Q3 2019 Earnings Call
2020 down 26% from 2019, historically, our class eight market share increases in non peak truck markets and we believe we are well positioned to outperform the market in 2020 and increase our market share.
This was another record setting quarter bros. Due to our nationwide inventory and ready to roll drugs and strong acuity construction and rental customers.
This was another record setting quarter bros. Due to our nationwide inventory and ready to roll drugs and strong acuity construction and rental customers.
This was another record setting quarter bros. Due to our nationwide inventory and ready to roll drugs and strong acuity construction and rental customers.
This was another record setting quarter bros. Due to our nationwide inventory and ready to roll drugs and strong acuity construction and rental customers.
This was another record setting quarter bros. Due to our nationwide inventory and ready to roll drugs and strong acuity construction and rental customers.
He research forecast U S class 47 sales to be 266000 units this year up 3% from 2018.
We expect some of our class four through seven drug sales, we expect glass for that so drug sales will be down in the fourth quarter compared to this this quarter over quarter due to the timing of some large fleet deliveries throughout earlier this year, but that we will outpace the industry for the year.
We expect some of our class four through seven drug sales, we expect glass for that so drug sales will be down in the fourth quarter compared to this this quarter over quarter due to the timing of some large fleet deliveries throughout earlier this year, but that we will outpace the industry for the year.
We expect some of our class four through seven drug sales, we expect glass for that so drug sales will be down in the fourth quarter compared to this this quarter over quarter due to the timing of some large fleet deliveries throughout earlier this year, but that we will outpace the industry for the year.
HCT research forecast for two seven retail sales were 257000 2020 down 3%, we expect our results will be consistent with the industry.
Thank you ladies and gentlemen.
Hey, what Chuck a question press the pound.
By way of is compelling turning rusty.
[noise].
Thanks, Good morning.
Thanks, Good morning.
Good morning, Justin.
So maybe that start with parts and service.
So maybe that start with parts and service.
So maybe that start with parts and service.
So maybe that start with parts and service.
Lastly, could you talk about what the energy headwind was for parts and service revenue. This quarter. Just curious if it was similar to what you saw in the prior quarter and you made the comment that your parts and service business should outgrow the industry going forward, so kind of ballpark should we be thinking industry grew.
Lastly, could you talk about what the energy headwind was for parts and service revenue. This quarter. Just curious if it was similar to what you saw in the prior quarter and you made the comment that your parts and service business should outgrow the industry going forward, so kind of ballpark should we be thinking industry grew.
Rose low single digits, and you guys grow mid single digits.
Well they implement reverse you're right on track you know, that's a sort of where we how we look at 2020 right now.
As of this day, Everything's always kind of all but yes, we do expect outpace the industry next year.
And we expect most folks are forecasting flat to book slightly up Barksdale, but we expect with all the initiatives we.
As sort of a sales along initiatives, we put in place well really over the last three and four years that we're still seeing traction right. We have not seen to fruition of you know.
As sort of a sales along initiatives, we put in place well really over the last three and four years that we're still seeing traction right. We have not seen to fruition of you know.
As sort of a sales along initiatives, we put in place well really over the last three and four years that we're still seeing traction right. We have not seen to fruition of you know.
Everything yet it's still coming you know we believe we've still got that on drag and that since my asked about energy No energy continues to get worse now. The Q3 was you know is down like 35% was ever so 30 to 35 first quarter.
Like 30 840 last quarter.
I don't remember right and I'm going to day is over 50% right now I don't have an exact number we're still combining some of that but well over 50% off and it had gotten any better here in October either so I don't see a lot of upside or at least in the foreseeable future.
In the energy second I guess, one of the most important things that Oh from my perspective.
Is the fact that Oh the performance we showed a was with huge energy headwinds and you know we do have obviously some exposure entity, but unlike in 2000.
In 2016 were seeing some tough energy GAAP, we've been able to weather because the investments we made in both Oh on both systems and people over the last three or four years.
Okay. That's that's helpful. And then secondly, I know you put the wheels in motion on DNA cost cat going into next year any update on what the size of that opportunity could look like and how much have been impacted we see from that in the fourth quarter.
Well it will be right you know phase into the fourth quarter Q4. Historically is always is typically a good DNA quarter horse anyway.
But I would expect the black will be fully you know in place by the first to the year. We've tried to do at a very strategically imprecise instead of just hitting the hit the button in Spain, and just you know we spent the last couple three months are going through the organization to make sure that we you know you don't want to take any meet off the ammonia is progressing.
No question Battle for a moment you can so we won't you know from a dollar perspective I really don't.
So next year and once we get fully loaded I'm open couple of million dollars or better amount.
Oh, you know as we go forward try to help somehow offset some of his office, obviously on the truck side.
The same them you know rolling out you know parts and service business. We are we hope you know in mid single digits right. So between the twin and medium duty market maintaining strong right.
I think as one of the thing sometimes it gets overlooked in the organization. It I realize everybody gets a infatuated with this class eight but you know I realize it takes couple of million many drugs to make a one heavy truck right now we sell a lot of medium any drugs and the projections are for that market to remain pretty stable in strong well into the next three or four years.
With the changing dynamics of.
The industry from a last mile perspective, and all the other stuff going on and the inner city. So we feel good about that I will answer a little bit more than you asked but you know you know me so [laughter].
That's it that's what I want I appreciate the response it I'll pass it on and congrats on the quarter.
Thank you.
And our next question comes into open.
Bank of America, you May proceed.
Good morning Rusty.
Good morning this growth.
Just a question on January so just to clarify I guess that that you can sort of take couple of million per month through the end of the through the end of 2020 did I hear that correctly.
That's that's roughly the go.
And so.
So the math slipped that's looking back on 2019 remember not asked DNA DNA S. will naturally come down if truck sales go down so anyway. So.
Im sorry, yes run rate to the extent, we grow back in mid single digits. There's some expense attached to that so that's not taken right current and leaving at a 2 million less amount for the entire year, we will spend money to generate that.
No I don't think I didn't pay 15 months I said starting in January Andrew. So that's 12, so let's start there and to Steve's point remember when we created a gross profit dollar in parts and service welcome to spend 50% of.
That we stay flat and we stayed flat from parts and service perspective, and not Robyn then, yes that would be or number but same time can we grow parts and service. We've just been part of that was a good part we keep part of it. So you don't create it is not total leverage zero spend right. So.
5%.
Rob was up 5% no problems, then at least 2.5% that 5% degree.
If you just stay flat, though yes, you can take 24 million out of.
<unk> gross margin there.
<unk> gross margin there.
So can we talk about sort of drop off in gross margin for parts and services in Threeq, you and whether or not it means you can still grow its structure over the long term. Thank you.
Well I think if you take this year, let's first analog swing Q2 to Q3, we said in Q2 that there were some don't expect it to say, yes. There we had some some purchasing went on in their strong purchasing discounts and rebates and stuff, it's little bit flowed into Q2, but if you take the years. All I think is better sometimes look is a whole year sometimes.
Everybody gets caught up and just these quarters you know I wrote it we're going that we're going to run about 38% for the year and I don't think you can go back the last two or three years and buying any 38% yearly margin.
Everybody gets caught up and just these quarters you know I wrote it we're going that we're going to run about 38% for the year and I don't think you can go back the last two or three years and buying any 38% yearly margin.
Margin or parts and services like I know you can't so.
We believe we made progress okay, and we believe there are still progress to remain but it is not a just a direct zones.
Big step as it is a continual effort continuous effort and I think you can see that in the last and this year's performance and I think you'll continue to see it niches performance moves I'm immediately double rollup role here from 33, I'm not going to happen in 2020, but it can creep up so I think you'll find by the end of the year. When you look back I think we're like 38, one or so right now.
Big step as it is a continual effort continuous effort and I think you can see that in the last and this year's performance and I think you'll continue to see it niches performance moves I'm immediately double rollup role here from 33, I'm not going to happen in 2020, but it can creep up so I think you'll find by the end of the year. When you look back I think we're like 38, one or so right now.
So if we were to go a little bit under 38, you know it would average 38, we drove Q4, there for the year, which would be the best year I think in the last three years or so.
Don't have Raman front, given I know, it's a whole lot better than what we weren't eighteens ending.
Don't have Raman front, given I know, it's a whole lot better than what we weren't eighteens ending.
Just if I could squeeze one more people asking if there's any onetime write downs and used inventory in the quarter.
No nothing outside of normal I think our margin was nine eight if I remember right was actually up from Q2. So we've done a pretty good job do we take losses or drugs, we still give we do that Dan a day out that's all blended into that nine eight. So if you see US then in the above 8% then were.
Probably not taking any losses outside of our normal stuff I mean, and that's it I don't want to unite you manage the business. You don't went on every truck I promise you just like you know we don't ever used cars to the carbon as you're aware our mall, but that's always been blending into the number I guess just any out any unusual no. Sir we feel good about the 19.
200 units, we have an inventory.
200 units, we have an inventory.
And they are properly.
There are probably price for the market.
Thank you very much.
You're welcome Thank you Andrew.
Your next question comes from gaming with Credit Suisse. You May proceed.
Hi, good morning rescued Steve how are Ya.
HM.
Yeah, I guess your questions Russ Russ you want any any sherene in one on on rush in particular, you know could you just comment what your customers are telling you in terms of when we should expect to see order starch improved there's a debate on whatever happens in the fourth quarter, we or do we have to wait until next year.
And then your view on the fit the length of the downturn, whether or not this could extend into 2021 and then my second question I guess, it's more specific you know trashes you're growing your your parts service business.
And then your view on the fit the length of the downturn, whether or not this could extend into 2021 and then my second question I guess, it's more specific you know trashes you're growing your your parts service business.
And then your view on the fit the length of the downturn, whether or not this could extend into 2021 and then my second question I guess, it's more specific you know trashes you're growing your your parts service business.
Well as hi, I'm going to I'll start with the truck market.
As well be easier for me then I'll get back to know this [laughter] I want to approach as you know I know you.
I don't give no. Okay. So I'll build a model rather you can build a model around the overall macro numbers on young you guys get to.
To that business I'll get back to that in the same as far as next year goes it's still it's still percolating up in my mind.
To that business I'll get back to that in the same as far as next year goes it's still it's still percolating up in my mind.
So solid that our Q4, while being off from Q3 record usury I feel pretty good about Q1.
Folks that are still debating what their purchasing is going to be like next year.
Obviously, because if you look at must along.
No contract rate should get beat up really good out there I mean, you guys are taking you know it's anywhere from 10% and there you know the contracts are being let tender rate exceptions, all they're up 95%.
More repos client growth growing right now so we're in the minimal I'm trying to you know that getting cleans up so but that hasn't effect on what people decide to do next year. They may wait a little longer.
More repos client growth growing right now so we're in the minimal I'm trying to you know that getting cleans up so but that hasn't effect on what people decide to do next year. They may wait a little longer.
Take some replacement drugs, but everyone. Remember these are the two biggest years itself I don't know six okay. MBR in history. So there's a lot of Fox out here right now.
So of course, but we're in that cleansing process. I know you asked if or when I expect the hours are going to naturally be little better here and these next three months. Okay. That's just natural then I will be 10000 units again, but do they only go to 20 or something like that I don't know or they get where they should be which is evident.
So of course, but we're in that cleansing process. I know you asked if or when I expect the hours are going to naturally be little better here and these next three months. Okay. That's just natural then I will be 10000 units again, but do they only go to 20 or something like that I don't know or they get where they should be which is evident.
35 range or something like that not that crazy 50000 that we were doing years I'm going to go but you would look for to know that is going to these will solve it makes you would look for intake come in you know in my mind start creeping up about 30000 range I don't know if I see that just yet.
But I'm not I don't represent Oems I don't know what all the Oems are doing and where that that we're taking I think there there will be more business booked well it.
No I look at Acds number up rapidly to of where they.
As retail.
I'll be honest I don't see much upside to it okay. If at all or if anything I say is like some downside in that no, but that's just class eight truck sales you know I mean, it's an election year people, sometimes don't enjoy not knowing what's going on right and the fleets pretty fresh out there right now so.
No I might wait a little bit more sort of why or this is this is my opinion okay.
Oh, My house back and I've seen it like happened like that before you know I'm getting old amount of 61, so [laughter] seen a few of these so maybe I didn't I can't pinpoint it but I can tell you I buy into the tool for high end for you as retail deliveries next year coming up to 77 or whatever it should be there.
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Good morning down.
26%.
19.
Ladies and gentlemen, thank you for standing by and welcome to the West Enterprises third quarter 2019 earnings Conference call.
At this time all participants are.
Lines are in listen only mode. As it is speaking presentation. There will be a question answer session to ask a question during the session you need to press star one when your telephone.
Please be advised of today's conference call is being recorded.
If required for further assistant please press star Zero I would now like to hand to conference over to your speaker today, Mr. Rusty Rush Chairman CEO and President. Thank you. Please go ahead Sir.
Well good morning, everyone will grow third quarter 2019 earnings release conference call only Goldenberg, Mark Roberts, Chief Operating Officer, Steve Gallagher, Chief Financial Officer, Derrek Weaver Executive Vice President Jay Hazelwood, Vice President Controller, and my goal, So Vice President General Counsel and corporate Secretary now so.
We will see a few words regarding forward looking statements certain statements. We will make today are considered forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Because these statements include risks and uncertainties. Our actual results may differ materially from those expressed or implied by such forward looking statements important factors that could.
As actual results to differ materially from those expressed or implied by such forward. Looking statements include but are not limited to those discussed in our annual report on Form 10-K for the year ended December 30, Onest 2018 and now.
And our.
Police Wifi quarterly revenues of 1.6 billion and net income of 39.1 million or an hour and five cents per blue shirt.
Please with our financial performance this quarter, which was partially impacted by the continued successful execution of our aftermarket tonnage James my significantly outpacing the market on low class eight and class four through seven new truck sales were also proud nuclear.
Another quarterly cash dividends of 13 cents per common share.
In the aftermarket our parts service and body shop revenues were 455 million or 6.5% over the third quarter 2018.
George and ratio was wrong, 120%.
Given the modest increase and aftermarket activity in the industry and the continued decline of energy sector activity. Our AD from aftermarket growth. This quarter was a direct result rush strategic initiatives, which include our technology solutions ecommerce pork parts ordering platform expedited service and the addition of aftermarket sales representatives and techniques.
As to our dealership network.
We expect industry parts and service activity remained stable in the fourth quarter factoring in normal seasonal decline due to winter months.
With continued successful execution, our strategic initiatives, we expect our aftermarket revenues to outperform the market in the fourth quarter enter 2020.
Turning to drug sales, we sold 40 318, new class a drugs up 30% year over year and accounting for 5.5% or the total U S class eight market.
Our healthy truck sales performance was driven primarily by over the road and vocational customers.
HCT research currently forecasts U S class eight retail sales were 277300 units in 2019.
We believe classic retail sales of peaked in the third quarter and as a result, we expect our class eight new truck sales to decline in the fourth quarter compared to the third work for our third quarter. We're confident that our overall 2019 sales results will exceed 2018.
HCT research forecast class eight retail sales me 204000 units in 2020 down 26% from 2019, historically, our class eight market share increases in non peak truck markets and we believe we are well positioned to outperform the market in 2020 and increase our market share.
In medium duty our class four through seven new drug sales reached 40, 566 units and accounted for 6.5% of the U.S. market.
This was another record setting quarter rose due to our nationwide inventory and ready to roll drugs and strong activity from construction and rental customers.
CD research forecasts U S class four through seven sales to be 266000 units this year up 3% from 2018.
We expect some of our class four through seven drugs settles large back last quarter. So drug sales will be down in the fourth quarter compared to this this quarter over quarter due to the timing of some large fleet deliveries throughout earlier this year, but that we will outpace the industry for the year.
HCT research forecast for two seven retail sales were 257000 2020 down 3%, we expect our results will be consistent with the industry.
Our used truck sales were down 15% over the third quarter 2018, well used truck values are depreciating faster than what was considered enrollment rate are used truck inventory is at its lowest level a year and we have confidence is positioned appropriately to meet current market demands.
As always and it's important for me to thank our employees for their continued hard work and dedication, which helped us achieve such positive results this quarter.
With that I'll take your questions.
[noise], Thank you ladies and gentlemen.
Reminder, to ask a question.
Please press star one on your telephone to withdraw your question press the pound.
Please stand by way of compelled to any roster.
[noise].
[noise] and our first question comes from Justin long, but Stephens you May proceed.
Thanks, Good morning.
Good morning, Justin.
So maybe that start with parts and service.
Lastly, could you talk about what the energy headwind was for parts and service revenue. This quarter. Just curious if it was similar to what you saw in the prior quarter and you made the comment that your parts and service business should outgrow the industry going forward, so kind of ballpark should we be thinking industry growth.
I was low single digits and you guys grow mid single digits.
Well they remain reverse you're right on Brad you know, that's a sort of where we have we look at 2020 right now.
As of this day, everything's always might get a ball, but yes, we do expect outpace the industry next year.
And we expect most folks are forecasting flat to book slightly up part sales, but we expect with all the initiatives if we.
As a sales along initiatives, we put in place well really over the last three and four years.
We're still seeing traction right, we have not seen to fruition.
Of everything yet it's still coming you know we believe we've still got that on track and that since my asked about energy No energy continues to get worse now. The Q3 was you know is down like 35%, we set or so 30 to 35 quarter score money like 38 to 40 last quarter.
If I remember right and I'm a day is over 50% right now I don't have an exact number we're still combining some of that but well over 50% all.
And it had gotten any better here in October either so.
I don't see a lot of upside.
At least in the foreseeable future in the energy sector I think as one of the most important things that Oh from my perspective.
And is the fact that Oh the performance. We showed a was with huge energy headwinds and you know we do have obviously some exposure in the but unlike in 2000 10 million 2016 were seeing some sub energy GAAP, we've been able to weather because the investments we made in both of you know in both systems and people.
Over the last three or four years.
Okay. That's that's helpful. And then secondly, I know you put the wheels in motion on DNA cost cat going into next year any update on what the size of that opportunity could look like and how much have been impacted we see from that in the fourth quarter.
Well it'll be right it'll phase into the bork or Q4. Historically is always is typically a good DNA core horse anyway.
But I would expect the black will be fully you know in place by the first to the year. We've tried to do at a very strategically imprecise instead of just hitting the hit the button in Spain, and just you know we spent the last couple three months going through the organization to make sure that we you know you don't want to take any meet off the ammonia as Margaret.
No question about off the bottom and you can so we won't you know from a dollar perspective I really don't.
Oh next year once we get fully loaded you know I'm open couple of million dollars or better a month.
Oh, you know as we go forward try to help somehow offset some of those offices, obviously on the truck side.
The same them you know Roanoke no parts and service business. We are we hope you know in mid single digits right. So between the you know between him and medium duty market, maintaining strong right Oh, I guess one of the thing sometimes it gets overlooked in the organization. It I realize everybody gets a infatuated with this class eight but you know I remember last.
Next couple of million many drugs to make a one heavy truck right now we still a lot of many many drugs and the projections are for that market to remain pretty stable in strong work for the next three or four years, you know with the changing dynamics of.
The industry from a last mile perspective, when all the other stuff going on and the inner city. So we feel good about that Atlantic a little bit more than you asked but you know you know me [laughter]. That's it that's what I want I appreciate the responses I'll pass it on and congrats on the quarter.
Thank you.
And our next question comes into open with Bank of America. You May proceed.
Good morning Roski.
Good morning this growth.
Just a question on January so just to clarify I guess that that you can sort of takes a couple of million per month through down of the through the end of 2020 did I hear that correctly.
That's that's roughly the go.
And so.
The math.
That's looking back on 2000, I can't remember not asked DNA DNA asked will naturally come down if truck sales go down so anyway, so just though.
Im sorry, yes, I'll run rate to the extent, we grow back ends mid single digits. There's some expense attached to that so that's not taken right earn leaving a 2 million less a month for the entire year, we will spend money to generate that that mid single backend grow to talk to you about so right, but just sort of if I take.
What you sat at face value of 15 months times 2 million by then the yeah. If things stay flat you should be able to take 30 million.
No I don't think I didn't pay 15 months I said starting in January Andrew. So that's 12, so let's start there and to Steve's point remember when we created a gross profit dollar in parts and service welcome to spend 50% of creating okay. So if we grow and saying.
Other back we stay flat and we stayed flat from parts and service perspective, and not Robyn then yes that would be for number but same time can we grow parts and service, we do spend part of that but the good Barton we keep part of it. So you don't create it is not total leverage zero spend right. So.
Were up 5%.
Rob is up 5% no, we're probably going to spend at least 2.5% that 5% degree.
So that's on top.
If you just stay flat, though yes, you can take your 24 million out of.
Okay that makes sense and then just in terms of profitability of parts and service sequentially I think looking back.
Like usually parts and service sequentially is flat and I know historically, you guys talked about structural changes to parts and service business model that would enable you to grow gross margin. There. So can we talk about sort of drop off in gross margin for parts and services in Threeq, you and whether or not it means you can still.
Grow its structure over the long term. Thank you.
Well I think if you take this year, let's first of all long swing Q2 to Q3, we said in Q2 that there were some don't expect it to say, yes. There we had some some purchasing went on in their strong purchasing discounts rebates and stuff that flow that flowed into Q2, but if you take the years. All I think is better sometimes look it as a whole year, sometimes everybody.
Caught up and just these quarters you know I wrote it working that we're going to run about 38% for the year and I don't think you can go back the last two or three years and buying any 38% yearly.
Margin or parts and services, but I know you can't so we believe we made progress okay, and we believe there's still progress to remain but it's not a just a direct don't they don't automatic big step as it has to continue effort continuous effort and I think you can see that in the last and this year's performance and I think.
I need to see it initiatives performance moves on the immediately job overall for a whole here from 33, I'm not going to happen in 2020, but it can creep up so I think you'll find by the end of the year. When you look back I think we're like 38, one or so right now so if we were to go a little bit under 38.
They would average 38 when you grow Q4 in there for the year, which would be the best here I think in the last three years or so.
But all in front me when I know, it's a whole lot better than what we weren't eighteens ending.
And just if I could squeeze one more people asking if there's any onetime write downs and used inventory in the quarter.
No nothing outside of normal I think our margin was 98, if I remember right was actually up from Q2.
So you know we've done a pretty good job do we take losses on drugs, we still give we do that Dan a day out that's all blended into that nine eight. So if you see US then in the above 8% then we're probably not taking any losses outside of our normal stuff I mean, and that's it I don't want to unite matters.
You don't went on every truck a promise you just like you know we don't ever used car from the car because you don't want our mall, but that's always been blended into the number I guess just any out any unusual no. Sir we feel good about the 1900 units we haven't inventory.
And they are properly.
There are probably price for the market.
Thank you very much.
Thank you Andrew.
[noise] and our next question comes from Jamie.
Please you May proceed.
Hi, Good morning, Raskin, Steve how are Ya.
So I guess your questions Russ Russ you want any industry and then one on on Rush in particular, you know could you just comment what your customers are telling you in terms of when we should expect to see orders start to improve it there's a debate on whatever happens in the fourth quarter, we or do we have to wait until next year.
And then your view on the that the length of the downturn, whether or not this could extend into 2021 and then my second question I guess, it's more specific you know trashes you're growing your your parts service business.
You know I guess Im just trying to understand I started as she just last question like your comfort level with you know the streets estimate for 2020 or any context, you could give to us because obviously as the earnings hold up better. This is that you know that should theoretically be a relate story for your stock. Thank you.
Well, that's hi, I'm going to I'll start with the truck market.
As well be easier for me, then I'll get back and handle those issues [laughter] I want to approach as you know I know you I don't give number okay. So I'll build a model around you can build a model around the overall macro numbers on young you guys get to.
Did that business I'll get back to that in the same as far as next year goes it's still it's still percolating up in my mind.
Obviously are you go back a year ago hair Ensign 18, everybody. The 19 was already booked everybody thought right. So in my mind that the your steel percolating were on business.
Feel solid that our Q4, while being off from Q3 record usury I feel pretty good about Q1.
I'm just not sure on some most folks that are still debating what their purchasing is going to be like next year.
Obviously, because if you look at what's going wrong, you know contract rates are getting beat up really good out there I know you guys are taking you know it's anywhere from 10% and there you know the contracts are being let tender rate exceptions, all they're up 95%, there's an oversupply of new drugs in the marketplace right.
No. So that has to clean itself up and you know the big guys are going to be fine getting through it but as always and then last Barlow cycle, you get into small and midsized. That's what came in earlier this year as why bankruptcies are up that's why you know more repos client growth growing right now so we're in them.
No I'm trying to you know that getting cleanse does so but that hasn't effect on what people decide to do next year. They may wait a little longer.
Take some replacement drugs, but everyone. Remember this is the two biggest year since Obama no six MBR in history. So there's a lot of trucks out here right now.
Great has been steady, but when oversupplied Fox is about a managed driven right now and people are having to you know to deal with that I think.
So of course, but we're in that cleansing process. I know you asked if or when I expect you know owners are going to naturally would be a little better here and these next three months. Okay. That's just natural then I will be 10000 units again, but do they only go to 20 or something like that I don't know or they get where they should be which is evident.
35 range or something like that Crazy 50000 that we were doing years open to go but you would look for to know that is going to these will solve it makes you would look for order intake come in you know in my mind start creeping up about 30000 range I don't know if I see that just yet.
What I'm not I don't represent Oems I don't know what all the Oems are doing and where that said, we're taking I think that there'll be more business book well it.
I look at Acds number to put out probably two of what are they.
For us retail.
I'll be honest I don't see much upside to it okay. If at all.
Oh, if anything I say is like some downside and that no, but that's just class eight truck sales you know I mean, it's an election year people, sometimes don't enjoy not knowing what's going on right and the fleets pretty fresh out there right now so.
Wait a little bit more sort of why or this is this is my opinion okay.
I I look back and I've seen it like happen like that before.
No I'm getting old amount of 61, so [laughter] seen a few of these so maybe I didn't I can't pinpoint it but I can tell you I buy into the tool for high end for you as retail deliveries next year coming up to 77 or whatever what should be this year wherever lands.
You don't get slides cable work.
You're going down compared to Q3, so I mean to force they'll be often delivers compared to Q3, not just me the industry. So I know you're asking for when I'm talking about giving exact is I'm not sure. It right now I really am I know working business and I know, we're pretty solid, but I've still got a year to make you know I feel pretty good working so.
So we're going to first core I get your drug right now you want to one of the first quarter. So [laughter] I mean is back to that isn't it. We don't have these nine month lead times anymore. You know, it's back and it's more 60 day stuff right.
Yep.
And that's just what your AD.
If you probably don't want to be on the road, if I'm driving a track, but you know I know I'm 2020, I know you don't want to give an exact number but is there anyway. You can help us with puts and takes you talked about DNA, we can make her own assumption on sort of the industry, but like Nick Yeah. I mean, like you know where do you think part service will be just said we concern.
To better calibrate whether we're on track for 2020, Thank you well.
I've been saying you know I'm going to say mid single and you can take the middle of you know zeroed in I mean, I'm driving better that okay, we're going to but I would.
Taking a proper approach.
Take that you know a and then remember like I said again I think I gave the answer is that going to go about.
24 mill out here, what you're going to add back 2.5% of the five to cost because that's what it cost me gets sold and done so you get a little bit of broker DNA and then the truck side you know your it's going to be on the trucks right you're going to take you know the market right now, they're saying, 26% all.
I I said I will say that the sorry, [laughter] somewhere in there I don't expect us to be all that much. My goal is only be also.
15 to 2020 to say 20, I'm a bit more conservative or better you know, we typically do a little better, but I don't have any oil and gas business, either so I'm I'm hedging a little bit on all nervous about it but we've always come up with something in the past history shows we do so a pretty good folks around it will find something up well figure something out weather.
You know.
Lots of market segments, but that's about as good as I can't get you to help you you know model and you know I would.
Just not going to really give I know I know, we're gonna be way better than we've ever been to do it like this before why because of the focus of what we've done.
I'm confident in that I'm confident a lot of things I, just don't I've got a number in my mind, but I'm not going to start today. After 23 years of giving a number okay. [laughter] I've got one target if I add right now and it's Oh, whatever that is every bit of the best and I think is very achievable.
Okay. All right. Thank you I appreciate your color I know I know, what you're looking for I'm going to the best I cannot colored up with without having started given to you know.
This guidance, but by the way I look forward to change conference in December .
I'd tell you said is everyone out. Thank you are asking.
And our next question comes from now on Apple.
<unk> research. Please proceed.
Yeah. Good morning, guys congrats on a great quarter.
Well, let's they can you talk about parts and service revenue performance on the Navistar side of the house I'm just curious if the negative impact from the Irrs on their marketshare was was really low as there's lots of the headwind just given a share gains they've seen over the last couple of years. It got to that behind at this point and I guess as a follow.
At the view that as an opportunity in 2020 or is it still going to take several more years for you guys have started seeing that benefit well, it's only going one direction again, we've already dropped.
And we're doing better this year than we had we're seeing improvement in that division in a in 19 and I think we're going to continue to see it it's not going to you know, it's not going to be in a rocket ship base, but.
He's going to continue to improve.
I think the performance overall and it's not just.
Because our sweet spot lets get real our sweet spot.
As trucks that are like.
Four to eight years old Okay nine years old that's where we that's our sweet spot.
Parts and service perspective, and obviously, we're just starting to get in or just got into.
Sorry, what do we put comments.
2013, 14, so really that 567 year old. So we're starting to build a you know, but we had low market share right. So you're not seeing the effects of board members at March are used to run up 10, you know as far as what we're looking at for parts and service perspective. So it is a tailwind there's no question I've been saying that for us.
You use it and it is helping and help when eighteens Elbaneh 19 is getting better every year and I can say, it's always been a hidden tailwind that's in there, but as they continue to perform better we're gonna be better obviously location, we have been their largest d.
So I'm not really quantifying bore you, but I would I would expect it to you know there's more trucks in operation worn out international drugs and operation.
All the Max I will say, all 90, plus 95% of 90 plus percent of them exports stuff cleaned out.
And so it but but it was low market share originally side. So the last couple of three years, a couple of years, a better market share rooms are still pretty new trucks right. So you're not really hit a piano parcel source from that you are from when they were running on the 10% range, but does it gets disease.
I think I've already answered it is going to get better how about that it's going to continue to get better there. Although we didn't really share gains all the things using will flow into parts and services, we continue going forward.
Okay got it so that'll be a nice positive tailwind overtime.
Can you give me should very much very much to continue obviously you know we're not as mature in those locations for look personnel perspective.
And we have you know I was it Wasnt just product man I was a beat down but that was a beat them from a personnel perspective to for those years right. You have choice to go to work from where it down it was talking to somebody to show up when Oh, you had was broke all maxxforce go in your shop, but that's changed.
No that's changed and we continue to a I think raised the level of performance, we do that all over the company, but we had a lot of opportunity on that and that part of it and that side of the house to continue to raise level performance and I feel really good about where we're going that way so.
Okay, Great. That's helpful color color. It can you provide an update on the top end group JV Rusty just expansion into Canada, or just any other M&A opportunities you're out there just straight.
You bet well worth of I'm, not going to tell you about a lot of M&A opportunities because that would mean.
[laughter] would be committing to something but I will talk about dahlman. You know we took do that in February but very pleased with it.
You know we though.
But we don't know honeymoon.
The owner of stayed there is a 50% owner and everything is just as we expected it to be.
And I think the opportunities might even be better than what we expected that downstream.
Habitability later on to take on the whole thing, we probably will I see no reason, we won't but we're integrating some of our snack with assistance. So our systems in them and also some were bringing some of our culture I think they're very accepting of it to because you know we've got a lot of stuff.
It allows us to go to market in achieved she's results, we yet and so a.
Great group of people positive performance is nothing negative about anything it's been positive do our Roe.
Earnings and I'm not.
Shifting the whole either what theres a lot of opportunity there and they've got some M&A opportunity up there and as a 50% on obviously were involved there. So we're excited about that whether it goes really over the next couple of years other perspectives on M&A around the country will things get tough opportunity show up So you know my phone.
No I answered my phone ever basis away [laughter], so when it rains, but I'll, let you know that was announced most though.
As we go but I wouldn't look pretty big slow.
Have you know M&A, but I think you'll see some strategic stuff back I know you will you'll see some strategic M&A stuff out there, but until we close and I don't without talking about it.
Okay, Great. That's helpful. And then one final one for Steve I think you guys gave to use gross margin.
Performance up nine eight just curious on how many medium and light if you have that handy.
Heavy seven one.
Mediums five for like 3.2.
Okay, great. Thanks, so much I appreciate it.
[noise] and our next question comes from Tilting BMO capital markets. You May proceed.
How's it going guys.
Oh Good morning, Joe are you doing my Brown.
Hanging in there.
Almost lunch time, I feel like I've been here so long.
So.
I don't even though that you had been analog.
Yeah.
Can you frame for us kind of the longer term opportunity on parts like what's your what's your penetration of your installed base now roughly and you know where can it be like wears best in class, maybe you know five and 10 years down the road like what's what's the ambition to be able to get too.
Okay I'm going to have the rough this for you I know when we started this this journey we got on we were less than 4% of the parts market. Okay right said.
We're running six on average are better and heavy and you know around five and a half Wow, we are and he had the opportunity. So I'll make sports to right. So that was a huge focus is still is a huge focus of ours. That's why I think we continue to outpace the market. The last three years and we will continue to do I have confidence in what we're doing so our goal.
Our goal and I don't know what was to get today, what is to get close somewhere willing buyer would happen 6% by 2022.
I don't have where we're at right now, but I've got I think it's around I'm referred in around 4.5, 0.6%. So we made some progress.
We were under four like three Athree nine were up to about four six.
Okay of the overall parts market and our goal would be to get somewhere, but where goes into six but I want to head and say five and a half to six somewhere in that range. Because you know, it's an evolving do I feel really good about the initiatives we got out there.
Really good about a you know some of the tools that we put out of deals out there we're going about our people and I think they're all onboard with the achieving that number over the next three years by 2022, So we can get somewhere between 5% to 6% by 2022.
I will feel pretty good about it.
You know and continued obviously time service growth at the same time field.
We had the opportunity.
Facilities to continue to expand.
Whether it be through mobile or embedded technicians have across the country. In every area not just guy you know, we see a lot of different things going not just in our shops, but outside of our shops.
We we do it in.
Summaries that are better than others, we're working on getting all or is up to the highest level. When it comes to those initiatives on the server side. So hoping gives you a little flavor on the numbers.
Yeah, that's awesome and then any acquisitions you can make to to accelerate that are this is this is all sorta necessarily needs to be more home grown.
Well our goal we've had very well we started we had little bit M&A in there.
But not a lot you got to remember mothball for software and stuff like that the write more capability.
You bet you met so think about likeness yeah. There's one out there was not even in there remember the tolman numbers.
They're not in my numbers, Okay. That's an investment because it's a 50 50 and give you don't even see the 800 trucks, they sell or about whatever it is you don't even see those numbers in my numbers are there are parts and services.
Okay. That's not in there so one day that will be in my numbers automatically okay.
In half and Canadian dollars to an investment coming to underline, but really and truly we will you know I have up to five years too.
When you're walking handle between your wanting to your file to bring them all in.
And I'm not going in the details can bring them all in on a new ground ROE. So that's exciting that's already that's already built and deal okay, but you're not fully secrecy and just a small investment would only half of it round down there. So.
They have any we got to be able to use our tools and stuff like focusing 15 locations and not a lot of smaller than what we have you know, but it is the Ontario, you know got all along I don't have all I'm curious why they've got some opportunities, but they have Ontario swallow area and they've been able to this small into any anyway. There is one that's already built in that will give yourself.
The next year Julio.
That's great. Thank you so much.
You bet, you'll ever good day my free go quickly I don't want I don't want you to disappear gross.
Yes, Sir.
And our next question comes from sign Kim with Gabelli. Thank you May proceed.
Good morning, gentlemen, congrats on a solid quarter.
Well good morning, I guess I'll see you person to Yep Yep, we look forward opinion, Steve out there a couple of weeks just one follow up question for me in the parts and service business. So roughly how do you for your OEM partner to expanding their respective fourth services business. So yeah for example, with pack or expanding or TRP business via would that represent a potential headwind figure aftermarket business.
No no way.
I don't see that is any headwinds. It's just you know it's it's a it's a strategy of theirs, we have a strategy, maybe not totally where weve instantly.
The RV parks, Okay, maybe not every piece of their where I believe we're participant with both Oems and their strategies okay.
Sure.
And we work very hard for me.
Any video in Boston, we participate all the way around so that's not a headwind. That's that's that's that's a partnership on our part also even without it.
The store, we felt in our imports.
Dan.
So part for announced on the same way.
Got it.
I have a starter navistar. They both have ended when you know private label stuff and we support.
Got it okay very helpful. Thank you got.
You bet.
[noise], ladies and gentlemen, this concludes that Q and a question on today's call I would now like a tank.
Let me see batch for any closing remarks.
Well.
Thank you guys and joining us on call today I know it will mean February before I talk anyone again, so I wish everyone, a very happy holidays save holidays coming forward and we'll look forward to copy to you in February Thank you.
[noise], ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.