Ryder System (R) Q3 2026 earnings call transcript

I would now like to introduce Ms. Colleen Candela, Vice President and Professor Relations for Rider. Ms. Candela, you may begin.

Thank you. Good morning and welcome to Rider's 3rd Quarter 2026 earnings conference call. I'd like to remind you that during this presentation, you'll hear some forward-looking statements within the meeting 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. More detailed information about these factors and a reconciliation of each non-GAP financial measure to the nearest gap measure is contained in this morning's earnings release, earnings call presentation, and in Rider's filings with the Securities and Exchange Commission, which are available on Rider's website. Presenting on today's call are John Diaz, Chief Executive Officer, and Christy Gallo Aquino, 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 John.

Good morning, everyone, and thanks for joining us. The Rider team delivered our 8th consecutive quarter of comparable earnings per share growth. Strong results were driven by consistent execution on our strategic initiatives and improving performance in use for equal sales and rental.

I'll begin today's call with an update on our balanced growth strategy, followed by key highlights from our 3rd quarter performance. Christy will review our segment performance, capital spending, and capital deployment capacity. I'll then review our outlook for 2026. Let's begin with strategic updates. Consistent execution on our balanced growth strategy has created a more durable earnings and cash flow profile, enabling us to outperform prior cycles. The solid foundation built by the Rider team reflects actions taken to de-risk the portfolio, enhance returns and cash flow, and shift to a less capital-intensive, more resilient business mix. This foundation continues to evolve and strengthen as we execute strategic priorities that create value for customers and shareholders. Operational excellence is where we stand out and what enables us to leverage our full end-to-end capabilities to solve our customer's toughest logistics and transportation challenges.

Investing in customer-centric innovation that enables proactive supply chain and gives our customer a competitive advantage remains a key priority. We're enhancing the capabilities and driving the evolution of customer-facing platforms, such as rider share and rider guide, by embedding a gentic AI. We're also leveraging AI and FMS customer service and roadside assistance to enhance the customer experience while improving effectiveness. Additionally, we continue to drive operating efficiencies in our warehouses by deploying automation and robotics.

We remain focused on profitably growing our contractual relationships by increasing customer engagement across our portfolio port-to-door solutions. Over 90 percent of our revenue is generated by long-term contracts and this high-quality contractual base has proven to be a key driver of business model resilience over the cycle. Our three complementary business segments are leaders in North America logistics and transportation and position as well to support customers and their increasing need for their value-added solutions that we provide. I am confident our market-leaning solutions strong relationships and transport model will continue to drive long-term earnings growth. We're also excited to unlock the company's full earnings potential as we continue executing on our strategic priorities against the backdrop of improving freight environment.

Turning to page five, our business model is benefiting from a broader or more diversified revenue mix. Key financial and operating metrics have improved since 2018, reflecting the effectiveness of our balanced growth strategy. The majority of our 8.4 billion of revenue was from our fleet management segment. Rider generated comparable EPS of $5.95 and return on equity of 13%. Operating cash flow was $1.7 billion. This was during peak freight cycle conditions.

Now let's look at Rider today. Our revenue mix has shifted towards supply chain and dedicated with approximately 60% of 2026 expected revenue generated by these asset life businesses compared to 44% in 2018. As a result of organic growth, strategic acquisitions and innovative technology. Since 2018, we've more than doubled the size of our asset life businesses while also delivering increased profitability.

Our 2026 comparable EPS forecast range of $14.85 to $15.05 is more than two and a half times our 2018 comparable EPS of $5.95. Our return on equity forecast of 18 to 19% is also well above the 13% generated during the 2018 cycle peak. As a result of our profitable growth across our businesses, forecasted operating cash flow of $2.6 billion is nearly a billion or 50% higher than 2018.

In 2026, the business is expected to outperform prior cycles even when comparing the pre-transformation peak to the current market environment. Moving to key performance highlights from the third quarter. Comparable EPS for the quarter was up 21%, marking our eighth consecutive quarter of comparable EPS growth. Results reflect the strength of our contractual portfolio, benefits from strategic initiatives, as well as improving performance in use vehicle sales and rental. Return on equity increased to 18%, in line with our expectations given where we are in the from strategic initiatives during 2026. These initiatives are part of a multi-year program launched in 2024 with total benefits in excess of $170 million expected by the end of this year.

Consistent execution on these initiatives is the key driver of expected earnings growth in 2026. And finally, we're encouraged to see benefits across the business from continued strengthening of freight market conditions. Contractual sales remain strong across all three segments with activity accelerating and lease and dedicated. Increased sales activity and robust pipelines reflect the value of our solutions and increase customer demand for quality capacity.

Customers are facing a host of challenges including increasing difficulty attracting and retaining drivers, securing reliable and safe capacity, and addressing rising insurance transportation and litigation costs. These dynamics reinforce the value of riders and transportation and logistics solutions, and are leading to new customer wins and expansion activity with existing customers. Use vehicle sales results continued improving and reflect better than expected pricing and retail sales volumes. Demand for use vehicles benefited from lower market inventories and spot rates that remain elevated. Least miles per unit increase year over year and sequentially, indicating that our lease customers are increasing utilization of their fleets. Commercial rental utilization was strong at 77 percent of 700 basis points year over year. While demand remained below prior year, it increased sequentially in line with historical seasonal patterns and was particularly strong in the tractor class.

Third quarter utilization was the highest we've seen since 2022, and we expect utilization will remain near this level on the fourth quarter. The market remains in the early stages of a recovery, with conditions continuing to improve. However, geopolitical and macroeconomic factors remain key variables affecting the pace and durability of the recovery. I'll now turn the call over to Chrissy to further review our third quarter performance.

Thanks, John. Total company operating revenue increased 6 percent to 2.8 billion, reflecting contractual revenue growth in supply chain and fleet management.

Comparable earnings per share from continuing operations were $4.33 in the third quarter, up 21 percent from the prior year, reflecting benefits from higher earnings in fleet management and share repurchases. Return on equity, our primary financial metric, was 18 percent, up from prior year, reflecting share repurchases and earnings growth. Free cash flow increased to 992 million from 496 million in the prior year, reflecting lower capital expenditures year to date.

In fleet management solutions, operating revenue increased 5 percent reflecting contractual revenue growth. Earnings before taxes were 177 million, up 21 percent versus prior year, reflecting benefits from strategic initiatives on choice lease results, as well as strengthening market conditions in used vehicle sales and improved rental performance. In rental, utilization increased to 77 percent on a 12 percent smaller average fleet.

Rental results benefited from planned asset management action and higher pricing. Rental pricing was up 4 percent year over year. Fleet management EVT as a percent of operating revenue was 13.2 percent in the third quarter, up from prior year and in line with our long-term target of low teams over the cycle. We're encouraged to achieve this profitability level in the early stages of the freight market recovery.

Looking ahead, SMS profitability has further upside as used vehicle sales and rental market conditions normalized, and we begin to realize the benefits from contractual fleet growth. In used vehicle sales, year over year pricing increased 19 percent for tractors and 5 percent for trucks. Sequential pricing increased 15 percent for tractors and 6 percent for trucks. In the third quarter, the retail channel accounted for 61 percent of our sales volume, up from 54 percent in the prior year and up from 56 percent in the second quarter.

During the quarter, we sold 5,100 used vehicles in line with prior quarter and up 200 units year over year. Used vehicle inventory declined to 7,300 vehicles near the lower end of our target range. We're encouraged by continued improvement in used vehicle pricing, reflecting the early stages of a freight market recovery. In supply chain, operating revenue increased 9 percent, driven by new business and higher volumes and pricing, partially offset by lost business in automotive. Earnings prior year. Results benefited from higher volumes in e-commerce fulfillment and rider last mile, which leveraged our optimized omni-channel retail network. These benefits were partially offset by productivity of new business ramping up and lower automotive results. Supply chain EBT as a percent of operating revenue was 8.1 percent in the quarter at the segment's long-term target of high single digits.

In dedicated, operating revenue decreased 1 percent due to lower year-over-year fleet count, partially offset by higher pricing. Sequentially, the power fleet count increased and was up 100 units due to improved net sales activity. Earnings before taxes declined from the prior year, reflecting lower operating revenue and a prior year worker's compensation insurance benefit, partially offset by benefits from strategic initiatives. Dedicated EBT as a percent of operating revenue was 7.5 percent in the quarter at the segment's long-term high single digit target.

Next, let me cover capital expenditures. Year-to-date lease capital spending of 996 million was below prior year, reflecting the timing of sales activity. Year-to-date rental capital spending of 265 million was just below prior year. Our full year, 2026 capital expenditures forecast of 2.4 billion is above prior year and unchanged from our prior forecasts, as increased investments in our rental fleet will be offset by lower lease spending. Our 2026 forecast for lease capital expenditures is now 1.7 billion. Above prior year, but below our previous forecast, reflecting the timing of lease sales activity. Our 2026 forecast for rental capital expenditures increased to 500 million, up 300 million from our prior forecast. A portion of these vehicles were delivered during the third quarter, and we expect remaining deliveries towards the end of the year.

This rental investment positions us to benefit from improving market conditions and capture higher expected demand in 2027. We expect the ending rental fleet to increase 8 percent sequentially in the fourth quarter, resulting in an approximate 10 percent increase in the second half of 2026.

Even with these investments, our ending rental fleet remains below peak levels. We expect approximately 500 million in proceeds from the sale of used vehicles in 2026, in line with prior year. Full year 2026, net capital expenditures are expected to be approximately 1.9 billion. Our high quality contractual revenue base is generating higher earnings and cash flow, which is delivering our balance sheet at a more rapid pace than prior to our business model transformation. This momentum is creating incremental debt capacity, given our target leverage range of between two and a half and three times. As shown on the slide over a three-year period, we expect to generate approximately 10 and a half billion from operating cash flow and used vehicle sales proceeds.

This creates approximately three and a half billion of incremental debt capacity. Together, these sources provide around 14 billion of capital available for deployment.

Over the same three-year period, we estimate approximately nine and a half billion will be deployed for the replacement of lease and rental vehicles and for dividends. This leaves around four and a half billion, which equates to approximately 50 percent of our quarter-end market cap, available for flexible deployment to support growth and return capital to shareholders. We estimate about half of our flexible deployment capacity will be used for growth capital expenditures, and the remainder will be available for discretionary share repurchases, strategic acquisitions, and investments. Our capital allocation priorities remain focused on profitable growth, strategic investments, and returning capital to our shareholders.

Our top priority is to invest in organic growth. Aligned with these priorities, year to date, we funded lease and rental replacement cap X of approximately 1.3 billion, and returned 485 million to shareholders through buybacks and dividends.

Our balance sheet remains strong with leverage of 242 percent at quarter-end, slightly below our target range, and continues to provide ample capacity to fund our capital allocation priorities. With that, I'll turn the call over to John to discuss our outlook.

Thank you, Christy, and turning to our outlook. We've increased our full-year 2026 copper bar earnings per share forecast to a range of $14.85 to $15.05, up from a range of $14.40 to $14.80. The increase to our forecasts reflects stronger than expected third-quarter performance, and incremental benefits expected in the fourth quarter from improving market conditions and use vehicle sales and rental. We've increased our 2026 ROE forecast to a range of 18 percent to 19 percent to reflect higher expected earnings.

Our free cash will forecast of $700 million to $800 million remains unchanged, and our fourth-quarter copper boy EPS forecast range is $4.25 to $4.45, above prior year of $3.59. Our transform model is well positioned for continued earnings growth. We continue to expect 2026 earnings growth to be driven by incremental benefits from multi-year strategic initiatives. These initiatives represent structural changes we're making to the business and are not dependent on a cycle upturn. In 2024 and 2025, we realized approximately 100 million in benefits, leaving more than 70 million of incremental benefits expected in 2026. In addition to driving out performance relative to prior cycles, our transform model also provides a solid foundation for the business to meaningfully benefit from the cycle upturn.

By the next cycle peak, we estimate the potential benefit could be $250 million or more rental and use vehicle sales in fleet management with additional benefits from higher omnichannel retail volumes leveraging our rationalized footprint. We expect to recognize these benefits over time as freight market conditions improve. We now expect to realize approximately 40 million of upturn benefits in 2026, up from the 20 million in our prior forecast. These benefits are driven primarily by higher use vehicle sales results and to a lesser extent from improved rental performance.

Profitable contractual growth provides another meaningful opportunity for long-term earnings growth. Strong 2026 sales activity and lease dedicated and supply chain is creating growth momentum across our contractual businesses. We remain focused on pricing discipline and as results, we expect our portfolio of five to seven-year lease contracts in FMS and three to five-year contracts in supply chain and dedicated to provide strong returns and earnings durability.

We've been pleased by the business's resilience and performance over the most recent cycle in our confidence. Each of our business segments is well positioned to benefit from the cycle upturn. Our transform business model continues to deliver value to our customers and shareholders. We continue to our perform prior cycles and our results are benefiting from consistent execution and the strength of our contractual portfolio. We continue to see significant opportunity for profitable growth supported by secular trends, our operational expertise and ongoing momentum from multi-year strategic initiatives. We remain committed to investing in the future with products capabilities and technologies that will deliver value to our customers and our shareholders.

Our transform model provides a solid foundation for rider to meaningfully benefit from the cycle upturn. That concludes our prepared remarks. Please note we expect to follow our 10Q later today. At this time, I'll turn it over to the operator to open the call for questions.

Hey, good morning, Jordan. And thank you. Yeah, let me address some of the market conditions. And then I'll turn it over to Steve who could provide you details.

Just a reminder for the group, our dedicated business is highly specialized. So, much of the discussion you've heard in the marketplace, clearly for us is a little bit different in that 70 to 80% of our dedicated is highly specialized. These are typically private fleet conversions where we take over a private fleet and execute the transportation. Typically, we are dealing with very experienced professional drivers, which have a different wage structure than as you would consider a brand-new driver. So, what we've done over the last couple of years, and you heard us talk about this post-COVID is we've introduced to many of our contracts inflationary adjusters for wage inflation. And that's still in place. So, we would expect the impact to us to be really limited to select markets and not a broad-based kind of impact.

And I'll let Steve maybe talk a little bit about what that looks like.

Yeah, thanks, Jordan. Overall, you know, we're seeing about a mid-single-digit wage increase in certain regions. So, it's very targeted, not a wide range, nationwide issue. If you'll recall, back during COVID, we already worked on our contracts with our customers to really address this. So, we have annual CPI openers for the customers, but we also have driver wage indices that allow us, if we see a drastic change, to go back and open discussions with those customers. So, I think we're pretty well protected there. Sometimes it's not immediate, but we do have tight windows. So, you know, from our recruiting standpoint, our recruiting team does a great job. I remember 80 percent of our jobs are home every day or every night.

So, that's very attractive, along with our comprehensive safety program. So, I think we're in pretty good shape there, and we'll continue to focus on that.

Okay, I'll let Tom address that.

Yeah, I appreciate you pointing that out, but it was the first order where we saw all three key product lines, lease, select care, and rental, all with year over year revenue increases, albeit relatively small and rental, but it was nice to see it was the first time we had seen that increase year over year since Q4 of 2022. So, you know, we're expecting this to be the inflection point with rental. So, very encouraging to get to 13 percent this early in the cycle, but certainly encourage that we'll continue to do that with all three product lines growing year over year. So, we do expect to see that over the coming quarters and into next year, assuming we continue to see the tailwinds of the cycle.

Yeah, George, just to add to that, I think we want to underscore the fact that all the good work the team has been building up for with all the strategic initiatives, both on the maintenance side and the lease pricing side, it's gone as here in that business to get to that low teams level early in the cycle, really underscores the good work that the team has been doing. So, thank you for asking the question.

Thank you. If you find that your question has been answered, you may remove yourself from the Q by pressing star one again.

Yeah, Brian. I think you're asking primarily about the timing of the wage increases relative to one weekend recovery from our customers. I would say there's usually a bit of a lag. We're not seeing any significant drag in our business as of yet. I think it's, you're from Steve to our select markets where that becomes more cute and we're getting out in front of it pretty quickly.

We did make the acquisition of Cardinal back at early 2024. So, this will be the first cycle that we go through that with those customers. Many of those customers have been replaced over the last several years and we've introduced that kind of language and protection in those contracts, obviously. There may be a little bit of a tail, but we don't expect any material drag from that activity.

Yeah. As you saw in the numbers, we continue to see really good use vehicle performance. We are seeing at a broad market level, lower use vehicle market inventory. So, that's providing a little bit of tailwind for us. We did start moving our retail wholesale mix upward and getting back to normalized levels. So, we made improvements there. So, a good portion of that improvement of the 20 million going to 40 million, I would say it's huge vehicles, both driven by pricing and some of the actions we're taking to improve the overall retail mix. And then you are seeing the early signs of an inflection point as you're from Tom on Rental. We do expect this fourth quarter to be better than last year's fourth quarter.

So, you got a little bit of the carry through from Rental posted in that incremental 20 million for the year.

Yeah, I'll give you some high-level remarks and I think Tom can provide some details for you. If you think about what's been happening over the last several quarters, we've been seeing great sales performance. So, we do have visibility to win and when that equipment will start coming in for both dedicated and fleet management. Our expectations, we kind of flammed out in the porter. You may see a tick up in Q4 and then it becomes more meaningful for both of those businesses as you get into 2027 to start the year. But I'll let Tom maybe talk a little bit about what he's seen as lease and also what's happening with the product fleet.

Yeah, so it's probably a little bit different story depending on the product line. I'll start with Lee. So, as John mentioned here, we've had three consecutive positive net sales quarters in lease. But really accelerated here in the third quarter. Now with lease, some of the timing does take a little bit longer before you see those sales result transition into the fleet with some of the ins and outs and necessarily see the lease fleet improve yet by the end of this year. But certainly going into 2027 based on the sales results we're seeing, we would certainly expect to see that. In rental, I think we've seen the inflection point and you heard from some of the opening comments that we've placed orders and you're going to see that rental fleet continue to grow through this year with some benefit here in the fourth quarter but really to set us up for what we expect to be an increasing demand environment into 2027.

And then select care we started to see it in Q2 where we did start to sign new business. And in select care you see it much more quickly than you do with lease as you transition those maintenance contracts pretty quickly. So you saw fleet growth, pretty good fleet growth year over year. Our pipelines are really strong really at record levels and both select care and at lease. So we would expect that momentum to continue to carry into 2027 and see in 2027 all three product lines with fleet increases.

Yeah I would say look this is indicative of the early cycle when you get to the mid portion of the cycle and things are going we still need some freight demand to to accelerate. And if you get that acceleration especially around rental you're going to see that number spike up. So this is kind of typically the numbers you would expect early in the cycle and then as rental accelerates you're going to see that number increase significantly and then it tapers off as you're approaching the peak of the cycle a little bit the incremental improvements. But that's that's typical of what you should expect.

Sure so look we we if you've heard already on the call we've seen good acceleration in demand for the services we offer especially in the quarter we saw dedicated continue to build on the momentum we saw in Q2 as well as lease where we saw good activity we hadn't seen that level of sales activity going back to post-COVID so that was a good indication for for the business. We have seen continued solid performance on on the supply chain side on the sales side. We did see our transactional businesses continue to improve you saw use people pricing get better. You also saw rental utilization get back to normal levels mid 70s and and at the end of the quarter we were in the high 70s.

We expect that to continue and spill over into Q4 as we even add more fleet. So we're seeing increased demand on our contractual businesses increased demand from some of our transactional businesses. And as you heard we also saw better utilization of police fleets or these customers are running more miles on their fleet which should translate later on to more fleet additions as we move through the site.

Yeah just what we are seeing is actually more activity from dedicated capacity as the spot rate market has moved up and good quality capacity has been taken out of the market. They're coming to us looking for high level service at a reasonable price level. So we have seen a little bit of move back from that dedicated capacity space into our dedicated business. More importantly what we continue to see is customers looking for a specialized dedicated we're seeing fleet conversions continue to accelerate in this market environment because the driver environment is getting tighter we're seeing increased cost and insurance claims and the rising cost of equipment all those things are putting pressure when we could do it more efficiently and more effective for our customers but I'll have Steve maybe add a little bit of color on what he's seen in the dedicated space.

Yeah I'm going to add you know the pipeline remains healthy. You know we're seeing some good opportunities there as John said some of these customers traded cost per service earlier in the year and last year we're seeing that come back to us now as a tender accepted rate for truck load is on the rise so they want a service that they can count on. But again our lost business is down year over year versus last year so it should put us in good shape for 27.

Yeah well we're in a different part of the cycle and coming into you know this upturned one of the things that we do have plenty of that capacity on the balance sheet if you look at our targeted leverage is we're on the low end of our target leverage of 250 so we have plenty of capacity to our first priority will be to continue to grow the fleet rebuild the rental fleet which is down almost 30 percent from peak levels so we're going to continue to deploy capital there we're excited to deploy capital and in high return business fleet growth that we know we could execute against and then we'll look to opportunistic acquisitions obviously for us priorities include adding capabilities whether it's on the supply chain side or value of creative acquisitions that we can do and and take advantage of opportunities that are in the marketplace so we'll continue to look at those that would be our top priorities clearly to build a a stronger foundation for the future and then as we continue even in this higher capital spending cycle we would continue to look to deploy capital return capital more shareholders appreciate that response and then quickly on supply chain I think you guys talked about potentially maybe a contract loss there but also new contracts starting up so how do you think about getting back on track to long-term growth targets and margin targets in that business thank you well yeah we we've made mention about the lost automotive account we finally as you saw in the results our year where your revenue growth was strong at high single digits of nine percent so that is we've laughed that account we continue to see good demand in the marketplace and we expect that business to continue to grow when you look at the bottom line performance this business continues to deliver at high single digit targets we had another good quarter above eight percent and we expect that business to continue to deliver high single digit targets through the year but Steve anything else to add there yeah I would just add a couple things so you know John spoke about that lap automotive loss last year they've in that situation they went away from dedicated and supply chain to to truck load we've seen through our pipeline part of that opportunity coming back to us so I think I said that earlier in the year so we're really excited about that I think too if you look at our if you look at our pipeline we're seeing really solid increases in CPG industrial health care in retail so you know I think is as John said as well for us to get the low double digits that we'll take M&A activity but we had a really solid quarter thank you your next question comes from Rob down and with Wells Fargo hey good morning um to and thank you for taking our question we saw real nice acceleration in the revenue per active in in choice lease can you give us a sense what the roughly 200 basis point acceleration came from was it's just contractual renewals with your annual rate increase new business or something else well it's a function take your route it's a function of two factors one obviously as we renew the new equipment you've got higher inflation on that equipment and then we are making sure that our pricing discipline and hitting our target spreads is showing through so you're getting the benefit of that we've also had a record level redeployment so we put a lot more equipment to work which has improved the overall performance of the portfolio in the business that's helpful and then with with the response to an earlier question I think was Scott's about the fleet it sounded like there'd be continued pressure um in the near term I'm curious if we can see sequential growth um looking out to the fourth quarter within the choice lease product given some of that new contract momentum you had talked about earlier on the call yeah I would I want to say pressured meaning downward pressure right now we've kind of flammed out you should see that planning to uptick perhaps in Q4 and then continued as the new equipment starts arriving we should expect Q1 and and beyond that in 27 to continue to grow and accelerate okay and John just as my final follow up there in terms of the growth and any sense of like what that can be is it should we be thinking about like low single-digit growth can it be better given the backdrop yeah right now the business you've seen it overall the business is growing at mid-single digits that's the complement of all three product lines that Tom talked about as we get into the up cycle you're going to see an acceleration of the top line from rental that's probably going to be the catalyst you are going to see healthy growth from lease I would expect that to be in the mid to high single digits as we start growing that fleet and then you're going to see select your continued to liver mid-single digit growth based on the market conditions we have in front of us really appreciate the context your next question comes from Baskum Majors with Steven's ink thanks for taking my questions John just under two months ago I believe you guys commissioned a investor perception study of analyst and in shareholders and I know that's probably not complete yet but if you could share any early findings that you've had from that engagement what surprised you what hasn't and and and how is the board and management thinking about incorporating that into the company strategy going for thank you yeah Baskum I have not seen the results of that or reviewed that so it'll be premature for me to comment on that but I will tell you look I think generally speaking when we talk to shareholders and I think everyone's been very pleased with number one the execution of the strategy that we set out to to to go after the business mix has really dramatically changed has elevated as we've talked about the overall profitability and the resiliency of the model I think one of the things that we're really proud of is we've been able to take that those asset-like businesses we've more than doubled those businesses and have expanded margins while at the same time significantly improved the margins of our historically largest segment which was fleet management and we expect that to continue one of the things we're excited about for the future is really around how do we leverage our how do we grow our relationships which are deeply rooted and their long lasting relationships with many of our customers where we can help them and solve some of their biggest supply chain challenges so I think that will show through going forward in our strategy and what you hear from us but as far as early indications from that report out I I don't have it but clearly I think we're going to hear good things about the execution from the team on the overall strategy thank you your next question is from Jeff Kaufman with Citizens Bank thank you very much and congratulations I want to get back to the growth question again I know this has been answered a couple different ways but you had talked about an increase in demand and increase in mileage both contractual and transactional I was wondering if I could get a little bit more of a feel for it just in terms of is it an equipment size if you're seeing stronger than the other is it an industry segment or two that's a little stronger than others is a geographic because you know based on your comments it's across the board and kind of ubiquitous yeah I will tell you obviously there's going to be unique circumstances out there but I'll paint a broad brush picture what we're seeing in the landscape we are seeing customers add fleet which we hadn't seen in some time Jeff and when they're adding fleet we're seeing additions across all three asset classes we have seen on the dedicated side on specialized handling we have seen higher demand for construction and on the industrial side which is interesting and then when you look at asset classes and asset class performance I will tell you on rental specifically we did see an acceleration in the tractor class in the quarter and we're going to grow that tractor fleet by 10% as we as we move into next year by the end of the year so that hopefully gives you a little bit of a broad perspective I would say lease and dedicate is pretty broad base we are seeing good activity on the industrial side on the dedicated sales activity and then rental we did see an acceleration in both tractors and trailers which is indicative of maybe this freight market showing signs of life which is one of the encouraging signs we saw in the quarter no it's very very helpful so with respect to that rental fleet you had gone about kind of downsizing the ratio of tractors relative to trucks over the last year or two right now the rental fleet at least on my numbers if I combine the rental and the lease fleet the rental fleet represents about 21 percent of that total and normally that ratio is closer to 25 and tractors are going to be kind of tough to get over the next six to nine months just because the EPA mandate do you have order slots already or is that why you're saying you know we'll get that tractor fleet up 10 percent by the end of next year and then over what you know do we go back to 25 percent of the total fleets since a lot of rental is is holding for lease customers where the equipment isn't ready yeah we do feel confident we could we could grow that fleet everything you asked will be dictated by market conditions right if we continue to see demand we're gonna we're gonna meet the demand and we have not only the sloths but we obviously have a large fleet that we could redeploy equipment and do some things with our with our assets to meet some of that demand but what I will tell you is we've already taken action I'll let Tom speak to it a little bit more detail we've taken action already in the quarter of starting to bring in equipment and we made some orders as you saw in our increase in our rental capex for the balance of the year which we think are going to alleviate some of the some of the pinch points we're seeing in the marketplace utilization is not yet to screaming red levels like we saw post covid but it'll get there if if we don't have fleet and we're gonna continue adding fleet to meet that demand but Tom maybe you could add a little bit of color on the fleet itself yeah just just to clarify a point that the 10 percent increase will be from Q3 to Q4 so we've made a pretty significant tractor order already and your comment about availability of slots that's not an issue we certainly able to order what we needed and have a pretty you know significant tractor fleet increase here in rental just in the fourth quarter going into 2027 obviously we still have work to do on how much we'll will continue to add to that fleet the market will help dictate that but to your point about the percent of the fleet you might expect that to pick up a little bit a couple of percentage points depending on what the what the market tells us but you know looking at history you know during the peak times you typically do see that percentage increase a little bit on tractors and I would expect to see the same thing assuming that the market indicators are there okay great context thank you the next question comes from Ben Moore with Citibank hi good morning thanks for taking the question John Christian teen thanks for putting me in at the tail end here my first question is on your use vehicles fails net target last quarter you had it at 40 million for the year and it sounds like from from the previous conversation here maybe we're targeting 55 to 60 mill given your 20 million increase in your 26 benefits my question on that is kind of risk and put some takes to that given this quarter the strength was driven by as you mentioned both volume and retail mix 61 versus wholesale so the question is kind of how should we think about that trending in the rest of the year what's the risk on that could it be driven by the truck capacity dynamic turning a different direction or EPA 27 just wanted to get a sense of kind of risk to that and it takes yep yep Ben so you have a ride coming into the core we had signal to about a 40 million dollar use vehicle performance for the full year that was up about 20 million year on year we're now signaling up more closer I would say to 50 than to 60 as you called out what we do see in the marketplace which I think are favorable trends even despite some of the potential headwinds we could face is we continue to see market inventory decline our inventory continues to decline we're now at the low end of our target range of 7000 we're going to continue to sell through that inventory I would suspect that it's going to give us the opportunity to continue to move our retail mix upward right now we would expect to hopefully continue at the same level you saw in Q3 but as you get into next year we're going to get into the 70 and get into a 70 level with our retail wholesale mix based on the inventory levels we have so we have that lever for us based on the thin inventory we expect to face later next year so that's probably the biggest the biggest I would say hedge against market forces we continue to see capacity being taken out of the market and as long as the spot rates remain elevated I think there's going to be demand for equipment and we have equipment ready to to provide that service so that's kind of how we're seeing it right now and obviously comes to the February when we get back together we'll give you a look at the full year for 2027.

Great thanks for that color that's very helpful for how we should think about modeling the next quarter and into next year my follow-up question is on your what you're seeing as sort of in the road ahead strengthen your dts with your sort of five or three to five year contracts other truckload dedicated carriers have been seeing a ramp in their renewal rates for their contracts at the beginning of the year kind of starting point at up low single digits to now many of them are seeing high single digit low double digit are you can you say that you're seeing kind of a similar upward trend or better or worse and so this will signify kind of more benefit to come in 27 and 28.

Yeah we're different so we're not in that truckload carrier or dedicated capacity space like some of the competitors you alluded to most of our businesses specialized dedicated which is you know highly engineered solutions with specialized handling from our drivers in providing that service so I would say they behave a little bit different from a pricing perspective because you are not trading you know price for service per se they we've committed to a level service that they expect what you should expect is continued discipline from us on pricing and as wages and inflation continues to pick up we do have the measures and structurally in our we'll continue to sign good business because there's good activity in the marketplace and as capacity tines we should be able to take advantage of those opportunities as the market develops here so hopefully that gives you a little bit of color on how we see dedicated progress wonderful really appreciate that thank you your next question is a follow-up from scott group with wolf research hey thanks for the follow appreciate it just a couple things how are we thinking about impact of higher rates and I don't buy versus lease decisions return targets all that sort of stuff when you talk about return targets scott you're talking about returns and the overall business yeah it just does does higher rates impact your ability to return targets and things like that interest rates yeah so yeah so look for us we continue to see that we're on pace of hitting our return targets right just to reiterate because I think it's important we're in the early parts of the cycle our return on equities in that 18 to 19 percent level based on what we're seeing in the marketplace and some of the inflection points we discussed around that fleet management business we're going to move closer to our long-term target of low 20s over the cycle so we expect a progression there as that some of that 250 gets realized we are staying disciplined around our pricing both on the lease side you saw rental pricing improve sequentially in the quarter where you'd expect pricing and rental to continue to strengthen which can provide potentially upside opportunities on some of those returns from the cycle and as you just heard from myself on dedicated we continue to see good activity there obviously capacity is tight there is opportunity for us to get some good rates walk capacity remains tight and I would expect both supply chain and dedicated to continue to perform at their high single digit targets okay help flood and then last thing if I can um how are what's the impact of this still EPA uncertainty like are you your customers like headed into be placing orders for 27 now does this impact use just any thoughts on the EPA it's sure I'll let them fall in on what we are seeing I will tell you I think we we've called it out we didn't see kind of this pre-buy surge activity with the change in the technology but I do think Tom has some color on what we are seeing as price increases in the marketplace which customers are feeling the impact of that and we're helping them navigate through the increased pricing in the marketplace going into next year yeah I think it's pretty well understood at this point that price increases are coming in 2027 and despite that there was not any you know significant pre-buy activity some customers took advantage of it but certainly not to any any any large extent the non-performance penalties non-conformance penalties or NCPs are clear to the marketplace at this point so we kind of know where what pricing will look like and what type of increases they're they're looking at the only thing that's maybe unclear is what happens after the non-conformance penalties and the engine manufacturers put out their new technology engines that's that's certainly not clear to the market we probably won't know that till some point mid next year we do have those conversations with our customers on a consistent basis and the message is generally back now because pricing is is increasing and I think that's well understood in the marketplace thank you guys appreciate it yep your next question is a follow-up from brian often back with stapie morgan yeah hi thanks just a real quick one here um with the sequential pricing up i think it's 15 percent tractors and like mid-senal digits for for trucks is that on a like for like basis and i talk about shifting the channel around a little bit sometimes there's some vintage movement there as well just want to see how clean of a read that is for the overall market thanks yes there's hey brian thank you for the call for the question there is a little bit of noise there i would say like on the tractor side you're getting the benefit of a shift in retail mix there as we've gotten lighter on inventory we were able to you know take advantage of that and sell more through our retail channel so you are seeing that 19 percent be a little bit windated by our retail mix activity in the border generally speaking i would say we continue to see pricing on a like for like basis continue to improve across all all the asset classes so that's really the underpinning performance of the overall market dinner okay anyway to quantify roughly the the wind assistance or the asterisk we should put on that or is it too difficult to tell no i would say look i think absent the retail wholesale mix shift it will probably be high to low double digits found on the tractor side so it benefited by you know it's about 700 basis points that i've benefited from perfect thank you very much there are no further questions at this time i'd like to turn the call back over to mr John Diaz for any closing remarks yeah thank you everyone appreciate taking an interest in rider and look forward to seeing you out on the road take care now this concludes today's conference call you may now disconnect