Robert Sanchez: No, I’m not sure those numbers are right, Jeff. Total units that we’re picking up from Cardinal track that’s power and trailers is just under 9,000. So we’re expecting lease fleet, which includes those units to be up about, I think, 12,000, 13,000 is what we’re expecting. So yes, all those Cardinal vehicles are going to dedicated. So dedicated’s fleet will be up at least that amount, at least the 9,000 units from Cardinal.
Jeff Kauffman: Okay. Yeah. I was a little confused because I think I heard like 12,600 vehicles or something like that. And it was only 11,800 in the quarter. So I misunderstood that 12,000 would have been incremental in terms of…
Robert Sanchez: By the way, it’s not in the fourth quarter numbers yet. We did this acquisition in February. So is that part of it?
Jeff Kauffman: Yes. No, that’s my point. So how much is the lease fleet itself going to be up from where it finished 2024 — 2023, by the end of ’24.
Robert Sanchez: Tom?
Tom Haven: The lease fleet, including the Cardinal acquisition, it will be up around 13,000 units.
Robert Sanchez: So of you assumed 9,000 or so of those are Cardinal, you’re up another 4,000 units — It’s in our target range of the 2,000 to 4,000.
Jeff Kauffman: Okay, very good. That was my question. Thank you.
Robert Sanchez: Thanks, Jeff.
Operator: We’ll go next to Brian Ossenbeck with JPMorgan.
Brian Ossenbeck: Yeah, thanks. Appreciate taking the questions. So maybe just on Cardinal, Robert, you mentioned a few of the synergies and the opportunity you see, I imagine better backhaul, better density, the maintenance. Can you give us a sense in terms of when you start to see those ramp up, what the accretion could look like on this in 2025? And maybe if you would exclude some of the acquisition costs, what that’s going to be in ’24 as well?
Robert Sanchez: Yes. I guess I’d tell you, ’24 is marginally accretive. So not a big number. It’s — we’re going to spend some money in the integration and really integrating this transaction into Ryder. It really becomes more accretive in 2025. And I guess what I would — guidance I would give you there is that if you look at all of dedicated, our target is to be, from an earnings standpoint, to be in the high single-digit range. In 2024, we’re not going to be because of the integration cost. As you get into 2025, you should expect us to be, if not they’re approaching that high single-digit range on a much higher revenue number now that we have Cardinal. So that would be reflective of beginning to really see those synergies come through.
Brian Ossenbeck: So the underlying Cardinal in DTS would be sort of equivalent to what you have now when it’s on a run rate fully integrated basis? Or could it actually be above returns?
Robert Sanchez: Returns — right after we integrate the synergies.
Brian Ossenbeck: Okay. And then just as a follow-up, can you just talk about being at the sort of the trough of the market in a couple of different ways, what the competition, what the pricing looks like? We saw a little bit of an uptick in early terminations, we got lower extensions, so it’s hard to really read into the asset management side of things, but maybe you can just give us some color on competition, the pricing trends and how the asset management playbook is progressing here into the extended trough?
Robert Sanchez: Yeah. I wouldn’t read much into that early terminations and redeployments because that — some of that was internal supply chain units that we had to move from an account from one account to another, and it shows up as an early termination, and it was just a movement within our supply chain business. dedicated business. But in terms of what we’re seeing in the market, I think, look, we’re still seeing a soft market in rental and used vehicle sales. There’s no doubt that has continued from Q4 into Q1 as you just — as we just look at the larger trend though and where we’re seeing the spot market now seems to be bottoming out. Typically, there’s a lag, let’s call it, about six months between spot market bottoming out and used tractor market and maybe even rental coming back.
So it’s beginning to line up some. Still no one is, I think, ready to call the bottom yet. But based on historical cycles, we would expect things to be beginning to bottom out. But Tom, I’d like — give us some additional color maybe on the used truck and rental market.
Tom Haven: Yeah, I think it’s what you might expect with the little bit lower utilization than what we see in peak cycles. There is some certainly competition for pricing in the rental market. And as you see inventories build in the used vehicle sale world, not only with us, but as an industry in general, you’re seeing pricing pressure in UBS. And like we said, we expect the pricing to continue to fall through the first half of the year, then some uptick in the back half of the year. In terms of lease pricing, which I think was part of your question, I would say, on existing equipment or idle assets that are in the market, we are seeing some price pressure there, but on new units, new capital spend, pricing is generally in line with what we expect.
And I think we’ve said this before as well, our biggest competition in the leasing market is actually ownership, not some of our core competitors. And we still have a pricing benefit versus ownership, that’s pretty nice regardless of the environment that we’re selling in.
Robert Sanchez: Yeah. And I would just add that Tom and his team have done a great job of delivering on our growth targets of 2,000 to 4,000 lease units a year at our target returns. And even in a more competitive market, certainly that we’ve been in here over the last year have been able to continue to deliver on that. So really proud of the work that they’re doing.
Brian Ossenbeck: Okay. Thanks guys. Appreciate it.
Operator: We’ll go next to Allison Poliniak with Wells Fargo.
Allison Poliniak: Hi, good morning.
Robert Sanchez: Good morning.
Allison Poliniak: I just want to go back to SCS to make sure I understand the outlook for this year. Could you maybe talk to, excluding the IFS acquisition, how you’re thinking through that? Are we sort of flat to up slightly? Or could that core result be down? And then for the EBT percent target in terms of the growth in pricing actions. Is there a mix benefit in there as well that’s helping to drive that? Just wanted to understand sort of the dynamics there.
Robert Sanchez: Yeah. First, if you take IFS out, certainly, earnings for supply are still up in a meaningful way. If you think about it, Supply Chain’s earnings this year as a percent of revenue, operating revenue were below our target. There was certainly some write-off we had to do, a write-down we had to do for a customer, plus there were some challenges in the year. We are — we feel like this year, we are certainly heading into this year with a much better profile and portfolio and feel confident that, that core earnings for the — earnings leverage for our supply chain business will get back to the target range, plus you have the benefit of the acquisition. So, Steve, is there anything else that you want to add there?
Steve Sensing: Yeah. Allison, I think you were asking, too, about the top line growth. If you take IFS out, organically, we’re still going to grow right around 4% or 5% in the base business in the year.
Allison Poliniak: Got it. And then one quick thing. I don’t know if I missed this. The working capital build at the end of the year. Could you walk through the dynamics of that?
Robert Sanchez: John?
John Diez: Yes. So, Allison, the working capital movements you saw there was a little bit of a drag at the end of the year. We did see our receivables balance move up from what we typically see. And then with the acquisition we made from IFS, that was a little bit of a drag as well on the working capital.
Allison Poliniak: Got it. Thank you.
Operator: We’ll go next to Justin Long with Stephens.
Justin Long: Thanks and good morning. I think you just gave the number for organic growth for the supply chain segment, but I was curious if you could provide that same forecast for cedicated just given the noise with the acquisitions? And maybe comment a little bit more broadly on what you’re seeing in the dedicated pipeline and from a competitive standpoint? Are you still seeing opportunities to deploy capital and dedicated at an attractive return? Or is that tougher to do right now, just given where we are in the cycle?
