Q4 2023 Paccar Inc Earnings Call

January 23, 2024

Thanks for watching!

Operator: Good morning, and welcome to PACCAR's Q4 2023 earnings conference call. All lines will be on listen-only mode until the question and answer session. Today's call is being recorded, and if anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning and welcome to PACCAR's fourth quarter 2023 earnings conference call. All lines will be on listen-only mode until the question and answer session. Today's call is being recorded and if anyone has an objection, they should disconnect at this time.

Good morning, and welcome to <unk> fourth quarter 2023 earnings Conference call.

All lines will be on listen only mode until the question answer session. Today's call is being recorded and if anyone has an objection. They should disconnect at this time.

I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead.

I would now like to introduce Mr. Ken Hastings, <unk> director of Investor Relations. Mr. Hastings. Please go ahead.

Ken Hastings: Good morning! We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Harrie Schippers, President and Chief Financial Officer, and Bryce Poplawski, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general, economic, and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the investor relations page of paccar.com. I would now like to introduce Preston Feight.

Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Harry Schippers, President and Chief Financial Officer, and Bryce Poplowski, Vice President and Controller.

Ken Hastings: Good morning, we would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings <unk> director of Investor Relations and joining me. This morning are Preston Feight, Chief Executive Officer, Harry Skippers, President and Chief Financial Officer, and Bryce Poplawski Vice.

Speaker Change: President and controller.

Speaker Change: As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode.

Speaker Change: As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode.

Speaker Change: Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive conditions that may affect expected results.

Speaker Change: Certain information presented today will be forward looking involve risks and uncertainties, including general economic and competitive conditions that may affect expected results.

Speaker Change: For additional information, please see our SEC filings and the Investor Relations page of paccar.com. For additional information, please see our SEC filings and the Investor

Speaker Change: Additional information please see our SEC filings and the Investor Relations page of <unk> Dot com.

Speaker Change: I would now like to introduce Preston Feight.

Preston Feight: Hey, good morning. Harrie, Bryce, Ken, and I will update you on our record Q4 and full year 2023 results, as well as other business highlights. PACCAR's outstanding employees delivered the excellent results by providing our customers with the highest quality trucks and transportation solutions in the industry. In 2023, PACCAR achieved annual revenues of $35.1 billion, net income of $4.6 billion, and an after-tax return on revenue of 13.1%. All three were records. PACCAR's strong financial performance benefited from record deliveries of DAF, Kenworth, and Peterbilt's innovative trucks, record results in our parts division, and strong financial services performance. PACCAR shareholders and customers benefited from the $7.8 billion invested over the past 10 years in new products, world-class facilities, and state-of-the-art technologies.

Preston Feight: Hey, good morning.

Preston Feight: Harry, Bryce, Ken, and I will update you on our record fourth quarter and full year 2023 results, as well as other business highlights.

Preston Feight: Barry Bryce, Ken and I will update you on our record fourth quarter and full year 2023 results as well as other business highlights.

Preston Feight: PACCAR's outstanding employees delivered the excellent results by providing our customers with the highest quality trucks and transportation solutions in the industry.

Preston Feight: <unk> outstanding employees delivered the excellent results by providing our customers with the highest quality trucks and transportation solutions in the industry.

Preston Feight: In 2023, PACCAR achieved annual revenues of $35.1 billion, $35.1 billion, $35.1 billion.

Preston Feight: In 2023 Packer achieved annual revenues of $35 1 billion.

Preston Feight: net income of $4.6 billion.

Preston Feight: Net income of $4 6 billion.

Preston Feight: and an after-tax return on revenue of 13.1%.

Preston Feight: And an after tax return on revenue of 13, 1%.

Preston Feight: All three were records.

Preston Feight: Packard's strong financial performance benefited from record deliveries of Doff, Kenworth, and Peterbilt's innovative trucks.

Preston Feight: Our strong financial performance benefited from record deliveries of staff Kenworth and peterbilt innovative trucks wrecked.

Preston Feight: Record results in our parts division and strong financial services performance. For more information visit www.FEMA.gov

Preston Feight: Our record results in our parts Division and strong financial services performance.

Preston Feight: PACCAR shareholders and customers benefited from the $7.8 billion invested over the past 10 years in new products, world-class facilities, and state-of-the-art technology.

Preston Feight: <unk>, our shareholders and customers benefited from the $7 $8 billion invested over the past 10 years in new products World class facilities and state of the art technologies.

Preston Feight: has achieved 85 consecutive years of net income and has paid a dividend every year since 1941. In 2023, PACCAR declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share. PACCAR's Q4 revenues were $9 billion. Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. Q4 net income included a $120 million tax provision release in Brazil. PACCAR Parts achieved Q4 revenues of $1.61 billion and pre-tax profits of $432 million. In Q4 2023, PACCAR delivered 51,000 trucks, and for Q1 2024, deliveries are forecast to be around 48,000.

has achieved 85 consecutive years of net income and has paid a dividend every year since 1941. In 2023, PACCAR declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share. PACCAR's Q4 revenues were $9 billion. Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. Q4 net income included a $120 million tax provision release in Brazil. PACCAR Parts achieved Q4 revenues of $1.61 billion and pre-tax profits of $432 million. In Q4 2023, PACCAR delivered 51,000 trucks, and for Q1 2024, deliveries are forecast to be around 48,000.

Preston Feight: PACCAR has achieved 85 consecutive years of net income and has paid a dividend every year since 1941.

Preston Feight: <unk> achieved 85 consecutive years of net income and has paid a dividend every year since $19 41.

Preston Feight: In 2023, PACCAR declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share.

Preston Feight: In 2023 pack, our declared a record $4 24 per share in dividends, including an extra cash dividend of $3 20 per share.

Thanks for watching!

Good morning, and welcome to PACCAR's fourth quarter 2023 earnings conference call.

All lines will be in listen-only mode until the question and answer session begins.

Preston Feight: PACCAR's fourth quarter revenues were nine billion dollars.

Preston Feight: <unk> fourth quarter revenues were $9 billion.

Today's call is being recorded, and if anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations.

Preston Feight: Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. For more information, visit www.FEMA.gov

Preston Feight: Quarterly net income was a record $1 42 billion, which was 54% higher than the prior year.

Preston Feight: Fourth quarter net income included a $120 million tax provision release in Brazil. For more information visit www.fema.gov

Preston Feight: Fourth quarter net income included a $120 million tax provision release in Brazil.

Ken Hastings: Mr. Hastings, please go ahead.

Ken Hastings: Good morning.

Ken Hastings: We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer; Harry Schippers, President and Chief Financial Officer; and Bryce Poplowski, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the Investor Relations page of paccar.com. For additional information, please see our SEC filings and the Investor Relations page of paccar.com. I would now like to introduce Preston Feight.

Preston Feight: Pack our parts to achieve fourth quarter revenues of $1.61 billion and pre-tax profits of $432 million.

Preston Feight: Pat car parts achieve fourth quarter revenues of $1, six 1 billion and pre tax profits of $432 million.

Preston Feight: In the fourth quarter of 2023, Packard delivered 51,000 trucks, and for the first quarter of 2024, deliveries are forecast to be around 48,000.

Preston Feight: In the fourth quarter of 2023 pack are delivered 51000 trucks and for the first quarter of 2024 deliveries are forecast to be around 48000.

Preston Feight: Last year, US and Canadian Class 8 truck retail sales were 297,000 units. Kenworth and Peterbilt's full-year deliveries increased from 96,000 to 109,000. In 2024, the US economy is projected to expand. Within the truck sector, the vocational, less-than-truckload, and medium-duty segments are experiencing strong demand, and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models. The 2024 US and Canadian Class 8 truck market is forecast to be in a range of 260,000 to 300,000 vehicles. European above 16-ton truck registrations were 343,000 last year. DAF's 2023 European deliveries increased to a record 63,000 trucks. DAF's customers appreciate the industry-leading fuel efficiency and driver comfort of DAF's premium trucks.

Last year, US and Canadian Class 8 truck retail sales were 297,000 units. Kenworth and Peterbilt's full-year deliveries increased from 96,000 to 109,000. In 2024, the US economy is projected to expand. Within the truck sector, the vocational, less-than-truckload, and medium-duty segments are experiencing strong demand, and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models. The 2024 US and Canadian Class 8 truck market is forecast to be in a range of 260,000 to 300,000 vehicles. European above 16-ton truck registrations were 343,000 last year. DAF's 2023 European deliveries increased to a record 63,000 trucks. DAF's customers appreciate the industry-leading fuel efficiency and driver comfort of DAF's premium trucks.

Preston Feight: Last year, U.S. and Canadian Class A truck retail sales were 297,000 units.

Preston Feight: Last year U S and Canadian class eight truck retail sales were 297000 units.

Preston Feight: Kenworth and Peterbilt's full-year deliveries increased from 96,000 to 109,000.

Preston Feight: Kenworth and Peterbilt full year deliveries increased from 96000 to 109000.

Preston Feight: In 2024, the U.S. economy is projected to expand and the U.S. economy is projected to expand.

Preston Feight: In 2020 for the U S economy is projected to expand.

Preston Feight: Within the truck sector, the vocational, less than truckload, and medium-duty segments are experiencing strong demand, and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models.

Preston Feight: Within the truck sector, the vocational less than truckload and medium duty segments are experiencing strong demand and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models.

Preston Feight: Hey, good morning.

Preston Feight: Harry, Bryce, Ken, and I will update you on our record fourth quarter and full year 2023 results, as well as other business highlights. PACCAR's outstanding employees delivered excellent results by providing our customers with the highest quality trucks and transportation solutions in the industry.

Preston Feight: The 2024 U.S. and Canadian Class 8 truck market is forecast to be in a range of 260,000 to 300,000 vehicles.

Preston Feight: The 2020 for U S and Canadian class eight truck market is forecast to be in a range of 260 to 300000 vehicles.

Preston Feight: European above 16-ton truck registrations were 343,000 last year.

Preston Feight: European above 16 tonne truck registrations were 343000 last year.

Preston Feight: In 2023, PACCAR achieved annual revenues of $35.1 billion, $35.1 billion, $35.1 billion, net income of $4.6 billion, and an after-tax return on revenue of 13.1%.

Preston Feight: DOS 2023 European deliveries increased to a record 63,000 trucks.

<unk> 2023 European deliveries increased to a record 63000 trucks.

Preston Feight: Doff's customers appreciate the industry-leading fuel efficiency and driver comfort of Doff's premium truck. For more information, visit www.FEMA.gov

Preston Feight: Thus customers appreciate the industry, leading fuel efficiency and driver comfort of Doffs premium trucks.

Preston Feight: All three were records.

Preston Feight: These trucks have a unique competitive advantage in the European market due to an innovative aerodynamic design that features the largest and most luxurious cab interior. In 2024, the European economy is forecast to grow modestly. We expect the above 16-ton truck registrations to be in the range of 260 to 300 thousand. Last year, the South American above 16-ton truck market was 110 thousand vehicles and is expected to be similar this year. In Brazil, DAF achieved a record 10.2% share, up from 6.9% last year. DAF Brazil makes a growing contribution to PACCAR's global success. PACCAR full-year truck, parts, and other gross margins were 19.3% and were 19.4% in Q4, reflecting strong truck deliveries and excellent parts business.

These trucks have a unique competitive advantage in the European market due to an innovative aerodynamic design that features the largest and most luxurious cab interior. In 2024, the European economy is forecast to grow modestly. We expect the above 16-ton truck registrations to be in the range of 260 to 300 thousand. Last year, the South American above 16-ton truck market was 110 thousand vehicles and is expected to be similar this year. In Brazil, DAF achieved a record 10.2% share, up from 6.9% last year. DAF Brazil makes a growing contribution to PACCAR's global success. PACCAR full-year truck, parts, and other gross margins were 19.3% and were 19.4% in Q4, reflecting strong truck deliveries and excellent parts business.

Preston Feight: These trucks have a unique competitive advantage in the European market due to an innovative, aerodynamic design that features the largest and most luxurious cab interior.

Preston Feight: Packard's strong financial performance benefited from record deliveries of Doff, Kenworth, and Peterbilt's innovative trucks, record results in our parts division, and strong financial services performance. For more information, visit www. FEMA.gov. PACCAR shareholders and customers benefited from the $7.8 billion invested over the past 10 years in new products, world-class facilities, and state-of-the-art technology.

Preston Feight: These trucks have a unique competitive advantage in the European market due to an innovative aerodynamic design that features the largest and most luxurious cabin interior.

Preston Feight: In 2024, the European economy is forecast to grow modestly. We expect the above 16-ton truck registrations to be in the range of 260,000 to 300,000.

Preston Feight: In 2020 for the European economy is forecast to grow modestly.

Preston Feight: We expect the above 16 tonne truck registrations to be in the range of 260 to 300000.

Preston Feight: Last year, the South American above 16-ton truck market was 110,000 vehicles and is expected to be similar this year.

Preston Feight: Last year, the South American above 16 tonne truck market was 110000 vehicles and is expected to be similar this year.

Preston Feight: PACCAR has achieved 85 consecutive years of net income and has paid a dividend every year since 1941.

Preston Feight: In Brazil, DAPA achieved a record 10.2% share, up from 6.9% last year.

Preston Feight: In Brazil, <unk> achieved a record 10, 2% share.

Preston Feight: In 2023, PACCAR declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share. PACCAR's fourth quarter revenues were nine billion dollars. Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. For more information, visit www. FEMA.gov, Fourth quarter net income included a $120 million tax provision release in Brazil. For more information, visit www.fema.gov, Pack our parts to achieve fourth quarter revenues of $1.61 billion and pre-tax profits of $432 million. In the fourth quarter of 2023, Packard delivered 51,000 trucks, and for the first quarter of 2024, deliveries are forecast to be around 48,000.

Preston Feight: Up from six 9% last year.

Preston Feight: DOF Brazil makes a growing contribution to PACCAR's global success.

Preston Feight: The off Brazil makes a growing contribution to <unk> global success.

Preston Feight: PACCAR full-year truck, parts, and other gross margins were 19.3% and were 19.4% in the fourth quarter, reflecting strong truck deliveries and excellent parts business.

Preston Feight: Our full year truck parts and other gross margins were 19, 3% and were 19, 4% in the fourth quarter, reflecting strong truck deliveries and excellent parts business.

Preston Feight: We estimate PACCAR's worldwide Q1 truck and parts gross margins to remain strong and be in the range of 18.5% to 19%. 2023 was another great year for PACCAR, with many highlights, including revenue and net income records. PACCAR announced a joint venture to manufacture commercial vehicle batteries. DAF opened a new electric truck assembly plant and earned the Green Truck Award as the most fuel-efficient truck in Europe. PACCAR Parts celebrated its 50th anniversary, and Kenworth celebrated its 100-year anniversary. We're looking forward to 2024 being another excellent year. Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harrie?

We estimate PACCAR's worldwide Q1 truck and parts gross margins to remain strong and be in the range of 18.5% to 19%. 2023 was another great year for PACCAR, with many highlights, including revenue and net income records. PACCAR announced a joint venture to manufacture commercial vehicle batteries. DAF opened a new electric truck assembly plant and earned the Green Truck Award as the most fuel-efficient truck in Europe. PACCAR Parts celebrated its 50th anniversary, and Kenworth celebrated its 100-year anniversary. We're looking forward to 2024 being another excellent year. Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harrie?

Preston Feight: We estimate PACCAR's worldwide first quarter truck and parts gross margins to remain strong and be in the range of 18.5% to 19%.

Preston Feight: We estimate <unk> worldwide first quarter truck and parts gross margins to remain strong and be in the range of 18, 5% to 19%.

Preston Feight: 2023 was another great year for PACCAR, with many highlights, including revenue and net income records.

Preston Feight: 2023 was another great year for <unk> with many highlights including revenue and net income records.

Preston Feight: PACCAR announced a joint venture to manufacture commercial vehicle batteries.

Preston Feight: <unk> announced the joint venture to manufacture commercial vehicle batteries Dov.

Preston Feight: DOP opened a new electric truck assembly plant and earned the Green Truck Award as the most fuel-efficient truck in Europe.

Preston Feight: <unk> opened a new electric truck Assembly plant and earned the Green Truck award as the most fuel efficient truck in Europe.

Preston Feight: Last year, U.S. and Canadian Class A truck retail sales were 297,000 units. Kenworth and Peterbilt's full-year deliveries increased from 96,000 to 109,000. In 2024, the U.S. economy is projected to expand, and the U.S. economy is projected to expand. Within the truck sector, the vocational, less than truckload, and medium-duty segments are experiencing strong demand, and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models. The 2024 U.S. and Canadian Class 8 truck market is forecast to be in a range of 260,000 to 300,000 vehicles. European above 16-ton truck registrations were 343,000 last year. DOS 2023 European deliveries increased to a record 63,000 trucks. Doff's customers appreciate the industry-leading fuel efficiency and driver comfort of Doff's premium trucks. For more information, visit www.fema.gov. These trucks have a unique competitive advantage in the European market due to an innovative, aerodynamic design that features the largest and most luxurious cab interior.

Preston Feight: Packard Parks celebrated its 50th anniversary and Kenworth celebrated its 100-year anniversary. For more information, visit www.fema.gov.

Preston Feight: Our parts celebrated its 15th anniversary and kenworth celebrated its 100 year anniversary.

Preston Feight: We're looking forward to 2024 being another excellent year.

Speaker Change: Harrie Schippers will now provide an update on Pack Our Parts, Pack Our Financial Services, and other business highlights. Harrie?

Speaker Change: Harry Skippers will now provide an update on pack, our parts pack or financial services and other business highlights Eric.

Harrie Schippers: Thank you, Preston. In 2023, PACCAR Parts set new records for revenues and profits. Annual revenues increased by 11% to $6.4 billion, and pretax profit increased by 18% to $1.7 billion. Parts gross margins climbed to 31.9%, up from 30.4% in the prior year. We estimate parts sales to grow by 3% to 5% in Q1 of this year compared to the record Q1 last year. PACCAR Parts' excellent long-term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers. PACCAR's aftermarket parts and connected services businesses provide strong profitability through all phases of the business cycle.

Harrie C. A. M. Schippers: Thank you, Preston.

Harrie C. A. M. Schippers: Thank you Preston.

Harrie C. A. M. Schippers: In 2023, Packer Parts set new records for revenues and profits.

Harrie C. A. M. Schippers: In 2023 parts set new records for revenues and profits.

Harrie C. A. M. Schippers: Annual revenues increased by 11% to $6.4 billion.

Harrie C. A. M. Schippers: Annual revenues increased by 11% to $6 $4 billion.

Harrie C. A. M. Schippers: Pre-tax profit increased by 18% to $1.7 billion.

Harrie C. A. M. Schippers: And pretax profit increased by 18% to $1 7 billion.

Harrie C. A. M. Schippers: Bart's gross margins climbed to 31.9%.

Harrie C. A. M. Schippers: Parts gross margins climbed to 31, 9%.

Harrie C. A. M. Schippers: from 30.4% in the prior year.

Harrie C. A. M. Schippers: From 34% in the prior year.

Harrie C. A. M. Schippers: We estimate part sales to grow by 3-5% in the first quarter of this year compared to the record first quarter last year.

Harrie C. A. M. Schippers: We estimate foreign sales to grow by 3% to 5% in the first quarter of this year compared to the record first quarter last year.

Harrie C. A. M. Schippers: Pack Our Parts' excellent long-term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers.

Harrie C. A. M. Schippers: Okay got parts has excellent long term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers.

Harrie C. A. M. Schippers: Packers aftermarket parts and connected services businesses provide strong profitability through all phases of the business cycle.

Harrie C. A. M. Schippers: Okay, Chris after market parts and connected services businesses.

Preston Feight: In 2024, the European economy is forecast to grow modestly, so we expect the number of above 16-ton truck registrations to be in the range of 260,000 to 300,000. Last year, the South American above 16-ton truck market was 110,000 vehicles and is expected to be similar this year. In Brazil, DAPA achieved a record 10.2% share, up from 6.9% last year. DOF Brazil makes a growing contribution to PACCAR's global success. PACCAR full-year truck, parts, and other gross margins were 19.3% and were 19.4% in the fourth quarter, reflecting strong truck deliveries and excellent parts business. We estimate PACCAR's worldwide first quarter truck and parts gross margins to remain strong and be in the range of 18.5% to 19%. 2023 was another great year for PACCAR, with many highlights, including revenue and net income records. PACCAR announced a joint venture to manufacture commercial vehicle batteries. DOP opened a new electric truck assembly plant and earned the Green Truck Award as the most fuel-efficient truck in Europe.

Harrie C. A. M. Schippers: Strong profitability through all phases of the business cycle.

Harrie Schippers: PACCAR Parts has 18 parts distribution centers, or PDCs, worldwide, and is expanding its global distribution network with the construction of a new PDC in Massbach, Germany, which will open later this year. PACCAR Financial Services achieved a Q4 pretax income of $113 million. Annual pretax income was $540 million, and portfolio assets increased to $21 billion. The used truck market normalized in 2023. PACCAR continues to experience good sales volumes of its premium used trucks. PACCAR Financial continues to perform well with low past dues, a larger portfolio, and excellent credit quality. Last year, PACCAR invested $698 million in capital projects and $411 million in research and development. PACCAR's return on invested capital increased to an industry-leading 38%.

PACCAR Parts has 18 parts distribution centers, or PDCs, worldwide, and is expanding its global distribution network with the construction of a new PDC in Massbach, Germany, which will open later this year. PACCAR Financial Services achieved a Q4 pretax income of $113 million. Annual pretax income was $540 million, and portfolio assets increased to $21 billion. The used truck market normalized in 2023. PACCAR continues to experience good sales volumes of its premium used trucks. PACCAR Financial continues to perform well with low past dues, a larger portfolio, and excellent credit quality. Last year, PACCAR invested $698 million in capital projects and $411 million in research and development. PACCAR's return on invested capital increased to an industry-leading 38%.

Harrie C. A. M. Schippers: There are parts at 18 parts distribution centers, or PDCs, worldwide.

Speaker Change: Okay got parts of <unk>.

Speaker Change: In parts distribution centers are pdc's worldwide.

Harrie C. A. M. Schippers: and is expanding its global distribution network with the construction of a new PDC in Maasbach, Germany, which will open later this year.

Speaker Change: And is expanding its global distribution network with the construction of a new PVC and masked by Germany, which will open later this year.

Harrie C. A. M. Schippers: PECA Financial Services achieved a fourth quarter pre-tax income of $113 million.

Preston Feight: Packard declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share. ACAR's fourth-quarter revenues were $9 billion. Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. Fourth-quarter net income included a $120 million tax provision release in Brazil.

Speaker Change: Financial services achieved a fourth quarter pre tax income of $113 million.

Harrie C. A. M. Schippers: Annual pre-tax income was $540 million and portfolio assets increased to $21 billion.

Speaker Change: Annual pretax pre tax income was $540 million and portfolio assets increased to 21 billion.

Harrie C. A. M. Schippers: The U.S. truck market normalized in 2023.

Speaker Change: The used truck market normalized in 2023.

Harrie C. A. M. Schippers: Pega continues to experience good sales volumes of its premium used trucks.

Speaker Change: PARAGARD continues to experience good sales volumes of its premium used trucks.

Harrie C. A. M. Schippers: Becker Financial continues to perform well with low past dues, a larger portfolio, and excellent credit quality.

Preston Feight: Pack our parts to achieve fourth-quarter revenues of $1.61 billion and pre-tax profits of $432 million. In the fourth quarter of 2023, PACCAR delivered 51,000 trucks, and for the first quarter of 2024, deliveries are forecast to be around 48,000. Last year, U.S. and Canadian Class A truck retail sales were 297,000 units.

Speaker Change: In fact, our financial continues to perform well with low past dues the larger portfolio.

Speaker Change: And excellent credit quality.

Harrie C. A. M. Schippers: Last year, Becker invested $698 million in capital projects.

Speaker Change: Last year our infested.

Speaker Change: $698 million in capital projects.

Harrie C. A. M. Schippers: and $411 million in research and development.

And $411 million in research and development.

Harrie C. A. M. Schippers: Becker's return on invested capital increased to an industry-leading 38%.

Speaker Change: <unk> return on invested capital increased to an industry leading 38%.

Preston Feight: Packard Parks celebrated its 50th anniversary, and Kenworth celebrated its 100-year anniversary. For more information, visit www.fema.gov. We're looking forward to 2024 being another excellent year.

Harrie Schippers: In 2024, we're planning capital investments in the range of $700 to 750 million and R&D expenses in the range of $460 to 500 million as we continue to invest in key technology and innovation projects. These include next-generation clean combustion engines, battery and hydrogen electric powertrains, advanced driver assistance systems, and new connected vehicle services. PACCAR is also investing in additional manufacturing capacity to support future growth, including truck factory expansions at PACCAR Mexico and Kenworth's Chillicothe, Ohio, a new engine remanufacturing facility in Columbus, Mississippi, and a zero-emissions battery cell factory joint venture. We're excited about the new Peterbilt Model 589, which began production this month. PACCAR's independent Kenworth, Peterbilt, and DAF dealers continue to invest in their businesses, enhancing our industry-leading distribution network and making a significant contribution to PACCAR's long-term success.

In 2024, we're planning capital investments in the range of $700 to 750 million and R&D expenses in the range of $460 to 500 million as we continue to invest in key technology and innovation projects. These include next-generation clean combustion engines, battery and hydrogen electric powertrains, advanced driver assistance systems, and new connected vehicle services. PACCAR is also investing in additional manufacturing capacity to support future growth, including truck factory expansions at PACCAR Mexico and Kenworth's Chillicothe, Ohio, a new engine remanufacturing facility in Columbus, Mississippi, and a zero-emissions battery cell factory joint venture. We're excited about the new Peterbilt Model 589, which began production this month. PACCAR's independent Kenworth, Peterbilt, and DAF dealers continue to invest in their businesses, enhancing our industry-leading distribution network and making a significant contribution to PACCAR's long-term success.

Harrie C. A. M. Schippers: In 2024, we're planning capital investments in the range of $700 to $750 million and R&D expenses in the range of $460 to $500 million.

In 2024, we're planning capital investments in the range of $700 million to $750 million in.

Preston Feight: Kenworth and Peterbilt's full-year deliveries increased from 96,000 to 109,000. In 2024, the U.S. economy is projected to expand. Within the truck sector, the vocational, less-than-truckload, and medium-duty segments are experiencing strong demand, and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models. The 2024 U.S. and Canadian Class A truck market is forecast to be in a range of 260,000 to 300,000 vehicles. European above 16 ton truck registrations were 343,000 last year.

Speaker Change: And R&D expenses in the range of 462 $500 million as.

Speaker Change: Harrie Schippers will now provide an update on Pack Our Parts, Pack Our Financial Services, and other business highlights.

Harrie C. A. M. Schippers: as we continue to invest in key technology and innovation projects.

Speaker Change: As we continue to invest in key technology and innovation projects.

Harrie C. A. M. Schippers: These include next-generation clean combustion engines, battery and hydrogen electric powertrains,

Speaker Change: Harrie?

Speaker Change: These include next generation clean combustion engines battery and hydrogen electric powertrains.

Harrie C. A. M. Schippers: Thank you, Preston. In 2023, Packer Parts set new records for revenues and profits. Annual revenues increased by 11% to $6.4 billion.

Harrie C. A. M. Schippers: Advanced Driver Assistance Systems and New Connected Vehicle Services.

Speaker Change: Advanced driver assistant systems, and new connected vehicle services.

Harrie C. A. M. Schippers: PEC is also investing in additional manufacturing capacity to support future growth.

Speaker Change: And because also investing in additional manufacturing capacity to support future growth.

Harrie C. A. M. Schippers: Pre-tax profit increased by 18% to $1.7 billion. Bart's gross margins climbed to 31.9% from 30.4% in the prior year. We estimate part sales to grow by 3-5% in the first quarter of this year compared to the record first quarter last year. Pack Our Parts' excellent long-term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers. Packers' aftermarket parts and connected services businesses provide strong profitability through all phases of the business cycle. There are parts at 18 parts distribution centers, or PDCs, worldwide, and the company is expanding its global distribution network with the construction of a new PDC in Maasbach, Germany, which will open later this year. PECA Financial Services achieved a fourth quarter pre-tax income of $113 million.

Harrie C. A. M. Schippers: including truck factory expansions, Ataca, Mexico, and Kenrose, Chillicothe, Ohio.

Speaker Change: Including truck factory expansions effect on Mexico, and Kenworth Chillicothe, Ohio.

Harrie C. A. M. Schippers: A New Engine Remanufacturing Facility in Columbus, Mississippi. New Engine Remanufacturing Facility in Columbus, Mississippi.

Preston Feight: DAS 2023 European deliveries increased to a record 63,000 trucks. DOF's customers appreciate the industry-leading fuel efficiency and driver comfort of DOF's premium trucks. These trucks have a unique competitive advantage in the European market due to an innovative aerodynamic design that features the largest and most luxurious cab interior. In 2024, the European economy is forecast to grow modestly. We expect the above 16-ton truck registrations to be in the range of 260 to 300,000. Last year the South American above 16 ton truck market was 110,000 vehicles and is expected to be similar this year. In Brazil, DOF achieved a record 10.2% share, up from 6.9% last year.

Speaker Change: A new engine re manufacturing facility in Columbus, Mississippi.

Harrie C. A. M. Schippers: and the Zero Emissions Battery Cell Factory Joint Venture.

And as there are emissions battery cell factory joint venture.

Harrie C. A. M. Schippers: We're excited about the new Peterbilt Model 589, which began production this month.

Speaker Change: We're excited about the new Peterbilt model 589, which began production this month.

Harrie C. A. M. Schippers: Packard's Independent, Kenworth, Peterbilt, and Dove dealers continue to invest in their businesses.

Speaker Change: Paragraphs independent Kenworth, Peterbilt and <unk> dealers continue to invest in their businesses enhancing our industry leading distribution network.

Harrie C. A. M. Schippers: Enhancing our industry-leading distribution network and making a significant contribution to PECA's long-term success.

Speaker Change: And making a significant contribution to <unk> long term success.

Harrie Schippers: PACCAR had an outstanding year in 2023, and this year is off to a very good start. Thank you. We'd be pleased to answer your questions.

PACCAR had an outstanding year in 2023, and this year is off to a very good start. Thank you. We'd be pleased to answer your questions.

Harrie C. A. M. Schippers: Becker had an outstanding year in 2023, and this year is off to a very good start.

Becker had an outstanding year in 2023, and this year is off to a very good start.

Speaker Change: Thank you. Will you please answer your questions?

Speaker Change: Thank you we'd be pleased to answer your questions.

Operator: ... Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two, and when preparing to ask a question, please ensure you are unmuted locally. So that's star followed by one on your telephone keypad to register a question. Our first question today is from Nicole DeBlase from Deutsche Bank. Nicole, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: If anyone would like to register a question, please press star followed by one on your telephone keypad.

Speaker Change: We would like to register a question. Please press star followed by one on your telephone keypad.

Speaker Change: If you would like to withdraw your question please press star followed by two and when preparing to ask a question please ensure you are unmuted locally.

Speaker Change: If you would like to withdraw your question. Please press star followed by two months of having to ask a question. Please ensure you Amit.

Preston Feight: DAF Brazil makes a growing contribution to PACCARB's global success. PACCAR-Foyer truck parts and other gross margins were 19.3% and 19.4% in the fourth quarter, reflecting strong truck deliveries and excellent parts business. We estimate PACCAR's worldwide first quarter truck and parts gross margins to remain strong and be in the range of 18.5 to 19 percent. 2023 was another great year for PACCAR, with many highlights, including revenue and net income records. PACCAR announced a joint venture to manufacture commercial vehicle batteries.

Speaker Change: So that's star followed by one on your telephone keypad to register a question.

Harrie C. A. M. Schippers: Annual pre-tax income was $540 million, and portfolio assets increased to $21 billion. The U.S. truck market normalized in 2023. Pega continues to experience good sales volumes of its premium used trucks. Becker Financial continues to perform well with low past dues, a larger portfolio, and excellent credit quality. Last year, Becker invested $698 million in capital projects and $411 million in research and development. As a result, its return on invested capital increased to an industry-leading 38%. In 2024, we're planning capital investments in the range of $700 to $750 million and R&D expenses in the range of $460 to $500 million, as we continue to invest in key technology and innovation projects. These include next-generation clean combustion engines, battery and hydrogen electric powertrains, Advanced Driver Assistance Systems, and New Connected Vehicle Services. PEC is also investing in additional manufacturing capacity to support future growth, including truck factory expansions in Ataca, Mexico, and Kenrose, Chillicothe, Ohio, and a New Engine Remanufacturing Facility in Columbus, Mississippi. The new Engine Remanufacturing Facility in Columbus, Mississippi, and the Zero Emissions Battery Cell Factory Joint Venture

Speaker Change: <unk>.

Speaker Change: So that stops slipped by one on your telephone keypad to register a question.

Speaker Change: Our first question today is from Nicole DeBlase from Deutsche Bank. Nicole, please go ahead, your line is open.

Speaker Change: Our first question today is from Nicole <unk> from Deutsche Bank Nicole. Please go ahead. Your line is open.

[Analyst] (Deutsche Bank): Yeah, thanks. Good morning, guys.

Nicole DeBlase: Yeah, thanks. Good morning, guys.

Yes. Thanks.

Nicole: Good morning, guys.

Preston Feight: Good morning, Nicole.

Ken Hastings: Good morning, Nicole.

Nicole: Good morning, Nicole.

[Analyst] (Deutsche Bank): Maybe just starting with the outlook for Q1 deliveries. Could you just talk a little bit about the implied sequential step down? Like, is that kind of across all regions? And then, I guess, is your expectation that Q1 is the high point of the year for builds, given that we've started to see orders fall in December?

Nicole DeBlase: Maybe just starting with the outlook for Q1 deliveries. Could you just talk a little bit about the implied sequential step down? Like, is that kind of across all regions? And then, I guess, is your expectation that Q1 is the high point of the year for builds, given that we've started to see orders fall in December?

Nicole DeBlase: um maybe just starting with um the outlook for 1q deliveries could you just talk a little bit about the implied sequential step down like is that kind of across all regions and then i guess is your expectation that 1q is the high point of the year for bills given that we started to see orders fall in december 1q is the high point of december

Nicole: Maybe just starting with <unk>.

Nicole: The outlook for <unk> deliveries could you just talk a little bit about the implied sequential step down is that kind of across all regions and then I guess is your expectation that <unk> is the high point of the year for Bell. It's given that we started to orders fall in December.

Preston Feight: DOF opened a new electric truck assembly plant and earned the Green Truck Award as the most fuel-efficient truck in Europe. Packhart Parts celebrated its 50th anniversary, and Kenworth celebrated its 100th anniversary. We're looking forward to 2024 being another excellent year. Harrie Schippers will now provide an update on Pack Our Parts, Pack Our Financial Services, and other business highlights.

Preston Feight: Well, let me take that one for the time being and say that I think what we see is strong global markets, right? Australia is doing really well. Mexico is doing really well. South America is doing really well. North America is steady at very high levels, and we've seen normalization in Europe, which is probably, we said the market in 2024 is 260 to 300, which is 15% to 20% lower, and that's kind of what we see in our deliveries in Europe. As far as the slowdown in orders, I'm not sure I can recognize that in our major North American markets. We see good order intake and good visibility.

Speaker Change: Well, let me take that one for the time being and say that I think what we see is strong global markets, but Australia is doing really well, Mexico is doing really well, South America is doing really well, North America is steady at very high levels, and we've seen normalization in Europe, which is probably we said the market in 2024 is 260 to 300, which is 15 to 20% lower, and that's kind of what we see in our deliveries in Europe.

Nicole: Yeah.

Speaker Change: Well, let me take that one for for the time being and say that I think what we see as strong global markets of Australia is doing really well Mexico is doing really well in South America is doing really well North America is steady at very high levels and we've seen normalization in Europe, which is probably we said the market in 2024 is $2 60 to 300, which is 15% to 20%.

Speaker Change: <unk> lower and Thats kind of what we see in our deliveries in Europe.

Speaker Change: As far as the slowdown in orders, I'm not sure I can recognize that in our major North American markets. We see good order intake and good visibility.

Harrie C. A. M. Schippers: Thank you, Preston. In 2023, Decker Parts set new records for revenues and profits. Annual revenues increased by 11% to $6.4 billion, and pre-tax profit increased by 18% to $1.7 billion.

Speaker Change: As far as the slowdown in orders I'm not sure I can recognize that in our major North American markets, we see good order intake.

Speaker Change: And good visibility.

[Analyst] (Deutsche Bank): Okay, got it. Thank you. And then just from a pricing perspective, can you guys just talk a little bit about what you're seeing with respect to industry pricing and any expectations for what you guys should realize in price for 2024? Thank you.

Nicole DeBlase: Okay, got it. Thank you. And then just from a pricing perspective, can you guys just talk a little bit about what you're seeing with respect to industry pricing and any expectations for what you guys should realize in price for 2024? Thank you.

Speaker Change: Thank you. And then just from a pricing perspective, can you guys just talk a little bit about what you're seeing with respect to industry pricing and any expectations for what you guys should realize in price for 2024? Thank you.

Speaker Change: Okay got it. Thank you and then just from a pricing perspective can you guys just talk a little bit about what youre seeing with respect to industry pricing and any expectations for what you guys should realize and priced for 2024. Thank you.

Harrie C. A. M. Schippers: Bart's gross margins climbed to 31.9%, up from 30.4% in the prior year. We estimate part sales to grow by 3-5% in the first quarter of this year compared to the record first quarter last year. Thank you for watching. Becker's Aftermarket Parts and Connected Services businesses provide strong profitability through all phases of the business cycle. There are parts at 18 parts distribution centers or PDCs worldwide and is expanding its global distribution network with the construction of a new PDC in Maasbach, Germany, which will open later this year. PECA Financial Services achieved a fourth quarter pre-tax income of $113 million.

Preston Feight: Sure thing, Nicole. I mean, I think what we have going on is, and we've shared this many times, but it's worth repeating, is we have refreshed our entire product lineup in the last few years. We have really high-performing products that are delivering excellent results to the customers. I think that, the latest recognition of that is the Green Truck Award in Europe for the new DAF products that were awarded as the most fuel-efficient product in Europe. As a result of that kind of performance of product, we're seeing good pricing realization for the trucks around the world for PACCAR.

Speaker Change: Sure thing, Nicole. I mean, I think what we have going on is, and we've shared this many times, but it's worth repeating, is we have refreshed our entire product lineup in the last few years. We have really high-performing products that are delivering excellent results to the customers. And I think that the latest recognition of that is the Green Truck Award in Europe for the new DOF products, that we're awarded as the most fuel-efficient product in Europe. As a result of that kind of performance of product, we're seeing good pricing realization for the trucks around the world for PACCAR.

Speaker Change: Sure thing Nicole I think what we have going on is and we've shared this many times, but it's worth repeating as we have refreshed our entire product lineup in the last few years, we have really high performing products that are delivering excellent results for the customers and I think that the latest recognition of that is the Green truck award in Europe for the new <unk> products that were awarded as the most fuel efficient.

Harrie C. A. M. Schippers: We're excited about the new Peterbilt Model 589, which began production this month.

Harrie C. A. M. Schippers: Packard's Independent, Kenworth, Peterbilt, and Dove dealers continue to invest in their businesses, enhancing our industry-leading distribution network and making a significant contribution to PECA's long-term success. Becker had an outstanding year in 2023, and this year is off to a very good start. Thank you.

Speaker Change: <unk> product in Europe, as a result of that kind of performance of product, we're seeing good pricing realization for the trucks around the world for <unk>.

Speaker Change: Yeah.

[Analyst] (Deutsche Bank): Thank you. I'll pass it on.

Nicole DeBlase: Thank you. I'll pass it on.

Speaker Change: Thank you. I'll pass it on.

Speaker Change: Thank you I'll pass it on.

Speaker Change: Will you please answer my questions?

Preston Feight: All right.

Speaker Change: All right.

Speaker Change: Alright.

Operator: Thank you. Our next question today is from Angel Castillo from Morgan Stanley. Angel, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two, and when preparing to ask a question, please ensure you are unmuted locally. So that's star followed by one on your telephone keypad to ask a question.

Speaker Change: Thank you.

Speaker Change: Our next question today is from Angel Castillo from Morgan Stanley. Angel, please go ahead, your line is open.

Speaker Change: Our next question today is from <unk>.

Joe D. Vruwink: And Joe Crystallized from Morgan Stanley Andrew. Please go ahead your line is open.

[Analyst] (Morgan Stanley): Hi, thanks for taking my question. Congrats on the strong quarter. So maybe just to dig in a little bit more on kind of the pricing dynamic, I was wondering if you could kind of expand that into more of a price cost and, give a sense for how you're kind of thinking about decrementals and just underlying kind of margins for 2024 overall. I think you got it to 18.5% to 19% for Q1 on gross margin. So maybe if you could, again, give a little bit more color on the full year and how we should see that progressing.

Angel Castillo: Hi, thanks for taking my question. Congrats on the strong quarter. So maybe just to dig in a little bit more on kind of the pricing dynamic, I was wondering if you could kind of expand that into more of a price cost and, give a sense for how you're kind of thinking about decrementals and just underlying kind of margins for 2024 overall. I think you got it to 18.5% to 19% for Q1 on gross margin. So maybe if you could, again, give a little bit more color on the full year and how we should see that progressing.

Angel Castillo: Hi, thanks for taking my question. And congrats on the strong quarter. So maybe just to dig in a little bit more on kind of the pricing dynamic, I was wondering if you could kind of expand that into more of a price cost.

Andrew: Alright, Thanks for taking my question and congrats on the strong quarter. So maybe just to dig in a little bit more on kind of the pricing dynamic I was wondering if you could kind of expand that into more of a price cost.

Harrie C. A. M. Schippers: Annual pre-tax income was $540 million, and portfolio assets increased to $21 billion. The U.S. truck market normalized in 2023. Bagger continues to experience good sales volumes of its premium used trucks. Becker Financial continues to perform well with low past use, a larger portfolio, and excellent credit quality. Last year, Becker invested $698 million in capital projects, and $411 million in research and development.

Angel Castillo: Give a sense for how you're kind of thinking about decrementals and just underlying kind of margins for 2024 overall. I think you got it to 18.5 to 19% for the first quarter on gross margins. So maybe if you could, again, give a little bit more color on the full year and how we should see that progressing.

Speaker Change: Our first question today is from Nicole DeBlase of Deutsche Bank.

Andrew: Give a sense for how you're kind of thinking about decrementals in just underlying kind of margins for 2024 overall I think you guided to 18, 5% to 19% for the first quarter on gross margins. So maybe if you could give a little bit more color on our full year and how we should see that progressing.

Nicole DeBlase: Nicole, please go ahead; your line is open.

Nicole DeBlase: Yeah, thanks.

Nicole DeBlase: Good morning, guys.

Speaker Change: Good morning, Nicole, um maybe just starting with um the outlook for 1q deliveries could you just talk a little bit about the implied sequential step down like is that kind of across all regions and then i guess is your expectation that 1q is the high point of the year for bills given that we started to see orders fall in december 1q is the high point of december, Well, let me take that one for the time being and say that I think what we see is strong global markets, but Australia is doing really well, Mexico is doing really well, South America is doing really well, North America is steady at very high levels, and we've seen normalization in Europe, which is probably we said the market in 2024 is 260 to 300, which is 15 to 20% lower, and that's kind of what we see in our deliveries in Europe. As far as the slowdown in orders, I'm not sure I can recognize that in our major North American markets.

Preston Feight: Yeah, well, first of all, thanks for the comment on the year. I think our, our team deserves an incredible amount of credit all around the world for the wonderful performance, and we see that continuing right now. On the price cost level standpoint, Angel, we think that we have good price against cost right now. We expect that to continue as we look forward. Obviously, there's a little bit of normalization in the market sizes. That's really the only thing we see going on, both Europe, with Europe, as I mentioned already, and North America in the single digits, 5% to 10% lower market size. But we expect to see good markets and good price versus cost performance. And as you know, we don't share information on the full years. We'll get to the quarter-by-quarter analysis of things as we get further into the year.

Speaker Change: Yeah, well, first of all, thanks for the comment on the year. I think our team deserves an incredible amount of credit all around the world for the wonderful performance. And we see that continuing right now. On a price-cost level standpoint, Angel, we think that we have good price against cost right now. We expect that to continue as we look forward. Obviously, there's a little bit of normalization in the market sizes. That's really the only thing we see going on, both Europe, as I mentioned already, and North America in the single digits, 5% to 10% lower market size. But we expect to see good markets and good price versus cost performance. And as you know, we don't share information on the full year. We'll get to the quarter-by-quarter analysis of things as we get further into the year.

Speaker Change: Yeah, well first of all thanks for the comment on the year I think our team deserves an incredible amount of credit all around the world for the wonderful performance and we see that continuing right now on the price cost levels standpoint, Angel, we think that we have good price against cost right now we expect that to continue as we look forward.

Preston Feight: In 2024, we're planning capital investments in the range of $700 to $750 million and R&D expenses in the range of $460 to $500 million, as we continue to invest in key technology and innovation projects. These include next-generation clean combustion engines, battery, and hydrogen electric powertrains.

Speaker Change: Obviously, theres a little bit of normalization in the market sizes Thats really the only thing we see going on both Europe with Europe as I mentioned already in North America in the single digits, 5% to 10% lower market size, but we expect to see good markets and good price versus cost performance and as you know we don't share information on the full years, we'll get to the quarter by quarter.

Speaker Change: Analysis of things as we get further into the year.

[Analyst] (Morgan Stanley): Understood. Thank you. Maybe just switching over to parts a little bit, the 3% to 5% that you guided to for 2024, just curious if you could break that down a little bit more into the pieces, what you're seeing in terms of price, volume, kind of assumptions.

Angel Castillo: Understood. Thank you. Maybe just switching over to parts a little bit, the 3% to 5% that you guided to for 2024, just curious if you could break that down a little bit more into the pieces, what you're seeing in terms of price, volume, kind of assumptions.

Speaker Change: Thank you. And maybe just switching over to parts a little bit, the three to five percent that you guided to for 2024, just curious if you could break that down a little bit more into the pieces, what you're seeing in terms of price, volume, kind of assumptions.

Speaker Change: Understood. Thank you and maybe just switching over to parts a little bit that 3% to 5% that you guided to for 2024, just curious if you could break that down a little bit more into its pieces of what youre seeing in terms of price volume assumptions.

Operator: Advanced Driver Assistance Systems, and New Connected Vehicle Services. PEC is also investing in additional manufacturing capacity to support future growth, including Truck Factory Expansions, Ateca Mexico, and Canberra's Chili Coffee in Ohio. A new engine remanufacturing facility in Columbus, Mississippi, and the Zero Emissions Battery Cell Factory Joint Venture. We're excited about the new Peterbilt Model 589, which began production this month. Beggar's Independent, Kenworth, Peterbilt, and Duff Dealers continue to invest in their businesses, Enhancing our industry-leading distribution network and making a significant contribution to Pekka's long-term success. Packer had an outstanding year in 2023, and this year is off to a very good start. Thank you. Would you please answer my questions?

Speaker Change: We see good order intake and good visibility. Thank you. And then just from a pricing perspective, can you guys just talk a little bit about what you're seeing with respect to industry pricing and any expectations for what you guys should realize in price for 2024? Thank you. Sure thing, Nicole. I mean, what we have going on is, and we've shared this many times, but it's worth repeating, we have refreshed our entire product lineup over the last few years. We have really high-performing products that are delivering excellent results for customers, and I think that the latest recognition of that is the Green Truck Award in Europe for the new DOF products, which were awarded as the most fuel-efficient products in Europe. As a result of that kind of performance of the product, we're seeing good pricing realization for trucks around the world for PACCAR.

Harrie Schippers: Yeah, the increase was 3% to 5%. So we see that mostly around the world; it compares to a record quarter, Q1 last year. So at parts, we continue to see that strong performance also this year. And for the full year, we're thinking parts would grow 4% to 8% compared to the record year last year. So, and that also reflects favorable pricing and some cost increases.

Speaker Change: Yes.

Speaker Change: This was 3% to 5%.

Speaker Change: So we see that mostly around the world. It's compares to a record quarter of first quarter last year. So far as we continue to see strong performance also this year and for the full year.

Speaker Change: Thinking Forex would grow 4% to 8% compared to the record record year last year. So.

Speaker Change: And that also reflects favorable pricing and some cost increase.

Speaker Change: And it also reflects favorable pricing and some cost increases.

[Analyst] (Morgan Stanley): Very helpful. Thank you.

Angel Castillo: Very helpful. Thank you.

Speaker Change: Very helpful. Thank you.

Preston Feight: Thanks a lot, Angel.

Speaker Change: Thanks a lot, Angel.

Speaker Change: Thanks, a lot Daniel.

Operator: Thank you. Our next question today is from Tami Zakaria, from J.P. Morgan. Tami, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question today is from Tami Zakaria from JP Morgan. Tami, please go ahead, your line is open.

Speaker Change: Our next question today is from Tami Zakaria from Jpmorgan. Tommy. Please go ahead. Your line is open.

[Analyst] (Deutsche Bank): Hi, thank you so much for taking my question. So my first question is, I think your outlook for Europe is weaker than the US and Canada this year. So can you remind us, how is the margin profile for your business in those two regions? Is a weaker Europe negative from a mixed perspective, given the last couple of years of DAF model launches?

Tami Zakaria: Hi, thank you so much for taking my question. So my first question is, I think your outlook for Europe is weaker than the US and Canada this year. So can you remind us, how is the margin profile for your business in those two regions? Is a weaker Europe negative from a mixed perspective, given the last couple of years of DAF model launches?

Speaker Change: Thank you. I'll pass it on.

Tami Zakaria: Hi, Thank you so much for taking my questions. So my first question is I think your outlook for Europe is weaker than the U S and Canada. This year. So can you remind us how does the margin profile for your business in those two regions is a weaker Europe next.

Speaker Change: All right.

Speaker Change: Thank you. Our next question today is from Angel Castillo of Morgan Stanley.

Operator: Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by 2 and, when preparing to ask a question, please ensure you are unmuted locally. So that's star split by one on your telephone keypad to ask a question.

Angel Castillo: Angel, please go ahead; your line is open.

Tami Zakaria: From a mix perspective.

Tami Zakaria: Given the last couple of years of Daas model launches.

Preston Feight: Well, I, I don't think I would characterize it as weaker, Tami. I think I would say that in 2023, Europe was 343,000 units, which was a very, very high year, in fact, a record year for us, right? By a lot. I think if we estimate the market at a midpoint to be 280,000, that's a nice year. I think that what we see is obviously the normalization of sales in that range, but we still have these new products which are providing great margins for us in the European theater.

Speaker Change: Well, I don't think I would characterize it as weaker, Tami. I think I would say that in 2023, Europe was 343,000 units, which was a very, very high year. In fact, a record year for us, right, by a lot. And I think if we estimate the market at a midpoint to be 280,000, that's a nice year.

Preston Feight: Our first question today is from Nicole DeBlase from Deutsche Bank. Nicole, please go ahead; your line is open. Yeah, thanks. Good morning, guys. Good morning, Nicole. Maybe just starting with the outlook for 1Q deliveries, could you just talk a little bit about the implied sequential step down is that kind of across all regions and then, I guess, your expectation that 1Q is the high point of the year for bills given that we started to see orders fall in December. 1Q is the high point of the year for bills, given that we started to see orders fall in December. Well, let me take that one for the South America is doing really well, and North America is steady at very high levels.

Speaker Change: Well I don't think I would characterize it as weaker Tammy I think I would say that in 2023 Europe was 343000 units, which was a very very high you are in fact, a record year for us right by a lot and I think if we estimate the market at the midpoint to be 280000, that's a nice year.

Speaker Change: Give a sense for how you're kind of thinking about decrements and just underlying kind of margins for 2024 overall. I think you got it to 18.5 to 19% for the first quarter on gross margins. So maybe if you could, again, give a little bit more color on the full year and how we should see that progressing. Yeah, well, first of all, thanks for the comment on the year. I think our team deserves an incredible amount of credit all around the world for its wonderful performance, and we see that continuing right now.

Speaker Change: I think that what we see is obviously the normalization of sales in that range, but we still have these new products which are providing great margins for us in the European theater.

Tammy: I think that what we see is obviously the normalization of sales in that range, but we still have these new products, which are providing great margins for us in the European theater.

[Analyst] (Deutsche Bank): Got it. So, so are the two regions, similar in terms of margin profile? That's basically what I'm trying to understand.

Tami Zakaria: Got it. So, so are the two regions, similar in terms of margin profile? That's basically what I'm trying to understand.

Speaker Change: Got it. So are the two regions similar in terms of margin profile? That's basically what I'm trying to understand.

Speaker Change: Got it.

Speaker Change: The two regions.

Speaker Change: Similar in terms of margin profile, and that's basically what I'm trying to understand.

Speaker Change: On a price-cost level, Angel, we think that we have a good price against cost right now. We expect that to continue as we look forward.

Harrie Schippers: Yeah, more or less similar. I think Europe is a little softer, so you'd expect some effect from that in Europe. But also in Europe, the new DAF continues its premium position, and as a result, we get excellent margins on those trucks.

Speaker Change: More or less similar. I think Europe is a little softer, so you'd expect some effect from that in Europe. But also in Europe, the new DAF continues its premium position, and as a result, we get excellent margins on those drugs.

Speaker Change: Yes, more or less similar I think Europe is a little softer so you.

Speaker Change: Spect some effect from that in Europe, but.

Speaker Change: So in Europe, the new Dove continues its premium position and as a result, we get excellent margins on those folks.

Speaker Change: Obviously, there's a little bit of normalization in the market sizes. That's really the only thing we see going on, both Europe, as I mentioned already, and North America in the single digits, 5% to 10% lower market size. But we expect to see good markets and good price versus cost performance. And, as you know, we don't share information on the full year. We'll get to the quarter-by-quarter analysis of things as we get further into the year.

Preston Feight: And we've seen normalization in Europe, which is probably we said the market in 2024 is 260 to 300, which is 15 to 20% lower. And that's kind of what we see in our deliveries in Europe. As far as the slowdown in orders, I'm not sure I can recognize that in our major North American markets. We see good order intake and good visibility. Okay.

[Analyst] (Deutsche Bank): Got it. Okay, that's all I had. Thank you.

Tami Zakaria: Got it. Okay, that's all I had. Thank you.

Speaker Change: Got it. Okay. That's all I had. Thank you.

Speaker Change: Got it okay. That's all I had thank you.

Preston Feight: Great. Thanks, Tami.

Speaker Change: Great. Thanks, Tami.

Speaker Change: Great. Thanks Tommy.

Operator: Thank you. Our next question is from Chad Dillard from AllianceBernstein. Chad, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question is from Chad Dillard from Alliance Bernstein. Chad, please go ahead, your line is open.

Speaker Change: Our next question is from Chad Dillard from Alliance Bernstein Chad. Please go ahead. Your line is open.

[Analyst] (AllianceBernstein): Hey, good morning, guys. I was hoping you could unpack your gross margin guide of 18.5-19%. Maybe give some puts and takes of trucks versus parts, and then as you're thinking about, like, the full year, you know, it sounds like parts are going to grow, you know, by mid-to-single digits. You know, should we expect, you know, gross margins in that business to continue that upward path?

Chad Dillard: Hey, good morning, guys. I was hoping you could unpack your gross margin guide of 18.5-19%. Maybe give some puts and takes of trucks versus parts, and then as you're thinking about, like, the full year, you know, it sounds like parts are going to grow, you know, by mid-to-single digits. You know, should we expect, you know, gross margins in that business to continue that upward path?

Chad Dillard: Hey, good morning, guys. I was hoping you could unpack your gross margin guide of 18 and a half to 19%. You can give some puts and takes of trucks versus parts. And then as you're thinking about the full year, it sounds like parts are going to grow by mid-ish single digits. Should we expect gross margins in that business to continue that upward path?

Chad Dillard: Hey, good morning, guys.

Chad Dillard: Was hoping you could unpack your gross margin guide.

Speaker Change: And maybe just switching over to parts a little bit, the three to five percent that you guided to for 2024, just curious if you could break that down a little bit more into the pieces, what you're seeing in terms of price, volume, and kind of assumptions. And that also reflects favorable pricing and some cost increases.

Preston Feight: And then just from a pricing perspective, can you guys just talk a little bit about what you're seeing with respect to industry pricing and any expectations for what you guys should realize in price for 2024? Thank you. Sure thing, Nicole.

Chad Dillard: 19%.

Chad Dillard: You didn't give some puts and takes of trucks versus parts and then as you're thinking about the full year. It sounds like parks are going to grow by mid single digits should we expect gross margins in that business to continue that upward path.

Preston Feight: I mean, I think what we have going on is, and we've shared this many times, but it's worth repeating, we have refreshed our entire product lineup in the last few years. We have really high-performance products that are delivering excellent results to customers. And I think that the latest recognition of that is the Green Truck Award in Europe for the new DAF products, which were awarded as the most fuel efficient products in Europe.

Preston Feight: Well, I think what we would unpack, I like your term. What I would share with you is the parts business continues to do really well. Last year was a record, as we mentioned, or Harrie mentioned in his comments, and we expect them to have a fantastic year this year as well. So even in truck market sizes that may moderate a little bit, we see the parts business doing a fantastic job, and that's because of the expansion in new PDCs. It's because of the connectivity that we're providing in our trucks. It's because of our great dealer network, and I think all of the benefits we provide to our customers. So I expect parts to continue to hum. And on the truck side, again, great new trucks are providing good margin performance.

Speaker Change: Well, I think what we would, in the unpack, I like your term, what I would share with you is the parts business continues to do really well. Last year was a record, as we mentioned, or Harry mentioned in the comments, and we expect them to have a fantastic year this year as well. So even in truck market sizes that may moderate a little bit, we see the parts business doing a fantastic job. And that's because of the expansion in new PDCs. It's because of the connectivity that we're providing in our trucks. It's because of our great dealer network, and I think all of the benefits we provide to our customers. So I expect parts to continue to hum. And on the truck side, again, great new trucks providing good margin performance. And, you know, obviously doing a fantastic job for our customers. That's what we see out there, and that's contributing to the strong truck margins.

Chad Dillard: Yeah.

Speaker Change: Well I think what we would unpack I'd like to turn I would share with you is the parts business continues to do really well.

Speaker Change: Very helpful.

Speaker Change: Thank you.

Speaker Change: Thanks a lot, Angel.

Speaker Change: Last year was a record as we mentioned are Harry mentioned in his comments and we expect them to have a fantastic year. This year as well so even in truck market sizes that may moderate a little bit we see the parts business doing a fantastic job and thats because of the expansion in new Pdc's, it's because of the connectivity that we're providing and of trucks, it's because of our great dealer network and I.

Speaker Change: Thank you.

Preston Feight: As a result of that kind of performance of the product, we're seeing good pricing realization for trucks around the world for PACCAR. Thank you. I'll pass it on.

Speaker Change: Our next question today is from Tami Zakaria of JP Morgan.

Tami Zakaria: Tami, please go ahead; your line is open.

Tami Zakaria: Hi, thank you so much for taking my question.

Tami Zakaria: So my first question is, I think your outlook for Europe is weaker than for the US and Canada this year. So can you remind us, what is the margin profile for your business in those two regions? Is a weaker Europe negative from a mixed perspective, given the last couple of years of DAF model launches?

Speaker Change: Thank all of the benefits, we provide to our customers. So I expect parts to continue to Hum.

Preston Feight: All right. Thank you. Our next question today is from Angel Castillo from Morgan Stanley. Angel, please go ahead; your line is open.

Speaker Change: And on the truck side again, great new trucks, providing good margin performance.

Preston Feight: You know, obviously, doing a fantastic job for our customers. That's what we see out there, and that's contributing to the strong truck margins.

You know, obviously, doing a fantastic job for our customers. That's what we see out there, and that's contributing to the strong truck margins.

Speaker Change: Obviously doing a fantastic job for our customers, that's what we see out there and thats contributing to the strong truck margins.

Preston Feight: Hi, thanks for taking my question. And congrats on a strong quarter. So maybe just to dig in a little bit more on kind of the pricing dynamic, I was wondering if you could kind of expand that into more of a price cost and give a sense for how you're kind of thinking about decrements and just underlying kind of margins for 2024 overall. I think you got it to 18.5 to 19% for the first quarter on gross margins. So maybe if you could, again, give a little bit more color on the full year and how we should see that progress. Yeah, well, first of all, thanks for the comment on the year. I think our team deserves an incredible amount of credit all around the world for its wonderful performance.

[Analyst] (AllianceBernstein): Got it. Okay. And just a second question, just on your Finco profitability. Just trying to think through the moving parts in 2024. Do you expect that profitability to grow? You know, to what extent are you contemplating any buydowns or any additional reserves given, just, like, the state of the truck market?

Chad Dillard: Got it. Okay. And just a second question, just on your Finco profitability. Just trying to think through the moving parts in 2024. Do you expect that profitability to grow? You know, to what extent are you contemplating any buydowns or any additional reserves given, just, like, the state of the truck market?

Speaker Change: Got it. Okay. And just a second question, just on your Finco profitability, just trying to think through the moving parts in 24. Do you expect that profitability to grow? You know, to what extent are you contemplating any buy downs or any additional reserves given, just like the sales of truck sales of truck

Speaker Change: Got it okay.

And just a second question is on your Cinco.

Speaker Change: Well, I don't think I would characterize it as weaker, Tami. I think I would say that in 2023, Europe had 343,000 units, which was a very, very high number.

Speaker Change: Profitability, just trying to think through the moving parts in 24 do.

Speaker Change: Do you expect that profitability to grow.

Speaker Change: To what extent are you contemplating any buy downs or any additional reserves Kevin.

Speaker Change: In fact, a record year for us, right? By a lot.

Speaker Change: And I think if we estimate the market at a midpoint to be 280,000, that's a nice year. I think that what we see is obviously the normalization of sales in that range, but we still have these new products which are providing great margins for us in the European theater.

Speaker Change: The truck market.

Harrie Schippers: Yeah, we saw some more normalized used truck prices in Q4. As a result, the good performance of PACCAR Financial at $113 million for the quarter. If we now look at this year, we expect PACCAR Financial to continue that good performance also in the quarters of this year.

Speaker Change: We saw some more normalized used truck prices in the fourth quarter and as a result the good performance of

Kevin: Yeah, we.

Kevin: Some more normalized used truck prices in the fourth quarter.

And as a result.

Kevin: Good performance of Becca.

Speaker Change: Pekka Financial at $113 million for the quarter.

Kevin: <unk> financial had $113 million for the quarter.

Preston Feight: And we see that continuing right now. From the price cost level standpoint, Angel, we think that we have a good price against cost right now. We expect that to continue as we look forward. Obviously, there's a little bit of normalization in the market sizes.

Speaker Change: And if we now look at this year, we expect Packer Financial to continue that good performance also in the quarters of this year.

Kevin: And if we now look at this year, we expect Becker financial to continue that good performance also in the.

Speaker Change: So are the two regions similar in terms of their margin profile?

Kevin: Quarters of this year.

Speaker Change: That's basically what I'm trying to understand. More or less similar. I think Europe is a little softer, so you'd expect some effect from that in Europe. But also in Europe, the new DAF continues its premium position, and as a result, we get excellent margins on those drugs.

[Analyst] (AllianceBernstein): Great. Thank you. I'll pass it on.

Chad Dillard: Great. Thank you. I'll pass it on.

Speaker Change: Great. Thank you. I'll pass it on.

Speaker Change: Great. Thank you I'll pass it on.

Preston Feight: Appreciate it.

Speaker Change: Appreciate it.

Preston Feight: That's really the only thing we see going on, both in Europe, with Europe, as I mentioned already, and North America in the single digits, five to 10% smaller market size. But we expect to see good markets and good price versus cost performance. And as you know, we don't share information on the full years; we'll get to the quarter by quarter analysis of things as we get further into the year. Thank you. And maybe just switching over to parts a little bit, the 3 to 5 percent that you got it to for 2024, just curious if you could break that down a little bit more into its pieces, what you're seeing in terms of price, volume, kind of an assumption. The increase was three to five percent, and so we see that mostly around the world, it compares to a record quarter first quarter last year, so at parts, we continue to see Thank you. Thanks a lot, Angel.

Speaker Change: I appreciate it.

Operator: Thank you. Our next question today is from David Raso from Evercore ISI. David, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question today is from David Raso from Evercore ISI. David, please go ahead, your line is open.

Speaker Change: Our next question today is from David Raso from Evercore ISI. David. Please go ahead. Your line is open.

[Analyst] (Evercore ISI): Hi, thank you. I'm kind of looking beyond 2024, the notion of a pre-buy. I'm just curious, conversations you're having today, now that we're in 2024, on customers' thoughts of any pulling forward of, say, you know, second half 2026, 2027 into next year. Anything at all about timing of orders to maybe reflect if we do see a pre-buy in 2025? Just trying to get a sense of how you're thinking about that concept moving forward. Thank you.

David Raso: Hi, thank you. I'm kind of looking beyond 2024, the notion of a pre-buy. I'm just curious, conversations you're having today, now that we're in 2024, on customers' thoughts of any pulling forward of, say, you know, second half 2026, 2027 into next year. Anything at all about timing of orders to maybe reflect if we do see a pre-buy in 2025? Just trying to get a sense of how you're thinking about that concept moving forward. Thank you.

David Raso: Hi, thank you. I'm kind of looking beyond 24, the notion of a pre-buy. I'm just curious, conversations you're having today, now that we're in 24,

David Raso: Hi, Thank you I'm kind of looking beyond 'twenty four the notion of a pre buy I'm. Just curious conversations you are having today now that we're in 'twenty four.

Speaker Change: Okay.

Speaker Change: That's all I had.

Speaker Change: Thank you.

Speaker Change: Great

Speaker Change: Thanks, Tami.

Speaker Change: Thank you. Our next question is from Chad Dillard of Alliance Bernstein.

David Raso: on customers' thoughts of any pulling forward of, say, you know, second half.

David Raso: Customers' thoughts of any pulling forward of say second half 'twenty six 'twenty seven.

Chad Dillard: Chad, please go ahead; your line is open.

David Raso: 7.

David Raso: and next.

David Raso: Into next year.

Chad Dillard: Hey, good morning, guys.

David Raso: Timing of orders to maybe reflect.

David Raso: Anything at all about timing of orders to maybe reflect if we do see a pre buy in 25, I'm just trying to get a sense of how youre thinking about that concept.

Chad Dillard: I was hoping you could unpack your gross margin guide of 18 and a half to 19%.

David Raso: by

David Raso: Just trying to get a sense of how you're thinking about that concept. You're thinking about that concept.

Chad Dillard: You can give some puts and takes on trucks versus parts.

Chad Dillard: And then, as you're thinking about the full year, it sounds like parts are going to grow by mid-ish single digits.

David Raso: Moving forward. Thank you.

Preston Feight: Sure, sure. I mean, let me start by saying that it's, it's not just a truckload carrier market out there, and in the LTL, the medium-duty, and the vocational markets, we're seeing strong performance of the products and strong interest from the customers with good order intake. I'd also say that from an overall PACCAR standpoint, as I mentioned, our global markets are doing quite well for us. But to dial in a little bit to your question, David, what I think is happening is the good operators, the ones that are thinking clearly about long-term, are continuing to buy trucks. And so they're looking to keep their fleet at a reasonable age and buying trucks and continuing that pattern.

Speaker Change: Sure, sure. I mean, let me start by saying that it's not just a truckload carrier market out there. And in the LTL, the medium duty and the vocational markets, we're seeing strong performance of the products and strong interest from the customers with good order intake.

Speaker Change: Sure sure I mean, let me start by saying that it's not just the truckload carrier market out there.

Chad Dillard: Should we expect gross margins in that business to continue on that upward path?

Speaker Change: And in the <unk>, the medium duty and vocational markets, we're seeing strong performance of the products and strong interest from the customers with good order intake.

Speaker Change: Well, I think what we would, in the unpack, I like your term, share with you is the parts business continues to do really well. Last year was a record, as we mentioned, or Harry mentioned in the comments, and we expect them to have a fantastic year this year as well. So even in truck market sizes that may moderate a little bit, we see the parts business doing a fantastic job, and that's because of the expansion in new PDCs. It's because of the connectivity that we're providing in our trucks. It's because of our great dealer network, and I think all of the benefits we provide to our customers.

Speaker Change: I'd also say that from an overall pack car standpoint, as I mentioned, our global markets are doing quite well for us. But to dial in a little bit to your question, David, what I think is happening is the good operators, the ones that are thinking clearly about long term, are continuing to buy trucks. And so they're looking to keep their fleet at a reasonable age and buying trucks and continuing that pattern.

Speaker Change: I would also say that from an overall packer standpoint, as I mentioned, our global markets are doing quite well for us but to dial in a little bit to your question. David What I think is happening is the good operators. The ones that are thinking clearly about long term continuing to buy trucks and so they're looking to keep their fleet at a reasonable age and buying trucks and continuing that pattern.

Preston Feight: Thank you. Our next question today is from Tami Zakaria from JP Morgan. Tami, please go ahead; your line is open.

Preston Feight: Then they're managing that against the fact that contract rates and spot rates are lower than they were, and trying to maintain that balance of fleet age with capital spending. We think that's going to continue. We think that there's an emissions change in 2027, and that the sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans, and that'll have an increasing effect as we move forward.

Then they're managing that against the fact that contract rates and spot rates are lower than they were, and trying to maintain that balance of fleet age with capital spending. We think that's going to continue. We think that there's an emissions change in 2027, and that the sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans, and that'll have an increasing effect as we move forward.

Speaker Change: and then they're managing that against the fact that contract rates and spot rates are are lower than they were and trying to maintain that balance of fleet age with capital spending and we think that's going to continue we think that there's an emissions change in 2027 and that the sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans and that'll have an increasing effect as we move forward

David Raso: And then they're managing that against the fact that contract rates and spot rates are are lower than they were and trying to maintain that balance of fleet age with capital spending and we think thats going to continue we think that there is an emissions change in 2027 and that the sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans and that will.

Preston Feight: Hi. Thank you so much for taking the time to answer my question. So my first question is, I think your outlook for Europe is weaker than for the US and Canada this year. So can you remind us, what is the margin profile for your business in those two regions? Is a weaker Europe negative from a mixed perspective, given the last couple of years of DoF model launches? Well, I don't think I would characterize it as weaker, Tami.

Speaker Change: So I expect parts to continue to hum. And on the truck side, again, great new trucks providing good margin performance. And, you know, obviously doing a fantastic job for our customers. That's what we see out there, and that's contributing to the strong truck margins.

David Raso: Have an increasing effect as we move forward.

[Analyst] (Evercore ISI): But just to be clear on timing, do you think some of that desire to buy in front of that would show up in orders in 2024 at all, or is that a little premature?

David Raso: But just to be clear on timing, do you think some of that desire to buy in front of that would show up in orders in 2024 at all, or is that a little premature?

Speaker Change: And to be clear on timing, do you think some of that desire to buy in front of that would show up in orders in 24 at all?

Speaker Change: But just to be clear on timing do you think some of that desire to buy in front of that would show up in orders and 24 at all or is that a little premature.

Speaker Change: Got it.

Speaker Change: Okay.

Speaker Change: And just a second question, just on your Finco profitability, just trying to think through the moving parts in 24.

Preston Feight: I think I would say that in 2023, Europe will have 343,000 units, which will be a very, very high year, in fact, a record year for us, right by a lot. And I think if we estimate the market at a midpoint to be 280,000, that's a nice year. I think that what we see is obviously the normalization of sales in that range, but we still have these new products which are providing great margins for us in the European theater. So are the two regions similar in terms of their margin profile? That's basically what I'm trying to understand. Yeah, more or less similar.

Preston Feight: I think it's fleet dependent. I think it depends on where they're at and what they're hauling, and I think how they're doing and how many trucks they need in their fleets. I think generalizing that into 2024 might be a little much, but the premise of your conversation or our conversation about, does that feature into later this year, next year or the year after? I think there's some truth in that. I think we see positive benefit from that.

Speaker Change: I think it's fleet dependent. I think it depends on where they're at and what they're hauling and I think how they're doing and how many trucks they need in their fleets. I think generalizing that into 24 might be a little much, but the premise of your conversation or our conversation about does that feature into the later this year, next year, the year after, I think there's some truth in that. I think we see positive benefit from that.

Speaker Change: I think its fleet dependent I think it depends on where they're at and what they're hauling and I think how they're doing how many trucks they needed their fleets I think generalizing that into 24 might be a little much but the premise of your conversation where our conversation about does that feature into the.

Speaker Change: Do you expect that profitability to grow? You know, to what extent are you contemplating any buy-downs or any additional reserves given, just like the sales of truck sales? We saw some more normalized used truck prices in the fourth quarter and, as a result, the good performance of Pekka Financial at $113 million for the quarter. And if we now look at this year, we expect Packer Financial to continue that good performance in the quarters of this year. Great.

Speaker Change: Later this year next year the year after I think theres some truth in that I think we see positive benefit from that.

[Analyst] (Evercore ISI): Okay. Thank you very much. I appreciate it.

David Raso: Okay. Thank you very much. I appreciate it.

Speaker Change: Okay. Thank you very much I appreciate it.

Speaker Change: Thank you very much.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question today is from Jeff Kauffman from Vertical Research Partners. Jeff, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question today is from Jeff Kauffman from Vertical Research Partners. Jeff, please go ahead, your line is open.

Speaker Change: Our next question today is from Jeff Kauffman from vertical Research partners. Please go ahead. Your line is open.

Preston Feight: I think Europe is a little softer, so you'd expect some effect from that in Europe. But also in Europe, the new DAF continues its premium position. And as a result, we get excellent margins on those trucks. Got it. Okay. That's all I had.

[Analyst] (Vertical Research Partners): Thank you very much. Well, first of all, congratulations. Fantastic year. I want to-

Jeffrey Kauffman: Thank you very much. Well, first of all, congratulations. Fantastic year. I want to-

Jeff Kauffman: Thank you very much well first of all congratulations fantastic year.

Jeff Kauffman: Thank you very much. Well, first of all, congratulations. Fantastic year.

Speaker Change: Thank you.

Preston Feight: Hey, Jeff. Thank you for that. Our team appreciates it.

Speaker Change: Hey Jeff, thank you for that. Our team appreciates it.

Speaker Change: I'll pass it on. I appreciate it. Thank you. Our next question today is from David Raso from Evercore ISI.

Speaker Change: Hey, Jamie Thank you for that our team appreciates it.

[Analyst] (Vertical Research Partners): You guys crushed it. I wanna ask about two kind of oddities, if I can. I don't wanna focus on the tail wagging the dog, but I think they're relevant questions. The first has to do with what's going on with electric vehicles right now, and it seemed like there was this big push for EV, and you're still seeing that in some of the lighter duty models, but a little bit of a pullback on the heavy side. But we are moving forward with the EV plan for batteries, and we're moving forward with investment. What is your feeling about the state of the EV market, and is this a surprise at all? Is this expected? How should we be thinking about framing EV demand for commercial vehicles?

Jeffrey Kauffman: You guys crushed it. I wanna ask about two kind of oddities, if I can. I don't wanna focus on the tail wagging the dog, but I think they're relevant questions. The first has to do with what's going on with electric vehicles right now, and it seemed like there was this big push for EV, and you're still seeing that in some of the lighter duty models, but a little bit of a pullback on the heavy side. But we are moving forward with the EV plan for batteries, and we're moving forward with investment. What is your feeling about the state of the EV market, and is this a surprise at all? Is this expected? How should we be thinking about framing EV demand for commercial vehicles?

Speaker Change: Oh, you guys crushed it.

Speaker Change: You guys crushed it.

Preston Feight: Thank you. Great. Thanks, Tami.

Speaker Change: I want to ask about two kind of oddities if I can. I don't want to focus on the tail wagging the dog, but I think they're relevant questions.

Speaker Change: I wanted to ask about two kind of oddities, if I can I don't want to focus on the <unk> the dog, but I think theyre relevant questions.

David Raso: David, please go ahead; your line is open.

Preston Feight: Thank you. Our next question is from Chad Dillard of Alliance Bernstein. Chad, please go ahead; your line is open.

David Raso: Hi, thank you.

Speaker Change: The first has to do with what's going on with electric vehicles right now.

David Raso: I'm kind of looking beyond 24, the notion of a pre-buy. I'm just curious about the conversations you're having today, now that we're in 24, on customers' thoughts of any pulling forward of, say, you know, the second half. 7, and next. Timing of orders to maybe reflect by. Just trying to get a sense of how you're thinking about that concept. You're thinking about that concept. Sure, sure. I mean, let me start by saying that it's not just a truckload carrier market out there. And in the LTL, the medium duty, and the vocational markets, we're seeing strong performance of the products and strong interest from customers with good order intake. I'd also say that from an overall pack car standpoint, as I mentioned, our global markets are doing quite well for us.

Speaker Change: The first has to do with what's going on with electric vehicles right now.

Speaker Change: and it seemed like there was this big push for EV and you're still seeing that in some of the lighter duty models but a little bit of a pullback on the heavy side but we are moving forward with the EV plant for batteries and we're moving forward with investment what is your feeling about the state of the EV market and is this a surprise at all is this expected how should we be thinking about frame

Preston Feight: Hey, good morning, guys. I was hoping you could unpack your gross margin guide of 18.5 to 19%. You can give some puts and takes of trucks versus parts. And then as you're thinking about, like, the full year, you know, it sounds like parts are going to grow by mid- or single-digits. Should we expect, you know, gross margins in that business to continue that upward path? Well, I think what we would, in the unpack, I like your term, share with you is the parts business continues to do really well. Last year was a record, as we mentioned, or Harry mentioned in the comments.

Speaker Change: And it seemed like there was this big push for EV and Youre still seeing that in some of the lighter duty models, but a little bit of a pullback on the heavy side.

Speaker Change: But we are moving forward with the EV plant for batteries and we're moving forward with investment what is your feeling about the state of the EV market and is this a surprise at all as expected how should we be thinking about framing EV demand for commercial vehicles.

Speaker Change: and more.

Preston Feight: Jeff, I think you nailed it. Actually, I think that there was maybe a lot of enthusiasm, maybe too much enthusiasm. I think it's something that is going to happen. It's gonna happen gradually, rather than rapidly. There's a lot of things that have to come along with it, energy, and infrastructure. From a PACCAR standpoint, it's been our approach all along, as we've shared with you over the years: right, we'd start in the tens, move to the hundreds, go to the thousands. That's the progression we're in. We continue to make prudent investments that'll be timed to what we think the adoption rates are going to be.

Speaker Change: Jeff, I think you nailed it. Actually, I think that there was maybe a lot of enthusiasm, maybe too much enthusiasm. I think it's something that is going to happen. It's going to happen gradually rather than rapidly. There's a lot of things that have to come along with it, energy and infrastructure. From a PACR standpoint, it's been our approach all along, as we've shared with you over the years, is right, we'd start in the tens, move to the hundreds, go to the thousands. That's the progression we're in. We continue to make prudent investments that'll be timed to what we think the adoption rates are going to be. We felt in 2023 was the right time to make sure that looking into the future, we could begin the journey of creating our own batteries so that we had the most cost-efficient, high-performing batteries when the time was right. So I think as we talked about in the last call, building a battery self-factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the decade as we gradually adopt. And it puts PACR in a really good position to offer our customers energy,

Speaker Change: Jeff I think you nailed it actually I think that there was maybe a lot of enthusiasm maybe too much enthusiasm I think it's something that is going to happen, it's going to happen gradually rather than rapidly. There's a lot of things that have to come along with it energy and infrastructure for Pac our standpoint has been our approach all along as we've shared with you over the years is right we'd start in the <unk>.

Preston Feight: And we expect them to have a fantastic year this year as well. So even in truck market sizes, that may moderate a little bit, we see the parts business doing a fantastic job. And that's because of the expansion of new PDCs, it's because of the connectivity that we're providing in our trucks, it's because of our great dealer network, and I think about all of the benefits we provide to our customers. So I expect parts to continue to hum.

Speaker Change: But to dial in a little bit to your question, David, what I think is happening is the good operators, the ones that are thinking clearly about the long term, are continuing to buy trucks. And so they're looking to keep their fleet at a reasonable age and buying trucks and continuing that pattern, and then they're managing that against the fact that contract rates and spot rates are lower than they were and trying to maintain that balance of fleet age with capital spending. And we think that's going to continue. We think that there's an emissions change in 2027 and that sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans, and I think it's fleet-dependent.

Speaker Change: <unk> moved to the hundreds go to the thousands thats the progression we're in.

Speaker Change: We continue to make prudent investments that will be time to what we think the adoption rates are going to be we felt in 2023 was the right time to make sure that looking into the future. We could begin the journey of creating our own batteries. So we had the most cost efficient high performing batteries. When the time was right. So I think as we talked about.

Preston Feight: We felt in 2023 was the right time to make sure that looking into the future, we could begin the journey of creating our own batteries so that we had the most cost-efficient, high-performing batteries when the time was right. So I think as we talked about in the last call, building a battery cell factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the decade as we gradually adopt. And it puts PACCAR in a really good position to offer our customers the best products they can get when they're looking for EVs, keep up with the regulatory, and also take a thoughtful approach to the adoption.

We felt in 2023 was the right time to make sure that looking into the future, we could begin the journey of creating our own batteries so that we had the most cost-efficient, high-performing batteries when the time was right. So I think as we talked about in the last call, building a battery cell factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the decade as we gradually adopt. And it puts PACCAR in a really good position to offer our customers the best products they can get when they're looking for EVs, keep up with the regulatory, and also take a thoughtful approach to the adoption.

Preston Feight: And on the truck side, again, great new trucks providing good margin performance and, you know, obviously doing a fantastic job for our customers. That's what we see out there.

Preston Feight: And that's contributing to the strong truck margin, got it okay, and just a second question just on your finco um profitability, just trying to think through the moving parts in 24. Do you expect that profitability to grow? To what extent are you contemplating any buy-downs or any additional reserves given the state of the truck market? We saw some more normalized used truck prices in the fourth quarter. And as a result, the good performance of Pack our financial at $113 million for the quarter. And if we now look at this year, we expect Packer Financial to continue that good performance in the quarters of this year. Great, thank you; I'll pass it on.

Speaker Change: In the last call building, a battery cell factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the decade as we gradually adopt and it puts <unk> in a really good position to offer our customers.

Speaker Change: The best products they can get when they're looking for EVs, keep up with the regulatory and also take a thoughtful approach to the adoption.

Speaker Change: The best products. They can get when they are looking for evs keep up with the regulatory and also take a thoughtful.

Speaker Change: Thoughtful approach to the adoption.

[Analyst] (Vertical Research Partners): Okay, thank you. And then the second one, and I'm expecting kind of a no comment on this one, but I'm going to ask anyway. The last time we had a certain Republican president, there were some EPA mandates that ended up being canceled and rolled back, and who knows what the future holds. But I think there's an industry thinks that there is a certainty about a massive 2026 pre-buy, and I think everyone's kind of thinking about that. I know it was part of David Raso's question earlier. Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back, that any of these EPA mandates might be at risk or CARB mandates might be at risk?

Jeffrey Kauffman: Okay, thank you. And then the second one, and I'm expecting kind of a no comment on this one, but I'm going to ask anyway. The last time we had a certain Republican president, there were some EPA mandates that ended up being canceled and rolled back, and who knows what the future holds. But I think there's an industry thinks that there is a certainty about a massive 2026 pre-buy, and I think everyone's kind of thinking about that. I know it was part of David Raso's question earlier. Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back, that any of these EPA mandates might be at risk or CARB mandates might be at risk?

Speaker Change: Okay, thank you. And then the second one, and I'm expecting kind of a no comment on this one, but I'm going to ask anyone.

Speaker Change: Okay. Thank you and then the second one.

Speaker Change: I'm expecting kind of a no comment on this one but I'm going to ask anyway.

Speaker Change: The last time we had a certain Republican president, there were some EPA mandates that ended up being canceled and rolled back.

Speaker Change: The last time, we had a certain Republican president there were some EPA mandates it ended up being cancelled and rolled back and who knows what the future holds but I think theres a industry.

Speaker Change: who knows what the future holds, but I think there's a industry think that there is a certainty about a massive 2026 pre-buy, and I think everyone's kind of thinking about that. I know it was part of David Raso's question earlier. Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back that any of these EPA mandates might be at risk or CARP mandates? Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back that any of these EPA mandates might be at risk or CARP mandates?

David Raso: I think it depends on where they're at and what they're hauling, and I think how they're doing and how many trucks they need in their fleets. I think generalizing that into 24 might be a little much, but the premise of your conversation or our conversation about whether that feature will be in later this year, next year, the year after, I think there's some truth in that. I think we will see positive benefits from that.

Speaker Change: Inc.

Speaker Change: That there is a certainty about a massive 2026 pre buy and I think everyone's kind of thinking about that I know it was part of David <unk> question earlier.

Preston Feight: I appreciate it. Thank you. Our next question today is from David Raso from Evercore ISI. David, please go ahead.

Preston Feight: Your line is open. Hi, thank you. I'm kind of looking beyond 24, the notion of a pre-buy.

Speaker Change: Do your political people think there is any risk if there is a Republican victory and we.

Preston Feight: I'm just curious, conversations you're having today, now that we're in 24, on customers' thoughts of any pulling forward of say, you know, second half. 27, Thanks for watching. Anything at all about timing of orders to maybe reflect, Goodbye. 5, just trying to get a sense of how you're thinking about that concept.

Speaker Change: We get a certain presidential candidate back that any of these EPA mandates might be at risk or carp mandates might be at risk.

Speaker Change: Be at risk.

Speaker Change: Thank you very much.

Speaker Change: You bet!

Preston Feight: Jeff, I think you nailed it. We have no comment on that. But all I can say is that we feel really good about PACCAR either way.

Speaker Change: Thank you. Our next question today is from Jeff Kauffman from Vertical Research Partners.

Speaker Change: Jeff, I think you nailed it. You have no comment on that. All I can say is that we feel really good about PACCAR's future either way.

Speaker Change: Jeff I think you nailed it we have no comment on that.

Speaker Change: All I can say.

Speaker Change: Jeff, please go ahead; your line is open. Thank you very much.

Speaker Change: Yeah.

Speaker Change: We feel really good about pack carton for either way.

Jeff Kauffman: Well, first of all, congratulations.

[Analyst] (Vertical Research Partners): Exactly. We're going to drive the road we see in front of us. I get it.

Jeffrey Kauffman: Exactly. We're going to drive the road we see in front of us. I get it.

Jeff Kauffman: Exactly. We're going to drive the road we see in front of us. I get it. Well, again, congratulations and thank you.

Jeff Kauffman: Fantastic year.

Speaker Change: Exactly we are going to drive the road, we see in front of us I get it exactly again, congratulations and thank you.

Preston Feight: Exactly.

Speaker Change: Hey Jeff, thank you for that.

Preston Feight: Sure, sure. I mean, let me start by saying that it's not just a truckload carrier market out there. And in the LTL, the medium duty, and the vocational markets, we're seeing strong performance of the products and strong interest from customers with good order intake. I'd also say that from an overall PACCAR standpoint, as I mentioned, our global markets are doing quite well for us. But to dial in a little bit to your question, David, what I think is happening is the good operators, the ones that are thinking clearly about the long term, are continuing to buy trucks. And so they're looking to keep their fleet at a reasonable age and buying trucks and continuing in that pattern. And then they're managing that against the fact that contract rates and spot rates are lower than they were, and trying to maintain that balance of fleet age with capital spending.

[Analyst] (Vertical Research Partners): Well, again, congratulations, and thank you.

Jeffrey Kauffman: Well, again, congratulations, and thank you.

Speaker Change: Our team appreciates it.

Jeff Kauffman: Oh, you guys crushed it. I want to ask about two kinds of oddities if I can.

Preston Feight: Thanks, Jeff.

Speaker Change: Thanks, Jeff.

Yeah.

Speaker Change: Thank you.

Operator: Thank you. Our next question today is from Jerry Revich from Goldman Sachs. Jerry, please go ahead. Your line is open.

Speaker Change: Thank you.

Jeff Kauffman: I don't want to focus on the tail wagging dog, but I think they're relevant questions.

Speaker Change: Our next question today is from...

Speaker Change: Our next question today is from.

Speaker Change: is from Jerry Revich from Goldman Sachs. Jerry, please go ahead. Your line is open.

Speaker Change: Is from Jerry Revich from Goldman Sachs. Jerry. Please go ahead your line is open.

Jeff Kauffman: The first has to do with what's going on with electric vehicles right now, and it seemed like there was this big push for EV and you're still seeing that in some of the lighter duty models but a little bit of a pullback on the heavy side but we are moving forward with the EV plant for batteries and we're moving forward with investment what is your feeling about the state of the EV market and is this a surprise at all is this expected how should we be thinking about frame and more.

[Analyst] (Goldman Sachs): Yes, thanks. Good morning and good afternoon. I wonder if you could just talk about the record gross margin performance you folks had in 2023 was, despite really significant supply chain disruptions continuing. Can you talk about just directionally, where your labor, labor hours per unit, today versus their targets? And is there a potential for things like factory overhead expense, et cetera, to turn to be a tailwind on a year-over-year basis, as surety of deliveries ramp up and maybe productivity ramps up?

Jerry Revich: Yes, thanks. Good morning and good afternoon. I wonder if you could just talk about the record gross margin performance you folks had in 2023 was, despite really significant supply chain disruptions continuing. Can you talk about just directionally, where your labor, labor hours per unit, today versus their targets? And is there a potential for things like factory overhead expense, et cetera, to turn to be a tailwind on a year-over-year basis, as surety of deliveries ramp up and maybe productivity ramps up?

Jerry Revich: Yes, thanks. Good morning and good afternoon. I wonder if you just talk about the record gross margin performance you folks had in 23 was, despite really significant supply chain disruptions continuing, can you talk about just directionally where your labor hours per unit today versus their targets, and is there potential for things like factory overhead expense, et cetera, to turn that around? I think it's going to turn to be a tailwind on a year-over-year basis as surety of deliveries ramp up and maybe productivity ramps up.

Jerry Revich: Yes, thanks, good morning, and good afternoon.

Jerry Revich: I'm wondering if you could just talk about the <unk>.

Jerry Revich: Record gross margin performance you folks had in 'twenty three was despite.

Really significant supply chain disruptions continuing.

Jerry Revich: Can you talk about just Directionally, where are your labor labor hours per unit.

Speaker Change: Jeff, I think you nailed it.

Jerry Revich: Today versus.

Speaker Change: Actually, I think that there was maybe a lot of enthusiasm, maybe too much enthusiasm.

Preston Feight: And we think that's going to continue. We think that there will be an emissions change in 2027 and that sophisticated buyers are conscious of that and take that into consideration as they make their purchase plans. And that'll have an increasing effect as we move forward, to be clear on timing. Do you think some of that desire to buy in front of that would show up in orders in 24 at all? Or is that a, I think it's fleet-dependent.

Jerry Revich: Their targets and is there a potential for things like.

Jerry Revich: Factory overhead expense et cetera to turn to be a tailwind on a year over year basis.

Speaker Change: I think it's something that is going to happen. It's going to happen gradually rather than rapidly. There are a lot of things that have to come along with it, energy and infrastructure. From a PACR standpoint, it's been our approach all along, as we've shared with you over the years, is right: we start in the tens, move to the hundreds, and go to the thousands. That's the progression we're in. We continue to make prudent investments that'll be timed to what we think the adoption rates are going to be.

Jerry Revich: As surety of deliveries ramp up.

Jerry Revich: Maybe productivity ramps up.

Preston Feight: Yeah, it's a fun conversation to have with you guys. First of all, our hats off to the supply base. They've done a really good job of trying to work through the challenges, and I think, as you note, things have become improved, maybe not perfect, but improved, which is good. We're used to that. I think as we look at it, smoother factories are more efficient factories. So as we look into 2024, if we have a smoother supply provided to the factories, we will have benefits in that regard. It could be a tailwind, as you word it.

Speaker Change: Yeah, it's a fun conversation to have with you. First of all, our hats off to the supply base. They've done a really good job of trying to work through the challenges. And I think, as you note, things have become improved, maybe not perfect, but improved, which is good. We're used to that. And I think as we look at it, smoother factories are more efficient factories. And so as we look into 2024, if we have a smoother supply provided to the factories, we will have benefits in that regard. So it could be a tailwind, as you word it.

Jerry Revich: Yes.

Speaker Change: Conversation to have with you guys and first of all our hats off to the supply base they've done a really good job of trying to work through the challenges and I think as you know things have become improved maybe not perfect, but improved which is good we're used to that.

Preston Feight: I think it depends on where they're at and what they're hauling, and I think how they're doing and how many trucks they need in their fleets. I think generalizing that into 24 might be a little much, but the premise of your conversation or our conversation about whether that feature will be in later this year, next year, the year after, I think there's some truth in that. I think we will see positive benefits from that. Thank you very much.

Speaker Change: And I think as we look at it smoother factories are more efficient factories and so as we look into 'twenty four if we have a smoother supply provided to the factories, we will have benefits in that regard so it could be a tailwind as you worded.

Speaker Change: We felt that 2023 was the right time to make sure that looking into the future, we could begin the journey of creating our own batteries so that we had the most cost-efficient, high-performance batteries when the time was right. So I think, as we talked about in the last call, building a battery self-factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the rest of the decade as we gradually adopt it. And it puts PACR in a really good position to offer our customers energy, the best products they can get when they're looking for EVs, keep up with the regulatory changes, and also take a thoughtful approach to adoption. Okay, thank you.

[Analyst] (Goldman Sachs): Very interesting. You know, another area where you folks have worked through, even as you put up record margins, is higher warranty costs because of higher per repair cost trends. Can you talk about whether you expect to return to the 1.5% warranty accrual rate in 2024, or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provisions?

Jerry Revich: Very interesting. You know, another area where you folks have worked through, even as you put up record margins, is higher warranty costs because of higher per repair cost trends. Can you talk about whether you expect to return to the 1.5% warranty accrual rate in 2024, or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provisions?

Speaker Change: Very interesting. And you know, another area where you folks have worked through even as you put up record margins is higher warranty costs because of higher per repair cost trends. Can you talk about whether you expect to return to the one and a half percent warranty accrual rate in 24 or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provisions?

Speaker Change: Very interesting.

Speaker Change: Another area, where you folks.

Speaker Change: Have worked through even.

Speaker Change: You put up record margins as higher warranty costs because of higher per repair cost trends can you talk about weather.

Preston Feight: You bet. Thank you. Our next question today is from Jeff Kauffman from Vertical Research Partners. Jeff, please go ahead; your line is open. Thank you very much.

Speaker Change: Whether you expect to return to about one 5% warranty accrual rate in 'twenty four or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provisions.

Preston Feight: Hey Jeff, thank you for that. Our team appreciates it. Oh, you guys crushed it. I want to ask about two kinds of oddities if I can.

Preston Feight: Well, I can say that we have a great group of analysts who understand our business well, because I think that, your question is salient, and it is true. Like, we've seen increasing truck complexity over the decades as an industry, with more electronics on them. That contributes to more opportunities. But we do think that the trucks are performing well and will be in that kind of normal range again.

Speaker Change: Well, I can say that we have a great group of analysts who understand our business well because I think that your question is salient and it is true. Like we've seen increasing truck complexity over the decades as an industry, more electronics on them that contributes to more opportunities, but we do think that the trucks are performing well and will be in that kind of normal range again.

Speaker Change: Well I can say that we are a great group of analysts who understand our business well because I think that your question salient and it is true like we've seen increasing truck complexity over the decades as an industry more electronics on them that contributes to more opportunities, but we do think that the trucks are performing well and we'll be in that kind of normal range again.

Preston Feight: I don't want to focus on the tail wagging the dog, but I think they're relevant questions. Um, the first has to do with what's going on with electric vehicles right now. And it seemed like there was this big push for EVs. And you're still seeing that in some of the lighter duty models, but a little bit of a pullback on the heavy side.

Speaker Change: And then the second one, and I'm expecting kind of a no comment on this one, but I'm going to ask anyone.

Speaker Change: The last time we had a certain Republican president, there were some EPA mandates that ended up being canceled and rolled back. Who knows what the future holds, but I think there's an industry belief that there is a certainty about a massive 2026 pre-buy, and I think everyone's kind of thinking about that. I know it was part of David Raso's question earlier.

[Analyst] (Goldman Sachs): Okay, super. And lastly, on parts, really strong performance in Q4 and the outlook for Q1, certainly higher than what we had in our model and what we're seeing for other companies. Can you just touch on how you folks have managed the parts delivery timeframe in Q1 2023? Because I think for most companies, the first quarter is going to be a really tough comp that saw inventory stocking in Q1 2023. It doesn't sound like you folks have faced that, but can you just spend a minute just addressing how you folks were able to avoid stocking in Q1 of last year?

Jerry Revich: Okay, super. And lastly, on parts, really strong performance in Q4 and the outlook for Q1, certainly higher than what we had in our model and what we're seeing for other companies. Can you just touch on how you folks have managed the parts delivery timeframe in Q1 2023? Because I think for most companies, the first quarter is going to be a really tough comp that saw inventory stocking in Q1 2023. It doesn't sound like you folks have faced that, but can you just spend a minute just addressing how you folks were able to avoid stocking in Q1 of last year?

Speaker Change: Okay Super and <unk>.

Speaker Change: Super. And lastly on parts, really strong performance in the fourth quarter and the outlook for the first quarter certainly higher than what we had in our model and what we're seeing for other companies. Can you just touch on how you folks have managed the parts delivery timeframe in the first quarter of 23? Because I think for most companies, the first quarter is going to be a really tough comp. That's inventory stocking in first quarter of 23. It doesn't sound like it's going to be a really tough comp. It doesn't sound like you folks have faced that. Can you just spend a minute just addressing how you folks were able to avoid stocking in the first quarter of last year?

Speaker Change: Lastly on parts really strong performance in the fourth quarter and the outlook for the first quarter certainly higher than what we had in our model and what we're seeing for other companies can you just touch on.

Preston Feight: But we are moving forward with the EV plant for batteries, and we're moving forward with investment. What is your feeling about the state of the EV market? And is this a surprise at all? Is this expected?

Speaker Change: You folks have managed the parts delivery.

Preston Feight: How should we be thinking about the frame, and Jeff, I think you nailed it. Actually, I think that there was maybe a lot of enthusiasm, maybe too much enthusiasm. I think it's something that is going to happen. It's going to happen gradually, rather than rapidly. There are a lot of things that have to come along with it, energy and infrastructure.

Speaker Change: Timeframe in the first quarter of 'twenty, three because I think for most companies. The first quarter is going to be a really tough comp inventory stocking.

Speaker Change: Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back that any of these EPA mandates might be at risk or CARP mandates?

Speaker Change: First quarter of 2003.

Speaker Change: It doesn't sound like you folks have faced that can you just spend a.

Speaker Change: Have made it just addressing how you folks were able to avoid.

Speaker Change: Stocking in the first quarter of last year.

Harrie Schippers: So you're spot on, Jerry. We've three to 5% growth this quarter compared to the record quarter last year. The nice performance, it really reflects all the fantastic things our parts team is doing. Focusing on technology that makes it easier to buy from us, the e-commerce technology, the MDI, where we manage the dealer's inventory, make sure the parts are available when needed. Our continuous investments in parts distribution centers, the strong performance of the PACCAR engine that provide us more proprietary parts. So it just all adds up, and we've been seeing some nice trends on parts over the years as a result of these, and we expect those to continue into this year.

Speaker Change: So you're spot on, Jerry.

Speaker Change: Okay.

Preston Feight: From a PACCAR standpoint, it's been our approach all along, as we've shared with you over the years. It is right: we would start in the tens, move to the hundreds, go to the thousands. That's the progression we're in. We continue to make prudent investments that'll be timed to what we think the adoption rates are going to be. We felt 2023 was the right time to make sure that, looking into the future, we could begin the journey of creating our own batteries, so we had the most cost-efficient, high-performance batteries when the time was right.

Speaker Change: Spud on Jeremy.

Speaker Change: Thank you for joining us.

Speaker Change: 3% to 5% growth this quarter compared to the record quarter last year was a nice performance. It reflects really reflects.

Speaker Change: All I can say is that we feel really good about PACCAR's future either way.

Speaker Change: All the fantastic things our parts team is doing, focusing on technology that makes it easier to buy from us, the e-commerce technology, the MDI where we manage the dealer's inventory and make sure the parts are available when needed, our continuous investments in parts distribution centers, the strong performance of the Packer engine that provides us more proprietary parts. So it just all adds up and we've been seeing some nice trends on parts over the years as a result of these and we expect those to continue into this year.

Speaker Change: Exactly. We're going to drive the road we see in front of us. I understand that.

Speaker Change: All of the fantastic things our parts team is doing.

Speaker Change: Well, again, congratulations and thank you.

Speaker Change: <unk> on technology that makes it easier to buy from us the E Commerce technology, the MDI, where we manage the dealer's inventory to make sure. The parts are available when needed our continuous investments in parts distribution center centers.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you. Our next question today is from Jerry Revich from Goldman Sachs.

Jerry Revich: Jerry, please go ahead.

Jerry Revich: Your line is open. Yes, thanks.

Jerry Revich: Good morning and good afternoon.

Speaker Change: I wonder if you could just talk about the record gross margin performance you folks had in 23 was, despite really significant supply chain disruptions continuing, can you talk about just directionally where your labor hours per unit today versus their targets, and is there potential for things like factory overhead expense, et cetera, to turn that around?

Speaker Change: The strong performance of the Paccar engine that provide us more proprietary parts. So it just all adds up and we've been seeing some nice trends on parts over the years as a result of these and we expect those to continue into this year.

Preston Feight: I think, as we talked about in the last call, building a battery cell factory in a joint venture manner will give us sufficient volume to supply our needs throughout the rest of the rest of the decade, as we gradually adopt. It puts PACCAR in a really good position to offer our customers the best products they can get when they're looking for EVs, keep up with the regulatory environment, and also take a thoughtful approach to adoption. Okay, thank you. And then the second one, and I'm expecting kind of a no comment on this one, but we're going to ask anyone. Um, the last time we had a certain Republican president, there were some EPA mandates that ended up being canceled and rolled back.

[Analyst] (Goldman Sachs): Great. I appreciate the discussion. Thank you.

Jerry Revich: Great. I appreciate the discussion. Thank you.

Speaker Change: Great. I appreciate the discussion. Thank you.

Speaker Change: Great I appreciate the discussion thank you.

Harrie Schippers: Thank you.

Preston Feight: Thank you.

Speaker Change: Thank you.

Operator: Thank you. Our next question is from Steven Fisher, from UBS. Steven, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question is from Steven Fisher from UBS. Steven, please go ahead, your line is open.

Speaker Change: Our next question is from Steven Fisher from UBS. Steven. Please go ahead. Your line is open.

Speaker Change: I think it's going to turn out to be a tailwind on a year-over-year basis as surety of deliveries ramps up and maybe productivity ramps up.

[Analyst] (UBS): So thanks. Good morning. Just as we-

Steven Fisher: Thanks. Good morning. Just as we think about 2020...

Speaker Change: Yeah, it's a fun conversation to have with you.

Steven Fisher: Thanks, Good morning.

Preston Feight: Good morning.

[Analyst] (UBS): As we think about 2024, how, how much visibility do you have on the truck outlook? Like, how well are you booked?

Speaker Change: First of all, our hats are off to the supply base.

Steven Fisher: When you think about 2020.

[Analyst] (UBS): As we think about 2024, how, how much visibility do you have on the truck outlook? Like, how well are you booked?

Steven Fisher: As we think about 2024, how much visibility do you have on the truck outlook? Like, how well are you booked?

Steven Fisher: As we think about 2024, how much visibility do you have on the truck outlook like how well are you booked.

Speaker Change: They've done a really good job of trying to work through the challenges. And I think, as you note, things have become improved, maybe not perfect, but improved, which is good. We're used to that.

[Analyst] (UBS): ... into Q1 and Q2. I imagine Q1 is pretty solidly booked and maybe even Q2 at this point, but curious also about the second half and what are your customers kind of telling you about later in the year?

... into Q1 and Q2. I imagine Q1 is pretty solidly booked and maybe even Q2 at this point, but curious also about the second half and what are your customers kind of telling you about later in the year?

Steven Fisher: into Q1 and Q2. I imagine Q1 is pretty solidly booked and maybe even Q2 at this point, but curious also about the second half and what are your customers kind of telling you about later in the year?

Into Q1, and Q2 I imagine Q1 is pretty solidly booked and maybe even Q2 at this point, but curious also about the second half and what are your customers telling you about that later in the year.

Speaker Change: And I think as we look at it, smoother factories are more efficient factories. And so as we look into 2024, if we have a smoother supply provided to the factories, we will have benefits in that regard.

Preston Feight: Who knows what the future holds, but I think there's an industry belief that there is a certainty about a massive 2026 pre-buy, and I think everyone's kind of thinking about that. I know it was part of David Raso's question earlier. Do your political people think there's any risk if there's a Republican victory and we get a certain presidential candidate back that any of these EPA mandates might be at risk or the CARB mandate? be at rest.

Preston Feight: Yeah, Q- as you know, Q1 is, effectively full, and Q2 is filling in very, very nicely. As we look out, there's obviously customers, lots of customers, buy full years with spread delivery, so we see some growing backlog in the second half as well, and things feel pretty healthy.

Speaker Change: Yeah, as you know, Q1 is effectively full, and Q2 is filling in very nicely. As we look out, there's obviously customers, lots of customers by full years with spread delivery, so we see some growing backlog in the second half as well, and things feel pretty healthy.

Speaker Change: Yes, as you know Q1 is effectively full in Q2's filling in very very nicely.

Speaker Change: So it could be a tailwind, as you word it. Very interesting. And you know, another area where you folks have worked through even as you put up record margins is higher warranty costs because of higher per repair cost trends. Can you talk about whether you expect to return to the one and a half percent warranty accrual rate in 24 months or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provisions?

Speaker Change: As we look out obviously customers.

Speaker Change: Lots of customers buy full year's with spread delivery. So we see some growing backlog in the second half as well and things feel pretty healthy.

[Analyst] (UBS): Okay, great. And then can you talk about the cost inflation that you're seeing, both on the direct and the indirect side? Is it safe to assume that that's, you know, maybe in line with the overall inflation in the economy? Maybe you still have some puts and takes in various directions, but it kind of nets out to the overall level of inflation in the economy. And then, if that's the case, is the pricing strategy to sort of just cover those costs? Or do you have maybe some additional cost reduction programs aimed at sort of trying to preserve margins in twenty twenty-four?

Speaker Change: Okay, great. And then can you talk about the cost inflation that you're seeing both on the direct and the indirect side? Is it safe to assume that that's

Speaker Change: Okay, Great and then can you talk about the cost inflation that you're seeing both on the direct any indirect side.

Speaker Change: Is it safe to assume that that maybe.

Speaker Change: you may be in line with the overall inflation in the economy maybe you still have some puts and takes uh in various directions but it kind of nets out to the overall level of inflation in the economy and then uh if that's the case is the the pricing strategy to sort of just cover those costs the pricing strategy to sort of just cover those costs

Speaker Change: And then maybe in line with the overall inflation in the economy, maybe you still have some puts and takes in various directions, but it kind of nets out to the overall level of inflation in the economy and then.

Preston Feight: Jeff, I think you nailed it. You have no comment on that yet. All I can say is that we feel really good about Pat Garcia either way.

Speaker Change: If that's the case is the pricing strategy.

Speaker Change: I'll just cover those costs or do you have maybe some additional cost reduction programs.

Speaker Change: or do you have maybe some additional cost reduction programs?

Preston Feight: Exactly. We're going to drive the road we see in front of us. I understand that.

Preston Feight: Well, again, congratulations. And thank you, Jeff. Thank you. Our next question today is from Jerry Revich from Goldman Sachs. Jerry, please go ahead.

Speaker Change: Thank you for joining us.

Speaker Change: Aimed at sort of trying to preserve margins in 2024, I know you always have some efficiency things that you have going on but I'm curious if this is the year to sort of step up the cost reduction if you are only able.

[Analyst] (UBS): I know you always have some efficiency things that you have going on, but I'm curious if this is the year to sort of step up the cost reductions if you're only able to cover inflation with your pricing.

I know you always have some efficiency things that you have going on, but I'm curious if this is the year to sort of step up the cost reductions if you're only able to cover inflation with your pricing.

Speaker Change: Super. And lastly, on parts, really strong performance in the fourth quarter, and the outlook for the first quarter is certainly higher than what we had in our model and what we're seeing for other companies. Can you just touch on how you folks have managed the parts delivery timeframe in the first quarter of 23? Because I think for most companies, the first quarter is going to be a really tough comp.

Preston Feight: Your line is open. Yes, thanks. Good morning and good afternoon.

Preston Feight: I wonder if you could just talk about the record gross margin performance you folks had in 23 was, despite really significant supply chain disruptions continuing. Can you talk about just directionally where your labor hours per unit today versus their targets? And is there a potential for things like factory overhead expenses, etc., to turn out to be a tailwind on a year over year basis as surety of deliveries ramps up and maybe productivity ramps up? Yeah, it's a fun conversation to have with you. First of all, our hats are off to the supply base. They've done a really good job of trying to work through the challenges. And I think, as you know, things have become improved, maybe not perfect, but improved, which is good. We're used to that.

Speaker Change: Able to cover inflation with your pricing.

Preston Feight: I think inflationary, we're experiencing the same things as most people are with inflation, as it's moderated some, and we do see inflationary costs. And, obviously, we try to acknowledge that in our pricing, and we do focus on reducing costs on the product. It's a continuous thing we do, and our teams are fully focused on it, and I think going to do a good job on it this year.

Speaker Change: I think inflationary...

Speaker Change: You think inflationary.

Speaker Change: We're experiencing the same things as most people are with inflation is it's moderated some and we do see inflationary costs.

Speaker Change: We're experiencing the same things as most people are with inflation is moderating some and we do see inflationary costs.

Speaker Change: obviously we try to

Obviously, we try to.

Speaker Change: Acknowledge that in our pricing and we do focus on reducing costs on the product as a continuous thing we do.

Speaker Change: <unk> acknowledged that in our pricing and we do focus on reducing costs on the product as a continuous thing we do.

Speaker Change: and our teams are fully focused on it and I think going to do a good job on it this year. Thank you.

Speaker Change: And our teams are fully focused on it and I think can do a good job on that this year.

Speaker Change: That's inventory stocking in the first quarter of 23. It doesn't sound like it's going to be a really tough comp. It doesn't sound like you folks have faced that.

[Analyst] (UBS): Okay. Thank you very much.

Speaker Change: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question is from Tim Thein from Citigroup. Tim, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question is from Tin Fine from Citigroup. Tin, please go ahead, your line is open.

Speaker Change: Our next question is from Tim Thein from Citigroup. Please.

Speaker Change: Can you just spend a minute just addressing how you folks were able to avoid stockpiles in the first quarter of last year? So you're spot on, Jerry.

Tim W. Thein: Please go ahead your line is open.

[Analyst] (Citigroup): Hi. Hi, good morning. Just one for me, and it's just on the truck business and specifically on mix. There was one asked earlier about geographic mix. But I'm curious about from the standpoint of kind of product and customer, you know, from an environment where you're selling more straight trucks, which is probably additive, but you know, but also medium duty and sleepers. You know, if those become a bigger percentage of the deliveries relative to the sleepers, is there much of a... Should we think about that as being, you know, a creative headwind to margin, neutral? Any comment on that?

Tim Thein: Hi. Hi, good morning. Just one for me, and it's just on the truck business and specifically on mix. There was one asked earlier about geographic mix. But I'm curious about from the standpoint of kind of product and customer, you know, from an environment where you're selling more straight trucks, which is probably additive, but you know, but also medium duty and sleepers. You know, if those become a bigger percentage of the deliveries relative to the sleepers, is there much of a... Should we think about that as being, you know, a creative headwind to margin, neutral? Any comment on that?

Tin Fine: Hi, good morning. Just one for me, and it's just on the truck business and specifically on mix. And there was one

Preston Feight: And I think as we look at it, smoother factories are more efficient factories. And so as we look into 24, if we have a smoother supply provided to the factories, we will have benefits in that regard. So it could be a tailwind, as you word it.

Tim W. Thein: Hi.

Tim W. Thein: Hi, Good morning, just one for me and it's.

Tim W. Thein: On the truck business.

Tim W. Thein: Specifically on mix there was one.

Speaker Change: Thank you for joining us.

Tin Fine: I asked earlier about geographic mix, but I'm curious about, from the standpoint of kind of product and customer, I'm curious about, from the standpoint of kind of product and customer,

Speaker Change: All the fantastic things our parts team is doing, focusing on technology that makes it easier to buy from us, the e-commerce technology, the MDI, where we manage the dealer's inventory and make sure the parts are available when needed, our continuous investments in parts distribution centers, and the strong performance of the Packer engine that gives us more proprietary parts.

Tim W. Thein: Asked earlier about geographic mix, but I am curious about from the standpoint of kind of product and customer.

Preston Feight: Very interesting. And you know, another area where you folks have worked through even as you put up record margins is higher warranty costs because of higher per repair cost trends. Can you talk about whether you expect to return to the one and a half percent warranty accrual rate in 24 hours? Or are there still things that you're working on in terms of per unit repair costs or other moving pieces in the warranty provision?

Tin Fine: uh you know from a an environment where you're selling more straight trucks which is probably added uh you know from a an environment where you're selling more straight trucks which is probably added

Tim W. Thein: From a.

Tim W. Thein: An environment, where you're selling more straight trucks, which is probably adding but.

Tin Fine: you know but also medium duty and sleepers but also medium duty and sleepers

Tim W. Thein: But also in medium duty and sleepers.

Tin Fine: You know, if those become a bigger percentage of the delivery relative to you know, if those become a bigger percentage of the delivery relative to

Tim W. Thein: Yes.

Tim W. Thein: Become a bigger percentage of the deliveries relative to.

Tin Fine: Sleepers. Is there much of a, should we think about that as being is there much of a, should we think about that as being

Speaker Change: So it just all adds up, and we've been seeing some nice trends on parts over the years as a result of these, and we expect those to continue into this year.

Sleepers is there is there much of that should we think about that as being.

Tin Fine: You know, accretive headwind to margin, neutral, any comment on that? And then I guess just, I guess part B of that is from a customer standpoint, from a customer standpoint,

Preston Feight: Well, I can say that we have a great group of analysts who understand our business well, because I think that your question is salient. And it is true, like we've seen increasing truck complexity over the decades as an industry, more electronics on them that contributes to more opportunities. But we do think that the trucks are performing well, and we'll be in that kind of normal range again.

Tim W. Thein: Ill accretive headwind to margin neutral and any comment on that and then I guess, just I guess part b of that is from a customer standpoint.

Speaker Change: Great

Speaker Change: I appreciate the discussion.

[Analyst] (Citigroup): Then, I guess just, I guess part B of that is from a customer standpoint. If you have a dynamic where more of your larger carriers are representing more of the order board in 2024, how acute is that? Should we think about that, presumably as more of a headwind, but any way to kind of think about those two factors? Thank you.

Then, I guess just, I guess part B of that is from a customer standpoint. If you have a dynamic where more of your larger carriers are representing more of the order board in 2024, how acute is that? Should we think about that, presumably as more of a headwind, but any way to kind of think about those two factors? Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question is from Steven Fisher from UBS. Steven, please go ahead, your line is open. Thanks. Good morning. Just as we think about 2020... As we think about 2024, how much visibility do you have on the truck outlook?

Speaker Change: If you have.

Tin Fine: A dynamic where... A dynamic where...

Dynamic where.

Tin Fine: from what your larger carrier, your

Larger carriers are representing more than the order board in 24 hour two does that should we think about that presumably in more of a headwind, but any way to kind of think about those two factors. Thank you.

Tin Fine: are representing more of the order board in 24. How too does that, should we think about that? Presumably more of a headwind, but any way to kind of think about those two factors? Thank you.

Preston Feight: Sure thing. Thanks, Tim. What I think is going on is we're seeing that over the last couple of years, we've probably been, as an industry, not able to supply everyone, the trucks they needed. I think that there's a strong vocational market, a strong LTL market, a strong medium-duty market, so we're now kind of able to build those trucks, and we're seeing that as a different percentage, an increased percentage in our, in our backlog. I wouldn't differentiate them in margin. They can both be good margin products for us.

Steven Fisher: Like, how well are you booked into Q1 and Q2.

Speaker Change: Sure thing. Thanks, Tim.

Preston Feight: And lastly, on parts, really strong performance in the fourth quarter, and the outlook for the first quarter is certainly higher than what we had in our model and what we're seeing for other companies. Can you just touch on how you folks have managed the parts delivery timeframe in the first quarter of 23? Because I think for most companies, the first quarter is going to be a really tough comp that's inventory stocking in the first quarter of 23. It doesn't sound like you folks have faced that, but can you just spend a minute just addressing how you folks were able to avoid stocking in the first quarter of last year? So, so you're spot on, Jerry, we've got of the Month.

Speaker Change: Sure thing Thanks, Tim.

Speaker Change: What I think is going on is we're seeing that over the last couple of years, we've probably been, as an industry, not able to supply everyone the trucks they needed. And I think that there's a strong vocational market, a strong LTL market, a strong medium duty market. So we're now kind of able to build those trucks, and we're seeing that as a different percentage, an increased percentage in our backlog. I wouldn't differentiate them in margin. They can both be good margin products for us.

Speaker Change: What I think is going on as we're seeing that over the last couple of years, we've probably been as an industry not able to supply everyone. The trucks they needed and I think that there is a strong vocational market a strong <unk> market strong medium duty markets. So we're now kind of be able to build those trucks and we're seeing that as a different percentage of an increased percentage and are in our backlog.

Steven Fisher: I imagine Q1 is pretty solidly booked and maybe even Q2 at this point, but curious also about the second half and what are your customers kind of telling you about later in the year?

I wouldn't differentiate them and margin they can both be good margin products for us 100% on a percentage basis, yes.

Harrie Schippers: On a percentage basis.

On a percentage basis.

Preston Feight: On a percentage basis, yeah. And then I think that as far as the larger carriers and the impacts of it, I think that it's really not that different than many years, right? It's not substantially different, so we don't see anything dramatically affecting our model. We've had some of the biggest carriers ordering a lot of trucks, and we've had some small carriers ordering trucks, but it's all kind of within the normal boundary.

Speaker Change: on a percentage basis yeah and then I think that as far as the larger carriers and and the impacts of it I think that it's really not that different than many years right it's not substantially different so we don't see anything dramatically affecting our model we've had some of the biggest carriers ordering a lot of trucks and we've had some small carriers ordering trucks but um we've had some small carriers ordering trucks but um

Speaker Change: And then I think that as far as the larger carriers and the impacts of it I think that it's really not that different than many years right. It's not substantially different so we don't see anything dramatically affecting our model.

Speaker Change: And then can you talk about the cost inflation that you're seeing both on the direct and the indirect side? Is it safe to assume that that's, you may be in line with the overall inflation in the economy? Maybe you still have some puts and takes uh in various directions, but it kind of nets out to the overall level of inflation in the economy. And then, if that's the case, is the pricing strategy to sort of just cover those costs the pricing strategy to sort of just cover those costs, or do you have maybe some additional cost reduction programs?

Preston Feight: All the fantastic things our parts team is doing, focusing on technology that makes it easier to buy from us, the e-commerce technology, the MDI, where we manage the dealer's inventory and make sure the parts are available when needed, our continuous investment in parts distribution centers, the strong performance of the Packard engine that provides us with more proprietary parts, so it just all adds up, and we've been seeing some nice trends on parts over the years as Great I appreciate the discussion. Thank you. Thank you. Our next question is from Steven Fisher from UBS. Steven, please go ahead; your line is open. Thanks. Good morning.

Speaker Change: We've had some of the biggest carriers ordering a lot of trucks and we've had some small carriers ordering trucks, but.

Speaker Change: It's all kind of within the normal boundary. It's all kind of within the normal boundary.

Speaker Change: So all kind of within the normal boundary.

[Analyst] (Citigroup): Okay, thank you.

Tim Thein: Okay, thank you.

Preston Feight: You bet.

Speaker Change: Okay, thank you.

Speaker Change: Okay. Thank you.

Speaker Change: That's it.

Speaker Change: Yes.

Operator: Thank you. Our next question today is from Matt Elkott, from TD Cowen. Matt, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question today is from Matt Elkott from TD Cohen. Matt, please go ahead, your line is open.

Speaker Change: Next question today is from Matt Alcott from TD Cowen Please.

Matt Elkott: Please go ahead your line is open.

[Analyst] (UBS): Thank you. If I can go back to the order question, the demand question. It seems you guys continue to see stronger demand, stronger orders in North America than the industry orders we see on a monthly basis. Is this still primarily a function of your higher vocational mix, or are you, you know, gaining traction in other areas that we're not, you know, super aware of?

Matt Elkott: Thank you. If I can go back to the order question, the demand question. It seems you guys continue to see stronger demand, stronger orders in North America than the industry orders we see on a monthly basis. Is this still primarily a function of your higher vocational mix, or are you, you know, gaining traction in other areas that we're not, you know, super aware of?

Matt Elkott: Thank you. If I can go back to the order question, the demand question, it seems you guys continue to see stronger demand, stronger orders in North America than the industry orders we see on a monthly basis. Is this still primarily a function of your higher vocational mix or are you gaining tractions in other areas that we're not super aware of?

Matt Elkott: Thank you if I can go back to the.

Matt Elkott: The order question. The demand question. It seems you guys continue to see stronger demand is stronger order in North America.

Matt Elkott: Then the industry orders, we see on a monthly basis is that primarily a function of your higher vocational mix or are you gaining.

Speaker Change: Thank you for joining us.

Speaker Change: I think inflationary... We're experiencing the same things as most people are with inflation, it's moderated some, and we do see inflationary costs. Obviously, we try to acknowledge that in our pricing, and we do focus on reducing costs on the product as a continuous thing we do, and our teams are fully focused on it, and I think we're going to do a good job on it this year.

Matt Elkott: Gaining traction in the other areas that were not.

Preston Feight: Just as we think about 2020 and 2024, how much visibility do you have on the truck outlook? Like how well are you booked into Q1 and Q2. I imagine Q1 is pretty solidly booked, and maybe even Q2 at this point.

Matt Elkott: Super aware of.

Preston Feight: We are the vocational market leader, so there is some benefit in that. And as I mentioned, too, I think our teams have done a great job over the last several years developing a new product lineup, which is the newest in the industry, which is helpful to us, and I think has given us good backlog. I think about it at the fundamental level. We get tied up in a lot of different things, but at the fundamental level, our goal is to build great trucks for our customers that provide them the lowest total cost of ownership. And when they do that, then they order the trucks, and we think we're doing that well. The products are performing well. They're the best in the industry, and that's contributing to our order visibility.

Matt Elkott: We are the vocational market leaders, so there is some benefit in that. And as I mentioned, too, I think our teams have done a great job over the last several years developing a new product lineup, which is the newest in the industry, which is helpful to us and I think has given us good backlog. Think about it at the fundamental level. We get tied up in a lot of different things, but at the fundamental level, our goal is to build great trucks for our customers that provide them the lowest total cost of ownership. And when they do that, then they order the trucks. And we think we're doing that well. The products are performing well.

Matt Elkott: We are the vocational market leaders. So there is some some benefit in that and as I mentioned to I think our teams have done a great job over the last several years developing a new product lineup, which is the newest and the industry, which is helpful to us and I think has given us good backlog I think about it at the fundamental level, we had tied up in a lot of different things, but at the fundamental level.

Speaker Change: Thank you.

Speaker Change: Okay, thank you very much.

Speaker Change: You bet!

Matt Elkott: Our goal is to build great trucks for our customers to provide them the lowest total cost of ownership and when they do that then they order the trucks and we think we're doing that well.

Speaker Change: Thank you.

Preston Feight: But here's also about the second half and what are your customers kind of telling you about later in the year? Yeah, Q, as you know, Q1 is effectively full, and Q2 is filling in very nicely. As we look out, there are obviously customers, lots of customers by full years with spread delivery. So we see some growing backlog in the second half as well, and things feel pretty healthy.

Speaker Change: Our next question is from Tin Fine from Citigroup. Tin, please go ahead, your line is open. Hi, good morning. Just one for me, and it's just on the truck business and specifically on mix. And there was one, I asked earlier about geographic mix, but I'm curious about, from the standpoint of kind of product and customer, I'm curious about, from the standpoint of kind of product and customer, uh you know from a an environment where you're selling more straight trucks which is probably added uh you know from a an environment where you're selling more straight trucks which is probably added you know but also medium duty and sleepers but also medium duty and sleepers You know, if those become a bigger percentage of the delivery relative to you know, if those become a bigger percentage of the delivery relative to, Sleepers. Is there much of a, should we think about that as being is there much of a, should we think about that as being You know, accretive headwind to margin, neutral, any comment on that?

Matt Elkott: Products are performing well.

Matt Elkott: They're the best in the industry and that's contributing to our order visibility. visibility.

Matt Elkott: They're the best in the industry and Thats contributing to our order visibility.

[Analyst] (UBS): Got it. And just one follow-up question: as we look into, you know, a mild decline in production this year, do you think you'll do more vertical integration of engines to kind of cut cost, or is that something that is independent of the cycle?

Matt Elkott: Got it. And just one follow-up question: as we look into, you know, a mild decline in production this year, do you think you'll do more vertical integration of engines to kind of cut cost, or is that something that is independent of the cycle?

Speaker Change: and just one follow-up question as we look into you know mild decline in production this year do you think you'll do more vertical integration of engines to kind of cut cost or is that something that is independent of the

Got it and just one follow up question.

Matt Elkott: As we look into a mild decline in production this year.

Matt Elkott: You think youll do more vertical integration of engines to kind of cut cost or is that something that.

Preston Feight: Okay, great. And then can you talk about the cost inflation that you're seeing both on the direct and the indirect side? Is it safe to assume that you may be in line with the overall inflation in the economy? Maybe you still have some puts and takes in various directions, but it kind of nets out to the overall level of inflation in the economy. And then, if that's the case, is the pricing strategy to sort of just cover those costs, or do you have maybe some additional cost reduction program aimed at sort of trying to preserve margins in 2024?

Matt Elkott: Dependent on the cycle.

Harrie Schippers: Yeah, yeah. We've built a record number of trucks last year, MX Engines, that is for North America, Europe, and worldwide, I would say. Yeah, and the investments that we've been continuing to make in our engine manufacturing capacity that will help us to grow engine penetration in North America this year. That is, we're in a good position to grow that percentage this year.

Speaker Change: We've built a record number of trucks last year, MX engines, that is for North America, Europe worldwide, I would say.

Matt Elkott: Yes.

Matt Elkott: <unk>.

Matt Elkott: Built on a record number of trucks last year.

Matt Elkott: That makes sense that is for North America Europe worldwide I would say.

Speaker Change: um yeah and the uh the investments that we've been continuing to make in our engine manufacturing capacity we uh that will help us to grow engine penetration in north america this year that's a good position to grow that percentage this year um yeah that's a good position to grow that percentage this year

Speaker Change: Yeah Andy.

Speaker Change: The investments that we've been continuing to make in our engine manufacturing capacity.

Speaker Change: That will help us to grow and your penetration in North America. This year.

Very good position to grow that percentage of this unit.

[Analyst] (TD Cowen): Great. Thank you very much.

Matt Elkott: Great. Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: Alright, Thank you very much.

Preston Feight: I know you always have some efficiency things that you have going on, but I'm curious if this is the year to sort of step up the cost reductions if you're only able to cover inflation with your prices. I think inflationary... We're experiencing the same things as most people are with inflation, it's moderated some, and we do see inflationary costs and, obviously, we try to acknowledge that in our pricing, and we do focus on reducing costs on the product as a continuous thing we do, and our teams are fully focused on it, and I think we're going to do a good job on it this year. Okay, thank you very much.

Speaker Change: Yes.

Operator: Thank you. Our next question is from Scott Group, from Wolfe Research. Scott, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question is from Scott Group from Wolf Research. Scott, please go ahead, your line is open.

Speaker Change: Our next question is from Scott Group from Wolfe Research. Please go ahead. Your line is open.

Tin Fine: And then I guess just, I guess part B of that is from a customer standpoint, from a customer standpoint. A dynamic where... A dynamic where, from what you're a larger carrier, you are representing more of the order board in 24. How should we think about that? Presumably more of a headwind, but any way to kind of think about those two factors? Thank you.

[Analyst] (Wolfe Research): Hey, thanks. Afternoon. So you talked about used prices normalizing in Q4. I'm just curious, your outlook for used prices from here, if you think we're bottoming yet, or if you think there's further risk on used?

Scott Group: Hey, thanks. Afternoon. So you talked about used prices normalizing in Q4. I'm just curious, your outlook for used prices from here, if you think we're bottoming yet, or if you think there's further risk on used?

Scott Group: Hey, thanks afternoon. So you talked about use prices normalizing in Q4. I'm just curious your outlook for use prices from here if you think we're bottoming yet or if you think there's further risk on use.

Hey, Thanks afternoon. So you talked about used prices normalizing in Q4 I'm just curious your outlook for used prices from here. If you think we're bottoming yet or if you think there is further risk unused.

Preston Feight: Harrie, you have any thoughts on that?

Speaker Change: Harry, do you have any thoughts on that? Used truck prices did come down in North America and Europe during the year. Now, I think in the fourth quarter, North America came down low single digit. And we do see some stabilization happening at these levels. That's why we expect things to continue at a normal level where used trucks are maybe at break-even, that kind of level. That's it.

Speaker Change: When you look Harry you have any thoughts on that and used truck prices did come down in North America Europe.

Harrie Schippers: Yeah, used truck prices did come down in North America and Europe during the year. But now, I think in Q4, North America came down low single digit. And we do see some stabilization happening at these levels. That's why we expect things to continue at a normal level, that where used trucks are maybe at breakeven, that kind of level. That's reasonable projection, I think.

Harrie C. A. M. Schippers: The year.

Harrie C. A. M. Schippers: I think in the fourth quarter, North America came down low single digits.

Harrie C. A. M. Schippers: And we do see some stabilization happening at these levels Thats, where we expect things to come to you at a normal level that we're used strokes are maybe breakeven the kind of level.

Preston Feight: You bet. Thank you. Our next question is from Tim Thein from Citigroup. Tim, please go ahead, your line is open. Hi, good morning.

Speaker Change: Sure thing.

Speaker Change: Thanks, Tim. What I think is going on is that over the last couple of years, we've probably been, as an industry, not able to supply everyone with the trucks they needed. And I think that there's a strong vocational market, a strong LTL market, a strong medium duty market. So we're now kind of able to build those trucks, and we're seeing that as a different percentage, an increased percentage in our backlog. I wouldn't differentiate them in terms of margin. They can both be good margin products for us, on a percentage basis. Yeah, and then I think that as far as the larger carriers and the impacts of them, I think that it's really not that different from many years ago. It's not substantially different, so we don't see anything dramatically affecting our model. We've had some of the biggest carriers ordering a lot of trucks, and we' It's all kind of within the normal boundary.

Preston Feight: Just one for me and it's just on the truck business and specifically on mix, and there was one question asked earlier about geographic mix, but I'm curious about from the standpoint of kind of product and customer, uh, you know, from an environment where you're selling more straight trucks, which is probably added, you know, but also medium duty and sleepers, um, you know, if those become a bigger percentage of the delivery relative to sleepers And then, I guess part B of that is, from a customer standpoint, if you have the dynamic where your larger carrier is representing more of the order board in 24. How tuned is that? Should we think about that? Presumably a whore of a headwind, but any way to kind of think about those two factors?

Harrie C. A. M. Schippers: Reasonable projection, I think.

Harrie C. A. M. Schippers: <unk>.

Harrie C. A. M. Schippers: Reasonable projection I think.

Preston Feight: You know, the only thing I'd add is that volumes continue to be good in that, in that space as well. So we watch both price and volume, and it seems like it's a, you know, it's a big change from what it was, but it's still not at a bad level.

Harrie C. A. M. Schippers: You know, I don't think I'd add is that volumes continue to be good in that space as well. So we watch both price and volume, and it seems like it's a big change from what it was, but it's still not at a bad level. It's more normal now.

Harrie C. A. M. Schippers: No I don't think I'd add is that volumes continue to be good in that space as well. So we watch both price and volume and it seems like it's a.

Harrie C. A. M. Schippers: It's a big change from what it was but it's still not a bad level that's more normal now.

Harrie Schippers: It's more normal now.

Preston Feight: Yep.

[Analyst] (Wolfe Research): Okay. And then just more theoretical on this sort of record gross margin, price cost spread, you know, I totally understand what you guys are saying with new products, but, you know, it also just strikes me, you know, this is a pretty consolidated market. And in an environment like we've seen the last couple of years with heightened inflation, is it just that maybe you and others just got enlightened to the fact that you maybe had more pricing power than maybe you previously thought? Is that right? Is that what's happening? And ultimately, I mean, is that? Do you think that's sustainable? Is this ultimately just the new range of gross margin?

Scott Group: Okay. And then just more theoretical on this sort of record gross margin, price cost spread, you know, I totally understand what you guys are saying with new products, but, you know, it also just strikes me, you know, this is a pretty consolidated market. And in an environment like we've seen the last couple of years with heightened inflation, is it just that maybe you and others just got enlightened to the fact that you maybe had more pricing power than maybe you previously thought? Is that right? Is that what's happening? And ultimately, I mean, is that? Do you think that's sustainable? Is this ultimately just the new range of gross margin?

Speaker Change: Okay, and then just more theoretical on this sort of record gross margin, price-cost spread, you know, I totally understand what you guys are saying with new products, but, you know, it also just strikes me, you know, this is a pretty consolidated market, and in an environment like we've seen the last couple years with heightened inflation, is it just that maybe you and others just got enlightened to the fact that you maybe had more pricing power than you?

Speaker Change: Okay and then just.

Speaker Change: More theoretical on this sort of record gross margin and price cost spread.

Speaker Change: I totally understand what you guys are saying with new products, but.

Speaker Change: It also just strikes me this is a pretty consolidated market and in an environment like we've seen in the last couple of years with heightened inflation is it is it just that maybe you and others just gotten lightened into the fact that you maybe had more pricing power than may.

Speaker Change: Maybe you previously thought. Is that right? Is that what's happening? And ultimately, do you think that's sustainable? Is this ultimately just a new range of...

Speaker Change: <unk> previously thought is that is that right is that what's happening in ultimately is that do you think that's sustainable is this ultimately just the new range of.

Speaker Change: gross margin

Speaker Change: Gross margin.

Preston Feight: My view is that the team of PACCAR people around the world, whether in the factories or the engineers or the controllers, organizations, over the last several years, have done a fantastic job of building a really robust business. It's lean, it's efficient, and it produces great products for our customers. I think that's the driving force between the margins that were generated. It's parts business, it's the truck business. That strength and focus of serving our customers and our shareholders is working really well.

Speaker Change: My view is that the team of PACCAR people around the world, whether in the factories or the engineers or the controllers organizations, over the last several years have done a fantastic job of building a really robust business. And it's lean, it's efficient, and it produces great product for our customers. And I think that's the driving force between the margins that were generated. It's parts business, it's the truck business. That strength and focus of serving our customers and our shareholders is working really well.

Speaker Change: My view is that the team of pack of our people around the world whether in the factories are the engineers of the controllers organizations over the last several years have done a fantastic job of building a really robust business.

Preston Feight: Thank you. Sure thing. Thanks, Tim. What I think is going on is that, over the last couple years, we've probably been, as an industry, not able to supply everyone the trucks they needed, and I think that there's a strong vocational market, a strong LPL market, a strong medium duty market, so we're now kind of able to build those trucks, and we're seeing that as a different percentage, an increased percentage in our backlog I wouldn't differentiate them in the margin.

Speaker Change: Okay, thank you.

Speaker Change: That's it.

Speaker Change: Thank you.

Speaker Change: Our next question today is from Matt Elkott from TD Cohen. Matt, please go ahead; your line is open. Thank you. If I can go back to the order question, the demand question, it seems you guys continue to see stronger demand, and stronger orders in North America than the industry orders we see on a monthly basis. Is this still primarily a function of your higher vocational mix, or are you gaining traction in other areas that we're not super aware of?

It's lean is sufficient and it produces great products for our customers and I think thats the driving force between the margins that were generated as parts business. It's the truck business.

Speaker Change: That strength and focus of serving our customers and our shareholders is working really well.

Preston Feight: They can both be good margin products for us, on a percentage basis, yeah. And then I think that as far as the larger carriers and the impacts of them, I think that it's really not that different from many years ago, right? It's not substantially different, so we don't see anything dramatically affecting our model. We've had some of the biggest carriers ordering a lot of trucks, and we've had some small carriers ordering trucks, too. It's all kind of within the normal boundary. Okay, thank you. HOW DO WE GO? Where do we go? How do we go? Where do we go? How do we go about it?

[Analyst] (Wolfe Research): So in your mind, the high teens is the new sort of normal?

Scott Group: So in your mind, the high teens is the new sort of normal?

Speaker Change: So in your mind, the high teens is the new sort of normal.

So in your mind, the high teens as the new sort of normal.

Preston Feight: Well, what we shared with you is Q1, we think, is 18.5% to 19%. That's pretty darn good.

Speaker Change: Well, what we shared with you is the first quarter we think is 18.5% to 19%. That's pretty darn good.

Speaker Change: Well, what we shared with you as the first quarter, we think is 18, 5% to 19%.

Speaker Change: That's pretty darn good.

[Analyst] (Wolfe Research): Yeah, for sure. Okay. All right. Thank you, guys. Appreciate it.

Scott Group: Yeah, for sure. Okay. All right. Thank you, guys. Appreciate it.

Speaker Change: Yes for sure.

Speaker Change: All right. Thank you, guys. Appreciate it.

Speaker Change: Okay Alright. Thank you guys appreciate it.

Preston Feight: You bet.

Speaker Change: You bet.

Speaker Change: Yes.

Operator: Thank you. Our next question is from Michael Feniger, from Bank of America. Michael, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question is from Michael Feniger from Bank of America. Michael, please go ahead, your line is open.

Our next question is from Michael Feniger from Bank of America. Michael. Please go ahead. Your line is open.

[Analyst] (Bank of America): Yeah, thanks for taking my question. Obviously, the pricing in 2023 was very impressive. I know you talked a little bit about the used market. I'm curious, when we look at the spread between your price increases for, you know, for 2024, relative to what you're seeing in the used market with trade-in, is that spread widening? Just any commentary that you're seeing in the used market that kind of informs 2024? Because obviously, the used market was very strong, you know, a few years ago. Seems like it's some cooling, but I'm just curious how we think about that spread between the new pricing, the used, and how to kind of think about that for 2024.

Michael Feniger: Yeah, thanks for taking my question. Obviously, the pricing in 2023 was very impressive. I know you talked a little bit about the used market. I'm curious, when we look at the spread between your price increases for, you know, for 2024, relative to what you're seeing in the used market with trade-in, is that spread widening? Just any commentary that you're seeing in the used market that kind of informs 2024? Because obviously, the used market was very strong, you know, a few years ago. Seems like it's some cooling, but I'm just curious how we think about that spread between the new pricing, the used, and how to kind of think about that for 2024.

Michael Feniger: Yeah, thanks for taking my question. Obviously, the pricing in 2023 was very impressive. I know you talked a little bit about the used market. I'm curious when we look at the spread between your price increases for 2024 relative to what you're seeing in the used market with trade-in. Is that spread widening? Just any commentary that you're seeing in the used market that kind of informs 2024? Because obviously, the used market was very strong a few years ago. It seems like it's some cooling, but I'm just curious how we think about that spread between the new pricing, the used, and how to kind of think about that for 2024.

Michael Feniger: Yes. Thanks for taking my question, obviously the pricing in 2023 was it was very impressive I know you talked a little bit about the used market.

Matt Elkott: We get involved in a lot of different things, but at the fundamental level, our goal is to build great trucks for our customers that provide them with the lowest total cost of ownership.

Preston Feight: Thank you. Our next question today is from Matt Elkott from TD Cohen. Matt, please go ahead; your line is open.

Michael Feniger: I'm curious when we look at the spread between your price increases for 2024 relative to what Youre seeing in the used market with trading does that spread widening just any commentary that you are seeing in the used market that 100 forums 2024, because obviously the used market was very strong a few years ago.

Preston Feight: Thank you. If I can go back to the order question, the demand question, it seems you guys continue to see stronger demand, and stronger orders in North America than the industry orders we see on a monthly basis. Is this still primarily a function of your higher vocational mix, or are you, you know, gaining traction in other areas that we're not, you know, super aware of?

Matt Elkott: And when they do that, then they order the trucks.

Matt Elkott: And we think we're doing that well. The products are performing well. They're the best in the industry and that's contributing to our order visibility. visibility, and just one follow-up question as we look into you know mild decline in production this year do you think you'll do more vertical integration of engines to kind of cut cost or is that something that is independent of the, We've built a record number of trucks last year, MX engines, that is for North America, Europe worldwide, I would say, um yeah and the uh the investments that we've been continuing to make in our engine manufacturing capacity we uh that will help us to grow engine penetration in north america this year that's a good position to grow that percentage this year um yeah that's a good position to grow that percentage this year, Thank you very much.

It seems like it's some cooling, but I'm just curious how we think about that spread between the new pricing in the us and how to kind of think about that for 2024.

Preston Feight: Well, I think what's maybe one of the things you could throw into your factors of consideration is the fact that in those high point markets, where contract rates were at all-time high, spot rates were at all-time high, some people got in to the trucking business, and some of those people are getting out, and that's contributing to the spread between new and used pricing. As you have some of those people exiting, the market is normalizing the used truck pricing. So I think there is a bit of a larger differential between new and used, and I think that'll reset itself over time.

Michael Feniger: Well, I think what's maybe one of the things you could throw into your factors of consideration is the fact that in those high point markets where contract rates were at all-time high, spot rates were at all-time high, some people got in to the trucking business, and some of those people are getting out, and that's contributing to the spread between new and used pricing, as you have some of those people exiting the market, it's normalizing the used truck pricing, so I think there is a bit of a larger differential between new and used, and I think that'll reset itself over time.

Speaker Change: Well I think maybe one of the things that you could throw into your factors of consideration is the fact that in those high point markets where contract rates are at all time highs spot rates were at all time high some people got in to the trucking business and some of those people are getting out and thats contributing to the spread between new and used pricing as you have some people exiting the market is normalizing the used truck.

Preston Feight: We are the vocational market leaders, so there is some benefit in that. And as I mentioned, too, I think our teams have done a great job over the last several years developing a new product lineup, which is the latest in the industry, which is helpful to us and I think has given us a good backlog. Think about it at the fundamental level.

Speaker Change: So I think there is a bit of it but.

Preston Feight: We're involved in a lot of different things, but at the fundamental level, our goal is to build great trucks for our customers to provide them with the lowest total cost of ownership. And when they do that, then they order the trucks. And we think we're doing that well. We think we're performing well, the best in the industry, and that's contributing to our order of visibility.

Speaker Change: Larger differential between new and used and I think that will reset itself over time.

[Analyst] (Bank of America): Perfect. And just to follow up, another different customers in the transportation market who buys your trucks. You know, you put up an excellent truck deliveries in 2023 at a time where spot freight rates were actually falling. And now that we see spot freight rates potentially bottoming and maybe picking up through 2024, how do we kind of think about what happened in 2023 and how that might potentially play out in 2024, and how that kind of translates to demand for your trucks?

Michael Feniger: Perfect. And just to follow up, another different customers in the transportation market who buys your trucks. You know, you put up an excellent truck deliveries in 2023 at a time where spot freight rates were actually falling. And now that we see spot freight rates potentially bottoming and maybe picking up through 2024, how do we kind of think about what happened in 2023 and how that might potentially play out in 2024, and how that kind of translates to demand for your trucks?

Speaker Change: Perfect. And just to follow up, I know there are different customers in the transportation market who buy your trucks. You know, you put up excellent truck deliveries in 2023 at a time where spot freight rates were actually falling.

Speaker Change: Perfect and just a follow up another different customers in the transportation market.

Speaker Change: Thank you.

Speaker Change: Our next question is from Scott Group from Wolf Research.

Speaker Change: By your trucks.

Scott Group: Scott, please go ahead; your line is open.

Speaker Change: You put up the excellent truck deliveries in 2023 at a time where spot freight rates were actually falling.

Scott Group: Hey, thanks for an afternoon. So you talked about usage prices normalizing in Q4.

Speaker Change: Now that we see spot freight rates potentially bottoming and maybe picking up through 2024, how do we kind of think about what happened in 2023, and how that might potentially play out in 2024, and how that kind of translates to demand for trucks.

Scott Group: I'm just curious about your outlook for use prices from here if you think we're bottoming yet or if you think there's further risk on use. Harry, do you have any thoughts on that? Used truck prices did come down in North America and Europe during the year. Now, I think in the fourth quarter, North America came down low single digits. And we do see some stabilization happening at these levels. That's why we expect things to continue at a normal level where used trucks are maybe at break-even, that kind of level.

Preston Feight: As we look into, you know, a mild decline in production this year, do you think you'll do more vertical integration of engines to kind of cut costs, or is that something that is independent of the We built a record number of trucks last year, AMEX engines, that is, for North America, and Europe worldwide, I would say. Yeah, and the investments that we've been continuing to make in our engine manufacturing capacity will help us to grow engine penetration in North America this year. We're in a good position to grow that percentage this year. Thank you very much.

Preston Feight: Well, one of the underlying contemplations should be that, what's the economy doing? And as we noted in our commentary, we see economic growth in 2024, which we think as the most fundamental principle, should be good for the truck market, especially as we continue through the year. And you put that economic growth against that spot rate bottoming that you talked about, and it should set the, set us up for a good year in 2024.

Speaker Change: Well, one of the underlying contemplations should be that what's the economy doing? And as we noted in our commentary, we see economic growth in 2024, which we think as the most fundamental principle should be good for the truck market, especially as we continue through the year. And you put that economic growth against that spot rate bottoming that you talked about, and it should set us up for a good year in 2024.

Speaker Change: Well one of the underlying contemplation should be that what's the economy doing.

Speaker Change: As we noted in our commentary we see economic growth in 2024, which we think is the most fundamental principles should be good for the truck market, especially as we continue through the year and you put that economic growth against that spot rate bottoming that you talked about and it should set the set us up for a good year in 2024.

Speaker Change: That's it.

Harrie C. A. M. Schippers: A reasonable projection, I think. You know, I don't think I'd add that volumes continue to be good in that space as well. So we watch both price and volume, and it seems like it's a big change from what it was, but it's still not at a bad level. It's more normal now.

[Analyst] (Bank of America): Thank you.

Michael Feniger: Thank you.

Speaker Change: Thank you.

Preston Feight: Thank you. Our next question is from Scott Group from Wolfe Research. Scott, please go ahead; your line is open.

Speaker Change #100: Thank you.

Preston Feight: You bet.

Speaker Change: You bet.

Speaker Change #101: You bet.

Operator: Thank you. Our next question is from Guillermo Herrera, from Gabelli Funds. Guillermo, please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change #102: Thank you.

Speaker Change: Our next question is from Guillermo Herrera from Gabelli Funds. Guillermo, please go ahead, your line is open.

Preston Feight: Hey, thanks, afternoon. So you talked about use prices normalizing in Q4. I'm just curious your outlook for use prices from here if you think we're bottoming yet or if you think there's further risk on use. Harry, do you have any thoughts on that? U-stroke prices did come down in North America and Europe during the year.

Next question is from Guillermo <unk> from Gabelli funds Guillermo please.

Guillermo: Please go ahead your line is open.

[Analyst] (TD Cowen): Hi, good morning, guys. Thanks for taking the question, and congrats on a great quarter.

Guillermo Herrera: Hi, good morning, guys. Thanks for taking the question, and congrats on a great quarter.

Guillermo Herrera: Hi, good morning, guys. Thanks for taking the question and congrats on a great quarter.

Guillermo: Hi, Good morning, guys. Thanks for taking my question and congrats on a great quarter.

Speaker Change: Okay, and then just more theoretical on this sort of record gross margin, price-cost spread. I totally understand what you guys are saying about new products, but, you know, it also just strikes me, you know, this is a pretty consolidated market, and in an environment like we've seen the last couple years with heightened inflation, is it just that maybe you and others just got enlightened to the fact that you maybe had more pricing power than you? Maybe you previously thought.

Preston Feight: Thanks.

Guillermo Herrera: Thanks.

Guillermo: Thanks.

[Analyst] (TD Cowen): So maybe more of a high-level one here than the ones we've been talking through so far. But, you know, you've been doing a great job generating cash, and there's a sizable cash position on the balance sheet right now. I'm curious, you know, aside from dividend payouts, how should we think about how you might deploy some of that cash? And maybe just to get a little bit more specific here, could you provide us sort of any commentary on the M&A space and whether you know, longer term, you might be considering inorganic growth as part of the growth story?

Guillermo Herrera: So maybe more of a high-level one here than the ones we've been talking through so far. But, you know, you've been doing a great job generating cash, and there's a sizable cash position on the balance sheet right now. I'm curious, you know, aside from dividend payouts, how should we think about how you might deploy some of that cash? And maybe just to get a little bit more specific here, could you provide us sort of any commentary on the M&A space and whether you know, longer term, you might be considering inorganic growth as part of the growth story?

Guillermo Herrera: um so maybe more of a high level one here than the ones we've been talking through so far but you know you've been doing a great job generating cash and there's a sizable cash position on the balance sheet right now um i'm curious you know aside from

Guillermo: So maybe more of a high level one here than the ones, we've been talking through so far but.

Harrie C. A. M. Schippers: Now, I think in the fourth quarter, North America came down low single-digits, and we do see some stabilization happening at these levels. That's why we expect things to continue at a normal level, where U-strokes are maybe at break-even, that kind of level.

Guillermo: <unk> been doing a great job generating cash and there is a sizable cash position on the balance sheet right now.

Guillermo: I'm curious aside from.

Guillermo: Dividend payouts.

Guillermo: Should we think about how you might deploy some of that cash.

Speaker Change: Is that right? Is that what's happening?

Speaker Change: And ultimately, do you think that it's sustainable?

Guillermo: And maybe just to get a little bit more specific here.

Preston Feight: A reasonable projection, I think. You know, I don't think I'd add that volumes continue to be good in that space as well. So we watch both price and volume, and it seems like it's a big change from what it was, but it's still not at a bad level. It's more normal now.

Speaker Change: Is this ultimately just a new range of gross margin? My view is that the team of PACCAR people around the world, whether in the factories or the engineers or the controllers' organizations, have done a fantastic job of building a really robust business.

Guillermo: Could you provide us sort of any commentary on the M&A space and whether longer term you might be considering inorganic growth as part of the growth story.

Preston Feight: Sure thing. You know, we're really pleased with how the company's performed financially. We have a strong history of dividend payouts of around 50% of net income. We continue to do that. We noted in our comments record dividend payouts in 2023. I mean, our shareholders are happy with that approach. We'll continue to do that. We do have uses for cash. Obviously, we are doing this joint venture, which will be something we fund out of cash. PACCAR's got a long history of making strategic acquisitions when they make sense, and we continue to make those evaluations at all times. Having the cash gives us that flexibility to build an even more robust company as we move forward into the future.

Speaker Change #100: Sure thing, you know.

Sure thing.

Speaker Change #100: We're really pleased with how the company's performed financially. We have a strong history of dividend payouts of around 50% of net income. We continue to do that. We noted in our comments record dividend payouts in 2023. I think our shareholders are happy with that approach. We'll continue to do that. We do have uses for cash. Obviously, we are doing this joint venture, which will be something we fund out of cash. PACCAR's got a long history of making strategic acquisitions when they make sense, and we continue to make those evaluations at all times. And having the cash gives us that flexibility to build an even more robust company as we move forward into the future.

Guillermo: We're really pleased with other companies perform financially we have a strong history of dividend payouts of around 50% of net income we continue to do that we noted in our comments a record dividend payouts in 2023.

Preston Feight: Okay, and then just more theoretical on this sort of record gross margin price cost spread. I totally understand what you guys are saying about new products. But no, it also just strikes me, you know, this is a pretty consolidated market and in an environment like we've seen the last couple years with heightened inflation, isn't it? Is it just that maybe you and others just got enlightened to the fact that you maybe have more pricing power than you maybe thought? Is that right? Is that what's happening?

Speaker Change: And it's lean, it's efficient, and it produces great products for our customers. And I think that's the driving force behind the margins that were generated. It's the parts business, it's the truck business. That strength and focus of serving our customers and our shareholders is working really well.

Guillermo: Our shareholders are happy with that approach, we'll continue to do that we do have uses for cash. Obviously, we are doing this joint venture, which will be something we fund out of cash.

Speaker Change: So in your mind, the high teens are a new sort of normal.

Speaker Change: Well, what we shared with you is the first quarter, which we think is 18.5% to 19%.

Speaker Change: That's pretty darn good.

Guillermo: <unk> got a long history of making strategic acquisitions, when they make sense and we continue to make those evaluations at all times and having the cash gives us that flexibility to build an even more robust company as we move forward into the future.

Speaker Change: All right.

Speaker Change: Thank you, guys.

Speaker Change: I appreciate it.

Speaker Change: You bet!

Speaker Change: Thank you.

Speaker Change: Our next question is from Michael Feniger from Bank of America.

Michael Feniger: Michael, please go ahead; your line is open.

Michael Feniger: Yeah, thanks for taking my question.

Michael Feniger: Obviously, the pricing in 2023 was very impressive. I know you talked a little bit about the used market. I'm curious when we look at the spread between your price increases for 2024 relative to what you're seeing in the used market with trade-in. Is that spread widening?

[Analyst] (TD Cowen): Great, thank you.

Guillermo Herrera: Great, thank you.

Speaker Change #101: Great, thank you.

Speaker Change #104: Great. Thank you.

Preston Feight: You bet.

Speaker Change #102: You bet.

Speaker Change #105: You bet.

Operator: Thank you. Our last question today is from Daniel Johansson, from Santander. Daniel, please go ahead. Your line is open. Daniel, please, can you check you're not muted locally?

Speaker Change #103: Thank you.

Preston Feight: And ultimately, is that? Do you think that's sustainable? Is this ultimately just the new range of gross margin? My view is that the team of PACCAR people around the world, whether they're in the factories or the engineers or the controllers, or the organizations, have done a fantastic job of building a really robust business. And it's lean, it's efficient, and it produces a great product for our customers. And I think that's the driving force behind the margins that were generated.

Thank you.

Speaker Change #103: Our last question today is from Daniel Johanson from Pan Advisors. Daniel, please go ahead, your line is open.

Speaker Change #105: Our last question today is from Daniel J Hansen.

Michael Feniger: Just any commentary that you're seeing in the used market that kind of informs 2024? Because obviously, the used market was very strong a few years ago. It seems like it's kind of cooling off, but I'm just curious how we think about that spread between the new pricing and the used market and how we kind of think about that for 2024.

Speaker Change #105: Daniel Please go ahead your line is open.

Daniel Johanson: Daniel, please can you check you're not muted locally?

Speaker Change #105: Daniel Please can you check your mute muted lately.

Speaker Change #105: Okay.

[Analyst] (Santander): Hello, hello. Can you hear me?

Daniel Johansson: Hello, hello. Can you hear me?

Daniel Johanson: Hello? Hello?

Speaker Change: Well, I think what's maybe one of the things you could throw into your factors of consideration is the fact that in those high point markets where contract rates were at all-time high, spot rates were at all-time high, some people got in to the trucking business, and some of those people are getting out, and that's contributing to the spread between new and used pricing, as you have some of those people exiting the market, it's normalizing the used truck pricing, so I think there is a bit of a larger differential between new and used, and I think that'll reset itself over time.

Daniel Hansen: Hello Hello.

Preston Feight: Hey. Yeah, we can, Daniel.

Daniel Johanson: Can you hear me? Hey.

Daniel Hansen: Can you hear me okay.

Preston Feight: It's the parts business, it's the truck business. That strength and focus of serving our customers and our shareholders is working really well. So in your mind, the high teens are the new sort of normal.

Speaker Change #105: yeah we can Daniel hi thank you thank you very much for taking my question and I'm sorry maybe this has already been discussed and I guess the question is

[Analyst] (Santander): Hi. Thank you. Thank you very much for taking my question. Sorry, maybe this has already been discussed, and I guess the question has a lot of different levels to think about. But thinking about your cost per unit and how that has been going up a little bit here over the last few years, I mean, there's mix, there is more content per unit, et cetera, et cetera. But how to think about that going forward, and especially so given that you had pretty high capacity utilization last year?

Daniel Johansson: Hi. Thank you. Thank you very much for taking my question. Sorry, maybe this has already been discussed, and I guess the question has a lot of different levels to think about. But thinking about your cost per unit and how that has been going up a little bit here over the last few years, I mean, there's mix, there is more content per unit, et cetera, et cetera. But how to think about that going forward, and especially so given that you had pretty high capacity utilization last year?

Daniel Hansen: Yes, we can Daniel.

Daniel Hansen: Alright. Thank you. Thank you very much for taking my question.

Daniel Hansen: Sorry, maybe this has already been discussed.

Daniel Hansen: I guess the question is.

Daniel Hansen: A lot of different levels to think about.

Daniel Hansen: Thinking about your cost per unit.

Daniel Johanson: and how that has been going up a little bit here over the last few years. I mean, there's mix, there is more content per unit, etc., etc. But how to think about that going forward and especially so given that you had pretty high capacity utilization last year?

Daniel Hansen: And how that has been going up a little bit here over the last few years I mean, theres mix. There is more content per unit et cetera, et cetera, but how to think about that going forward.

Preston Feight: Well, what we shared with you is the first quarter, we think it's 18 and a half to 19 percent. That's pretty darn good. All right. Thank you guys. Appreciate it. That. Our next question is from Michael Feniger from Bank of America. Michael, please go ahead. Your line is open.

Speaker Change: Perfect.

Daniel Hansen: Especially so given that you had pretty high capacity utilization last year.

Speaker Change: And just to follow up, I know there are different customers in the transportation market who buy your trucks.

Preston Feight: Well, I think about cost in terms of there's the normal inflationary side of it. I think the other side of it to contemplate is we're building trucks that are more efficient than they ever have been for our customers. Sometimes that efficiency comes with higher purchase price, but as a percentage of their total operating costs, the purchase price is not significant compared to the fuel utilization. So it's beneficial to PACCAR in that way and beneficial to our customers to have high-performing products that are very efficient, even if that drives up purchase price. And then another element to that is, of course, regulatory. As you anticipate future regulatory changes, those typically come with added componentry to meet emission standards, which is also a factor in increasing cost and price.

Speaker Change #106: Well, I think about costs in terms of there's the normal inflationary side of it. I think the other side of it to contemplate is we're building trucks that are more efficient than they ever have been for our customers. Sometimes that efficiency comes with higher purchase price, but as a percentage of their total operating costs, the purchase price is not significant compared to the fuel utilization.

Daniel Hansen: Well I think about costs in terms of Theres, a normal inflationary side of it I think the other side of it to contemplate as we're building trucks that are more efficient than they ever have been for our customers, sometimes that efficiency comes with higher purchase price, but as a percentage of their total operating costs. The purchase price is not significant compared to the <unk>.

Preston Feight: Yeah, thanks for taking my question. Obviously, the pricing in 2023 was very impressive. I know you talked a little bit about the used market. I'm curious, when we look at the spread between your price increases for, you know, for 2024, relative to what you're seeing in the used market with trade-in, is that spread widening?

Speaker Change: You know, you put up excellent truck deliveries in 2023 at a time when spot freight rates were actually falling.

Speaker Change: Now that we see spot freight rates potentially bottoming and maybe picking up through 2024, how do we kind of think about what happened in 2023 and how that might potentially play out in 2024 and how that kind of translates to demand for your truck? Well, one of the underlying considerations should be, what's the economy doing? And as we noted in our commentary, we see economic growth in 2024, which we think, as the most fundamental principle, should be good for the truck market, especially as we continue through the year. And you put that economic growth against the spot rate bottoming that you talked about, and it should set us up for a good year in 2024.

Daniel Hansen: Physician, so it's beneficial to pack on that way and beneficial to our customers to have high performing products that are very efficient, even if that drives up purchase price and then another element to that is of course regulatory.

Speaker Change #106: So it's beneficial to PACCAR in that way and beneficial to our customers to have high-performing products that are very efficient, even if that drives up purchase price. And then another element to that is, of course, regulatory. And as you anticipate future regulatory changes, those typically come with added componentry to meet emission standards, which is also a factor in increasing cost and price.

Preston Feight: Just any commentary that you're seeing in the used market that kind of informs 2024? Because obviously, the used market was very strong, you know, a few years ago. It seems like it's kind of cooling off, but I'm just curious how we think about that spread between the new pricing and the used market and how we kind of think about that for 2024. Well, I think one of the things you could throw into your factors of consideration is the fact that in those high-point markets where contract rates were at all-time highs, spot rates were at all-time highs, some people got into the trucking business, and some of those people are getting out, and that's contributing to the spread between new and used truck prices, as you have some of those people exiting the market, it's normalizing used truck prices So I think there is a bit of a larger differential between new and used, and I think that'll settle down over time.

Daniel Hansen: We anticipate future regulatory changes those typically come with added componentry to meet emission standards, which is also a factor in increasing cost and price.

Preston Feight: So those are some of the things that go into that cost equation for us, and we've seen price more than keep up with that.

So those are some of the things that go into that cost equation for us, and we've seen price more than keep up with that.

Speaker Change #106: So those are some of the things that go into that cost equation for us.

Daniel Hansen: So those are some of the things that go into that cost equation for us.

Speaker Change #106: and we've seen price more than keep up with that. We'll see you next time.

Daniel Hansen: And we've seen price more than keep up with that.

[Analyst] (Santander): Should we expect cost per unit to continue to go up, you think, even in a very good volume scenario?

Speaker Change #106: And should we expect cost per unit to continue to go up, you think, even in...

Daniel Johansson: Should we expect cost per unit to continue to go up, you think, even in a very good volume scenario?

Daniel Hansen: And should we expect cost per unit continued to go up you think even even in.

Speaker Change #106: Very good volume scenario.

Daniel Hansen: Very good volume scenario.

Speaker Change: Thank you.

Preston Feight: I think they could. It depends on the inflationary state, it depends on the state of competition, and whether there's more added content that has to be added to the trucks.

Speaker Change #107: I think they could. It depends on the inflationary state. It depends on the state of competition and whether there's more added content that has to be added to the trucks.

Speaker Change #107: I think they could it depends on the inflationary state it depends on the state of competition and whether Theres more added content that has to be added to the trucks.

Speaker Change: You bet!

Speaker Change: Thank you.

Speaker Change: Our next question is from Guillermo Herrera from Gabelli Funds. Guillermo, please go ahead; your line is open. Hi, good morning, guys.

Guillermo Herrera: Thanks for taking the question and congrats on a great quarter.

[Analyst] (Santander): Okay. Thank you very much.

Daniel Johansson: Okay. Thank you very much.

Speaker Change #108: Okay, thank you very much.

Speaker Change #108: Okay. Thank you very much.

Preston Feight: You bet. Thanks for the question, and we appreciate all the questions.

Speaker Change #109: You bet. Thanks for the question. And we appreciate all the questions. Thanks.

Speaker Change #109: You bet, thanks for that question and.

Speaker Change: Thanks, um, so maybe this is more of a high-level one than the ones we've been talking through so far, but you know you've been doing a great job generating cash, and there's a sizable cash position on the balance sheet right now. I'm curious, you know, aside from, Sure thing.

[Analyst] (Santander): Thanks.

Daniel Johansson: Thanks.

Speaker Change #109: And we appreciate all the questions. Thanks.

Operator: Thank you. This is the end of the Q&A session, so I'd now like to hand back for any further closing remarks.

Speaker Change #110: Thank you. This is the end of the Q&A session so I'd now like to hand back for any further or closing remarks.

Speaker Change #110: Thank you. This is the end of the Q&A session. So I would now like to hand back for any closing remarks.

Preston Feight: We'd like to thank everyone for joining the call, and thank you, operator.

Speaker Change #110: I'd like to thank everyone for joining the call, and thank you, operator.

Preston Feight: Perfect. And just to follow up, I know there are different customers in the transportation market who buy your trucks. You know, you put up excellent truck deliveries in 2023 at a time when spot freight rates were actually falling. Now that we see spot freight rates potentially bottoming and maybe picking up through 2024, how do we kind of think about what happened in 2023 and how that might potentially play out in 2024 and how that kind of translates into demand for your truck?

Speaker Change #111: We'd like to thank everyone for joining the call and thank you operator.

Operator: Thank you, everyone, for joining today's call. You may now disconnect your lines and have a lovely day.

Speaker Change #111: Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day.

Speaker Change #112: Thank you everyone for joining today's call you may now disconnect your lines and have a lovely day.

Speaker Change: We're really pleased with how the company has performed financially.

Speaker Change: We have a strong history of dividend payouts of around 50% of net income. We continue to do that. We noted in our comments record dividend payouts in 2023. I think our shareholders are happy with that approach. We'll continue to do that. We do have uses for cash.

Speaker Change: Obviously, we are doing this joint venture, which will be something we fund out of cash. PACCAR's got a long history of making strategic acquisitions when they make sense, and we continue to make those evaluations at all times. And having the cash gives us that flexibility to build an even more robust company as we move forward into the future.

Preston Feight: Well, one of the underlying considerations should be that, as we noted in our commentary, we see economic growth in 2024, which we think, as the most fundamental principle, should be good for the truck market, especially as we continue through the year. You put that economic growth against that spot rate bottoming that you talked about, and it should set us up for a good year in 2024.

Speaker Change: Great, thank you.

Speaker Change #100: You bet!

Speaker Change #101: Thank you.

Speaker Change #101: Our last question today is from Daniel Johanson from Pan Advisors. Daniel, please go ahead, your line is open. Can you please check that you're not muted locally?

Speaker Change #101: Hello?

Daniel Johanson: Hello, can you hear me?

Daniel Johanson: Hey, yeah we can Daniel, hi, thank you, thank you very much for taking my question and I'm sorry, maybe this has already been discussed, and I guess the question is and how that has been going up a little bit here over the last few years. I mean, there's a mix, there is more content per unit, etc., etc. But how should you think about that going forward and especially so given that you had pretty high capacity utilization last year?

Preston Feight: Thank you. You bet. Thank you. Our next question is from Guillermo Herrera from Gabelli Funds. Guillermo, please go ahead. Your line is open.

Preston Feight: Hi, good morning, guys. Thanks for taking the question and congrats on a great quarter. Thanks. Um, so maybe this one is more of a high level one than the ones we've been talking through so far.

Daniel Johanson: Well, I think about costs in terms of there being the normal inflationary side of it.

Daniel Johanson: I think the other side of it to contemplate is we're building trucks that are more efficient than they ever have been for our customers. Sometimes that efficiency comes with a higher purchase price, but as a percentage of their total operating costs, the purchase price is not significant compared to fuel utilization. So it's beneficial to PACCAR in that way and beneficial to our customers to have high-performing products that are very efficient, even if that drives up the purchase price. And then another element to that is, of course, regulatory. And as you anticipate future regulatory changes, those typically come with added componentry to meet emission standards, which is also a factor in increasing cost and price. So those are some of the things that go into that cost equation for us, and we've seen prices more than keep up with that. We'll see you next time.

Preston Feight: But, you know, you've been doing a great job generating cash, and there's a sizable cash position on the balance sheet right now. I'm curious, aside from Dividend Payouts, how should we think about how you might deploy some of that cash? And maybe just to get a little bit more specific here, could you provide us with some commentary on the M&A space and whether, you know, longer term, you might be considering inorganic growth as part of the growth story? Sure thing, you know. We're really pleased with how the company's performed financially. We have a strong history of dividend payouts of around 50% of net income.

Daniel Johanson: And should we expect cost per unit to continue to go up, you think, even in a... Very good volume scenario?

Preston Feight: We continue to do that. We noted in our comments record dividend payouts in 2023. I think our shareholders are happy with that approach. We'll continue to do that. We do have uses for cash. Obviously, we are doing this joint venture, which will be something we fund out of cash. PACCAR's got a long history of making strategic acquisitions when they make sense, and we continue to make those evaluations at all times.

Speaker Change #103: I think they could. It depends on the inflationary state. It depends on the state of competition and whether there's more added content that has to be added to the trucks.

Speaker Change #104: Okay, thank you very much.

Speaker Change #105: You bet!

Speaker Change #106: Thanks for the question.

Speaker Change #106: And we appreciate all the questions.

Speaker Change #106: Thanks. Thank you.

Speaker Change #106: This is the end of the Q&A session, so I'd now like to hand back for any further or closing remarks.

Speaker Change #106: I'd like to thank everyone for joining the call, and thank you, operator.

Speaker Change #107: Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day.

Preston Feight: And having the cash gives us that flexibility to build an even more robust company as we move forward into the future. Great, thank you. You bet. Thank you. Our last question today is from Daniel Johansen from PAN Advisors. Daniel, please go ahead if your line is open. Daniel, could you please check that you're not muted locally?

Operator: Hello? Hello? Can you hear me?

Operator: Hey. Yeah, we can, Daniel. Hi, thank you. Thank you very much for taking my question. And I'm sorry, maybe this has already been discussed. And I guess the question is, has a lot of different levels to think about but but thinking about your cost per unit and how that has been going up a little bit here over the last few years I mean there's mixed there is more content per per unit etc etc but but how to think about that going forward and especially so given that you had pretty high capacity utilization last year, Well, I think about costs in terms of there's the normal inflationary side of it, I think the other side of it to contemplate is we're building trucks that are more efficient than they ever have been for our customers.

Operator: Sometimes that efficiency comes with a higher purchase price, but as a percentage of their total operating costs, the purchase price is not significant compared to fuel utilization. So it's beneficial to PACCAR in that way and beneficial to our customers to have high-performing products that are very efficient, even if that drives up the purchase price. And then another element is, of course, regulatory, because you anticipate future regulatory changes. Those typically come with added componentry to meet emissions standards, which is also a factor in increasing cost and price.

Preston Feight: So those are some of the things that go into that cost equation for us, and we've seen prices more than keep up with us. And should we expect costs per unit to continue to go up, you think, even in the... Very good volume scenario. I think they could. It depends on the inflationary state. It depends on the state of competition and whether there's more added content that has to be added to the trucks.

Preston Feight: Okay, thank you very much. You bet. Thanks for the question. And we appreciate all the questions. Thanks. Thank you. This is the end of the Q&A session, so I'd now like to hand back for any further or closing remarks. We'd like to thank everyone for joining the call and thank you, operator. Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day.

Q4 2023 Paccar Inc Earnings Call

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