Q2 2020 Rush Enterprises Inc Earnings Call

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At this time, all participants Oh listen only mode.

After the speakers presentation there'll be a question answer session.

Sounds good question during the session you really depressed star one on your telephone.

Please be advised of today's call is being recorded.

You acquired additional systems, you refresh stores, the Roche, which an operator.

I'll now like to hand, the call over to Mr., Rusty Rush Chairman CEO and President. Please go ahead.

Good morning, and wasn't burst second quarter 2020 earnings release conference call on the call today or Mike Mckee Roberts, Chief Operating Officer, Steve Killer, Chief Financial Officer, Derrek Weaver Executive Vice President Jay Hazelwood, Vice President Controller, and Michael Do also Vice President General Counsel and corporate Secretary now Steve will say 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 might you 95, because these statements include risks and uncertainties. Our actual results may differ materially from those expressed or implied by such forward looking statements.

Certain factors that could cause actual results to differ materially from those expressed or implied by such forward. Looking statements include but are not limited to those discussion or annual report on form 10-K for the year ended December 31st 2019, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved quarterly revenues of $1 billion and net income was 16.8 million or 46 cents per diluted share.

Also declared a cash dividend or 14 cents per common share an increase of 7.7% over last quarter.

Since the Golden 19 pandemic began rush truck centers have remained fully operational across our dealership network. We're complying with all CDC guidelines federal state and local orders.

And turning policies to keep the health and safety of our employees customers and communities our top priority.

As expected to go over 19 pandemic.

And resulting economic shutdown combined with the industry shut down and continued severe decline in the energy sector had a significant negative impact on our financial results in the second quarter, two addresses Jones and help ensure our long term financial strength, we implemented immediate steps to reduce and manage expenses during the quarter. We're continue.

Mostly monitoring cobot, Nike and its effect on the economy and our industry and we're cautiously optimistic we will not see any further declines in our revenues and believe we are right size to meet the needs of the market.

Turning now to our operations in the aftermarket our annual parts service and body shop revenues were 378 million or down 15.8% compared to second quarter 2019 arm social ratio was 110.2%.

This was the result declines in virtually all market segments and consistent with the overall industry experienced this quarter. However, the energy sector remains hardest hit due to global pricing wars and reduced rig counts.

We don't expect due to improved substantially in the near term the investments we've made in our strategic initiatives, all including our own long part sorry web and web based communication system enabled us to capture sales in this tough environment. However, there are still great uncertainty in the market and we anticipate any recovery will be gradual.

We believe that go with 19 pandemic will continue to negatively impact our aftermarket results in the third quarter.

Regarding truck sales, we sold 1800 66, new class a drugs down 50.5% from the second quarter 2019, our truck sales accounted for 5.2% of the total U S class eight market.

Our results were down significantly as we expected due to go 19 pandemic and then industrywide shut down in class eight truck sales.

Several of them about manufactured we represent also experienced production closes in the early part of the book War, which further impacted our class eight truck sales on a positive note HCT research recently adjusted at U. S class eight retail sales forecast to 159000 units in 2021.

Perfect for Macy's previous estimate.

We're seeing increased quoting activity, but our customers still remain someone has been due to uncertainty about the go over 19 bundling and the upcoming elections.

Our used truck sales decreased 15.8.

8% year over year, we aggressively reduced our used truck prices and inventory levels in anticipation of the pandemics impact on used truck sales.

We experienced a significant decline and used truck sales to go with 19 pandemic in April night, but we solved truck sales and values begin to stabilize can rise in June.

Further new businesses are entering the market to take advantage of healthy spot rates and those new businesses, usually start by purchasing used trucks, which has an encouraging sign.

And medium duty our class four through seven drug sales.

For 220, 331 units down 40% year over year and accounted for 4.6% of the U.S. market. These results were primarily due to an overall decline in activity throughout the markets. We support our customers many of whom are small business owners are uncertain about the economy and delaying purchases accordingly.

That said cancellations of class four through seven new truck orders or not.

As a comp not as much as we had expected to be.

CP research is forecasting U.S. retail sales to be 106, 76500 in 2020, 33.9% decrease compared to 2019.

We maintain our commitment to returning we maintained our commitment to returning value to our shareholders as well as doing the right thing for our employees. We've instituted the share repurchase program. There was temporarily suspended in the first quarter and increased our quarterly dividends. We also lifted a wage freeze on our service technicians that was implemented earlier this.

Sure.

As an expense management measure and earlier this month, we raised our company minimum wage to $15 per hour to encouraged employees to build long lasting careers with us.

While challenges remain ahead, our employees and I take pride in being assessed and essential business supporting our customers and helping our economy recover from this unprecedented time.

I'm incredibly thankful to them for their dedication to our company and to protecting the health and safety of those around.

With that I'll take your questions.

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Our first question comes from Jamie Cook of Credit Suisse. Your line is open.

Hi, good morning, a nice quarter.

I I guess it a couple questions. One you know somebody always have reported so far talked about when they thought about service or even order trends or sales. It was like April is the worst quarter and things improved into June and it sounds like July just wondering you know what you're seeing from the truck sales par as well is that the service part.

Whether service ended stronger relative to April.

And then I guess my second question, you know that they did Jean <unk> a was impressive in the quarter. How much you are able to sort of take out take costs out to help your E. P. S.

I'm wondering how we should think about going forward in and then as we sort of go through you know covidien always in or is there an opportunity to sort of structurally reduce your cost base. Thank you.

Good question, Jamie well as far as we look forward from a truck sales perspective, let's start there.

As I mentioned in the <unk> My comments earlier no question quoting has increased right.

We are saying you know some of that come to fruition.

But we're continuing to hope the quoting activity continues to get better as you saw when you're on the net order intake for the month from June was more than was anticipated, obviously and we're still a.

Well I don't want to say.

For bullish on it we're not talking about getting back to levels. You know what we beforehand is definitely increase Tonight, we expected to stay that way right.

I'm counting understanding that way unless we have some second wave as they talk about mix that type of stuff is out of my control from a business perspective, given where you know the freight businesses right now as you've seen all the reports from a lot of our customers large customers anyway.

You know they've reported nice reports have come in and and spot rates are probably would be about getting about as good as they've been in a couple of years, so that usually bodes well for rate increases down the road.

For our over the road customer base was we know what about 70% of all looks like so so you know looking at those indicators you got a feel there's some legs on it there.

As we look at forward right that would be my opinion on that from a parts and service perspective. It was interesting as I mentioned in the release, we took up which is a little more hit service and you know and while we did see what we fall I would call out can turn it might we were bottling on the bottom now if I looked at apart from apart.

Perspective, we did increase for sure as we move through April being the worst made about the same.

It did increase somewhat in June the server side, we took some pretty good hits in the core and a lot of it has to do with the oil and gas business, even though it's a way lesser percentage in what we used to me I mean, it's not even what we were four five years ago. Its you know it was less than one day was maybe I told you in the first quarter I think it was 3% to 4% of our.

Parts and service will not less than two okay and that is more heavily service weighted so service took a little tougher hit in the quarter, but we do believe it's going to come back we are seeing backlogs in our shopping tickets, we write up increase so not I don't take a dramatic increases you know I'm.

Looking you know I'm looking to pick up a couple of points a month as I said gradual I just want to start picking it up you know slowly, which we have bottomed I haven't seen all I want to see but what I'm seeing good indicators I believe out there that we will continue its not going to be any V shape, but thats fine we just want to keep it going in the right direction and I am.

And I think we will as I look at the backlogs what we call work in process I look at the amount of tickets for writing up on a daily basis. The problem. We took for a while was some of the absolute dollar values on the tickets and tickets have been coming back, but the dollar values were less but I think they're starting to creep back a little too. So it's something we got our eye on not just a month.

The quarter to quarter per week to week day to day, our out right now, but but I do feel a you know I do feel that we will gradually come back on that side of the plan on that side of the house and for sure. We build the parts business has bottomed and was gradually coming back also now.

The expenses I've got to do one thing I've got it.

I can't go without complementing our team and that goes for each and every one of the employees out during the company.

For an outstanding job under very stressful conditions, when you're dealing with the pandemic.

Yeah, you're dealing with the and the you know a lot of people affected by being essential business don't think we weren't affected as an organization and we had people whether it was in corn Kane dealing with Covidien then on top of that you're having reductions in workforce and you've you've got all this going on the job. They did was just over the top I just.

Say that I can't be more proud of the organization to produce the results with the stresses.

And multitude of stresses you know.

Out of different channels coming at you.

That that they did.

Managing expenses now the big question, which I knew would be the question and we've worked what were those a lot on lately. You know is now okay. Now you've got you've gone down to this bottom.

Let me about expense base, well I have historically always told you what every gross profit dollar that we create.

We're going to take probably 50 cents, it's going to cost me to do it I don't loan money I don't know things like that I work on parts on trucks and I'm, a big parts up but I do this and deliver it takes personnel. Thanks personally I'm working with an argument eight objects I'm working with drugs, so, but because of what we've learned and because of the investments we've made.

You know over the last few years and maybe from lessons. We're learning in this current in these current its current environment. You know we've set a goal we set a goal not to 50% go we've gotta go to get 30% to 35%.

You talk about adding back of gross profit. So when you expenses to gross profit. So our goal is to keep two thirds or better somewhere in that range and not just 50% when the markets do come back.

When we do see which we've we've been but there was enough times, it's going to come back I mean, not having I can't tell you the timeline exactly but sometimes a steeper the valley the bigger the rise back to so always remember that so it's going to come back so in order to as an organization. Our goal is to yes, we're going to spend a little money, but we're not going to spend as much as we ever did in the past that sorry.

Well I guess, we got approved right well, we'll see the proof of buttons and eating and so I look forward to that challenged I think the whole team from top to bottom looks forward to that challenge to try to maintain.

At least a two thirds.

Of holding of the gross profit when as the market does come back.

We've taken some rather compared to last you know we look at margin I mean I go back to Muggy July June July of last year. I mean, we're talking about you know taken $12 million a better gross profit out a month.

And we manage they've done a great job of managing on the expense side and but it's taught us some things I think and obviously the investments and all that combine has allowed us to set a new internal goal and then you said when I've tried to give you some high level view of how we're going to do it I can't get into the exact but I do believe.

With using technology and being forced a lot of ways to use more of a here in the last 90 120 days.

And then with the investments we made we'll be able to achieved that goal I gave you.

All right Rusty one last question, probably unfair, but you know it's it's a it's a complement to you and your team you know you look we're going to covert environment. Your sales were down I don't know, 35% you put up 46 cents this quarter.

And that type of environment, you know with the costs you took out with the with the you know and you know the focus on the aftermarket parts business like why isn't the second quarter, you know the trough of earnings or why shouldn't people think about sort of if we take that 46 cents or 45 cents multiplied by four lies in a buck 80, new troffer.

Earnings for Rush.

Yes, sorry, if you don't want to you know I'm not going to Jamie Okay, I'm not going to start to try and well hi. This is the C. We went public June six doing the seventh we repriced in six to 719, 96, and if I'm going to stick you're going to get a new guy in here to get that started.

So I'm not going to go there I'm just going to say I'm proud, where we're at and the job that was done but it's on this is one down for sure I missed it listed a lot uncertainty out there okay. In many different ways not just opened with the elections and everything else going on.

Everybody is there's a lot of anxiety not just in our organization for sure just People's lives out there so I'm not going together right now so.

All right I tried congratulations [laughter] welcome good tracker [laughter].

Our next question comes from Justin Long of Stephens. Your line is open.

Thanks, Good morning, gentlemen.

Justin.

So I wanted to ask about the trend in parts and service revenue in the quarter and if you could give any color on how you think that compares to the industry and into Q and then also would love to get your thoughts around the competitive landscape in parts and service and how that could potentially change post cobot.

Sure.

You know I don't like we did any worse than the parts and service.

Information is not the best together overall other than mine right. We've got a couple things that we look at and you know and from what I've seen I think we did a couple points better in parts, maybe a couple points. So works in surface I'm not sure, but it's really know our stayed flat with it.

I'm pretty confident we do a little bit better on the part side than most.

But I do expect so it has bottomed as I said.

You know I just is creeping up they did creep up as I mentioned, Jamie a minute ago parts to creep up in June for sure service I still think we were feeling a lot of the effects bottomed out I'm looking at my gene technician count in the stuff and that's flattened out too if we had some declines for a bit of so I.

And I'm looking at tickets written up as said is again I'm, just we had to get values on tickets back up because for a while the trust me in April and May people, just spend and what they had to nobody's been any active we didn't go. If you had this problem. It was going to break down you fix that you Didnt you said Ms Test would you like this and this done and that they didn't do that.

And then you had other people extending things like oil in the rules and stuff as people were you know struggling there for a while I mean I knew you know him and the rest on the stores certain market. There was market segment, driven now certain market segments were fine.

No, but certain market segments warrant you closing down all the department stores, and everything else and everything's going online that change, though a lot of you know things a lot of focus what way lot of our customers.

We're not doing well in that environment I think that is straighten itself out somewhat I think it's going to be interesting to see.

How it all shakes out when we're done with all this.

Because of my stuff was pushed online et cetera et cetera, but.

I do believe weren't bottomed and you know we're poised to go up as I said I'd like to start picking up a couple of points.

Month.

I'm not.

[noise] T that I don't have the future in front of me, but that's what I'd like to see and I think we're seeing I think the confidence levels given what you see the freight companies large guys, who put out there are going to help spin I thinking you know Maggie and I will talk more in Ramble morning, you won't probably got remember the small and medium got you know there was a hub.

With that wasn't.

They got BPP money, well that's 20%.

Now, let's 20% of people got deal team no that when you look into where the money went.

You know.

I can break it down, but you don't need to hear all that data from me, but point being they got some help those extensions Doug from what I can tell I was worried about a bubble out there, but from what I can tell talking to people in the business on the finance side with large finance companies and a couple of and I just want to double three you know most of those people seem.

To be making their payments and habits are picking back up so that's a good day I know we've seen that inside of our lease portfolio. We've seen that inside of our lease portfolio that you know where we had to extend some people. They really are picking back up okay, and making their payments. So you know and we've seen utilization inside our rental come.

And I'm, just giving you antidotes probably more in your one for why.

No V shape, but at least you feel you ask the bottom when you're going to gradually get back there now what was your second question that my ramble on yet [laughter].

The competitive landscape I'm just wondering.

Yeah, I do you see some of these other companies and financial distress and maybe a little bit of a shake out our consolidation opportunity on the other side of this.

No if he could if you didnt have spill the letter PPP I think I wouldnt be looking at some right now, okay, but I wasn't able to do that what we were rest what they will do that where we are making price while I'm proud of that quarter morning anybody else I can't tell you how many dealers. So it's all put out there already [laughter] took PPP money along with.

Couple of customers right. Unfortunately, we had to do it on our own what I think that speaks to the quality. The organization personally so whether it was weak but theres a lot of dealers. It took a lot of money.

And my rightfully, so nothing wrong with right baked goods, but given our size.

It wasn't the right thing to do for US it wasn't meant for US. So we just managed our business. So.

I do expect opportunities to come but they may be you know a little further down I didn't give to push that I was looking for I think because a lot of people got money man [laughter] makes no sense and then following up on what she said about parts and service and some of the mix changes, we thought on that and.

Second quarter I wanted to ask about parts and service gross margins going forward do you think they can get better versus what we saw in into Q and the service piece and proved there how should we be thinking about that yes. We service does combat that will affect the mix when it starts coming back at a higher rate.

So there's no question.

We could you know we could see it pick up it was up from Q1, you know I mean.

This is we're up from 36 six to 37 too.

They were nothing like Q2 last year Q2 was a block or best quarter, we'd add five years. So I don't I'm going to put that as anomaly, but I think we can you know I believe we're gonna be somewhere right for right now somewhere and where we're modeling around.

Im not going to drive margins, but somewhere in the high 36 is to the you know mid thirtys getting maybe get up to 37, something but in that range, Justin I don't want to commit but when service does come up and starts coming up faster, which I anticipate it will.

Sometime over the next few months I'm not going to say right now, but it will as we know we've had to take that hit as I said in LNG, which affected our service more than anything else.

Well, we will pass that I mean, you can see the results that's why I'm proud and I'm excited about where we can go when we do start getting stuff back.

A little rising closer to normal so yes, you could have some bump in the margin, but don't look for two points bump or something like that out there on 200, Bips I don't see that but as service does and you can start you start picking up 10 20 bips here in there as it becomes a larger piece of the growth and mix.

Okay that helps and last question just real quick on.

The longer term financial targets I know you you guys put those out there a while back obviously the word worlds changed a lot any updated thoughts around you know one those targets and to the timing of when they can be achieved.

Well, I guess timing got extended a little bit right.

Targets haven't changed if anything we're going to raise the targets.

That's what you do when you start talking about trying to hold a higher percentage of when you get down to the bottom and you're going back. This there is there there is an exciting thing as I said about going when you get down your trip down like this and then you can look and how you're going to growing back and really dial in on it. So targets are still out there you know how should we still want 6% to the parts Mark.

Can I have looked to see what Perenco would world I know, we had gone down we had grown from three eight to like 4647.

We still have a goal when they get to 6% of the overall parts market out there we stated that.

You know I was going into this year I was excited too.

Until Kogan I was excited to prove 30% off from truck sales and.

You know and ensure really good year, but that didn't happen in spite of what's going on I think we're going to end up 200 pretty doggone good year.

Given the environment now we've had to manage so.

We're we're constantly a we're constantly right now that I'm not I can't give you the timeline how about that okay. Let's get out of this morning, just take some of this uncertainty out here and allow me to hopefully later you know later this year or first quarter next year, we could take some of this uncertainty this grey matter out in front of me out of my window.

And maybe we'll be able to give you a little bit of timeline, just not because I don't want to sheet from the hip on something with there's that much in certain yet, but don't think the goals look we haven't stopped strategically or you see all that cost come out I don't think for one minute, we're stopping already strategic investments. We've got going on we have those would run cost and we're still working on strategic stuff that we.

We believe we'll continue to allow us to well do what we've done the last few years.

Okay, Great I appreciate the time congrats on the quarter.

Thank you Sir.

Thanks, Mike Baker folks.

Our next question comes from Joel Tiss of BMO. Your line is open.

Hey, guys How's it going good Joe how are you.

And then there.

Hey.

Yeah. That's all you can ask for you now.

You can as from why do go ahead.

Okay.

That sounds like you were kind of softening up a little bit from what you're saying or in you know in earlier conversations about the potential for kind of smaller and medium sized guys to.

See more bankruptcies than we've seen before and you know a bunch of low mileage used trucks come back in the market is up there well given what I'm seeing out there from a freight perspective in miles being driven and stuff like that and what I'm hearing.

Maybe there is going to maybe they're going to weather all the store you know I was concerned.

You throw second degree shut their doors shut down and then all bets are off Okay. You get you really ship displaced down all bets are off but with the spot market do look at spot market. Just did all that this in the last four weeks or so okay. It was taken in May in early June it's just come back here over the last four or five weeks at.

No I mean acceptance rates are still tenant retention rates are still.

Pretty strong, but you're not us, but they've slowed a little bit. So you are right now.

It appears to be more freight I would have anticipated now that said you might have some guys inner segment and wrong that may have some issues, but talking to you know the first people. They got extensions are making payments, let's say that they're making their first payments from what I gather talking to like three different big finance companies. So.

So are not everybody, but the majority vast vast majority or.

Now does that mean, they're going to make it all agreement through the winter and Colombia, I can't answer that based upon what's out there, but what I see right now.

You know that's still out there the only thing that you wouldn't watch out for and they may be coming down because a great referred to so I were insurance rates were up there, but I think you know if the freight can come back then maybe people whether it maybe it wasn't the extensions in the BPP money for the people within get it.

We will get them through the other side, which.

I wasn't a little but I've been out but that was looking at the freight market. You know some news different six eight weeks ago six weeks ago, but it seems to have picked up the I'm not I don't have you know I don't have.

I can't see that far out there as I said earlier still uncertain in still little grey matter out there, but based upon the last few weeks from what I'm hearing most people that are booked business is pretty decent so that my whole over into the small and midsized Guy would be my only comment Joe I didn't anticipate spot rates jumping up like they have here recently so.

And then do you use are you starting to feel like you obviously been doing this longer than all of us and starting to feel like we could we could squeeze the whole cyclical downturn into one year versus how we usually kind of have you know whatever for good years into bad years and things like that you think the show.

For the cycle changes.

Yes, I think that.

Very much could change the Ohio Theres no question in my mind.

You know the deeper the valleys quicker you come out on that slowed that slow crawl down remember we were only supposed to go down looking back when we came into this year somewhere around you as retail was going to be 200.

Well now we're going to be in the one thing you want to 60 range. So we've taken a bigger here and if it.

Continues and that was paces into next year any more than yeah. There's no question you could squeeze it may not be 12 months would you could squeeze in 18, you know are less somewhere in there where you know you get this thing right sized back as long as long as we got to give you know this economy going off of but yes.

You know because obviously, we had an oversupplied drugs as always we went up so lots of trucks and 18 19, just like we didn't know five and six but yes, you could definitely.

Squeeze it in entire I've I've said that a few folks you know it'll be I'm sure someone will ask me will be interesting to watch.

The used market, that's going to be a big indicators. We go forward. So.

And just more of a fit from a you know a bigger picture standpoint, what why would you like to see how great. Your company has reacted to this you know unbelievable time why would you be reluctant to walk away from saying you know I think trough earnings or $1.50 or something like that I mean, no whatever knows what's going to happen but.

You, you've seen sort of the resiliency and and the excellence to your company.

Well I'm going to let you say that okay I'll, let the for we all read that we all can read the tea leaves.

As we get out of this year that give you something around about wanting.

And put out there. So we'll let US finished the year out and we can call. This trough and you can take it from there I'm not I'm not wanting to put if he is out there Joel and as I told Jamie.

Not planning after 24 years plus of this to start today, maybe one day I'll get a little senile into it or something I don't know, but for now I'm not planning on doing if you can read the tea leaves you can see the results and ultimate Yup Brent.

All right I'll get you a couple more margaritas next time. Thank you okay make it doubles.

[laughter].

As a reminder to ask a question. Please press Star then one our next question comes from Andrew Obin of Bank of America. Your line is open.

Yes, good morning rustic good morning This road.

And I know you don't rush PM Hi.

How hard you know that high rush can work to deliver these results. So very impressive Thanksgiving. Thank everybody not me like everybody else, but I appreciate how relay the message if they're not as.

Just a question could you just give us more over your front down a lot of questions have been answered, but could you give us a rundown by key geographies, California, Texas, Florida Midwest what are the key trends you're seeing by industry and is there a material difference between let's just call. These four via.

Trends right.

Right. Okay. Surprisingly you know, California has held in really nicely, Okay, California is held in very nicely.

Given what went on and you know ship everything shutdown in the ports earlier in the quarter et cetera et cetera.

They have held on very nicely, Arizona has held on I would tell you.

Probably the.

That's the biggest you know the biggest hit which is our biggest most powerful region and that's Texas, Oklahoma folks that rely more on the LNG, while they're still very profitable relative to other parts of the country, they're not up to the usual standards right now.

For us when we look at where we would arrive earnings from at the same time, they're they're showing resiliency by holding one thing we could have not have still posted results were boasting and these because there were so always G driven and we have no Oh, Gee, I said parts and services under.

2% man and I remember when it was close to 15, a few years ago. So you know that's with those kind of results yet we're still posting not the levels, but it's we're continuing to evolve this region to be.

To be more diverse okay.

We continue to work on that San Antonio Dallas, Houston threw out we've got 24 or five stores in the state of Texas.

So I mean, we're heavily yeah, we got a lot of stores in Texas, but Texas. One good thing about Texas has got a heck of even without oil and gas Gotta Hegman economy. So it typically is learn how to weather better.

If I look up in the Midwest.

I would tell you that they have for all and have started to.

Doing we're doing a little better looking, Illinois, and Ohio, and those states now there there are gradually coming back okay. We trough in April, let's say like everything else and but we're seeing I'm seeing we've seen some good stuff up there in internally even.

With the results of our people that we've got a place up right now.

Seeing some good results coming out of that area. So I'm excited about where that can go.

In the future I I think it will maintain I think it's going to maintain stability better than we have in prior years and be a better client.

Coming out of it.

You move over you know in Georgia still tough.

No question, we're still tough in the Atlanta around that area and over in the.

Southeast.

Sure on emerging.

Georgia those areas seem to be up.

You know.

There there there, okay, but they're having a tougher time getting through it all.

But Florida, which started all maintaining strength I think.

When you ship you know were like four or five locations route Orlando, well and you shut down Mickey mouse.

And all that other it goes around there you you have some effect, but yet at the same time, they're handling still pretty well there I was looking at the results for the month in June and.

Doggone good job given so there.

Don't want to say they're maintaining.

Better than I would have their maintaining better.

I would have thought given there's you know there how tourism and all that type of stuff in Florida is such a big deals throughout the state I just had Atlanta just throughout the state. So you know I feel good about that so I hope that gives you some kind of.

You know when you're talking about market segments, while as I've said, you know I'm not Ken when we ever do ever given where we get oil and gas back you. Just you can just tag on those results. That's all I can tell you when that does happen one day, because you know we've always been pretty deep into that business, but we've had learned how to diversify the company. That's results were showing right now.

So you know your year year Foodservices you guys most of that mostly like your refrigerated stuff those guys have been pretty strong yeah, you lost in restaurants things like that but boy the grocery stores, they can't get enough milk delivered or sort of stuff on the shelf you know.

Most of all you know our big guys, everybody seems to be coming back now right where people were in shock like I said to small and medium guys were hammered early even though the big guys would maintain most of them as you can see by results.

That they posted but I believe that the Mark if you have the freight markets.

Pretty robust and most people are now projecting to get rate increases next year, where you know they weren't that wasn't Wow I read report the other day shippers, we're planning on only pay and 0.6% more next year and adds up to two and a half the three I can guarantee the carriers are looking for double that okay.

Hey, as they didnt contracts as things get to.

You know as things move forward. So those are good signs right. Those are good signs, we just don't mean anything stalling it out overall perspective, and I think we can you just gradually keep coming I'm not going visas anything like that you it'd be nice to see a solid continual March forward and I think it's possible without any outside influences.

I I think in your press release, you highlighted that you know the fact that parts and service business was down was.

The functional sort of headcount and trying to get tax and you also sort of talked about.

Going forward you know, perhaps you could.

Do more with less I can just talk about how will you ramp up staffing.

And the parts and service Department I going forward will it be in line with historical patterns or have you learned lessons or would allow you to be more efficient in that area of the business.

Thanks, Andrew well I'm going to reflect back on to comment I made a little bit earlier I think on the call maybe but you know historically I go back said one more time historically I've always told everybody. We grow gross profit I'm going to probably spent about 50 cents of every dollar.

But as moving investments we've made in the past few years and through the lessons learned in this pandemic now that we've we've taken it down as with the margins those back we have an internal goal you know the keeping them for someone like 30, 35%. We'll go back to cost backed in DNA. So.

So you say how do you do it wasn't obviously you know as you become more and more multi channel right you know more online stuff right technology.

They are ours, our phone systems and stuff, we're all interconnected throughout the whole country. You know you you're you're picking off there's there's a multitude of things here. Okay that allow you to continue to leverage you basically do a better job leveraging off the base, you've got and using.

Technology to communicate and with your customer and you know that's only going to grow well you know when the drug that is pretty mundane business. Unlike change what looks like and if you know this is sort of accelerate where you could go over to ever bodies place you had curbside pickup you had this going on in you know you you learn.

A lot of things during the middle of all this and then Pat you know position with the investments.

You know you go well, Okay. I believe I can you know we can do that and you can mapping out and it's just not buying this guy talk because you're learning how to like I said, you leverage up all your phone representatives throughout the country. When one area is busy enrolled over it rolls over to rolled over if you may be doing business for you know Atlanta in California or something.

And then there's just a multitude I'm not going to get it all up right now, but it all those are cost cutting you don't need as many bodies in that one or you're just leveraging man and you continue to leverage and and I just and you continue to get share. The memory you just and that's what are you. The gross outcomes rather than you do you leverage off what you got I know it may sound a little broad.

But it's just really that's out works for them.

Thank you.

You bet you.

Our next question comes from song Kim of Gabelli Fund Your line is open.

Good morning, Rusty and congrats again to you and the team and a great quarter.

Hi, John appreciate it.

Yeah, No problem I wanted to switch gears here just given some of the attention that some startup in the industry have been getting.

Wanted to get your thoughts your updated thoughts on hydrogen fuel cell technology in commercial vehicles. Obviously this is probably more of a long term play, but just wanted to get some commentary are you having any discussions with customers are you seeing any sort of customer bad and any thoughts on timeline for the rollout of these technologies.

Okay, Oh hydrogen fuel cell I'm, not having any correct you know I'm discussions you know I mean, it's it's really early and I know, there's a lot of value in some people's companies that we have few years for the breadth of first dollar okay. So I'm not disputing.

Its long term viability again I'm not disputing that we're not looking at how do we you know how do we conform to that as it becomes relative and continues to become more relative to real life real day use I mean, if I was going to tell you anything.

I do that so folks when it comes to that one thing I know, they're not going to have service are there.

There's one thing I've got bigger than anybody else I've got a network. So I'm always looking at ways to leverage off of that network and push for services and products that they're working on product they're not working on this distribution systems. We're not we're all of that regardless I know everybody. Originally say well electric you noted there has been 35% less when I'm reading tend to 20.

And magnets and stuff. So I think it all that still to be foreseen in all of these startups is one thing they don't have and that distribution in the service network and we are in the commercial business and then a commercial business trucks can't sit and I don't care, how they build of things will break so.

So I know I'm not answering your anhydride I'm not the expert on not involved in it have I've talked for some people about how we might do some things around yeah, but it's way too early for me to even fried or frame that for you.

But I can promise you. This we will be when it comes the electric and when it comes to hybrid and we will be we will be out there we already playing the natural gas space and we will play in the alternative fuels base you can rest assured driven by our Oems.

But also you never know what else.

We might be able to do given the breadth of our network and the expertise. We have you know and other partnerships and things like that was all but there's so much as we know the big ones. There's a lot of smaller players out neglect space to right now, they're really getting all or most all most I'm trying to get merged or by bought up but if a safe and there are people out there in that space.

We are we had we're watching it closely working inside of it and we're actually working I don't I can't but rest assured we're out there were I'm not looking at the world stay the same for the next 10 or 15 years, either so we'll be involved it's just a little bit early for me to say, how and how rush is involved in it other than that.

Remember this will be driven by Oems paccars for sure out and announced or we are one of you know they will.

Our medium duty stuff coming soon.

The largest comes distributors they will all be in that space. So we will be in that space with them.

Terrific. Thank you rescue appreciate it guys you bet.

No further questions like to turn the call back over to Mr. rescue S for any closing remarks.

Well, ladies and gentlemen, first off I want to thank you for joining us on the call today and most importantly.

Got you in years and everyone in all the health and safety I can.

So there is still very very uncertain times and so just.

Through the right thing as I spend a lot of time talking with my folks and if I can tell anybody anything get off the horse and do the right thing okay.

No there's such a thing if.

We do the right thing around Russia, Okay, I can promise you that because the health and safety run employees and our customers and just our communities in general.

As the most important thing so the rest of this really doesn't mean a lot. So anyway. Thank you very much wish you all the best buy.

Ladies and gentlemen. This concludes today's conference call. Thank you for sustaining you may now disconnect everyone have a great day.

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