Q2 2024 Rush Enterprises Inc Earnings Call
Ladies and gentlemen, thank you for standing by. Welcome to Rush Enterprises Report Second Quarter 2024 Earnings Results.
Operator: 24 Earnings Results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Rusty Rush, Chairman of the Board, Chief Executive Officer, and President. Please go ahead.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised.
Rusty Rush: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded I would like now to turn the conference over to rusty rush chairman of the board chief executive officer and President please go ahead
Rusty Rush: Good morning, and welcome to our second quarter 2024 earnings release call. With me on the call are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Jay Hazelwood, Vice President and Comptroller; and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary. Now Steve will say a few words regarding forward-looking states.
Rusty Rush: Good morning and welcome to our second quarter 2024 earnings release call. With me on the call are Mike McRoberts, Chief Operating Officer, Steve Keller, Chief Financial Officer, Jay Hazelwood, Vice President and Controller, and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary.
Steve Keller: Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risk and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31, 2023, and in our other filings with the Securities and Exchange Commission.
Speaker Change: Now, Steve will say a few words regarding forward-looking statements.
Steve Keller: Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risk and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements.
Steve: Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31st, 2023, and in our other filings with the Securities and Exchange Commission.
Rusty Rush: As indicated in our news release, we achieved second quarter revenues of $2 billion and net income of $78.7 million, or $0.97 per diluted share. We are proud to declare a cash dividend of $0.18 per common share, an increase of 5.9% over our prior quarterly dividend and our eighth increase since announcing our intent to begin paying quarterly cash dividends in July of 2018, despite the ongoing challenges facing the art industry that are highlighted in our earnings release.
Speaker Change: As indicated in our news release, we achieved second quarter revenues of $2 billion and net income of $78.7 million or $0.97 per diluted share.
Speaker Change: We are proud to declare a cash dividend of $0.18 per common share, an increase of 5.9% over our prior quarterly dividend, and our eighth increase since announcing our intent to begin paying quarterly cash dividend in July of 2018.
Rusty Rush: I am pleased with our financial results in the second quarter. Past strategic initiatives, including expanding our breadth of product offerings, investing in our sales force and technicians, and diversifying our customer base, to name a few, are helping produce significantly better results than we achieved during the last industry trials in 2020 and 2016. Although low freight rates continue to negatively impact over-the-road carriers, we experienced ongoing strength in other key customer segments, including public sector and vocational, which positively impacted our Class VIII truck sales revenues and market share during the second quarter.
Speaker Change: Despite the ongoing challenges facing the art industry that are highlighted in our earnings release, I am pleased with our financial results in the second quarter.
Speaker Change: past strategic initiatives, including expanding our breadth of product offering.
Rusty Rush: Our Class IV-VII sales remained steady, and we executed well on our used truck pricing and inventory strategy. With respect to our aftermarket products and services, we did experience a decrease in demand during the second quarter... However, we believe we kept pace with the industry from a parts sales perspective and outperformed the industry with respect to service sales. In the aftermarket, our parts, service, and body shop revenues were $627.4 million, down 3.6% compared to the second quarter of 2023, and our absorption ratio was 134%. As I stated in the news release, the freight recession and high interest rates are still negatively impacting over-the-road carriers.
Speaker Change: In the aftermarket, our parts, service, and body shop revenues were $627.4 million, down 3.6% compared to the second quarter of 2023, and our absorption ratio was 134%.
Rusty Rush: The same challenging economic conditions also led to a decrease in demand from wholesale, independent parts distributors, and energy customers. However, decreases in those segments were partially offset by healthy year-over-year growth in our public sector, vocational, and medium-duty customers. Looking ahead, we do not expect market conditions or aftermarket demand to improve significantly in the third quarter. However, we are committed to leveraging the foundational tools and processes we have put in place over the last few years through the execution of our strategic initiatives, and we are confident this will lead to increased efficiency and provide better service for our customers.
Rusty Rush: We believe that these actions will allow us to improve our market share and continue to outperform the industry. Turning now to truck sales, we sold 4,128 new Class 8 trucks in the second quarter, accounting for 6.8% of the total U.S. Class 8 market and 1.7% of the Canadian market. Weak demand caused by a lingering Frank recession led to an 18.6% decline in U.S. Class 8 retail sales in the second quarter of 24 compared to the same quarter in 2023.
Speaker Change: Weak demand caused by a lingering frank recession led to an 18.6% decline in U.S. Class 8 retail sales in the second quarter.
Rusty Rush: However, strong retail sales to vocational customers and the timing of deliveries to certain other large customers helped to offset the decline in over the road sales and allowed us to increase our Class 8 market share. ACT Research forecast U.S. Class VIII retail sales to be 228,700 units in 2024, down 15.8% compared to 2023.
Speaker Change: and allowed us to increase our Class 8 market share.
Rusty Rush: During the second quarter, the industry experienced higher-than-normal Class VIII order cancellations and weak order intake, which we believe will cause new Class A truck sales to be down for the remainder of the year. We also expect truck pricing to be more competitive in the second half of the year. However, we expect vocational sales to remain strong, and we believe we are well prepared to perform in a more competitive pricing environment. Our Class 4-7 sales reached 3,691 units in the second quarter, or 5.7% of the U.S. market and 2.4% of the Canadian market.
Speaker Change: which we believe will cause new Class A truck sales to be down for the remainder of the year. We also expect truck pricing to be more competitive in the second half of the year. However, we expect vocational sales to remain strong and we believe we are well prepared to perform in a more competitive pricing environment.
Rusty Rush: Commercial vehicle production continued to increase, and delivery times have improved, resulting in healthy activity for medium-duty customers. Our Class 427 commercial vehicle sales were broad-based across industry segments, and we are pleased to outpace the market in the second quarter. ACT Research forecasts U.S. Class 4-7 retail sales to be 262,000 units in 2024, up 3.7% from 2023.
Rusty Rush: We will closely monitor economic factors that could impact customer spending and lead to a decrease in Class 4-7 commercial vehicle demand. However, at this time, we anticipate our third quarter Class 4-7 commercial vehicle sales will be consistent with our second quarter results. We sold 1,723 used trucks in the second quarter, down 7.8% year-over-year. Used truck demand remained weak due to low freight rates, more radio-available new truck alternatives, and higher interest rates.
Speaker Change: We sold 1,723 used trucks in the second quarter, down 7.8% year-over-year. Used truck demand remained weak due to low freight rates, more radio-available new truck alternatives, and higher interest rates.
Rusty Rush: However, the rate of used drug depreciation has slowed to more manageable levels, and we executed well on our used drug strategy. We are keeping inventories low, and are well positioned for the second half of the year. We expect our third quarter performance to be on par with our second quarter results. Looking ahead, we will continue to monitor industry and macroeconomic conditions looking for signs of significant freight recovery. As I previously stated, we expect retail sales of new Class 8 trucks to decrease from second quarter levels throughout the remainder of the year and for retail sales to remain solid for new Class 4 through 7.
Speaker Change: Looking ahead, we will continue to monitor industry and macroeconomic conditions, looking for signs of significant freight recovery.
Rusty Rush: Despite the difficult market conditions, we believe we are well positioned to continue to outperform the industry and to increase our market share. It is also worth noting that we instituted expense reductions during the second quarter in anticipation of a soft new market. These actions, combined with the diversity of our customer base and our strategic focus, will help us successfully manage this challenging market cycle. Our employees have worked particularly hard throughout this challenging quarter to achieve these positive results, so I want to acknowledge their efforts and thank them for their dedication to providing best-in-class service to our customers while staying focused on efficiency and the successful execution of our strategic mission. With that, I'll take your questions.
Speaker Change: Despite the difficult market conditions, we believe we are well positioned to continue to outperform the industry and to increase our market share.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And our first question will come from Daniel Embro with Stevens. Your line is now open.
Speaker Change: With that, I'll take your questions.
Daniel Embro: Hey, good morning, guys. Thanks for your questions.
Rusty Rush: Thank you, Daniel. It's good to hear from you.
Daniel Embro: Rocio, I'll start, maybe on the demand backdrop. Obviously, fleets are slowing spending, and the freight backdrop has remained tough. Just curious how the back half pipeline looks as we head on the Class 8 side into the second half and maybe how that tone has changed as you talk to carriers? I feel like in the last few months some are sounding a little more positive that we're seeing some normalization happening in the freight market. I'm so curious if you're hearing that or how you think that would affect the back half.
Speaker Change: Thank you, Daniel. Good to hear from you.
Rusty Rush: You bet. No, I mean, when you think about truck sales, most of the truck sales, like truck sales for the third quarter, other than stock truck sales, we pretty much know what we've got coming already, right? Because there is some lead time still to it.
Rusty Rush: From that perspective, you asked me how I look at it, oh, if I'm going to say something, I would say, similar from a class eight perspective, similar to Q1, more like, and not as many units as we sold in Q4. And the fourth quarter is still to be, you know, still to be told. I can still get you all the trucks you need in the fourth quarter if you need some, okay?
Speaker Change: And the fourth quarter is still to be told. I can still get you all the trucks you need in the fourth quarter if you need some, right? So obviously we have business booked in the fourth quarter, but it's still coming together, right? That quarter is still coming together given the reduction in lead times with basically all Class 8 OEMs.
Rusty Rush: So obviously, we have business booked in the fourth quarter, but it's still, you know, it's still coming together, right? That quarter is still coming together given the reduction in lead times with basically all Class 8 OEs. From a customer perspective, yeah, what I think, you know, to me, yes, things have leveled off. Are they getting a lot better? No.
Speaker Change: From a customer perspective, to me, yes, things have leveled off.
Rusty Rush: Are they bobbling along where I think they're pretty level, talking to customers like I do? Yeah, I think they're, you know, bouncing along. But, you know, there are slight, you know, green shoots you'll see here and here. But, you know, it takes trend lines. It doesn't take a little here, a little, you know, a little spot here, and then you skip and a little bit here.
Speaker Change: A lot better? No. Are they bobbling where I think they're pretty level talking to customers like I do?
Speaker Change: Yeah, I think they're, you know, bouncing along.
Speaker Change: But, you know, there's slight, you know, green shoots you'll see here and here, but, you know, it takes trend lines. It doesn't take a little here and a little, you know, a little spot here and then you skip and then a little bit here. You really need a consistent trend line of positive news. Do I believe that's coming? You bet.
Rusty Rush: You really need a consistent trend line of positive news. Do I believe that's coming? You bet.
Rusty Rush: Do I believe it's going to be difficult to get to that situation, get to a real positive environment? Oh, in the back half of this year with the election and everything else going on, probably going to be tough. But the foundation is set for a rebound, for sure, for next year. Exactly pegging when it'll be, I'm not that guy to peg exactly. But I do believe there's not this continual pessimism of continuing to drop, drop, drop.
Speaker Change: I believe it's going to be difficult to get to that situation, get to a real positive environment.
Speaker Change: Oh, in the back half of this year with the election and everything else going on, probably going to be tough, but the foundation is set for a rebound for sure for next year. Exactly pegging when it'll be, I'm not that guy to peg exactly, but I do believe
Speaker Change: You know, there's not this Continual pessimism of continuing to drop drop drop right, but I do believe they'll be
Rusty Rush: But I do believe we'll inch our way forward here in the back half of the year, you know, between supply and demand, where we have had some come out, you know, but we've also, it's not like freight tonnage has grown a lot either, okay, so, you know, we're getting our way. We're finally, I think, I think you can see the light, right, but it's not a full picture yet to where, you know, our customer base will be able to take advantage of it and try to get back some of those freight rates that they've had to be so highly competitive just to do what they've had to do the last few years and, you know, the reduction in freight rates should be about over with.
Speaker Change: you know, between supply and demand, where we have had some come out.
Rusty Rush: I think if you see most everybody, it's low singles if they've given anything back here recently, and I expect that to flatten, and I expect that to maintain, but then they should be able to start picking up. And I'm talking about the truckload side; we're not getting into the LTL side here, obviously, but on the truckload side, for sure, that's really what I see for the haul for hire
Daniel Embro: A really helpful color. And then, if I could follow up on the parts and service side, you mentioned revenue stepped down sequentially. I guess, can you talk about what changed since the first quarter? The macro has been tough, but I felt like demand for parts and service maybe slowed more than we thought. And then given the stable macro, I guess, how do you think that year-over-year growth shapes up, or sequential growth shapes up in the back half?
Speaker Change: Really helpful, Culler. And then if I could follow up on the parts and service side, you mentioned revenue step down.
Rusty Rush: Yeah, obviously, I don't see any big pickup taking it reversed, or I mean, let me hear you take it the way you ask. Look, we've been fighting it off. I've talked about it for a while.
Speaker Change: Yeah, I obviously I don't see any big pickup taking it reverse or I'll let me let me take it the way you asked it.
Rusty Rush: We've had double-digit declines from what I call our unassigned accounts continually, okay? And that's the small accounts. And that's still 30% of our business, okay? You know, small customers out there are still struggling. What you've seen are the large customers, read all the public trucks. They've been in there for two years.
Speaker Change: Look, we've...
Rusty Rush: And we've fought back and fought back and had growth inside of that. Well, you know, it's finally coming to where we had it. We went backwards a little.
Rusty Rush: But the most important thing to understand is the diversity of our customer base. If we were tied strictly to the over-the-road business, you would have seen double digits, somewhere between 10% and 20% declines in our parts and service business, but we don't because we go about it, you know, in a very strategic way because of the brands we represent and how we go to market. We make sure that we're doing it in a way that we're hitting every market. You know, that the diversification of our customer base is one of the key things that we have. And so that allows you, when one segment's way down, to still maintain and go along.
Speaker Change: If we were tied strictly to the over-the-road business, you would have seen double-digit
Speaker Change: in our parts and service business, but you don't.
Speaker Change: and how we go to market, you know, we make sure that we're doing it.
Speaker Change: in a way that we're hitting every market. You know, that's the diversification of our customer base is one of the most key things that we have.
Rusty Rush: And then I look at the fact that, you know, we could see this coming, and we mentioned it in April that, you know, we were going to make some adjustments. That's the good thing about, you know, the business is that you can understand that the absorption rates that we run now compared to where we used to, we can make adjustments. Was our absorption rate down slightly? Yeah, but we made some pretty good adjustments inside our expense base to help offset, you know, some of that reduction and run a pretty high Peter told me a few years ago that we'd be running 134% and complaining. I told you you're crazy.
Speaker Change: to help offset some of that reduction and run a pretty high... Peter told me a few years ago we'd be running 134% and complaining. I told you you're crazy.
Rusty Rush: But those are the kind of things we're able to do. Now, as I look forward, you know, I don't see any big catalyst to really push that revenue line. I do think we can maintain, you know, with where we are currently, and hopefully, we still have some expenses that a few expenses that are going to come in, that will help to, you know, offset the lack of growth. But you really have to remember, even though we're very diversified, the largest base we do business with is still the over the road business, whether it be the large public carriers or large carriers, private, or whether it be the small customer, it is still the majority of trucks on the road out there.
Speaker Change: But those are the kind of things we're able to do. Now, as I look forward, I don't see any big catalyst to really push that revenue line up. I do think we can maintain.
Rusty Rush: Just thank God that we have the diversity of a customer base that we do to maintain where we are and provide the results that we did in this quarter. I mean, if you look at our results compared to some of our, not all of our customers, but a lot of our over the road customers that have suffered, which is the biggest sector again that we have. We do all these other things, vocational and wholesale and municipal, and all these other market segments. But at the same time, that's still the largest.
Rusty Rush: So when it gets hit like it has to be able to pull through and produce the numbers, I can tell you, I've never been more proud of the organization than I am right now. And I expect us then, with truck sales going backwards, it gives us these different revenue streams, right? We have different gross profit areas, whether it's the parts, the service, truck sales, heavy duty, medium duty, and used trucks.
Speaker Change: And I expect, and with truck sales going backwards, it gives us, we have these different revenue streams, right? Different.
Rusty Rush: And again, that balance of earning streams is what's providing the results. As I said in comments a minute ago, go back and look at the last trough in 20 and the trough in 16. This organization is not even close. It doesn't even look like the same organization that it was back in.
Speaker Change: And again, that balance.
Rusty Rush: The results show that. So I expect we'll just bobble along where we are on that revenue and back in line and continue to work on our expense base and continue to provide the outstanding results we have. But we will be backwards in truck sales. Like I said, we'll go back more to Q1 levels, and let's just let it unfold in front of us. But I'm very confident the organization will do what it's been doing and just look at the last few years' results. I mean, we're tracking, and a professor here, we're tracking do well, well. I'm not going to get into it, third best or whatever year we've ever had as an organization. And that's pretty, that's pretty outstanding.
Speaker Change: Bob along where we are on that revenue and back in line and continue to work on our expense base and continue to provide
Speaker Change: Outstanding results we have, but we will be backwards in truck sales. Like I said, we'll go back more to Q1-type levels. Let's just let it unfold in front of us, but I'm very confident in the organization to do what it's been doing. Just look at the last few years' results. We're tracking.
Speaker Change: and a troughier, we're tracking to well, well.
Daniel Embro: No, I appreciate all that color. I'm going to have to do a quick follow up. You mentioned it. Obviously, the trough has been raised, and cash flow has been a source of a positive guide throughout the story. I guess, how are you thinking about uses of cash, not only here at the trough, but as the cycle turns, I would think cash flow gets even better. What are you seeing as the most attractive uses of that capital as we think about cash flow generation through a cycle?
Rusty Rush: Sure. Well, you know, we've had to take a balanced approach in the last few years to what we do with free cash flow. We've said that, you know, we'll give somewhere about 40% back in shareholder return, and that will be a combination, obviously, of dividend and share repurchase. But at the same time, our number one thing is still growth, right? So M&A will always be a part of that, too, which could influence some of that as we go forward. M&A would be the biggest thing I would tell you that we would be focused on, right? Do I have a lot of it out there right now? Not necessarily.
Speaker Change: Sure. Well, you know, we've had to take a balanced approach the last few years to what we do with free cash flow. We've said that, you know, we'll give somewhere about 40% back in shareholder return and that being a combination, obviously, of dividend and share repurchase.
Speaker Change: Our number one thing is still growth, right?
Speaker Change: that we would be focused on, right? Do I have a lot of it out there right now?
Rusty Rush: Are we looking at things? Of course we are. But at the same time, I can't sit here—by the way, I wouldn't sit here and tell you we're going to do something.
Rusty Rush: I would announce it to you when it's done. But growth inside the organization, you know, when it comes to that piece, you know uh is is there you know we we had a little acquisition in Nebraska this quarter and there's some others that we're looking at not a big one but just those singles man you know sometimes folks don't understand that just because I'm not doing big M&A like say the last big M&A deal was December 21 when we bought the the second largest Navistar deal we're you know we're always doing what I call bump singles we're opening up three four five stores a year that you don't see that are a little small and then we're buying little deals that sometimes we don't even talk about okay but right now you know M&A would always be first and foremost to continue to expand our footprint remember, The best thing we have going for us is our foot, outside of our people now.
Speaker Change: You know is is there, you know, we we had a little acquisition in Nebraska this quarter
Speaker Change: Just because I'm not doing big M&A, like say the last big M&A deal was December 21, when we bought the second largest Navistar deal. We're always doing what I call bump singles. We're opening up.
Rusty Rush: But the, you know, number one thing is our footprint. It's the differentiation that we can touch more, you know, more customers, especially as customers continue to consolidate. You know, it's not as fractionalized a customer base as it used to be, and we can drive efficiencies, not just into our organization but, most importantly, into their organization. Leveraging off that footprint with our outstanding people so we can go out and do what? You know, we're out there. We're always out there looking for new customers, right?
Speaker Change: outside of our people now. But, you know, the number one thing is our footprint. It's the differentiation that we can touch more, you know, more customers, especially as customers continue to consolidate.
Speaker Change: customer base as it used to be, and we can drive efficiencies not just into our organization, but most importantly into their organization.
Speaker Change: leveraging off that footprint with our outstanding people.
Speaker Change: So we can go out and we'll do what you know, we're out there. We've always out there looking for new customers, right? You've always got target customers and thing you're going at and that's to me one of our is our biggest selling point I saw our people as I said is our network and we'll continue to look to expand that that's always going to be number one And then it'll just be you know, returning, you know to shareholders that
Rusty Rush: You've always got target customers and things you're going at. And that's, to me, one of our, well, our biggest selling points outside of our people, as I said, is our network. And we'll continue to look to expand that. That's always going to be number one. And then it'll just be, you know, returning to shareholders that, if you look at the average, we've averaged around 40% over the last five years.
Rusty Rush: Some years it was 25, some years it wasn't. You know, but that's about, it depends on that year when you're, you know, sometimes there will be acquisitions if we can find them to continue to build our footprint.
Speaker Change: limited as to what you can do anyway from a repurchase perspective and when you hit it you know from that perspective. We've consistently raised our dividend every year sometimes more than five to ten percent but our commitment is five to ten percent and
Daniel Embro: Great. I appreciate all the color. Best of luck.
Rusty Rush: You bet. Thank you.
Operator: The next question comes from Andrew Obin with Bank of America. Your line is open.
Andrew Obin: Hey Rusty, how are you? Good morning. I'm very good. Andrew. How are you this morning? I'm good. Just maybe, you know, you talk about outperformance and, obviously, it's because you have a high vocational mix versus the industry. Can you just remind us where we are in your mix?
Andrew: Hey Rusty, how are you? Good morning. I'm very good Andrew. How are you this morning? I'm good. Just maybe, you know, you talk about outperformance and obviously it's because you have high vocational mix versus the industry. Can you just remind us where we are in your mix at this point?
Rusty Rush: So, what was that question again, Andrew? I'm sorry. Oh, just your mix. Your class 8 mix versus the industry, right? Because you have more vocational training, right? You have more waste. Correct.
Andrew Obin: You have all the road, but less of it. Could you just remind us what the mix is like these days? I'm going to give it to you.
Rusty Rush: Andrew, I know it's not a stat that I'm going to give you that I keep total track of, but I always say, and I usually say, somewhere around 50-50, you know, depending on the brand, you know, we're a little, maybe a little bit heavier on the vocational side on the Peterbilt side than we are on the Navistar side, but somewhere 45-50% of our, let's say 45% of our When you really look into the construction, the refuse, and all those businesses, and that's on the H side, right? And that's one of the key pieces, but again, it's diversification, diversification into each market segment, and that's really, and I appreciate the color of the question, but the color would be somewhere in that range.
Speaker Change: I'm going to give you...
Speaker Change: And I know it's not a stat that I'm going to give you that I keep total track of, but I always say, and I usually say somewhere around 50-50.
Speaker Change: You know, depending on the brand, you know, we're a little maybe a little bit heavier on the vocational side on the Peterbilt side than we are on the Navistar side, but somewhere 45, 50% of our 40, let's say, let's say 45% of our business is vocational somewhere in that range.
Speaker Change: Right, and then what folks are wondering, just in terms of orders, what do you think, and I think you've clearly been early, sort of sounding caution about Outlook for a second half, where are the orders trending in July, August, what are you seeing, what's your experience?
Rusty Rush: You know, Andrew, compared to where we were in the first quarter, really, it started all, it's been all year, you know, it's been pretty down for us all year from an order intake perspective. Now, I will say that, you know, we hit a few deals, a couple deals along the way, but from just a demand perspective, quoting, no question, it's been down for our customers.
Speaker Change: You know, Andrew, you know, compared to where we were in the first quarter.
Rusty Rush: You know, you're starting to talk about emissions, right? We're out right now talking with folks, but it's been very difficult for a lot of the, you know, truckload guys to start talking about that when you can see their earnings and the pressures that they feel inside their business. So, I would tell you, orders are still going to be down in July, I would guess, when they come out tomorrow. Last month, I think I was on a call, and I think it went pretty well with you and a bunch of investors around 15,000.
Andrew: No question, it's been down. Our customers.
Andrew: Last month, I think I was on a call, I guess pretty good with you and a bunch of investors, around 15,000, and I don't know where they'll be this month.
Rusty Rush: And I don't know where they'll be this month. I have, I'm really not sure, but I'm not going to say they're not going to be super outstanding because folks are, you know, as I said, they're still build available in the back part of the year, but it's, you know, people are still trying to, you know, come get the supply demand. We still need more supply from a truckload perspective. It's still the biggest market out there.
Speaker Change: I'm really not sure, but I'm not going to say they're not going to be super outstanding.
Speaker Change: Because folks are, you know, as I said, they're still build available in the back part of the year, but it's a, you know, people are still trying to, you know, come get the supply demand. We still need more supply from a truckload perspective. It's still the biggest market out there. We still need more supply to come out.
Rusty Rush: We still need more supply to come out, more trucks to come out of the market, and capacity from a capacity perspective from where we're at. And people have been too buried, I think, inside of running and managing their own business to worry about carbon emissions. You know, a lot of people still believe that, well, you know, this election is going to change something. It's not going to change anything dramatically. I don't care.
Speaker Change: More trucks to come out of the market and capacity from a capacity perspective from where we're at and people have been too buried I think inside of running and managing their own business to worry about 27 emissions
Speaker Change: still believe that, well, you know, this election is going to change something. It's not going to change anything.
Rusty Rush: The OEMs have spent millions, but they're too busy taking care of their businesses to worry about the cost increases that are going to come with meeting the 27 emissions standard, which is going to happen. We can all think an election will change all that, but I don't believe that to be the case because of the multi-millions to billions committed to technology already. These things have been being worked on for a while, but I do expect that we will get them, maybe the last.
Speaker Change: I don't, you know, we can all think an election will change all that, but I don't believe that to be the case because of the multi-millions to billions.
Rusty Rush: We usually start picking up in October, November, December, which translates into picking up, and business picking up next year. So I'm not, I can't tell you exactly when I expect that to happen, but usually, you've got ATA in October and then you, people follow through on that. So I'm looking, you know, as long as everybody can, if businesses really are flattening, like I said, and what I've taught people I've talked to, they were on the bottom, and they can see slight, you know, slivers of green out there and their business going forward, that they weathered the toughest part, then people will start getting concerned about the technology of diesel trucks and all the after treatment and everything.
Speaker Change: which translates into business picking up next year.
Speaker Change: So I can't tell you exactly when I expect that to happen.
Speaker Change: but usually you've got ATA in October .
Speaker Change: And then you people follow through on that so I'm looking
Speaker Change: About the technology of diesel trucks and all the after-treatment and everything people still remember what it was like in 2010
Speaker Change: I can tell you that. Big uptick now in the next, you know, but we are out talking and people are starting to talk more about it.
Speaker Change: Some people thought they were going to talk, you can reach some OEMs I read earlier and said, oh, it's going to happen.
Speaker Change: It's happening.
Andrew Obin: Back half of the year, excuse me, back a couple of months. But for the next couple of months, you think there's 15,000 sort of... Relatively flat or down from that number. Is that a fair estimate?
Speaker Change: But for the next couple of months, you think there's 15,000 sort of...
Rusty Rush: Some big customers, a couple, three or four big customers want to place big orders that are spread out. That's, the demand's not, you know, the demand's just going to be limited. I mean, yes.
Andrew Obin: How did that EGR decision work out for that CEO?
Rusty Rush: I don't think I was allowed to do that.
Speaker Change: I don't think I was allowed into that building for a while.
Speaker Change: Just a question on macro, I always ask you because you have very good systems.
Speaker Change: Lots of uncertainty about the economy. I think the PMIs just came out.
Speaker Change: indicates sort of a step down in industrial activity. What are you seeing? You have coast-to-coast presence. What are you seeing about the economy? Are you more optimistic about the economy today versus a month ago or are you more pessimistic? We'd love to get your take because you tend to be very smart about it. Thank you.
Andrew Obin: Oh, and... One's been piloted on me today, aren't you, boy? Huh, good question.
Andrew: Oh, Andrew.
Rusty Rush: I just see a lot of uncertainty, be honest with you. I mean, I see more uncertainty in my mind about the economy, you know, and I know it sounds like a broad no answer. But truly, I do believe that I just think this election and all this stuff that's going on outside of everything else have got people a little bit paralyzed in some areas. You know, as I look around, you know, obviously, the truckload side is still not in good shape.
Andrew: One's piloted on me today, aren't you, boy?
Andrew: Huh, good question. I just see a lot of uncertainty.
Speaker Change: To be honest with you, I see more uncertainty in my mind about the economy, and I know that sounds like a broad no answer.
Speaker Change: But truly, I do believe that. I just think this election and all this stuff that's going on outside of everything else has got people a little bit paralyzed in some areas.
Rusty Rush: The LTL side has been in good shape. We were off a little bit in energy this last quarter, from a parts and service perspective, more than I would have anticipated. I think the economy just, you know, it looked a little hot earlier. I think that, you know, I think it was going to be a tougher back half, but I do expect it to pick up after that. I do expect, no matter what anybody else says, I do expect it to, you know, my problem is sometimes I get, I'll look at it through my industrial glasses, right? I got to take my, you want to take my macro, put my macro glasses on, and sometimes maybe I'm not the best at that.
Speaker Change: As I look around, obviously the truckload side is still not in good shape. The LTL side has been in good shape.
Speaker Change: We were off a little bit in energy this last, from a parts and service perspective, this last quarter more than I would have anticipated. I think the economy just, you know, it looked a little hot earlier. I think that, you know, I think it was going to be
Speaker Change: a tougher back out.
Andrew: What I do expect it to pick up after that, I do expect, no matter what anybody else says, I do expect it to...
Andrew: You know, my problem is sometimes I get, I'll look at it through my industrial glasses, right? I got to take my, you want to take my macro, put my macro glasses on, and sometimes maybe I'm not the best at that. I can make a stab at it, but I don't look for any, I don't, I'm not looking for a recession if that's what you're saying.
Andrew Obin: I make a stab at it, but I don't look for any, I don't, I'm not looking for a recession, if that's what you're saying right now, but I'm just looking for sort of bobbling along right now until we get through November and end in 25. And then I'm going to feel, especially from an industry perspective, I will feel pretty good about it because we will have a great drop year from a business perspective, and we will have taken out capacity. Look at it. Is it fair to say that your vocational business is fairly stable? Is that a fair statement? Yes,
Speaker Change: right now, but I'm just looking for sort of bobbling along right now till we get through November and end in 25. And then I'm going to feel, especially from an industry perspective, I will feel pretty good about it because we will have a great crop year from a business perspective.
Andrew: and we will have taken out capacity.
Speaker Change: out of the marketplace, and that's always a good thing.
Speaker Change: It would be a platform to set up for good for my industry, but you know, I just look at this back half, it's going to be a little slow, if you ask me, and I'm not an economist, so I'm not going to get out past that much.
Rusty Rush: Our vocational business is fairly stable, which is a pretty solid indicator. I will say that a lot of the medium-duty demand has been met. I wouldn't look for any continued growth for medium-duty big orders in this back half. I think that'll slow down a little bit from where it has been. But it's not troughing terribly, like we said, our Q3. But I'm not sold out in Q4 there. So, you know, where we have been pretty sold out for a couple plus years running in medium-duty, we're not going to be, you know; I'm not a year out when I look at it anymore. But that doesn't mean it's terrible.
Speaker Change: Is it fair to say that your vocational business is fairly stable? Is that a fair statement?
Speaker Change: Yes.
Speaker Change: Our vocational business is fairly stable, which, you know, is a pretty solid indicator. I will say that, you know, a lot of the medium-duty demand has been met.
Speaker Change: You know, I wouldn't look for any continued growth or medium-duty big orders in his back half. I think that'll slow down a little bit.
Speaker Change: from where it has been, but it's not troughing terribly, like we said, our Q3, but I'm not sold out in Q4 there.
Speaker Change: So, you know, where we have been pretty sold out for a couple plus years running in medium duty, we're not going to be, you know, I'm not a year out when I look at it anymore. But that doesn't mean it's terrible. Look, reality is you're not supposed to be sold out a year ahead.
Rusty Rush: Look, the reality is, you're not supposed to be sold out a year ahead. Let's get back to the real world. And I think that's one of the things I'm most proud of, is how we manage inside these types of situations. And it's showing in the numbers that we're producing, and it will continue to show. You know, I'm pretty conservative, judging by where we end up versus where I sometimes, in the back of my head, I always bet on us, probably ought to bet more on us. Because these people that work with me and beside me every day, all 8,000 of them, they prove it, they execute extremely well.
Andrew: Let's get back to real world.
Andrew: I think that's one of the things I'm most proud of, is how we manage inside these type of situations.
Andrew: and it's showing in the numbers that we're producing, and it will continue to show. You know I'm pretty conservative.
Andrew: Judging by, you know, where we end up, where I sometimes, in the back of my head, I always bet on us, probably ought to bet more on us.
Rusty Rush: And just as we have this year and the prior few years, I just, you know, sometimes I wish everybody understood the diversification of the company. And I hope this year proves it to anyone that if this is the trough middle year of a five-year run, we're in pretty good shape. We're in pretty good shape, that's all I can tell you. And I think the numbers are gonna play out for where, yeah, we're gonna sell less drugs, but we're gonna do a good job of managing through it, given the diversification of our earning strength and what we do and how we go to market and, you know, expenses.
Andrew: because these people that work with me and beside me every day, all 8,000 of them, they prove it. They execute extremely well and just as we have this year and the prior few years, I just, you know, sometimes I wish everybody understood the diversification.
Andrew: of the company and I hope this year proves it to anyone that if this is the trough middle year of a five-year run
Andrew: We're in pretty good shape, we're in pretty good shape, that's all I can tell you. And I think the numbers are going to play out for where, yeah, we're going to sell less drugs, but we're going to do a good job of managing through it, given the diversification of our earning strength.
Rusty Rush: Look, we're down. We're down, G&A. Remember, I never talk about SG&A. I talk about G&A. Q1 to Q2, we're down 4.7% in G&A. That's outstanding, okay? That is truly outstanding, and so I'm very proud of our people for doing more with less, and we will continue to execute that way. And we'll, when the market does pick back up, which I believe will happen real fast, we'll get to those numbers I've been talking about for the last three or four years, in 25 and 26. We will execute. You got that commitment from me.
Andrew: and what we do and how we go to market and you know expense stuff. Look we're down, we're down G&A. Remember I never talk about SG&A, I talk about G&A.
Speaker Change: Q1 to Q2, we're down 4.7% in DNA.
Speaker Change: That's outstanding. Okay, that is truly outstanding. And so I'm very proud of our people for
Speaker Change: doing more with less, and we will continue to execute that way. When the market does pick back up, which I believe will get real fast, we'll get to those numbers I've been talking about the last three or four years in 2025 and 2026. We will execute. You've got that commitment from me.
Andrew Obin: Well, sir, thank you so much.
Operator: As a reminder, to ask a question, please press star 1-1 on your telephone. The next question comes from A. V. Arasolowicz with UBS. Your line is open.
Speaker Change: Well, sir, thank you so much.
Speaker Change: You betcha.
Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone. The next question comes from A.B. Arasolowicz with UBS. Your line is open.
A. V. Arasolowicz: Good morning, guys. Thanks for a good morning question. Um, so I just wanted to dig into the location.
Aby Arasolowicz: Good morning, guys. Thanks for your questions.
Aby Arasolowicz: So just wanted to dig into vocational a little bit more. Just kind of want to understand how much do you think that continued strong demand there
Speaker Change: has to do with that area of the market being just a healthier market overall, fundamentally, versus there maybe just having been more leftover pent-up demand after the past couple years of tighter supply, kind of similar to what we saw with medium duty.
Rusty Rush: Well, I don't think that really, it's not from left-over demand. We were taking care of class A demand regardless, balancing it through the last few years. I think it has to do with more of the, you know, the money the government's been throwing at it.
Speaker Change: Well, I don't think that really, it's not from leftover demand. We were taking care of class 8 demand regardless.
Rusty Rush: And I think some of these customers got a little bit behind coming out of COVID, and they're still catching up with where they got a little bit behind in the age of their fleets, not necessarily because they, you know, well, it was balanced across the board, but they didn't take the hits in their business as the over the road business did, right? So those guys have had to slow down some.
Rusty Rush: I do believe this will continue. I feel good about next year. I'm not going to get out and talk about two and three-year runs, but I do believe our vocational business will continue to be good. We had some issues.
Rusty Rush: We could have done more vocational business this year, except there's been a lack of, and we had a component issue with transmissions, or we would have sold more this year than we have. We've got to believe that that business will carry over into 25. What business didn't get booked, and I can't quantify it exactly for you, but that business will get carried over into 25 because that demand is still there, given what's going on.
Speaker Change: this year than what we have. So we've got to believe that that business will carry over into 25. What business didn't get booked, and I can't quantify it exactly for you, but that business will get carried over in 25 because that demand is still there.
Rusty Rush: I feel really good about where it's going to continue to be strong into 25. Then sometime in 25, we're going to pick up in the over-the-road business. The LTL business will still be good with our LTL customers, but the, you know, the small customer, A.M. Moody's being taken out of the market. You'll show back up by then.
Speaker Change: given what's going on. So, you know, I feel really good about where it's going to continue to be sprawled, excuse me, into 25. And then sometime in 25, we're going to pick up in the over-the-road business. You know, the LTL business will still be good with our LTL customers.
Aby Arasolowicz: But the, you know, the small customer, even though he's being taken out of the market, he'll show back up by the end of 25, you watch.
Aby Arasolowicz: And I think the over the road, you know, business will pick up somewhere at 25, as I said, with maybe, you know, orders coming in late this year. I could be wrong. It could roll into next year, just depending on if this is the bottom. I do believe people are going to start.
Aby Arasolowicz: thinking about how they get ready for January 1 of 27 and how they, you know, how they position.
Aby Arasolowicz: their fleets from an age perspective going into all that. But no, vocational should still be solid from the best take I can give you. We're not looking for anything going backwards or over across the board, you know.
A. V. Arasolowicz: Okay, I got it. I appreciate that. And then just in terms of your comments about the more competitive truck pricing in the second half, any way you can kind of dimensionalize that in terms of, yeah, year over year price changes and just to what extent does it vary by OEM? I'm assuming that we're really just talking about sort of over the road Class A, but Yeah, also curious if you think that will stick kind of as we go into 2025 and it's really more of like a market share battle over pricing or really just temporary and keeping things moving to clear out some inventory here in a week second half.
Aby Arasolowicz: when you look across the whole country. So that would be my response.
Speaker Change: Okay, got it, appreciate that. And then just in terms of your comments about the more competitive truck pricing in the second half...
Speaker Change: Anyway, you can kind of dimensionalize that in terms of like, yeah, year-over-year price changes and just to what extent does it vary by OEM. I'm assuming that we're really just talking about the over-the-road Class A, but...
Speaker Change: Also curious if you think that should stick kind of as we go into 2025 and it's really more of like a market share battle over pricing or really just temporary and keeping things moving, clear out some inventory here in the second half?
Rusty Rush: Well, when I say it's going to be more competitive, it will be more competitive. Understand, though, the third quarter business is already booked. OK, well, it's not like we're booking Q3 business really right now. We're in the middle of one month through a three month quarter. So, you know, there's not much I can do to move that.
Aby Arasolowicz: Well...
Speaker Change: When I say it's going to be more competitive, it'll be more competitive. Understand, though, the third quarter business is already booked.
Speaker Change: Okay, we're not like we're booking Q3 business really right now. We're in the middle of it. We're one month through a Three month quarter. So that's you know, there's not much I can do to move that. I think you know
Rusty Rush: I think, you know, when you talk about pricing, we have you know, when you look at our inventories, I'm very comfortable that we have our inventories mark to market. We do that every quarter and have done that for 27 years. I don't come out and talk about it when you look at what really is our inventory. We're very prudent about making sure we understand where the market is and the demand. And that's not just what's used.
Aby Arasolowicz: When you talk about pricing, we have, you know, when you look at our inventories
Aby Arasolowicz: I'm very comfortable that we have our inventories marked to market. We do that every quarter and have done that for 27 years. I don't come out and talk about it when you look at what truly are inventories. We're very prudent.
Aby Arasolowicz: about making sure we understand.
Rusty Rush: That's also new across the board. So I feel good that, you know, when I say we're going to be competitively set up to do what we should do with our inventories. And when I talk about it, it's going to be more competitive, but not crazy competitive. If that makes any sense.
Aby Arasolowicz: where the market is and the demand and that's not just used, that's new also.
Aby Arasolowicz: across the board. So I feel good that, you know, we're, when I say we're
Aby Arasolowicz: to be competitively set up to do what we should do with our inventories.
Aby Arasolowicz: When I talk about, it's going to be more competitive, but not crazy competitive, if that makes any sense. You know, people, I think the OEMs are going to show decent discipline.
Rusty Rush: You know, people I think the OEMs are going to show decent discipline; they're gonna show decent discipline because this is just a moment in time. That doesn't mean there won't be some more competitiveness, and that's really what I was trying to say, but not crazy over-competitive. It's like I saw, going way back to 2009 or sometime like that, a 92,000 Class A truck market. So, understanding that all you're doing is, you know, you're setting yourself up now when the market picks up to have to, because I think, you know, I think the majority of all these cost increases have been required. Remember what inflation was like, driving it all up. So Williams had to catch up, and they have done that, and they don't wanna get back in that situation again.
Aby Arasolowicz: They're going to show decent discipline, because this is just a moment in time. That doesn't mean there won't be some more competitiveness, and that's really what I was trying to say. But not crazy over-competitive, it's like I saw it going way back to 2009 or sometime like that when it was...
Aby Arasolowicz: You know, a 92,000 class A truck market.
Speaker Change: So, because understanding.
Aby Arasolowicz: that all you're doing is, you know, you're setting yourself up now when the market picks up to have to, because I think, you know, I think the majority of all these cost increases have been required. Remember what inflation was like? Drove it all up.
Rusty Rush: Will they be more competitive in certain situations or certain deals, probably as needed, because they still do need some fourth-quarter bill. Okay, at the same time, they'll manage bill rates down. I guarantee you build rates are coming down, finally. You know, that was one of the things that got out of whack. We've got way too much inventory across the whole country right now. You can go look at it.
Williams: So OEMs had to catch up, and they have done that, and they don't want to get back in that situation again. Will they be more competitive in certain situations or certain deals? Probably, as needed, because they still do need some fourth quarter build. Okay, at the same time, they'll manage build rates down.
Speaker Change: I guarantee you, build rates are coming down, finally. That was one of the things that got out of whack. We've got way too much inventory across the whole country right now. You can go look at it.
Rusty Rush: It's out of line a little bit too, almost an all-time high, but they'll have to slow down. I know OEMs are slowing down bill rates, and by the way, I'm not getting specific to any OEMs. I'm just talking broadly here, but I know bill rates are going to come down. They have to.
Aby Arasolowicz: It's out of line a little bit, too, almost an all-time high, but they'll have to slow down. I know OEMs are slowing down build rates, and I'm, by the way, I'm not getting specific to any OEMs. I'm just talking broadly here. But I know build rates are going to come down. They have to.
Rusty Rush: You'll see that throughout the back half of the year. I think they'll continue to decline through Q4. When you look at how many, I don't remember the exact stats. I don't have them on me at any given day.
Aby Arasolowicz: You'll see that throughout the back avenue. I think they'll continue to decline.
Rusty Rush: I expect bill rates to be down 15%, 20% because they stayed high too long. They got too much inventory shoved out. They've got to bring them down. There's only so much the market can take. So, you know, that's my overall view of where we are when it comes to trucks and where they are. But we feel, you know, that when you take bill rate out, you'll relieve some of the pressure on pricing right when you stop overbuilding. So I think we got a little bit too overbuilt here.
Aby Arasolowicz: through Q4. When you look at how many, I don't remember the exact stats. I don't have them on me a day. You know, I expect bill rates to be down 15, 20 percent because they stayed high too long. They got too much inventory shoved out. They've got to bring them down. There's only so much the market can take.
Aby Arasolowicz: So, you know, that's my overall view of...
Aby Arasolowicz: you know, where we're at when it comes to
Aby Arasolowicz: trucks, you know, and where they're at. But we feel, you know, that when you take build rate out, you'll relieve some of the pressure on pricing, right? When you stop overbuilding. So I think we got a little bit too overbuilt here. I think build rates are coming down. I think build rates will.
Rusty Rush: I think bill rates are coming down. I think bill rates will be positioned to be ramped back up. But you know, it'll be a little more competitive. Is it going to be under what I've told people? No, it's not.
Aby Arasolowicz: be positioned to be ramped back up.
Aby Arasolowicz: But, you know, it'll be a little more competitive is it going to be
Rusty Rush: We're going to be at our highest with highs of 23. No, but we're not currently. We're going to stay pretty consistent. You'll see our blended rates probably fairly consistent, which should be, you know, with where we are currently. I don't look for our, you know, our margins combined, our blended margins on trucks, I don't look for them to come backwards from really from where they're at right now. It's all I can tell you, but it will be more competitive, but we believe we've marked our stuff to market, and we're prepared to do that, and I expect any orders we get will be competitive, but not to the point of dramatically knocking a couple points or something like that out of margins.
Aby Arasolowicz: It's going to be under what I've told people. No, it's not. Are we going to be at our highest on highs of 23? No, but we're not currently. We're going to stay pretty consistent. You'll see our blended rates probably fairly consistent.
Aby Arasolowicz: which it should be, you know, with where we are currently. I don't look for our, you know, our margins blended, our blended margins on trucks. I don't look for them to come backwards from really from where they're at right now.
Aby Arasolowicz: That's all I can tell you. But it will be more competitive, but we believe we've marked our stuff to market, and we're prepared to do that, and I expect any orders we get will be competitive, but not to the point of dramatically knocking a couple points or something like that out of margins, okay?
A. V. Arasolowicz: All right, that's very helpful. Thanks for your time.
Rusty Rush: You bet. Thank you for the call.
Operator: I have no further questions at this time. I would now like to turn the call back over to Rusty for closing remarks.
Speaker Change: All right, that's very helpful. Thanks for the time.
Speaker Change: You bet. Thank you for the call.
Speaker Change: I show no further questions at this time. I would now like to turn the call back over to Rusty for closing remarks.
Rusty Rush: Yeah, first off, I just want to thank our employees one more time. I know I've mentioned them a couple times on this call, but I can't mention them enough.
Russi: Yeah, first off, I just want to thank our employees one more time. I know I've mentioned them a couple times on this call, but I can't mention them enough.
Rusty Rush: Their perseverance and their execution of our strategies in spite of us; we did. I reduced some expenses, and we will continue along those lines so that we can do the right thing and produce the kind of results we're producing right now. So I would just like to thank them one more time for their efforts during this last quarter. It was tough, but we're dialed in right now, and we're going to execute, trying to stay pretty flat in the back, you know, like I said, in parts and service, work on our expenses a little bit, you know, with where we're at.
Speaker Change: their persistence and their execution of our strategies.
Speaker Change: In spite of us, we did, I reduced some expenses and we will continue along those lines.
Speaker Change: so that we can do the right thing and produce the kind of results we're producing right now. So I would just like to thank them one more time for their efforts during this last quarter. It was tough.
Speaker Change: But we're dialed in right now and we're going to execute, trying to stay pretty flat in the back, like I said, in parts and service.
Rusty Rush: Because remember, I did this during the quarter. We did it during the quarter, so it'll be a little, hopefully, a little more reduction that took place in the back half of the quarter. We're not looking to do any more, but just the fact that it was rolled into this last quarter and we still continue to produce these outstanding results, and I look forward to continuing to do so for our shareholders and for the company. So thank you all very much, and we'll talk to you again in October, I guess.
Speaker Change: Work on our expenses a little bit, you know, with where we're at because remember I did this during the quarter. We did it during the quarter, so it'll be a little, hopefully a little more reduction that took place in the back half of the quarter. We're not looking to do any more, but just the fact that it was rolled into this last quarter and we still continue to produce these outstanding results.
Speaker Change: And I look forward to continuing to do that for our shareholders and for the company. Thank you all very much, and we'll talk to you again in October , I guess.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: Appreciate it. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.