Key Themes Overview February 2019
Safe Harbor and Non-GAAP Financial Measures Note Regarding Forward-Looking Statements: Certain statements and information included in this news release are forward-looking statements under the Federal Private Securities Litigation Reform Act of 1995, including our expectations regarding market trends and economic conditions, manufacturer production and delivery schedules, our financial condition, fleet growth, performance in our product lines and segments, the strength of our sales pipeline, demand, utilization and pricing trends in commercial rental, volumes and pricing trends in used vehicle sales, used vehicle inventory levels, residual values, return on capital spread, operating cash flow, free cash flow, capital expenditures, our ability to make investments in sales, marketing, IT and new product initiatives, benefits of our sales and marketing initiatives, maintenance costs on certain older model year vehicles, and the impact and adequacy of steps we have taken to address our cost structure, including our maintenance initiatives and zero-based budgeting process. Our forward-looking statements also include our expectations regarding the impact from the new lease accounting standard on our earnings, financial position, cash flow, leverage and the demand for our products and services. The expected impact on these items may differ due to changes in the distribution of lease fleet by age, the number of early terminations, vehicle type and lease terms, and the percentage of leases fulfilled with new versus used vehicles. All of these statements are based on our preliminary estimates and are subject to our continuing evaluation of our leases under the new lease accounting standard as well as necessary changes to accounting and business processes in order to implement the recognition and disclosure requirements of the new standard. All of our forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Important factors that could cause such differences include, among others, our ability to adapt to changing market conditions, lower than expected contractual sales, decreases in commercial rental demand or poor acceptance of rental pricing, availability of rental vehicles to meet demand and availability of labor to maintain our fleet at normalized levels, worsening of market demand for used vehicles impacting current pricing and our anticipated proportion of retail versus wholesale sales, lack of customer demand for our services, higher than expected maintenance costs due to, among other things, lower than expected benefits from maintenance initiatives and a newer fleet, setbacks or uncertainty in the economic market, implementation or enforcement of regulations, decreases in freight demand or volumes, poor operational execution particularly with new accounts and product launches, our ability to obtain adequate profit margins for our services, our inability to maintain current pricing levels due to soft economic conditions, business interruptions or expenditures due to severe weather or natural occurrences, competition from other service providers and new entrants, customer retention levels, loss of key customers, driver and technician shortages resulting in higher procurement costs and turnover rates, unexpected bad debt reserves or writeoffs, changes in customers' business environments that will limit their ability to commit to long-term vehicle leases, a decrease in credit ratings, increased debt costs, adequacy of accounting estimates, reserves and accruals particularly with respect to pension, taxes, depreciation, insurance and revenue, impact of changes in accounting policies, the sudden or unusual changes in fuel prices, unanticipated currency exchange rate fluctuations, our ability to manage our cost structure, and the risks described in our filings with the Securities and Exchange Commission. The risks included here are not exhaustive. New risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Note Regarding Non-GAAP Financial Measures: This presentation includes certain non-gaap financial measures as defined under SEC rules, including: Comparable Earnings Measures, which consist of comparable earnings from continuing operations, comparable earnings per share from continuing operations (as well as forecasts), comparable earnings before income tax and comparable effective income tax rate, and comparable earnings before interest, taxes, depreciation and amortization. Additionally, our adjusted return on average capital (ROC) and adjusted return on capital spread (ROC spread) measures are calculated based on comparable earnings items. Operating Revenue Measures, which consist of operating revenue for Ryder and its business segments, and segment EBT as a percentage of operating revenue. Cash Flow Measures, which consist of total cash generated and free cash flow. Debt Measures, including total obligations and total obligations to equity. Refer to Appendix - Non-GAAP Financial Measures for reconciliations of the non-gaap financial measures contained in this presentation to the nearest GAAP measure. Additional information regarding non-gaap financial measures as required by Regulation G and Item 10(e) of Regulation S-K can be found in our most recent Form 10-K, Form 10-Q and our Form 8-K filed with the SEC as of the date of this presentation, which are available at http://investors.ryder.com. 2
Key Themes Summary 1 2 3 4 5 6 Leader in transportation and logistics outsourcing with significant growth opportunity $1.3 trillion addressable market with ability to further penetrate given secular trends Large contractual revenue base supports long-term value creation through earnings and operating cash flow growth Industry leader in new product innovation to drive future earnings potential Increasing operating cash flow and counter-cyclical free cash flow supports strong balance sheet, strategic optionality, and increasing shareholder returns Executing on our strategy 3
1 Leader in Transportation and Logistics Outsourcing Solutions $ $ RYDER IS A FORTUNE 500 COMPANY WITH 8.4 Billion Annual Revenue (1) 306 Million 800+ Comparable Earnings (1,2) Maintenance Locations 272,100 Vehicles 55 Million Sq. Ft. Warehouse Space 39,600 Employees REVENUE BY SEGMENT (3) 61% 13% 26% Fleet Management Solutions (FMS) Supply Chain Solutions (SCS) Dedicated Transportation Solutions (DTS) More than 90% of revenue is generated in North America (1) These amounts result from continuing operations; (2) Net Earnings from Continuing Operations are $276 million, (3) % of 2018 Operating Revenue 4
1 Complementary Business Segments Provide Broad Range of Value-added Solutions FMS DTS SCS Solutions comprising two or more services: Vehicle Maintenance, Financing and Support Services Drivers, Routing, Scheduling and Administration Management of Outside Carriers Warehousing Integrated Logistics Solutions E-fulfillment / Last Mile Delivery Diversified customer base representing most industry segments 5
2 $1.3 Trillion Addressable Market Provides Significant Growth Opportunities RYDER MARKET SHARE <1% of $1.3 TRILLION MARKET FMS DTS SCS $200B Commercial Vehicle Market $50B $12B $800B Dedicated Transportation Market $400B $16B $1.1T Warehouse & Truck- Based Transportation Management Market $900B $127B Addressable DIY Market Highly Addressable DIY Market (Market Opportunity) Currently Outsourced Growth opportunity to penetrate large, non-outsourced ( DIY ) market Sources: Polk/HIS, Armstrong & Associates, Ryder estimates. 6
2 DIY Transportation and Logistics Market Faces Increasing Challenges from Secular Trends that Favor Outsourcing SECULAR TRENDS THAT SUPPORT OUTSOURCING DECISION Increased Vehicle Cost and Complexity; More Stringent Regulations Driver and Technician Shortage Dynamic Supply Chains Disruptive Technologies Purchase costs up 50-65% (1) Maintenance cost up 25-100% (1) Safety regulations may reduce freight capacity / productivity Current driver shortfall is 50k expected to be 175k by 2026 (2) Technician shortage 140k needed by 2022 (2) Growth in e-commerce and omni-channel More nearshoring / onshoring activity Low / zero-emission electrified powertrains Semi-autonomous control systems Asset sharing opportunities supported by technology platforms Ryder is well positioned to address challenges facing DIY transportation and logistics market (1) Compared with power vehicles with pre-2007 technology (2) American Trucking Association and U.S. Department of Labor 7
3 Majority of Revenue Comes from a Growing Base of Contractual Revenue % of 2018 Operating Revenue Contractual Revenue Growth (1) 14% FMS: Commercial Rental Transactional revenue 9% 11% 10% 86% FMS: ChoiceLease FMS: SelectCare DTS SCS Supported by 3-7 year customer contracts 1% 0% 1% PRE-GROWTH STRATEGY (2000-11) 5% 6% POST-GROWTH STRATEGY (2011-18) 5% 2019 FORECAST FMS DTS SCS Record contractual sales in 2017 and 2018 7 years of organic lease fleet growth Contractual revenue growth accelerated following implementation of Growth Strategy (1) CAGR is operating revenue ex-acquisitions. Growth in contractual revenue supports long term value creation 8
3 Contractual Revenue Provides More Stable Earnings and Operating Cash Flow Future Revenue Contracted as of Year-end ($B) % of Earnings before Tax from Contractual Revenues (1) $16.6 78% 85% 78% 49% 51% $15.3 2017 2018 ChoiceLease locks in future revenue and cash flow over average 6-year life DTS & SCS - multi-year contracts with long-term customer retention 2014 2015 2016 2017 2018 Contractual revenue growth accelerated following implementation of growth strategy Smaller proportion of earnings coming from transactional used vehicle sales and rental businesses Growth in contractual revenue improves earnings stability and visibility (1) ChoiceLease, SelectCare, DTS and SCS 9
3 Overcoming Used Vehicle Downturn and Maintenance Headwinds Through Growth and Cost Management Negative Impact on Comparable EPS Comparable EPS Positive Impact on Comparable EPS Weak used vehicle pricing due to market downturn that began in mid- 2015 Elevated maintenance costs on certain older model year vehicles that are expected to exit the operating fleet $6.10 $6.15 * $5.79 $5.42 $4.53 2015 2016 2017 2018 2019F Beginning in 2018, earnings from revenue growth and cost management more than offset headwinds from used vehicle sales and elevated maintenance costs Earnings growth resumed in 2018 as earnings from growth and cost management more than offset headwinds (*) represents midpoint of FY19 forecast range of $6.00 - $6.30 10
3 Actions to Further Minimize Future Earnings Variability USED VEHICLE SALES COMMERCIAL RENTAL De-risked new leases signed Reduced residual value assumptions below the 5-year rolling average to current market rates Grow rental fleet commensurate with lease fleet growth Y/E 2018 rental fleet = 24% of total fleet (1) vs. target of ~25% Expanded used truck retail capacity through direct marketing and inside sales to minimize use of wholesale channel De-fleet excess rental capacity into lease during cyclical downturn Fulfill lease contracts with mid-life rental vehicles Lowering accounting residual values using accelerated depreciation and the 5 year average methodology Assuming no market change, accounting residuals expected to be at market prices by the end of 2021 MAINTENANCE COSTS Exit of model year 2012 vehicles expected to reduce 2019 maintenance cost headwind to $11M vs. $30M headwind in 2018 Initiating a $75M multi-year effort to reduce maintenance costs - $20M benefit expected in 2019 (1) Power vehicles Actions taken on transactional businesses and maintenance costs are expected to further reduce earnings variability 11
4 Industry Leader in New Product Innovation to Drive Future Earnings Potential Description Environment Ryder s Approach Advanced Vehicle Technology the Tesla effect Low/zero emission electrified powertrains Semi- and fully autonomous control systems Speed of adoption and regulations uncertain Likely initial use cases: Electrified light-duty vehicles Autonomous drayage and long-haul applications Partnerships for deployment of new technologies Chanje, Workhorse and Nikola Signed customer deal for largest EV order in market (1k vehicles) Establish EV/AV maintenance standards with OEMs Asset Sharing the Uber effect Monetize underutilized trucks or freight capacity by providing access to another party with need Early stages of platform and marketplace Gain capacity visibility Launched COOP by Ryder TM, a peer-to-peer digital platform for commercial vehicle sharing Ongoing enhancements to RyderShare TM platform for freight visibility e-commerce the Amazon effect Movement of goods through parallel supply chains direct to customers B2B or B2C E-commerce growth accelerating, but only ~10% of market Big & bulky e-commerce is a growing category Provide omni-channel solutions addressing e-commerce needs MXD acquisition significantly expanded capabilities in e- commerce fulfillment and last mile delivery of big and bulky goods Ryder s new e-commerce fulfillment solution for large to small parcels direct to consumer 12
5 Understanding Ryder s Cash Flow Profile Contractual nature of business portfolio provides reliable, multi-year operating cash flow ChoiceLease growth requires upfront capital expenditure; not committed until a lease contract is signed with customer, while cash returns are generated over typical 5-7 year contract period Ryder s free cash flow is counter-cyclical with growth Lumpy replacement cycles can also drive uneven replacement capital for lease and rental Dedicated Transportation Solutions and Supply Chain Solutions provide solid positive Free Cash Flow throughout cycle Contractual growth drives higher, reliable, multi-year operating cash flow. Free cash flow will be negative during periods of rapid growth and positive during period of slower growth. 13
5 Impact of Growth Capital Growth Capital Total Cash Generated ($M) 1,700 1,587 ($M) 2,580 1,292 1,940 2,099 2,050 2,106 585 582 2015 2016 2017 2018 2019F 2015 2016 2017 2018 2019F Free Cash Flow: (728) 194 190 (944) (1,120) Free Cash Flow is impacted by growth capital in the period of initial vehicle investment and by variability in the timing of replacement capital Total Cash Generated increases following periods of growth as capital is priced into lease contracts and recovered over the contract term Growth capital investment positions Ryder for long term value creation 14
5 Balanced Capital Allocation Philosophy Leads to Attractive Shareholder Returns Capital Expenditures Dividend Growth Acquisitions Share Repurchases Organic growth: primarily vehicle capex for contractual lease fleet Growth reflects long-term earnings growth; 10% CAGR since 2005 FMS: tuck-ins drive operating leverage SCS/DTS: expand capabilities, industries served Anti-dilutive: offset dilution creep Discretionary: driven by balance sheet leverage Over $1.6B in Cash Returned to Shareholders Over The Last Decade (2008 2018) 2008-2018 $803 M $838 M $1.6B Dividends Share Repurchases 15
6 Execution Scorecard in 2018 Forecast (1) Results Lease Fleet Growth 6,500 vehicles 9,600 Operating Revenue Growth FMS DTS SCS 8% 9% 6% 9% 10% 17% Comparable EPS $5.40 $5.70 $5.79 FCF ($600M) ($944M) ROC Spread (2) 0 bps 10 bps Used Vehicle Inventory ~7,000 vehicles 6,900 Includes outperformance in contractual lease sales Delivered on our commitments while investing for long-term growth (1) Initial full-year forecast issued on February 16, 2018 (2) Rolling 12 months. 16
6 Progress Toward Three-year Financial Targets Target (1) 2018 Results 2019 Forecast (2) Operating Revenue Growth FMS DTS SCS 6 7% 9 10% 7 8% EBT as % of Op. Revenue FMS DTS SCS ROC Spread 10 12% 8 9% 8 9% 100 150 bps Leverage (Debt-to-Equity) (1) Three-year targets provided on 2/16/18 (2) 2019 forecast provided on 2/14/19 (3) Reflects impact from new lease accounting standard 2018: 200 250% 2019: 250 300% (3) Met Modestly Below Significantly Below 17
Summary of Key Themes Leader in transportation and logistics Large addressable market Increasing market penetration given secular trends Contractual revenue base providing stable earnings growth Industry leader in product innovation Counter-cyclical cash generation Balance sheet strength Returning cash to shareholders 18
Appendix
Appendix: Non-GAAP Reconciliation Earnings from Continuing Operations Reconciliation FY18 Earnings GAAP $ 275.6 Non-operating pension costs 4.7 Pension-related adjustments Gain on sale of property Restructuring and other charges, net 7.7 Goodwill impairment 15.5 Tax law changes (3.0) Tax reform-related and other tax adjustments, net 10.0 Uncertain tax position (4.4) Operating tax adjustment Comparable $ 306.2 20
Appendix: Non-GAAP Reconciliation EPS from Continuing Operations Reconciliation ($ Earnings Per Share) 2015 2016 2017 2018 2019 Forecast Diluted EPS $ 5.73 4.95 14.90 5.21 $5.18 to $5.48 Non-operating pension costs 0.19 0.33 0.31 0.09 0.36 Goodwill impairment - - - 0.29 - Restructuring and other charges, net 0.23 0.06 0.25 0.15 0.10 Tax reform-related and other tax adjustments - - (10.78) 0.19 - Uncertain tax position - - - (0.08) - Pension lump sum settlement expense - - - - - Pension-related adjustments (0.01) 0.09 0.06 - - Operating tax adjustment - - 0.03 - - Gain on sale of property - - (0.27) - - Acquisition-related tax adjustment - - - - - Acquisition transaction costs - - - - - Tax law changes (0.04) - 0.03 (0.06) - Expiring state net operating losses - - - - 0.10 ERP implementation - - - - 0.26 Comparable EPS $ 6.10 5.43 4.53 5.79 $6.00 to $6.30 21
Appendix: Non-GAAP Reconciliation Cash Flow Reconciliation ($ Millions) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 Forecast Cash Provided by Operating Activities from Continuing Operations $ 1,442 $ 1,601 $ 1,548 $ 1,635 $ 2,045 Proceeds from Sales (Primarily Revenue Earning Equipment) (1) 427 421 429 396 450 Collections of Direct Finance Leases (1) 71 77 73 75 85 Other, net (1) Total Cash Generated 1,940 2,099 2,050 2,106 2,580 Capital Expenditures (1), (2) (2,668) (1,905) (1,860) (3,050) (3,700) Free Cash Flow (3) $ (728) $ 194 $ 190 $ (944) $ (1,120) Memo: Depreciation Expense (4) $ 1,187 $ 1,187 $ 1,255 $ 1,395 $ 1,600 Net cash provided by (used in) financing activities 731 (186) (155) 1,093 1,100 Net cash used in investing activities (2,161) (1,406) (1,366) (2,746) (3,165) (1) Included in cash flows from investing activities. (2) Capital expenditures presented net of changes in accounts payable related to purchases of revenue earning equipment. (3) Non-GAAP financial measure. We refer to the net amount of cash generated from operating activities and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations as free cash flow. We calculate free cash flow as the sum of net cash provided by operating activities and net cash provided by the sale of revenue earning equipment and operating property and equipment, collections on direct finance leases and other cash inflows from investing activities, less purchases of property and revenue earning equipment. (4) Includes adjustment to reclassify losses from fair value adjustments on our used vehicles to Gains on Used Vehicles, Net. 22
Appendix: Non-GAAP Reconciliation 2018 Net earnings (2) $ 273 Restructuring and other charges, net and other items 25 Income taxes 98 Adjusted earnings before income taxes 397 Adjusted interest expense (3) 179 Adjusted income taxes (4) (142) Adjusted net earnings [A] $ 434 Adjusted Return on Capital Reconciliation (1) ($ Millions) Average total debt (5) $ 5,979 Average off-balance sheet debt (5) 4 Average total shareholders' equity (5) 2,874 Average adjustments to shareholders' equity (6) (43) Adjusted average total capital [B] $ 8,813 Adjusted return on capital [A]/[B] 4.9% Weighted average cost of capital 4.8% Adjusted return on capital spread (7) 0.1% (1) Non-GAAP elements of this calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital is provided on this slide. (2) Earnings calculated based on a 12-month rolling period. (3) Interest expense includes interest on off-balance sheet vehicle obligations. (4) Income taxes were calculated by excluding taxes related to comparable earnings items and interest expense. (5) The average is calculated based on the average GAAP balances. (6) Represents comparable earnings items for those periods. (7) Represents the adjusted return on capital vs. cost of capital (trailing 12 months). 2019 Forecast reflects impact from lease accounting change. @ 2018 Ryder System, Inc. All Rights Reserved. 23
@ 2018 Ryder System, Inc. All Rights Reserved. 24