Q2 2021 Rush Enterprises Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to Rush Enterprises, Inc. Reported second quarter 2021 earnings results.

At this time, all participants on a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then 1 on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker for today.

The rush Chairman and CEO and President you may begin.

Good morning, and welcome to our second quarter 2021.

Our earnings release conference call on the call today are Mike Mcroberts, Chief Operating Officer, Steve Keller, Chief Financial Officer, Derrek Weaver Executive Vice President, Jay Hazelwood, Vice President Controller, and Michael Goldstone, Vice President General Counsel and corporate Secretary now Steve will say a few words regarding forward looking statements certain statements.

And we'll make today are considered forward looking statements as defined in the private Securities Litigation Reform Act 1995.

These statements include risks and uncertainties on.

Results may differ materially from those expressed or implied by such forward looking statements.

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 discussed and our annual report on form 10-K for the year ended December 31, 2020, and and our other filings with the Securities and Exchange Commission.

As indicated in our news release and the second quarter, we achieved revenue of 1.3 billion and net income of $58 million and $1 per diluted share. We are very proud to declare a cash dividend of <unk> 19 per common share, which is a 5.6% increase over the last quarter. Our results were primarily due to the country's continued economic recovery Chelsea and.

<unk> for most market segments, we support solid demand from new and used class 8 truck sales and increased aftermarket activity along with our continued interest and managing expenses contributed to our strong quarter. As we look ahead and component supply chain issues are delayed and the timing of some new truck deliveries and to next year and those constraints.

And then getting to negatively impact parts and service revenues as well.

By supply issues, we will continue to add back key personnel to meet market demand as we believe our financial results will continue to be strong throughout the remainder of the year.

And the market our parts service and body shop revenues $445.5 day absorption ratio was 129, 1%.

Aftermarket revenues increased 18% compared to the second quarter of 2020, which is primarily as a result of the nationwide economic recovery. Our port sales are back to pre pandemic levels and we increased 10 experienced increased healthy activity.

And most market segments, particularly leasing revenues over the road customers and independent service centers serve.

<unk> revenues are recovering and a little bit slower pace and parts impacted not only by supply chain issues, but continued service technician staffing and SUNS common and the industry.

Looking ahead, we expect supply constraints will continue to impact parts and service revenues throughout the industry for the revenue from the lender and the year that set to mitigate those impacts.

We're actively hiring key parts personnel and service technicians, and focusing on our preventative and contract maintenance service offerings further.

Other we leveraged our parts management technologies to help us effectively adjust to market demand and through our extensive dealership network to help mitigate parts supply constraints and finally, we're also piloting final mile route optimization to help estate efficiency and our parts deliveries to better serve our customers we do believe.

Demand for aftermarket and services will continue to increase through the remainder of the year as the overall economy remains healthy.

Turning to truck sales and the second quarter, we sold 2900.54, new class 8 trucks and getting to 5% of the total class 8 U S market.

And our truck sales were driven by a healthy economy and strong freight rates, which led to solid activity from most market segments, we support, especially vocational and construction and over the road customers and healthy stock truck sales, while demand for new trucks remains strong and the second quarter truck sales were limited by supply constraints.

Which impacted manufacturers production capabilities.

Research forecasts U S class 8 retail sales to be 259000 units and 2021 up 32, 4% from 2020.

We believe the support and components supplier their strength will likely continue and get back class 8 truck sales through the third quarter, our longer causing downside risk to the 259000 units.

Because of this we believe our third quarter classic performance will be flat compared to our second quarter results. We believe class 8 heavy and there are new.

Truck sales may accelerate later this year as manufacturers are able to increase production when component parts are more readily available on.

Class 4 through 7 new truck sales reached 2825 units and the second quarter accounting for 45% of the U S market.

<unk> income.

And we significantly over the second quarter of 2020, largely due to increased activity from leasing and rental and foodservice customers. However, sub and the manufacturers we represent continue to be based on production shutdowns.

<unk> and spreads negatively impacting medium duty truck availability, which will most likely continue through the third quarter.

Research forecasts U S class 4 through retail set and 47 retail sales to be 257000 units and 2021 up 11% from 2020 looking ahead, while we believe class 4 through 7 truck production will not increase as quickly as class 8 demand remained strong and we have the teams and.

And strategies in place to take advantage of every sales opportunity puzzle.

Our used truck sales lease reached 2094 units from the second quarter up 18, 4% from the same time period, and 2020 used truck demand and values remain high primarily due to production constraints and class 8 new trucks.

Though it is becoming more challenging to maintain a healthy used truck inventory. We believe our third quarter used truck sales will be consistent with our second quarter results and.

And we announced we have signed the letter of and Jeff with Cummins, Inc. For governments to acquire <unk>, 50% equity interest and momentum fuel technologies are.

Our company's manufacturer.

Natural gas fuel systems. This letter of intent and reflects our shared belief and the long term viability of natural gas fuel systems and drew on our share in history as leaders and the natural gas market and our.

Extensive service network capabilities throughout North America. The joint venture is expected to close later this year.

As always it is important and I. Thank our employees for their continued focus on growing our business and providing superior service to our customers.

With that I'll take your questions.

Understood.

And Thats Star then 1 on your telephone.

So withdraw your question price per pound key.

Again, Thats star 1 to ask the question.

Ladies and Bob.

And a roster.

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

Hi, good morning, and nice quarter.

And I think again.

I guess my first question Rusty I just wanted hoping you can elaborate you talked about your sales.

Per truck being flat sequentially and that there's risk to the industry forecasts out there I'm. Just wondering is this just a third quarter and do we make up for it and the fourth quarter or do we get pushed cash.

And how much gets pushed to 2020 curious if you could just give color on how much risk is to 2020.1 and.

And then I guess my second question.

Obviously demand continues to be strongly and <unk> heard from other OE sort of reluctance to open their order book, yet for 2022 because of pricing.

And so if you could just provide a little color on on how you see that unfolding.

Sure the average Jamie well, if you'd vastly 90 days ago I would have told you we would probably been given my sources and what I saw out there we would have been through the supply and component supply issue, but unfortunately.

I wasn't.

Extend it out from where we are now.

<unk> and.

Communications on behalf of all the manufacturers that this thing will smoothed out by the end and the third quarter.

Don't see it.

Smoothed out somewhat towards the back part of the third quarter, we're already what 10 days on a real away from the end of July.

No.

And I still think we're going to see a lot of pressure for the next 4 to 6 weeks.

For sure anyway, I wish I had a price better engagement with myself, but we all know about the chip issues, but.

Issues extend beyond that.

There is a lot of issues with other parts and component supply, even coming out of Mexico and Asia I think.

Bodies pretty aware of all that we're dealing with.

I do believe that.

Demand is still strong so I don't want anyone to get concerned about that the demand is there and the marketplace and I don't see it going away I see maybe getting pushed out as you said to the fourth and into the first quarter, just because <unk> just because you can't deliver does it mean, you don't build what you're committed.

And 2.

And right for people and this year because those were commitments made prior to all these issues. So I see a lot of that actually moving into the first quarter of next year to I don't think it's all going to get picked up here and the back half of the year.

And as far as 2022 numbers, we're just getting started on some of them. We've done a few deals and not a lot.

And our standard people are very manufacturers.

And once they got caught up with this year are very very little of it hasnt.

And on some stuff, but that's not to say that we're not working on.

And on deals currently so I.

And I expect them to start it's really July.

And when you think about it normally we are really not working on and introduce deals still.

And really you really get started in September and October typically it's just because the backlog is so large people are worried about 2022, but I think the first half of 2020.2 maybe a lot of catch up for 2021, our first quarter sort of San Jose and first quarter. So I mean, I look at our backlogs.

And if you look at our backlog at the end of Q1 versus the end of Q2 now that are robust and reflective of the industry and I don't.

<unk> solid.

We're up 25%, so while you could get a little bit discouraged with the issues that we're dealing with are you just going to ask it and make it last spring it out a little bit longer because I don't see demand going away right now I don't think and taking away from that and that that's 1 of the reasons over the last 2 quarters have been record used truck orders.

And.

Leveraging more difficult to file but at the same day of our guys have done a great job on.

And doing that so.

And I just think everything just gets pushed out a little further and.

And obviously, we show even with not anywhere close close to record unit numbers I think the performance from a record earnings quarter from a company with those type of deliveries and speaks to the space involvement on the company over the last 5 or 6 years.

When you look at it across the board so.

And I hope I, just don't have the exact answers.

And I don't see it I see and stretching from the third quarter and.

And hopefully in the fourth quarter, we get back to some semblance of back to what projected build rates were supposed to be because I think the numbers from production came out for June.

And quite a bit of a lower than were anticipated from North America and.

And I don't know what thats going to change here in July or August.

Sorry, and just 1 follow up Rusty obviously, the margin performance was very strong and the quarter.

And on parts, but also sort of new news and I'm just wondering on the truck side, how much of that is used and and just given low inventory of used and pricing why wouldn't your margins be comparable on the back half of the year for truck relative to what we saw on the first half.

Well some of that just timing of certain transactions, whether it's more smaller transactions or larger transactions.

I think.

Margins used margins were just barely under what they were in Q1, but they were way above historical okay.

I'm not here to say they will be close but.

I think we sold a lot of inventory and those are typically deals that we make really good margins on okay. So our inventory levels are pretty low okay.

Youre balancing between taking care of long term fleet customers and the other that would be the only thing that might impact margins still be good I don't know that the new margins will be where they are at because of the mix of business.

Yes.

And we'll see I don't expect them to be terrible, but.

Across the board and every segment.

As heavier media and for us.

Parts and service and they were extremely strong for the quarter and we were pleased with that but a lot of that is a demand driven.

Supply side demand side.

But I don't see that changing maybe slightly.

Not going to get Super frustrating I'm not sure if I said that somewhere I don't think I did.

I'm, not saying that buy them off and there could be a slight downtick and <unk>.

And some new margins just because of mix.

With more robustly customers not as many small individual inventory sales.

Okay. Thank you congrats on a nice quarter.

Thank you ma'am.

Thank you. Our next question comes from the line of Justin Long with Stephens. Your line is open.

Good morning, gentlemen.

1 and brings our wanted to start with a question on parts and service Rusty can you give a little bit more color on how much growth, you're expecting and parts and service and the back half of the year and maybe you can talk about how much this outlook changed as a result of debt prolonged supply chain.

And issues.

Well as I mentioned and there we are back to pre pandemic levels.

From where we were say the prior 5 or 6 months.

We're not back to summer of 19 quite because the oilfield was still up and back then.

But we are back to pre pandemic levels and parts and service and the second quarter.

And gradually increasing.

I think that while they are solid solid solid numbers as you can tell.

And we might be able to do even a little bit better.

We didn't have some supply constraints, we've probably got.

More open work orders and the shops percentage wise waiting on parts and by far than we typically do so sort of slows it down by ex that back okay.

And so it's not like it's bad or anything it's just keeps youre always striving to do more even though we have record numbers like we've had and that's the way we're putting together around here. So I do believe that we will probably continue to see gradual and I'm not talking about 2% jumps on a daily basis.

Mark, but continue to see gradual increases and parts and service, especially as we're able to continue to staff up a little back to pre to and they make level as well.

Let's put a lot of stress on the organization, but we all know what the employment markets look like and.

So.

We're trying to hire and some side by side and some of those skill sets that you are looking for and.

And it's been very difficult, but the organization has done outstanding job to get back to where we were doing more with less which we continue we believe we will continue to do by the way, but we want to do more breaks and what brings people and and still do more than what we're doing now and we do believe we're capable of doing that but there are supply constraints.

Don't mistake, the fact that demand is there so.

It will continue I think to do likewise.

Warrants you saw here and continue to try to strive to make that better.

Again I go back to.

We could never have that those kind of unit deliveries prior and perform with the and it's across the board was expense management its production and the back ends and back to those levels and.

Performance, even though the volume wasn't there on the sales side.

Great.

But performance from a margin perspective on the sales that we did at turquoise.

And on that point of returning to pre pandemic levels I was under the impression that part Ted recovered to pre pandemic levels, but services had not fully recovered and maybe just clarify that and if that's true how much do we have to go and services to get to that Paul and recovery.

Great Great question I was looking at it as a whole so the mix is a little different you are correct, Okay and service.

It recovered quite as much as parts together the combined total and is there from a margin monthly daily margin perspective, but it's shifted a little bit more to parts and so the upside of that we believe because of that but we believe our technologies and some other things we're doing are allowing us to take a more get larger parks market share once we.

Good day, and once were able to hire more technicians qualify qualified technicians and get them into our workforce. We do believe that work will be there.

We're just again.

It goes back to that employment and not the only person and overall I talked to a lot of people and every.

Read all the articles.

And it's just been difficult.

And between stimulus and unemployment.

And the last year and a half.

And jobs.

And we had been our fulfill it's just the facts.

And I can walk you through double the time to replace people, we have all the stats and numbers. So it just blows up the amount of people because you've got to have replacement youre going to have approach and as part of the business and so it's been more difficult to increase that technician count net we are increasing it and I like.

And the fact actually that we're increasing it and a gradual rate. We 1 time back on our history. A few years ago, we increased I think too fast and rate.

And so our efficiencies and proficiency and weren't where they needed to be.

So I feel good about that they are there are much better just not quite to the overall volume that we want it to be but we're doing a whole lot better job I think hours billed protect all of the different stats and I'm not going to get into on this call, but we feel good about that it's been a lithium and we'd like to go a little faster than we are.

And bringing people back, but again, it's tough labor market out there and certain job sites.

Understood and maybe 1 last question for Steve any clarity on and.

Expectation for SG&A as we get into the third and fourth quarter relative debt, what we saw here and the second.

Yes, I mean, as we continue to add back and grow parts and service hopefully in Q3 debt.

SG&A will grow as a percentage of that like we said I think we grew about.

And the G&A piece grew about 50% sequentially compared to the increase and back and gross profit in Q2 versus Q1, we'd expect that seem to continue.

And as was up with the high margins, even though with volume trucks were GAAP with high margins across the board of drug sales and cash was up and Q2 also so and I.

I would expect that if we can maintain where we're at to be similar on the other side.

And this correlate.

Truck margins and truck gross profit.

Understood I appreciate the time and congrats on the quarter.

And so very much Jessie you noticed that well steves voices and sort of sounds like minded data on it.

And I like it.

Okay.

Thank you our.

Our next question comes from the line of and you open with Bank of America. Your line is open.

Yes, good morning, gentlemen.

Well good morning, Mr. Owen.

Can you just talk.

During Covid I think the part of the story that is being.

Maybe it's starting to be appreciated by the market, but it's just the structural change and how you guys and managing your costs.

And it does seem that the recovery could be there's more going on and the recovery than anticipated the supply chain constrained right labor shortage can you just talk to us about how you're sort of cost management and your approach to managing cost and the cycle can you.

Mind of what the thinking is and what adjustments do you need to make near term to manage this very volatile environment that you guys are facing rusty and Steve.

Whoever wants to answer thank you.

Sure well from a cost perspective, Andrew you learn a lot I think I've told you all that a few calls back on a lot during the COVID-19 fears from last year and while we know the business where it requires people to do it and not just loaning money to someone and I am turning wrenches and southern parts of deliberate parts on that stat bark warehousing stuff.

Do it and that's what we do but what we did learn.

And we can do a better job as the market comes back.

And spending a certain percentage rate and less percentage maybe than we historically have.

Because of some of the technologies and things. We're adding also we believe that's going to allow us it's showing out like Steve said a minute ago. We spent a little more than maybe we wanted to have 50% of the gross profit increase sequentially from Q1 and Q2.

And at the same time, and if I could manage close to that going forward.

And I would feel.

Pretty good about that.

And I think we expect that to be the case and Q3, it's just a diligence we've put in some other I'm not going to get it from some other all everything we do some of that is proprietary to us.

And some other measurements that historically.

News and we've taken that infant training, we're taking that down to different levels of our organization. So that whether it's a mid level manager general manager regional manager, but these people understand that we can do things differently just like he's talking about the current might've mentioned and thereabout, we haven't even rolled out the optimization of.

Our delivery service.

We've rolled out projects like that and the last 2 or 3 years.

We rolled out all the revenue producing projects and I think some of these projects.

Allowing us to manage a little bit differently on the cost side.

And as I said from others.

Our proprietary is probably not that big a deal, but I don't want to get into it on this call, but I guess, I'd, just say crusted and numbers and trust and the performance.

We book and we print we plan on continuing to perform like we are we realize the market demands for this call, but at the same time market demand has not turned to net dollars without management on both sides of the coin and.

And.

I believe that Thats the case with the performance, you're seeing and the performance Youre going to see from the company, regardless of where truck manufacturers are getting as product. We guide does that go to earlier on the sales side ex they've got 25% more backlog and I have the Q1, so demands there that'll get straightened out and.

But for now it's something we are going to do we're still in the near future.

The parks problems with supply problems, we're at but we learned a lot last year and we're going to continue to try to utilize that learning as we go forward and to these growth years.

Thinking is that sort of the amount of cost deploy it to get the extra dollar of sales and <unk>.

Structurally lowered the cycle right.

Yes, structurally we believe that we don't need to spend I've always told you. We have spent ex but when you really looked at it over the cycle.

And you start 1 place you get some places and cycles.

And when the cycle starts to flatten out and sometimes your costs don't flatten that would we think with the tool.

And place to manage through the cycle better from a cost perspective to state stay with the revenue piece right.

And because we've seen these before it goes up.

And it's going the other way well, sometimes they're not as good.

And when it does flatten out on it.

And it's hard to keep that pitch growth like you see just like it was hard to lose that future growth when COVID-19 hit and it's just it's hard to go back up space for more gradual now and it was earlier in the year or late last year from a gross profit perspective growth. So we believe that yes, we will manage the cost side much better than we use.

Storage, we have which will continue to lead to.

Better returns at the end of the day Okay.

Gotcha and.

You've been very useful in the past, giving us color.

About your key end markets, maybe you can just sort of.

Take us from that country and.

Markets like construction and oil and gas right why don't we see and thank you.

You bet.

I would tell you construction is already very good and we're seeing signs of and even getting better.

It's been a bigger mixture marketing and that's about it.

And market.

Part of it big part for US this year revenue.

And as it remains because it continues to remain strong.

Feel real good about where we're at with that and where we are in that and that environment and our relationships with many municipalities but of course from major players on the private side.

And where the public companies or not but on the private and not municipal.

The over the road business my goodness.

That's the biggest driver as we all know and.

And it's extremely strong right now.

And again.

Just getting trucks to everybody that wants to have and that's why it's going to be stretched out and moves are in my mind into next year, because we're not going to meet commitments that we've made on for demand to customers earlier. This year. So we will that will carry on.

Andrew.

Across the board really.

Don't see.

<unk>.

I don't see any 1 sector that.

Super soft.

Oil and gas, yes talk about LNG and everybody always.

And go back 7.8 years and I thought we were in oil and gas well 1 thing we are doing better now than when we had the oil and gas business, our parts and service business and the quarter was slightly up from a year before but you got to remember last April they were paying you to take a barrel of oil. So it was totally depressed.

Youre seeing some pickup and it.

Hi.

And rule out the part that it could buy realizes and now they've opened up the spigots again and it's.

And it would be really volatile and really space I don't think we'll ever see it like it was in the past.

Of course, that's 1 of the things on most proud of and the organization is that we shifted from so much reliance on that but and it does come back and some way, we're going to be where we're at and the middle of it.

And so.

And I don't ever expect it to look like it and the fracking years or whatever but I do expect somewhere down the line human and I realize we're going to be a non carbon.

And the country of World eventually, it's not a light switch so.

And that's not going away and.

And this decade so.

I do think we might in gets and playback somewhere down the line on LNG and that will just be a tailwind and it's not something we rely on upon anymore, even though we're still heavily involved and especially on the mobile.

On mobile tech side and that those types of things so.

I think that covers most sectors.

I mean, it's just it's pretty robust.

Around medium duty and demand remains strong. It's 1 other thing you can say well gosh.

And 5% of the market well.

And.

And if I could.

Oems that build on both heavy and medium duty trucks are got a slant towards building more heavy because it make better margin on it okay, and we have 1 medium duty.

Manufacturing that has been sort of how the market for almost a year, who will be getting right back into it here later this year so.

Those are all good things in my mind.

Im talking about so but to answer the good safely and killing it.

Construction and over the road is probably higher than what they.

And they were say 6 months ago over 9 months ago anticipated, while some are still staying strong, but refuse and areas like that.

And.

And I, usually go on to it but I'll ask you 1 more question talking about carbon free future.

You do seem to be doing quite a bit more than people realize.

Can you just talk about what have your interactions been with these emerging players autonomous driving electric vehicles.

And a dialogue to have and are there any potential opportunities longer term for you to work with these new and emerging players and new emerging technologies. Thank you.

Right well first off.

I think we're going to have the biggest opportunities with our own Oems, okay and.

And they are emerging and their investment into and I've always said on that.

And the majority of the wind is going to come from the guys and folks that have the other.

Their feet on the ground planet and our routes now, but that doesn't mean other people win and.

And I think Thats 1 of the strongest things we have is our distribution network and our service capabilities, which are larger than anyone else's.

We don't cover the whole country and.

And the 1 thing he is lot of these startups don't have or that are those.

Abilities right.

And technology and try to produce product and.

And no distribution network et cetera, I would tell you that those opportunities and continue to pass by.

Say pass continues to show up on.

The doors debt and we will listen whether it's.

And whether any of these types of.

New technologies that are coming on board I mean, we work with other people and we have that ability and our capabilities inside and not just our dealerships, but inside of our outfit centers and stuff like that we have a few of those around the country. So.

That's a hidden.

And to me that's 1 of the hidden.

So the future for growth for us.

And I still believe that I still believe 1 of the biggest tailwind will have 1 day is.

Market share gain by Navistar, 1 day, there is still not where they need to be within our historical work before Max worse, and I expect them to get background items are somewhere down the road now with the acquisition. We're trying to on closed in July I think the balance sheet changed from that organization. So I think and the goals will change within our organization and I do believe that.

Peter will still be able to gain market share with backlogs.

And of course technologies and their products.

And so are there products have always been.

Stellar so that but we will have the opportunity we did the JV and we did with comments, let me express that for a second.

That was I think that's going to I'm, not saying, that's something that we work on it.

And here in the first year or 2 but I do believe given regulations that are being driven by government debt.

And I don't believe always emerging technologies can take care of at the level that politicians want I do believe there's going to be some room for natural gas growth and I do believe it's not going to go away long term.

I just don't believe that there is like I don't believe diesel is going away for a long term, okay, especially on the truckload side battery.

Batteries aren't going to work on the truckload side, they're going to be doing great.

It's going to work, great and sort of certain segments medium duty 6.7 and that got it.

Going to be a 10 year run to get everything there but.

That's why that JV, we did with Cummins and I think we've established ourselves with.

And the number 2 player and the fuel system business and I do think the RMG with its negative carbon footprint combined with some with some CMG growth I think is going to allow us to grow some mid day.

As you know.

Yes.

Especially.

And I don't have to deliver on environmental stuff, that's going on and the pressures that are going to be put by outside organizations not truck companies by by other organizations for us and <unk>.

Transition.

<unk> transition as we transition from 120 years.

And internal combustion engines to always technologies and onward.

Talking a lot.

And then ramp and long enough to know how to do that.

I think that transition from these other technologies, yes. Your questions are going to provide quite a few opportunities for rush too.

Delve into other areas some of them Unbeknownst to me at this moment, but I can.

They are out there and we are actively paying attention and I can tell you that and because of our involvement and natural gas for the last 6.7 years regardless.

And maybe it was a little bit colored red I feel really good about the base and it gives us as an organization to evolve into this next decade with all the new technologies coming out and I'll leave it at that because I could talk forever.

That was a great answer thanks, so much.

You bet.

Thank you.

As a reminder, ladies and gentlemen, Thats star 1 to ask the question.

Our next question comes from the line of Joel <unk> with BMO. Your line is open.

Hey, guys how has it gone.

Very good Joe how are you today alright.

Alright, well definitely great expense management, I think you got to ease up on.

Cut and Steve Hey, so he can get his voice back.

Well no.

A little jealous of the vessel thanks Joel.

I think I can let you had been on the rest of the call you wouldn't know any difference.

[laughter].

I am going to get a little philosophical today I just wonder if you can talk a little bit about the implications of training and Navistar on your parts business and theyre going to be more global opportunities or are there going to be like Latin American opportunities with Scania or MAA and or just any any idea that you saw.

Starting to get that could that could have some impacts and kind of like the 5 year.

Timeframe.

And honestly, Joe that was types of questions. It's a little bit early and the ballgame for me to truly understand the deal just closed about 3 weeks ago or 2 weeks ago.

And I really don't know a lot of those folks yes, okay.

But I'm sure I'll get to know them and our research and understand what other opportunities might be out there for us okay.

And I do believe that.

Biggest and easiest want us to get market share back here in North America, where it belongs.

When you got market share that drives parts and service downstream not that we don't work on everything but she will typically has worked more and your.

Shops on the OE and they represent so.

And that would be buyer.

And number 1 thing I don't know I have not as I said, it's a little early in the game.

<unk>.

For me to understand those opportunities I havent, even personally been able to get.

Arm's length. During this total getting the transaction closed remember it wasn't huge integration of people coming over and and stuff like that until the transaction close. So I think we're at the beginning stages of understanding what if any those opportunities might be.

For us from a larger scale perspective, and obviously.

Given our given who we are we're always listening and looking.

And for other growth opportunities and just like I talked about a minute ago with Andrew and all this new emerging technology.

And we feel good about our place in the marketplace differentiating ourselves from others and take advantage of these things. So I don't have an answer for you, it's too new and the guidance.

It's too new.

And I don't know everybody I don't really understand.

What those opportunities would be without any conversations with folks yet.

Okay and on another little philosophical direction too can you talk about how youre thinking about how the dealership model.

It's going to change as we go forward. This 2020 for California, Carb youre going to need to partner with charging stations or any other kind of ideas that are floating around about how the business might look and 5 to 10 years.

Sure.

It will be it will be integrated into that needs and whatever these technologies are okay, Yes, California, and we just had a meeting and approved.

The last year deciding how we're going to have a california being our first ground to really do what we need to do so we're prepared to meet the demands.

And as manufacturers remember.

People are building thousands of units yet so.

And I want to get the cart before the horse so, but yes, we just approved getting all our California stores.

Baird.

The 2024 car Briggs and what our customers will need.

And really understood you really don't want to understand because you don't want to go out and this new and something and do a bunch of work and find out a year and a half later, where you didnt do enough where you didnt do this right, but we think we've got our arms around it and just a couple of weeks ago approved a plan that we will roll it all out into next year.

And with with all of the charging necessities and along with all the stuff to really support ESG from up.

And from solar.

A lot of big a whole plan not just go sticker charters on place. So we feel good about that and now we're exploring will start working on talking about and thinking about what we do and other areas, but California of course will be a balance.

Those are the leader in this space and.

So yes, we are.

And we're going forward with that around that and we will continue to look at other areas where attainment.

Certain regulations is on ahead of what may be the EPA might be theres.

<unk> 15 states that typically tied to car I don't believe they will come out at the same time, because they haven't gone through all the proper legislators and stuff, but I have told us.

And it sounds like I know, what I'm talking about here, but I'm not sure, but I haven't told the fact that they will come out, but there might be a year behind it here or there or the other 15 states, which do make up about a total of about 30% of the marketplace.

Don't know at what pace, those others will and obviously the EPA is coming out and 27.

I Gotcha, and there'll be 2022, and 5 months right. So it's right around the corner so.

That all makes demands will be put on and that's why when I talk about the JV added would come and so I feel real good about it because I don't think we're going on.

Have.

Electric.

I, just don't think we're not going to be ready for it whether it's the grid.

And unfortunately, some people outside of this industry I think it is.

<unk> cars.

And you just plug it in like Air dryer.

And having brownouts and California already and it's weighted to 3.4% electric cars. So I mean, there is a lot of work to do it's going to get there, but theres going to be this transition and we are noted and as I always like to say I want to be on the leading edge of the bleeding edge. So you can rest assured that we will be on the leading edge as we from.

Walmart dealerships.

Transform transition and Scott.

Scott and transformation is based on is not going away right now, but transition our dealerships and adapt our dealerships to be able to handle whatever technologies went out and whatever market spaces or market segments.

And hope that was somewhat informative.

Yeah, you remind me and my wife on lease plugged and to have dry on 1 of them and the bathtub.

I wanted to ask.

A last quick quick 1.

And youre growing a little bit slower than the overall industry is that is that supply constraints is that your regional positioning like any any color into what's going on there and then I'm done.

When you say that I'm guessing you're talking about volumes a lot of that.

And I would tell you I think that our backlogs, probably ramped up a little bit slower than others, but as I told you by backlog really up and maybe go back a few quarters. It is rather large at the moment. So maybe some of our customers transitioning we transition a little later on the deals that we did book.

And now we're caught and the supply constraint.

Issue.

But we're dealing with so.

Bob.

But I feel good about the demand is not going away. Okay at talking to customers. They are still there's still boat and go and so.

And then also and as I've mentioned on the Ford Class Force. So we've had 1 I guess.

I didn't want to him.

And typically sold about 2500 units that is sort of and out of the marketplace and we'll get back into a starting in October. So that's quite a few units and they've been out of the marketplace for about 9 months now so there'll be back and doing stronger than ever.

And I'm confident in that so that's kind of efforts some of that for class 4 through 7.

And you might still.

Flip some of them and something else, but you don't flip them all so.

That's that's what I would have to say, we expect to be hopefully.

I think the market share will stay flat because I don't think I don't think retail deliveries are going up and Q3 across the board and my friend and I really don't because retail deliveries always lagged production and as production doesn't mean, what it should that youll see the retail deliveries follow because there is no inventories.

Everybody sold their inventory, we were able to support a lot of things through inventory, but inventories are extremely low right. Now. So it's just some of the headwinds, but again I go back and go back here.

And we lost a little share plan on getting it back just a matter of timing here.

I've got the backlog to do it.

Alright, Thank you very much.

You're welcome Sir.

Thank you.

I'm showing no further questions and the queue I would now like to turn the call back over to Rusty for closing remarks.

And just 1 quick comment.

And most people don't realize is that this last quarter on June 7.

25 years, since my father, and I and our.

And with people went public.

And we're the first car truck dealer to ever go club and it's been it's been an amazing 25 years and it could have been done without the support of all personnel and people that have contributed to rush enterprises across the country. So with that I want to think and 1 more time.

From a bottom on heart for their efforts.

And that future efforts too as we continue to move forward, but it was still.

And I could get I got a little bit sentimental lunch and so thinking about it and.

And talking to some other people that know what and the industry, but we're still the only public.

And all the car cuts COVID-19 coming out and the fall, but it was.

It's been a good ride and I've enjoyed at all and our plan on right and for quite a while longer and getting Steve's voice and tuned up and actually you can here. So anyway I'm sure it'll be even more closer to mine by Q3 on a steep debt notes.

We reported Q3 results, but thank you everybody very much I appreciate your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to Rush Enterprises, Inc. Reported second quarter 2021 earnings results.

At this time all participants on on listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then 1 on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker for today, Rusty Rush, Chairman and CEO and President you may begin.

Good morning, and welcome to our second quarter 2021.

Earnings release conference call on the call today are Mike Mcroberts, Chief Operating Officer, Steve Keller, Chief Financial Officer, Derrek Weaver Executive Vice President, Jay Hazelwood, Vice President and controller, and Michael Goldstone, Vice President and General Counsel and corporate Secretary now Steve will say a few words regarding forward looking statements certain statements.

And we'll make today are considered forward looking statements as defined in the private Securities Litigation Reform Act 90.95.

These statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward looking statements and reports.

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 discussed and our annual report on form 10-K for the year ended December 31, 2020, and and our other filings with Securities and Exchange Commission.

As indicated in our news release and the second quarter. We achieved revenue was 1.3 billion and net income of $58 million and $1 per diluted share were very proud to declare a cash dividend of <unk> 19 per common share, which is a 5.6% increase over the last quarter. Our results were primarily due to the country's continued economic recovery.

<unk> from most market segments, we support solid demand from new and used class 8 truck sales and increased aftermarket activity along with our continued interest and managing expenses contributed to our strong quarter. As we look ahead and component supply chain issues are delayed and the timing of some new truck deliveries and to next year and those constraints.

And then again it could negatively affect parts and service revenues as well.

By supply issues, we will continue to add back key personnel to meet market demand as we believe our financial results will continue to be strong throughout the remainder of the year and the.

The aftermarket our parts service and body shop revenues and $445.5 day and our absorption ratio was 129, 1%.

Aftermarket revenues increased 18% compared to the second quarter of 2020, which is primarily as a result of the nationwide economic recovery. Our port sales are back to pre pandemic levels and we increased and.

Experienced increased to healthy activity.

And most market segments, particularly and leasing refuse over the road customers and independent service centers.

Service revenues are recovering at a little bit slower pace and parts impacted not only by supply chain issues, but continued service technician staffing and designs common and the industry.

Looking ahead, we expect supply constraints will continue to impact parts and service revenues throughout the industry for the revenue from the later this year that said to mitigate those impacts and we are actively hiring key parts personnel and service technicians and focusing on our preventative and contract maintenance service offerings further.

Other we leveraged our parts management technologies to help us effectively adjust to market demand and through our expenses and dealership network and would help mitigate parts supply constraints and finally, we're also piloting final mile route optimization to help us data efficiency on our parts deliveries to better serve our customers. We do believe there.

Demand for aftermarket services will continue to increase through the remainder of the year as the overall economy remains healthy.

Turning to truck sales and the second quarter, we sold 2900.54, new class 8 trucks and getting to 5% from the total class 8 U S market.

And our truck sales were driven by a healthy economy and strong freight rates, which led to solid activity from most market segments, we support, especially vocational and construction and over the road customers and healthy stock truck sales, while demand for new trucks remained strong and the second quarter truck sales were limited by supply constraints.

Which impacted manufacturers production capabilities.

Research forecast U S class 8 retail sales to be 259000 units and 2021 up 32, 4% from 2020.

We believe the support and component suppliers and strength will likely continue to have that class 8 truck sales through the third quarter, our longer causing downside risk and the 259000 units.

Because of this we believe our third quarter classic performance will be flat compared to our second quarter results. We believe class 8 heavy and there are.

New truck sales may accelerate later this year as manufacturers are able to increase production and when component parts are more readily available.

Our class 4 through 7 new truck sales reached 2800, 25 units and the second quarter accounting for 45% of the U S market.

Our results.

Increased significantly over the second quarter of 2020, largely due to increased activity from leasing and rental and foodservice customers. However, some other manufacturers we represent continue to be faced with production shutdowns and the supply constraints negatively impacting medium duty truck availability, which will most likely continue through the third quarter.

ACG research forecasts U S class 4 through retail set and 47 retail sales to be 257000 units and 2021 up 11% from 2020 looking ahead, while we believe class 4 through 7 truck production will not increase as quickly as class 8 demand remains strong and we.

And the teams and strategies in place to take advantage of every sales opportunity possible.

Our used truck sales lease reached 2094 units from the second quarter up 18, 4% from the same time period, and 2020 used truck demand and values remain high primarily due to production constraints and class 8 new drugs.

Though it is becoming more challenging to maintain a healthy used truck inventory. We believe our third quarter used truck sales will be consistent with our second quarter results and.

And we announced we have signed the letter a and Jeff with Cummins, Inc. For governments to acquire a 50% equity interest and momentum fuel technologies our.

And our company's manufacturer.

Natural gas fuel systems. This letter of intent and reflects our shared belief and the long term viability of natural gas usage ecosystems and drew on our share in history as leaders of the natural gas market and our.

Extensive service network capabilities throughout North America. The joint venture is expected to close later this year.

As always it is important and I. Thank our employees for their continued focus on growing our business and providing superior service to our customers.

With that I'll take your questions.

And actually.

Understood.

And that's.

Star then 1 on your telephone.

To withdraw your question press the pound key.

Again, Thats star 1 to ask the question.

Please standby, while we compile the Q&A roster.

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

Hi, good morning, and nice quarter.

And again.

And I guess my first question Rusty I just wanted you know.

Can elaborate you talked about your sales.

Per truck being flat sequentially and that there's risk to the industry forecasts out there I'm. Just wondering is this just the third quarter and do we make up for it and the fourth quarter or do we get price.

And how much gets pushed to 2022. So if you could just give color on how much risk is through 2020.1 and.

And then I guess my second question.

Obviously demand continues to be strong lease <unk> heard from other oes sort of reluctance to open their order book, yet for 2022 because of pricing.

And so if you could just provide a little color on on how you see that unfolding.

Sure the average Eric well if you ask me 90 days ago I would have told you we would have probably been given my sources and what I saw out there we would have been through the supply and component supply issue, but unfortunately.

I wasn't.

Extend it out to where we are now.

And.

Communications I would add and with all the manufacturers that this thing and smoothed out by the end of the third quarter.

I don't see it.

Smoothed out somewhat towards the back part of the third quarter, we're already what 10 days and it all away from the end of July so.

I still think we're going to see a lot of pressure for the next 4 to 6 weeks.

For share anyway, I wish I had better engage and with myself, but we all know about the chip issues, but the issues extend beyond that.

A lot of issues with other parts and components wide and coming out of Mexico and in Asia I think.

And it's pretty aware of all that we're dealing with.

I do believe that.

Demand is still strong so I don't want anybody to get concerned about that the demand is there and the marketplace and I don't see it going away I see it maybe getting pushed out as you said to the fourth and into the first quarter, just because cash just because you can't deliver it doesn't mean, you don't build what you've committed to.

2.

Right for people and this year because those were commitments made prior to all these issues. So actually a lot of that actually moving and in the first quarter and next year too I don't think it's all going to get picked up here and the back half of the year.

As far as 2022 numbers, we are just getting started on some other we've done a few deals on a lot.

Our standard people are very manufacturers.

And for what they got caught out with this year are very very little bit hesitant.

And on some stuff, but that's not to say that we're not working on.

And our on deals currently so I.

And I expect them to start really July.

And when you think about it normally we are really not working on the next year's deals and Joe.

And really you really get started in September and October typically it's just because the backlog is so large and people are worried about 2022, and but I think the first half of 2020.2 maybe a lot of catch up for 2021, our first quarter sort of San Jose and first quarter. So I mean, so and I look at our backlogs.

And if you look at our backlog at the end of Q1 versus the end of Q2, now that and robust and reflective of the industry and I don't.

<unk> solid.

We're up 25%, so while you could get a little bit discouraged with the issues that we're dealing with are you just going to ask them and make it last spring it out a little bit longer because I don't see demand going away right now I don't think and taking away from that demand and that's 1 of the reasons.

And the last 2 quarters have been a record used truck orders, because and 5 leveraging more difficult.

But at the St and out of our guys did a great job of.

Doing that so I just I just think everything just gets pushed out a little further and.

And obviously, we show even we're not anywhere close close to record unit numbers I think the performance from a record earnings quarter from a company with those type of deliveries speaks to the spacing involvement on the company over the last 5 or 6 years.

When you look at it across the board so.

I just don't have the exact answers.

And I'm not the manufacturing environment is going to be secondhand information, but.

I don't see it I see it stretching from the third quarter and hopefully in the fourth quarter.

We get back to some semblance of back to what projected build rates were supposed to be because I think the numbers from production came out for June.

And quite a bit of a lower than were anticipated from North America and.

And I don't know if thats going to change here in July or August.

And sorry, and just 1 follow up ROTC, obviously, the margin performance was very strong and the quarter.

And on part, but also sort of new news and I'm just wondering on the truck side, how much of that it used and and just given low inventory of used and pricing why wouldn't your margins be comparable on the back half of the year for truck relative to what we saw on the first half.

Well some of that is timing of certain transactions, whether it's more smaller transactions on larger transactions.

Margins used partners were just barely under what they were in Q1, but they were way above historical okay.

On.

And here to say they wont be close but.

I think we sold a lot of inventory and those are typically deals that we make really good margins on okay. So our inventory levels are pretty low okay.

Youre balancing between taking care of long term fleet customers and the other that would be the only thing and might impact margins that I won't still be good I don't know what the new margins will be where they are at because of the mix of business.

Yes.

But we will see I don't expect them to be terrible.

Across the board and every segment.

And as you heavier media and were used on.

Our parts and service they were extremely strong for the quarter and we were pleased with that and that allows us to demand driven.

And supply side demand side.

But I don't see that changing maybe slightly but not it's not going to get super frustrating and assets.

And that's somewhere I don't think I did.

I'm, not saying that but I'm also other could be a slight downtick and <unk>.

And some new margins just because of mix.

With more robustly customers have as many small individual inventory sales.

Okay. Thank you congrats on a nice quarter.

Thank you ma'am.

Thank you. Our next question comes from the line of Justin Long with Stephens. Your line is open.

Good morning, gentlemen.

1 and brings our wanted to start with a question on parts and service Rusty can you give a little bit more color on how much growth, you're expecting and parts and service and the back half of the year and maybe you can talk about how much. This outlook has changed as a result of debt prolong supply chain.

Issues.

Well as I mentioned and there we are back to pre pandemic levels.

From where we were say the prior 5 or 6 months.

We're not back to suffer a 19 quite because the oilfield and we're still on that back there, but we are back to pre pandemic levels and parts and service and the second quarter.

And gradually increasing.

I think that while they are solid solid solid numbers as you can tell.

We might be able to do even a little bit better if we didn't have some supply constraints, we've probably got.

More open work orders and the shops percentage wise waiting on parts by far than we typically do so sort of slows it down by Scott back Okay.

So it's not like it's bad or anything it's just huge youre always striving to do more even though you have record cash numbers like we've had and that's the way we're putting together around here. So I do believe that we will probably continue to see gradual and I'm not talking about 2% jumps on a daily basis average.

Mark, but continue to see gradual increases and parts and service, especially as we're able to continue to staff up a little back to freaks and epic level as well.

But a lot of stress on the organization, but we all know what the employment markets look like and so.

Trying to hire and some sockets items on those skill sets that you are looking for it.

It's been very difficult, but the organization has done an outstanding job to get back to where we were doing more with less which we continue we believe we will continue to do by the way, but we want to do more breakthrough and bricks people and and still do more than what we're doing now and we do believe we're capable of doing that but there are supply constraints.

Don't mistake, the fact that the demand is there so.

We'll continue I think to do LIBOR, what performance you saw here and continue to try and strive to make that better.

Again, I go back to that.

And we could never have guide those kind of unit deliveries prior and perform with the and it's across the board was expense management. It's production on the back ends and back to those levels and.

Performance, even though the volume wasn't there on the sales side.

Rates.

But performance from a margin perspective on the sales that we did at turquoise.

And on that point are returning to pre pandemic levels I was under the impression that part Ted recovered to pre pandemic levels, but services had not fully recovered and maybe just clarify that and if that's true how much volume do we have to go and services to get to that Paul and recovery.

Great Great question I was looking at them as a whole. So the mix is a little different you are correct. Okay service hasn't recovered and we have are quite as much as parts together. The combined total is there from a margin monthly daily margin perspective, but it's shifted a little bit more to parts and so the upside of that we believe to that but we believe our.

All of these and some other things we're doing are allowing us to take a more get larger parks market share mostly.

And once we are able to hire more technicians qualify qualified technicians and get them into our workforce. We do believe that work will be there.

Just again.

It goes back to that employment on the only purchases and overall I talked a lot of people and Eric.

Bodies read all the articles.

And it's just been difficult.

And between stimulus and unemployment paychex, and the last year and a half.

Certain jobs.

He had been our fulfill and just the facts.

And I can walk you through double the time to replace people and we have all the stats and numbers. So I'd just close up the amount of people because you've got to have replacements, you've got to have a patient as part of business and.

So it's been more difficult to increase that technician count now we are increasing it and I like the fact actually that were increasing and and a gradual rate. We onetime back 15 years ago, we increased I think too fast and rate.

And so our efficiencies and proficiency and weren't where they needed to be.

So I feel good about that they are there are much better just not quite to the overall volume that we wanted to be but we're doing a whole lot better job I think hours billed per tech all of the different stats and I'm not going to get into on this call, but we feel good about that it's been a lithium and we'd like to go a little faster than we are.

And bringing people back, but again, it's tough labor market out there and certain job sites.

Understood and maybe 1 last question for Steve any clarity on.

Expectation for SG&A as we get into the third and fourth quarter relative debt, what we saw here and the second.

Yes, I mean, as we continue to add back and grow parts and service hopefully in Q3 debt.

SG&A will grow as a percentage of that like we said I think we grew about.

And the G&A piece grew about 50% sequentially compared to the increase and back and gross profit in Q2 versus Q1, we'd expect that same to continue.

And as was up with the high margins, even though with volume drugs were GAAP with high margins across the board and drug sales and was up and Q2 also so and I.

I would expect that if we can maintain where we're at to be several on the other side, where we're at.

And this correlate.

And drug margins and truck gross profit.

Understood I appreciate the time and congrats on the quarter.

Thank you very much Jessie you noticed well steves voices and source and I was like minded data on it.

It does and I like it.

Yeah.

Okay.

Our next.

And comes from the line of and you open with Bank of America. Your line is open.

Yes, good morning, gentlemen.

Well good morning, Mr. Owen.

Can you just talk.

And during Covid I think the part of the story that is being.

Maybe starting to be appreciated by the market, but it's just the structural change and how you guys and managing your costs.

And it does seem that the recovery could be there's more going on and the recovery than anticipated the supply chain constrained right labor shortage can you just talk to us about how you're sort of cost management and your approach to managing cost and the cycle can you.

And of what the thinking is and what adjustments do you need to make near term to manage this very volatile environment that you guys are facing rush too Steve.

Whoever wants to answer thank you.

Sure well from a cost perspective, Andrew.

You learn a lot I think I've told you on that a few calls back.

During the Covid fears of last year, and while we know the business where it requires people to do it and not just loaning money to someone on turning wrenches and southern parts of delivered parts on that Mark warehousing, Scott do and Thats, what we do but what we did learn.

And is that we can do a better job as the market comes back.

Spending a certain percentage weighted less percentage maybe than we historically have booked.

Because of some of the technologies and things. We're adding also we believe that's going to allow us and it's showing out and like Steve said a minute ago.

And then a little more than maybe 150% from the gross profit increase sequentially from Q1 to Q2 and.

At the same time.

And if I can manage close to that going forward.

I would feel.

Pretty good about that and I think we expect that to be the case and Q3, it's just a diligence we've put in some other I'm not going to get into some other all everything we do some of that is proprietary to us.

And some other measurements that historically, we didn't use and we've taken that agent training, we're taking that down to different levels of our organization. So that whether it's the mid level manager General manager regional manager, but these people understand that we can do things differently just like.

He's talking about correct Rod mentioned and thereabout, we haven't even rolled out the optimization of our delivery service.

We've rolled out projects like that and the last 2 or 3 years.

If we rolled out all the revenue producing projects and I think some of these projects are allowing us to manage a little bit differently on the cost side.

And as I said some of it.

Troy is probably not that big a deal and I don't want to get into it on this call, but I guess, I'd, just say trusted and numbers and trust and the performance.

And we book and we and we plan on continuing to perform like we are we realized market demand has been strong but at the same time market demand has not turned to net dollars without management on both sides of the coin and.

And I believe that that's the case with the performance you're seeing and the performance youre going to see from a clubby, regardless of where truck manufacturers are getting a product that goes earlier on a sales side ex I've got 25% more backlog and I have the gigawatt. So demands there that'll get straightened out.

But for now it's something we are going to do we're still in the near future.

The parks problems with supply problems, but we learned a lot last year and we're going to continue to try to utilize that learning as we go forward and to these growth years.

The thinking is that sort of the amount of cost deploy together extra dollar of sales and structurally lower the cycle still right.

Yes, we structurally we believe that we don't need to spend I've always told and we have spent ex but when you really looked at it over the cycle.

You start 1 place you get some places and cycles.

Cycle starts to flatten out sometimes the costs don't flatten out.

And we think we put the tools in place to manage through the cycle better from a cost perspective to say stay with the revenue piece right.

Because we've seen these before it goes up.

Our school and the other way well some factor and not as good.

When it does flatten out on and.

And because it is and it's hard to keep that pitch growth like <unk> just like it was hard to lose that future growth when COVID-19 hit and it's just as our and should go back up and space for more gradual now and then it was earlier in the year or late last year from a gross profit perspective growth. So we believe that yes, we will manage the cost side much better than <unk>.

And you historically have good day to lead to.

Better returns at the end of the day Okay.

Gotcha and.

You have been very useful in the past, giving us color.

And by a few key end markets, maybe you can just sort of.

Take us around the country and <unk>.

And it's like construction and oil and gas right why don't we see and thank you.

You bet.

I would tell you could structure is already very good and we're seeing signs of and even getting better.

It's been a bigger mixture market and that's not a huge market.

None of it.

For us this year refuse remains continues to remain strong and we.

And we feel real good about where we're at with that and where we are in that and that environment and our relationships with many municipalities and of course, the major players on the private side.

Other companies are not but on the private and not municipal.

On the over the road business my goodness.

That's the biggest driver as we all know and.

And it's extremely strong right now.

Again, we're just getting trucks to everybody that wants to them. That's why it's going to be stretched out and moves are in my mind into next year, because we're not going to meet commitments that we've made on for demand to customers earlier. This year. So we will that will carry on.

And it's across the board really.

I don't see.

<unk>.

I don't see any 1 sector that's super soft.

Oil and gas and talk about LNG and everybody always.

And go back 7.8 years and I thought we were on oil and gas company well 1 thing we were feeling better now than when we had and the oil and gas business, our parts and service business and the quarter was slightly up from a year before but you got to remember last April.

And you can take a barrel of oil so it was totally depressed youre seeing some pickup and it.

Hi.

Don't rule out the harder it could buy realizes and other governments that gets again.

It's going to be really volatile and really space I don't think we'll ever see it like it was in the past and of course, that's 1 of the things I'm most proud of and the organization is that we shifted from so much reliance on that but if it does come back and some way, we're gonna be Iraq and the middle of it.

So I don't ever expect it to look like it did and the fracking years or whatever but I do expect somewhere down the line human and I realize we're going to be a non carbon based country or world. Eventually it's not a light switch so youre still going on.

Not going away and.

This decade so.

And I do think we might get some play back somewhere down the line on <unk> and that will just be a tailwind and it's not something we rely on upon anymore, even though we're still heavily involved in especially on the.

Well mobile tech side and that those types of things so.

I think that covers most sectors.

I mean, it is pretty robust.

Around medium duty and demand remains strong it's 1 other things, you'll say what gas and at 4.5% of the market well.

And.

And if I could.

Oems that build both heavy and medium duty trucks are going to slag towards building more heavy because they make better margin on it okay, and we have 1 medium duty.

Manufacturer that has been sort of part of the market for almost a year, who will be getting right back into it here later this year so.

Those are all good things in my mind, but I'm talking about so but to answer the Greg safely and filling it.

And construction volume.

And over the road is probably higher than what they were say 6 months ago over 9 months ago anticipated, while some are still staying strong, but refuse and areas like that.

And.

I usually go on there, but I'll ask you 1 more question I'm talking about carbon free future.

Do seem to be doing quite a bit more than people realize.

Can you just talk about what have your interactions been with these emerging players autonomous driving electric vehicles, and what kind of dialogue to have and are there any potential opportunities longer term for you to work with these new emerging players and new emerging technologies. Thank you.

Right well first of all.

I think we're going to have the biggest opportunities with our own Oems okay.

And there are emerging and their investment into and I've always said on that.

Majority of the wins that income from our guys and folks that have the.

Other feet on the ground planet and our routes now, but that doesn't mean other people win.

And I think Thats 1 of the strongest things we have is our distribution network and our service capabilities, which are larger than anyone else's.

We don't cover the whole country.

And the 1 thing that a lot of these startups don't have or that.

Are those capabilities right, there are best and technology and try to produce product and.

Distribution network et cetera, I would tell you that those opportunities continue to pass by and I would say pass continues to show up.

On the doorstep and we.

We will listen and whether it's.

And whether any of these types of.

New technologies that are coming on board I mean.

We work with other people and we have that ability and our capabilities inside and not just our dealerships with inside of our outlet centers and stuff like that we have a few of those around the country. So.

That's a hit.

To me, that's 1 of the Nuggets and the future for growth for us.

Still believe that I still believe 1 of the biggest tailwind will have 1 day is March.

<unk> share gains.

And that and star 1.

And not where they need to be and within our historical where before Max worse and I expect them to get background meds are somewhere down the road now with the acquisition would trade on closed in July.

The balance sheet change from that organization, So I think and the goals will change from that organization and I do believe and Peter will still be able to gain market share with backwards.

Technologies and their products.

So are there products have always been.

So that but we will have the opportunity we did the JV and we did with current let me express on a segment that was I think that's going to I'm not saying, that's something that we haven't done a lot here and the first year or 2 but I do believe given regulations that are being driven by government.

That I don't believe always emerging technologies can take care of at the level that.

And the politicians want I do believe there's going to be some room for natural gas growth and I do believe it's not going to go away long term.

I just don't believe that there is like I don't believe diesels going away for a long term, okay, especially on the truckload side.

Batteries aren't going to work on the truckload side, they're going to be doing great and electric is going to work, great and side of certain segments medium duty 6.7 and this and that got it.

Going to be a 10 year run to get everything there but.

That's why that JV, we did with Cummins and I think we've established ourselves with and then the number 2 player and the fuel system business and I do think the RMG with its negative carbon footprint combined with sub CMG growth I think is going to allow us to grow some.

Okay.

Yes.

And especially.

And I don't have to deliver on the environmental stuff, that's going on and the pressures that are going to be put by outside organizations not truck companies by by other organizations for us when transition how low transition as we transition from 120 years.

Internal combustion engines to always technologies and onward.

And a lot, but that Ravi long enough to know how to do that.

Yes.

I think that transition through these and other technologies, yes to your questions are going to provide quite a few opportunities for rush too.

Delve into other areas some of them Unbeknownst to me at this moment, but.

They are out there and we are actively paying attention and I can tell you that and because of our involvement and natural gas for the last 6.7 years regardless.

And how it may change.

Was a little bit colored red and feel really good about the base and it gives us as an organization to evolve into this next decade with all the new technologies come out and I'll leave it at that and as I could talk forever.

That was a great answer thanks, so much.

You bet.

Thank you.

As a reminder, ladies and gentlemen, Thats star 1 to ask the question.

Our next question comes from the line of Joel <unk> with BMO. Your line is open.

Hey, guys How's it going on.

Very good Joe how are you today alright.

Alright, well definitely great expense management, I think you got to ease up on cut and Steve's pay so we can get his voice back.

Well he's.

He's a little jealous of me and that's all thanks Joe.

I think on rest of the call you wouldn't have any difference.

[laughter].

I'm going to get a little philosophical today I just wonder if you can talk a little bit about the implications of training and Navistar on your parts business, you know where theyre going to be more global opportunities or are there going to be like Latin American opportunities with Scania, our MAA and or just any any idea that debt.

We're starting to get that could that could have some impact and kind of like the 5 year.

Timeframe.

And honestly, Joe those types of questions, it's a little bit early and the ballgame for me to truly understand the deal just closed about 3 weeks ago or 2 weeks ago and.

I really don't know all those folks yet okay.

But I'm sure I'll get to know them in our research and understand what other opportunities might be out there for us okay.

I do believe that.

Biggest and Asia is 1 is to get market share back here in North America, where it belongs.

And when you got market share that drives parts and service downstream not that we don't work on everything but you will typically has worked more and your shops on the OE.

And you represent and so that would be buyer.

And number 1 thing I don't know I have not as I said, it's a little early in the game.

For me to understand those opportunities I havent, even personally been able to get their arms length. During this total getting the transaction closed remember it wasn't huge integration of people coming over and stuff like that until the transaction close. So I think we're at the beginning stages of understanding what if any.

And those opportunities might be.

For us from a larger scale perspective, and obviously.

Given our given who we are we're always listening and looking.

And for other growth opportunities and just like I talked about a minute ago with Andrew and obviously the emerging technology.

And we feel good about our place in the marketplace differentiating ourselves from others to take advantage of these things. So I don't have an answer for you it's tuner and the guidance.

It's too new.

And I don't know everybody I don't really understand what those opportunities would be without any conversations with folks yet.

Okay and on another little philosophical direction too.

You talk about how youre thinking about how the dealership model, it's going to change as we go forward. This 2020 for California Carb.

And the need to partner with charging stations or any other kind of ideas that are floating around about how the business might look and 5 to 10 years.

Sure I mean, it will be it will be integrated into that needs. Whatever these technologies are okay, Yes, California, and we just had a meeting and approve the strength.

Last year, deciding how we're going to have and California being our first ground to really do what we need to do so we are prepared to meet the demands.

As manufacturers remember.

People are building thousands of units yet so.

And you don't want to get the cart for the horse so, but yes, we just approved getting all our California stores prepared for.

The 2024 car Briggs right and what our customers will need weighted really understood you really don't want to understand because you don't want to go out with this new and something and do a bunch of work and find out a year and a half later, where you didnt do enough for you didn't do this right, but we think we've got our arms around it and just a couple of weeks.

And go approved a plan that we will roll it all out and the next year.

With.

And with all the charging necessities and along with all the stuff to really support ESG from up.

And from solar.

A lot of makeup.

Our whole plan not just going to stick of charters on place. So we feel good about that and that we're exploring mobile start working on talking about and thinking about what we do and other areas, but California of course will be what they always are the leader in this space and so.

So yes, we are.

And we're going forward with that around that and we will continue to look and other areas where attainment.

Certain regulations is ahead of what may be the EPA might be there.

And as 15 states that typically tied to car I don't believe they will come out and the same time, because they haven't gone through all the proper legislated.

I have told us.

Sounds like I know, what I'm talking about here.

Not sure I do but I am told the fact that they will come out, but there might be a year behind it here or there and the other 15 states, which do make up about a total of about 30% of the marketplace I just don't know at what pace those others will and obviously the.

EBITDA is coming out and 27.

I Gotcha, there'll be 2022, and 5 months right. So it's right around the corner so.

That always demands will be put on and that's why when I talk about the JV added would come and so I feel real good about it because I don't think we're going to have.

And.

And I, just don't think we're not going to be ready for whether it's the grid or.

Unfortunately, some people outside of this industry I think it's like cars.

Plug it in.

I mean, they've been having brownouts and California already and it's weighted to 3.4% electric cars. So I mean, there is a lot of work to do it's going to get there, but theres going to be this transition and we are noted and as I always like to say I want to be on the leading edge leading edge. So you can rest assured that we will be on the leading edge.

As we transform our dealerships.

<unk> transition.

Scott transformation based on.

Total way and right now, but transition our dealerships and adapt our dealerships to be able to handle whatever technologies went out and whatever market spaces or market segments.

I hope Atlas and somewhat informative.

Yeah, you remind me and my wife on Leap plugged and the hard drive and 1 of them and the bathtub.

I wanted to ask.

A last quick 1.

You are growing a little bit slower than the overall industry is that is that supply constraints is that your regional positioning like any any color into what's going on there.

And then I'm done well and when.

And you say that im guessing youre talking about volumes a lot of that I would tell you I've seen and our backlogs probably ramped up a little bit slower than others, but as I told you my backlog really up and maybe go back a few quarters is rather large at the moment, so maybe some of our customers.

Transitioning we transitioned a little later on the deals that we did book, so and now we're caught and the supply constraint.

Issue.

And that we're dealing with so.

Sure.

But I feel good about the demand has not gone away.

And the customers are still there's still blowing and going so.

And then also and as I mentioned on the Ford Class Force out we've had 1 I'm not going to give specific.

And then 1 OEM.

And typically sold about 2500 units that is sort of and out of the marketplace.

Get back into a starting in October so that's quite a few units and they've been out of the marketplace for about 9 months now so there'll be back into a stronger than ever.

And that so that's kind of effort some of that platform.

Class 4 through 7 I mean, you Microsoft flip some of them and something else, but you don't flip them all so.

And that's that's what I would have to say, we expect it to be hopefully.

I think the market share of stay flat because I don't think I don't think retail deliveries are going up and Q3 across the board and my friend and I really don't.

So as retail deliveries always lagged production and as production doesn't mean, what it should that youll see the retail deliveries followed because theres no inventories.

And so their inventory we were able to support a lot of things through inventory, but inventories are extremely low right. Now. So it's just some other headwinds, but again I go back and get back here, Yes, we lost a little share plan on getting it back.

As a matter of timing here.

Backlog to do it.

Alright, Thank you very much.

Youre welcome Sir.

Thank you.

I am showing no further questions and the queue I would now like to turn the call back over to Rusty for closing remarks.

I'd just like to make 1 quick comment.

Most people don't realize is that this last quarter on June 7.

And 25 years since my father, and I and our team of people went public when we were the first car truck builder to ever go public.

It's been it's been an amazing 25 years and it could have been done without the support of all personnel and people that have contributed to rush enterprises across the country. So with that I want to thank them 1 more time.

From a bottom on heart for their efforts.

And our future efforts too as we continue to move forward, but it was.

And how can I got a little bit sentimental launching 7 and thinking about it and.

And talking with some of the people and know what the industry, but we're still on the on a public total beer, but all the car cuts COVID-19 coming out and the fall, but it was.

It's been a good ride and I've enjoyed at all and our plan on right and for quite a while longer and getting to Steve's voice and tuned up now as you can hear so anyway I'm sure it'll be even more closer to mine by Q3 on and Steve.

We reported Q3 results, but thank you everybody very much I appreciate your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.