 2022 upcycle and generated significantly higher returns during the 2023 down cycle relative to prior downturns in.

Speaker Change: In 2024, we expect ROE to outperform prior cycles. Despite trough conditions in used vehicle sales and rental we continue to see significant opportunity for profitable growth supported by secular trends, our operating expertise and ongoing momentum from our multi year initiatives, we remain committed to.

They are driving riders profitable growth more details will be forthcoming regarding the event and required registration.

That concludes our prepared remarks. Please note we expect to file our 10-K in the next few days.

Speaker Change: Vesting and products capabilities, and technology that will deliver value to our customers and our shareholders.

We had a lot of material to cover today. So please limit yourself to one question. Each if you have additional questions Youre welcome to get back in the queue and we'll take as many as we can at this time I'll turn it over to the operator.

Speaker Change: Before we go to questions I'd like to remind everyone that we're planning an investor day for June 13th in New York City. So please mark your calendars for planning a half day event that would include a leadership luncheon and our solutions showcase where in person attendees can learn more about the innovative technologies and services.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are you my speaker phone. Please make sure. Your mute function is turned off Tobias dignitaries chocolate and that again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Speaker Change: That are driving riders profitable growth more details will be forthcoming regarding the event and required registration.

Speaker Change: That concludes our prepared remarks. Please note we expect to file our 10-K in the next few days we.

And we'll go first to Jordan <unk> with Goldman Sachs.

Speaker Change: We had a lot of material to cover today. So please limit yourself to one question. Each if you have additional questions Youre welcome to get back in the queue and we'll take as many as we can at this time I'll turn it over to the operator.

Just a couple of things.

One on the on the supply chain business, you mentioned I think various price actions to get margin back to targeted levels in.

Operator: Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are you may speaker phone. Please make sure. Your mute function is turned off Tobias did not treat chocolate and that again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for quest.

Our 2024 can you maybe give a little bit more color on sort of your plans in that segment and was it sort of pricing getting a little bit off that led it to be somewhat below margin target in the fourth quarter.

Yes.

I'll, let Steve here.

Operator: <unk>.

Give you a little more color on that but no I think most of the actions that we need to take have been taken.

We have a little bit of headwind from some of our E Commerce and last mile business is probably not new news to most people in the industry has been a little softer but other than that the contractual businesses are still performing well.

Operator: And we'll go first to Jordan <unk> with Goldman Sachs.

Jordan: Just a couple of things.

Jordan: One on the on the supply chain business, you mentioned I think various price actions to get margin back to targeted levels in.

Yes, Jordan I would really put it in three buckets as you look into into the year. It's.

Jordan: 2024 can you maybe give a little bit more color on sort of your plans in that segment and was it sort of pricing getting a little bit off that led it to be somewhat below margin target in the fourth quarter.

We had some one timers earlier in the year that will not repeat themselves with the bankruptcy and we already have established rate increases for underperforming accounts. We've got the acquisition, which is a big piece and then as Robert said, the Omnichannel volumes across the board whether it be last mile E Com.

Jordan: Yes.

Speaker Change: I'll, let Steve here.

Steve Sensing: Give you a little more color on that but no I think most of the actions that we need to take have been taken.

Even in our high Tech business are going to rebound here hopefully in the back half of the year, but we've seen some softness there.

Steve Sensing: We have a little bit of headwind from some of our E Commerce and last mile business is probably not new news to most people in the industry has been a little softer but other than that the contractual businesses are still performing well.

Great and then just sort of.

Yeah.

Second question.

With regards to Cardinal.

That was helpful color I guess the question is excluding Cardinal.

Speaker Change: Yes, Jordan I would really put it in three buckets as you look into end of the year.

Don't know if you could give some sense for this but excluding cardinal.

Speaker Change: We had some one timers earlier in the year that will not repeat themselves with the bankruptcy and we already have established rate increases for underperforming accounts with <unk>.

Would you say that the Dts operating revenue and EBT margin in particular.

For 2024 would be sort of at or around targeted levels, excluding the impact from cardinal.

Speaker Change: The acquisition, which is a big piece and then as Robert said, the Omnichannel volumes across the board whether it be last mile E Com.

Well I would tell you the bottom line, yes on the top line will still be a little soft.

Similarly, driven by the fact that we're still in a pretty soft freight environment, but we would expect that to start to pick up as the freight environment picks up so.

Even in our high Tech business are going to rebound here hopefully in the back half of the year, but we've seen some softness there.

Speaker Change: Great and then just sort of.

Speaker Change: Second question.

The acquisition, though is a real shot in the arm to that business because it really is.

Speaker Change: With regards to Cardinal.

Speaker Change: That was helpful color I guess the question is excluding Cardinal.

Increases the scale.

And the density of that business and really provides us opportunities to really.

Speaker Change: Don't know if you could give some sense for this but excluding cardinal.

Speaker Change: Would you say that the Dts operating revenue and EBT margin in particular.

Capitalize on some significant synergies that we're going to be working on this year to integrate.

Speaker Change: For 2024 would be sort of at or around targeted levels, excluding the impact from cardinal.

And we should really see the bulk of that in 2025.

Great. Thank you.

Thanks.

Speaker Change: Well I would tell you the bottom line, yes on the top line will still be a little soft.

If you find that your question has been answered you may remove yourself from the queue by pressing the star key followed by the digit too.

Speaker Change: Primarily driven by the fact that we're still in a pretty soft freight environment, but we would expect that to start to pick up as the freight environment.

We'll go next to Scott Group with Wolfe Research.

Speaker Change: Picks up so.

Hey, Thanks morning, So everybody's got color on how to think about.

The acquisition, though is a real shot in the arm to that business because it really is.

First half versus second half from an earnings standpoint, and then.

Speaker Change: Increases the scale.

Speaker Change: And the density of that business and really provides us opportunities to really.

I was looking at the earnings Bridge, you gave us a year ago, an fms contract contractual supposed to add 10 cents to earnings.

Speaker Change: Capitalize on some significant synergies that we're going to be working on this year to integrate.

Speaker Change: And we should really see the bulk of that in 2025.

<unk> and <unk>.

Dedicated we're supposed to add about a dollar to earnings and this year Fms is supposed to have a dollar in FCS and dedicated a $1 50. So I just want to understand what's driving much better contractual earnings in 24 versus 23 is that a fleet come in is at a pricing comment cost.

Speaker Change: Great. Thank you.

Speaker Change: Thanks.

Speaker Change: If you find that your question has been answered you may remove yourself from the queue by pressing the starkey followed by the digit too.

Speaker Change: We'll go next to Scott Group with Wolfe Research.

Scott H. Group: Hey, Thanks morning, so anyone who's got color on how to think about.

Comment on just any color there. Thank you yeah, I think a lot of that is the growth were expecting.

Scott H. Group: First half versus second half from an earnings standpoint, and then.

F M S part of that from Cardinal as we bring in the acquisition, but growth in our lease business is really the biggest driver along with maintenance cost I think overall, we've done a great job of bringing down our maintenance costs.

Scott H. Group: I was looking at the earnings Bridge, you gave us a year ago, an fms contract contractual supposed to add 10 cents to earnings.

Scott H. Group: <unk> and dedicated we're supposed to add about a dollar to earnings and this year Fms is supposed to have a dollar in FCS and dedicated a $1 50. So I just want to understand what's driving much better contractual earnings in 24 versus <unk> 23 is that a fleet common is.

But as it relates to the first half second half I'm glad you asked that question.

Awesome.

Some questions about our Q1 guidance I first I want to mention that our Q1 guidance is consistent with last year and pre COVID-19.

Seasonality decline from Q4 to Q1 thing about Q4 of 'twenty three versus Q1 of 2004 and you go back and look at Q4 of 'twenty two.

Scott H. Group: The pricing comment cost comment on just any color. There. Thank you yeah I think a lot of that is the growth we're expecting in Fms part of that from Cardinal as we bring in the acquisition, but growth in our lease business is really the biggest driver along with maintenance cost I think overall, we've done a great job of bringing it down.

Q1 of 'twenty three generally in line and also in line with the pre Covid. During the Covid years, you did have an anomaly because used vehicle pricing had been declining from these astronomical levels. So Q4.

Sometimes was that Laurie I'm, sorry, Q1 was at a larger percentage than what it would normally be due to the growth as a result of the normal seasonality. So it's very consistent with where we would expect to be.

Scott H. Group: Maintenance costs.

Speaker Change: But as it relates to the first half second half I'm glad you asked that question.

Speaker Change: Hum.

Speaker Change: Some questions about our Q1 guidance I first I want to mention that our Q1 guidance is consistent with last year and pre COVID-19.

Got it.

At this point in the cycle with rental and used vehicle sales now continuing to decline and really bottoming out.

Speaker Change: Analogy decline from Q4 to Q1 thing about Q4 of 'twenty three versus Q1 of 2004 and you go back you look at Q4 of 'twenty two.

We are expecting.

Some pickup in rental and used vehicle sales in the second half of the year. If you look at the top end of our range. If you look at the bottom end of our range that assumes no decline I'm, sorry, no pickup in or uptick in demand for rental and used trucks I think we've given you the <unk>.

Speaker Change: One of 23 generally in line and also in line with the pre Covid. During the Covid years, you did have an anomaly because used vehicle pricing had been declining from these astronomical levels. So Q4.

Speaker Change: Sometimes was that Laurie I'm, sorry, Q1 was at a larger percentage than what it would normally be due to the growth as a result of the normal seasonality. So it's very consistent with where we would expect to be.

Full range of where we think things could end up I think based on where we are in the cycle and where the spot market. As we are getting long in this downturn I think we're now almost two years.

Definitely longer than what most of these cycles go. So I think it's reasonable to expect in the second half some type of us of a modest pickup we're not we're not even on the high end is expecting a significant pick up just a modest pickup in rental and used vehicle demand, but I do want to.

Speaker Change: At this point in the cycle with rental and used vehicle sales now continuing to decline and really bottoming out.

Speaker Change: We are expecting.

Speaker Change: Some pickup in rental and used vehicle sales in the second half of the year. If you look at the top end of our range. If you look at the bottom end of our range that assumes no decline I'm, sorry, no pickup in or uptick in demand for rental and used trucks I think we've given you the.

<unk> clarified that the range does contemplate no pick up in the second half for rental and used vehicles.

The bottom end.

Speaker Change: A full range of where we think things could end up I think based on where we are in the cycle and where the spot market. As we are getting long in this downturn I think we're now almost two years.

Okay. That's helpful and then if I could just ask one more.

That appendix slide on.

Residuals, so it looks at the tractor prices sort of like now like right at the range for the residual assumption. So do we need to consider any residual.

Definitely longer than what most of these cycles go. So I think it's reasonable to expect in the second half some type of us of a modest pickup we're not we're not even on the high end is expecting a significant pickup.

Value adjustments what is this if not what does this mean for gains going forward.

Any thoughts here. Thank you yeah. So so if you recall that.

Speaker Change: A modest pickup in rental and used vehicle demand, but I do want to.

For tractors, we have a range and that range is because during downturns, we do have lower residual values for that downturn, obviously, we're in a downturn.

Speaker Change: Clarify that the range does contemplate no pick up in the second half for rental.

Speaker Change: Used vehicles at the bottom end.

So where the residual values are really at the lower end of that bar.

Speaker Change: Okay. That's helpful. And then if I could just ask one more that that appendix slide on.

Yes, so as you go into this year, we're expecting that decline to level off at some point and then start to come back so where we sit right now we feel comfortable that we've got.

Speaker Change: The residuals so it looks at the tractor prices sort of like now like right at the range for the residual assumption. So do we need to consider any residual.

The residuals, where the debate during this downturn and would not expect any additional changes there.

Speaker Change: Value adjustments what is this if not what does this mean for gains going forward.

Again.

What we're expecting is to see.

Speaker Change: Any thoughts here. Thank you yeah. So so if you recall that.

Continue to decline through the first half and then.

Some type of modest pick up in the second half.

Speaker Change: For tractors, we have a range and that range is because during downturns, we do have lower residual values for that downturn, obviously, we're in a downturn.

Okay very helpful. Thank you Robert Thank.

Thank you Scott.

We'll go next to Jeff Kauffman with vertical research partners.

Speaker Change: So where the residual values are really at the lower end of that bar.

Thank you very much first of all congratulations.

Speaker Change: Yes, so as you go into this year, we're expecting that decline to level off at some point and then start to come back so where we sit right now we feel comfortable that we've got.

Thanks.

Strange year.

Second of all I, just want to make sure im understanding what youre talking about with fleet and units. So you're picking up about 2900 vehicles through Cardinal but your net change in vehicles by the end of 'twenty four there's only about 700 more vehicles and D.

The residuals, where the debate during this downturn and would not expect any additional changes there.

Speaker Change: Again.

Speaker Change: What we're expecting is to see.

Speaker Change: Continue to decline through the first half and then.

Speaker Change: Some type of modest pick up in the second half.

Yes.

What happens to those other 'twenty, one 'twenty 200, Cardinal vehicles that you're bringing in.

Speaker Change: Okay very helpful. Thank you Robert Thank.

Thank you Scott.

Speaker Change: We will go next to Jeff Kauffman with vertical research partners.

No no I'm not sure those numbers are right.

Total units that we're picking up from Cardinal track.

Jeff Kauffman: Thank you very much first of all congratulations.

Power and trailers is just under 9000.

Jeff Kauffman: Thanks.

Jeff Kauffman: Strange year.

Jeff Kauffman: Second of all I, just want to make sure im understanding what youre talking about with fleet and units. So you're picking up about 2900 vehicles through Cardinal but your net change in vehicles by the end of 'twenty four there's only about 700 more vehicles and <unk>.

So we're expecting lease.

Our fleet, which includes those units to be up about I think 12 to 13000 is what we're expecting.

So yes, the all those cardinal vehicles are going to dedicated so dedicated fleet will be up at least that amount at least the <unk>.

9000 units from Cardinal.

Jeff Kauffman: Yes.

Jeff Kauffman: What happens to those other 'twenty, one 'twenty 200, Cardinal vehicles that you're bringing in.

Okay, Yeah, I was little confused because I think I heard.

12600 vehicles or something like that.

Speaker Change: No no I'm not sure those numbers are right.

Jeff Kauffman: Jeff.

And it was only 11800 in the quarter. So I misunderstood that 12000 would have been incremental.

Jeff Kauffman: It'll units that we're picking up from Cardinal track.

Jeff Kauffman: Power and trailers is just under 9000.

In the fourth quarter numbers, yet room, we did this acquisition in February so is that part of it yes.

Jeff Kauffman: So we're expecting lease.

Jeff Kauffman: Fleet, which includes those units to be up about I think 12 to 13000 is what we're expecting.

No that's my point.

How much is the lease fleet itself going to be up.

Jeff Kauffman: So yes, the all those cardinal vehicles are going to dedicated so dedicated fleet will be up at least that amount at least the <unk>.

From where it finished 2020 for 2023 by the end of 'twenty four.

Carl.

Jeff Kauffman: 9000 units from Cardinal.

Yeah.

Yeah.

But the lease fleet, including the Cardinal acquisition it will be up.

Okay, Yeah, I was little confused because I think I heard.

13000 units.

Jeff Kauffman: Like 12600 vehicles or something like that.

If you assume 9000 or so of those our continental Europe, another 4000 units okay.

Jeff Kauffman: And it was only 11800 in the quarter. So I misunderstood that 12000 would have been incremental.

Okay.

Within our target range of the two to 4000.

Jeff Kauffman: By the way in the fourth quarter numbers, yet room. We did this acquisition in February so is that part of it yes.

Okay very good that was my question. Thank you.

Joe.

Speaker Change: No that's my point.

We'll go next to Brian <unk> with Jpmorgan.

Speaker Change: How much is the lease fleet itself going to be up.

Yeah. Thanks I appreciate you taking the question so maybe just on Cardinal.

Speaker Change: From where it finished 2020 for 2023 by the end of 'twenty four.

Robert You mentioned, a few of the synergies and the opportunities here imagine better backhaul better density.

Speaker Change: Carl.

Speaker Change: Yeah.

Speaker Change: Yeah.

So the lease fleet, including the Cardinal acquisition, it will be up around 13000 units.

The maintenance can you give us a sense in terms of when we start to see those.

Ramp up you know what the accretion could look like on this in in 2025 and you know maybe if you exclude some of the acquisition cost.

Speaker Change: If you assume 9000 or so of those our continental Europe, another 4000 units.

Speaker Change: Okay.

What that's going to be in 'twenty four as well.

Speaker Change: In our target range of the two to 4000.

I guess, what I'd tell you 2000 ports marginally accretive so not a big number it's because it is.

Speaker Change: Okay very good that was my question. Thank you.

Thanks, Joe.

We're going to spend some money in the integration and really.

Speaker Change: We'll go next to Brian <unk> with Jpmorgan.

Integrating this transaction into into rider it really becomes more accretive in 2025.

Brian: Yeah. Thanks I appreciate you taking the question so maybe just on Cardinal Rob.

And I guess, what I would guidance I would give you. There is that if you look at all of dedicated our target is to be from an earning standpoint to be in the high single digit range. In 2024, we're not going to be because of the integration costs. As you go into 2025, you should expect us to be if not they're approaching that high single digit range on a <unk>.

Brian: Robert You mentioned, a few of the synergies and the opportunities here imagine better backhaul better density.

Brian: The maintenance can you give us a sense in terms of when we start to see those.

Brian: Ramp up you know what the accretion could look like on this in in 2025 and you know maybe if you exclude some of the acquisition costs.

Higher revenue number now that we have cardinal so.

Brian: What that's going to be in 'twenty four as well.

Speaker Change: Yeah, I guess, what I'd tell you in 2000 and for its marginally accretive so not a big number it's because it is working.

That would be reflective of beginning to really see those synergies come through.

Speaker Change: Spend some money in the integration and really integrating.

The underlying cardinal in Pts would be sort of equivalent to.

Speaker Change: Integrating this transaction into into rider.

Speaker Change: It really becomes more accretive in 2025.

What you have now and it's on a run rate fully integrated basis or could actually be.

Speaker Change: And I guess, what I would guidance I would give you. There is that if you look at all of dedicated our target is to be from an earning standpoint to be in the high single digit range. In 2024, we're not going to be because of the integration costs. As you get into 2025, you should expect us to be if not they're approaching that high single digit range on a much.

Returns.

Yes.

Right. After we after we integrate the synergies.

Okay, and then just as a follow up can you just talk about being at the sort of the trough of the market in a couple of different ways with the competition with the pricing.

It looks like we saw you know a little bit of an uptick in early terminations, we got lower extension. So it's hard to really read into the asset management side of things, but maybe you can just.

Speaker Change: Higher revenue number now that we have cardinal so that.

Speaker Change: That would be reflective of beginning to really see those synergies come through.

Give us some color on competition and the pricing trends and you have asset management playbook is progressing here into the extended trough.

Speaker Change: The underlying cardinal in Pts would be sort of equivalent to.

Yeah, I wouldn't read much into that early terminations and redeployments because that was some of that was internal supply chain units that we had to move from an account from one account to another and it shows up as an early termination and it was just a movement within our supply chain business and dedicated business.

Speaker Change: What you have now and it's on a run rate fully integrated basis or could actually be.

Speaker Change: The returns.

Speaker Change: Yes.

Speaker Change: Right. After we after we integrate the synergies.

Speaker Change: Okay, and then just as a follow up can you just talk about being at the sort of the trough of the market in a couple of different ways, what the competition with the pricing.

But in terms of what we're seeing in the market I think look we're still seeing a soft market and rental and used vehicle sales. There's no doubt that has continued from Q4 into Q1.

Speaker Change: It looks like we saw a little bit of an uptick in <unk>.

Speaker Change: Early terminations, we got lower extension, so it's hard to really read into the asset management side of things, but maybe you can just.

As you just as we just look at the larger trend, though and where we're seeing the spot market now seems to be bottoming out.

Speaker Change: Give us some color on competition and the pricing trends and you have asset management playbook is progressing here into the extended trough.

Typically there is a lag let's call it about six months between spot market bottoming out and used tractor market and maybe even rental coming back. So you know.

Speaker Change: Yeah, I wouldn't read much into that early terminations and redeployments because that was some of that was internal supply chain units that we had to move from an account from one account to another and it shows up as an early termination and it was just a movement within our supply chain business and dedicated business.

At the beginning the lineup so still no one's I think ready to call the bottom yet.

But based on historical.

Speaker Change: But in terms of what we're seeing in the market I think look we're still seeing a soft market and rental and used vehicle sales. There's no doubt that has continued from Q4 into Q1.

Cycles, we would expect.

Seems to be beginning to bottom out but.

Tom I like it.

Give us some additional color maybe on the used truck rental market.

Yes, I think it's.

It's what you what you might expect.

Speaker Change: As you just as we just look at the larger trend, though and where we're seeing the spot market now seems to be bottoming out.

With the little bit lower utilization than what we see in peak cycles. There is some certainly competition for.

Speaker Change: There is a lag let's call it about six months between spot market bottoming out and used tractor market and maybe even rental coming back so.

Pricing in the rental market and as you see inventories build in the used vehicle sale world not only with us, but as an industry in general Youre seeing pricing pressure in UBS.

Speaker Change: At the beginning the lineup so still no one's I think ready to call the bottom yet.

And like we said, we expect pricing to continue to fall.

Speaker Change: But based on historical.

Through the first half of the year than some uptick in the back half of the year.

Speaker Change: Cycles, we would expect.

Thanks to be beginning to bottom out but.

In terms of lease pricing, which I think was part of your question.

Speaker Change: Tom ill give some additional color maybe on the used truck rental market.

I'd say on existing equipment or idle assets that are that are in the market.

Tom Havens: Yes, I think it's.

Tom Havens: It's what you what you might expect.

Tom Havens: With the little bit lower utilization than what we see in peak cycles. There is some certainly competition for.

We are seeing some price pressure, there, but on new units new capital spend.

Pricing is generally in line with what we expect and I think we've said this before as well our biggest competition.

Tom Havens: Pricing in the rental market and as you see inventories build in the used vehicle sale world not only with us, but as an industry in general Youre seeing pricing pressure and UBS.

N D.

The leasing market is actually ownership not some of our core competitors and we still have.

Tom Havens: And like we said, we expect pricing to continue to fall.

Pricing benefit versus ownership, that's pretty nice regardless of the environment that we're selling it.

Tom Havens: Through the first half of the year than some uptick in the back half of the year.

Yeah, and I would just add that Tom and his team have done a great job of delivering.

Tom Havens: In terms of lease pricing, which I think was part of your question I would say on existing equipment or idle assets that are that are in the market.

Delivering on our growth targets of 2% to 4000 lease units a year at our target returns and even in a in a more competitive market certainly we've been in here over the last year.

Tom Havens: We are seeing some price pressure, there, but on new units new capital spend.

Been able to continue to deliver on that so really proud of the work that they're doing.

Tom Havens: Pricing is generally in line with what we expect and I think we've said this before as well our biggest competition is.

Okay. Thanks, guys I appreciate it.

Tom Havens: N D.

Tom Havens: The leasing market is actually ownership not some of our core competitors and we still have.

Okay.

We'll go next to Allison <unk> with Wells Fargo.

Tom Havens: Pricing benefit versus ownership, that's pretty nice regardless of the environment that we're selling it.

Hi, good morning.

Good morning, just wanted to go back to Ses I make sure I understand the outlook for this year could you maybe talk to excluding the IMS acquisition, how you're thinking through that would be sort of flat to up slightly.

Speaker Change: Yeah, and I would just add that Tom and his team have done a great job of delivering.

Speaker Change: Delivering on our growth targets of 2% to 4000 lease units a year at our target returns and even in a in a more competitive market certainly we've been in here over the last year.

At corporates have to be down and then frame the EBT percent target in terms of the product and pricing actions is there a mix benefit in there as well that's helping to drive that just wanted to understand the dynamics there. Thanks.

Speaker Change: Been able to continue to deliver on that so really proud of the work that they're doing.

Yeah, if you take <unk> out certainly earnings for supply chain is still up.

Speaker Change: Okay. Thanks, guys I appreciate it.

In a meaningful way you think about it supply chain earnings this year as a percent of revenue operating revenue were below our target.

Speaker Change: Okay.

Speaker Change: We will go next to Allison <unk> with Wells Fargo.

There was certainly some write off we had to do right now and we had to do for our customer plus there were some challenges in the year. We are we feel like this year, we're certainly heading into this year with a with a much better.

Allison: Hi, good morning.

Allison: Good morning, just wanted to go back to SPX to make sure I understand.

Allison: The outlook for this year could you maybe talk to excluding the IMS acquisition, how you're thinking through that would be sort of flat to up slightly.

Profiling portfolio.

Allison: Corporate and have to be down and then frame the EBT percent target in terms of that.

We feel confident that that core earnings for the.

Earnings leverage for our supply chain business will get back to the target range plus you have the benefit of the acquisition. So.

Allison: Actions is there a mix benefit in there as well that's helping to drive that just wanted to understand the dynamics there.

Speaker Change: Yeah, if you take <unk> out certainly earnings for supply chain is still up.

Steve is there anything else that you want to add there also I think you were asking too about the topline growth. If you take <unk> out organically, we're still gonna grow right around four 5% in the base business and the year.

Speaker Change: In a meaningful way you think about it supply chain earnings this year as a percent of revenue operating revenue were below our target.

Got it and then one quick thing I don't know if I missed this the working capital build at the end of the year could you walk through the dynamics of that.

Speaker Change: There was certainly some write off we had to do right now and we had to do for our customer plus there were some challenges in the year. We are we feel like this year, we're certainly heading into this year with a with a much better.

Hey, John Yeah, So Allison the working capital movements you saw there was a little bit of a drag at the end of the year, we did see.

Speaker Change: <unk> portfolio.

Our receivables balance move up from what we typically see.

Speaker Change: Confidence at that core earnings for the.

Speaker Change: Earnings leverage for our supply chain business will get back to the target range plus you have the benefit of the acquisition. So.

And then with the acquisition, we made from <unk> that was a little bit of a drag as well on the working capital.

Speaker Change: Steve is there anything else that you want to add there also I think you were asking too about the topline growth. If you take <unk> out organically, we're still gonna grow right around four 5% in the base business and the year.

Got it thank you.

Okay.

We'll go next to Justin long with Stephens.

Yeah.

Thanks, and good morning.

Steve Sensing: Got it and then one quick thing I don't know if I missed this the working capital build at the end of the year could you walk through the dynamics of that.

Thank you just gave the number for organic growth for the supply chain segment, but I was curious if you could provide that same forecast for dedicated just given that noise with the acquisitions and maybe comment a little bit more broadly on what you're seeing in the dedicated pipeline and from a competitive standpoint.

Steve Sensing: Hey, John Yeah, So Allison the working capital movements you saw there was a little bit of a drag at the end of the year, we did see.

John R. Cummings: Our receivables balance move up from what we typically see.

Are you still seeing opportunities to deploy capital and dedicated at an attractive return or is that tougher to do right now just given where we are in the cycle.

John R. Cummings: And then with the acquisition, we made from <unk> that was a little bit of a drag as well on the working capital.

John R. Cummings: Got it thank you.

John R. Cummings: Yeah.

I would tell you.

John R. Cummings: We'll go next to Justin long with Stephens.

Excluding the acquisition dedicated is relatively flat I think given especially that's the way we planned it out, especially given we had a lot of effort to integrate this acquisition this year and.

Justin Long: Thanks, and good morning.

Justin Long: Thank you just gave the number for organic growth for the supply chain segment, but I was curious if you could provide that same forecast for dedicated just given that noise with the acquisitions and maybe comment a little bit more broadly on what you're seeing in the dedicated pipeline and from a competitive standpoint.

And the market, we expect to continue to be somewhat soft at least through the middle of the year, we start signing stuff in the back half of the year that will more benefit.

125, but I'll, let Steve give you some some additional color.

Yes, I think from a from a pipeline standpoint, we're down at the end of the year versus last year single digits.

Justin Long: Are you still seeing opportunities to deploy capital and dedicated at an attractive return or is that tougher to do right now just given where we are in the cycle.

Customers are continuing to delay decisions typically.

Six month decision. It's now protracted asks about nine months. So you've got some timing issues. There deal size is slightly down, but where we're focused on our marketing efforts are.

I would tell you.

Justin Long: Excluding the acquisition dedicated is relatively flat I think given especially that's the way we planned it out, especially given we had a lot of effort to integrate this acquisition this year and.

Our sales team has refocused on expanding our book of business across cut.

Customers and many other initiatives that we've got out there so.

Justin Long: And the market, we expect to continue to be somewhat soft at least through the middle of the year, we start signing stuff in the back half of the year that will more benefit.

Robert and I expect the first year to be kind of a slow part and then as the as the market bounces back in the back half and pipeline should increase.

Justin Long: 125, but I'll, let Steve give you some some additional color.

Steve Sensing: Yes, I think from a from a pipeline standpoint were down.

Okay.

Understood. Thanks for the time.

Steve Sensing: At the end of the year versus last year single digits cut.

Joseph.

Okay.

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

Steve Sensing: Customers are continuing to delay decisions typically it's about a six month decision. It's now protracted asks about nine months. So you've got some timing issues. There deal size is slightly down but we are.

Okay, well thanks, everyone for your interest listen I, certainly am proud of the performance in 'twenty, three and excited about our outlook for 2024.

Steve Sensing: We're focused on our marketing efforts.

Steve Sensing: Our sales team has refocused on expanding our book of business across <unk>.

We've been talking about this transformation that we've done through the balanced growth strategy with higher highs and higher lows I think youre seeing now re consecutive years of us being able to deliver on that as we continue to grow the contractual earnings of the company.

Steve Sensing: Customers and many other initiatives that we've got out there. So as Robert said I expect the first year to be kind of a slow part and then as the as the market bounces back in the back half and pipeline should increase.

Youre going to have the ups and downs of rental and used vehicle sales, but each year that contractual earnings number is going to continue to we expect and we certainly are focused on continuing to grow that number and certainly within the ranges of our return on equity targets that we've that we've outlined so we feel very good about where we're at.

Steve Sensing: Okay.

Speaker Change: Understood. Thanks for the time thanks Joseph.

Steve Sensing: Okay.

Steve Sensing: At this time there are no additional questions I'd like to turn the call back over to Mr. Robert Sanchez for closing remarks.

Okay, well thanks, everyone for your interest.

Robert E. Sanchez: Certainly are proud of the performance in 'twenty, three and excited about our outlook for 2024.

And the execution and excited about.

What we're going to deliver this year. So thank you all for your interest and look forward to finish soon.

Robert E. Sanchez: We've been talking about this transformation that we've done through the balanced growth strategy with higher highs and higher lows I think youre seeing now three consecutive years of us being able to deliver on that as we continue to grow the contractual earnings of the company.

Yeah.

This does conclude today's conference we thank you for your participation.

Robert E. Sanchez: Youre going to have the ups and downs of rental and used vehicle sales, but each year that contractual earnings number is going to continue to we expect and we certainly are focused on continuing to grow that number and certainly within the ranges of our return on equity targets that we've that we've outlined so we feel very good about where we're at.

Robert E. Sanchez: And the execution and excited about.

Speaker Change: What we're going to deliver this year. So thank you all for your interest and look forward to seeing it soon.

Speaker Change: Yeah.

Speaker Change: This does conclude today's conference we thank you for your participation.

Speaker Change: Yeah.