Q2 2021 Rush Enterprises Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to Rush Enterprise Eat report second quarter 2021 earnings results.

At this time all participants are in 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'd now like to hand, the conference over to your speaker for today, Rusty Rush Chairman 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 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 1995.

These statements include risks and uncertainties, our actual 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 in our annual report on form 10-K for the year ended December 31, 2020, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release in the second quarter, we achieved revenue of 1.3 billion and net income of $58 million for $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 for our results were primarily due to the country's continued economic recovery healthy.

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

So beginning to negatively impact parts and service revenues as well despite 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.

In the aftermarket our parts service and body shop revenues from $445.5 day.

Towards the 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 tenant we.

We experienced increased healthy activity.

In most market segments, particularly leasing refuse over the road customers and independent service centers service revenues are recovering a little bit slower pace than parts.

It did not only by supply chain issues, but continued service technician staffing those items common in the industry.

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

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. Finally, we are also piloting final mile route optimization to help estate efficiency in our parts deliveries to better serve our customers we do believe.

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

Turning to truck sales in the second quarter, we sold 2900.50 for new class 8 trucks going from 5% for the total class 8 U S market.

Our truck sales were driven by a healthy economy and strong freight rates, which led to solid activity for most market segments, we support, especially vocational construction and over the road customers and healthy for stock truck sales, while demand for new trucks remained strong in 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 in 2021 up 32, 4% from 2020.

We believe the subordinate component supplier constraints will likely continue to impact classic 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 duty.

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

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

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

ACD research forecasts U S class for the retail set with 47 retail sales to be 257000 units from 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 have the.

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

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

We announced we have signed the letter of intent with Cummins, Inc. For covenants to acquire <unk>, 50% equity interest and momentum fuel technologies or companies manufacturer.

Natural gas fuel systems.

At urban Tech reflects our shared belief in the long term viability of natural gas fuel systems 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 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.

Okay.

Star then 1 on your telephone.

To withdraw your question price per pound key.

Again, Thats star 1 to ask the question.

Please standby, while we compile the.

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.

I guess my first question Rusty I just wanted to help you.

You can elaborate you talked about your sales.

For 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 is do we make up for it in the fourth quarter or do we get price.

How much gets pushed to 2022. So if you could just give color on how much risk is for 2021.

And then I guess my second question.

Obviously demand continues to be strongly incurred 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 how you see that unfolding.

Sure be happy to Jamie well, if you'd have asked 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 component supply issue, but unfortunately.

I wasn't.

<unk> extended out from where we are now.

Hope for.

In the communications I've had with all the manufacturers this thing smoothed out by the end of the third quarter.

Don't see it.

Smoothed out somewhat towards the back part of the third quarter.

Already what 10 days of the other way from the end of July so.

But 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 better.

Hey, Joe with myself, but we all know about the chip issues, but the 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 anybody to get concerned about that the demand is there in the marketplace and I don't see it going away I see maybe getting pushed out as you said for the fourth and into the first quarter, just because cost just because you can't deliver does it mean you don't build.

What you've committed to.

Right for people in 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 too.

Don't think it's all going to get picked up here in the back half of the year.

As far as 2022 numbers. We are just getting started on some of them. We've done a few deals not a lot I understand that people are very manufacturers and.

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

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

On deals currently so I expect them to start it's really July when.

When you think about it normally we're really not working on the next year's deals.

Really you really get started in September and October typically it's just because the backlog is for large people are worried about 2022, but I think the first half of 2022, maybe a lot of catch up for 2021, our first quarter. So thats analyst day half 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 I don't know if thats reflective of the industry I don't mind solid.

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

<unk> and <unk>.

Leveraging more difficult, but at the same time, our guys have done a great job of.

Doing that so I just I just think everything just gets pushed out a little further and obviously, we so even with not anywhere close close to record unit numbers I think the performance from a record earnings quarter for the company with those kind of deliveries speaks to the phase III.

The bulk of the company over the last 5 or 6 years.

When you look at it across the board so.

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

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

I don't see it I see you're expecting through the third quarter and hopefully in the fourth quarter.

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

Vitamin a little lower than we anticipated for North America.

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 in the quarter.

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

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

Smaller transactions or larger transactions.

Thank you.

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

I'm not 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 it might impact margins still be good I don't know that new margins will be where they are at because of the mix of business.

Yes.

We will see I don't expect them to be terrible, but.

Across the board in every segment.

Heavier media for us.

Parts and service 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 but it's not going to get super impressed or anything I'm not sure.

That's somewhere I don't think I did.

I'm not saying that there.

There could be a slight downtick in some and some new margins just because of mix.

With more robustly customers got 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 <unk> wanted to start with a question on parts and service RFT can you give a little bit more color on how much growth you're expecting in parts and service in the back half of the year and maybe you can talk about how much. This outlook has changed as a result of debt prolonged supply chain.

Issues.

Well as I mentioned in 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 humming back there.

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

And gradually increasing.

I think that while theyre 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 in the shops percentage, while waiting on parts by far than we typically do so sort of slows it down but ex that back okay.

So it's not like it's bad or anything its just youre always striving to do more.

Even though you have record numbers like we've had 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 every month, but continue to see gradual increases in parts and service, especially.

As we're able to continue to staff up a little back to free to endemic levels well, let's.

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

So for.

We're trying to hire in some sockets items some of those skill sets that you are looking for it's.

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 brings for people in 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 to do like what the performance you saw here and continue to try to ascribe to make that better.

Again, I go back to that.

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

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

Thanks.

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 had recovered to pre pandemic levels, but services had not fully recovered maybe just clarify that and if that's true how much room do we have to go in services to get to that for recovery.

Great Great question I was looking at it as a whole so the mix is a little different you are correct. Okay service hasn't recovered over 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. So the upside of that we believe because of 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 once we.

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

Just again.

It goes back to that employment I'm not the only person for all I talked to a lot of people in the other.

Please read all the articles.

It's just been difficult.

Between stimulus and unemployment paychecks for last year and a half.

Certain jobs that have.

We have been hard to fill and just the facts.

I can walk you through double the time to replace people, we have all the stats and numbers so.

Blows up the amount of people because you've got to have replacement you're going to have a provision as part of business.

So it's been more difficult.

<unk> increased debt technician count that we are increasing it.

The fact actually that we're increasing it at a gradual rate we onetime back just a few years ago, we increased I think too fast right.

So our efficiencies and proficiency 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 I am not going to get into on this call, but we feel good about that.

We'd like to go a little faster than we are and bringing people back, but again, it's tough labor market out there in certain job sites.

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

Expectation for S. DNA as we get into the third and fourth quarter relative debt, what we saw here in 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.

The G&A piece grew about 50% sequentially compared to the increase in back in 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 trucks were GAAP with high margins across the board of drug sales cash was up in Q2 also so and I would expect that if we can maintain where we're at to be simple on the other side where revenue.

This correlate with.

Truck margins from truck gross profit.

Understood I appreciate the time and congrats on the quarter.

Thank you very much Jessie you noticed that well steves voices it sort of sounds like mine the data.

I like it.

Okay.

Thank you.

Our next question comes from the line of Andrew <unk> with Bank of America. Your line is open.

Yes, good morning, gentlemen.

Well good morning, Mr Open.

Can you just talk.

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 in how you guys are managing your costs.

It does seem that the recovery could be there's more going on in 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 re.

A 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 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 all that a few calls back a lot during the COVID-19 fears from last year and while we know the business where it requires people to do it I am not just loaning money to someone I'm, turning wrenches and southern parts of delivered barred from first that mark warehousing scope.

Doing thats, what we do but what we did learn.

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

Spending a certain percentage or a less percentage maybe than we historically have book.

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

<unk>.

If I could manage close to that going forward.

<unk>.

I would feel.

Pretty good about that and.

And I think we expect that to be the case in Q3.

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's proprietary to us that line went into 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 correct Rod mentioned in there, but we haven't even rolled out the optimization of.

Our delivery service.

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

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

As I said some of it was I would call proprietary it's probably not that big a deal, but I don't want to get into it on this call, but I guess I would just say trusted and numbers and trust in the performance.

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

And.

I believe that that's the case with the performance Youre seeing in the performance Youre going to see from the company, regardless of where truck manufacturers are getting a product we've got a as I talked earlier on the sales side I got 25% more backlog in Q1.

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 into these growth years.

Thinking is that sort of the amount of cost deploy to get the extra dollar of sales.

Structurally lowered the cycle right.

Yes, we 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.

You start 1 place you get some places in cycles.

Cycle starts to flatten out sometimes for costs don't flatten out what we think.

<unk> is 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.

Going the other way well, sometimes they're not as good.

When it does flatten out on because it is hard to keep that pitch growth like you see just like it was hard to lose that patient growth. When COVID-19 hit is just as ours to go back up space for more gradual now than it was earlier in the year or late last year from a gross profit perspective growth. So we believe yes.

We will manage the cost side much better than we historically have and will continue to lead to.

Better returns at the end of the day Okay.

Gotcha.

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

I bought a few key end markets, maybe you can just sort of.

Take us around the country.

It's like construction oil and gas right why don't we can thank you.

You bet.

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

It's been a bigger mixture marketing value.

Market share.

Part of it.

For us this year refuse remains because it continues to remain strong we feel real good about where we're at with that and where we are in debt in that environment and our relationships with many municipalities but of course for major players on the private side.

Other public companies are not going on the private non municipal.

The over the road business my goodness.

That's the biggest driver as we all know.

It's extremely strong right now.

Again, we're just getting trucks to everybody that wants for 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.

Andrew it's across the board really I mean, I don't see.

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

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

Go back 7.8 years, if I thought we were in oil and gas well 1 thing we can do we're feeling better now than when we had any oil and gas business.

Our parts and service business in 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 in it.

Hi.

I don't rule out the part that it could buy realizes now that they've opened up the spigots 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 at force. That's 1 of the things I'm. Most proud of the organization is that we shifted from so much reliance on that but if it does come back in some way, we're going to be a rack in the middle of it.

I don't ever expect it to look like fracking.

Fracking years, or whatever but I do expect somewhere down the line, even though I realize we're going to be a non carbon based country of world. Eventually it's not a light switch so that's.

Not going away.

This decade so.

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

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 demand remains strong it's 1 other thing you can say what guidance.

5% of the market well.

Yes.

If I could.

Oems that build both heavy and medium duty trucks or the 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 out 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.

Im talking about so but to answer the question succinctly I'm telling it.

Construction volume at.

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 don't do it but I'll ask you 1 more question I'm 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 Ben was these emerging players autonomous driving electric vehicles, what kind of dialogue to have and are there any potential opportunities longer term for you to work with these new emerging players in 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 there are emerging and their investment into it I've always said that.

Majority of the wind is going to come from our guidance for folks that have the.

Other feet on the ground planet no 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 book.

And for you in the 1 thing seasonality startups don't have for that.

For those capabilities right.

Technology and try to produce product.

Distribution network et cetera.

Would tell you that those opportunities continue to pass by I would say pass continues to show up.

On the doorstep, and we will listen whether it's.

Whether any of these types of.

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

That's a hidden.

To me that's 1 of them.

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 gains by Navistar, 1 day there still.

Not where they need to be with Andrew historically, where before Max worse, and I expect them to get background meds are somewhere down the road now with the acquisition with Triton closed in July.

The balance sheet changed for that organization. So I think in the goals will change for that organization and I do believe it will still be able to gain market share with backwards.

Petrobras technologies and their products.

So our products have always been.

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

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

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

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 batteries.

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

For it is going to work great inside of certain segments medium duty 6.7.

Got it but it's still going to be a 10 year run to get everything there but.

<unk>.

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

The number 2 player in 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.

Okay.

<unk>.

Especially.

I don't have to deliver volume 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.

<unk> transition as we transition from 120 years.

Internal combustion engines to always technologies.

Talking a lot, but for abbvie long enough to know how to do that.

I think that transition from these 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.

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

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

That was a great answer thanks, so much.

You bet.

Thank you.

As a reminder, ladies and gentlemen that 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 gone.

Very good Joe how are you today alright.

Alright, well definitely great expense management, I think you got to ease up on cotton Steves pay so he can get his voice back.

Well no interest.

He is a little jealous of me that's all thanks Joel.

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

[laughter].

I am 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 in or just any any idea that debt.

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

Timeframe.

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

I really don't know a lot of those folks yet okay.

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

I do believe the biggest easiest 1 is to get market share back here in North America, where it belongs.

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

Your shops on the OEM you represent.

So that would be by.

The 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.

Arm's 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 those opportunities might be for.

For us from a larger scale perspective.

Obviously.

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

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

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 too new in the guidance.

It's too new.

I don't know everybody I don't really understand what those opportunities would be just any conversations with folks yet.

Okay.

Other little philosophical direction too.

You talk about how youre thinking about how the dealership model.

To change as we go forward this 2020 for California Carb.

You're going to need to partner with charging stations or any other kind of ideas that are floating around about how the business might look in 5 to 10 years.

Sure I mean, it will be it will be integrated into the needs of whatever these technologies are okay, Yes, California, we just had a meeting and approved we spent the last year deciding how we're going to have a california being our first grounds 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 you.

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

Repaired.

For the 2020 for car breaks right and what our customers will mean.

It 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 got our arms around it and just a couple of weeks ago approved a plan that we will roll it all out.

Next year.

With you know with all the charging necessities, along with all the stuff to really support ESG from up.

From solar.

A lot of baked a whole plan not just going to stick a charterer someplace. So we feel good about that and that we're exploring both for our working on talking about and thinking about what we do in other areas, but California of course will be what the alloys are the leader in this space.

Yes.

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

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

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 legislated.

But I've told us.

And it sounds like I know, what I'm talking about here.

I'm not sure I do but I am told the fact that they will come out, but they 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 market place I just don't know at what pace those others will and obviously the EPA is coming out in 2007.

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 that's why when I talk about the JV debt would come in as I feel real good about it because I don't think we're going to have.

Electric.

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

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

Plug it in line I mean, they've been having brownouts and California already and it's weighted.

2 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 noticed because 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 transform our dealerships I don't think transform.

Transition.

Transformation is diesel is not going away right now, but transition our dealerships and adapt our dealerships to be able to handle whatever technologies went out in whatever market spaces for market segments.

Hope that was somewhat informative.

Yeah, you remind me my wife, only plugged in the hair dryer when I'm in the bathtub.

I wanted to ask.

A last quick 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.

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

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

So now we're caught in this supply constraint.

Issue.

But we're dealing with so.

Bob.

But I feel good about the demand is not going away okay.

And the customers are still they are still blowing and going so.

And then also as I mentioned on the for Glass Force out we've had 1.

Robert 1 OEM.

That typically sold about 2500 units that has sort of been 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 ex stronger than ever.

I'm confident in that so that's kind of hampered somewhat by for class 4 through 7 I mean, you might sell flip some of them for something else, but you don't flip them all so.

That's that's what I've got to say, we expect could be hopefully.

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

Everybody has sold their inventory right, 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 for that.

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.

Youre welcome Sir.

Thank you.

I'm showing no further questions in 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 for this last quarter on June 7.

25 years since my father.

Team of people went public.

For the first car could be able to ever go public.

Ben 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 line work for their efforts.

Future efforts too as we continue to move forward, but it was still.

I could get a little bit sentimental engines, but thinking about it.

Welcome to some other people I know in the industry, but we're still the only public.

Other car types started coming out for fall, but it was.

It's been a good ride and I've enjoyed at all in our planning horizon for quite a while longer I'm getting to Steve's voice and tuned up Alex you can here so anyway I am sure it will be even more closer to mine by Q3 items, Steve that we.

We report 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. Reports second quarter 2021 earnings results.

At this time all participants are in 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.

Vietnam for 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 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 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 1995, because these.

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

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

As indicated in our news release for the second quarter. We achieved revenue was 1.3 billion in net.

Income of $58 million for $1 per diluted share were very proud to declare a cash dividend of <unk> 19 per common share, which is a 5.6% interest over the last quarter. Our results were primarily due to the country's continued economic recovery Chelsea activity for most market segments, we support solid demand for new and used class 8 truck sales.

And increased aftermarket activity along with our continued interest in managing expenses contributed to our strong quarter. As we look ahead component supply chain issues are delaying the timing of some new truck deliveries into next year and those constraints from the beginning to negatively affect parts and service revenues as well despite 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.

In the aftermarket our parts service and body shop revenues $445.5 day, and our absorption ratio was 129, 1% our aftermarket revenues increased 18% compared to the second quarter of 2020.

This is primarily as.

As a result of the nationwide economic recovery, our port sales for back to pre pandemic levels and we increased tenant.

We experienced increased healthy activity.

In most market segments, particularly releasing refuse over the road customers and independent service centers service revenues are recovering at a little bit slower pace than parts.

It did not only by supply chain issues, but continued service technician staffing those items common in 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 for the year that said to mitigate those impacts we are actively hiring key parts personnel and service technicians and focusing on our preventative and contract maintenance service offerings for.

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. Finally, we are also piloting final mile route optimization to help with data efficiency in our parts deliveries to better serve our customers we do believe.

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

Turning to truck sales in the second quarter, we sold 2900.50 for new class 8 trucks getting to 5% for the total class 8 U S market.

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

Which impacted manufacturers production capabilities.

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

We believe the subordinate component supplier of these facts will likely continue to have that 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.

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

Our platform for 7 new truck sales reached 2825 units for the second quarter accounting for 45 per cent 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 of the manufacturers. We represent continue to be faced with production shutdowns due to supply constraints negatively impacting medium duty truck availability, which will most likely continue through the third quarter.

ACG research forecasts U S class for the retail setting for the 7 retail sales to be 257000 units in 2021 up 11% from 2020.

While we believe class 4 to 7 truck production will not increase as quickly as class 8 demand remained strong and we have the teams and strategies in place to take advantage of every sales opportunity possible.

Our used truck sales reached 2094 units from the second quarter up 18, 4% from the same time period in 2020 used truck demand and values remain high primarily due to production growth strengths for 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.

June we announced we have signed a letter of intent with common thing 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 reflects our share belief in the long term viability of natural gas usage ecosystems and drew on our share in history as leaders in the natural gas market and our extensive service network capabilities throughout North America. The joint venture is expected to close later this year.

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

With that I'll take your questions.

Yes.

Understood.

Understood.

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, a nice quarter.

I guess my first question Rusty I just wanted.

Hope you can elaborate you talked about your sales.

For 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 is do we make up for it in the fourth quarter or do we get price.

How much gets pushed into 2020 curious if you could just give color on how much risk is for 2021.

And then I guess my second question.

<unk>.

Honestly demand continues to be strongly as <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 how you see that unfolding.

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

I wasn't guidance.

Extend it out from where we are now.

For the.

Communications I've had with all the manufacturers that this thing has smoothed out by the end of the third quarter.

Don't see it.

Smoothed out somewhat towards the back part of the third quarter, we're already what 10 days or the other way from the end of July.

No.

It feels like we're going to see a lot of pressure for the next 4 to 6 weeks.

For sure anyway, I wish I had better engage 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 in Asia.

Everybody is 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 in the marketplace and I don't see it going away I see it maybe getting pushed out as you said for the fourth and into the first quarter.

Cash debt because you can't deliver it doesn't mean, you don't build what you've committed to.

Right for people in 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 or 2 I don't think it's all going to get picked up here in the back half of the year.

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

Understand that people are very manufacturers.

And for what they got caught out with this year are very very little of it hasnt.

Some stuff, but that's not to say that we're not working.

And our own deals currently so I expect them to start.

Early July when.

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

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 for first half of 2022, maybe a lot of catch up for 2021, our first quarter for 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, but I don't know if thats reflective of the industry I don't mind solid.

We're up 25% so while you can.

You get a little bit discouraged with the issues that we're dealing with are you just going to ask Joe to make it last spring it out a little bit longer because I don't see demand going away right now I don't mean and taking away from that and that.

That's 1 of the reasons for the last 2 quarters have been a record used truck orders because they are small.

By leveraging more difficult for Bob.

But at the same time, our guys have done a great job of doing that so.

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

Obviously, we show even we're not anywhere close close to record unit numbers.

The performance from a record earnings quarter for the company with those type of deliveries speaks to the spacing involvement of 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.

I am not the manufacturer in mind, that's going to be secondhand information, but.

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

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

<unk> been a little lower than were anticipated for North America.

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

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

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

Well some of that is 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.

<unk>.

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 it might impact margins I won't still be good I don't know what the new margins will be where they are at because of mix of business.

Yes.

We'll see I don't expect it to be terrible book.

Across the board in every segment.

Is it heavier media for us.

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

Supply side demand side.

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

That's somewhere I don't think I did.

I'm, not saying that but im also there could be a slight uptick in <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 Matt.

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

Good morning, gentlemen.

1 <unk> wanted to start with a question on parts and service Rusty can you give a little bit more color on how much growth youre expecting in parts and service in 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 earlier, we are back to pre pandemic levels.

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

We're not back to several of 19 quite because the oilfield was still in bad debt, but we are back to pre pandemic levels in parts and service in 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 in the shops for cities, while waiting on parts by far than we typically do so.

Slows it down price start back okay.

So it's not like it's bad or anything it's just huge youre always striving to do more even though we have record numbers like we've add 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 in parts and service, especially as we're able to continue to staff up a little back to free to endemic levels while.

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

For trying to hire and some severance items some of those skill sets that you are looking for.

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 bring somewhat bricks for people and it's still a bit 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 like for.

Why put the warrants you saw here and continue to try to strive to make that better.

Again I go back to the.

Never have guide those kind of unit deliveries prior and perform with the and it's across the board was expense management is production in the back is back to those levels.

For.

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

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 maybe you can just.

Clarify that and if that's true how much do we have to go in services to get to that for recovery.

Great Great question I was looking at them as a whole. So the mix is a little different you are correct. Okay services hasn't recovered we never 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. So the upside of that we believe to that but we believe our <unk>.

Acknowledges and some other things we're doing.

<unk> us to take a more get larger parks market share once we can.

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

Just again.

It goes back to that employment I'm not the only person for all I talked to a lot of people in there.

Please read all the articles.

It's just been difficult.

Between stimulus and unemployment paychecks for last year and a half.

Certain jobs.

He had been our bill it's just the facts.

I can walk you through double the time to replace people, we have all the stats and numbers so.

Close up the amount of people because you've got to have replacement you're going to have a position as part of business.

So it's been for difficult to increase that technician cap that we are increasing it and I like the fact actually that we're increasing it at a gradual rate. We 1 time back in our history. A few years ago, we increased for I think 2 fashion right.

So our efficiencies and proficiencies work, 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 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 in certain job sites.

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

Expectations for SG&A as we get into the third and fourth quarter relative to what we saw here in 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.

The G&A piece grew about 50% sequentially compared to the increase in backend gross profit in Q2 versus Q1, we'd expect that thing to continue.

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

I would expect that if we can maintain where we're at to be simple on the upside for this.

Correlate.

Drug margins from truck gross profit.

Understood I appreciate the time and congrats on the quarter.

So very much Jessie you noticed well steves voices and sort of sounds like mine the data.

I like it.

Okay.

Thank you.

Our next question comes from the line of Andrew <unk> with Bank of America. Your line is open.

Yes, hi, 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 starting to be appreciated by the market, but it's just the structural change in how you guys are managing your costs.

It does seem that the recovery could be there's more going on in 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 us what the <unk>.

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.

For everyone's transfer 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 a lot during the COVID-19 fears from last year and while we know the business where it requires people to do it or not just loaning money to somewhat I'm, turning wrenches and southern parts of deliberate barred from past that mark warehousing stuff.

Doing thats, what we do but what we did learn.

We can do a better job as the market comes back.

Spending a certain percentage for a 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 for its showing out like Steve said a minute ago, we spent a little more than maybe 150% from the gross profit increase sequentially from Q1 for Q2 at the same time.

If I can manage close to that going forward.

Sure.

I would feel.

Pretty good about debt I think we expect that to be the case in Q3, it's just a diligence we've 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.

We put in some other measurements that historically, we use and we've taken that for infant training, we're taking that down to different levels of our organization so that.

Are there some 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 thereabout, we haven't even rolled out the optimization of our delivery service.

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

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

As I said from others.

Prior towards 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 trusted and numbers and trust in the performance.

We book and with Sprint we plan on continuing to perform like we are we realize this market demands for this call but at the same time market demand has got turned to net dollars without management on both sides of the coin.

Believe that Thats the case with the performance Youre seeing in the performance Youre going to see from Mcafee.

Listen we're truck manufacturers are getting a product we'd guide does that go to earlier on the sales side ex I got 25% more backlog in the queue.

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, 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 into these growth years, but the thinking is that sort of the amount of cost deploy together extra dollar of sales structure, we lowered the psycho fill rate.

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.

You start 1 place you get some places in cycles.

The cycle starts flattening out sometimes your cost don't flatten that wood, 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 and then it starts going the other way well sub debt or not as good.

And it does flatten out.

It's hard to keep that pitch growth like you see just like it was hard to lose that page of growth from Covid here. It's just it's hard to go back up space for more gradual now than 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.

Historically, app, which will could day to lead to.

Better returns at the end of the day Okay.

Gotcha.

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

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

Take us around the country.

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

You bet.

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

It's been a bigger mixture marketing value.

Big part of it.

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

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

Other companies are not but on the private non municipal.

The over the road business my goodness.

That's the biggest driver as we all know.

It's extremely strong right now.

Again, we're just getting trucks to everybody that wants for them, that's why it's going to be stretched out and moves.

Into next year, because we're not going to meet commitments that we've made on for demand for customers earlier. This year. So we will that will carry on.

Andrew it's across the board really I mean, I don't see.

<unk>.

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

While in gas, yes, okay to talk about LNG everybody always.

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

Revenue to take a barrel of oil so it was totally depressed youre seeing some pickup in it.

Hi.

Don't rule out the harder it could buy realizes now they've opened up the spigots 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 at force. That's 1 other things I'm. Most proud of the organization is that we shifted from so much reliance on that but if it does come back in some way, we're going to be right in the middle of it.

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

Not going away.

This decade so.

I do think we might get some play back somewhere down the line, our LNG and that will just be a tailwind that's not something we rely on upon anymore, even though we're still heavily involved in from Chrysler.

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

I think that covers most sectors.

I mean this is pretty robust.

Around medium duty demand remains strong it's 1 other things you can say well gosh for 5% of the market well.

Sure.

If I could.

Oems debt build both heavy and medium duty trucks are going to slack 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.

Im talking about so but to answer the Greg to safely until ahead.

Construction volume at 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 don't do 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.

Could you just talk about what have your interactions been with these emerging players autonomous driving electric vehicles, what kind of dialogue do have and are there any potential opportunities longer term for you to work with these new emerging players in 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 it I've always said that.

Majority of the wind is going to come from the guidance for folks that have the.

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

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 book.

And for you in the 1 thing seasonality startups don't have for that.

For those capabilities for.

For our best in technology and try to produce product in.

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

On the doorstep.

We will listen whether it's.

Whether in 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 of not just our dealerships with inside of our outfit centers and stuff like that we have a few of those around the country. So.

That's a hidden.

For me, that's 1 of the Nuggets in the future for growth for us.

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

Share gain by Navistar ones that are still not where they need to be within our historical where before Max worse than I expected to get background items are somewhere down the road now with the acquisition with Triton closed in July.

The balance sheet change for that organization. So I think in the goals will change for the organization.

I believe it will still be able to gain market share with backwards.

Technologies and their products.

Their products have always been stellar so that but we will have the opportunity we did Jay.

We did with current let me express for a second.

That was I think thats going to I'm, not saying, that's something that we are turning down a lot here in the first year or 2 but I do believe given regulations that are being driven by government debt I don't believe always emerging technologies can take care of at the level that.

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

No.

I just don't believe that there is like I don't believe diesels going away for a long term okay.

On the truckload side.

Batteries aren't going to work on the truckload side, they're going to be doing great, but for its going to work great inside of certain segments medium duty 67 bps 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 them for them. The number 2 player in the fuel system business and I do think the RMG with its negative carbon footprint combined with subs with sub CMG growth I think is going to allow us to gross up mid <unk>.

Okay.

Yes.

Especially.

I don't have to deliver volume environmental stuff, that's going on the pressures that are going to be put by outside organizations not truck companies by by other organizations for us when transition.

<unk> transition as we transition from 120 years.

Internal combustion engines to always technologies.

Talking a lot.

And then Ravi 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.

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

You may begin.

It was a little bit colored red I feel really good about the base that it gives us as an organization to evolve into this next decade with all the new technologies coming out 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 a 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.

Cotton Steve's pay so we can get his voice back.

Well.

He is a little jealous of the vessel thanks Joel.

I think calculated for the rest of the call you wouldn't have 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, they're going to be more global opportunities or are there going to be like Latin American opportunities with Scania, our MAA in or just any any idea that debt.

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

Timeframe.

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

I really don't know a lot of those folks yes, 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 the biggest and easiest 1 is to get market share back here in North America, where box.

When you got market share that drives parts and service downstream, but we don't work on every day, but you will typically has worked more than your.

Shops on the OEM day represent so.

So that would be buyer.

The 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 there.

Arm's 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 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.

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

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

It's too new.

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

Okay.

Other little philosophical direction too.

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

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

Sure I mean, it will be it will be integrated into that needs. Whatever these technologies are okay, Yes, California, 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.

As manufacturers remember.

People are building thousands of units yet so.

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

For 2020 for car Briggs, right and what our customers will need.

It 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 ago approved a plan that we will roll it all out into next year.

With with all of the charging necessities, along with all the stuff to really support ESG from up.

From solar.

A lot of big a whole plan not just going to stick of charters in place. So we feel good about that and now we're exploring mobile start working on talking about and thinking about what we do in other areas, but California of course would be what they are.

Those are the leader in this space.

So yes, we are.

Sure.

We're going forward with that around that and we will continue to look at other areas where attainment of <unk>.

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

But im told.

And it sounds like I know, what I'm talking about here, but I'm not sure, but im told the fact that they will come out, but there might be a year behind it here or there. 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 EPA is coming out in 2007.

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 that's why when I talk about the JV added would come in debt feel real good about it because I don't think we're going for.

<unk>.

Electric.

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

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

<unk> cars.

You just plug it in like a hair dryer.

Been having brand house in 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 always as I always like to say I want to be on the leading edge not the bleeding edge. So you can rest assured that we will be on the leading edge as we for.

Walmart dealerships.

Transform transition Scott.

Scott transformation based on current away right now, but transition our dealerships and adapt our dealerships to be able to handle whatever technologies went out in whatever market spaces for market segments.

Hope that was somewhat informative.

Yeah, you remind me my wife, only plugged in the hair dryer when I'm in the bathtub.

I wanted to ask.

A last quick 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.

And then I'm done.

When you say that I'm guessing you're talking about volumes a lot of that I would tell you I think that our backlogs, probably ramped up a little bit slower than others, but as I told you my backlog really up I mean, if you go back a few quarters as his rather large at the moment so maybe some of our.

Customers transitioning we transition a little later on the deals that we did book. So now we're caught in this supply constraint.

Issue.

But we're dealing with so.

Sure.

But I feel good about the demand is not going away okay.

The customers are still there's still blowing and going so.

And then also as I've mentioned on the for glass for so we've had 1 I'm not going to give specific.

The other 1 OEM.

Typically sold about 2500 units that has sort of been out of the marketplace.

Get back into it 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 ex stronger than ever.

I'm confident in that so that's kind of efforts some of that for class.

Class 4 through 7 I mean, you might zone flipped.

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

No.

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

I think the market share will stay flat because I don't think I don't think retail deliveries have gone up in Q3 across the board and my friend 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 right, 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 for the back here, Yes, we lost a little share plan on getting it back just a matter of timing here.

We got the backlog to do it.

Alright, Thank you very much.

Welcome Sir.

Thank you.

I am showing no further questions in 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 for this last quarter on June 7.

25 years since my father, and I and our team of people went public.

For the first car truck dealer to ever go book, 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 line work for their efforts.

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

I got a little bit sentimental launching <unk> thinking about it.

In talking with some other people I know in the industry, but we're still going to public but other car types started coming out in the fall, but it was.

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

We report 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.