Prepared remarks
Good morning, and welcome to the Ryder Systems Second Quarter 2025 Earnings Release Conference Call. Today's 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 of Investor Relations for Ryder. Ms. Candela, you may begin.
Thank you. Good morning, and welcome to Ryder's Second Quarter 2025 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. 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; John Diez, President and Chief Operating Officer; and Cristy 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 Robert.
Good morning, everyone, and thanks for joining us. I'm proud of the Ryder team for delivering our third consecutive quarter of double-digit earnings per share growth. Second quarter results were above our expectations, driven by outperformance in our Supply Chain segment. This benefit was partially offset by increased used vehicle wholesale volumes to manage aged inventory levels. The business continues to outperform prior cycles, driven by our resilient contractual portfolio that reflects the actions we've taken under our balanced growth strategy to derisk the business, increase the return profile and accelerate growth in our asset-light supply chain and dedicated businesses. I'll begin today's call by providing you a strategic update. Christy will then take you through our second quarter results, and John will review capital expenditures and our increasing capital deployment capacity. I'll then review our updated outlook for 2025 and discuss how we expect to leverage the momentum of our transformational business model.
Let's begin on Slide 4. Turning to Slide 4. The structurally higher earnings profile of our transformed business model and execution on our strategic initiatives continue to drive earnings growth. We remain on track to realize the benefits from the strategic initiatives outlined during the February earnings call. These benefits are the key drivers of the year-over-year earnings growth we are expecting. Long-term secular trends that favor transportation and logistics outsourcing remain strong. The value that our solutions bring to our customers remains compelling. We are also well positioned to benefit from increased industrial manufacturing in the U.S. as 93% of our revenue is generated here. We delivered return on equity of 17% for the trailing 12-month period, which is in line with our expectations during a freight cycle downturn and continues to demonstrate the resilience of our transformed business model.
Earnings growth from our high-performing contractual portfolio reflects our value proposition as well as our pricing discipline. Over 90% of our operating revenue is generated by multiyear contracts. We expect our transformed and cycle-tested business model to continue to outperform prior cycles. In addition to increasing the return profile of our business, the earnings power of our contractual portfolio continues to provide us with increased capital deployment capacity, which we expect to use to support profitable growth and return capital to shareholders. Earlier this month, we announced a 12% annualized increase to our quarterly dividend, reflecting higher profitability and improved returns over the cycle. In 2025, we returned $330 million to shareholders by repurchasing approximately 1.7 million shares and paying our dividend. Since 2021, we have repurchased approximately 21% of our shares outstanding and increased the quarterly dividend by 57%.
We increased our 2025 forecast for free cash flow by approximately $500 million to a range of $900 million to $1 billion due to lower expected capital spending and the estimated cash flow benefit of approximately $200 million from the permanent reinstatement of tax bonus depreciation. Slide 5 illustrates how 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, the majority of our $8.4 billion of revenue was from Fleet Management Solutions. Ryder generated comparable earnings per share of $5.95 with an ROE of 13%. Operating cash flow was $1.7 billion. This was during peak freight cycle conditions. Now let's look at what we're expecting from Ryder today. In 2025, a year in which freight market conditions are expected to remain near trough levels, our transformed business model is expected to generate meaningfully higher earnings and returns than it did during the 2018 peak.
Through organic growth, strategic acquisitions, and innovative technology, we have shifted our revenue mix towards Supply Chain and Dedicated with 60% of 2025 revenue expected to come from these asset-light businesses compared to 44% in 2018. 2025 comparable earnings per share is expected to be between $12.85 and $13.30, more than double 2018 comparable earnings per share of $5.95. ROE is expected to be approximately 17%, up from 13% generated during the 2018 cycle peak. As a result of profitable growth in our Contractual Lease, Dedicated and Supply Chain businesses, operating cash flow is expected to increase to $2.8 billion, up approximately 65% from 2018. As shown here, in 2025, the business is expected to continue to outperform prior cycles even when comparing the pre-transformation peak to the current market environment. We're proud of the strong performance of our transformed business model and believe that executing on our balanced growth strategy will continue to deliver higher highs and higher lows over the cycle. I'll now turn the call over to Christy to review our second quarter performance.
Thanks, Robert. Total company results for the second quarter are on Page 6. Operating revenue of $2.6 billion in the second quarter, up 2% from the prior year, primarily reflects contractual revenue growth in Supply Chain Solutions and Fleet Management Solutions. Comparable earnings per share from continuing operations were $3.32 in the second quarter, up 11% from $3 in the prior year. The increase reflects higher contractual earnings and share repurchases. Return on equity, as Robert previously mentioned, our primary financial metric was 17%, up from the prior year, primarily reflecting higher contractual earnings. The ROE benefit from share repurchases was offset by used vehicle sales and rental performance. Year-to-date free cash flow increased to $461 million from $71 million in the prior year, reflecting lower working capital needs and reduced capital expenditures. The benefit in working capital reflects lower tax payments and the timing of vendor payments.
Turning to Fleet Management results on Page 7. Fleet Management Solutions operating revenue increased 1%, driven by ChoiceLease revenue, which was up 2%. Pretax earnings in Fleet Management were $126 million, down year-over-year, reflecting weaker freight market conditions. Higher ChoiceLease performance driven by pricing and maintenance cost savings initiatives partially offset lower used vehicle sales results. We continue to see progress on our pricing and maintenance cost initiatives and remain on track to achieve the benefits targeted for this year. Used vehicle sales results in the second quarter were negatively impacted by the decisions we made to exit out of some aged inventory by utilizing our wholesale channels. We do not plan on executing this level of wholesale trades going forward. And given that we are not expecting any significant change to market conditions for the second half, we expect used vehicle sales results to be in line with first quarter levels for the next 2 quarters.
Rental results for the quarter reflect market conditions that remain weak. The sequential increase in rental demand for the quarter was in line with the prior year and below historical trends as contemplated in our prior forecast. Rental utilization on the power fleet was 70%, up from 69% in the prior year on an average active power fleet that was 7% smaller. Although utilization remains below our target range of mid-70s, year-over-year comparisons improved for the first time since the third quarter of 2022. Rental power fleet pricing was up 4% year-over-year. Fleet Management EBT as a percent of operating revenue was 9.7% in the second quarter, below our long-term target of low teens over the cycle. Page 8 highlights used vehicle sales results for the quarter. Year-over-year, used tractor and truck pricing both declined 17%. On a sequential basis, pricing for tractors increased 3% and pricing for trucks decreased 10%.
Pricing in the second quarter reflects increased wholesale volumes to manage aged inventory. Approximately 50% of our sales volume went through retail sales channels this quarter compared to 65% in the prior year. Pricing in our retail sales channel increased sequentially with tractor retail pricing up 10% and truck retail pricing up 4%. During the quarter, we sold 6,200 used vehicles, up sequentially and versus the prior year. Used vehicle inventory of 9,600 vehicles was slightly above our targeted inventory range. Used vehicle pricing remained 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. Although used vehicle sales results were negatively impacted by higher wholesale volumes, lower levels of aged inventory position us to increase our use of the retail sales channel where we realize higher pricing.
As such, we expect a higher retail sales mix in the balance of the year compared to current levels. Turning to supply chain on Page 9. Operating revenue increased 3%, driven by new business as well as higher customer volumes and pricing. Supply chain earnings increased 16% from the prior year, reflecting operating revenue growth and improved performance from our initiative to optimize our omnichannel retail network. Supply Chain EBT as a percent of operating revenue was 9.7% in the quarter, at the high end of the segment's long-term target of high single digits. Moving to Dedicated on Page 10. Operating revenue decreased 3% due to lower fleet count, reflecting the prolonged freight downturn. Dedicated EBT increased 1% year-over-year, reflecting acquisition synergies and prior year integration costs that were partially offset by lower operating revenue. DTS results continued to benefit from strong performance of our legacy Dedicated business, reflecting pricing discipline as well as favorable market conditions for recruiting and retaining professional drivers. Dedicated EBT as a percent of operating revenue was 7.9% in the quarter at the segment's long-term high single-digit target.
Turning to Slide 11. Year-to-date lease capital spending of $832 million was below prior year, reflecting delayed OEM deliveries in the prior year. Rental capital spending of $268 million was also below prior year levels. For the full year 2025, lease spending is now expected to be $1.8 billion, down $300 million from our prior forecast, reflecting lower lease sales activity. Lease spending is expected to be down $200 million from the prior year, reflecting delayed OEM deliveries in 2024. We expect the ending lease fleet to remain fairly consistent with current levels by year-end. Forecasted rental capital spending remains at approximately $300 million, down from the prior year. Our ending rental fleet is expected to decrease 12% by year-end, and our average rental fleet is expected to be down 5%. The rental fleet remains well below peak levels as we manage through an extended market downturn. In rental, we've continued to shift capital spending to trucks versus tractors. As of the second quarter, trucks represented approximately 60% of our rental fleet. Our full year 2025 gross capital expenditures forecast of approximately $2.3 billion is below the prior year. We expect approximately $500 million in proceeds from the sale of used vehicles in 2025 and full year 2025 net capital expenditures are expected to be approximately $1.8 billion.
Turning to Page 12. In addition to increasing the earnings and return profile of the business, our transformed contractual portfolio is also generating significant operating cash flow. Improving the overall cash generation profile of the business is one of the essential elements of our balanced growth strategy. Better earnings performance is driving higher cash flow generation and, in turn, is delevering our balance sheet at a more rapid pace. This momentum is creating incremental debt capacity given our target leverage range of between 2.5 and 3 times. As shown on the slide, over a 3-year period, we now expect to generate approximately $10.5 billion from operating cash flow and used vehicle sales proceeds. Our operating cash flow will benefit from the permanent reinstatement of tax bonus depreciation and improving contractual earnings. This creates approximately $3.5 billion of incremental debt capacity, resulting in $14 billion available for capital deployment.
Over the same 3-year period, we estimate approximately $9 billion will be deployed for the replacement of lease and rental vehicles and for dividends, leaving around $5 billion of capital available for flexible deployment to support growth and return capital to shareholders. We estimate about half of this capacity will be used for growth CapEx and the remaining to be available for discretionary share repurchases and strategic acquisitions and investments. Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long-term profitable growth and return capital to shareholders. Our top priority is to invest in organic growth. We've taken a balanced approach to investing and since 2021, have invested approximately $1.1 billion in strategic M&A and have deployed approximately $1.1 billion for discretionary share repurchases, reducing our share count by 21%. Our balance sheet remains strong with leverage of 251% at quarter end at the low end of our target range and continues to provide ample capacity to fund our capital allocation priorities.
With that, I'll turn the call back over to Robert to discuss our outlook. Turning to our outlook on Page 13. Our full year 2025 comparable EPS forecast is updated to a range of $12.85 to $13.30, above the prior year of $12 as higher contractual earnings and the benefits from our strategic initiatives more than offset the impact from market conditions in rental and used vehicle sales. Our updated forecast continues to reflect contractual earnings growth with a more muted second half recovery in used vehicle sales. Although sales pipelines remain strong, the prolonged freight downturn and economic uncertainty continue to cause some customers and prospects in Lease and Dedicated to delay decisions. These near-term contractual sales headwinds are consistent with current market conditions. We are, however, encouraged by robust sales and pipeline activity in Supply Chain. Our 2025 ROE forecast is revised to 17% from a range of 16.5% to 17.5%.
The revised forecast remains in line with our expectations given current market conditions. As mentioned earlier, we increased our free cash flow forecast by $500 million to a range of $900 million to $1 billion to reflect lower capital expenditures and the permanent reinstatement of tax bonus depreciation. Our third quarter comparable EPS forecast range is $3.45 to $3.65 versus the prior year of $3.44. Turning to Page 14. The key driver of expected earnings growth in 2025 is incremental benefits from multiyear strategic initiatives that are well underway and related to our contractual lease, dedicated, and supply chain businesses. We have good visibility to these initiatives. They represent structural changes that we're making to the business and are not dependent on a cycle upturn. Upon completion, we expect these initiatives to generate annual pretax earnings benefits of approximately $150 million, which will be a key component to achieving our long-term ROE target of low 20s over the cycle.
In Fleet Management Solutions, we expect to realize an incremental annual benefit of approximately $20 million in 2025 from our lease pricing initiative. This results in a total of $125 million benefit relative to our 2018 run rate, reflecting portfolio pricing under the new model. We expect $50 million in benefits over multiple years from our maintenance cost savings initiative announced in mid-2024. In Dedicated Transportation Solutions, we expect to realize $40 million to $60 million in annual synergies from the Cardinal acquisition at full implementation. The majority of these synergies are related to maintenance efficiencies and replacing third-party operating leases with the benefits from Ryder ownership and asset management. In Supply Chain Solutions, we are focused on optimizing our omnichannel retail warehouse network through continuous improvement efforts, driving operational efficiencies, and better aligning our footprint with the demand environment.
Since the second half of 2024, we have seen improved productivity in this vertical as a result of these actions and expect incremental benefits throughout 2025. By year-end 2025, we expect to realize approximately $100 million from these initiatives, benefiting all three business segments. Approximately $70 million of these benefits are incremental to 2024. In addition to continuing to increase the return profile of our contractual businesses, we are also focused on ensuring the business is well positioned to benefit from the eventual cycle upturn. As such, we expect an annual pretax earnings benefit of approximately $200 million by the next cycle peak and expect to begin to realize these benefits during the upturn. Although over 90% of our operating revenue is supported by long-term contracts that generate relatively stable and predictable operating cash flows over the cycle, each business segment has meaningful opportunities to benefit from the cycle upturn.
We expect the majority of the $200 million benefit to come from the cyclical recovery of rental and used vehicle sales in Fleet Management Solutions. In Dedicated, improved driver availability and lower recruiting and turnover costs are benefiting earnings but have been a headwind to new sales and revenue growth. As freight capacity tightens and driver availability becomes more challenging, we expect to see incremental sales opportunities and improved revenue growth in Dedicated Transportation Solutions as private fleets seek solutions to address this pain point. In Supply Chain, muted volumes in our omnichannel retail vertical have been a headwind to revenue and earnings. We expect supply chain results to benefit as volumes from these services recover and our optimized warehouse footprint is leveraged. We've been pleased by the business's resilience and performance during the prolonged freight market downturn and are confident each of our business segments is appropriately positioned to benefit from the cycle upturn.
Turning to Page 15. Our transformed business model continues to deliver value to our customers and our shareholders. We continue to outperform prior cycles, and our results are benefiting from consistent execution and the strength of our contractual portfolio. We continue to see significant opportunities for profitable growth supported by secular trends, our operational expertise, and ongoing momentum from multiyear strategic initiatives. We remain committed to investing in products, capabilities, and technologies 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. At this time, I'll turn it over to the operator to open the call for questions.
Questions and answers
We'll now take our first question from Ravi Shanker with Morgan Stanley.
So great to see the dry powder on the balance sheet here. Are you confident kind of deploying that now? Or do you think you need to wait for the up cycle and maybe a little more clarity before you decide where to go there?
Ravi. Yes, look, I think, obviously, we feel really good about the dry powder. We've got repurchase programs in place already. We are always looking for acquisition opportunities. And then obviously, as we get into the freight up cycle, we're going to be investing organically in vehicles, not only for lease but for rental. So we feel really good about where we're at. We think we've got a great balance, as you saw on that page that John took us through, and we really feel we've got the dry powder we need to do all of the things that we want to do across each of those areas.
If I can squeeze a quick follow-up here. Noted on the retail versus wholesale mix in the back half, but how are you thinking about the different scenarios on residual truck values in the back half of the year, just given the uncertainty around the cycle?
What we're thinking about on the pricing?
Yes, correct.
Yes. Look, as we look at the back half, what we've seen and what probably many of you have seen is that tractor pricing has begun to move up. Our tractor pricing, as we showed, even with the additional wholesaling activity we did was still up 3%. If you look at retail only, it was up 10%. So we would expect that trend to continue. We did bring down the top end of our guidance, primarily because we don't expect the increase to be as significant as we originally did, so a more muted increase. But we would expect a steady increase, especially in the fourth quarter as we get into the fourth quarter in terms of tractor. But we're very encouraged by what we're seeing in the used tractor market.
We'll now take our next question from Scott Group with Wolfe Research.
Just a follow-up there. So just maybe a little bit more on why we went to losses on sales in Q2 and why it goes back to gains right away in Q3? I don't know that we've seen it flex so quickly in the past? And then just maybe if that's right, though, that we get this uplift from $0.20 or so of gains, we typically see just the core earnings get a little bit better Q2 to Q3. So are there other offsets to think about in the guide for Q3?
Yes. I think the reason we went to a loss was really driven by the fact that we had this incremental wholesaling activity of aged inventory. We talked about it on the last call, we said we're going to do it. We did. We actually did a little more than we had originally expected. So that probably cost us about $10 million in the quarter. There was about 1,000 units that we did there incremental to what we had done in the first quarter. So that's really why we know as going forward, we still have some wholesaling to do, but we don't expect to do anywhere near that magnitude of it, and that's what would get us back to more of the gains levels that you saw in Q1.
I don't know if you had other thoughts on like the other part of the question just about if we get that $10 million or whatever uplift in used, are there other offsets to think about in the guidance for Q3?
No, I think we're expecting, if you consider the high end of our guidance, about $70 million in earnings improvement from initiatives, which translates to approximately $1.20. Last year, we were at $12 with the initiatives we implemented, leading us to $13.20, which brings us close to the high end. The additional earnings are primarily coming from the contractual segments of the business, which are more than compensating for some challenges we're facing in rental and used vehicle sales. We reduced our range last quarter due to rental issues and are slightly lowering it again this quarter because of used vehicle sales. Those transactional segments haven't really rebounded, and the market is still uncertain. However, I believe there's slightly less uncertainty this quarter compared to the last, and I hope for continued improvement next quarter. The only other challenge we have is related to contractual sales. Due to the uncertainty, contractual sales have been subdued, particularly in our lease and dedicated businesses. We need to see customers making decisions to get those sales back on track, as this will impact our earnings growth. On a positive note, we have observed an increase in sales on the Supply Chain side, with larger customers starting to make decisions, which is encouraging. However, we haven't experienced similar improvements on the Dedicated and Leasing side yet.
If I could ask one more question about this point, I understand the cash flow benefits from the bill. How do you think this might influence customer behavior? Are we seeing more purchases instead of leases? Is this a potential risk for you? Given the cash flow benefits, could there be a reason for increased leasing activity? I would appreciate any thoughts you have on this.
Historically, when bonus depreciation has been implemented, we've typically seen an increase in overall business spending. This is beneficial for us as it leads to heightened activity in the marketplace, providing us with more chances to promote our leases and services. It offers a cash flow advantage for us in the coming years. More importantly, it stimulates the economy, encouraging our customers to feel more confident about making investments, whether that involves purchasing additional equipment or leasing and signing contracts for more equipment.
We'll now take our next question from David Zazula with Barclays.
I guess we've talked a little bit about the 3Q portion of the guide. Given 3Q and full year, we can back into what is going on in 4Q. Can you maybe talk early assumptions on what you're expecting in 4Q from an FMS perspective, leasing environment? Any thoughts you have into that portion of the guide?
If you consider the upper end of our guidance range, we are mainly anticipating historical sequential trends in rental. For used vehicles, we expect a slight increase or stability in the third quarter, followed by a mild increase in pricing during the fourth quarter. On the lower end of the range, however, we foresee flat rental with no seasonal upswing and continued declines in used vehicle pricing for both the third and fourth quarters. This outlines the potential outcomes we are looking at. The contractual business is generally more stable, and we expect it to maintain its current performance. We also aim to continue executing our initiatives effectively and are on track to achieve the $70 million target we set initially.
And if I just ask about OEM delays and some of the drivers behind the CapEx change, are those things that you're expecting to kind of reverse in 2026? And, yes, early, do you expect an environment that would warrant increased capital spending on your part in '26?
Yes, I believe the tax bill will definitely be beneficial. We need the freight market to complete its correction. I'm repeating that we're closer to the end of the beginning. After three years, I genuinely feel we're much nearer to the end than the start. We're observing early indications with the trends in used tractor pricing. However, rental activity remains soft and somewhat stagnant. The lease miles per unit are also remaining steady. We haven't yet seen a significant increase. There’s still some uncertainty about tariffs, and I hope that will be mostly resolved in the next month or so. Then, it's about the freight market rebalancing, and we can move forward. This could certainly change by next year. The decline in CapEx is mainly due to the absence of the lease and rental capital expenditures we usually expect as we begin to rebuild the business. By 2026, you should start to see some of that return.
We'll now take our next question from Harrison Bauer with Susquehanna.
Maybe could you walk us through about how you're thinking about the margin cadence in the back half of the year really across your different segments and for FMS maybe on an ex-gain basis? And then as you take a step back, considering all your segment margins, including FMS ex-gains are at or approaching their long-term guides, in 2026, as you pivot to growth more, do you think there might be some margin pressure that comes with that?
Let me hand it over to Cristy; she can give you a little color around the margin expectations. And then we can talk about what would happen as we start to grow.
Yes. Regarding the margin side for the FMS business, we anticipate growth in Q3 and Q4 as we recover from the rental declines experienced last year. With rental now stabilizing, conditions should improve. Additionally, we are benefiting from FMS initiatives related to pricing and maintenance, which are positively affecting our margins. On the supply chain front, we continue to see strong growth alongside our omnichannel retail network initiative, which we expect will also contribute to margin growth. For the Dedicated segment, while we are realizing benefits from Cardinal synergies, a lower fleet count will affect our earnings comparisons on a year-over-year basis. This will create some pressure. Overall, we expect to see earnings growth and continue to benefit from these initiatives and the improvements made to our contractual business, enhancing its resilience.
Yes, I believe you pointed out that the segments are mostly achieving their target margins. Supply Chain and Dedicated are performing at their target margins, but Fleet Management Solutions is falling short. They are currently in the high single digits to low double digits, while our goal is to reach the low teens. We anticipate this change will occur as the market recovers, particularly with an increase in rental and used vehicle sales contributing to growth. We hope to see these improvements materialize next year. This is the key issue we need to address. Additionally, as we approach the second half of the year, the supply chain sector has shown significant growth, marked by consecutive quarters of earnings advancement. We expect this trend to continue in the third and fourth quarters. However, there may be some residual effects from last year’s earnings improvement and variability in the timing of new business contributions. Nevertheless, we expect top-line growth to accelerate in the fourth quarter, leading to an increase in bottom-line performance as well.
Great. Could you provide an update on the differences in demand between your lease and rental for tractors versus trucks?
I can start with the lease. We've experienced some challenges with the growth of our lease fleet year-over-year. However, if we look at specific categories, truck units have actually increased by about 2,000 compared to last year. The challenges we're facing are primarily in the tractor trailer categories, which aligns with the transport difficulties present in the market. Overall, this is a positive sign for trucks, and we anticipate that tractor trailers will recover as the market improves, as Robert mentioned. Regarding rentals, John noted in his opening remarks that we have continued to invest in our truck fleets, which currently make up about 60% of our rental fleet. We plan to maintain this investment throughout the year. As the market improves, I would expect that we may invest in some tractors for the rental fleet around 2026, but we'll hold off until we see market improvements before expanding that tractor fleet again.
We'll now take our next question from Jordan Alliger with Goldman Sachs.
I'm just sort of curious on the used truck markets. It's great. We're seeing the sequential increase. You indicated you expect that trend to continue. What underpins that? Is it more a function of new truck prices are higher, orders are down, but people still need high-quality trucks? Or is it a function perhaps of maybe supply getting a little firmer in the overall trucking market?
Yes. I think it's probably all of those things that you mentioned. We are getting to a point where this freight recession has been going on for a while, and you're starting to see some other people, I guess, that are looking to replace vehicles that they have. Used vehicles, and the vehicles that we have are attractive to that. I don't know, Tom, if you want to give him...
Yes. The only thing I might add is you look at the sleeper classes in particular, is where you're seeing the most price uplift in used vehicle sales. And I think our inventory probably mirrors the overall general inventory of used vehicles. Our sleeper inventory is actually relatively low. And I think that's what's driving the pricing. So it's, I think, an indication that you're getting closer to equilibrium, at least on that class. Hopefully, the others will follow soon.
These are high-quality vehicles and if you examine the historical pricing charts, you will notice that prices have declined to relatively low levels. This situation is prompting some buyers to start replacing their units.
The supply chain margins remain on target despite challenges in closing deals and revenue growth being below expectations. Will this be the approach moving forward? What factors contribute to the stability in margins despite potentially subpar revenue growth?
Yes. Look, I think it's an indication of the value prop of the work that we do in supply chain. But let me hand it over to Steve to give a little more color.
Yes, Jordan. I think, first of all, I wanted to thank the team for focusing on the business and our customers. There's 3 or 4 things that we've been focused on. You remember a few years ago, we focused on investing in our start-up effectiveness teams. We continue to do that. So as Robert said, as we bring on new business, we've got the right approach and execution on that. The team is also focused on continuous improvement in the business. We've been very disciplined, I think, on the overhead structure and our pricing on new contracts. And I think a diversification of the port-to-door capabilities and service offerings is attractive to our customers. So as Robert said, we're off to a good start. We should expect as we exit Q4 to be in that mid-single-digit range.
Yes. The only I'd add to that is that as we get through this uncertainty, I think what was really holding up decisions in supply chain has been the uncertainty because it's not all just tied to the freight market. And we're starting to see some of that loosen up now. But we're really encouraged about the opportunities to continue to grow that business, especially as if you start to see more industrial manufacturing pick up in the U.S. and more industrial manufacturing come to the U.S., I think we're really well positioned to play in that space.
We'll now take our next question from Jeff Kauffman with Vertical Research Partners.
Congratulations. I have a broader question about maintenance. In the past, we viewed outsourced maintenance as a strategic growth opportunity, but it has been somewhat stagnant over the last few years. While we can attribute this to the current environment and the fleet, part of it may relate to the shift towards trucks as opposed to tractors. I’m curious about maintenance because, in theory, during a time when truck sales are slow, maintenance should become more significant, yet many fleets have communicated to me that their maintenance expenses are increasing. What is happening with maintenance? Why hasn’t it seen growth in the past couple of years? Is this attributable to strategic choices, customer preferences, or a mix of factors? What do we anticipate the long-term outlook for outsourced maintenance to be?
Yes. I'll let Tom provide more details, but I want to emphasize that we haven't abandoned our efforts. We're currently focused on expanding our mobile maintenance initiative with our Torque product, which involves offering retail mobile maintenance services. We believe the key opportunity lies in retail rather than in long-term contract agreements for guaranteed maintenance. We're discovering that many customers, especially those who do not want to enter into full-service leases, prefer to engage in retail maintenance. They want to pay for services as needed and at retail rates. This approach, coupled with mobile service, appears to have promising potential. We're committed to launching and growing this initiative. So no, we haven't given up. Additionally, if you come across any customers facing maintenance issues, please direct them to us. Now, let me pass it over to Tom.
Let me make a couple more comments on Torque. Robert is correct that we haven't offered a product like this in the past, where customers pay for services as they go. Our traditional maintenance offering is contractual, and we believe there is a good market for that today, as you mentioned, Jeff. However, since this is a new business for us, I consider it a start-up. Revenue has increased about 75% year-over-year, which is good growth, but not yet significant for us. We are certainly continuing to invest in this area. Currently, we have about 200 technicians working on it, and we expect to enhance that number substantially. We are also looking into acquisitions in this space, hoping to find suitable opportunities. Regarding our traditional SelectCare fleet, I know it has decreased quite a bit year-over-year, and we've discussed the reasons for that in previous earnings calls. Nevertheless, we have seen some sequential growth in that fleet, as reflected in our numbers. Revenue and margins in SelectCare are up, so we are not abandoning it and expect continued growth in that fleet for the rest of the year. Therefore, along with our initiatives with Torque, we are focused on growing in that maintenance space.
Yes. If you take a moment to consider, I want to invest in companies that are well-managed. We are not prioritizing turnaround situations, and we aim to acquire companies that align with our core businesses. We are always looking for opportunities in the market and have made several acquisitions in recent years, including IFS and Cardinal last year. However, we are looking for the right fit and are patient in our approach. We have ample resources available to make acquisitions and will continue to search until we find suitable candidates. Regarding Ryder Ventures, it primarily serves as a way for us to identify emerging technologies that could benefit our customers or that we might want to acquire, similar to our acquisition of Baton. However, I do not anticipate that this will require a significant amount of our capital unless we find the right acquisition opportunities.
We'll now take our next question from Brian Ossenbeck with JPMorgan.
On the residual slide, you've mentioned that tractors are starting to improve, and there's a noticeable change as we move towards the midpoint and beyond. It appears that trucks are also getting closer to that point. I'm curious if you anticipate trucks will reach that threshold. Can you provide an update on your thoughts regarding this, and what actions you might need to take if trucks do cross that line? We're monitoring these trends closely, but we haven't seen the truck figures drop to that level yet.
Yes. Just as a reminder, Brian, this quarter's numbers and those endpoints of those lines include all the extra wholesaling that we did in the quarter. So that's why it's gone to where it is. Without that, it would be up certainly higher than it is now. But I'll let Christy give you a little more color around that.
Yes, Brian. Essentially, the trucks are reflecting the effects of the aged inventory, which has primarily been in the truck sector where we took action. What you're observing is that despite the aged inventory, retail activity for trucks has shown a slight sequential price increase. As Robert mentioned earlier, we are pleased to see that retail pricing is maintaining and showing slight improvements. Regarding your question, the current happenings in the market are primarily due to the ongoing freight environment, and we don't anticipate this being a long-term issue. If this situation were to persist, it wouldn’t have a significant impact on our results, so we are not worried. Our residuals are reasonable at the moment, and we have no concerns in that area.
This situation truly underscores the advantages of lowering our residuals, both in terms of pricing and accounting. Even in the current challenging market conditions, we are in a position where we do not need to take further action regarding residual values. We feel very confident about their current status.
Yes, that's correct. We do expect to continue to have that cash benefit for the next several years.