Q4 2023 Rush Enterprises Inc Earnings Call
[music].
Operator: Here we go Hello, and thank you for standing by. Welcome to Rush Enterprises, Inc.'s fourth quarter 2023 earnings results. At this time, all participants are in a listen-only mode.
Yeah.
Hello, and thank you for standing by walking through Rush Enterprises, Inc. Reports fourth quarter 2023 earnings results.
At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.
After the speaker's presentation, there will be a question and answer session.
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To withdraw your question. Please press star one again.
Rusty Rush: I would now like to hand the conference over to Rusty Rush, President, CEO, and Chairman of the Board. Sir, you may begin. Well, good morning and welcome to our fourth quarter year-end 2023 earnings release call. On the call are Mike McRoberts, Chief Operating Officer, Steve Keller, Chief Financial Officer, Jay Hanselwood, Vice President and Controller, and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary.
I would now like to hand, the conference over to Rusty Rush, President CEO and chairman of the board Sir you may begin.
Well good morning, and welcome to our fourth quarter and year end 2023 earnings release call.
On the call are Mike Mcroberts, Chief operating Officer, Steve Keller, Chief Financial Officer, Jay Hazelwood, Vice President Controller, and Michael Goldstone, Senior Vice President General Counsel and corporate Secretary.
Steve Keller: Now Steve will say a few words regarding forward-looking statements. Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risk and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31st, 2022, and in our other filings with the Securities and Exchange Commission. As indicated in our news release, we achieved annual revenues of $7.9 billion and net income of $347 million, or $4.15 per diluted share. In the fourth quarter, we achieved revenues of $2 billion and net income of $78 million, or $0.95 per diluted share. In addition, we are pleased to declare a cash dividend of $0.17 per common share.
Steve will say a few words regarding forward looking statements.
Certain statements. We make today are considered forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
These statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward looking statements.
Important factors that could cause actual results to differ materially.
As expressed or implied by such forward looking statements include but are not limited to those discussed in our annual report on Form 10-K for year ended December 31, 2022, and in our other filings with Securities and Exchange Commission.
As indicated in our news release, we achieved annual revenues of $7 9 billion and net income was $347 million or $4 <unk> per diluted share in.
In the fourth quarter, which had revenues of 2 billion and net income of $78 million or 95 cents per diluted share. In addition, we are pleased to declare a cash dividend of 17 cents per common share.
Rusty Rush: Throughout 2023, there was pent up demand for new commercial vehicles due to limited drug production over the past few years. Expected new Class A trucks, that pinup demand was largely fulfilled by the end of 2023. With respect to Class 4-7 commercial vehicles, demand remains solid. The manufacturers we represent were able to increase production throughout the year, which led us to significantly outpacing the industry with respect to new Class 4-7 commercial vehicle sales. Despite a challenging operating environment in 2023, caused by low freight rates and high interest rates, which led to great general softness in parts and service sales industry-wide, we were able to achieve healthy growth in aftermarket revenue. The growth was due primarily to our ability to support large fleets in strong demand from the diverse range of market segments we support, including our refuse, public sector, wholesale, and energy customers.
Throughout 2023, there was pent up demand for new commercial vehicles due to limited drug production over the past few years with respect to new class eight trucks that pent up demand was largely fulfilled by the end of 2023 with respect to the class four through seven commercial vehicles demand remains solid.
Actually we represent we're able to increase production throughout the year, which led us to a significant order.
I believe is significantly outpacing the industry with respect to new class four through seven commercial vehicle sales.
Quite a challenging operating environment in 2023 caused by low freight rates and high interest rates, which led to great general softness in parts and service sales industry wide, we were able to achieve a healthy growth for the aftermarket revenues.
The growth was due primarily to our ability to support large fleets and strong demand from the diverse range of market segments, we support including our refuse public sector wholesale and energy customers. In addition, our aftermarket revenues also increased due to the addition of 215 service technicians to our network.
Rusty Rush: In addition, our aftermarket revenue has also increased due to the addition of 215 service technicians to our network. Expanding our service technician workforce is a key aspect of a certain strategic initiative. Overall, we are very proud of both our operational and financial performance in 2023. In the aftermarket, our annual parts, service, and body shop revenues were $2.6 billion, up 8% over 2022 aftermarket results, and our annual absorption rate was 135.3. As I previously mentioned, we added 215 service technicians to our network last year, which enhanced our ability to execute on certain of our strategic initiatives, including express services, contract maintenance, and mobile service offerings.
Expanding our service technician workforce is a key aspect of it.
Certain of our strategic initiatives.
We are very proud of both our operational and financial performance in 2023.
In the aftermarket our annual parts service and body shop revenues were $2 6 billion.
Up 8% over 2022 after market results and our annual absorption rate was $135 three.
As I previously mentioned, we added 250 in service to diagnosis.
At work last year, which enhanced our ability to execute on certain of our strategic initiatives, including express services contract maintenance and mobile service offerings. We have also experienced healthy part sales growth from our energy revenues and leasing costs.
Rusty Rush: We also experienced healthy parts sales growth from our energy, refuse, and leasing customers. Looking ahead, we expect the challenging freight conditions and high interest rates will continue to impact our customers, and that aftermarket demand in the first half of 2024 will be similar to the second half of 2023. However, we are cautiously optimistic that the current freight recession may begin to ease in the summer.
Looking ahead, we expect the challenging break conditions and high interest rates will continue to impact our customers and then after market demand in the first half 2020 will be similar to the second half of 2023. However, we are cautiously optimistic that the current freight recession may begin to ease and sub.
Rusty Rush: In addition, we believe that our diverse customer base, our ability to support large national fleets, and our ongoing focus on our strategic aftermarket initiatives will allow us to outpace the aftermarket industry and to achieve flat to modest aftermarket growth in 2024. As previously stated, we experienced healthy demand from a variety of market segments. However, the pent-up demand in the Class A market has been satisfied.
In addition, we believe that our diverse customer base, our ability to support large national fleets and our ongoing focus on our strategic aftermarket initiatives will allow us to outpace the aftermarket industry and to achieve flat to modest aftermarket growth in 2024.
Turning to truck sales, we sold 17000 border seven new class eight trucks in 2023 accounting for a six 2% of the total U S class eight market and 2% of the class eight market in Canada.
Rusty Rush: ACT Research forecasts Class A retail sales to be 214,300 units in 2024, down roughly 22% from 2023. Though the industry is expecting new Class A truck sales to be down significantly in 2024 due to challenging economic and industry conditions, we are confident that we will be able to navigate a down year and outpace the industry in 2024 due to the strategic decisions we made in previous years to diversify our customer base and focus on vocational customers. Class 4-7 New Drug Sales reached 13,624 units in 2023, or 5.1% of the U.S. market and 2.9% of the Canadian market.
<unk> previously stated we experienced healthy demand from a variety of market segments. However, the pent up demand for the class eight market has been satisfied ACG research forecasts class eight retail sales to be 214300 units in 2044 down roughly 22% from 2023.
Though the industry is expecting new class eight truck sales to be down significantly in 2024.
Challenging economic and industry conditions, we are confident that we'd be able to navigate a down year and outpaced the industry in 2024 due to our strategic decisions. We made in prior years to diversify our customer base and focus on vocational customers.
Our class four through seven new truck sales reached 13644 units in 2023 or five 1% of the U S market.
Excuse me and two 9% of the Canadian market.
Rusty Rush: In addition to pent-up demand due to limited new mediability commercial vehicle production over the last few years, the manufacturers that we represent were able to increase production throughout the year. Those factors, along with our ongoing efforts to diversify our customer base and support large national accounts, allowed us to significantly outperform the industry in 2023. However, we're still experiencing delays from drug body companies.
In addition to pent up demand due to limited new medium duty commercial vehicle production over the last few years. The manufacturers that we represent we're able to increase production throughout the year.
Those factors along with our ongoing efforts to diversify our customer base escort and large national accounts allowed us to significantly outperform the industry in 2023.
We are still experiencing delays from truck body countries and these delays impacted deliveries during the fourth quarter, which limited our growth somewhat.
Rusty Rush: And these delays impacted deliveries during the fourth quarter, which limited our growth somewhat. ACT Research forecasts Class of 4-7 retail sales to be 254,250 units in 2023, up slightly from 2023 and 2022. As we look, excuse me, 2023, as we look ahead, we expect they will continue to see improvements in medium duty commercial vehicle production for the manufacturers we represent, and we expect customer demand to remain strong. If both of these things happen, we believe our class four through seven commercial vehicle sales will remain strong in 2024. Our used truck sales reached 7,117 units in 2023, relatively flat compared to 2022. Due to high interest rates and soft freight rates, demand for used trucks was weak, and used truck values declined throughout 2023.
ACD research forecast class four through seven retail sales.
To be 254250 units in 2023 up slightly from 2023 422, as we look to excuse me 2023 as.
As we look ahead, we expect they will continue to see improvements in the medium duty commercial vehicle production for the manufacturers, we represent and we expect customer demand to remain strong at both of these things occur we believe our class four through seven commercial vehicle sales.
Maine's strong in 2024.
Our used truck sales reached 70 117 units in 2023 relatively flat compared to 2022.
High interest rates are soft freight rates demand for used trucks was weak and used truck values declined throughout 2023.
Rusty Rush: In 2024, we expect that demand for used trucks will remain flat, but that the rate at which used trucks are depreciating will continue to decrease, and used truck values will stabilize somewhat over the course of the year. We are confident our diverse product mix and ability to move inventory throughout our network will help us to continue to effectively navigate the used truck market in 2024.
2024, we expect that demand for used trucks will remain flat.
The rate at which used trucks depreciated will continue to decrease and the used truck values will stabilize somewhat over the course of the year. We are confident our diverse product mix our ability to move inventory throughout our network will help us to continue continue to effectively navigate the used truck market in 2024.
Excuse me.
Rusty Rush: Looking ahead, we expect demand for Class 8 trucks to be soft, while demand for Class 4-7 commercial vehicles remains healthy. However, it should be noted that delays from body companies may continue to impact deliveries of new Class 4-7 commercial vehicles. We will continue to monitor freight rates, interest rates, consumer spending, and other economic factors that impact both commercial vehicle sales and aftermarket demand in our industry. Despite challenging market conditions, we are confident that the strategic decisions we've made in the past several years to diversify our customer base to support large national accounts and to add technicians to our workforce have us well positioned to perform in 2024. As always, it is important that I take a moment to thank our employees for their incredible work during 2023 and providing world-class service to our customers while staying focused on our company's long-term goals. With that, I'll take your question. Thank you. Ladies and gentlemen, as a reminder to ask the question, that's star 11.
Looking ahead, we expect demand for class eight trucks to be soft while demand for class four through seven commercial vehicles remains healthy it should be noted that delays from body companies may continue to impact deliveries of new class four through seven commercial vehicles, we will continue to monitor freight rates interest rates consumer spending.
Other economic factors that impact both commercial vehicle sales and aftermarket demand in our industry.
Despite challenging market conditions, we are confident that the strategic decisions. We've made in the past several years to diversify our customer base are supporting large national accounts and to add technicians to our workforce has us well positioned to perform in 2024.
As always it is important that I take a moment to thank our employees for their incredible work during 2023, and providing world class service to our customers, while staying focused on our company's long term goals.
With that I'll take your question.
Yeah.
Thank you, ladies and gentlemen, as a reminder to ask a question Thats Star one one.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Justin Long with Stevens. Your line is open. Thanks and good morning.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Justin Long with Stephens. Your line is open.
Okay.
Thanks, and good morning.
Justin Long: Good morning, Justin. Good morning, Rusty. So I guess to start with the parts and service business. You've talked about the divergence in the trends between national accounts and the smaller customers. I'm curious how those two buckets performed in the fourth quarter and just your general level of confidence on a net basis about the parts and service businesses. Well, I'm pretty confident, like I said in my notes, that we expect to remain at least as good as where we are. I didn't want to push it.
Good morning, Justin.
Good morning, Rusty so I guess to start with the parts and service business, you've talked about the divergence in trends between national accounts and the smaller customers I'm curious how those two buckets performed in the fourth quarter and just your general level of confidence on that.
On a net basis.
The parts and service business has bottomed.
Well.
Im pretty confident like I said in my notes, we would expect to remain.
At least as good as where we are I don't want to I didn't want to push it up I think I think there's room for growth in parts and service and you wanted to pay for it as I've said if it works.
Rusty Rush: I think there's room for growth in parts and service in 2024. As I said, if it works, we would just be pacing along where we were in the second half of the year in 2023. What I always love to do is break things down into parts and pieces, right?
Pacing, along where we were in the second half of the year in 2023 when.
When you look at it.
I always love to do is take it at the parts and pieces right at the end of the day you look at the small accounts right. We talked about this before the last six months last couple of calls the fact that for the year. They were down almost 12% now quarter wise I don't have that in front of me, but I know it started only off about 867% to 8% in Q1 through.
Rusty Rush: At the end of the day, you look at the small accounts, right? We talked about this before the last six months, and on the last couple of calls, the fact that for the year, they were down almost 12%. Now, quarter-wise, I don't have that in front of me, but I know it started only off about seven to 8% in Q1 and ramped up throughout the year. I've got to believe that Q4 was probably down somewhere in the 13% or 14% range. What we call those are unassigned accounts.
And ramped up throughout the year. So I've got to believe that Q4 was probably down somewhere in the 13% to 14% range and when we call those our unassigned accounts, but what you don't realize that sometimes those those accounts still make up 32% of our business. So when you look at what we did in <unk>.
Rusty Rush: What you don't realize is sometimes those accounts still make up 32% of our business. So when you look at what we did, and you talk about being down like that, really, you know, continuing to decline over the year, you know, you have to feel good about where you're at. Like I've said before.
Talk about being down like that.
Continuing to decline over the year, you got to feel good about where youre at like I've said before.
Rusty Rush: You know, maybe our margins were a hair softer because some of the shift, what we were doing, over to more national accounts, which obviously, you know, demand, you know, better prices, along with this one, their national accounts, right? So we were able to make up for that, you know, that's 32. A third of our business was down, probably, like I said. I don't have that fourth quarter right in front of me, but it was pushing 12 for the year. And I know it can climb more as the year goes on.
Maybe our margins were at herself because some of the shift what was the business. We are doing over the more national accounts, which obviously.
Demand a better pricing.
Along with us where they are national accounts right. So we were able to makeup.
Turning to the third of our business was down probably like I said I don't have it in the fourth quarter Revpar, maybe pushing 12 for the year and I know it can decline more than zero wells I got to believe it's in the 14% to 15% range.
Rusty Rush: So I have to believe it's in the 14 to 15% range in Q4, right? So, you know, you got to feel good about where we're at, the focus that we've had, and it's not just over the road customers, right? When I talk about, you know, the diversity of our customer base, I'm very proud of what we've done by putting a focus individually on each of these sectors, you know, assigning people at the highest corporate level for the mid-level to assign. We have over 300 And while they focus on some of their, you know, their local mid-size accounts, we have really put the pressure on the national accounts. And when you do that, you've got to, you know, you have to form relationships with both the high end of the corporation all the way down to the street level in the individual areas that, you know, they have terminals or they have, you know, shops or whatever they have, whatever business they're in across the network.
Q4, right so.
You got to feel good about where we are at the focus that we've had and it's not just over the road customers right with what I talked about the diversity of our customer base I'm very proud of what we've done by putting a focus individually on each of these sectors.
Signing people at the highest corporate level from the mid level. Two aside we have over 300, plus outside parts and service salespeople and while they focus on similar their local mid size accounts, we have really put a push on to.
The national accounts and when you do that you've got to you have.
The former relationships at both the high end of cooperation all way out to the street level on the individual areas that they have terminals or they have.
Our shops or whatever they have whatever business they ran across the network. So.
Rusty Rush: So, you know, that allowed us to achieve an 8% growth rate with it being down 12% on a third of your business. So you can see, you know, you can, you can extrapolate what, you know, how good, how well, what that meant to the company, right? That's why we're, why it was a little softer because, you know, the other side accounts are your small accounts, and they're a little higher-margin accounts, right? But we were able to overcome them with, you know, I'd like to say overcome a third of your business being off 12% by the focus that we had. So, you know, and we don't see that changing. So, when the small guy does come back, you know, you've got to feel real good about where you're going to be when it pivots back the other direction, which you've got to believe.
With that that allowed us to achieve an 8% growth rate with it being down 12% on a 30 year business. So you can see.
You can extrapolate.
What have you.
What that net to the company right. That's why it was a little softer because.
We are assigned accounts of your small accounts and they are a little higher margin accounts.
But we were able to overcome them with.
I'd like to say, okay overcome a third of your business being up 12% by the focus that we had so.
We don't see that changing so when the small guy does come back.
<unk> got to feel real good about where youre going to be what that does when that when that would happen.
Pivots back the other direction, which you've got to believe we've been in a freight recession for water year to have two years, almost and it seems like.
Rusty Rush: We've been in a freight recession for, what, a year and a half, two years, it seems like. While the country's been doing decently well, the freight market, as you know, all you've got to do is read all the reports, has been under a lot of stress here this last year. That's helpful. And the national accounts, do you have a number on how much they were up for the full year just to compare that to what you're seeing with the unassigned accounts? Yeah, they were up in the high teens to around 20, you know, somewhere between 18 and 20.
<unk> been doing decently well the freight market is you read all the reports has been under a lot of stress here this last year as well.
That's helpful on the National accounts do you have a number on how much they were up for the full year just to compare that to what youre seeing with the unassigned accounts.
Yes, they were up in the high teens to around 20% somewhere between 18 and 20 I don't again I don't have the total number of which the stores we're talking about.
Rusty Rush: I don't, again, I don't have the total number of stores we're talking about, but, you know, they were up somewhere in that. And, you know, I can break it into so many different segments too because we've still got a lot of mid-sized customers too. You know, national accounts are, while they're the largest growing thing we have going on, we still have a lot of mid-sized customers that, you know, we forget about them. They're a piece of it also. So you've got roughly 32% in the small business, and you've got about 28% we would call national accounts, okay, of our business. So the other 40% is really that middle bucket, which is the largest bucket we touch, right?
They were up somewhere in that I can point, we break it into so many different segments too.
Because we still got a lot of midsized customers too.
On the gas there.
The largest growing thing we have going on we still have a lot of mid global midsize customers. We forget about the therapy, but also so you've got roughly 32%.
And the small and you've got about 28%, we've got national accounts, Okay of our business. So the other 40% is really that middle bucket.
Which is the largest bucket we tax rates so.
Rusty Rush: So, you know, that diversity of customers is, you know, really what's allowed us to navigate what has been a rough, rough time for a lot of our customer bases. And that focus on vocational training, right? When I talk about refuse being up, and I talk about, you know, oil and gas being up, and our wholesale business still being up, and municipal being up, all these other areas are up, okay? And regardless of whether they're national accounts or mid-level accounts, we break it into a lot of different buckets. But those are the areas that have allowed us to overcome, with 32% of your customers are off 12% and still post a positive year. Got it.
Diversity.
Of customers is really what's allowed us to navigate what.
What has been a rough rough time for a lot of our customer basis and that focus on vocational right. When I talk about revenues, but I'd talk about oil and gas being up at our wholesale business still being municipal being up all of these other areas.
Okay.
Regardless of whether they are national accounts or mid level gas, we break it into a lot of different buckets, but those are the areas that have allowed us to overcome with.
With 32% of your customers are up 12% and still posted a positive year.
Got it and I was wondering too if you could share anything on expectations for the first quarter, maybe truck sales parts and service and Steve I know typically you see an uptick in G&A. So maybe some thoughts there as well.
Rusty Rush: And I was wondering, too, if you could share anything on expectations for the first quarter, maybe truck sales, parts, and service. And Steve, I know typically you see an uptick in GNA, so maybe some thoughts there as well. Yeah, well, the first quarter is always, you know, G&A goes up. We didn't put it in the releases here, we put it in the releases for the last 25 years, but nothing's changed, right? You know, all the equity comp and taxes and all that ramp back up and get expensed out in the first quarter.
Yes, well first quarter is always G&A.
G&A goes up we Didnt put it in our release this year, we've put in over the last 25 years.
Nothing has changed right.
The equity comp and taxes, and all that ramp back up and get expense out in the first quarter and that is natural for our business. You can go back and model. It every year. So we definitely expect that from a truck sales perspective.
Rusty Rush: And that is natural for our business; you can go back and model it every year. So we definitely expect that from a truck sales perspective. We are going to start declining, okay? There's no question that, you know, everyone knows, we've known it for a couple of years, that 2024 was gonna be a little bit soft due to, and no one expected 23 to be as big as it was, you know, with all the demand, the pent-up demand. But the key thing on the truck sale side is this is nothing that we didn't expect, but we're not expecting. ACT has it down about 22%.
We are going to start declining.
There's no question.
Everyone knows we've noted for a couple of years, the 2024 was going to be a little bit soft.
And no one expected 'twenty three to be as big as it was while the demand the pent up demand, but the key thing and the truck sales side is this is nothing that we didn't expect we're not expecting ACD as it added about 22%.
Rusty Rush: And I'm going to agree with that. I don't expect it to be down 22% in Q1. But I do expect it to be softer.
And I'm going to agree with that I don't expect it to be down 22% in Q1, but I do expect it to be softer than we expected to do better by the way given the diversity of our customer base right.
Rusty Rush: And we expect to do better, by the way, given the diversity in our customer base, right? But I can tell you that the over the road business is going to be down more like 30 percent plus for the whole year. But the key thing is we've got 25 and 26 coming. With EPA regulations of January 1 or 27, there will be, I'm guessing, as we get to the back half of this year, folks are going to wake up and realize that they are probably going to free buy at $25 and $26, given they get their feet under.
The over the road business is going to be more like 30, plus for the whole year I believe but the key thing is we've got 25 and 26, Kevin with EPA regulations in January one of 2007, there will be.
Im guessing as we get to the back half of this year folks who are going to wake up and realize that they are probably going to free by 'twenty five 'twenty six given.
Not just the new technology, but.
I won't get into a price pricing what the engines are going to cost to go up by January one of 2007 with all the new aftermarket Patrick or excuse me after treatment systems are going and where youre putting into play to meet the new EPA regulations. So as we believe the freight market will go back, Illinois business is still the biggest piece of volume out there so not in Russia.
Rusty Rush: I would expect some, you know, a pre-buy to start possibly in the back quarter toward the back half of this year if folks realize what the cost and stuff will be around that equipment. From an aftermarket perspective, yeah, I said the first half would be flat when I went through it a minute ago. I have hopes that we're up slightly, but I don't want to put that out there. I think some of the initiatives we have are still, we keep rolling them out, and we still haven't come to fruition on a lot of the ones that we have rolled out over the last couple of years. So, you know, I got to believe that we're still greenly focused on, you know, remember we're also battling less inflation, okay, regardless of the report yesterday. Overall, obviously, replacement is not what it was two years ago or even the first half of last year.
With the work they were $50 50, right between locations on that but in the real market is still the biggest piece.
<unk>.
Those folks as they can just get get their feet underneath them here, it's been a long year and a half or two like I said.
They get their feet under.
I'd expect some pre buy to start possibly in the back quarter toward the back half of this year as folks realize what the cost will be around that equipment from an aftermarket perspective, yes, I said the first half would be flat when I went through it a minute ago.
I have hopes that were up slightly.
Bottom, we'll put that out there I think some of the initiatives we have are still.
Keep rolling them out and we still haven't come to fruition and allow the ones that we have rolled out over the last couple of years. So.
I got to believe that we're still extremely focused on.
Remember, we're also battling less inflation, okay, regardless of the report yesterday overall, obviously replacement is not what it was two years ago or even the first half of last year.
Rusty Rush: So we're, you know, it'll be real growth. It'll be taking share. That's what we focus on every day.
So it.
There'll be real growth that will be taking share. That's what we focus on every day, we get up in the parts and service business is to take share.
Rusty Rush: We get up in the parts of the service business to take a share. So, you know, I've got to believe that we're going to be, like I said, I wrote, I said flat. I have hopes to do way better or a little better. You know, I'd love to say I could be, you know, low to mid staggles up for the year, but you know, it's not as easy to look at as it was the last couple of years, right? It's a day-to-day hand combat game.
I've got to believe that we're going to be like I said, I said flat I have hopes to do way better or a little better.
I'd love to say I can be.
Low to mid singles.
For the year, but us.
Yes.
It's not as easy to look at it as it was the last couple of years right.
Day to day hand to hand combat type work.
Rusty Rush: But I have all the confidence in the world, as I always do, and I think the results will bear that out for the organization and our strategic initiatives that we've laid out there and what we're focused on as a group so that we can execute on those, right? I like to believe that we have executed in the past, and we'll continue to execute as we go forward, regardless of what the truck sales market is. I can't make a truck market, but I expect to do better. I don't want to, I'm not going to guarantee it, but I expect to do better than 22%.
But I have all the confidence in the world.
And I think the results bear that out of the organization and our strategic initiatives that we've laid out there and what we're focused on.
As a cohort as a group so that we can execute on those right I'd like to believe we've executed in the past and will continue to execute as we go forward regardless of what the truck sales market I can't make a truck market, but I expect to do better I don't want to im not going to guarantee that I expect to do better than 22% I can promise you that.
Rusty Rush: I can promise you that. But, you know, that's going to be, we're working on it every day. You don't have the leap times.
But that's going to be.
Working that every day you don't have the lead time, if you don't have allocation like yet that's not out there anymore. So it's not like I've got a year long backlog of trucks. So.
Rusty Rush: You don't have allocation like you had. That's not out there anymore. So it's not like I've got a year-long backlog of trucks. So, you know, I'll still sell most of them to you. I can still sell you trucks, and if you don't sell them in Q2, I'll get you some. So, you know, that's just where we're at. We're back to normal times, okay? Let's just say that when it comes to truck sales. I do think we'll be back on allocation this time almost next year. That I can, you know, I do believe that will come to pass. Whether it's February, whether it's, you know, April of next year, I can't tell you, but there's no doubt in my mind that we'll be going back to an allocation market in 25. I got it.
You'll say, yes.
Most of it I can still sell your proxy and you also in the Q2 I'll get yourself. So that's just where we're at we're back to normal times. Okay. Let's just say that when it comes to drug sales I do think we'll be back on allocation. This time almost next year that I can I do believe that will come to pass whether it's whether it's February or whether it's paid off.
April of next year I can't tell you, but there is no doubt in my mind, it will be going back to an allocation market.
25.
Got it and last one from me Rusty you've talked about earnings expectations and free cash flow expectations in the trough in 2020 for any change to your outlook there.
Rusty Rush: And last one for me, Rusty, you've talked about earnings expectations and free cash flow expectations and the trough in 2024. Any change to your outlook there? None whatsoever.
None whatsoever.
Rusty Rush: I don't take back anything I've said in the last couple years. Okay. And as usual, you know, we're focused on. I like to over deliver. How about that?
Take back anything I've said, the last couple of years ago and as usual we're.
Focused on.
I would like to over deliver about that.
Justin Long: I like it. I'll leave it there. Thanks, Rusty. Thanks, Steve.
I like it I'll leave it there thanks for asking.
Operator: Please stand by for our next question. Our next question comes from the line of Andrew Obin with Bank of America. Your line is open. Hey, Rusty. How are you?
Thanks, Nick.
Please standby Corral next question.
Our next question comes from the line of Andrew <unk> with Bank of America. Your line is open.
Andrew Burris Obin: Good morning. Well, good morning, Mr. Obin. Are you calling the bottom of the cycle? Because that's what you're, you know, it's and have you called? I don't think you've called the bottom of the cycle before. It seems that you're basically saying the cycle will bottom sometime around the summer. Yeah, I think so. I think we're, you know, you're gonna have a little carryover. You know, when it comes to truck sales, okay, I'm not talking about the aftermarket business; the aftermarket business is totally different. But when it comes to class A truck sales, I think that, you know, the summer is going to be a little more difficult than what we've experienced. You know, there's some carryover to Q1 from finishing up the year. Remember, we're at the end of the train. We don't manufacture them; we deliver them. A lot of times, trucks take bodies and things like that, and it could be up to 60 to 90 days for those trucks to get delivered to our customer base, especially on the vocational side.
Hey, how are you good morning.
Well good morning, Mr. Owen.
Are you, calling the bottom of the cycle because that's what you get out.
Have you call I don't think you've called the part of the cycle before it seems like Youre basically saying cycle will bottom sometime around this summer.
Yes, I think so I think where youre going to have a little carryover.
When it comes will drop back truck sales, so again I'm not talking about aftermarket business aftermarket business totally different but when it comes to class eight truck sales.
I think that.
The summer is going to be a little more difficult than.
And what we have experienced some carryover into Q1 from.
Finishing up the year remember we're at the end of the frame, we don't manufacturer and we deliver a lot of that instruct state bias and things like that and it can be up to 60 to 90 days for those products get delivered to our customer base, especially on the vocational side. So yes, I would tell you that.
Rusty Rush: So, yes, I would tell you that, you know, a little trough for us in Class A deliveries will probably be sometime this summer. But again, like I said, I do expect the freight market cannot continue to be as rough as it's been the last couple of years. So, you know, I would expect that to pick up and, along with the, you know, EPA emission laws of 27, January 1 of 27, I do firmly believe will be a pre-buy. Without question, I don't think most people expect 2026 to be the biggest year in history, you know, given decent economic conditions overall in the country, right?
It'll trough for us and class eight deliveries will probably be sometime this summer.
Again like I said.
Expect.
The freight market cannot continue I don't believe to be as referenced has been the last couple of years. So.
I would expect that to pick up right along with what they are.
EPA emission laws of 27 January one of 'twenty.
And we believe will be a pre buy.
Without question.
Most people expect 126 to be the biggest year in history.
Even decent economic conditions overall in the country right. So yes, I mean I would tell you that gross sales will be softer in the second in the summer.
Rusty Rush: So yeah, I mean, I would tell you that truck sales will be, you know, softer in the second half, in the summer, in Q2 and Q3 than what we have seen. But again, you know, we believe, you know, when I say 22%, I think the majority of it will be in the summer, yes. But, you know, I expect to start bouncing back by the end of the year. Excellent And can you just remind us when is the use pricing bottoming? And is it? I wish I, Andrew, if I could tell you that you might even give me a raise, okay? Which I would gladly take. But anyway,
Into Q2 and Q3.
And then what we haven't seen but again.
We believe I'd say, 22%.
I think the majority of it will be in summer yes.
Hi.
To start bouncing back by the end of the year.
Excellent.
Can you just remind us what is used pricing bottoming.
And is it I wish I think Andrew if I can tell you that.
Maybe you can give me a raise okay.
Gladly take.
Rusty Rush: I think you're doing fine, Rusty. I think you're doing fine as it is. I would agree with that. I'm probably overplayed.
But any.
I think a very fine as it is.
I would agree with that that probably overplayed.
Rusty Rush: Did I say that? Okay. Thank you. No, Andrew, I'll tell you, I will say this: the decline and use truck pricing has continued. Well, it is not as dramatic as what it was a year and a half ago, but it is still declining more than normal. I think our average used truck price was like $53,000. I see. And when you look at the average, and if you go back to 19 or, I think it was in the high 40s or something like that, 47, 48.
Did I say that okay.
Got it.
No Andrew.
I will say this use the decline in used truck pricing has continued.
Wow.
Is not as dramatic as what it was.
Here at App ago.
It is still declining more than normal I think our average used truck price was like 53000 IC.
When you look at average if you go back to.
19, or was <unk> or something like that 47 48.
Rusty Rush: So you got to believe with inflationary of what trucks cost now, that spread has gotten, It's only so far it could go. But the problem is that pricing is one thing, and demand is the other, right? And when you've got spot markets, which are the main driver of used truck values, in such rough shape and down so much, it's still... And it'll happen quick when it happens, you watch. I can't tell you when, though, because that means I guess they don't get my race, but exactly when.
You got to believe with the inflationary what trucks costs now.
He has gotten.
I was only so far it can go but the problem is it pricing is one of the thing demand as the other right.
When you've got spot markets, which was the main driver of used truck values and a sex rough shape and down so much it still.
Okay.
And it will happen quick when it happens you watch.
Can't tell you with though.
I guess, they don't give my raise but exactly where but I would tell you I got to believe sometime before the year's out but I don't look forward in the next.
Rusty Rush: But I would tell you, I have got to believe sometime before the year's out, but I don't look forward to the next. You know, it'll continue to decline at a faster rate, but not as fast as it was declining. There's still trucks being put on the market. I've heard of a couple of batches this week, you know, in big numbers, that people are trying to unload, which puts pressure on it, you know, puts pressure on the market.
It will continue to decline at a faster rate, but not as fast as it was declining.
<unk> being put on the market over of a couple batches this week and.
In big numbers.
Okay.
Downloads, which puts pressure on it puts pressure on the market, but the most important thing is to create demand.
Rusty Rush: But the most important thing is to create demand, which means you got to get the spot market back. You've got to have some of these others, you know, this over the road business spot market back to really stabilize it and make it come, you know, to make these drug values go up again. It's still decelerating faster than what I would say normal percentages are. Just a question, in terms of macro, and I always love asking this question just because you have great systems.
Means you got to get the spot market back you've got to have some of these others over the road business spot market back to really stabilize it and make it can.
Can make used truck values go up again.
Scott, it's still it's still.
Decelerating faster than what I would say normal percentages are.
Alright.
Just a question in terms of macro and I always I've asked me. This question just because you have great systems.
Rusty Rush: Can you just take us around the country, just by region? How is the economy holding up relative to your expectations? Maybe six weeks ago, and I know that it's only six weeks, but you do have some of the best systems of anybody I cover. Just maybe you can take us around the country and tell us what Rusty Rush's 30,000 foot view of the U.S. economy would look like. Well... Obviously, the biggest concentration we have would be in Texas, right? And Texas is doing just fine. Okay, our Texas stores are still, you know, the state's still growing. It's one of the fastest growing states in the nation.
Can you just take us around the country because by region how.
As the economy holding up relative to your expectations, maybe six weeks ago.
Now that it's only six weeks, but you do have some of the best systems of antibody I cover just maybe you can take us around the country and tell us what's the rest of the rushes.
30000 foot view of the U S economy.
Well.
Obviously, our biggest concentration we have would be in Texas right.
Texas is doing just fine.
Our Texas stores are still the states still growing.
No our highest growing states in the nation.
Rusty Rush: And from both the population and the business perspective, you know, business is still coming in here. Florida is doing great. Where are we going to go? We're getting through, I would tell you, a little softer maybe. Larry in Ohio, I think.
And.
From both population in our business.
Perspective for business is still coming in there.
Florida is doing great.
We've got to we're.
We're getting through I would tell you a little softer maybe lately.
Clearly in Ohio, I think but I think Illinois is decent and doing well.
Rusty Rush: And but I think Illinois is decent and doing well. You know, if we go out west, California is still in good shape. I do, you know, I worry about California with the new 24 car blogs that came in by the time we get to the back half of the year, they may be suffering on the truck sale side. Right now, they're doing fairly well. But we, you know, we made sure to have some inventory and things like that to carry over into the market out there. Well, Oklahoma is still going strong. Arizona is decent. So it's pretty decent across the border. Like I said, a little softness in a state or so. And really, probably in Ohio, for whatever reason, I've noticed it is a little softer up there recently.
We go out West, California is still in good shape.
Do I worry about California, with the new 24 car blows. It came in at about that we get in the back half of the year that may be separately on the truck sales side right now they are doing fairly well.
We made sure to have some inventory things like that to carry over into the markets.
Out there.
Oklahoma is still growing strong.
Arizona is decent.
So pretty decent across the board like I said, a little softness.
Or so.
It really is in Ohio for whatever reason I've noticed is all software up there recently, but I don't expect that to hold up I expect that to come back.
Rusty Rush: But I don't expect that to hold up. I expect it to come back. So I hope that gives you some. I don't know if you're talking about geographic markets, but other markets, you know, breaking it out into, you know, construction, is better. You know, that's what we hope will help keep the order board better with the hits that we're seeing in the road business, both for the large customer and for the small person, which we know are pretty much out right now. We're not in the mix. But, you know, refuse is really going strong, and construction is doing extremely well.
So I hope I can answer.
Go ahead.
I'd like to look at our markets.
Geographic markets, but the other markets.
Breaking it out in a good market.
Construction.
He is better that's what we hope will help keep the waterborne better with the hits.
Hits that we're seeing.
On the overall business, both from a large customer and for the small person, which pretty much right now.
Out of our mix.
But revenues is really going strong.
Construction is doing extremely well.
Rusty Rush: Municipal business is holding in strong, you know, moderate growth rates, as I said earlier, and we expect that to continue. You know, it's like I said, the hardest thing we've got going is the small customer, right? That's why when the small customer does come back into the railroad business, we're going to be in really good shape because we haven't overcome that one third of our business being off double digits. So, you know, that will bring back, and I don't expect vocational to continue to be strong, given, you know, the government monies that are out there that are being spent right now. So, you know, look, 24 is not going to be what 23 was.
Municipal business is holding strong neuro moderate growth rates as I said earlier, and we expect that to continue.
Like I said the hardest thing we've got going is the small cost correct. That's why when the small customer does come back and railroad business, we're going to be in really good shape.
Because we're having overcome at one third of our business being up double digits. So.
That will bring back an idle I expect vocational to continue to be strong given the government monies that are out there that are being spent right now so.
Look 24, it's not going to be with 23 was but at the same time.
Rusty Rush: But at the same time, It's gonna be, I'll stick to my guns, as I was asked earlier by Justin about what I've said in the past, will still execute, you know, the truck market. I can't make the truck market, but I'm doggone sure to take share and grow in the after market. And that's the goal of the organization. That's the highest profitable, most profitable business we can do. So if I were to summarize it, the truck market is bottoming out, the economy is solid, and Rush Enterprises is doing well.
It's going to be a.
I'll stick to my guns as I was asked earlier by Bob.
By just about what I've said in the past as to will still execute.
The truck market I can't make truck market by Belgian insurer can take share and grow in the aftermarket and that's the goal of the organization.
The problem with most proppant business, we do.
So if I were to summarize it truck market is bottoming economies solid rush enterprises is executing is that a fair summary.
Rusty Rush: Is that a fair summary? That's what we like to think, you know, I guess the proof of that's been the numbers, but, you know, I think we've had a really good year, right, in 20, and what we did in 21, what we did in 22, what we did in 23, we're going to execute really well, I believe, inside of the 24 market with a 20 plus percent class A decline. Maybe not by us, though, you know; maybe we're better than that.
That's what we like to think.
I guess the proof of it has been.
But.
I think we've had.
Even going back to Covid year Rag in 'twenty and what we did in 'twenty one what we didn't want to what we did 23, we're going to execute really well I believe inside of up to 24 market with a 20 plus percent class a decline.
Maybe not so maybe we are better than that I don't want to guarantee anything, but I would like to see us only be half of that but I can't guarantee that because I'm still can build yourself.
Rusty Rush: I don't want to guarantee anything, but I'd like to see us only be half of that, but I can't guarantee that, because I can still build you something. You know, it's still a moving target, right? We're back to normalized times. We have to get out of this allocation world we lived in. And so, you know, everybody's got to sharpen up their tools and go to work and get out there and take some shares because the company is a little more competitive in the environment. But, you know, we've always been able to do that. In my view, you guys can build a high-quality organization.
It's still a moving target right. We're back to normalized times will get out of this allocation world We live in.
So everybody's got to sharpen up sharply.
Sharpen up their tools and go to work.
There and take some share to the company a little more.
Relative to the environment.
We've always been able to do that.
No.
We will get a high quality organization.
Rusty Rush: Thanks a lot. Thank you, Andrew. I appreciate it. Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Rusty for closing remarks. Yes, I want to thank everybody for joining us this morning, and we will see you in mid-April, and you and your loved ones have a happy Valentine's Day. Thank you very much. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Thanks for watching!
Thanks, a lot. Thank you Andrew.
<unk>.
Thank you.
Ladies and gentlemen, I'm showing no further questions in the queue I would now like to turn the call back over to Rusty for closing remarks.
Yes, I want to thank everybody for joining us this morning, and we will see you in mid April at junior level ones have a happy Valentine's day. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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Okay.
Yes.
Sure.
Sure.
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