Q2 2024 PACCAR Inc Earnings Call

Operator: Good morning and welcome to PACCAR's Q2 2024 earnings conference call. All lines will be in a listen-only mode until the question and answer session. Today's call is being recorded, and if anyone has any objections, 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 Paccor's second quarter 2024 earnings conference call. All lines will be in a listen-only mode until the question and answer session. Today's call is being recorded and if anyone has any objections they should disconnect at this time.

Operator: All lines will be in a listen-only mode until the question and answer session. Today's call is being recorded, and if anyone has any objections, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCOR's Director of Investor Relations. Mr. Hastings, please go ahead.

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

Ken Hastings: Good morning. We would like to welcome those listening by phone and those watching the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations. And joining me this morning are Preston Fite, Chief Executive Officer; Harrie Skippers, President and Chief Financial Officer; and Bryce Poplosky, 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 that may affect expected results. For additional information, please see our SEC filings and the Investor Relations page at paccor.com. I would now like to introduce Preston Fite.

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 Poplosky, 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 that may affect expected results. For additional information, please see our SEC filings and the Investor Relations page at PACCAR.com. I would now like to introduce Preston Feight.

Speaker Change: Good morning. We would like to welcome those listening by phone and those on the webcast.

Ken Hastings: My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Fite, Chief Executive Officer, Harrie Skippers, President and Chief Financial Officer, and Bryce Poplosky, Vice President and Controller.

Ken Hastings: 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 that may affect expected results. For additional information, please see our SEC filings and the Investor Relations page at paccor.com.

Preston Feight: Well, good morning. Harry, Bryce, Ken, and I will update you on our excellent Q2 financial results and business highlights. I'd like to start by saying thank you to PACCAR's great employees who provide our customers with the best trucks and transportation solutions in the world. They are really an impressive group of people. PACCAR's excellent revenues of $8.8 billion and net income of $1.12 billion were due to the strong performance of truck and parts operations around the world. PACCAR Parts' Q2 revenues increased to $1.7 billion. Parts pre-tax profits were $414 million, with 30.3% gross margin. PACCAR Financial achieved good pre-tax income of $111 million, and truck, parts, and other gross margins were a very strong 18% in Q2. Looking at the US and Canadian truck market, the vocational segment, where Peterbilt and Kenworth are the market leaders, remain strong with continued infrastructure investments.

Preston Fyte: I would now like to introduce Preston Fyte.

Preston Fite: Harry, Bryce, Ken, and I will update you on our excellent second quarter financial results and business highlights. But I'd like to start by saying thank you to Paccor's great employees, who provide our customers with the best trucks and transportation solutions in the world. They are really an impressive group of people.

Preston Fite: Well, good morning. Harrie, Bryce, Ken, and I will update you on our excellent second quarter financial results and business highlights.

Preston Fite: Paccor's excellent revenues of $8.8 billion and net income of $1.12 billion were due to the strong performance of truck and parts operations around the world. Parts second quarter revenues increased to $1.7 billion. Parts pre-tax profits were $414 million with a 30.3% gross margin.

Preston Fyte: I'd like to start by saying thank you to Paccor's great employees who provide our customers with the best trucks and transportation solutions in the world. They are really an impressive group of people.

Preston Fyte: Paccor's excellent revenues of $8.8 billion and net income of $1.12 billion were due to the strong performance of truck and parts operations around the world.

Preston Fyte: Parts second quarter revenues increased to 1.7 billion dollars. Parts pre-tax profits were 414 million dollars with 30.3% gross margin.

Preston Fite: Financial achieved good pre-tax income of $111 million, and Truck Parts and Other Gross Margins were a very strong 18% in the second quarter. Looking at the U.S. and Canadian truck market, the vocational segment, where Peterbilt and Kenworth are the market leaders, remains strong with continued infrastructure investment. The less-than-truckload market is also performing well, while being offset by a truckload segment where rates remain soft. Kenworth and Peterbilt's first half share grew significantly to 31.5%, up from 27.7% in the same period last year.

Preston Fyte: Paccor Financial achieved good pre-tax income of $111 million.

Preston Fyte: And truck, parts, and other gross margins were a very strong 18% in the second quarter.

Preston Fyte: Looking at the U.S. and Canadian truck market, the vocational segment, where Peterbilt and Kenworth are the market leaders, remains strong with continued infrastructure investments.

Preston Feight: The less-than-truckload market is also performing well, while being offset by a truckload segment where rates remain soft. Kenworth and Peterbilt's first-half share grew significantly to 31.5%, up from 27.7% in the same period last year. We estimate this year's US and Canadian Class 8 market to be in a range of 240,000 to 280,000 trucks. Demand for medium-duty trucks continues to be strong. Kenworth and Peterbilt have increased their medium-duty market share in the first six months this year to 17.3%, compared to 12.8% in the same period last year. In Europe, economies in the truck market are softer this year. DAF's premium new trucks provide customers with the latest technology and the best operating efficiency. We project the 2024 European above-16-ton market to be in a range of 260,000 to 300,000 trucks. South America is a region of PACCAR's geographic growth.

Preston Fyte: The less-than-truckload market is also performing well, while being offset by a truckload segment where rates remain soft.

Preston Fyte: Kenworth and Peterbilt's first half share grew significantly to 31.5%, up from 27.7% in the same period last year.

Preston Fite: We estimate this year's U.S. and Canadian Class VIII market to be in a range of 240,000 to 280,000 trucks. Demand for medium-duty trucks continues to be strong. Kenworth and Peterbilt have increased their medium-duty market share in the first six months of this year to 17.3%, compared to 12.8% in the same period last year. In Europe, economies and the truck market are softer this year.

Preston Fyte: We estimate this year's US and Canadian Class 8 market to be in a range of 240 to 280,000 trucks.

Preston Fyte: Demand for medium-duty trucks continues to be strong. Kenworth and Peterbilt have increased their medium-duty market share in the first six months this year to 17.3%, compared to 12.8% in the same period last year.

Preston Fite: Dots' premium new trucks provide customers with the latest technology and the best operating efficiency. We project the 2024 European above 16 ton market to be in a range of 260 to 300,000 trucks. South America is a region of PACCAR's geographic growth. Doc Brazil increased its market share to 10.3% in the first six months of this year, compared to 9.2% a year ago.

Preston Fyte: In Europe , economies and the truck market are softer this year.

Preston Fyte: Dot's premium new trucks provide customers with the latest technology and the best operating efficiency.

Preston Fyte: We project the 2024 European above 16 ton market to be in a range of 260 to 300,000 trucks.

Preston Fyte: South America is a region of PACCAR's geographic growth. DOF Brazil increased market share to 10.3% in the first six months of this year, compared to 9.2% a year ago.

Preston Feight: DAF Brazil increased market share to 10.3% in H1 this year, compared to 9.2% a year ago. DAF trucks are highly desired by customers in South America. Over the last few quarters, we've been updating you on the progress of a battery joint venture that PACCAR formed with Cummins, Daimler Truck, and EVE Energy. This joint venture, named Amplify Cell Technologies, will produce state-of-the-art batteries that are specifically designed for commercial vehicle duty cycles. Amplify Cell Technologies began construction of the new factory in Q2. PACCAR continues to demonstrate strong performance through all phases of the business cycle and is expanding its global manufacturing capacity as we are excited about the future. Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harrie?

Preston Fite: Doff trucks are highly desired by customers in South America. Over the last few quarters, we've been updating you on the progress of a battery joint venture that Paccor formed with Cummins, Daimler Truck, and EVE Energy. This joint venture, named Amplify Cell Technologies, will produce state-of-the-art batteries that are specifically designed for commercial vehicle duty cycles. Amplify Cell Technologies began construction of the new factory in the second

Preston Fyte: Doff trucks are highly desired by customers in South America.

Speaker Change: Over the last few quarters, we've been updating you on the progress of a battery joint venture that Paccor formed with Cummins, Daimler Truck, and EVE Energy.

Speaker Change: This joint venture, named Amplify Cell Technologies, will produce state-of-the-art batteries that are specifically designed for commercial vehicle duty cycles.

Speaker Change: Amplify Cell Technologies began construction of the new factory in the second quarter.

Ken Hastings: Paccor continues to demonstrate strong performance through all phases of the business cycle and is expanding its global manufacturing capacity as we are excited about the future. Harrie Schippers will now provide an update on Paccor Parts, Paccor Financial Services, and other business highlights. Harrie? Thanks, Preston.

Speaker Change: Paccor continues to demonstrate strong performance through all phases of the business cycle and is expanding its global manufacturing capacity as we are excited about the future.

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

Harrie Schippers: Thanks, Preston. PACCAR delivered 48,400 trucks and achieved excellent truck parts and other gross margins of 18% in the second quarter. We estimate third quarter deliveries to be around 43,000 to 44,000 trucks with strong truck parts and other gross margins of around 17%. The third quarter delivery estimate reflects normal truck markets and the regular summer production shutdown in Europe. PACCAR Parts achieved excellent second quarter gross margins of 30.3%. Parts quarterly sales grew by 4% compared to the same period last year and is expected to grow around 4% for the rest of this year. PACCAR Parts' focus on expanding its customer base and providing a full range of transportation solutions is enabling solid revenue growth in a softer after-sales market. PACCAR Parts opened a new distribution center in the country of Colombia in the second quarter and will open another distribution center in Germany later this year.

Harrie C. A. M. Schippers: Packard delivered 48,400 trucks and achieved excellent truck parts and other gross margins of 18% in the second quarter. We estimate third quarter deliveries to be around 43 to 44,000 trucks, with strong truck parts and other gross margins of around 17%. The third quarter delivery estimate reflects normal truck markets and the regular summer production shutdown in Europe.

Harrie C. A. M. Schippers: Paccor delivered 48,400 trucks and achieved excellent truck parts and other gross margins of 18% in the second quarter.

Harrie C. A. M. Schippers: We estimate third quarter deliveries to be around 43,000 to 44,000 trucks, with strong truck parts and other gross margins of around 17 percent.

Harrie C. A. M. Schippers: The third quarter delivery estimate reflects normal truck markets and the regular summer production shutdown in Europe .

Harrie C. A. M. Schippers: Paccor Parts achieved excellent second quarter gross margins of 30.3%. Paccor's quarterly sales grew by 4% compared to the same period last year and are expected to grow around 4% for the rest of this year. Paccor Parts' focus on expanding its customer base and providing a full range of transportation solutions is enabling solid revenue growth in a softer after-sales market. Packer Parts opened a new distribution center in the country of Columbia in the second quarter and will open another distribution center in Germany later this year.

Pekka Parts: Parts achieved excellent second quarter gross margins of 30.3 percent.

Bart: Parts quarterly sales grew by 4% compared to the same period last year.

Bart: And it's expected to grow around 4% for the rest of this year.

Bart: Packer Parts' focus on expanding its customer base and providing a full range of transportation solutions is enabling solid revenue growth in a softer after-sales market.

Speaker Change: Parks opened a new distribution center in the country of Columbia in the second quarter and will open another distribution center in Germany later this year.

Harrie Schippers: Each new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day. PACCAR Financial is having another good year. PACCAR Financial Services' Q2 pre-tax income was $111 million, reflecting its high-quality portfolio and normal-use truck markets. PACCAR achieved an industry-leading return on invested capital of 27% in the first half of this year. In 2024, we're projecting R&D expenses in the range of $460 million to $480 million as we continue to invest in key technology and innovation projects. These include a full suite of high-quality, clean diesel, and zero-emission powertrains, innovative advanced driver assistance systems, and new connected vehicle services that enhance our customers' operational efficiency. PACCAR is planning capital investments in the range of $725 million to $775 million this year as we continue expanding manufacturing capacity at our factories in Europe, the United States, Mexico, Brazil, and Australia.

Speaker Change: Each new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day.

Harrie C. A. M. Schippers: Each new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day. Financial is having another good year. Bank of Financial Services' second quarter pre-tax income was $111 million, reflecting its high quality portfolio and normal use drug markets.

Speaker Change: Paccor Financial is having another good year.

Speaker Change: Financial Services' second quarter pre-tax income was $111 million, reflecting its high-quality portfolio and normal use-stroke markets.

Harrie C. A. M. Schippers: Paccor achieved an industry-leading return on invested capital of 27% in the first half of this year. In 2024, we're projecting R&D expenses in the range of $460 to $480 million as we continue to invest in key technology and innovation projects. These include a full suite of high-quality clean diesel and zero emission powertrains, innovative advanced driver assistance systems, and New Connected Vehicle Services that enhance our customers' operational efficiency. Paccor is planning capital investments in the range of $725 to $775 million this year, as we continue expanding manufacturing capacity at our factories in Europe, the United States, Mexico, Brazil, and Australia.

Speaker Change: Paccor achieved an industry-leading return on invested capital of 27% in the first half of this year.

Speaker Change: In 2024, we're projecting R&D expenses in the range of $460 to $480 million.

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

Speaker Change: These include a full suite of high-quality clean diesel and zero-emission powertrains, innovative advanced driver assistance systems, and new connected vehicle services that enhance our customers' operational efficiency.

Packer: Paccor is planning capital investments in the range of $725 to $775 million this year, as we continue expanding manufacturing capacity at our factories in Europe , the United States, Mexico, Brazil, and Australia.

Harrie C. A. M. Schippers: These investments are supporting Packard's growth, as well as our customers' success. Paccor's investments and its industry-leading truck lineup. Efficient Manufacturing Capacity, Best-in-Class Parts and Financial Services Businesses, and Continued Development of Advanced Technologies position the company well for today and for the future. Thank you. We'd be pleased to answer your questions.

Harrie Schippers: These investments are supporting PACCAR's growth as well as our customers' success. PACCAR's investments in its industry-leading truck lineup, efficient manufacturing capacity, best-in-class parts and financial services businesses, and the continued development of advanced technologies position the company well for today and for the future. Thank you. We'd be pleased to answer your questions.

Packer: These investments are supporting Paccar's growth as well as our customers' success.

Packer: Paccor's Investments and its industry-leading truck lineup.

Speaker Change: efficient manufacturing capacity, best-in-class parts and financial services businesses, and the continued development of advanced technologies position the company well for today and for the future. Thank you, we'd be pleased to answer your questions.

Operator: Thank you. If you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press start and then two. When preparing to ask your question, please ensure that your microphone and your device are unmuted locally. Our first question today comes from the line of Steven Volkman with Jeffreys. Please go ahead; your line is open.

Operator: Thank you. If you would like to ask a question today, please do so now by pressing Start, followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press Start and then Two. When preparing to ask your question, please ensure that your microphone and your device are unmuted locally. Our first question today comes from the line of Stephen Volkmann with Jefferies. Please go ahead. Your line is open.

Speaker Change: Thank you. If you would like to ask a question today please do so now by pressing star followed by the number one on your telephone keypad.

Speaker Change: If you change your mind and would like to be removed from the queue, please press star and then 2. When preparing to ask your question, please ensure that your microphone and your device are unmuted locally.

Speaker Change: Our first question today comes from the line of Steven Volkman with Jeffreys. Please go ahead, your line is open.

Steven Volkman: Hi, good morning, gentlemen. Thank you for taking the question. You bet. The question is... I appreciate it.

Stephen Volkmann: Hi. Good morning, gentlemen. Thank you for taking the question.

Stephen Volkman: Hi, good morning, gentlemen. Thank you for taking the question.

Ken Hastings: You bet.

Stephen Volkmann: The question is, appreciate it. The question actually is kind of around your sort of R&D and CapEx ramp that we're seeing. It strikes me that probably one of the key things that I would worry about would be if there's a potential that the various emission regulations actually change with a change in government. I'm assuming you guys must have some good connections in Washington, and certainly not asking you to pontificate on the outcome of this, but is there a risk in your mind that the target moves here and that you actually may have to do something different than what you're currently doing relative to these regulations?

unknown: The question actually is kind of around your sort of R&D and CapEx ramp that we're seeing. It strikes me that probably one of the key things that I would worry about would be if there's a potential that the various emission regulations actually change with a changing government, and I'm assuming you guys must have some good connections in Washington, and certainly not asking you to pontificate on the outcome of this. But is there a risk, in your mind, that the target will move here and that you actually may have to do something different than what you're currently doing relative to these regulations?

Stephen Volkman: You bet. The question is...

Stephen Volkman: Appreciate it. The question actually is kind of around your sort of R&D and CapEx ramp that we're seeing. It strikes me that

Speaker Change: Probably one of the key things that I would worry about would be if there's a potential that the various emission regulations actually change with a changing government and

Speaker Change: I'm assuming you guys must have some good connections in Washington and certainly not asking you to pontificate on the outcome of this, but is there a risk in your mind that the

Speaker Change: The target moves here and that you actually may have to do some something different than what you're currently doing relative to these regulations.

Preston Fite: Good question. Thanks for taking the time to ask it.

Ken Hastings: Good question. Thanks for taking the time to ask it. I'd start by saying that the reason our R&D and CapEx expenses are moving upward is because we have a lot of really good projects to work on. They come in the form of technology related to emissions, but also just improvements in operating efficiency of trucks and transportation solutions we can provide to our customers. So when we have a good set of projects, we invest in them, and that's what we're doing right now. Regarding the changes in emissions regulations, we don't have the answer to that. And what we do think is it's unlikely and that it won't change the total number of trucks PACCAR delivers over a few-year period of time. It might just shift the timing of those.

Speaker Change: Good question. Thanks for taking the time to ask it. I'd start by saying that the reason our R&D and CapEx expenses are moving upward is because we have a lot of really good projects to work on.

Speaker Change: They come in the form of technology related to emissions, but also just improvements in operating efficiency of trucks and transportation solutions we can provide to our customers. So when we have a good set of projects, we invest in them. And that's what we're doing right now. Regarding

Speaker Change: the changes in emissions regulations. You know, we don't have the answer to that. And what we do think is it's unlikely, and that it won't change the total number of trucks Paccor delivers over a few year period of time, it might just shift the timing of those.

Preston Fite: I'd start by saying that the reason our R&D and CapEx expenses are going up is because we have a lot of really good projects to work on. They come in the form of technology related to emissions, but also just improvements in operating efficiency of trucks and transportation solutions we can provide to our customers. So when we have a good set of projects, we invest in them, and that's what we're doing right now.

Stephen Volkmann: Okay. Great. And can you speak broadly to how much capacity you're adding across the system with these various investments?

Preston Fite: Regarding the changes in emissions regulations, you know, we don't have the answer to that, and what we do think is it's unlikely and that it won't change the total number of trucks Paccor delivers over a few years. It might just shift the timing of those.

Speaker Change: Okay, great. And can you speak broadly to how much capacity you're adding across the system with these various investments?

Preston Fite: Okay, great. And can you speak broadly about how much capacity you're adding across the system with these various investments?

Ken Hastings: We've shared with you previously that our intention is to grow our market share. And so what we're doing is getting capacity in line with that so that if we see peak market conditions that are kind of similar to what we saw in 2023, that we can grow market share in those markets as well. So you could think of it as like a 10% to 15%, in some cases, increase in capacity.

Speaker Change: You know we've shared with you previously our intention is to grow our market share.

Speaker Change: And so what we're doing is getting capacity in a line with that, so that if we see peak market conditions that are, you know, kind of similar to what we saw in 2023, that we can grow market share in those markets as well. So you could think of it as like a 10 to 15% in some case increase in capacity.

Stephen Volkmann: Great. Thank you. I'll pass it on.

Ken Hastings: You bet. Have a good day.

Speaker Change: Great. Thank you.

Speaker Change: You bet. Have a good day.

Preston Fite: You know, we've shared with you previously that our intention is to grow our market share, and so what we're doing is building capacity in line with that. So if we see peak market conditions that are, you know, kind of similar to what we saw in 2023, we can grow market share in those markets as well. So you could think of it as like a 10 to 15%, in some cases, increase in capacity.

Operator: Our next question comes from the line of Stephen Fisher with UBS. Please go ahead. Your line is now open.

Speaker Change: Our next question comes from the line of Steven Fisher with UBS. Please go ahead, your line is now open.

Preston Fite: Great. Thank you. I'll pass it on. You bet.

Preston Fite: You bet. Have a good day.

Steven Fisher: Thanks for taking the question. Good morning. Just wanted to unpack the Q3 expected 17% truck parts and other margins a little bit. Can you just give us a sense of how much of a factor, if there's any perhaps one-time costs in there, any pricing changes or pressure, any mix from trucks versus parts in there? I would have thought that might be a little more supportive. Just any way to unpack that 17% a little bit.

Steven Fisher: Thanks for taking the question.

Steven Fisher: and good morning.

Steven Fisher: Just wanted to unpack the Q3 expected 17% truck parts and other margins a little bit.

Operator: Our next question comes from the line of Steven Fisher with UPS. Please go ahead; your line is now open.

Steven Fisher: Thanks for taking the question. And good morning. Just wanted to unpack the Q3 expected 17% truck parts and other margins a little bit. Can you just give us a sense of how much of a factor if there's any, perhaps one-time costs in there, any pricing changes or pressure, any mix from trucks versus parts in there? I would have thought that that might be a little more supportive. Any way to unpack that 17% a little bit?

Steven Fisher: Can you just give us a sense of, of, you know, how much of a factor if there's any perhaps one-time costs in there, any pricing changes or pressure, any mix?

Steven Fisher: from from trucks versus versus parts in there, I would have thought that that might be a little more supportive, just any way to unpack that 17% a little bit.

Preston Fite: Well, I would start by saying remember, in Q3, there's a typical holiday season in Europe that takes a few thousand units out, which has some impact. I'd also say that as we look at the truckload sector, our customers' rates are remaining low, and I think that has some opportunity of impact on pricing and cost balance in the third quarter as well. But there's no big one-time thing sitting in.

Ken Hastings: Well, I would start by saying, remember, in Q3, there's a typical holiday season in Europe that takes a few thousand units out, which has some impact to it. I'd also say that as we look at the truckload sector, our customers' rates are remaining low, and I think that has some opportunity of impact for pricing and cost balance in Q3 as well. But there's no big one-time thing sitting in there.

Speaker Change: Well, I would start by saying, remember, in Q3, there's a typical holiday season in Europe that takes a few thousand units out, which has some impact to it. I'd also say, though, as we look at the truckload sector, our customers' rates are remaining

Speaker Change: Low, and I think that has some opportunity of impact for pricing and cost balance in the third quarter as well. But there's no big one-time thing sitting in there.

Steven Fisher: Okay, and then maybe on the parse margin specifically, in the quarter, can you talk about what drove the negative incrementals this quarter? And what maybe you're expecting for Q3 and Q4? It was just a surprising takedown. Just kind of wondering if this is maybe a more broader correction after a strong period of the cycle? Or is there maybe just any sort of one time exception?

Stephen Volkmann: Okay. And then maybe on the parts margins specifically, in the quarter, can you talk about what drove the negative incrementals this quarter and what maybe you're expecting for Q3 and Q4? It was just a surprising takedown. Just kind of wondering if this is maybe a more broader correction after a strong period of the cycle, or is there maybe just any sort of one-time dynamic?

Speaker Change: Okay, and then maybe on the parse margin specifically, in the quarter, can you talk about what drove the negative incrementals this quarter?

Speaker Change: And what maybe you're expecting for Q3 and Q4. It was just a surprising takedown, just, you know, kind of wondering if this is a, maybe a more broader correction after a strong period of the cycle, or is there maybe just any sort of one-time dynamic?

Preston Fite: Now, I think what you look at is the comps are really strong from last year when the market was just constrained by supply. And now it's not, so I think everybody's participating in the parts market. I think the team is just doing a fantastic job.

Ken Hastings: No. I think what you look at is the comps are really strong from last year when the market was just constrained by supply, and now it's not. So I think everybody's participating in the truck and the parts market. I think the team is just doing a fantastic job. I mean, 30.3% parts margins are very strong and continue to be strong. So we think that we'll see improvement in those as time comes along again. But obviously, we're making sure that we keep our share of the market. I would kind of remind that the after-sales market is down this year. So parts growing in a down after-sales environment is a testament to their great abilities.

Speaker Change: No, I think what you look at is the comps are really strong from last year when the market was just constrained by supply.

Speaker Change: And now it's not. So I think everybody's participating in the truck in the parts market. I think the team is just doing a fantastic job. I mean, 30.3% parts margins.

Preston Fite: I mean, 30.3% parts margins are very strong and continue to be strong. So we think that we'll see improvement in those as time comes along again. But obviously, we're making sure that we keep our share of the market. And I would kind of remind you that the after-sales market is down this year. And so parts growing in a down after sales environment is a testament to their great abilities. Still Achieving March.

Speaker Change: are very strong and continue to be strong. So we think that we'll see improvement in those as time comes along again. But obviously we're making sure that we keep our share of the market. And I would kind of remind that the after-sales market is down this year.

Speaker Change: And so parts growing in a down after sales environment is a testament to their great abilities.

Preston Fite: And they are still achieving margins above 30%.

Harrie Schippers: Still achieving margins above 30%.

Speaker Change: And still achieving margins above 30%.

Steven Fisher: Okay, thank you very much.

Stephen Volkmann: Okay. Thank you very much.

Ken Hastings: You bet.

Speaker Change: Okay, thank you very much.

Speaker Change: Bye. Bye.

Operator: The next question comes from the line of Tami Zakaria with JP Morgan. Please go ahead; your line is open.

Operator: The next question comes from the line of Tammy Zakaria with JP Morgan. Please go ahead. Your line is open.

Speaker Change: The next question comes from the line of Tami Zakaria with JP Morgan. Please go ahead, your line is open.

Tami Zakaria: Hi, everyone. Thank you so much. So I think, Preston. I just heard you say, hi.

Tami Zakaria: Hi, everyone. Thank you so much. I think, Preston, I just heard you say hi. I think I just heard you say that Q3, typically, Europe sees some seasonal shutdown. Over the last few years, we've seen fourth quarter deliveries actually a bit higher than the third quarter. Is that how we should be thinking about this year as well?

Tami Zakaria: Hi, everyone. Thank you so much. So I think, Preston, I just heard you say, hi. So I think I just heard you say that Q3, typically, Europe sees some seasonal shutdown.

Speaker Change: And over the last few years, we've seen fourth quarter deliveries actually a bit higher than the third quarter. Is that how we should be thinking about this year as well?

Tami Zakaria: So I think I just heard you say that, typically, Europe sees some seasonal shutdown, and over the last few years, we've seen fourth quarter deliveries actually a bit higher than the third quarter. Is that how we should be thinking about this year as well?

Ken Hastings: No. I think what we'd say in the previous years is you can look at a lot more other factors driving things. There was timing of deliveries. I mean, there's the term that you all would like to use, the red tags of a period of a couple of years ago. So I think you have to say we're in a more normal operating environment right now, and normal feels healthy and good, but you'd expect the Q3 deliveries to be in that 43,000 to 44,000 range.

Preston: No, I think what we'd say in the previous year is you can look at a lot more other factors driving things. There was timing of deliveries. I mean, there's the term that you all like to use, the red tags of a period of a couple years ago. So I think you have to say we're in a more normal operating environment right now.

Preston: And normal feels healthy and good, but you'd expect the Q3 deliveries to be in that $43,000 to $44,000 range.

Tami Zakaria: Got it. That's helpful. And then my second question is, I think you tweaked lower the US-Canada outlook by about 10,000 units. What are some of the pockets of strength versus weakness? What I'm trying to understand is which category within that bucket weakened in the last few months that drove you to reduce the outlook?

Speaker Change: Got it. That's that's helpful. And then my second question is, I think you tweaked lower the US Canada outlook by about 10,000 units. What are some of the pockets of strength versus weakness? What I'm trying to understand is which category within that

Speaker Change: Bucket weekend in the last few months that drove you to reduce the outlook.

Preston Fite: I think what we'd say in previous years is you can look at a lot more other factors driving things. For example, there was timing of deliveries. I mean, there's the term that you all like to use, the red tags of a period a couple years ago. So I think you have to say we're in a more normal operating environment right now. And normal feels healthy and good. But you'd expect the Q3 deliveries to be in that 43 to 44,000 range.

Ken Hastings: Sure. Sure, Tammy. Good question to think about the totality of the market. What we see is the vocational market remains strong for us. We still have a lot of demand for our market-leading trucks, for Peterbilt and Kenworth in that space. The LTL market remains healthy with kind of a normal cadence to it. But I think our customers in the truckload sector are still seeing spot rates at low levels and contract rates at low levels. And maybe that's the part that there might have been an expectation of starting to lift off the bottom at this point for them.

Speaker Change: Sure. Sure, Tami. Good question to think about that.

Preston Fite: Got it. That's helpful. And then my second question is, I think you tweaked the US-Canada outlook by about 10,000 units. What are some of the pockets of strength versus weakness? What I'm trying to understand is which category within that bucket weakened in the last few months that drove you to reduce the outlook?

Speaker Change: Totality of the Market.

Speaker Change: What we see is like the vocational market remains strong for us. We still have a lot of demand for our market-leading trucks for Peterbilt and Kenworth in that space.

Preston Fite: Sure, a good question to think about the totality of the market. What we see is that the vocational market remains strong for us. We still have a lot of demand for our market-leading trucks for Peterbilt and Kenworth in that space. The LTL market remains healthy, with kind of a normal cadence to it. But I think our customers in the truckload sector are still seeing spot rates at low levels and contract rates at low levels. And maybe that's the part that there might have been an expectation of starting to lift off the bottom at this point for them.

Speaker Change: The LTL market remains healthy with kind of a normal cadence to it, but I think our customers in the truckload sector are still seeing spot rates at low levels and contract rates at low levels. And maybe that's the part that there might have been an expectation starting to lift off the bottom at this point for them.

Tami Zakaria: Got it. Okay, great. Thank you.

Preston Fite: You got it.

Tami Zakaria: Got it. Okay. Great. Thank you.

Ken Hastings: You bet.

Speaker Change: Got it. Okay, great. Thank you.

Speaker Change: You bet.

Operator: Our next question comes from Angel Castillo with Morgan Stanley. Please go ahead; your line is now open.

Operator: Our next question comes from Angel Castillo with Morgan Stanley. Please go ahead. Your line is now open.

Speaker Change: Our next question comes from Angel Castillo with Morgan Stanley . Please go ahead, your line is now open.

Angel Castillo: Hi, good morning. Thanks for taking my question. Just wanted to go back to the comment about price cost and perhaps, hi, person, just the price cost comment around the parts segment, if we could expand on that more broadly for trucks, parts, and the full equipment business. Just curious if price cost is going to be a little bit more negative or under pressure across just the broader business. Your comment around maintaining share in the parts business: how should we think about that as it pertains to pricing strategy, both in parts but also any weakness in trucks as well and pricing strategy there?

Angel Castillo: Hi. Good morning. Thanks for taking my question. Just wanted to go back to the comment about price, cost, and perhaps, hi, Preston, just the price, cost comment around the parts segment, if we could kind of expand on that more broadly for trucks, parts, and the full kind of equipment business. Just curious if price, cost is going to be a little bit more negative or under pressure across just the broader business. And your comment around maintaining share in the parts business, how should we think about that as it pertains to pricing strategy, both in parts, but also any kind of weakness in trucks as well and pricing strategy there?

Angel Castillo: Hi, good morning. Thanks for taking my question. I just wanted to go back to the comment about price cost and perhaps high prison.

Angel Castillo: Just the price-cost comment around the parts segment, if we could kind of expand on that more broadly for, you know, trucks, parts, and the full kind of...

Angel Castillo: Equipment Business. Just curious if...

Speaker Change: Price, Cost is going to be a little bit more negative or under pressure across just the broader business and your comment around maintaining share in the parts business, how should we think about that as it pertains to pricing strategy both in parts but also any kind of

Speaker Change: Weakness in trucks as well and pricing strategy there.

Preston Fite: Price and Cost in the second quarter for Turks. Price was up slightly less than a percent, while cost was up slightly more than a percent. So pretty much in balance.

Harrie Schippers: Price, cost in Q2 for trucks, price was up slightly less than 1%. Cost was up slightly more than 1%. So pretty much in balance. If you look at the parts business, price was up 3%. Cost was up 5%. So a little bit more margin pressure there as we saw in the 30.3% gross margin for parts. But a really nice performance if you take into account that the overall after-market parts market was smaller, especially in the US and Canada this year.

Preston Fite: Look at the parts business. Price was up three percent. Cost was up five. So a little bit more margin pressure there, as we saw in the 30.3% gross margin for parts. But a really nice performance if you take into account that the overall aftermarket parts market was smaller, especially in the US and Canada this year.

Speaker Change: Price Costs in the Second Quarter for Trucks.

Speaker Change: Price was up slightly less than a percent, cost was up slightly more than a percent, so pretty much in balance. If you look at the parts business...

Speaker Change: Price was up 3%, cost was up 5%.

Speaker Change: So a little bit more margin pressure there, as we saw in the 30.3% gross margin for parts, but a really nice performance if you take into account that the overall aftermarket parts market was smaller, especially in the U.S. and Canada this year.

Preston Fite: Yeah, kind of what Harrie said, Angel. I think the fact that our after-sales parts team is growing in a market that's declining, that our truck division and Peterbilt and Kenworth are growing market share in a market that's smaller last year is just a testament to the high-quality products and transportation solutions the team's providing. And I think it's just a testament to the high-quality products and transportation solutions the team

Ken Hastings: Yeah. Just kind of what Harry said, Angel. I think the fact that our after-sales parts team is growing in a market that's declining, that our truck division, Peterbilt, and Kenworth are growing market share in a market that's smaller last year is just a testament to the high-quality products and transportation solutions the team's providing. I think it's just showing up there.

Harrie C. A. M. Schippers: Yeah, just kind of what Harrie said, Angel, I think the fact that our after-sales parts team is growing in a market that's declining, that our truck division and Peterbilt and Kenworth are growing market share in a market that's smaller last year is just a testament to the high-quality products and transportation solutions the team's providing, and I think it's just showing up there.

Preston Fite: That's very helpful. And maybe just to kind of continue down that path, just in terms of your order book fill rate for the third quarter and fourth quarter, can you just talk about the level of visibility that you have, you know, beyond maybe as we think about even heading into the fourth quarter and orders? We're happy to do that, Angel. Yeah, you bet.

Angel Castillo: That's very helpful. Maybe just to kind of continue down that path, just in terms of your order book fill rate for the third quarter and fourth quarter, could you just talk about the level of visibility that you have beyond maybe as we think about even heading into the fourth quarter and orders? Yeah, just any comment there.

Speaker Change: That's very helpful. And maybe just to kind of continue down that path, just in terms of your order book fill rate for the third quarter and fourth quarter, can you just talk about the level of visibility that you have, you know, beyond maybe as we think about even heading into the fourth quarter and orders?

Ken Hastings: Sure. Happy to do that, Angel. Yeah. You bet. If you look at Q3, we have a few openings left in Q3 but are substantially full for the quarter, and in Q4, over half full. So obviously, as we said before, the vocational segment is the place where they have the greatest strength, and then the LTL market, less-than-truckload market. And then the truckload carriers, I think, are trying to decide what their cadence is going to be for the balance of the year.

Preston Fite: If you look at the third quarter, we have a few openings left in the third quarter, but we're substantially full for the quarter and in the fourth quarter, over half full. So obviously, as we said before, the vocational segment is film is the place where they have the greatest strength, and then the LTL market is less than the truckload market. And then the truckload carriers, I think, are trying to decide what their cadence is going to be for the balance of the year.

Speaker Change: We're happy to do that, Angel.

Angel Castillo: Yeah, you bet. If you look at the third quarter, we have a few openings left in the third quarter, but we're substantially full for the for the quarter and in the fourth quarter over half full.

Speaker Change: So, obviously, as we said before, the vocational segment is the place where they have the greatest strength, and then the LTL market, less than truckload market, and then the truckload carriers, I think, are trying to decide what their cadence is going to be for the balance of the year.

Angel Castillo: Very helpful. Thank you.

Ken Hastings: You bet.

Speaker Change: Very helpful. Thank you.

Operator: Our next question comes from Jamie Cook with Truist. Please go ahead; your line is now open.

Operator: Our next question comes from Jamie Cook with Truist. Please go ahead. Your line is now open.

Speaker Change: You bet.

Speaker Change: Our next question comes from Jamie Cook with Truist. Please go ahead, your line is now open.

Jamie Lyn Cook: Hi, good morning. I guess just two questions, you know, back to your orders. I think, or sorry, your deliveries were 48.4,000 relative to your expectation of 48. So a little ahead, but your margin was at the lower end of your targeted range of 18 to 18.5%. So was there anything else impacting the margin besides the price costs, the sort of headwind that you just spoke to? I'm just wondering if there's anything else unusual about that.

Preston Feight: Hi. Good morning. I guess just two questions. Back to, I mean, your orders, I think—or sorry, your deliveries were 48,400 relative to your expectation of 48,000. So a little ahead, but your margin was at the lower end of your targeted range of 18% to 18.5%. So was there anything else impacting the margin besides the price, cost sort of headwind that you just spoke to? I'm just wondering if there's anything else unusual on that. And then do you expect price, cost to continue to be negative into Q4? And then I guess my follow-up question on Europe. I think your deliveries are down 30% for the first half relative to your industry. Retail sales forecasts have down 13% to down 22%. So why are we underperforming or implies you're underperforming the market, at least in the first half of year?

Jamie Lyn Cook: Hi, good morning. I guess just two questions. You know, back to I mean, your orders, I think, or sorry, your deliveries were 48.4 thousand relative to your expectation of, you know, 48. So a little ahead, but your margin was at the lower end.

Jamie Lyn Cook: of of your targeted range of 18 to 18.5%. So was there anything else impacting the margin besides the price cost sort of headwind that you just spoke to? I'm just wondering if there's anything else unusual on that.

Jamie Lyn Cook: And then do you expect price costs to continue to be negative, you know, into the fourth quarter? And then, I guess my follow-up question on Europe, you know, I think your deliveries are down 30% for the first half relative to your industry retail sales forecast of down 13 to down 22. So why are we underperforming or implies that you're underperforming the market at least in the first half of the year?

Speaker Change: And then, do you expect price cost to continue to be negative, you know, into the fourth quarter? And then I guess my follow-up question on Europe , you know, I think your deliveries are down 30% for the first half relative to...

Speaker Change: Your industry retail sales forecast is down 13 to down 22, so why are we underperforming, or implies you're underperforming the market at least in the first half of the year? Just any color on that. Thank you.

Preston Feight: Just any color on that? Thank you.

Preston Fite: Just any color on that? Thank you.

Ken Hastings: Sure. Jamie, I think that was actually three questions, but it's good to hear from you and nice to get the questions from you. If you look at any other commentary around the 48.4 and the 18%, there's not really anything different that we'd share on that. It's kind of exactly what we thought would happen. Obviously, the industry had a supplier who had an issue in Mexico in the quarter, and we kind of had to manage through that. So I think that we managed through. Our teams did a fantastic job working with the supplier who did a great job recovering, and that allowed us to get to that 48,400 number. So kudos to the suppliers, kudos to our teams, and our ops teams for getting that sorted out, and that led to the strong performance.

Preston Fite: Jamie, I think that was actually three questions, but it's good to hear from you and nice to get the questions. If you look at any other commentary around 48.4 and 18%, there's not really anything different that we'd share on that. It's kind of exactly what we thought would happen. Obviously, the industry had a supplier who had an issue in Mexico during the quarter, and we kind of had to manage through that.

Speaker Change: Jamie, I think that was actually three questions, but it's good to hear from you and nice to get the questions from you.

Speaker Change: If you look at any other commentary around the 48.4 and the 18%, there's not really anything different that we'd share on that. It's kind of exactly what we thought would happen. Obviously, we had a...

Speaker Change: We had a, the industry had a supplier who had an issue.

Preston Fite: So I think that we managed through. Our teams did a fantastic job working with the supplier, who did a great job recovering, and that allowed us to get to that 48.4 hundred number. So kudos to the suppliers, kudos to our teams, and our operations teams for getting that sorted out, and that led to the strong performance. I think you could say that the trend from Q1 to Q2 and to Q3 should be similar in that we'll have price and cost challenges sitting in front of us with that implied in the 70%.

Speaker Change: in Mexico in the quarter. And we kind of had to manage through that. So I think that we managed through our teams did a fantastic job working with the supplier who did a great job recovering. And that allowed us to get to that 48 400 number. So kudos to the suppliers kudos to our teams and our ops teams for getting that sorted out.

Ken Hastings: I think you could say that the trend from Q1 to Q2 into Q3 should be similar in that we'll have price and cost challenges sitting in front of us with that implied in the 17%. And again, the reason is I think we're looking at the truckload carriers and watching how they're making their decisions right now and seeing where they go from there, but that being offset by strong vocational and LTL markets and a very good-performing medium-duty truck. So the trucks are performing well. It's just the underlying basis of contract rates, I'd say. And then maybe, Harry, any commentary on trends in the EU?

Speaker Change: And that led to the strong performance. I think you could say that the trend from Q1 to Q2 and Q3 should be similar in that we'll have price and cost challenges sitting in front of us with that.

Preston Fite: And again, the reason is I think we're looking at the truckload carriers and watching how they're making their decisions right now and seeing where they go from there, but that is being offset by strong vocational and LTL markets and a very good-performing medium-duty truck. So the trucks are performing well. It's just the underlying basis of contract rates, I'd say.

Speaker Change: with that implied in the 70%. And again, the reason is, I think we're looking at the truckload carriers and watching how they're making their decisions right now, and seeing where they go from there. But that being offset by strong vocational and LTL markets and a very good performing medium duty truck.

Speaker Change: So the trucks are performing well. It's just the underlying basis of contract rates, I'd say.

Preston Fite: And then maybe, Harry, any commentary on trends in the EU? In Europe, volumes were down 30%, as you mentioned, Jamie. We continue to benefit from our new DAF, which has the best fuel economy in this industry, and it's positioned in a premium pricing position, so we'll continue to benefit from that. But yeah, weaker Central and Eastern European markets do have an impact on DAF a little bit more than proportional for Europe in general. And I think Kerry said it, but I just re-emphasized the fact that the pricing discipline of the team is very good right now. Thank you. I appreciate the

Harrie Schippers: Yeah. In Europe, volumes were down 30%, as you mentioned, Jamie, especially in Central and Eastern Europe where DAF is strong. The market is softening, and so DAF is working through that. We continue to benefit from our new DAF, which has the best fuel economy in this industry, and it's positioned in a premium pricing position. So we'll continue to benefit from that. But yeah, weakest Central and Eastern European markets do have an impact on DAF a little bit more than proportional for Europe in general.

Harrie: And then maybe, Harrie, any commentary on trends in the EU? In Europe , voting for down 30%, as you mentioned, Jamie. Especially in Central and Eastern Europe , where doubt is strong.

Dove: The market is softening and so Dove is working through that.

Speaker Change: We continue to benefit from our new DAF, which has the best fuel economy in this industry. And it's positioned in a premium pricing position.

Kerry: We'll continue to benefit from that, but yeah, weaker Central and Eastern European markets do have an impact on DoF a little bit more than proportional for Europe in general. And I think, Kerry, you said it, but I just re-emphasized the fact that the pricing discipline of the team is very good right now.

Ken Hastings: I think, Harry, you said it, but I just reemphasize the fact that the pricing discipline of the team is very good right now.

Jamie Lyn Cook: Thank you. I appreciate the caller.

Preston Feight: Thank you. I appreciate the color.

Ken Hastings: Yeah. You bet.

Kerry: Thank you. I appreciate the call.

Kerry: Yeah, you bet.

Operator: The next question comes from David Raso with Evercore ISI. David, please go ahead. Your line is now open.

Operator: The next question comes from David Resso with Evercore ISI. David, please go ahead. Your line is now open.

Speaker Change: The next question comes from David Raso with Evercore ISI. David, please go ahead, your line is now open.

David Michael Raso: Hi, thank you for your time. I was just curious about your conversations with customers regarding the potential or already putting in motion plans for a pre-buy. Has the tone of the conversation changed at all with the last month's events politically? And then I just have a quick follow-up on US-Canada, we call it North America, inventory. I know you're looking to gain share, and you've gained share already this year, but I'm just trying to be thoughtful about going into 25.

Angel Castillo: Hi. Thank you for the time. I was just curious, your conversations with customers regarding the potential or already putting in motion plans for a pre-buy, has the tone of the conversation changed at all with the last month of what we've seen politically? And then I just have a quick follow-up on US-Canada, we can call it North America inventory. I know you're looking to gain share, and you've gained share already this year, but I'm just trying to be thoughtful about going into 2025. The inventory in the industry is a bit elevated, right? The backlog to build is pushing below four. So just how do you see your inventory exiting 2024 into 2025? And again, circle back if you can to the question about the pre-buy.

David Michael Raso: Hi, thank you for the time. I was just curious, your conversations with customers...

David Michael Raso: regarding the potential or already putting in motion plans for a pre-buy. Has the tone of the conversation changed at all with the, you know,

Speaker Change: The last month of what we've seen politically, and then I just have a quick follow-up on U.S.-Canada, we call it North America, inventory.

Speaker Change: I know you're looking to gain share, and you've gained share already this year, but I'm just trying to be...

David Michael Raso: The inventory in the industry is a bit elevated, right? The back wall to build is pushing below four. So just how do you see your inventory exiting 24 into 25? And again, circle back if you can to the question about the pre-buy.

Speaker Change: Thoughtful about going into 25. The inventory in the industry is a bit elevated, right? The backlog to build is, you know, pushing below 4. So just how do you see your inventory exiting 24 into 25? And again, circle back if you can to the question about the pre-buy.

Preston Fite: Yeah, sure. So, David, pre-buy: we're spending a lot of time with our customers. I don't think there's been any change in their, in kind of their assumptions. You know, the EP rules are sitting out there already. I think they'll probably remain out there. It's easy to hypothesize that they wouldn't, but you know, I think that's speculative. And so I think they're trying to figure out what their buying plans will be in 25 and then into 26. But I don't think there's any change in assumptions right now.

Ken Hastings: Yeah. Sure. So David, Pre-buy, we're spending a lot of time with our customers. I don't think there's been any change in kind of their assumptions. The EPA rules are sitting out there already. I think they'll probably remain out there. It's easy to hypothesize they wouldn't, but I think that's speculative. So I think they're trying to figure out what their buying plans will be in 2025 and then into 2026, but I don't think there's any change in assumption right now. I think trucks are being well used. There is a lot of freight being moved out there, so trucks are being healthily consumed, and they'll need a replacement at some point. I'd also say that from an inventory standpoint, the industry's at like 3.9 months of retail sales, and PACCAR's at a very healthy 3.3 months.

Speaker Change: Yeah, sure. So, David, pre-buy, we're spending a lot of time with our customers. I don't think there's been any change in kind of their assumptions.

Speaker Change: You know, the EP rules are sitting out there already. I think they'll probably remain out there.

Speaker Change: It's easy to hypothesize they wouldn't, but I think that's speculative. And so I think they're trying to figure out what their buying plans will be in 2025 and then into 2026. But I don't think there's any change in assumption right now. I think trucks are being well used. There is a lot of freight being moved out there.

Preston Fite: I think trucks are being well used. There is a lot of freight being moved out there. So, trucks are being healthily consumed, and they'll need a replacement at some point.

Speaker Change: structure being

Preston Fite: I'd also say that from an inventory standpoint, the industry's at around 3.9 months of retail sales, and Paccor's at a very healthy 3.3 months. So as we're seeing our market share gain, we feel like our inventory's in really good shape. And I would add to that the fact that we have such a high vocational share that that's also contributing to where our inventory levels are at. So things feel quite good for us in terms of inventory with the share growth we're realizing.

Speaker Change: Healthily Consumed, and they'll need a replacement.

Speaker Change: at some point.

Speaker Change: I'd also say that from an inventory standpoint, the industry is at like 3.9 months of retail sales.

Ken Hastings: So as we're seeing our market share gain, we feel like our inventory's in really good shape. And I would add to that the fact that we have such a high vocational share that that's also contributing to where our inventory levels are at. So things feel quite good for us in terms of inventory with the share growth we're realizing.

Packard: And Paccor's at a very healthy 3.3 months. So as we're seeing our market share gain, we feel like our inventory's in really good shape. And I would add to that the fact that we have such a high vocational share that that's also contributing to where our inventory levels are at. So things feel quite good for us in terms of inventory with the share growth we're realizing.

David Michael Raso: Can I just follow up on that comment on vocational training? Obviously, it's a strength for Paccor.

Preston Fite: Are you looking at a vocational market where you're having, say, better visibility into 25 already, just given a, you know, a key supplier that's maybe limiting a little bit? How many vocationals can you sell? How should we think about vocational into 25 versus? Obviously, we can think through a pre-buy or not, but the vocational in particular. You bet. I think that with the infrastructure spending that's just getting started.

Angel Castillo: Can I just follow up on that comment on vocational? Obviously, it's a strength for PACCAR. Are you looking at a vocational market where you're having, say, better visibility into 2025 already, just given a key supplier that's maybe limiting a little bit how many vocationals you can sell? Just how should we think about vocational into 2025 versus obviously, we all can think through a pre-buy or not, but the vocational in particular? Thank you.

Speaker Change: Hey, can I just follow up on that comment on vocational? Obviously it's a strength for Paccor.

Speaker Change: Are you looking at a vocational market where you're having, say, better visibility into 25 already, just given a, you know, a key supplier that's maybe limiting a little bit? How many vocationals you can sell?

Speaker Change: How should we think about vocational into 25 versus, you know, obviously we all can think through a pre-buy or not, but the vocational in particular. Thank you.

Preston Fite: You bet. I think that with the infrastructure spending that's just getting really going in the U.S. and the amount of, call it, reshoring that seems to be happening, that bodes well for a strong vocational market for a while. And there have been supply constraints in the inventory or on the vocational side of the market. So I think that we will see steady strength for quite a period of time.

Ken Hastings: Yeah. You bet. I think that with the infrastructure spending that's just getting really going in the US and the amount of, call it, reshoring that seems to be happening, that bodes well for a strong vocational market for a while. And there have been supply constraints in the inventory or in the vocational side of the market. So I think that we see steady strength for quite a period of time.

Speaker Change: I think that with the infrastructure spending that's just getting really going in the U.S. and the amount of

Speaker Change: Call it reshoring that seems to be happening that bodes well for a strong vocational market for a while and there have been supply constraints in the inventory or in the Vocational side of the market so that I think that we see steady strength for quite a period of time

Angel Castillo: All right. Thank you.

Ken Hastings: You bet.

Speaker Change: All right. Thank you.

Speaker Change: You bet.

Operator: Our next question comes from Jerry Revich with Goldman Sachs. Please go ahead. Your line is now open.

Speaker Change: Our next question comes from Jerry Revich with Goldman Sachs.

Speaker Change: Please go ahead, your line is now open.

unknown: Yes, hi. Good morning, everyone. I just want to ask about warranties.

Jerry Revich: Yes. Hi. Good morning, everyone. I just wanted to ask.

Ken Hastings: Hey, Jerry.

Jerry Revich: About warranties. Hi, Preston. On warranties, you folks had put up really good margin for the past couple of years while paying for higher warranty costs that were out of period. Where do we stand now? Are your warranty accrual rates starting to come down? Are we starting to see that tailwind playing out in the numbers?

Jerry David Revich: Hi, good morning everyone. I just wanted to ask on warranties, hi Preston, on warranties, you folks have put up really good margin for the past couple of years while paying for higher warranty costs that were out of period. Where do we stand now? Are your warranty accrual rates...

Speaker Change: Are we starting to see that tailwind playing out in the numbers?

unknown: Yeah, good observation, Jerry. Warranty, of course, has been developing very favorably, and it reflects the excellent folks that we're currently building and that customers are experiencing. So yeah, that's moving into the right direction.

Harrie Schippers: Yeah. Good observation, Jerry. Warranty cost has been developing very favorably, and it reflects the excellent trucks that we're currently building and that customers are experiencing. So yeah, that's moving into the right direction.

Preston: Yeah, good observation, Jerry. Warranty, of course, has been developing very favorable, and it reflects the excellent trucks that we're currently building and that customers are experiencing. So, yeah, that's moving into the right direction.

unknown: And Harry, can I ask the cost number, if I heard right, for parts was up 5% year over year? What drove that?

Jerry Revich: And Harry, can I ask the cost number, if I heard right, for parts was up 5% year over year? What drove that, and what's the outlook for cost per unit for your parts business if we see it continue at this 5% rate? Is it fair to think about pricing re-accelerating to recoup that for the parts business?

Preston: And Harrie, can I ask the cost number, if I heard right, for parts was up 5% year-over-year. What drove that, and what's the outlook for cost per unit for your parts business if we see it continue at this 5% rate? Is it fair to think about pricing re-accelerating to recoup that for the parts business?

Harrie Schippers: I think for the pricing, I said pricing was up 3%, and cost was up 5%. We expect to continue to see favorable pricing developments as we move through the year.

Harrie: I think for the pricing I said pricing was at 3% and costs were up 5% and we expect to continue to see favorable pricing developments as we move through the year. I think as we look forward in the parts side maybe specifically we would start to see some improvement in price versus cost in the outer quarter.

unknown: I think for pricing, I said pricing was at 3% and cost was at 5%. And we expect to continue to see favorable pricing developments as we move through the year. And I think as we look forward...

unknown: And what's the outlook for cost per unit for your parts business? If we see it continue at this 5% rate, is it fair to think about pricing, reaccelerating to recoup that for the parts business?

Ken Hastings: Yeah. I think as we look forward in the parts side, maybe specifically, we would start to see some improvement in price versus cost in the outer quarter.

unknown: I think as we look forward on the parts side, maybe specifically, we will start to see some improvement in price versus cost in the outer quarter.

Jerry Revich: So was it just a one-off related to a supplier issue that you spoke about earlier, or was that just on the OEM side? I'm just wondering how broad-based is the inflation that we saw in the quarter versus just transitory?

Speaker Change: So was it just a one-off related to a supplier issue that you spoke about earlier or was that just on the OEM side? I'm just wondering how broad-based is the inflation that we saw in the quarter? Was it just transitory?

unknown: So was it just a one-off related to a supplier issue that you spoke about earlier? Or was that just on the OEM side? I'm just wondering how broad-based the inflation that we saw in the quarter was versus just the supplier side.

Harrie Schippers: The 5% cost increase is broad-based. Inflation in the parts business is a little different than trucking business. But the price versus cost reflects the after-sales market in North America mainly that we talked about earlier during the call.

Speaker Change: The 5% cost increase is broad-based. It's inflation and the parts business is a little different than the trucking business.

unknown: The 5% cost increase is broad-based, it's inflation, and the parts business is a little different than the trucking business. But the price versus cost reflects the soft office sales market in North America, mainly what we talked about earlier during the call.

Speaker Change: But the price versus cost reflex is off the sales market in North America mainly that we talked about earlier during the call.

unknown: And lastly, I'm wondering if you could just update us on the performance of your trucks in California that are on the new emission specs, what's been the fuel economy and broader performance since you rolled out the new engine. The California market has taken a

Jerry Revich: Got it. Super. And lastly, I'm wondering if you'd just update us on the performance of your trucks in California that are on the new emission specs. What's been the fuel economy and broader performance since you've rolled out the new engines?

Speaker Change: And lastly, I'm wondering if you could just update us on the performance of your trucks in California that are on the new emission specs. What's been the fuel economy and broader performance since you've rolled out the new engines?

unknown: The California market has taken a bit of a pause, and a breath, I think, is the advanced clean fleet, advanced clean truck. Engine, I'm aware of an engine that is fully compliant. And so that engine is just entering the market because there was a lot of carryover from last year there. But that engine is entering the market and will be an early look at technology for 2027. And I'm really pleased to be kind of leading the way into that.

Ken Hastings: Well, the California market has taken a bit of a pause and a breath, I think, as the Advanced Clean Fleet, Advanced Clean Truck rules have come into place. The market has slowed down. I'd say that we are the only ones that have developed an engine that I'm aware of, an engine that is fully compliant. And so that engine's just entering the market because there was a lot of carryover from last year there. But that engine's entering the market, and it'd be an early look at technology for 2027, and really pleased to be kind of leading the way into that.

Speaker Change: The California market has taken a bit of a pause and a breath, I think, is the advanced clean fleet, advanced clean truck.

Speaker Change: The rules have come into place, market has slowed down, I'd say that we are the only ones that have developed a

Speaker Change: engine that I'm aware of, an engine that is fully compliant.

Speaker Change: And so that engine is just entering the market because there was a lot of...

Speaker Change: Terry over from last year there.

Speaker Change: But that engine's entering the market and will be a, it'd be a early look at technology for 2027 and really pleased to be kind of leading the way into that.

Jerry Revich: Okay. Super. Thank you.

Ken Hastings: You bet.

Speaker Change: Super. Thank you.

Operator: The next question comes from Chad Dillard with Bernstein. Please go ahead, Chad, your line is open.

Speaker Change: You bet.

Operator: The next question comes from Chad Dillard with Bernstein. Please go ahead, Chad. Your line is open.

Speaker Change: The next question comes from Chad Dillard with Bernstein. Please go ahead Chad, your line is open.

Charles Albert Edward Dillard: Hi, good morning, guys. So I've got a few hard questions. Hey, so if you compare the truck industry today to what it was five years ago, how has the industry's ability to hold on to price changed? That's the first part. And then second, if it comes to it, is Paccor willing to keep truck market share if it means holding on to the line on price?

Chad Dillard: Hi. Good morning, guys. So, got an issue-at-heart question. Hey. So if you compare the truck industry today to what it was, let's say, five years ago, how has the industry's ability to hold on to price changed? That's the first part. And then second, if it comes to it, is PACCAR willing to see truck market share if it means holding the line on price?

Charles Albert Edward Dillard: Hi. Good morning, guys. So, got a two-part question.

Charles Albert Edward Dillard: So, if you compare the truck industry today to what it was, let's say, five years ago, how has the industry's ability to hold on to price changed? That's the first part, and then second, if it comes to it, is Paccor willing to keep truck market share if it means holding the line on price?

Preston Fite: So that's great, I love your first question in there and thinking about the truck market today and the ability, I think that the market has access to great Paccor products that are providing a lower total cost of ownership today, more than at any point in history. And so these trucks are helping our operators be more successful, our customers be more successful, and I think that's contributing to a structurally stronger Paccor, where we're able to realize better margins cycle over cycle. And we are doing that.

Ken Hastings: So that's a great—I love your first question in there. And thinking about the truck market today and the ability, I think that the market has access to great PACCAR products that are providing a lower total cost of ownership today, more than at any point in history. And so these trucks are helping our operators be more successful, our customers be more successful, and I think that's contributing to a structurally stronger PACCAR where we're able to realize better margins cycle over cycle. And we're doing that. And I think the same is true on our transportation solutions and our PACCAR Parts businesses where we're able to get more and more parts to our customers in the same day, which is highly valuable to them, which is also helpful to them. So I think that that's why the structurally stronger business is working so well.

Speaker Change: So I that's a great I love your first question in there and thinking about the truck market today and the ability I think that the that the market is

Speaker Change: has access to great Paccor products that are providing a lower total cost of ownership today, more than at any point in history.

Speaker Change: And so these trucks are helping our operators be more successful, our customers be more successful, and I think that's contributing to a structurally stronger Paccor.

Speaker Change: where we're able to realize better margins cycle over cycle, and we're doing that. And I think the same is true on our transportation solutions and our PACCAR parts businesses.

Preston Fite: And I think the same is true for our transportation solutions and our Paccor parts businesses, where we're able to get more and more parts to our customers in the same day, which is highly valuable to them, which is also helpful to them. So I think that that's why the structurally stronger business is working so well.

Speaker Change: Where we're able to get more and more parts to our customers in the same day, which is highly valuable to them, which is also helpful to them. So I think that that's why the Structurally Stronger business is working so well.

Preston Fite: The one thing, or one of the things that drives this conversation is legislation on greenhouse gas reductions. So over the last five, eight years, we've been improving greenhouse gas emissions, which means fuel economy improvements for our customers. It means that if you buy a new truck today compared to five years ago, you'll get a truck with 10, 15% better fuel economy. That creates a lot of value for our customers.

Harrie Schippers: Yeah. One of the things that drives this, Chad, is also the legislation on greenhouse gas reductions. So over the last five, eight years, we've been improving greenhouse gas emissions, which means fuel economy improvement for our customers. So it means that if you buy a new truck today compared to five years ago, you'll get a truck with 10%, 15% better fuel economy. And that's creating a lot of value for our customers.

Speaker Change: One of the things that drives this chat is also the legislation on greenhouse gas reductions.

Speaker Change: So, over the last five, eight years, we've been improving greenhouse gas emissions, which means fuel economy improvement for our customers, so it means that if you buy a new truck today compared to five years ago, you'll get a truck with 10, 15% better fuel economy, and that's creating a lot of value for our customers.

Preston Fite: Gotcha. And then the second part of it comes to it is the hacker willing to see market share with the wine on price.

Chad Dillard: Gotcha. And then the second part, when it comes to it, is PACCAR willing to cede truck market share if it means holding the line on price?

Speaker Change: Gotcha. And then the second part of the project comes to it, is the HAC are willing to see truck and market share with the mean tolling and the line-on price.

Preston Fite: Well, what I'm looking at right now is I think the team's done a fantastic job of looking at the share growth that we're realizing right now. I mean, we've gone from 27.7% last year to 31.5% this year and delivered 18% gross margins in the second quarter. I'm really proud of what they're doing and keeping both in balance.

Ken Hastings: Well, what I look at right now is, I think the team's done a fantastic job of looking at the share growth that we're realizing right now. I mean, we've gone from 27.7% last year to 31.5% this year and delivered 18% gross margins in Q2. I'm really proud of what they're doing and keeping both in balance.

Speaker Change: Well, what I look at right now is I think the team's done a fantastic job of looking at the share growth that we're realizing right now. I mean we've gone from 27.7% last year to 31.5% this year and delivered 18% gross margins in the second quarter. I'm really proud of what they're doing and keeping both in balance.

Charles Albert Edward Dillard: Okay, thank you. That's all for me.

Chad Dillard: Got it. Okay. Thank you. That's all for me.

Ken Hastings: You bet. Thanks.

Speaker Change #100: Okay, thank you. That's all for me.

Operator: Our next question comes from Rob Wertheimer with Melius Research. Please go ahead.

Operator: Our next question comes from Rob Wertheimer with Melius Research. Please go ahead.

Speaker Change #101: Our next question comes from Rob Wertheimer with Melius Research. Please go ahead.

Robert Cameron Wertheimer: Thank you. Preston, I wonder if you can expand on the comments.

Preston Feight: Thank you. Preston, I wonder if you expand on the comments? The share performance is remarkable. I know there's probably a mixed benefit on vocational versus sleeper cabs or whatever, but it seems like it's probably more than that and more broad-based. So I wonder if you just have any comments to help on the sustainability of that or what's driven it aside from Jake products?

Robert Cameron Wertheimer: Thank you. Preston, I wonder if you can expand on the comments.

Robert Cameron Wertheimer: The share performance is remarkable. I know there's probably a mixed benefit on vocational versus, you know, sleeper cabs or whatever, but it seems like it's probably more than that and more broad-based. So I wonder if you just have any comments to help on the sustainability of that or what's driven it, aside from J products.

Preston Fite: The share performance is remarkable. I know there's probably a mixed benefit from vocational training versus, you know, sleeper cabs or whatever, but it seems like it's probably more than that and more broad-based. So I wonder if you just have any comments to help on the sustainability of that or what's driving it, aside from J products.

Ken Hastings: Yeah. Sure. I think that over the last few years, as we've shared often with you, we've invested in new product upgrades, and we've spent wisely in our research and development efforts, and the trucks out there are performing exceptionally well for our customers. And that's contributing to the share growth. I also think we have a fantastic dealer network who's done a good job of taking care of our customers. And as I just mentioned, right, the parts organization is also a fantastic support, and we offer great financial services. I don't think you can say it's one or the other. It's all of them that are structurally helping us. And then the additive to that is, as you said, a strong vocational market where we're the market leader is helpful as well. And we see that also in the medium-duty side, right?

Speaker Change #103: Sure. I think that, you know, over the last few years, as we've shared often with you, we've invested in

Speaker Change #104: New Product Upgrades, and we spent wisely in our research and development efforts.

Speaker Change #105: And the trucks out there are performing exceptionally well for our customers, and that's contributing to the share growth. I also think we have a fantastic dealer network who's doing a good job of taking care of our customers.

Speaker Change #103: And as I just mentioned, right, the parts organization is also a fantastic support and we offer great financial services. I don't think you can say it's one or the other. It's all of them that are structurally helping us.

Speaker Change #103: And then the additive to that is, as you said, a strong vocational market where the market leader is helpful as well. And we see that also in the medium-duty side, right? It's not just the heavy-duty side. But we introduced a new product and we've grown significantly with that new product.

Ken Hastings: It's not just the heavy-duty side, but we introduced a new product, and we've grown significantly with that new product and really supportive of our customers' businesses. And Harry, anything you'd add?

Preston Fite: I don't think you can say it's one or the other. It's all of them that are structurally helping us, and then the additive to that is, as you said, a strong vocational market where we're the market leader is helpful as well, and we see that also on the medium-duty side, right? It's not just the heavy-duty side, but we introduced a new product, and we've grown significantly with that new product, really supportive of our customers' businesses. And Harrie, anything you'd add? For the last two or three years,

Preston Fite: I think that, you know, over the last few years, as we've shared often with you, we've invested in new product upgrades, and we've invested wisely in our research and development efforts, and the trucks out there are performing exceptionally well for our customers, and that's contributing to share growth. I also think we have a fantastic dealer network who've done a good job of taking care of our customers, and as I just mentioned, the parts organization is also a fantastic support, and we offer great financial services.

Speaker Change #103: We're really supportive of our customers' businesses. And Harrie, anything you'd add? The last two or three years, I think we were also held back by supplier capacity. And now with the supply base easing up, we get the opportunity to go market share, and that's what we're doing with the great new products.

Harrie Schippers: The last two or three years, I think we were also held back by supplier capacity. And now with the supply base easing up, we get the opportunity to grow market share, and that's what we're doing with the great new products.

Preston Fite: The last two or three years, I think we were also held back by supplier capacity. Yeah. And now with the supply base easing up, we get the opportunity to go market share, and that's what we're doing with the great new product.

Robert Cameron Wertheimer: Okay, that makes sense. If I may, on the battery JV, it's still a ways out, I know, and the market is still going to develop. But do you have any thoughts on offtake, on ramp, and offtake of the batteries? I don't know whether it's clear to you whether that'll be largely medium duty or whether you, you know, whether you're still introducing products that will absorb those batteries or just any comments on where the evolution of that is. And I'll stop there. Thank you.

Preston Feight: Well, so at least a little bit. Okay. That makes sense. If I may, on the battery JV, it's still a ways out, I know, and the market's still going to develop. But do you have any thoughts on off-take, on the ramp and off-take of the batteries? I don't know whether it's clear to you whether that'll be largely medium-duty or whether you're still introducing products that will absorb those batteries or just any comments on where the evolution of that is? And I'll stop there. Thank you.

Speaker Change #106: Okay, that makes sense. If I may on the on the battery JV

Speaker Change #107: It's still a ways out, I know, and the market's still going to develop.

Speaker Change #108: But do you have any thoughts on offtake, on rampant offtake of the batteries? I don't know whether it's clear to you whether that'll be largely medium duty or whether you, you know, whether you're still introducing products that will, that will absorb those batteries or just any comments on where the evolution of that is. And I'll stop there.

Preston Fite: Great question. I think it's what we're all trying to understand about the future.

Ken Hastings: Great question. I think it's what we're all trying to understand in the future. It's part of the reason we did this in a joint venture is we wanted to develop batteries that were optimized for the commercial vehicle market and had a great cost position for them. So we had the most competitive products out there. So we get scale here, but we also get benefits of cost. The primary applications will start, I think, in return to base. So that could be medium-duty or pickup and delivery where trucks' total cost of ownership could be positive with a battery operation, but you can keep your charging in a local area. I think that will be kind of how we thought about the off-take. It'll take, I think, significantly more time before this would translate into an over-the-road solution.

Speaker Change #109: Great question. I think it's what we're all trying to understand in the future. It's part of the reason we did this in a joint venture is we wanted to develop batteries that were optimized for the commercial vehicle market and had a great cost position for them so we had the most competitive products out there.

Preston Fite: It's part of the reason we did this in a joint venture is because we wanted to develop batteries that were optimized for the commercial vehicle market and had a great cost position for them, so we had the most competitive products out there. So we get scale here, but we also get benefits of cost. The primary applications will start, I think, and return to base.

Preston Fite: So that could be medium duty or pickup and delivery, where trucks' total cost of ownership could be positive with a battery operation, but you can keep your charging in a local area. I think that will be kind of how we think about the offtake. And it'll take, I think, significantly more time before this translates into an over-the-road solution, but we can use this battery factory to serve other markets as well. It doesn't just have to be North America. And I think it was proven to be a good decision the way we structured it.

Speaker Change #108: So we get scale here, but we also get benefits of cost.

Speaker Change #108: The

Speaker Change #108: Primary applications will start, I think, and return to base, so that could be medium-duty or pickup and delivery, where trucks...

Speaker Change #108: Total cost of ownership could be positive with a battery operation, but you can keep your charging in a local area.

Speaker Change #108: I think that will be kind of how we thought about the offtake, and it'll take, I think, significantly more time before this would translate into an over-the-road solution. But we can use this battery factory to serve other markets as well. It's not just have to be North America. And I think it was a proven to be a good decision the way we structured it.

Ken Hastings: But we can use this battery factory to serve other markets as well. It's not just out to be North America. And I think it was proven to be a good decision the way we structured it.

Preston Feight: Thank you.

Speaker Change #110: Thank you.

Operator: Our next question comes from Nicole DeBlaise with Deutsche Bank. Please go ahead; your line is now open.

Operator: Our next question comes from Nicole DeBlaise with Deutsche Bank. Please go ahead. Your line is now open.

Speaker Change #111: Our next question comes from Nicole DeBlaise of Deutsche Bank. Please go ahead, your line is now open.

Unknown Attendee: Yeah, thanks for the question, guys. I guess maybe just starting with the 3Q delivery outlook. So I know we've got the usual production shutdown in Europe, which has an impact of a few thousand units. Does that imply that the U.S. and Canada are kind of flat to slightly down from a delivery perspective?

Nicole DeBlaise: Yeah. Thanks for the question, guys. I guess maybe just starting with the Q3 delivery outlook. So I know we've got the usual production shutdown in Europe, which has an impact of a few thousand units. Does that imply that US and Canada is kind of flat to down slightly from a delivery perspective?

Unknown Attendee: Yeah, thanks for the question, guys. I guess maybe just starting with...

Unknown Attendee: The 3Q Delivery Outlook. So I know we've got the usual, you know, production shutdown in Europe , which has an impact of a few thousand units. Does that imply that U.S. and Canada is kind of flat to down slightly from a delivery perspective?

Preston Fite: I think I would look at it, Nicole is saying that that's half of the total delivery shift between 2Q and 2Q3, and then the other is the market. Marketed North America and America adjustments that I would say are, you know, reflecting in that.

Ken Hastings: Yeah. I think I would look at it, Nicole, as saying that that's half of the total delivery shift between Q2 and 2023, and then the other is market.

Unknown Attendee: You know, I think I would look at it, Nicole, as saying that that's half of the total delivery shift between 2Q and 2.3, and then the other is market.

Harrie Schippers: Market in North America and market adjustments that I would say are reflecting in that.

Speaker Change #113: Marketed North America and America adjustments that I would say are, you know, reflecting in that.

Unknown Attendee: Okay, got it. That's clear. Thank you. And then I'm sorry to belabor the point on price. I know you guys have had this question like a million different ways. But is there a risk within the truck segment only that pricing could potentially go negative in the back half? Or is that not what you guys would expect to see?

Nicole DeBlaise: Okay. Got it. That's clear. Thank you. Then sorry to belabor the point on price. I know you guys have had this question a million different ways. But is there a risk within the truck segment only that pricing could potentially go negative in the back half, or is that not what you guys would expect to see?

Nicole: Okay, got it. That's clear. Thank you. And then I'm sorry to belabor the point on price. I know you guys have had this question like a million different ways. But is there a risk within the truck segment only that pricing could potentially go negative in the back half? Or is that not what you guys would expect to see?

Preston Fite: So, we get guidance for the third quarter with an excellent 17% gross margin. Fourth quarter, we'll talk about that during the next call, Nicole. Yeah, I think I would look at it also in saying that while prices are feeling...

Harrie Schippers: So we get guidance for Q3 with an excellent 17% gross margin. Q4, we'll talk about that during the next call, Nicole.

Speaker Change #115: So we get guidance for the third quarter with an excellent 17% gross margin.

Preston Fite: Yeah, I think I would look at it also in saying that while prices are feeling effective, the market, you could also say that costs might have some opportunity, but just not as much as price right now. And so I think, as you said, the Q3 gets less clear in Q4, but we'll definitely update you on the next call. Got it. Thank you guys. Our next question.

Speaker Change #116: Fourth quarter

Ken Hastings: Yeah. I think I would look at it also in saying that while price is feeling effective, the market, you could also say that costs might have some opportunity, but just not as much as price right now. And so I think, as you said, we talked about the Q3 gets less clear at Q4, but we'll definitely update you in the next call.

Speaker Change #116: We'll talk about that during the next call, Nicole. Yeah, I think I would look at it also in saying that while prices is feeling effective, the market, you could also say that costs might have some opportunity, but just not as much as price right now. And so I think, as you said, we talked about the Q3 gets less clear at Q4, but we'll definitely update you in the next call.

Nicole DeBlaise: Got it. Thank you, guys.

Ken Hastings: You bet.

Nicole: Got it. Thank you, guys.

Nicole: You bet.

Operator: Our next question comes from Kyle Menges with Citigroup. Please go ahead, Kyle, your line is open. I thank you. I just wanted to clarify the parts growth.

Operator: Our next question comes from Kyle Menges with Citigroup. Please go ahead, Kyle. Your line is open.

Speaker Change #117: Our next question comes from Kyle Menges with Citigroup. Please go ahead Kyle, your line is open.

Preston Feight: Hi. Thank you. I just wanted to clarify the parts growth outlook, 4% in the back half of the year. Should we think about that as a guide for 4% growth in Q3 and then another 4% year-over-year growth in Q4?

Kyle Menges: Hi, thank you. I just wanted to clarify the parts growth outlook 4% in the back half of the year. Should we think about that as a guide for 4% growth in 3Q and then another 4% year-over-year growth in 4Q?

Kyle Menges: That sounds about right. Okay, and then I'm curious.

Harrie Schippers: Yeah. That sounds about right.

Speaker Change #119: That sounds about right.

Preston Feight: Okay. And then I'm curious, how much does the opening of some of these distribution centers impact that growth outlook?

Kyle Menges: How much does the opening of some of these distribution centers impact that growth outlook? They support the growth. It's not if you add a distribution center that automatically results in parts growth, but it gives us Proximity and Capacity for Parts and Better Delivery Performance that benefits our dealers and customers. So it definitely supports the growth. But it's not the only thing that drives part sales.

Kyle Menges: Okay, and then I'm curious, how much does the opening of some of these distribution centers impact that growth outlook?

Harrie Schippers: They support the growth. If you add a distribution center, that automatically results in parts growth, but it gives us proximity and capacity for parts and better delivery performance that benefits our dealers and customers. So it definitely supports the growth, but it's not the only thing that drives the part sales.

Speaker Change #120: They support the growth. It's not, if you add a distribution center, that automatically results in parts growth, but it gives us a proximity and capacity for parts and better delivery performance that benefits our dealers and customers. So it definitely supports the growth.

Preston Fite: Yeah, I think exactly what Harrie said. I echo the fact that these investments are strategic and long-term in thinking, right? They just build a better support system for our customers and our ability to get same-day deliveries, which contributes to the long-term success and performance of the parts team.

Ken Hastings: Yeah. I think exactly what Harry said. I'd echo the fact that these investments are strategic and long-term in thinking, right? They just build a better support system for our customers and our ability to get same-day deliveries, which contributes to the long-term success and performance of the parts team.

Speaker Change #120: But it's not the only thing that drives the parts sales. Yeah, I think exactly what Harrie said. I echo the fact that these investments are strategic and long-term in thinking, right? They just build a better support system for our customers and our ability to get same-day deliveries, which contributes to the long-term success and performance of the parts team.

Preston Feight: Great. Thank you.

Ken Hastings: You bet.

Speaker Change #121: Great, thank you.

Operator: The next question comes from Scott Group with Wolfe Research. Please go ahead, Scott, your line is open.

Operator: The next question comes from Scott Group with Wolf Research. Please go ahead, Scott. Your line is open.

Speaker Change #122: The next question comes from Scott Group with Wolf Research. Please go ahead Scott, your line is open.

Scott H. Group: Hey, thanks, guys. So I think you said you were 50%, roughly 50% sold out for the fourth quarter. Do you have any perspective? What's normal at this point in the year?

Preston Feight: Hey. Thanks, guys. So I think you said you were roughly 50% sold out for Q4. Do you have any just perspective? What's normal at this point of the year? Just is that 50% about right or not? And then as you start at some point, start selling trucks for 2025, any directional color on price for the 2025 trucks?

Scott H. Group: Hey, thanks, guys. So I think you said you were 50%, roughly 50% sold out for fourth quarter.

Scott H. Group: Do you have any perspective, what's normal at this point of the year, is that 50% of that right or not? And then as you start, at some point start selling trucks for $25, any directional color on price?

Preston Fite: Just, you know, is that 50% right or not? And then, as you start, at some point, start selling trucks for 25, any directional color on prices? for the 25 trucks. Yeah.

Preston Fite: Um, yeah, I mean, 50% full for 4Q this time of year is extremely normal. So if you went back over the longest term, this is right in the wheelhouse of normal. And that's what we see in the market, too. We see kind of a very normal, successful market where Paccor can perform well. And I think that it's too early to talk about 2025 prices.

Ken Hastings: Yeah. I mean, 50% full for Q4 this time of year is extremely normal. So if you went back over the longest term, this is right in the wheelhouse of normal. And that's what we see in the market too. We see kind of a very normal, successful market where PACCAR can perform well. And I think that it's too early to talk about 2025 pricing.

Speaker Change #124: for the 25 trucks.

Speaker Change #125: Yeah, I mean, 50% full for 4Q this time of year is extremely normal. So if you went back over the longest term, this is right in the wheelhouse of normal. And that's what we see in the market, too. We see kind of a very normal, successful market where Paccor can perform well.

Speaker Change #125: And I think that it's too early to talk about 2025 pricing.

Preston Feight: Okay. Then just quickly, any color on used truck pricing and how you see that trending in the back half of the year?

Scott H. Group: Okay, and then just quickly, any color on used truck pricing and how you see that trending in the back half?

Speaker Change #126: Okay, and then just quickly any color on used truck pricing and how you see that trending in the back half of the year?

Ken Hastings: Yeah. Sure, Harry.

Harry: Fisher, Harry. Especially in North America, with inventories also at normal levels, we expect that to continue in the second half of this year.

Harrie Schippers: Yeah. Used truck prices have come down to more normal levels. Especially in North America, with inventories also at normal levels, we expect that to continue in the second half of this year.

Speaker Change #126: New Stroke Prime Slip comes down to more normal levels.

Speaker Change #127: Specially in North America with inventories also at normal levels, we expect that to continue in the second half of this year.

Preston Feight: Meaning you think that they continue to trend lower, or you think they sort of stabilize from here?

Scott H. Group: Meaning do you think that they will continue to trend lower, or do you think they will sort of stabilize from here?

Harrie C. A. M. Schippers: Meaning you think that they continue to trend lower or you think they sort of stabilize from here?

Harry: I would expect them to stabilize from here for the U.S. and Canada. Okay, helpful.

Harrie Schippers: I would expect them to stabilize from here for the US and Canada.

Speaker Change #128: I would expect them to stabilize from here for the U.S. and Canada.

Preston Feight: Okay. Helpful. Thank you, guys.

Scott H. Group: Okay, that was helpful. Thank you, guys.

Ken Hastings: You bet. Have a good day.

Speaker Change #129: Okay, helpful. Thank you guys.

Speaker Change #130: You bet. Have a good day.

Operator: The next question comes from Michael Finnegan with Bank of America Merrill Lynch. Please go ahead, Michael; your line is open.

Operator: The next question comes from Michael Feniger with Bank of America Merrill Lynch. Please go ahead, Michael. Your line is open.

Speaker Change #130: The next question comes from Michael Finnegar with Bank of America Merrill Lynch. Please go ahead Michael, your line is open.

Michael Finnegan: Yes. Hi, everyone. Thanks for squeezing me in.

Preston Fite: Preston, you mentioned obviously rates have been softer on the truckload segment, and contract rates are at low levels. It sounds like when you listen to the public players, there's overcapacity there. I'm just curious, do you feel like that can improve in a quarter or two, or does it take more time to work through that overcapacity based on your experience with cycles? It sounds like there's confidence on the vocational side into 2025. I'm just curious if we think that softness could kind of bleed into 2025 on that particular side of the market.

Preston Feight: Yes. Hi, everyone. Thanks for squeezing me in. Just, Preston, you mentioned obviously rates have been softer on the truckload segment. Contract rates are at low levels. It sounds like when you listen to the public players, there's overcapacity there. I'm just curious, do you feel like that can improve in a quarter or two, or does that take more time to kind of work through that overcapacity based on your experience with cycles? It sounds like there's confidence on the vocational side into 2025. I'm just curious if we think that softness could kind of bleed into 2025 on that particular side of the market.

Michael Finnegan: Yes. Hi, everyone. Thanks for

Michael Finnegan: Squeezing me in just pressing you mentioned obviously rates have been softer on the truckload segment contract rates are at low levels

Speaker Change #132: It sounds like when you listen to the public players, there's overcapacity there.

Speaker Change #133: I'm just curious, do you feel like that can improve in a quarter or two, or does that take more time to kind of work through that overcapacity based on your experience with cycles? It sounds like there's confidence on the vocational side into 2025. I'm just curious if we think that softness could kind of bleed into 2025 on that particular side of the market.

Michael Finnegan: Michael, it's a good question. I think we'll have to wait and see what that is. I think it's obviously not that easy to predict it. There are a lot of factors that go into it. So I think that our focus is on making sure that we gain our share of whatever the market size is, which teams are really demonstrating success in doing with great products. But knowing the cadence for when that might turn, I think you'd think a couple of quarters might be a good way to think of it, plus or minus.

Ken Hastings: Yeah. I think we're going to, Michael, it's a good question. I think we'll just have to watch and see what that is. I think it's obviously not that easy to predict it. There's a lot of factors that go into it. So I think that our focus is on making sure that we gain our share of whatever the market size is, which teams are really demonstrating success in doing with great products. But knowing the cadence for when that might turn, I'd think in a couple of quarters might be a good way to think of it, plus or minus.

Speaker Change #133: Yeah, I think we're going to, Michael, it's a good question. I think we'll have to watch and see what that is. I think it's obviously not that easy to predict it. There's a lot of factors that go into it.

Speaker Change #134: So I think that our focus is on making sure that we gain our share of whatever the market size is, which teams are really demonstrating success in doing with great products. But knowing the cadence for when that might turn, I think you'd think in a couple of quarters might be a good way to think of it, plus or minus.

Preston Fite: Fair enough. And Preston, I know there's so many questions about the pre-buy. I mean, you know, you guys are investing and making sure you have capacity will be there. Sounds like others are too. I'm curious, roughly, when a customer needs to place an order to secure slots ahead of the EPA 27, is there just anything we should be aware of ahead of this emission standards change compared to others? Can fleets wait for the second half of 25 or early 26 to place an order and secure a truck? Or does that start to cut it too close? I'm just curious how we should kind of think about that in the context of other emission changes. You know, I would look at it and say that

Preston Feight: Fair enough. And Preston, I know there were so many questions on the pre-buy. I mean, you guys are investing. Make sure you have capacity will be there. Sounds like others are too. I'm curious, roughly, when a customer needs to place an order to secure slots ahead of the EPA 2027, is there just anything we should be aware of ahead of this emission standards change compared to others? Can fleets wait for the second half of 2025 or early 2026 to place an order and secure a truck, or does that start to cut it too close? I'm just curious how we should kind of think about that in the context of other emission changes.

Speaker Change #134: Fair enough. And Preston, I know there's so many questions on the pre-buy. I mean, you know, you guys are investing and make sure you have capacity will be there. Sounds like others are too.

Preston: I'm curious.

Preston: Roughly, when a customer needs to place an order to secure slots ahead of the EPA 27, is there just anything we should be aware of ahead of this emission standards change compared to others? Can fleets wait for the second half of 25 or early 26?

Speaker Change #135: to place an order and secure a truck? Or does that start to cut it too close? I'm just curious how we should kind of think about that in the context of other emission change or changes.

Preston Fite: You know, I would look at it and say that we have a long history in the industry of having these emissions changes. And I think when they bring costs into the market, then people want to buy their product sooner. And I think we'll see the same kind of approach here. How far forward that will trend, I think, depends on too many factors to kind of weigh in on it.

Ken Hastings: I would look at it and say that we have a long history in the industry of having these emissions changes. I think when they bring cost into the market, then people want to buy their product sooner. I think we'll see the same kind of approach here. How far forward that'll trend, I think, depends on too many factors to kind of weigh in on it.

Speaker Change #136: You know I would look at it and say that we have a long history in the industry of having these emissions changes and I think when they bring cost into the to the market then people want to buy their product sooner I think we'll see the same kind of approach here how far forward that'll trend I think depends on too many factors to kind of weigh in on it

Preston Feight: Thank you.

Ken Hastings: You bet.

Speaker Change #136: Thank you.

Operator: The next question comes from Jeff Kauffman with Vertical Research Partners. Please go ahead, Jeff, your line is open.

Operator: The next question comes from Jeff Kaufman with Vertical Research Partners. Please go ahead, Jeff. Your line is open.

Speaker Change #136: The next question comes from Jeff Kauffman with Vertical Research Partners. Please go ahead Jeff, your line is open.

Jeffrey Asher Kauffman: Thank you very much and good afternoon. A lot of my questions have been asked at this point, so let me go back to one that Rob Wertheimer asked. The market share gains are fantastic, and you guys have a great product lineup and I know that's driving it, but out of the 380 basis points of market share that you improved, if you had to guess, how much of it was dominant in categories that are outgrowing the market? versus we've got new products, and we're taking share from other products in the existing.

Steven Fisher: Thank you very much and good afternoon. A lot of my questions have been asked at this point. So let me dig back into one that Rob Wertheimer asked. The market share gains are fantastic, and you guys have a great product lineup, and I know that's driving it. But out of the 380 basis points of market share that you improved, if you had to guess, I mean, how much of it was we're dominant in categories that are outgrowing the market versus we've got new product and we're taking share from other products in the existing market?

Jeffrey Asher Kauffman: Thank you very much and good afternoon.

Jeffrey Asher Kauffman: You know, a lot of my questions have been, hey, a lot of my questions have been asked at this point. So let me dig back into one that Rob Wertheimer asked.

Jeffrey Asher Kauffman: You know, the market share gains are fantastic. And you guys have a great product lineup. And I know that's driving it. But, you know, out of the 380 basis points of market share that you improved, if you had to guess, I mean, how much of it was we're dominant in categories that are outgrowing the market?

Speaker Change #144: versus we've got new product and we're taking share from other products in the existing market.

Preston Fite: Well, that's a fun question, Jeff, and I wish I knew the answer to it.

Ken Hastings: Well, that's a fun question, Jeff. I wish I knew the answer to it, but I would say that the two things you characterized are probably the dominant characteristics of why the share gain is coming: great products, and then I think strong sectors where PACCAR is the leader. I don't know if it's necessary to kind of put percentages on them. I think we just say that it's nice to see both performing so well.

Preston Fite: But I would say that the two things you characterized are probably the dominant characteristics of why the share gain is coming from great products. And then I think there are strong sectors where Paccor is the leader. So I don't know if it's necessary to kind of put percentages on them.

Jeffrey Asher Kauffman: Well, that's a fun question, Jeff, and I wish I knew the answer to it, but I would say that the two things you characterized are probably the dominant characteristics of why the share gain is coming, great products.

Speaker Change #138: And then I think a strong sectors where Paccor is a leader. So I don't know if it's necessary to kind of put percentages on them. I think we just say that it's nice to see both performing so well.

Steven Fisher: I thought I'd ask if you had a view.

unknown: I

Ken Hastings: Well, congratulations.

Preston Feight: I'm glad you asked, Jeff.

Jeffrey Asher Kauffman: I thought I'd ask if you had a view.

Steven Fisher: Well, congratulations. Thank you.

Speaker Change #139: Well, congratulations. Thank you.

Ken Hastings: You bet.

Speaker Change #142: You bet.

Jeffrey Asher Kauffman: Eh, I thought I'd ask if you hadn't already. I'm glad you asked, Jeff.

Operator: The next question comes from the line of Miguel Borrega with BNP Paribas. Please go ahead, Miguel. Your line is open.

Speaker Change #140: The next question comes from the line of Miguel Borrega with BNP Paribas. Please go ahead, Miguel, your line is open.

Operator: The next question comes from the line of Miguel Borrega with BNP Paribas. Please go ahead, Miguel, your line is open.

Miguel Borrega: Hi, good afternoon, everyone. Thanks for taking my question. The first one, just wondering about the competitive environment in Europe, where the market is obviously weaker. Traditionally, that would lead to some price pressure. Are you seeing any of that today? Are you seeing any attempt at a discount in any segment in particular? Do you see any weakness from a pricing perspective? That's my first question.

Preston Feight: Hi. Good afternoon, everyone. Thanks for taking my questions. The first one, just wondering about the competitive environment in Europe where the market is obviously weaker. Traditionally, that would lead to some price pressure. Are you seeing any of that today? Are you seeing any attempt of discount in any segment in particular? Do you see weaker from a pricing perspective? That's my first question.

Miguel Borrega: Hi, good afternoon everyone. Thanks for taking my questions.

Miguel Borrega: The first one just wondering about the competitive environment in Europe where the market is obviously weaker Traditionally that would lead to some price pressure. Are you seeing any of that today? Are you seeing any attempt?

Speaker Change #143: of discount in any segment in particular, and you see weaker from a pricing perspective? That's my first question.

Harrie Schippers: Yeah. The market in Europe is down, and you're right. We're seeing some pricing pressure there, but I think the team does a really nice job in keeping the premium position of the New DAF in Europe and will continue to do so.

Preston Fite: The market in Europe is down, and you're right, we're seeing some pricing pressure there, but I think the team did a really nice job of keeping the premium position of the new DAF in Europe, and we'll continue to do so.

Speaker Change #145: The market in Europe is down and you're right, we're seeing some pricing pressure there, but I think the team does a really nice job in keeping the premium position of the new DAB in Europe and we'll continue to do so.

Miguel Borrega: Thank you. That's very good. And then secondly, just in terms of the make. Can you give us some color on whether the mix from a regional perspective was a positive or negative contributor to the margin with Brazil rebounding, Europe substantially down, but the U.S. and Canada up? Can you help us understand the different moving parts, some kind of color?

Preston Feight: Thank you. That's very good. And then secondly, just in terms of the mix, can you give us some color whether the mix from a regional perspective was a positive or negative contributor to the margin with Brazil rebounding, Europe substantially down, but US and Canada up? Can you help us understand the different moving parts, some kind of color?

Speaker Change #146: Thank you. That's very good. And then secondly, just in terms of the mix.

Preston Fite: I don't think we, I don't think the mix, geographical mixes, has a big impact on overall margin. I think all the regions are performing really well at this point in the cycle. I think one of the things you can see that's really helpful to us is the strength in South America and Brazil specifically.

Harrie Schippers: I don't think the geographical mix has a big impact on our overall margin. I think all the regions are performing really well at this point in the cycle.

Speaker Change #147: I don't think the geographical mix has a big impact on an overall margin.

Ken Hastings: Yeah. I think one of the things you can see that's really helpful to us is the strength in South America, Brazil specifically, another place where market share has grown significantly. So that's grown with good margin performance also. Obviously, not as big as the US and Europe, but it is a contributor in a positive way. So I think, as Harry said, all the teams are doing a good job of keeping the balances right and pleased with the performance it's delivering.

Speaker Change #148: Regions are performing really well at this point in the cycle.

Preston Fite: We can see that it's really helpful to us as a strength in South America and Brazil specifically. Another place where market share has grown significantly, so that's grown with good margin performance also, obviously not as big as the US and Europe, but it is a contributor in a positive way. So, I think, as Harrie said, all the teams are doing a good job of keeping the balances right and pleased with the performance it's delivering.

Speaker Change #149: I think one of the things you can see that's really helpful to us is the strength in South America and Brazil specifically. Another place where market share has grown significantly, so that's grown with good margin performance also.

Speaker Change #149: Obviously not as big as the U.S. and Europe .

Speaker Change #149: but it is a contributor in a positive way. So I think, as Harrie said, all the teams are doing a good job of keeping the balances right, pleased with the performance it's delivering.

Preston Feight: Thank you very much.

Ken Hastings: You bet.

Speaker Change #150: Thank you very much.

Harrie C. A. M. Schippers: You bet.

Operator: Our next question comes from Kim Fine with Roman James. Please go ahead, Tim, your line is open.

Operator: Our next question comes from Tim Thein with Raymond James. Please go ahead, Tim. Your line is open.

Speaker Change #151: Our next question comes from Kim Fine with Raymond James.

Kim Fine: Great, thank you. Preston, the first question I had was just how you're thinking about managing this outlook as you think about a softer, you know, softening in the back half of this year and, you know, potentially that bleeds into 25, who knows. But then, you know, looking beyond that, we know at some point, assuming legislation goes as planned, we're going to be looking at, you know, maybe the largest market ever.

Preston Feight: Great. Thank you. Preston, the first question I had was just how you're thinking about managing this outlook as you think about a softening in the back half of this year, and potentially that leads into 2025. Who knows? But then looking beyond that, we know at some point, assuming legislations go as planned, we're going to be looking at maybe the largest market ever. So coming off a period where the supply chain has kind of been whipped around and has struggled to ramp up, how do you kind of, and it's not just a PACCAR question, but how does the industry kind of balance those two forces where you have to respond to conditions in the near term but with also not jeopardizing yours and the supply chain's ability to ultimately then ramp back up? How do you kind of thread that needle?

Speaker Change #151: Please go ahead, Tim, your line is open.

Tim: Great, thank you. Preston, the first question I had was just how you're thinking about

Tim: The managing this outlook is, as you think about it, the softer, you know, softening in the back half of this year, and, you know, potentially that that bleeds into 25, who knows, but then, you know, looking beyond that, we know, at some point, assuming legislation to go as planned,

Tim: We're going to be looking at, you know, maybe maybe the largest market ever. So, you know, and coming off a period where

Kim Fine: So, you know, coming off a period where Supply Chain has kind of been whipped around and struggled to ramp up. How do you kind of, it's not just a Paccor question, but how does the industry kind of balance those two forces where you have to, you know, you have to respond to conditions in the near term but also not jeopardizing yours and the supply chain's ability to ultimately then ramp back up? How do you kind of thread that needle?

Speaker Change #153: The supply chain has kind of been whipped around and has struggled to ramp up. How do you kind of, it's not just a Paccor question, but how does the industry kind of balance those two forces where you have to, you know, you have to respond to

Speaker Change #153: in the near term, but with also not jeopardizing yours and the supply chain's ability to ultimately then ramp back up. How do you kind of thread that needle?

Preston Fite: Yeah, Tim, I think it's a very good question. And, you know, obviously, you know Paccor quite well. And our approach is a long-term strategic view of the market. We're in it for the long term, we're here to support our customers, and we keep making smart investments, which are good for the long term. And so we aren't quite as concerned about an outlook of what the market might be in a quarter; we're just going to keep doing the right things and gradually growing our share and increasing the performance of our products for our customers and growing the business.

Ken Hastings: Yeah, Tim, I think it's a very good question. And obviously, you know PACCAR quite well. And our approach is a long-term strategic view of the market. We're in it for the long term. We're here to support our customers. We keep making smart investments, which are good for the long term. And so we aren't quite as concerned about an outlook of what the market might be in a quarter. We're just going to keep doing the right things and gradually growing our share and increasing the performance of our products for our customers and growing the business. And that's the way it works out for us. And as we started the call with, Harry mentioned making investments in capital and products that support future growth, and we're going to continue to do that in the wisest way possible.

Speaker Change #153: Yeah, Tim, I think it's a very good question. And, you know, obviously, you know Paccor quite well. And our approach is a long-term strategic view of the market. We're in it for the long term. We're here to support our customers. We keep making smart investments, which are good for the long term.

Speaker Change #153: And so we aren't quite as concerned about an outlook of what the market might be in a quarter. We're just going to keep doing the right things and gradually growing our share and increasing the performance of our products for our customers.

Speaker Change #153: and growing the business. And that's the way it works out for us. And as we started the call with, Harrie mentioned making investments in capital and products that support future growth, and we're going to continue to doing that in the wisest way possible.

Preston Fite: And that's the way it works out for us. And, as we started the call with Harrie mentioned, making investments in capital and products that support future growth. And we're going to continue doing that in the wisest way possible.

Kim Fine: Got it. Okay.

Preston Feight: Got it. Okay. And then the comment earlier just on the looking to the order board and specifically in the fourth quarter, that call at 50% full that you mentioned, a lot of airtime here on pricing. But I'm just curious, in terms of the composition of the backlog, obviously that can influence or have an impact on the price realization. And again, not specifically, but in terms of the mix between fleet versus retail, any sense for, I mean, obviously, a year ago, you couldn't get trucks. Now inventories are a bit heavy. So I'm guessing that has flipped. Is that a factor in this price discussion in terms of just the composition of the orders and who the ultimate end buyers are?

Speaker Change #154: Got it. Okay. And then the comment earlier, just on the looking to the, to the, to the order board and specifically in the fourth quarter that they call it 50% fold that you mentioned.

Preston Fite: And then the comment earlier, just on the look at the order board and specifically in the fourth quarter when they call it 50% full, as you mentioned. A lot of airtime here on pricing, but I'm just curious, in terms of the composition of the backlog, obviously that can influence or have an impact on price realization. And so again, not specifically, but in terms of the mix between fleet versus retail, any sense for me? I mean, obviously, a year ago, you know, he couldn't get trucks; now, inventories are a bit heavy. So I'm guessing that has flipped. Is that factor in this price discussion in terms of just the composition of the orders and who the ultimate end buyers are?

Speaker Change #155: A lot of airtime here on pricing, but I'm just curious, in terms of the composition of the backlog, obviously that can influence or have an impact.

Speaker Change #156: on the price realization. So again, not specifically, but in terms of the mix between

Speaker Change #156: fleet versus retail. Any sense for, I mean, obviously a year ago.

Speaker Change #157: You know, you couldn't get trucks now, inventories are a bit heavy, so I'm guessing that has flipped. Is that a factor in this price discussion in terms of just the composition of the orders and who the ultimate end buyers are?

Kim Fine: I think that, you know, we've kind of hit on that a couple of ways in this call. And I would say that, you know, the vocational market continues to be solid. And so with that strength, that's good for us. Our inventory at 3.3 months compared to the industry at 3.9 months feels quite healthy and appropriate, given the share gains we're making. And then I think the mixture of work truck and other things comes in is that there's some timing associated with that.

Ken Hastings: Well, I think that we've kind of hit that a couple of ways in this call. I would say that the vocational market continues to be solid. So with that strength, that's good for us. Our inventory at 3.3 months compared to industry at 3.9 feels quite healthy and appropriate given the share gains we're making. Then I think the mixture of where truck and other things come in is, there's some timing associated with that. We're sitting here in late July now. Fleets tend to enter into this a little bit later over the next couple of months. They'll get more clarity on what their capital allocation plans are for the next year. Then we'll see what that balance looks like in the fourth quarter.

Speaker Change #158: I think that, you know, we've kind of hit that a couple of ways in this call and I would say that

Speaker Change #159: You know, the vocational market continues to be solid.

Speaker Change #160: And so with that strength, that's good for us. Our inventory at 3.3 months compared to industry at 3.9 feels quite healthy and appropriate given the share gains we're making.

Kim Fine: We're sitting here in late July now, and fleets tend to enter into this a little bit later. Over the next couple months, they'll get more clarity on what their capital allocation plans are for the next year. And then we'll see what that balance looks like in the fourth quarter. Got it. Okay.

Speaker Change #160: And then I think the mixture of work truck and other things come in is there's some timing associated with that. We're sitting here in late July now. Fleets tend to enter into this a little bit later. Over the next couple of months, they'll get more clarity on what their capital allocation plans are for the next year. And then we'll see what that balance looks like in the fourth quarter.

Preston Fite: Got it. Okay. All right. Thank you, Preston.

Preston Feight: Got it. Got it. Okay. All right. Thank you, Preston.

Ken Hastings: You bet.

Speaker Change #160: Got it. Got it. Okay. All right. Thank you, Preston.

Preston: You bet.

Operator: There are no other questions in the queue at this time. Are there any additional remarks from the company?

Operator: There are no other questions in the queue at this time. Are there any additional remarks from the company?

Speaker Change #161: There are no other questions in the queue at this time. Are there any additional remarks from the company?

Unknown Executive: We'd like to thank everyone for joining the call, and thank you, operator.

Ken Hastings: We'd like to thank everyone for joining the call. Thank you, operator.

Operator: Ladies and gentlemen, this concludes Paccor's earnings call. Thank you for participating. You may now disconnect.

Speaker Change #162: We'd like to thank everyone for joining the call and thank you, Operator.

Operator: Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect.

Speaker Change #163: Ladies and gentlemen, this concludes Paccor's earnings call. Thank you for participating. You may now disconnect.