Q2 2024 Ryder System Inc Earnings Call

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Operator: Please stand by. Good morning, and welcome to the Ryder System Second Quarter 2024 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation.

Unknown Executive: Good morning, and welcome to the Ryder System second quarter 2024 earnings release conference call. All lines are in a listen-only mode until after the presentation.

Good morning, and welcome to the Ryder system second quarter 2024 earnings release Conference call. All lines are in a listen only mode until after the presentation today's call's being recorded if you have any objections. Please disconnect at this time.

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Operator: This call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Ms. Calene Candela, Vice President, Investor Relations, for Ryder. Ms. Candela, you may begin.

Kaylene Candela: I would now like to introduce Ms. Kaylene Candela, Vice President and Vester Relations for Ryder. Ms. Candela, you may be good.

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

Calene F. Candela: Thank you. Good morning, and welcome to Ryder's second quarter 2024 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. 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.

Kaylene Candela: Thank you.

Thank you good morning, and welcome to Ryder's second quarter 2024 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.

Kaylene Candela: Good morning, and welcome to Ryder's second quarter 2024 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 Biden Security's Litigation Reform Act of 1995. 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.

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.

Calene F. Candela: 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 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 Diez, Executive Vice President and Chief Financial Officer. 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 this time, I'll turn the call over to Robert. Morning, everyone, and thanks for joining us.

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

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

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

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

Additionally, Tom Hayden 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 this time I'll turn the call over to Robert.

Robert E. Sanchez: At this time, I'll turn the call over to Robert. For you, everyone, and thanks for joining us. I'm extremely proud of our team for delivering solid results again this quarter, despite three conditions that remain challenging. Our offering performance continues to demonstrate that the transformative changes that we made to de-risk our business model and hands returns and drive long-term profitable growth have significantly increased the earnings and return profile of the business versus prior cycles.

Robert E. Sanchez: I'm extremely proud of our team for delivering solid results again this quarter, despite freight conditions that remain challenging. Our operating performance continues to demonstrate that the transformative changes that we've made to derisk our business model, enhance returns, and drive long-term profitable growth have significantly increased the earnings and return profile of the business versus prior cycles. I'll begin today's call by providing you with key strategic, John will then take you through the second quarter results, which exceeded our forecast due to better than expected results and choices. I'll then review our outlook and discuss how we are well positioned to benefit from the coming cycle. Let's begin on slide four.

Good morning, everyone and thanks for joining us.

I'm extremely proud of our team for delivering solid results again this quarter, despite freight conditions that remain challenging.

Our operating performance continues to demonstrate that the transformative changes that we've made to derisk, our business model enhanced returns and drive long term profitable growth have significantly.

<unk> increased the earnings and return profile of the business versus prior cycles.

Robert E. Sanchez: I'll begin today's call by providing you with key strategic updates. John will then take you through the second quarter results, which succeeded our forecast due to better-than-expected results in choice sleeves. I'll then review our outlook and discuss how we are well-positioned to benefit from the cycle of turn. Let's begin on slide four. During this slide four, our transform business model and execution of our balanced growth strategy is continuing to drive outperformance relative to prior cycles. Across all phases of the current freight cycle, our earnings and return profile has been higher than prior cycles, demonstrating the effectiveness of our strategy.

Begin today's call by providing you with key strategic updates.

John will then take you through the second quarter results, which exceeded our forecast due to better than expected results in choices.

I'll, then review our outlook and discuss how we are well positioned to benefit from the cycle upturn.

Let's begin on slide four.

Robert E. Sanchez: Turning to slide four, our transformed business model and execution of our balanced growth strategy is continuing to drive out performance relative to the prior cycle. Across all phases of the current freight cycle, our earnings and return profile has been higher than prior cycles, demonstrating the effectiveness of our strategy. The integration of our recent acquisition of Cardinal Logistics and Impact Fulfillment Services, or IFS, is on track.

Turning to slide four our transformed business model and execution of our balanced growth strategy.

To drive outperformance relative to prior cycles.

<unk> all phases of the current freight cycle our URL.

Earnings and return profile has been higher than prior cycles, demonstrating the effectiveness of our strategy.

Robert Sanchez: The integration of our recent acquisition of Cardinal Logistics and Impact Fulfillment Services or IFS is on track. As you may recall, we completed the acquisition of Cardinal Logistics on February 1st, enabling growth and further strengthening our position as a leading provider of customized dedicated transportation solutions. I'm November 1st of last year, we completed the acquisition of IFS, which added co-packaging and co-manufacturing capabilities to supply chain by merely supporting our CPG business. We continue to see long-term growth opportunities in all three business segments, supported by secular trends that favor outsourcing decisions, large addressable markets, and the value of our solutions.

The integration of our recent acquisition of Cardinal logistics and impact of government services or ISS is on track.

Robert E. Sanchez: As you may recall, we completed the acquisition of Carta Logistics on February 1st, enabling growth and further strengthening our position as a leading provider of customized, dedicated transportation solutions. On November 1st of last year, we completed the acquisition of IFS, which added co-packaging and co-manufacturing capabilities to our supply chain, primarily supporting our CPG business. We continue to see long-term growth opportunities in all three business segments supported by secular trends that favor outsourcing decisions, large addressable markets, and the value of our solutions.

As you May recall, we completed the acquisition of Cardinal logistics on February 1st enabling growth and further strengthening our position as a leading provider of customized dedicated transportation solutions.

On November <unk> of last year, we completed the acquisition of <unk>, which added co packaging and co manufacturing capabilities to supply chain, primarily supporting our CPG business.

We continue to see long term growth opportunities in all three business segments supported by secular trends that favor outsourcing decisions large addressable markets and the value of our solutions.

Robert Sanchez: Our initiative remained focused on enhancing returns. Just at our, we have 16% for the turning 12-month period is in line with our expectations given where we are in the freight cycle. At our investor day last month, we introduced the next phase of our balance growth strategy, which is focused on creating compelling value through operational excellence, investing in customer-centric innovation, further improving full cycle returns, and generating profitable growth. We are confident that continuing to execute our strategy while positioning ourselves for the cycle of turn will result in full cycle returns that will be further enhanced. We also expect our enhanced asset management playbook to continue to optimize returns in FMS over the cycle.

Robert E. Sanchez: Our initiatives remain focused on enhancing return. Adjusted ROE of 16% for the trailing 12-month period is in line with our expectations, given where we are in the freight cycle. At our investor day last month, we introduced the next phase of our balanced growth strategy, which is focused on creating compelling value through operational excellence, investing in Customer-Centric Innovation, further improving full cycle returns, and generating profitable growth. We are confident that continuing to execute our strategy while positioning ourselves for the cycle upturn will result in full cycle returns that will be further enhanced. We also expect our Enhanced Asset Management Playbook to continue to optimize returns and FMS over the cycle.

Our initiatives remain focused on enhancing returns.

Adjusted ROE of 16% for the trailing 12 month period is in line with our expectations, given where we are in the freight cycle.

At our Investor Day last month, we introduced the next phase of our balanced growth strategy, which is focused on creating compelling value through operational excellence investing in customer centric innovation.

Further improving full cycle returns and generating profitable growth.

We are confident that continuing to execute our strategy, while positioning ourselves for the cycle upturn will result in full cycle returns that will be further enhanced.

We also expect our enhanced asset management playbook to continue to optimize returns and Fms over the cycle.

Robert Sanchez: Our higher return profile reflecting the enhanced quality of our interaction portfolio is providing us with expanded capital deployment capacity, which we will use to support profitable growth and return capital to shareholders. We recently increased our quarterly dividend by 14% and announced a planned acquisition to grow our retail mobile maintenance business at FMS. Here today, we have returned 207 million in cash to shareholders to share purchases and dividends. Our full year 2024 forecast for free cash flow is now increasing by approximately 400 million to positive 150 to 250 million due to the lower expected lease capital spending.

Robert E. Sanchez: Our higher return profile, reflecting the enhanced quality of our contractual portfolio, is providing us with expanded capital deployment capacity, which we will use to support profitable growth and return capital to shareholders. We recently increased our quarterly dividend by 14% and announced a planned acquisition to grow our retail mobile maintenance business in FMS. Year-to-date, we have returned $207 million in cash to shareholders through share repurchases and dividends.

Our higher return profile, reflecting the enhanced quality of our contractual portfolio is providing us with expanded capital deployment capacity, which we will use to support profitable growth and return capital to shareholders.

We recently increased our quarterly dividend by 14% and announced a planned acquisition to grow our retail mobile maintenance business in Fms.

Year to date, we have returned $207 million in cash to shareholders through share repurchases and dividends.

Robert E. Sanchez: Our full year 2024 forecast for free cash flow is now increasing by approximately $400 million, a positive $150 to $250 million due to the lower expected lease capital spending. We're encouraged by our solid performance in the second quarter and believe that executing on our balanced growth strategy will continue to enable us to deliver higher highs and higher lows over the cycle. Slide five is one that you are likely familiar with if you've been following our business model transformation.

Our full year 2024 forecast for free cash flow is now increasing by approximately 400 million to positive $150 million to $250 million due to lower expected lease capital spending.

Robert Sanchez: We encourage by our solid performance in the second quarter and believe that executing on our balance growth strategy will continue to enable us to deliver higher highs and higher lows over the cycle.

Encouraged by our solid performance in the second quarter and believe that executing on our balanced growth strategy will continue to enable us to deliver higher highs and higher lows over the cycle.

Robert Sanchez: My five is whether you are likely familiar with if you've been following our business model transformation. It clearly shows how our key financial and operating metrics have improved since 2018, reflecting the execution of our strategy. In 2018, prior to the implementation of our balance growth strategy, we generated comparable earnings per share of 595 and ROI of 13%. This was during peak freight cycle conditions. At that time, the majority of our 8.4 billion of revenue was from FMS. Supply chain revenue had a three year growth rate of 16%, and operating cash flow was 1.7 billion.

Slide five is one that you are likely familiar with have you been following our business model transformation.

Robert E. Sanchez: Clearly shows how our key financial and operating metrics have improved since 2018, reflecting the execution of our strategy. In 2018, prior to the implementation of our balanced growth strategy, we generated comparable earnings per share of 595 and an ROE of 13%. This was during peak freight cycle conditions. At that time, the majority of our $8.4 billion of revenue was from FMS. Supply chain revenue had a 3-year growth rate of 16%, and operating cash flow was $1.7 billion. Now, let's look at what we're expecting from Ryder today.

It clearly shows how our key financial and operating metrics have improved since 2018, reflecting the execution of our strategy.

In 2018 prior to the implementation of our balanced growth strategy, we generated comparable earnings per share of $5 95, and ROE of 13%.

This was during peak freight cycle conditions.

At that time, the majority of our $8 4 billion of revenue was from Fms.

Supply chain revenue had a three year growth rate of 16% and operating cash flow was $1 7 billion.

Robert Sanchez: Now let's look at what we're expecting from Rider today. In 2024, I hear that we expect will represent trough conditions and use vehicle sales and rental. We expect our transformed de-risk business model to generate meaningfully higher earnings and returns than we did during the 2018 peak. 2024 comparable EPS is expected to be 1,190 to 1,240. More than double 2018 comparable EPS of 595. R.O.E. is expected to be up 350 basis points to a range of 16 to 16 and a half percent, above the 13 percent generated during the prior cycle peak. Through organic growth, strategic acquisitions and innovative technology, we've shifted our revenue mixed towards supply chain and dedicated, with approximately 60 percent of 224 revenues expected to come from these asset light businesses, compared to 44 percent in 2018.

Now, let's look at what we're expecting from Ryder today.

Robert E. Sanchez: 2024, a year that we expect will represent trough conditions and used vehicle sales and rental. We expect our transformed de-risk business model to generate meaningfully higher earnings and returns than we did during the 2018 peak. 2024 comparable EPS is expected to be $1190 to $1240, more than double 2018 comparable EPS of $595. ROE is expected to be up 300 to 350 basis points to a range of 16 to 16 and a half percent, above the 13% generated during the prior cycle.

In 2024, a year that we expect will represent trough conditions in used vehicle sales and rental.

We expect our transformed derisked business model to generate meaningfully higher earnings and returns than we did during the 2018 peak.

2024 comparable EPS is expected to be 11, 90% to 12 40 more than double 2018 comparable EPS of $5 95.

ROE is expected to be up 300 to 350 basis points to a range of 16% to 16, 5% above.

Above the 13% generated during the prior cycle peak.

Robert E. Sanchez: Through organic growth, strategic acquisitions, and innovative technology, we've shifted our revenue mix towards supply chain and dedicated, with approximately 60% of 2024 revenues expected to come from these asset-light businesses, compared to 44% in 2018. The supply chain three-year growth rate is also expected to increase to approximately 20%.

Through organic growth strategic acquisitions and innovative technology.

Shifting our revenue mix towards supply chain and dedicated with approximately 60% of 2024 revenue is expected to come from these asset light businesses.

3rd% to 44% in 2018.

Robert Sanchez: Applying green or growth rate is also expected to increase to approximately 20 percent. As a result of profitable growth in our contractual lease, supply chain and dedicated businesses, operating cash flows expected to increase 40 percent from 1.7 billion in 2018 to 2.4 billion this year. As shown here, the business is outperforming prior cycles, even when comparing prior peak to an expected trust. I mean, encouraged by the results of our transformation thus far and confident that solid execution and momentum from multi-year initiatives positions us for 2024 and beyond.

Supply chain three year growth rate is also expected to increase to approximately 20%.

Robert E. Sanchez: As a result of profitable growth in our contractual lease, supply chain, and dedicated business, operating cash flow is expected to increase 40% from $1.7 billion in 2018 to $2.4 billion this year. As shown here, the business is outperforming prior cycles, even when comparing the prior peak to an expected drop. I'm encouraged by the results of our transformation thus far and confident that solid execution and momentum from multi-year initiatives positions us well for 2024 and beyond. I'll now turn the call over to John to review our second quarter performance. Thanks, Robert.

As a result of profitable growth in our contractual lease supply chain and dedicated businesses operating cash flow is expected to increase 40% from $1 7 billion in 2018 to $2 4 billion. This year.

As shown here our business is outperforming prior cycles, even when comparing prior peak two unexpected trough.

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

John Diaz: I'll now turn the call over to John to review our second quarter performance. Thanks, Robert. Total company results for the second quarter on page six. Operating revenue of 2.6 billion in the second quarter, sub 10 percent from the prior year, primarily reflects recent acquisitions. Comparable earnings per share from continuing operations were three dollars in the second quarter, down from three dollars and 61 cents in the prior year. The earnings decline reflects weaker market conditions in use, equal sales and rental, partially offset by higher contractual earnings. Return on equity, primary financial metric, was 16 percent. The year re-year decline reflects weaker use vehicles sales and rental market conditions.

I'll now turn the call over to John to review, our second quarter performance.

Thanks Robert.

John J. Diez: Total company results for the second quarter are on page six. Operating revenue of $2.6 billion in the second quarter, up 10% from the prior year, primarily reflects a recent acquisition. Comparable earnings per share from continuing operations were $3 in the second quarter, down from $3.61 in the prior year.

Total company results for the second quarter on page six.

Operating revenue of $2 6 billion in the second quarter up 10% from the prior year, primarily reflects recent acquisitions.

Comparable earnings per share from continuing operations were $3 in the second quarter down from $3.61 in the prior year.

John J. Diez: The earnings decline reflects weaker market conditions and youth equal sales and runs, partially offset by higher contractual earnings; return on equity, the primary financial metric was 16% year over year decline reflects weaker used vehicle sales and rental market conditions. Year-to-date free cash flow increased to $71 million from $16 million in the prior year, primarily due to lower capital expenditures, partially offset by higher working capital needs related to recent acquisitions and lower Proceeds from the Sale of Used Vehicles and Property. Earning to Flee Management results on page 7.

The earnings decline reflects weaker market conditions in used vehicle sales and rental.

Partially offset by higher contractual earnings.

Return on equity our primary financial metric was 16%.

The year over year decline reflects weaker used vehicle sales and rental market conditions.

John Diaz: Year-to-date free cash flow increased to 71 million from 16 million in the prior year, primarily through the lower capital expenditures, partially offset by higher working capital needs related to recent acquisitions and lower proceeds from the sale of used vehicles and properties.

Year to date free cash flow increased to $71 million from 16 million in the prior year, primarily due to lower capital expenditures, partially offset by higher working capital needs related to recent acquisitions and.

And lower proceeds from the sale of used vehicles and properties.

John Diaz: Turning to fleet management results on page seven. Fleet management solutions operating revenue increased 2 percent due to a higher choice lease revenue, partially offset by lower rental demand. Choice lease revenue grew 10 percent, with about half coming from organic lease revenue growth and the remainder from end or segment lease revenue from carnal vehicles operating in our dedicated segments. Feet tax earnings and fleet management were 133 million and down year re-year is anticipated. Results reflect lower use vehicle pricing compared to elevated levels in the prior year, as well as weaker rental demand. Rental utilization on the power fleet was 69 percent and down from 75 percent in the prior year.

Turning to fleet management results on page seven.

John J. Diez: Fleet Management Solutions operating revenue increased 2% due to higher choice lease revenue, partially offset by lower rental demand. Choice lease revenue grew 10%, with about half coming from organic lease revenue growth and the remainder from intersegment lease revenue from Carnot vehicles operating in our dedicated segment. Fee tax earnings and fleet management were $133 million, and down year-over-year as anticipated. Results reflect lower used vehicle pricing compared to elevated levels in the prior year, as well as weaker rental demand. Rental utilization on the power fleet was 69%, down from 75% in the prior year.

Fleet management solutions operating revenue increased 2% due to a hard choice lease revenue, partially offset by lower rental demand.

Choice lease revenue grew 10% with about half coming from organic lease revenue growth and the remainder from intersegment lease revenue from carnal vehicles operating in our dedicated segment.

Pre tax earnings and fleet management were $133 million and down year over year as anticipated.

Soltes reflect lower used vehicle pricing compared to elevated levels in the prior year as well as weaker rental demand.

Rental utilization on the power fleet was 69% and down from 75% in the prior year.

John J. Diez: Rental results for the quarter continue to reflect market conditions that remain weak. We saw some seasonal improvement in rental demand from Q1 to Q2, but the increase was below what we typically see and not enough to signal a freight recovery. Our fleet pricing was in line with the prior year. During the quarter, higher-choice lease results and benefits from our maintenance cost savings initiatives harshly offset the earnings impact from weaker market conditions in used vehicle sales and rental. Fleet Management EBT as a percent of operating revenue was 10.4% in the second quarter.

John Diaz: Rental results for the quarter continue to reflect market conditions that remain weak. We saw some seasonal improvement in rental demand from Q1 to Q2, but the increase was below where we typically see and not enough to signal a freight recovery. Powerfully pricing was in line with prior year. During the quarter, higher choice lease results and benefits from our maintenance cost savings initiatives, partially offset the earnings impact from weaker market conditions in use vehicle sales and rental. Sleep management EBT as a percent of operating revenue was 10.4% in the second quarter and is expected to be low double digits for four year 2024.

Rental results for the quarter continue to reflect market conditions. There remain weak we saw some seasonal improvement in rental demand from Q1 to Q2, but the increase was below where we typically see and not enough to signal freight recovery.

Our fleet pricing was in line with prior year.

During the quarter higher choice lease results and benefits from our maintenance cost savings initiatives, partially offset the earnings impact from weaker market conditions in used vehicle sales and rental.

Fleet management EBT as a percent of operating revenue was 10, 4% in the second quarter and is expected to be low double digits for full year 2024 in line with our expectations given where we are in the freight cycle of below our recently increased long term target of low teens.

John J. Diez: And it's expected to be low double digits for full year 2024, in line with our expectations given where we are in the freight cycle below our recently increased long-term target of low teens. Page 8 highlights used vehicle sales results for the quarter. As anticipated, market conditions for used vehicle sales continue to weaken from elevated levels in the prior year. Compared with the prior year, used tractor proceeds declined 19%, and used truck proceeds declined 27%. On a sequential basis, proceeds for tractors increased 5%, and proceeds for trucks decreased 10%. Tractor pricing remained relatively stable, whereas truck pricing continued to decline.

John Steven Sensing: In nine with our expectations given where we are in the free cycle of below our recently increased long-term target of low teams. H.A. highlights use vehicle sales results for the quarter as anticipated market conditions for use vehicle sales continued to weaken from elevated levels in the prior year. Compared with prior year, use tracks are proceeds declined 19% and use truck proceeds declined 27%. On a sequential basis, proceeds for tracks are increased 5%, and proceeds for trucks decreased 10%. Tractor pricing remained relatively stable, whereas truck pricing continued to decline. During the quarter, we sold 6,000 use vehicles down sequentially in and up versus prior year.

John J. Diez: During the quarter, we sold 6,000 used vehicles, down sequentially and up versus the prior year. Used vehicle inventory increased to 9,500 vehicles at quarter end, reflecting higher lease expiration. Inventory was just above our targeted inventory range and is expected to decline as fewer rental units are expected to be outserviced during the balance of the year. Although used vehicle pricing declined, proceeds remain above residual value estimates used for depreciation purposes. Slide 19 in the appendix provides historical sales proceeds and current residual value estimates for used tractors and trucks for your information.

Page eight highlights used vehicle sales results for the quarter.

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

Compared with prior year used tractor proceeds declined 19% in used truck proceeds declined 27%.

On a sequential basis proceeds for tractors increased 5% and proceeds for trucks decreased 10%.

Tractor pricing remained relatively stable, whereas truck pricing continued to decline.

During the quarter, we sold 6000 used vehicles down sequentially and up versus prior year.

John Steven Sensing: Vehicle inventory increased to 9,500 vehicles at quarter end, reflecting higher lease expiration. Inventory was just above our targeted inventory range and is expected to decline as fewer rental units are expected to be out of service during the balance of the year. Although used vehicle pricing decline, proceeds remain above residual value estimates used for depreciation purposes.

Used vehicle inventory increased to 9500 vehicles at quarter end, reflecting higher lease expirations.

Inventory was just above our targeted inventory range and is expected to decline as fewer rental units are expected to be out service during the balance of the year.

Although used vehicle pricing decline proceeds remain above residual value estimates used for depreciation purposes.

John Steven Sensing: Slide 19 in the appendix provides historical sales proceeds and curve residual value estimates for use tractors and trucks for your information.

<unk> 19 in the appendix provides historical sales proceeds incur residual value estimates for used tractors and trucks for your information.

John Diaz: Turning to supply chain on page 9, operating revenue increased 14% driven by recent acquisitions and organic growth across all industry verticals. Supply chain earnings increased by 9 million from prior year are merely reflecting stronger automotive performance. Supply chain EBT as a percent of operating revenue was 8.6% in the quarter and is expected to remain in line with the segment's long-term target of high single digits for four year 2020.

John J. Diez: Turning to the supply chain on page 9, operating revenue increased 14% driven by recent acquisitions and organic growth across all industry verticals. Supply chain earnings increased by $9 million from the prior year, primarily reflecting stronger automotive performance. Supply chain EBT as a percent of operating revenue was 8.6% in the quarter and is expected to remain in line with the segment's long-term target of high single digits for full year 2025. Burning to dedicate on page 10.

Turning to supply chain on page nine.

Operating revenue increased 14% driven by recent acquisitions and organic growth across all industry verticals.

Why chain earnings increased by $9 million from prior year, primarily reflecting stronger automotive performance.

Supply chain EBT as a percent of operating revenue was eight 6% in the quarter and is expected to remain in line with the segment's long term target of high single digits for full year 2024.

John Diaz: Turning to dedicated on page 10, operating revenue increased 48%, reflecting the acquisition of Cardinal Logistics. Dedicated EBT increase from prior year reflecting improved operating performance, partially offset by acquisition integration and other related costs. EBT continue to benefit from favorable driver conditions as the number of open decisions and time to fill for professional drivers continue to improve. Dedicated EBT as a percent of operating revenue was 7.6% in the quarter and in line with the segment's long term high single digit target.

Turning to dedicate out page 10.

John J. Diez: Operating revenue increased 48% reflecting the acquisition of Cardinal Logistics. Dedicated EBT increased from the prior year reflecting improved operating performance, partially offset by acquisition, integration, and other related costs. EBT continued to benefit from favorable driver conditions as the number of open positions and time to fill for professional drivers continued to improve. Dedicated EBT as a percent of operating revenue was 7.6% in the quarter, and in line with the segment's long-term high single-digit target. Turning to slide 11.

Operating revenue increased 48%, reflecting the acquisition of Cardinal logistics.

Dedicated EBT increased from prior year, reflecting improved operating performance, partially offset by acquisition integration and other related costs.

<unk> continued to benefit from favorable driver conditions as the number of open positions in time to fill for our professional drivers continue to improve.

Dedicated EBT as a percent of operating revenue was seven 6% in the quarter and in line with the segment's long term high single digit target.

John Steven Sensing: Turning to slide 11, year to date, these capital spending of 933 million was below prior year, reflecting more lease sales activity. Year to date, rental capital spending of 294 million was also below prior year, reflecting lower planned rental investments. We reduced our 4-year 2024 lease capital spending forecast by approximately 400 million due to lower lease sales activity, reflecting delayed decisions and economic uncertainty, as well as increased redeployment activity. 2024 lease spending is now expected to be approximately 2.2 billion, and our year-end lease fleet is expected to increase moderately from second quarter levels. Our forecast for rental capital spending is unchanged from our prior forecast, and our 2024 year-end rental fleet is expected to be down by approximately 2% year-over-year.

Turning to slide 11.

John J. Diez: Year-to-date lease capital spending of $933 million was below the prior year, reflecting lower lease sales activity. Year-to-date rental capital spending of $294 million was also below the prior year, reflecting lower planned rental investment. We reduced our full year 2024 lease capital spending forecast by approximately $400 million due to lower lease sales activity, reflecting delayed decisions and economic uncertainty, as well as increased redeployment activity. 2024 lease spending is now expected to be approximately $2.2 billion, and our year-end lease fleet is expected to increase moderately from the second quarter level. Our forecast for rental capital spending is unchanged from our prior forecast.

Year to date lease capital spending of 933 million was below prior year, reflecting lower lease sales activity.

Year to date rental capital spending of 294 million was also below prior year, reflecting lower planned rental investments.

We reduced our full year 2024 lease capital spending forecast by approximately 400 million due to lower lease sales activity, reflecting delayed decisions and economic uncertainty.

As well as increased redeployment activity.

'twenty 'twenty four lease spending is now expected to be approximately $2 2 billion and our year end lease fleet is expected to increase moderately from second quarter levels.

Our forecast for rental capital spending is unchanged from our prior forecast and our 'twenty 'twenty four yearend rental fleet is expected to be down by approximately 2% year over year.

John J. Diez: And our 2024 year-end rental fleet is expected to be down by approximately 2% year over year. In rental, we continue to increase capital spending on trucks versus tractors as trucks have benefited from relatively stable demand and pricing trends. At year-end 2023, trucks represented approximately 60% of our rental fleet, up from 49% in 2018. Our full year 2024 capital expenditures forecast is now expected to be approximately $2.9 billion, below the prior year. We expect approximately $600 million in proceeds from the sale of used vehicles in 2024, with four-year net capital expenditures expected to be approximately $2.3 billion. Turning to slide 12.

John Diaz: In rental, we continue to increase capital spending on trucks versus tractors as trucks have benefited from relatively stable demand in pricing trends. At year-end 2023, trucks represented approximately 60% of our rental fleet, up from 49% in 2018. Our 4-year 2024 capital expenditures forecast is now expected to be approximately 2.9 billion and below prior year. We expect approximately 600 million in proceeds from the sale of use vehicles in 2024, with 4-year net capital expenditures expected to be approximately 2.3 billion.

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

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

Our full year 'twenty 'twenty four capital expenditures forecast is now expected to be approximately $2 9 billion and below prior year.

We expect approximately 600 million in proceeds from the sale of used vehicles in 2024 with full year net capital expenditures are expected to be approximately $2 3 billion.

John Steven Sensing: Turning to slide 12. Our 2024 four-year forecast for operating cash flow is unchanged at 2.4 billion, and our forecast for free cash flow has increased to a range of positive 150 to 250 million. As shown, operating cash flow remains strong, driven by growth in our contractual lease dedicated in supply chain businesses, which comprise over 85% of riders' operating revenue. Our free cash flow profile has changed significantly since the implementation of our bound scroll strategy in late 2019. Lower targeted lease growth, as well as COVID-19 effects in OEM delays, resulted in lower capital spending and a higher free cash flow.

Turning to slide 12.

John J. Diez: Our 2024 full-year forecast for operating cash flow is unchanged at $2.4 billion, and our forecast for free cash flow has increased to a range of positive $150 to $250 million. As shown, operating cash flow remains strong, driven by growth in our contractual lease dedicated supply chain businesses, which comprise over 85% of Ryder's operating revenue. Our free cash flow profile has changed significantly since the implementation of our balanced growth strategy in late 2019.

Our 2020 for full year forecast for operating cash flow is unchanged at $2 4 billion and our forecast for free cash flow has increased to a range of positive $150 million to $250 million.

As shown operating cash flow remained strong driven by growth in our contractual lease dedicated and supply chain businesses, which comprise over 85% of writers operating revenue.

Our free cash flow profile has changed significantly since the implementation of our balanced growth strategy in late 2019.

John J. Diez: Lower targeted lease growth as well as COVID effects and OEM delays resulted in lower capital spending and higher fee cash. Proceeds from the exit of the UK FMS business also benefited free cash flow in 2020. The summary on the right side of the slide illustrates the free cash flow generated by the business prior to investing in fleet growth.

Lower targeted lease growth as well as COVID-19 effects and OEM delays resulted in lower capital spending and higher free cash flow.

John Diaz: Proceeds from the exit of the UK FMS business also benefited free cash flow in 2022. The summary on the right side of the slide illustrates the free cash flow generated by the business prior to investing in fleet growth. In 2024, since we do not expect free growth given market conditions, our increased free cash flow forecast for positive 200 million at the midpoint of our range is the same as our forecast for free cash flow prior to growth.

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

The summary on the right side of the slide illustrates the free cash flow generated by the business prior to investing in fleet growth in 'twenty 'twenty four since we do not expect fleet growth given market conditions, our increased free cash flow forecast of positive 200 million at the midpoint of our range is the same as our forecast for free.

John J. Diez: In 2024, since we do not expect fleet growth given market conditions, our increased free cash flow forecast of positive 200 million at the midpoint of our range is the same as our forecast for free cash flow prior to growth. Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long-term profitable growth and return capital to our shareholders. Our top priority is to continue to invest in organic growth. Balance sheet leverage of 245% at the end of the quarter was below our 250 to 300% target range 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.

Cash flow prior to growth.

John Diaz: Our capital allocation priorities remain unchanged, and our focus on supporting our strategy to drive long-term profitable growth and return capital to our shareholders. Our top priorities to continue to invest in organic growth. Balancing leverage of 245% at the end of the quarter was below our 250 to 300% target range and continues to provide ample capacity to fund the organic growth and strategic investments. As well as to return capital or shareholders through sharing purchases and dividend.

Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long term profitable growth and return capital to our shareholders. Our top priority is to continue to invest in organic growth.

Balance sheet leverage of 245% at the end of the quarter was below our 250% to 300% target range 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.

Robert Sanchez: With that, I'll turn the call back over to Robert to discuss our 2024 outlook. Learning to our outlook on page 13, we continue to see freight conditions that remain weak, and the timing of the cycle and flexion remains uncertain. We're updating our full year 2024 comparably PS4 cast to a range of 1190 to 1240 from our prior forecast of 1175 to 1250. A high end of our forecast range continues to assume a gradual recovery in rental and use vehicle sales, although later in the year, and the bottom end reflects ongoing weak conditions for these businesses.

John J. Diez: With that, I'll turn the call back over to Robert to discuss our 2024 outlook. According to our outlook on page 13, we continue to see freight conditions that remain weak, and the timing of the cycle inflection remains uncertain. We're updating our full year 2024 comparable EPS forecast to a range of 1190 to 1240 from our prior forecast of 1175 to 1250. The high end of our forecast range continues to assume a gradual recovery in rental and used vehicle sales, although later in the year, and the bottom end reflects ongoing weak conditions for these businesses. For example, our 2024 ROE forecast is 16 to 16.5%.

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

Turning to our outlook on page 13, we continue to see freight conditions that remained weak and the timing of the cycle inflection remains uncertain.

We're updating our full year 2024 comparable EPS forecast to a range of 11, 9% to 12 40 from our prior forecast of $11 75 to $12 50.

The high end of our forecast range continues to assume a gradual recovery in rental and used vehicle sales. Although later in the year and the bottom end reflects ongoing weak conditions for these businesses.

Robert Sanchez: Our 2024 ROI forecast is 16 to 16 and a half percent. Extended freight downturn and economic uncertainty have been causing some customers and prospects at least dedicated supply chain to delay decisions or downsides their fleets. These near-term contractual sales and winds are consistent with where we are in the cycle and the current economic environment. We remain confident in the long-term secular growth trends for all our businesses. We continue to believe that the transformative changes that we've made to the business will continue to drive outperformance relative to prior cycles and that all segments are well positioned to benefit from the cycle of turn.

Our 2020 for Aro <unk> forecast of 16 to 16, 5%.

Robert E. Sanchez: The extended freight downturn and economic uncertainty have been causing some customers and prospects in lease-dedicated and supply chains to delay decisions or downsize their fleet. These near-term contractual sales headwinds are consistent with where we are in the cycle and the current economic environment. We remain confident in the long-term secular growth trends for all our businesses. We continue to believe that the transformative changes that we've made to the business will continue to drive outperformance relative to prior cycles and that all segments are well positioned to benefit from the cycle. We're also providing a third quarter comparable EPS forecast of 330 to 350 versus a prior year of 358. Turning to slide 14.

Extended freight downturn in economic uncertainty have been causing some customers and prospects at lease dedicated and supply chain to delay decisions or downsize their fleets.

These near term contractual sales headwinds are consistent with where we are in the cycle and the current economic environment.

We remain confident in the long term secular growth trends for all of our businesses.

We continue to believe that the transformative changes that we've made to the business will continue to drive outperformance relative to prior cycles and that all segments are well positioned to benefit from the cycle upturn.

Robert Sanchez: We're also providing a third-quarter comparable EPS forecast of 330 to 350 versus a prior year of 358.

We're also providing a third quarter comparable EPS forecast of $3 30 to $3 50 versus the prior year of $3 58.

Robert Sanchez: Turning the slide 14. In addition to managing through the down cycle, we are also focused on ensuring that the business is well positioned to benefit from the cycle of turn. As we outlined at our recent investor day, we expect an annual free tax earnings benefit of approximately 200 million by the next cycle peak. This is an addition to the 150 million in pre-tax earnings. We expect from the contractual growth and strategic initiatives such as lease pricing, maintenance cost savings initiatives, realization of the cardinal synergies, and optimization of our multi-clined network. Although the majority of our revenue is supported by long-term contracts that generate relatively stable and predictable operating cash flows over the cycle.

Turning to slide 14.

Robert E. Sanchez: In addition to managing through the down cycle, we are also focused on ensuring that the business is well positioned to benefit from the up cycle. As we outlined at our recent Investor Day, we expect an annual free tax earnings benefit of approximately $200 million by the next cycle peak. This is in addition to the $150 million in pre-tax earnings we expect from contractual growth and strategic initiatives such as lease pricing, maintenance cost savings initiatives, realization of the cardinal synergies, and optimization of our multi-client network.

In addition to managing through the down cycle. We are also focused on ensuring that the business is well positioned to benefit from the cycle upturn.

As we outlined at our recent Investor Day, we expect an annual pretax earnings benefit of approximately 200 million by the next cycle peak.

This is in addition to the $50 million in pretax earnings we expect from the contractual growth and strategic initiatives, such as lease pricing maintenance cost savings initiatives realization of the cardinal synergies and optimization of our multi client network.

Robert E. Sanchez: 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 still has the opportunity to benefit from the cycle update. Most of our cyclical exposure resides within fleet management, in rental, and used vehicle sales. As a result, we expect the lion's share of the $200 million benefit to come from the cyclical recovery of these two businesses.

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 still has the opportunity to benefit from the cycle upturn.

Robert Sanchez: Each business segment still has the opportunity to benefit from the cycle of turn. Most of our cyclical exposure resides within fleet management and rental and use vehicle sales. As a result, we expect a line share of the 200 million benefit to come from the cyclical recovery of these two businesses. In dedicated and improved driver availability and lower recruiting and turnover costs are benefiting earnings, but have been headwinds for new sales and revenue growth. As the freight cycle strengthens and driver availability becomes more challenging, we expect to see incremental sales opportunities and improve revenue growth in dedicated as private fleets see solutions to address this paying point.

Most of our cyclical exposure resides within fleet management, and rental and used vehicle sales and as a result, we expect the lion's share of the 200 million benefit to come from the cyclical recovery of these two businesses.

Robert E. Sanchez: Dedicated, improved driver availability, and lower recruiting and turnover costs are benefiting earnings but have been headwinds for new sales and revenue growth. As the freight cycle strengthens and driver availability becomes more challenging, we expect to see incremental sales opportunities and improved revenue growth in dedicated as private fleets seek solutions to address this pain. In supply chain, weaker volumes in our omni-channel retail vertical have been a headwind to revenue and earnings.

In dedicated improved driver availability and lower recruiting and turnover costs are benefiting earnings but have been headwinds for new sales and revenue growth.

As the freight cycle strengthens and driver availability becomes more challenging we expect to see incremental sales opportunities and improve revenue growth and dedicated as private fleets seek solutions to address this pain point.

Robert E. Sanchez: In supply chain, weaker volumes in our omnichannel retail vertical have been a headwind revenue earnings. We expect supply chain results to benefit as volumes for these services recover and the incremental footprint is left.

And supply chain weaker volumes in our Omnichannel retail vertical have been a headwind to revenue and earnings we expect supply chain results to benefit as volumes for these services recover and the incremental footprint is leveraged.

Robert E. Sanchez: We expect supply chain results to benefit as volumes for these services recover and the incremental footprint is leveraged. We also expect improved freight conditions and reduced economic uncertainty will benefit contractual sales activity for lease, dedicated, and supply chains. We've been pleased by the business outperformance during this down cycle and have appropriately positioned all three segments to benefit from the cycle. An additional opportunity on the horizon for FMS is the anticipated pre-buy activity ahead of the 2027 EPA engine technology change. We would expect this to benefit choicely sales activity and longer-term used vehicle pricing due to demand for the old emissions technology. Turning to slide 15.

We also expect improved freight conditions and reduced economic uncertainty will benefit contractual sales activity for lease dedicated and supply chain.

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

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

We would expect this to benefit choice lease sales activity and longer term support used vehicle pricing due to demand for the old emissions technology.

Turning to slide 15.

Robert E. Sanchez: Ryder is delivering value to its shareholders with more to come. Since implementing our balanced growth strategy, we have generated strong returns during each phase of the cycle, and the resulting diversification of the business mix has demonstrated the resiliency of the transport model. We achieved higher highs during the 2022 up cycle, even after adjusting for outsized used vehicle gains, and generated significantly higher returns during the 2023 down cycle relative to prior down cycles. In 2024, we continue to expect ROE to outperform prior cycles.

Ryder is delivering value to our shareholders with more to come.

Lamenting our balanced growth strategy, we have generated strong returns during each phase of the cycle and the resulting diversification of the business mix as demonstrated the resiliency of the transport model.

We achieved higher highs during the 2022 upcycle, even after adjusting for outsized used vehicle gains and generate significantly higher returns during the 2023 down cycle relative to prior downturns.

In 2024, we continue to expect <unk> to outperform prior cycles. Despite expected trough conditions in used vehicle sales and rent.

Robert E. Sanchez: Despite Expected Trough Conditions and Used Vehicles Sailed at Rent, we continue to see significant opportunity for profitable growth, supported by secular trends, our operational expertise, and ongoing momentum from multi-year initiatives. We remain committed to investing in products, capabilities, and technology that will deliver value to our customers and our shareholders. That concludes our prepared remarks. Please note that we expect to file our 10-Q later today. We have a lot of material to cover today, so please limit yourself to one question each.

We continue to see significant opportunity for profitable growth supported by secular trends, our operational expertise and ongoing momentum for multiyear initiatives.

We remain committed to investing in products capabilities and technology that will deliver value to our customers and our shareholders.

That concludes our prepared remarks. Please note that we expect to file our 10-Q later today.

Speaker Change: 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.

Operator: If you have additional questions, you're 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. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: At this time I will turn it over to the operator.

Operator: Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity. This is the signal for questions, and our first question will come from Christyne McGarvey with Morgan Stanley. Great. Thanks, guys, for taking my question. Good morning.

Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If he argues in a speaker phone. Please make sure mute function is turned off to allow your signal to reach our equipment again press star one to ask a question we'll pause.

Just a moment to allow everyone an opportunity to signal for questions.

Speaker Change: And our first question will come from Christine Mccarthy with Morgan Stanley.

Christine Mccarthy: Great. Thanks, guys for taking my question good morning.

Christyne McGarvey: We'd love to just start on the guidance and dig in a little bit more, particularly at the high end. It seems like cycle recovery sort of pushed out to the right a little bit. But we'd just love to hear what you guys are seeing and sort of what's kind of underpinning that. It does seem like some of the early cycle data points that we tracked are seeing a little bit of life. So we'd just be curious about your thoughts on that.

Christine Mccarthy: Well, let's just start on the guidance I'm digging in a little bit more particularly at the high end. It seems like a cycle recovery sort of pushed out to the right a little bit but would just love to hear what you guys are seeing and sort of.

Speaker Change: What's kind of underpinning that.

Speaker Change: Seem like some of the early clinical data points that we track are seeing a little bit of life. So it would just be curious your thoughts.

Matt: Hi, Matt.

Robert E. Sanchez: Thanks, Christy. Let me just reiterate the range that we gave and the kind of thinking around that range. The higher end of the range continues to assume a gradual recovery in rental and used vehicles in the second half. At the lower end of the forecast contemplated, there'll be no pickup in the second half of 24.

Speaker Change: Thanks for steel isn't well, let me just reiterate what we the range that we gave and kind of thinking around that range. The higher end of the range continues to assume a gradual recovery in rental and used vehicles in the second half and.

Speaker Change: And in the lower end of the forecast contemplates that there'll be no pick up in the second half of 'twenty four so I'm just kind of ongoing.

Weak conditions in.

Robert E. Sanchez: So just kind of an ongoing weak condition. In terms of, you know, what we're seeing, we have not seen an inflection, certainly in rental used vehicles. I would say, maybe we're seeing some signs of stabilization and maybe a real drop out. I'll mention three that we see in our business in the second quarter that I'll then hand over to Tom, because they're really an FMS. First, we saw, you know, a seasonal uptick in rental in the second quarter; we're seeing that going into the third.

Speaker Change: In terms of what we're seeing we have not seen an inflection certainly in rental used vehicles I would say.

Speaker Change: Maybe we're seeing some signs of stabilization and maybe a real trough.

Speaker Change: I'll mention three that we see in our business in the second quarter that I'll, then hand, it over to Tom because it really in Fms first we saw a seasonal uptick in rental in the second quarter, we'll see that go into the third.

Robert E. Sanchez: Another one is the lease miles per unit, something we haven't talked about in a while, which is typically an indication of how much our lease units are being utilized. We saw that go up in the second quarter for the first time in a while.

Tom: Another one is that the lease miles per unit, probably something we haven't talked about it in a while.

Tom: Which is typically an indication of how much our lease units are being utilized we saw that go up in the second quarter for the first time in a while and then also around tractor pricing.

Robert E. Sanchez: And then also around tractor pricing, used tractor pricing. I know we've reported it up sequentially by about 5% and there are some unusual new units that we sold in the mix this quarter. So when you take those out, it's kind of flattish.

Speaker Change: Used tractor pricing.

Speaker Change: We reported it up sequentially about 5%, but somewhat unusual new units that we sold in the mix. This quarter. So when you take those out it's kind of flattish. So that's really kind of a bottoming out of used tractor pricing.

Thomas M. Havens: So that's really kind of a bottoming out of used tractor pricing, which I think is also a plus. So let me hand it over to Tom to give you a little bit more color around each of those. Yeah, so let me start with rental and give you just a little more color there. But we saw six straight quarters of sequential demand declines before this second quarter period here. So you do normally see seasonality in business and rental. But last year, as we went through the year, demand declined the entire year.

Speaker Change: Which I think is also a side so let me hand, it over to Tom to give you a little bit more color around each of those three.

Robert Sanchez: Yes, let me start with Rental, just a little more color there, but we saw six straight quarters of cement sequential demand declines before this second quarter period here. So you do normally see seasonality in the business and rental, but last year, as we went through the year, demand declined the entire year. So this was the first quarter going from Q1 to Q2 that we actually saw a sequential increase in demand. We would typically see expect to see that just from seasonality. So it was good to finally see that trend go up. I don't think it signals a recovery in any way, but just sort of a normal seasonal improvement in demand.

Tom: Yeah. So let me let me start with rental just a little more color there, but we saw.

Tom: Six straight quarters of.

Tom: Sequential demand declines before this second quarter period here. So you do normally see seasonality and seasonality in the business and rental.

Tom: But last year as we went through the year demand declined the entire year.

Tom: So this was the first quarter going from Q1 to Q2 that we actually saw a sequential increase in demand we would typically see.

Thomas M. Havens: So this was the first quarter going from Q1 to Q2 that we actually saw a sequential increase in demand; we would typically see, expect to see that just from seasonality. So it was good to finally see that trend go up. I don't think it signals a recovery in any way, but just sort of a normal seasonal improvement in demand. From a lease perspective, the story may be even a little bit more dramatic where we had seen Unknown Speaker 11 straight quarters of year over year declines in miles per unit. So a little over two years since the last time we saw miles per unit increase year over year and a quarter.

Tom: Expect to see that just from seasonality.

Tom: So it was good to finally see that trend go up I don't think it signals a recovery in any way, but just sort of.

Tom: Normal seasonal improvement in demand.

Robert Sanchez: From a from a least perspective, the story, maybe even a little bit more dramatic where we had seen 11 straight quarters of year-over-year declines in miles per unit. So little over two years, the last time we saw miles per unit increase year over year and a quarter. So we did see some declines in the least fleet, maybe we do to customers downsizing their fleet. So maybe this is an indication that there's some right sizing and rebalancing of those fleets when you see the miles finally improved year over year. And then finally in used vehicle sales, like Robert said, we saw an increase in tractor pricing sequentially.

Tom: From a lease perspective, the story, maybe even a little bit more dramatic where we had seen.

Tom: 11 straight quarters of year over year declines in miles per unit. So.

Little over two years, the last time, we saw miles per unit increase year over year on a quarter.

Thomas M. Havens: So as we did see some declines in the lease fleet, mainly due to customers downsizing their fleets, so maybe this is an indication that there's some right-sizing and rebalancing of those fleets when you see the miles finally improve year over year. And then finally, in used vehicle sales, like Robert said, we saw an increase in tractor pricing. Unknown Speaker We did have some unusual sales for us of newer equipment, which drove that pricing up when you take that out.

Tom: So we did see.

Tom: Yeah.

Tom: Some declines in the lease fleet, mainly due to customers.

Tom: <unk> their fleets. So maybe this is an indication that there is some.

Speaker Change: Right sizing and rebalancing.

Tom: <unk>.

Tom: Of those fleets when you see the the miles finally improve.

Tom: Year over year, and then finally in used vehicle sales.

Tom: Like Robert said, we need.

Robert: Saw an increase in tractor pricing.

Tom: Sequentially.

Robert Sanchez: We did have some of the usual sales for us of newer equipment, which drove that pricing up. When you take that out. The kind of underlying normal pricing trend, we've been down about 2% in tractor pricing. So kind of flattening out of tractor pricing, if you will, sequentially.

Speaker Change: We did have.

Robert: Some unusual sales for us of newer newer equipment, which drove that pricing up when you take that out.

Thomas M. Havens: Unknown Speaker The, [inaudible] Maybe a slight sign of recovery. Unknown Speaker 0, Thank you. 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 two.

Tom:

Speaker Change: Kind of underlying normal pricing trend, we'd have been down about 2%.

Tom: And tractor pricing, so kind of flattening out of attractive pricing. If you will sequentially. So are.

Robert E. Sanchez: So those are the three things that we saw in the quarter that may indicate kind of a bottoming out and maybe it's like sign of recovery.

Tom: Those are the three things that we saw in the quarter.

Tom: That may indicate kind of a bottom of bottoming out.

Tom: Maybe a slight sign of recovery.

I hate to call it out.

Tom: No.

Speaker Change: Thanks for saying.

Unknown Executive: Thank you.

Jeffrey Asher Kauffman: And the next question will come from Jeff Kauffman of Vertical Research. Thank you very much. You know, it's interesting you're talking about the positive changes you're seeing in customer behaviors in the environment. But when I look at capital spending, it's being taken down pretty aggressively. [inaudible] pretty aggressively for the second half of this year. Yeah, thanks, Jeff.

Speaker Change: Thank you 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 and the next question will come from Jeff Kauffman with vertical research.

Unknown Executive: 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 two.

Jeffrey Asher Kauffman: And the next question comes from Jeff Kaufman with Vertical Research. Thank you very much. You know, it's interesting. You're talking about the positive changes you're seeing in customer behaviors in the environment. But when I look at capital spending, it's being taken down pretty aggressively across more and more companies. And I feel like this isn't just publicly traded for-hire truckload here, but, you know, we're starting to see the private slow down a little bit. I'm just curious, do you view this more as a delayed reaction where the industry P&Ls have just been under pressure and people are kind of now coming to grips with that in terms of their equipment orders?

Jeffrey Asher Kauffman: Thank you very much.

Jeffrey Asher Kauffman: You know it's interesting you're talking about the positive changes you're seeing in customer behaviors in the environment, but when I look at capital spending it's being taken down pretty aggressively.

Jeffrey Asher Kauffman: Across more and more companies and I feel like this isn't just publicly traded for hire truckload here, but we're starting to see the private slow down a little bit.

Speaker Change: I'm just curious do you view this more as a delayed reaction where the the industry <unk> have just been under pressure and people are kind of now coming to grips with that in terms of their equipment orders because it's because we've seen the Oems and act research and people like that take their forecasts down pretty aggressively for the second half of this year.

Jeffrey Asher Kauffman: Because because we've seen the OEMs and Act Research and people like that take their forecast down pretty aggressively for the second half of the issue. here.

Jeffrey Asher Kauffman: Yeah.

Robert E. Sanchez: Yeah, thanks, Jeff. Look, I think what we're seeing is we're coming off of a really hot period in terms of orders for new trucks; they were delayed for as much as over a year. So a lot of those are a bit of a frenzy of people getting into order vehicles and then waiting for them to come in. Now, they come in. So I think most companies are probably reevaluating how many they need right now, and there's not this hurry about having to order today because I won't get it for you. I know I can pick up, get a tractor here in the next, you know, 90, 120 days.

Robert E. Sanchez: Look, I think what we're seeing is we're coming off of a really hot period in terms of orders for new trucks, but they were delayed. [inaudible] So I think most companies are probably re-evaluating how many they need right now, and there's not this hurry about having to order today because I won't get it for a year.

Jeffrey Asher Kauffman: Yeah. Thanks, Jeff look I think what we're seeing as well.

Jeffrey Asher Kauffman: We're coming off of a really hot period in terms of orders for new trucks they were delayed.

Speaker Change: As much as over a year. So a lot of there was a bit of a frenzy of people getting into to order vehicles, and then waiting for them to come in now they've come in so I think most companies are reevaluating, how many they need right now and theres not just her it'd be about having the order today, because I will get it for you I know I can pick up get attract.

Robert E. Sanchez: I know I can pick up, and get a tractor here in the next 90, 120 days. So, you know, the lead times have come in a lot, and that need to order in order to get in line has kind of slowed down for me. That's not unusual, I would say, for where we are in the cycle. So this stuff can turn pretty quickly.

Speaker Change: Here in the next 90 120 days so the lead times have come in a lot in that need to order in order to get line has kind of slowed down for me that's not unusual I would say from where we are in the cycle. So this stuff can turn pretty quickly, but yes, and I want to make sure we're clear where we are.

Robert Sanchez: So, you know, the lead times have come in a lot, and that needs to order in order to get line has kind of slowed down for me. That's not unusual, I would say, for where we are in the cycle. So this stuff can turn pretty quickly, but yes, and I want to make sure we're clear: we are seeing, you know, a huge pickup in sales on our contractual businesses. We are seeing some headwinds from customers in the lead that are downside. I think they're fleeting and indedicated, and then also delayed decisions. You know, the uncertainty around the election and when interest rates are going to come down, I think are a great excuse or reason for customers to say, well, why should I do it this month if I can wait till next month, for two months, until I see how this transpires, especially since the economy and the freight market has not really picked up strong yet.

Robert E. Sanchez: But yes, and I wanna make sure we're clear. We aren't seeing, you know, a huge pickup in sales on our contractual businesses. We are seeing some headwinds from customers in lease that are downsizing their fleets, even in dedicated. And then also late decisions.

Speaker Change: C N.

Speaker Change: Huge pick up in sales on our contractual businesses, we are seeing some headwinds from customers and leased at our downside I think the fleets even in dedicated.

Speaker Change: And then.

Speaker Change: Also delayed decisions.

Robert E. Sanchez: Unknown Speaker The uncertainty around the election and when interest rates are going to come down is, I think, a great excuse or reason for customers to say, well, why should I do it this month if I can wait till next month or two months until I see how this transpires, especially since the economy and the freight market have not really picked up strong yet. What we're seeing, though, and what we're trying to outline here is that we believe that the deep fleeting, if you will, especially with our lease customers that's been going on for a while, is now maybe getting to a point of more equilibrium where the units that they do have, they are running them more, which is a good sign. Rental, there's a need for rental trucks again, at least during the season. You gotta pick up a need for more rental trucks.

Speaker Change: Certainty around the election and when interest rates are going to come down I think.

Speaker Change: Great excuse or reason for customers to say why should I do it. This month, if I can wait until next month or two months until I see others transpire, especially since the economy and the freight market has not really picked up strong again, what we're seeing though I think what we're trying to outline here.

Robert Sanchez: Well, what we're seeing though, I think, but we're trying to highlight here is that we believe that the deep fleeting, if you will, especially in with our lease customers that's been going on for a while, is now maybe getting to a point of more equilibrium where the units that they do have, they are running a more, which is a good sign. Rental, there's a need for rental trucks again, at least during the season. You got to pick a need for more rental trucks. And then the price, you know, the tractor price, and we give you pretty good graphs there in the appendix on where we are historically.

Speaker Change: We believe that the deep bleeding, if you will especially in it with our lease customers that's been going on for a while is now maybe getting to a point of more equilibrium, where the units that they do have they are running a more which is a good sign.

Speaker Change: Rental theres a need for rental trucks again at least during the season, you've got to pick a need for more rental trucks and then the pricing the tractor pricing, we'd give you a pretty good.

Robert E. Sanchez: And then the pricing, you know, the tractor pricing, we give you a pretty good graph there in the appendix showing where we are historically. And you can see that after a pretty significant decline from those crazy peaks back in 21 and 22, we are seeing it kind of get to a bottom, what appears to be a bottom over the last couple of quarters. Okay, and I don't want to detract from the terrific results we saw in Supply Chain and Dedicated.

Speaker Change: Grass they are in the appendix on where we are historically and you can see that that after a pretty significant decline from those crazy peaks back in 'twenty.

Robert Sanchez: And you can see that after a pretty significant decline from those crazy peaks back in 2022, we are seeing it kind of get to a bottom, what appears to be a bottom over the last couple of quarters.

122, we are seeing and kind of get to a bottom what appears to be a bottom.

Speaker Change: Over the last couple of quarters.

John Diaz: Okay, and I don't want to detract from the terrific results we saw in supply chain and dedicated. I mean, I'm just kind of curious, because, you know, the theme across most calls this quarter has been we're reducing our capital span, we're going to take fewer trucks, we're going to take fewer trailers. I did notice that the select care vehicle numbers were on what's driving that. John, you got that? Yeah, so when we continue to see, we've got a number of select care customers that have to lent it to convert over to full service weeks, and that has been a trend we've seen over the last two years.

Speaker Change: Okay, and I don't want to detract from the terrific results, we saw in supply chain and dedicated I'm just kind of curious because you know the theme across most calls this quarter has been we're reducing our capital spend we're going to take fewer trucks, we're gonna take fewer trailers.

Robert E. Sanchez: I'm just kind of curious because, you know, the theme across most calls this quarter has been that we're reducing our capital spend, we're going to take fewer trucks, we're going to take fewer trailers. I did notice that the select care vehicle numbers were down. What's driving that, John? You got that?

Speaker Change: I did notice that the select care.

Speaker Change: Vehicle numbers were down what's driving that.

Speaker Change: John you got there yet so we continue to see we've got a number of select care customers that have liked it to convert over to full service lease and that has been a trend we've seen over the last two years. So as you continue to see the select care numbers.

John J. Diez: Yeah, so what we continue to see is that we've got a number of SelectCare customers that have elected to convert over to full-service lease, and that has been a trend we've seen over the last two years. So as you continue to see the SelectCare numbers, I would expect that to reduce over the balance of the year, and then once we get to next year, you should see that start picking up. Okay, so sit down for a good look.

John Diaz: So, as you continue to see the select care numbers, I would expect that to reduce over the balance of the year. And then, once we get to next year, you should see that start picking up.

Speaker Change: Yeah.

Speaker Change: I would expect that to too rich.

John: Reduce over the balance of the year and then once we get to next year and you should see that start picking up.

John Steven Sensing: Okay, so now for a similar question. Yeah, what else? No, I would also say we saw similar to the lease fleet, where our select care customers were downsizing their fleet as well. We had two very large trailer fleets, actually, that were really low impact to us. So kind of large and low impact to the panels. If you look at the panel, if you look at the panel. Yeah, thanks, Christine. Yeah, I would say right now, we're kind of flat year-over-year. If you think about the omnichannel business, specific getting into e-commerce and last mile, still kind of flatish, I'd say our customers right now are projecting a flight uptick, you know, more seasonal as you go into the peak periods but nothing, I would say nothing significant.

Speaker Change: We have also.

Speaker Change: Yeah.

John J. Diez: Yeah, what else? No, I would also say we saw a similar trend to the lease fleet where our select care customers are downsizing their fleet as well. We had two very large trailer fleets, actually, that were really low impact to us. So, kind of large in fleet but low in impact on the P&L. If you look at the P&L, revenues were actually up year over year, despite the fleet headwinds, and returns were a little bit better.

Speaker Change: Yes.

Speaker Change: I would also say we saw.

Speaker Change: Similar to the to the lease fleet, where.

Speaker Change: Our select care customers are downsizing their fleet as well.

Speaker Change: We had two very large.

Speaker Change: Trailer fleets actually that were really low impact to us.

Speaker Change: So on a kind of large in fleet, but on LOE and impact to the P&L. If you look at the P&L.

John J. Diez: So kind of a rebalancing of that fleet, maybe a little bit smaller, but better returns. Okay, and then last follow-up question on this: one of the trends we've seen over the last two years is that there has been a lot more activity on the private fleet side than the public for hire fleet. Are you sensing any change in terms of private fleet customer thinking on the need to expand? I think that the private fleet expansion was probably driven by, and most likely driven by, the shortage that we had of truck load capacity during the, you know, 2022 spike. So we saw it in our lease customers really, that's when our lease customers were all scrambling for vehicles.

Speaker Change: The revenues were actually up year over year, despite the fleet headwinds and the returns are a little bit better so kind of a rebalancing of that fleet, maybe a little bit smaller but.

Speaker Change: Better returns.

Speaker Change: Okay, and then last follow up question on this one of the trends we've seen over the last two years is that a lot more activity on the private fleet side than.

Speaker Change: And then the public for hire fleet or are you sensing any change in terms of private fleet customer thinking on the need to expand the fleet.

Speaker Change: I think that was the private fleet expansion was probably driven by most likely driven by the shortages that we had a truckload capacity during the 2020 could spike.

Speaker Change: So we saw it in our lease customers really that's when our lease customers were all scrambling for vehicles I think those vehicles have come in.

Robert E. Sanchez: I think those vehicles have come in. (Inaudible) miles per unit is, I guess, a first indication that maybe we're getting close. All right, well, congratulations on a terrific quarter, and thank you. Thank you. And we'll take a question from Jordan Alliger with Global. Yeah, hi.

Speaker Change: And they are now.

Speaker Change: Getting to what could be a stabilization point in terms of they've got they're now they're now getting to the right number of vehicles that they needed in the fleet.

Speaker Change: There's still some downsizing going on but again that increase in lease miles per unit is I guess, a first indication that maybe we're getting closer.

Speaker Change: Alright, well congratulations on a terrific quarter and thank you.

Jim: Thank you Jim.

Speaker Change: And we'll take a question from Jordan Alegar with Goldman Sachs.

Jordan Robert Alliger: Question on Dedicated. At least what I was thinking, especially with the acquisition and what have you, the margins seem to be tracking right in that high single-digit range. The longer-term target may be a little bit ahead of sort of what I was thinking or where we were thinking. I'm curious if you could maybe talk to some of the drivers behind the performance, and then specifically, do you think you could sort of stay maybe closer to this type of level quicker than expected? Thanks.

Jordan Robert Alliger: Yeah, Hi question on dedicated.

Jordan Robert Alliger: At least what.

Speaker Change: What I was thinking.

Speaker Change: You know, especially with the acquisition and what have you. The margins are seem to be tracking are right in that high single digit range longer term target may be a little bit ahead of.

Speaker Change: Sort of what I was thinking of where we were thinking I'm. Just curious if you could maybe talk to some of the drivers behind the the.

Speaker Change: The performance and then specifically you know do you think you could sort of stay may be closer to this type of level, you know quicker than expected facts.

Robert E. Sanchez: Yeah, thanks, Jordan. You know, um, yeah, we are very pleased with the results that we saw this quarter in dedicated. Some of it is a bit of a seasonal pickup that we tend to get, but the really earnings growth was primarily driven by the base business just performing better. And I think it speaks to the power of these long-term contracts that we have been dedicated to, I would say supply chain and lease, you know, where you look at, even in this difficult of an environment, you're actually getting earnings growth from these businesses, which, you know, is probably a bit unique, given our industry and some of the volatility that we see there.

Jordan Robert Alliger: Yes, Thanks Jordan.

Speaker Change: Yeah. We are very pleased with the results that we saw this quarter and in dedicated some of it is a bit of a seasonal pickup, but we tend to get but the really the earnings growth was primarily driven by the base business just performing better.

Speaker Change: And I think it speaks to the to the power of the of these long term contracts that we haven't dedicated I would say supply chain at least you know where you look at even in this difficult environment Youre actually getting earnings growth.

Speaker Change: From these businesses, which you know.

Speaker Change: It was probably a bit unique given our industry and that's some of the volatility that we see there. So those businesses are really what are holding up the earnings of the company. They are moving they are helping to counter some of the volatility that we see in rental and used goods, which was basically the goal of our balanced growth strategy, so dedicated as well.

Robert E. Sanchez: So those businesses are really what are holding up the earnings of the company. They're moving, and they're helping to counter some of the volatility that we see in rental and used goods, which was basically the goal of our balanced growth strategy.

Robert E. Sanchez: You saw supply chain also with good earnings growth. And then even in lease, we're seeing, you know, the outperformance in the quarter was driven by outperformance in our lease business. So again, we're really pleased with the performance that we see there. And probably a little too early to say how we're going to end the full year in dedicated, but we feel pretty good. Actually, we feel pretty good about the waterfall that we built at the beginning of the year.

Speaker Change: One you saw supply chain also.

Speaker Change: With good earnings growth and then and then even in and lease we're seeing you know the outperformance in the quarter was driven by outperformance in our lease business. So again, we're really pleased with the.

Speaker Change: Performance that we see there and probably a little too early to say, how we're going to end full year in dedicated but we feel pretty good actually we feel pretty good about the waterfall that we gave at the beginning of the year.

Robert E. Sanchez: We're, the contractual businesses; we expect to come in and aggregate coming in pretty close to what we had on that waterfall. Thank you. I appreciate it. Thank you. And our next question will come from Brian Ossenbeck with JP Morgan. Hey, good morning.

Speaker Change: <unk> businesses, we expect to come in in aggregate are coming in pretty close to what we had on that waterfall.

Speaker Change: Thank you I appreciate it.

Speaker Change: Thank you and our next question will come from Brian Awesome Beck with J P. Morgan.

Brian Patrick Ossenbeck: Thanks for taking the question. So I just wanted to see, given there are some signs of stability, but a little bit of uncertainty out there, and some pulling back from the customer. What are you seeing in terms of competition? pricing trends across the different and, I guess, particularly interested in? Maybe some of the shorter cycle stuff where there has been a bit of extra capacity on the market but also undedicated because it does seem like this lower for longer environment has caused maybe some behavioral changes to push for that last cut or two on.

Speaker Change: Hey, good morning, Thanks for taking the question.

Speaker Change: So I just wanted to see given there's some signs of stability, but a little bit of uncertainty out there.

Speaker Change: And some pulling back from the customers what are you seeing in terms of competition and pricing.

Speaker Change: Pricing trends across the different segments, and I guess, particularly interested in.

Speaker Change: Some of the shorter cycle stuff, where there has been a bit of extra capacity over the market, but also on dedicated because it does seem like there is this lower for longer environment has caused maybe some behavioral changes to push for that last a cut or two on on pricing. So.

Brian Patrick Ossenbeck: Comments on competition and price scale. I'll touch on the contractual businesses a little bit on the leasing side. It's primarily terms of what we see from competition. Most of us don't buy a truck until we have a signed lease.

Speaker Change: Some comments on competition and price would be helpful. Thanks.

Robert E. Sanchez: So there's not this need to just, you know, push equipment into the market. There is some redeployment of rental equipment, maybe that sometimes brings a little bit more aggressive pricing, but generally, I think there is pretty decent pricing discipline there around the dedicated business. The clearly the more dedicated capacity vanilla freight type of, Unknown Speaker We are seeing some pressure as customers look to take advantage of lower spot rates and truck load rates. However, on the customized type dedicated, which is primarily what we do, less of a challenge.

Speaker Change: Well I'll touch on the contractual businesses.

Speaker Change: A little bit on the leasing side, it's primarily in terms of what we see from competition most of US don't buy a truck until we have a signed lease so there's not this lead to just.

Speaker Change: Push equipment into the market.

Speaker Change: There is some redeployment of rental equipment, maybe that sometimes it brings a little bit more aggressive pricing, but generally I think some pretty decent pricing discipline there around the dedicated business.

Speaker Change: Clearly the more.

Speaker Change: Dedicating capacity vanilla freight type of.

Speaker Change: Freight we are seeing some pressure as customers look to take advantage of lower spot rates in truckload rates. However, on a customized type dedicated which is primarily what we do less of a challenge. There. So that's why you saw you know we're getting.

Robert E. Sanchez: So that's why you saw, you know, we're getting , , , , , , , , , , , , , , , , , , , , , , , , , , , Okay, thanks for that, Robert. So just to understand the guidance here, and sort of the expected recovery that's embedded in there, the top and the bottom end of the range isn't isn't quite wide, especially [inaudible] Unknown Speaker Maybe you can walk through sort of what, I mean, it seems to imply that that's a pretty small recovery in the back half of the year that you're that you're expecting if that's the range is that small, but just wanted to, Yeah, I would I mean, I guess, for the high end of the range, I would tell you, we would expect rental utilization to get back into that mid high 70s range, which is what we would call more normalized.

Robert E. Sanchez: Unknown Speaker And then gains kind of a little bit from where we are today. I think, you know, we were just under 20 million this quarter. We're probably looking to be a little bit above 20 million going into the second half and more of that in the fourth quarter. So So yeah, a modest uptick. [inaudible] Okay, thanks. That's helpful. Appreciate it, and we'll take a question from Scott Group with Wolf Research. Hey, thanks. Good morning.

Speaker Change: Some customers that are taken freight that they brought over during 2022 that was more vanilla freight maybe moving back but generally the core of our dedicated business is still strong and again in that market I think.

Speaker Change: From a competitor standpoint, I think the competition again relatively rational, especially when it requires more specialized type handling and supply chain I would say, it's really just getting customers to make decisions I think much of the pricing has moved a lot on the traditional supply chain business now some of the multi client E com.

Speaker Change: <unk>.

Speaker Change: He didn't multi client supply chain type activity, where.

Speaker Change: Some of our competition may have empty warehouses, you might see some aggressive pricing in some areas.

Speaker Change: But generally on a contractual or traditional business again pretty decent pricing discipline.

Speaker Change: Okay. Thanks for that Robert So just to understand the guidance here.

Speaker Change: And sort of the expected recovery and that's embedded in there is at the top and the bottom end of the range isn't isn't quite wide, especially considering how much that can move with things like rental and UBS, but.

Speaker Change: Maybe you can walk through sort of what I mean, it seems to imply that that's a pretty small recovery in the back half of the year that you're if you're expecting if that's the the range is that small, but I just wanted to understand that a little better.

Speaker Change: Yeah, I would I mean, I guess or the high end of the range I would tell you we would expect rental utilization to get back into that mid to high Seventy's range, which is what we would call more normalized.

Speaker Change: And then gauge kind of a little bit up from where we are today I think we were we were just under $20 million. This quarter, we're probably looking to be a little bit above $20 million going into the second half and more of that in the fourth quarter.

Speaker Change: So so yeah modest uptick for the balance of the year, primarily fourth quarter and then on the bottom and it's really more of a.

Speaker Change: Modest seasonal pickup in rental in the second half and then UBS really not doing much maybe flattish to down from where we are today. So yeah. It's they're not it's not a huge difference between the top and the bottom and obviously everything in between as it could have a little bit more of this a little bit more of that so.

Speaker Change: We think it's a it's a very reasonable range in terms of what's achievable here and it'll be a matter of how much.

Speaker Change: The market cooperates over the next couple of quarters.

Speaker Change: Okay. Thanks, that's helpful. I appreciate it.

Speaker Change: And we'll take a question from Scott Group with Wolfe Research.

Scott H. Group: So I just want to follow up on that last point. So when I just look at the third quarter guide, it's up a good amount from q2 in terms of earnings, probably a little bit better than normal, which is seasonal.

Scott H. Group: Hey, Thanks, Good morning, So I just wanted to follow up on that last point, so when I just look at it.

Speaker Change: The third quarter guide right, it's up a good amount from from Q2 in terms of earnings probably a little bit better than normal season.

Scott H. Group: So it doesn't sound like that's reflective of used and rental getting much better in the third quarter. So is that more, is that right? And is it more just like the core earnings just getting better, or am I mishearing and there is some assumption in the Q3 guide specifically that has rental and use getting better? No, it's what you said.

Speaker Change: Seasonal so it doesn't sound like that's reflective of used and rental getting much better in the third quarter. So is it more is that right and is it more just like the core earnings just getting better or my Miss hearing and there is some assumption in the Q3 guide specifically that has rental and used.

Speaker Change: Getting better.

Scott H. Group: Its core earnings are getting better from Q2 to Q3. And then more of the seasonal uptick would be in the fourth quarter. I would say, I'm sorry, not the seasonal uptick, the transactional uptick. So more of an inflection, a modest inflection in Q4. But when you go from Q3 to Q2 to Q3, it's primarily going to be the contractual business continuing to. Okay, that makes sense. And then just given where I think you showed the used inventories above the long-term target, and then I think the tractor price is now in the residual value range, is it realistic that used is going to get better with inventory where it is? And do we need to do anything with residual assumptions?

Speaker Change: No. It's what you said its core earnings getting better from Q2 to Q3.

Speaker Change: And then more of the seasonal uptick would be fourth quarter, I would say I'm, sorry, not seasonal uptick the transactional uptick so more of an inflection modest inflection in Q4, but when you go from Q3 to Q2 to Q3, it's primarily going to be the contractual business continuing to deliver.

Speaker Change: Okay that makes sense and then just given where I think there you showed the used inventories above the long term target and then I think the tractor prices now at the residual value range like.

Speaker Change: Is it realistic that used is going to get better.

Speaker Change: Inventory, where it is and do we need to do anything with residual assumptions.

John J. Diez: Yeah, I'll let John give you a little color on that. Yes, Scott. So we're sitting with inventory levels just above our target range of seven to 9000, sitting at 9500. We have reduced the rental fleet, which drove up that inventory level. For the balance of the year, we're not expecting any further significant reductions in our rental fleet. So you should expect our inventory level to actually start coming down through the end of the year. Nothing dramatic there, but it certainly will not continue peaking. So that's one indicator.

Speaker Change: Yeah.

Speaker Change: Net.

Speaker Change: So I can give you a little color on that yes, Scott. So we're sitting with inventory levels just above our target range of seven to 9000 sitting at 9500, we have reduced our rental fleet, which drove up that inventory level for the balance of the year, we're not expecting any.

Speaker Change: Further significant reductions of our rental fleet. So you should expect.

Speaker Change: Our inventory levels actually to start coming down through the end of the year.

Speaker Change: Nothing dramatic there, but certainly will not continue picking up.

John J. Diez: The other indicator is we've seen relative stability in the tractor classes for the last two quarters with single-digit declines, I would say, even though Q2 adjusted for that one transaction Tom alluded to. So we're seeing stability there. And then we are expecting some sort of recovery based on the capacity demand imbalance that we've enjoyed over the last two quarters. [inaudible] And we are sitting, you know, we did provide for you all our typical slide; we are sitting above our residual value estimates.

Speaker Change: So that's one indicator of the other indicators, we've seen relative stability in the tractor classes for the last two borders with single digit declines I would say, even the Q2 adjusted for that one transaction Tom alluded to so.

Speaker Change: We're seeing stability there and then we are expecting some sort of recovery based on the capacity demand imbalance that we've enjoyed over the last.

Speaker Change: Several quarters, we think we're getting to the bottom of that and we may hit an inflection point in Q4. So all indicators for us is that as we exit the year and going into 2025, we should see used vehicle market conditions get better.

John J. Diez: And even on the tractor side, there's room there that we can handle any, any sort of modest reduction. And then, if I could just ask one more, I know you talked about pre-buy at the analyst day a month ago, but I guess we've had the Chevron ruling since then. I don't know.

Speaker Change: And we are sitting we didn't provide for you all saw our typical slide we are sitting above our residual value estimates and even on the tractor side. There's there's room there that we can handle any any sort.

Speaker Change: Sort of a modest reduction.

Speaker Change: Okay, and then if I could just ask one more I know you talked about pre buy at the analyst day, a month ago, but we I guess, we've had the chevron ruling since then I don't know does that in any way change your views and how you think about timing magnitude of a pre buy in 'twenty five.

Scott H. Group: Does that in any way change your views on how you think about timing and the magnitude of a pre-buy in 25? Yeah, I think Scott. First of all, I want to make sure we're clear that we're not an OEM. So the pre-buy doesn't have, [inaudible] Where it does provide us with a more significant opportunity is if it behaves the way, if things behave the way they did in other technology chains, it does provide a lift for used equipment for the, for use after the technology change.

Speaker Change: Yeah, I think Scott first of all I want to make sure. We're clear that we're not an OEM. So the pre buy doesn't have.

Speaker Change: As big of a of an earnings impact on us in the short term as it would for an OEM. We're gonna during a pre buy gives us an opportunity to win more business because you got more customers, making decisions they pulled forward some.

Customers that we're going to renew a year out so there's certainly an opportunity to win more business, but the earnings for that lease will come in over the next six years. So it's not a big driver one way or the other it you'll be you'll have some additional capital probably is the way that'll work, where it does provide us a more significant opportunities if it behaves.

Speaker Change: If things behave the way they did in other.

Speaker Change: Technology chased it does provide a lift for used equipment for the first for the years. After the technology change so the equipment that we're buying today and even when we bought over last few years should be more valuable as.

Scott H. Group: So the equipment that we're buying today and the equipment we've bought over the last few years should be more valuable as Unknown Speaker As those vehicles hit the used truck market because that older technology does become more desirable from a business and economic standpoint. So that's really how I would say you should think about the Pre-Buy 4 Ryder. I mean, as it relates to Ryder, I think the other thing I've mentioned is, you know, when can it happen? Clearly, it should happen in 2026. Will it start early? I mean, I think back in 2006 and 2007, which is probably the one that's more like this one.

Speaker Change: As those giggles at the used truck market because that older technology does become more desirable from a business and economic standpoint. So that's really the how I would say you should think about the pre buy for rider I mean as it relates to rider I think the other thing I'd mention is when can it have.

Speaker Change: And clearly it should happen in 2026, well, let's start early I mean, I think back in 2006, and seven which is probably the one that's more like this one it started in the second half of 2005. So if it follows the same.

Robert E. Sanchez: It started in the kind of second half of 2005. So if it follows the same pattern, you would expect to see maybe a few, starting in the second half. Thank you guys. I appreciate it. Hey, Scott, I should probably clarify one other thing. On the high end of our range, just to be clear, I told you it's the contractual businesses that are helping us, Q2 to Q3. But I also want to mention, you know, we did say we were also assuming that, on the high end, our utilization for rental will get back to more normalized levels.

Speaker Change: Pattern you would be you would expect to see you.

Speaker Change: Starting in the second half of 'twenty five.

Speaker Change: Got it. Thank you guys appreciate it.

Speaker Change: Hey, Scott I should probably clarify one other thing on the high end of our range just to be clear I told you. The contractual businesses that are helping us from Q2 to Q3, but I also want to mention we did say we were also assuming that on the high end that our utilization for rental will get back to more normalized levels. So we are looking for an uplift in Q3.

Robert E. Sanchez: So we are looking for an uplift in Q3 for utilization. And to put that in perspective, I think, Tom, if you're a little color on where we are today versus Yeah, so we finished Q2 at 69%. You see that?

Speaker Change: For utilization and to put that in perspective, I think Tom gave you a little color on where we are today versus where we finished Q2, 69% and you see that you see that number where we're sitting here today.

Robert E. Sanchez: You see that number? We're sitting here today at around 73. So it's up four percentage points. And that's the seasonal uptick that you would expect to get. So obviously, that 4% improvement is going to bring with it a little bit more return as well. So we're early in the quarter. We're at 73.

Tom: At around 73, so it's up four percentage points and that's a seasonal up tick there too.

Speaker Change: Expect to get so obviously that.

Speaker Change: That 4%.

Speaker Change: <unk> is going to bring with it a little bit more return as well. So we're early in the quarter. We're at 73, we would expect that to come up some and things you know behaving that way and it should come up more and we're having some type of an improvement Q. It's come up in August and September. So that's still that's still TBD, but okay.

Robert E. Sanchez: We would expect that to come up some and things, you know, behaving that way, and it should come up more and we're having some type of improvement to come up in August and September. So, you know, that's still TBD, but hopefully that gives you a little color of where we're at. But that feels a little better than seasonal, right? That, you know, four-point improvement. Unknown Speaker Not really.

Speaker Change: It gives you a little color on where we're at.

Speaker Change: But that feels a little better than seasonal right that four point improvement.

Robert E. Sanchez: That tends to be kind of what we see seasonally. If it gets up above that 73, right, and we start to see the next few months, it continues to go up, then you're talking about something more than, Thanks for all the time. Appreciate it. And moving on to Daniel Imbro with Stephen. Yeah, thanks. I want to start on the dedicated market.

Speaker Change: No not really that tends to be kind of what we see seasonally.

If it gets up above that 73 right and.

Speaker Change: And we start to see the next few months. It continues to go up then you're talking about something more than seasonal.

Speaker Change: Thanks for all the time I appreciate it.

Scott H. Group: Thanks Scott.

Speaker Change: And moving on to Daniel <unk> with Stephens.

Daniel Robert Imbro: You guys noted in the slides, I think a lot of the DTS growth from Cardinal, if we excluded Cardinal August, how's the rest of the business growing either on a revenue or an EBT basis? And then related, obviously, the integrations are progressing, you have the financial capacity, but do you have enough human capital or operational bandwidth to integrate another large deal on that side of the business today? Just curious about your appetite to add scale.

Daniel: Yep, Thanks to a more of a third on the dedicated market you guys noted in the slides I think a lot of the D. T S growths from Cardinal if we excluded card in August.

How is the rest of the business growing either on a revenue and an EBT basis, and then related obviously the integrations progressing you have the financial capacity, but do you have enough human.

Speaker Change: Capital or operational bandwidth to integrate another large deal in that side of the business today, just curious your appetite to add scale.

Robert E. Sanchez: So, first, if you look at dedicated excluding Cardinal, it's kind of flattish on the growth side. Earnings are growing because of operational improvements, but, uh, flattish on the top line primarily is, you know, customers have, are downsizing their fleet, in some cases holding off decisions, and where it was on the margin, moving it to truckloads. Unknown Speaker So that's the first piece. The second piece around, do we have bandwidth to do another acquisition? I mean, we do.

Speaker Change: So so first if you look at dedicated excluding Cardinal it's kind of flattish on the growth side earnings are growing because of operational improvements but.

Speaker Change: Flattish on the topline primarily as you know customers have.

Speaker Change: That's downsizing their fleets in some cases holding off decisions and.

Speaker Change: Where it was on the margin moving into truckload.

Speaker Change: So that's the first piece the second piece around do we have bandwidth to do another acquisition I mean, we do we could.

Robert E. Sanchez: We could. However, we're really focused; this is a pretty significant acquisition for that business. So we're really focusing on making sure we get this one right and that we get it on track in terms of all the activities we have to do. We've got synergies to deliver for next year that we've already outlined as $40 to $60 million. And we feel good about where we're at. So integration's going well. And we found another perfect acquisition, and we certainly wouldn't have been able to do it. Great, that's helpful.

Speaker Change: However, we're really focused this is a pretty significant acquisition for that business. So we're really focusing on making sure we get this one.

Speaker Change: Right and that we'd get it on track in terms of the all the activities we have to do.

Speaker Change: We've got synergies to deliver for next year that we've already outlined as $40 million to $60 million.

Speaker Change: And we feel good about where we're at so integration is going well and we found as you know we found another perfect acquisition and we certainly haven't been with the do it but we're going to be very selective as we because we are during the period, while we're integrating this one.

Daniel Robert Imbro: And I'll squeeze a follow-up question on the guide. Used vehicle sales obviously weighed on 2Q, and I think truck prices have kept moderating at least a bit. There was an OEM chatter around potentially new truck price pressure coming in the back half. So I'm just curious, are you guys embedding that used vehicle sales remain pressured in the guide? Is that incorporated into the outlook today? Yeah, it is.

Speaker Change: Great that's helpful and I've got to squeeze a follow up question on the guide our used vehicles sales, obviously weighed on <unk> and I think truck prices have kept moderating at least a bit there was an OEM chatter around penetrating new truck price pressure coming in the back half. So I'm. Just curious are you guys embedding that used vehicle sales remained pressured in the guide is that is that incorporated into the outlook today.

Speaker Change: Yeah.

Daniel Robert Imbro: Well, as I mentioned, the high end of our range has some uplift as we get into the second half, probably more into the fourth quarter. The low end does not, and the low end has continued softness in the infrastructure.

Speaker Change: Yeah, and as well you mentioned the high end of our range, perhaps some uplift as we get into the second half probably more to the fourth quarter. The low end does not below it has continued.

Speaker Change: Softness in the used truck market.

Robert E. Sanchez: Great, I appreciate all the color. Best of luck. [inaudible] And the next question comes from Christyne McGarvey with Morgan Stanley. Hey, thanks for the second question. And maybe just on the supply chain business, just want to dig in a little bit more, you alluded to it at the top of the call, but what you guys are seeing in sort of the e-commerce omnichannel verticals and, you know, what customers are currently telling you about their kind of volume outlook as we look to the back half of the year and peak season. Unknown Speaker

Speaker Change: Great I appreciate all the color best of luck.

Thank you Mary Anne.

Speaker Change: And the next question comes from Christine Mccarthy with Morgan Stanley.

Christine Mccarthy: Hey, Thanks for the second question.

Christine Mccarthy: Maybe just from a supply chain business just wanted to dig in a little bit more you alluded to it at the top of the call, but what you guys are seeing sort of the e-commerce omnichannel vertical of them.

Speaker Change: You know what customers are telling you about their kind of volume outlook.

In the back half of the year.

Speaker Change: Sure It was.

Christyne McGarvey: As you know, we've had some softness in that business over the last year and a half. I'll let Steve give a little more color on what we're seeing in the e-commerce business. Yeah, thanks, Christine. Yeah, I would say right now that we're kind of flat year over year. If you think about the omnichannel business specifically and getting into e-commerce and the last mile, still, still kind of flattish, I'd say our customers right now are projecting a slight uptick, you know, more seasonal as you go into the peak period, but nothing, I would say, significant at this point.

Speaker Change: We've had some softness in that business.

Steve W. Martin: Thanks, I appreciate the call. Thank you. 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, thank you all. Thanks for being on the call and look forward to seeing you guys get on the road. Have a good day. Thank you. And that does conclude today's conference. We do thank you for your participation and have an excellent day.

Speaker Change: Over the last year and a half I'll, let Steve give a little more color what we're seeing in that ecommerce business.

Steve: Yeah. Thanks, Christine Yeah, I would say right now, we're kind of flat year over year.

Steve: If you think about the omnichannel business specific into getting into e-commerce and last mile.

Steve: Still still kind of flattish I'd say, our customers right now are projecting a slight uptick.

Steve: More seasonal as you go into the peak period, but nothing I would say nothing significant at this point.

Speaker Change: Thanks, I appreciate the color.

Christine Mccarthy: Thanks Christine.

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

Robert Sanchez: I'd like to turn the call back over to Mr. Robert Sanchez for closing remarks. Okay, thank you all. Thanks for being on the call and looking forward to seeing you guys get on the road. Have a good day.

Robert E. Sanchez: Okay. Thank you all thanks for being on the call and look forward to seeing the same thing.

Speaker Change: Guys, we get on the road.

Have a good day.

Unknown Executive: Thank you, and that does conclude today's conference. We do. Thank you for your participation, and have an excellent day.

Speaker Change: Thank you and that does conclude today's conference. We do thank you for your participation and have an excellent day.

Speaker Change: [music].