Q2 2024 Rush Enterprises Inc Earnings Call

August 1, 2024

Bye-bye.

Operator: Welcome to Rush Enterprises' Report Second Quarter 2024 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 1-1 on your telephone.

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Rush Enterprises' Report Second Quarter 2024 Earnings Results.

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.

Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 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.

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: Rusty Rush, Chairman of the Board, Chief Executive Officer, and President 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 statements. Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Rusty Rush: Because these statements include risk and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31st, 2023, and in our other filings with the Securities and Exchange Commission. 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.

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.

Rusty Rush: 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.

Speaker Change: Steve Keller, Chief Financial Officer Jay Hazlewood, Vice President and Controller Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary 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.

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.

Steve Keller: 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.

Rusty Rush: 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. 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 8 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: 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 A truck sales revenues and market share during the second quarter.

Rusty Rush: Our Class 4-7 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%.

Speaker Change: 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.

Rusty Rush: As I stated in the news release, the freight recession and high interest rates are still negatively impacting over-the-road carriers. The same challenging economic conditions have also led to a decrease in demand from wholesale, independent parts distributors, and energy customers.

Rusty Rush: Decreases to 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 A trucks in the second quarter, accounting for 6.8% of the total U.S. Class VIII 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 period in 2023.

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 forecasts US Class 8 retail sales to be 228,700 units in 2024, down 15.8 percent compared to 2023. During the second quarter, the industry experienced higher-than-normal Class 8 order counts, and week ordering dates, which we believe will cause new Class A truck sales to be down for the remainder of the year.

Speaker Change: New class eight truck sales to be down for the remainder of the year. We also expect 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: We also expect truck pricing to be more competitive in the second half. 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: Our class four through seven.

Speaker Change: New truck sales reached 3600 91 units in the second quarter or five 7% of the U S market and two 4% of the Canadian market.

Speaker Change: Commercial vehicle production continued to increase and delivery times have improved resulting in healthy activity for medium duty customers. Our class four through seven commercial vehicle sales were broad based across industry segments, and we are pleased to outpace the market in the second quarter.

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 percent from 2023.

Speaker Change: ACD research forecast U S class four through seven retail sales to be 262000 units and <unk> up three 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 radios available, new truck alternatives, and a higher interest rate.

Speaker Change: We will closely monitor economic factors that could impact customer spending and lead to a decrease in class four through seven commercial vehicle demand.

Speaker Change: However at this time, we anticipate our third quarter class four through seven commercial vehicle sales will be consistent with our second quarter results.

Speaker Change: We sold 2723 used trucks in the second quarter down seven 8% year over year used truck demand remained weak due to low freight rates more radio available new truck alternatives and higher interest rates. However, the right of use depreciation has slowed to more manageable levels.

Speaker Change: And we executed well on our used truck strategies, 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.

Speaker Change: Looking ahead, we will continue to monitor industry and macroeconomic conditions looking for signs of significant freight recovery.

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 A trucks to decrease from second quarter levels throughout the remainder of the year and for retail sales to remain solid for new classes four through seven.

Speaker Change: As I previously stated we expect retail sales of new class eight trucks to decrease from second quarter levels throughout the remainder of the year and for retail sales to remain solid for new class four through seven trucks. Despite the difficult market conditions. We believe we are well positioned to continue to outperform the industry and to increase.

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.

Speaker Change: Our market share.

Speaker Change: 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.

Speaker Change: 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 successful execution of our strategic initiatives.

Rusty Rush: With that, I'll take your questions. 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.

Speaker Change: With that I'll take your question.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be in the us to withdraw your question. Please press star one again.

Operator: And our first question will come from Daniel Imbro with Stevens. Your line is now open. Hey, good morning guys. Thanks for your questions. Thank you, man.

Speaker Change: And our first question will come from Daniel <unk> with Stephens. Your line is now open.

Daniel <unk>: Hey, good morning, guys. Thanks for taking my question.

Speaker Change: Thank you Emmanuel good to hear from you.

Rusty Rush: Good to hear from you, Russell. 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 has that tone changed as you talk to carriers?

Speaker Change: Brett I'll start maybe on the demand backdrop, obviously fleet. They are slowing spending in the freight backdrop has remained tough I'm just curious on the back half pipeline looks as we head on class eight tied into the into the second half and maybe how has that tone changed as you talk to carriers I feel like the last few months some are sounding a little more positive that we're seeing.

Rusty Rush: I feel like the last few months, some are sounding a little more positive that we're seeing some normalization happening in the freight market. So curious if you're hearing that or how you think that would affect the back half. You bet. No, I mean, when you think about truck sales, most truck-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. From that perspective, you asked, how do I look at it?

Speaker Change: So normalization happening in the freight market. So curious if you're hearing that or how do you think that would affect the back half.

Speaker Change: You bet no I mean, when you think about truck sales most of the truck by 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.

Speaker Change: From that perspective, you asked how do I look at it.

Speaker Change: Im going to say, so I would say, it's similar from a class eight perspective now similar to Q1 more not as many units as we sold in Q4.

Rusty Rush: 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, right? So, obviously, we have business booked for the fourth quarter, but it's still, you know, it's still coming together, right?

Speaker Change: In the fourth quarter is still to be still to be told I can still get you all the trucks you need in the fourth quarter. If it needs. So right. So obviously, we have business booked in the fourth quarter, but it's still.

Speaker Change: Still coming together right that.

Rusty Rush: That quarter is still coming together, given the reduction in lead times with basically all Class A OE. Um, from a customer perspective, um, what I, you know, to me, yes, things have leveled off. Are they getting a lot better? No.

Speaker Change: Core is still coming together given the reduction in lead times with basically all class eight Oems.

Speaker Change: From a customer perspective.

Speaker Change: Yes for me.

Speaker Change: Yes, things have leveled off or they getting.

Speaker Change: A lot better no are they boblet, where I think they are pretty level talking to customers like I do yes, I think they are.

Rusty Rush: Are they bobbling along where I think they're pretty level when 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; you really need a consistent trend line of positive news. Do I believe that it's coming? You bet. I believe it's going to be difficult to get to that situation, to a real positive environment.

Speaker Change: Bouncing along.

Speaker Change: There is slight green shoots youll see here and here, but it takes trend lines. It doesn't take a little here a little spot here and then you skip and a little bit here, you really need a consistent trend line of positive news I believe thats coming you bet I believe it's going to be difficult to get to that situation to get to a real pause.

Speaker Change: Positive environment.

Rusty Rush: Oh, 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.

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 will be.

Speaker Change: That guy to peg exactly but I do believe.

Speaker Change: There is not this continual pessimism of continuing to drop drop drop right, but I do believe there'll be more.

Rusty Rush: But I do believe there's not this continual pessimism of continuing to drop, drop, drop. But I do believe we'll inch our way forward here in the back half of the year. But setting the stage, I think, is we continue to get, you know, there's still capacity. There's still a little bit too much capacity out there in the marketplace. You know, it's a balancing act.

Speaker Change: Yes, our way forward here in the back half of the year, but setting the stage I think as we continue to get.

Speaker Change: Capacity.

Speaker Change: A little bit too much capacity out there in the marketplace.

Speaker Change: <unk>.

Rusty Rush: You know, between supply and demand, where some have come out, you know, 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?

Speaker Change: Between supply and demand.

Speaker Change: We have had some come out.

Speaker Change: We've also got like freight tonnage has grown a lot either okay. So.

Speaker Change: We're getting our way. We're finally I think I think you can see the light right.

Rusty Rush: 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 such highly competitive rates 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. I think if you see most everybody, it's low singles that 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.

Speaker Change: But it's not a fourth was not a full picture yet.

Speaker Change: Where our customer base will be able to take advantage of it and try to get back some of that those freight rates if they have been.

Speaker Change: Had there been such a highly competitive and yet.

Speaker Change: They're doing what they have to do the last few years a reduction in freight rates should be about over with I think if you see most everybody. It's low singles if they've given anything back here recently.

Speaker Change: I expect that the flat and I expect that to maintain but then they should be able to start to pick it up.

Rusty Rush: And I'm talking about the truckload side. When I get into the LTL side here, obviously, but on the truckload side, for sure, that's really what I see for the Hall for Hire. Not a really helpful color.

Speaker Change: And I'm talking about the truckload side without getting in the Lps side, you're obviously well on the truckload side for sure and that's really what I see if at all from here.

Speaker Change: Really helpful color and then if I could follow up on the parts and service side, you mentioned revenue step 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 for sequential.

Rusty Rush: 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 may have 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? Yeah, I obviously don't see any big pickup taking it in reverse, or I'll let me take it the way you asked.

Speaker Change: Both shapes up into the back half.

Speaker Change: Yes.

Speaker Change: Obviously, I don't see any big pickup.

Speaker Change: Reverse or let me take the way you asked it look.

Rusty Rush: Look, we've been fighting it off. I've talked about it for a while. We've had double-digit declines from what I call our unassigned accounts, continually, okay? And that's the small accounts.

Speaker Change: We've been fighting at all as I've talked about it for a while we've had double digit decline from what I call. Our unassigned accounts continually okay and thats, the small accounts and thats still 30% of our business. Okay. A small customers out there are still struggling what you've seen is the large customers.

Rusty Rush: And that's still 30% of our business, okay? You know, small customers out there are still struggling. What you've seen is the large customers, read all the public trucks, they've been in there for two years, and we've fought back and fought back and had growth inside of that. Well, you know, it's finally coming to where we went backwards a little bit.

Speaker Change: Really read all the public trucks, they've been ended for two years and we've fought back and bought back and had growth inside of that well.

Speaker Change: Finally, it's finally coming to where we had we went backwards a little bit 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 see double digit.

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 see double digits, somewhere between 10% and 20% declines in our parts and service business. But you don't have to, because we go about it 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. Diversification of our customer base is one of the key things that we have. And so that allows you, when one segment is way down, to still maintain and go on.

Speaker Change: Somewhere between 10, and 20% declines in our parts and service business, but you don't because we go about it and very strategic way because of the brands, we represent and how we go to market.

Speaker Change: <unk>.

Speaker Change: Make sure that we're doing it in a way that we're hitting every market.

Speaker Change: The diversification of our customer base is one of the most key things that we have and so that allows you win one segments way down to still maintain and go off and then I'll look to the fact, we could see this coming and we mentioned it.

Rusty Rush: And then I look at the fact that we could see this coming. And we mentioned it in April that we were going to make some adjustments. That's the good thing about the business is that you 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?

Speaker Change: That we were going to make some adjustments so thats a good thing.

Speaker Change: About the business as we understand it the absorption rates that we have right now compared to where we used to we can make adjustments with our absorption rate down slightly yeah.

Rusty Rush: 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: But we made some pretty good adjustments inside our expense base to help offset.

Speaker Change: Some of that reduction.

Speaker Change: And run a pretty high Bill told me a few years ago, we'd be running 134% and complaining.

Speaker Change: <unk> Crazy.

Rusty Rush: Uh, 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, oh, I don't see any, you know, big catalyst to really push, you know, to push that revenue line up. I do think we can maintain, you know where we are currently and hopefully we still have some expense things that a few expense things that are going to come in that will help to you know offset the lack of growth but we really you got to remember even though we're very diversified the still the largest base we do business with is 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.

Speaker Change: I don't see any big.

Speaker Change: I don't see any big catalyst to really push to push that revenue line up I do think we can maintain.

Speaker Change: With where we are currently.

Speaker Change: Hopefully, we will still have some expense things that.

Speaker Change: <unk> expense things that are going to come in that will help to offset the lack of growth, but we really you got to remember even though we're very diversified there's still the largest base. We do business with is the over the road business, where there'd be the large public carriers or large carriers private or whether it would be the small customers. It is still look.

Speaker Change: We already have trucks on the road out there.

Rusty Rush: Just thank God that we have the diversity of the customer base 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.

Speaker Change: Thank God that we have the diversity of our customer base, we do to maintain where we're at and performance I'll 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.

Speaker Change: And all these other market segments, but at the same time that is still the largest so when it gets here like it has to be able to pull through and produce the numbers.

Speaker Change: I can tell you I've never been more proud of the organization than I am right now and I expect this then with truck sales going backwards. It gives us we have these different revenue streams right different we have different gross profit areas, whether it's the parts and service truck sales heavy duty medium duty used trucks again that balance of earning streams whats providing results as I've said.

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, which is 20, 12, and 16. This organization is not even close.

Speaker Change: Im comments a minute ago go back and look at the last trough 'twenty trough in 16. This organization is not even close to that it looked like the same organization.

Rusty Rush: It doesn't even look like the same organization that it was back in. The results, the results show that. So I expect we'll just bobble along where we are on that revenue and get back in line and continue to work on our expense base and continue to provide the outstanding results we have. But we will be backward in truck sales. Like I said, we'll go back more to Q1-type levels, and you know, let's just let it unfold in front of us.

Speaker Change: Back in the results the results show that so I expect we'll just.

Bob: Bob along where we are on that revenue and back in line and continue to work on our expense base and continuing to provide outstanding results. We have but we will be backwards in truck sales like I said, we will go back more a Q1 type levels.

Speaker Change: Well, 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.

Rusty Rush: But I'm very confident in the organization to do what it's been doing and just look at the last few years' results. I mean, we're tracking in a tough year, we're tracking to, well, well. To you know, I'm not going to get into it the third best or whatever year we've ever had as an organization, and that's pretty outstanding. I appreciate all that color.

Speaker Change: Just look at the last few years results I mean, we're tracking.

Speaker Change: In a trough year, we're tracking two well well.

Speaker Change: I'm not going to get into its third best or whatever year, we've ever had as an organization and thats pretty thats pretty outstanding.

Rusty Rush: I'm going to have to quick follow up. You mentioned it. Obviously, the trough has been raised, and cash flow has been a source of a positive guide throughout this 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. I guess, what are you seeing as the most attractive uses of that capital as we think about cash flow generation through a cycle? Sure.

Speaker Change: No I appreciate all the color if I can ask a quick follow up you mentioned, obviously your growth has been raised and cash flow has been a source of positive guide throughout the story I guess, how are you thinking about uses of cash not only here at the trough as the cycle turns I would think cash flow gets even better I guess, what do you think is the most attractive uses of that capital as we think.

Speaker Change: The cash flow generation through the cycle.

Speaker Change: Sure well, we've had to take a balanced approach the last few years to what we would do a free cash flow. We said that we will give somewhere about 40% back in.

Rusty Rush: 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 will be a combination, obviously, of dividend and share repurchase. 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: Shareholder return and that would be in a combination obviously of dividend and share repurchase.

Speaker Change: 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. So.

Speaker Change: M&A would be the biggest thing I would tell you that we would be focused on right.

Speaker Change: Do I have a lot of it out there right now, but not necessarily are we looking at things of course, we are.

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.

Speaker Change: At the same time I can't sit here by the way.

Speaker Change: I wouldn't sit here and tell you we're going to do some.

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 dealer 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 they're 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: Wouldn't announce it to you what it's done but growth inside of the organization.

Speaker Change: When it comes to that piece.

Speaker Change: Okay.

Speaker Change: Is there we had a little acquisition in Nebraska this quarter and there are some others that we're looking at not a big one.

Speaker Change: Singles Man, sometimes folks don't understand that just because I'm not doing big M&A like I say the last big M&A deal was December 'twenty, one when we bought the second largest navistar dealer work.

Speaker Change: We're always doing what I call bought singles were opening up 345 stores a year that you don't see that it was small and we're buying little deals that sometimes we don't even talk about okay.

Speaker Change: Right now M&A will always be first and foremost to continue to expand our footprint remember.

Speaker Change: The best thing, we have going for us is our footprint.

Rusty Rush: But the number one thing is our footprint. It's the differentiation that we can touch more customers, especially as customers continue to consolidate. 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?

Speaker Change: Outside of our people now, but the number one thing is our footprint. It's the differentiation that we can touch more.

Speaker Change: More customers, especially as customers continue to consolidate.

Speaker Change: It is not as rationalized customer base as it used to be and we can drive efficiencies into our organization, but most importantly, and that their organization leveraging off that footprint with our outstanding people. So we can go out and do what we are out there. We are always out there looking for new customers right and you've always got target customers and things go ahead.

Rusty Rush: We're out there. We're always out there looking for new customers, right? You've always got target customers and things you're going at. And that's to me, one of 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.

Speaker Change: And Thats to me one of our is our biggest selling point outside of our people as I said is our network and we will continue to look to expand that thats always going to be number one and then it'll just be.

Rusty Rush: And then it'll just be, you know, returning to shareholders that if you look at the average, we've averaged around 40% the last five years; some years it was 25, some years it was, but that about depends on that year when you're, you know, sometimes limited as to what you can do anyway from a repurchase perspective and when you hit it from that perspective. We've consistently raised our dividend every year, sometimes more than 5% to 10%, but our commitment is 5% to 10%, and last year it was 21%.

Speaker Change: Returning to shareholders.

Speaker Change: If you look at the average and we've averaged around 40%. The last five years. Some years. It was 20 some years it was 50.

Speaker Change: That's about it depends on that year.

Speaker Change: Sometimes.

Speaker Change: Limited as to what you can do anyway.

Speaker Change: From a repurchase perspective, and when you hit it from that perspective.

Speaker Change: Consistently raised our dividend every year, sometimes more than 5% for 10%, but our commitment is 5% to 10%.

Speaker Change: And.

Speaker Change: Last year. It was 21, okay just happened so it would be.

Rusty Rush: Okay, just after so it's not that high, but we'll continue. Those will be the three main things that we'll do right. Shareholder to shareholder return is 1 and not 2. It'll be shareholder return, and then, of course, number 1 will be acquisitions.

Speaker Change: But we will continue to those will be the three main things that will do is shareholder to maintain shareholder return is one and not to be shareholder return and then of course number one will be acquisitions. If we can find them to continue to build our footprint out.

Rusty Rush: If we can find them, we can continue to build our footprint out. Great. I appreciate all the color.

Speaker Change: Great I appreciate all the color best of luck.

Speaker Change: You bet. Thank you Dan.

Rusty Rush: Best of luck. You bet. Thank you. The next question comes from Andrew Obin with Bank of America. Your line is open. Hey Rusty, how are you?

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

Andrew <unk>: Hey, Rusty how are you.

Rusty Rush: Good morning. I'm very good. And 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 at this point? So, what was that question again, Andrew? I'm sorry. Oh, just your mix.

Rusty Rush: Good morning, Im very good Andrew how are you this morning.

Andrew: I'm good just maybe.

Speaker Change: You talked about outperformance and obviously because you have higher vocational mix versus the industry can you just remind us where we are.

Speaker Change: In your mix at this point.

Rusty Rush: So what was that question again, Andrew I'm sorry.

Andrew <unk>: Your mix your mix your class eight your class eight mix.

Rusty Rush: Your mix, your class 8 mix versus the industry, right? Because you have more vocational training, right? You have more waste.

Speaker Change: Versus the industry right because you have more vocational right you have more ways correct.

Rusty Rush: Correct. You have all the road rules, but less of it. Could you just remind us what the mix is like these days? I'm gonna give you, 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 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, you know, key pieces.

Andrew <unk>: The road, but less so but could you just remind us what the mix is like these days.

Speaker Change: I'm going to give you.

Speaker Change: <unk> status.

Speaker Change: I'm going to give you the total graco, but I've always said I, usually say somewhere around 50 50.

Speaker Change: Depending on the brand, we're a little maybe a little bit heavier.

Speaker Change: On the vocational side on the Peterbilt side than we are on the navistar side, but somewhere 45, 50% of our 40, Firstly, let's say, 45% of our visitors and vocational somewhere in that range.

Rusty Rush: When you really look into the construction the refuse and all of those businesses and that's on the <unk> side right and that's one of the key pieces.

Rusty Rush: Again, it's diversification, diversification to each market segment, and that's really, and I appreciate the color of the question, but the color would be somewhere in that range. And then what folks are wondering, just in terms of orders, what do you think? And I think you've clearly been an early sort of sounding caution about Outlook for the second half. Where are the orders trending in July and August? What are you seeing? What's your experience?

Rusty Rush: This diversification diversification to each market segment.

Speaker Change: I appreciate the color.

Rusty Rush: But the color would be somewhere in that range.

Speaker Change: Alright, and then what are folks I'm 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 second half.

Speaker Change: 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 off, 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. Our customers. You know, you're starting to get talk about emissions, right?

Rusty Rush: Andrew.

Andrew <unk>: <unk> to where we were in the first quarter.

Andrew <unk>: Really it started all it's been all year.

Andrew <unk>: It's been pretty down for us all year from an order intake perspective, now I will say that.

Speaker Change: So we hit a few deal a couple of deals along the way, but from a just a.

Speaker Change: Demand perspective, quoting no question, it's been down our customers.

Speaker Change: Youre starting to get talk.

Speaker Change: <unk> emissions, we're at right now talking with folks, but it's been very difficult for a lot of the truckload guys to start talking about that when you can see the earnings and the pressures that they felt 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.

Rusty Rush: 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 when they come out tomorrow. Last month, I think I was on a call pretty good with you and a bunch of investors, around 15,000, and I don't know where they'll be this month.

Speaker Change: Last month, I think I was on a call I guess pretty good view of it.

Speaker Change: Active investors around 15000.

Speaker Change: Don't know where there'll be this month I have.

Rusty Rush: 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 billed 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. We still need more supply to come out, more trucks to come into the market, and capacity from a capacity perspective from where we're at.

Speaker Change: Not sure, but I'm not going to say, they're not going to be super outstanding.

Speaker Change: Because folks are as I said theres still build available in the back part of the year before.

Speaker Change: People are still traveling.

Speaker Change: 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.

Speaker Change: More trucks to come out of the market and capacity from a capacity perspective.

Rusty Rush: 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 folk still believe that, well, this election is going to change something. It's not going to change anything dramatically. I don't care.

Speaker Change: From where we're at and people have been too buried I think inside of running and managing their own business.

Speaker Change: Worry about 'twenty seven emissions.

Speaker Change: A lot of folks still believe that well.

Speaker Change: Election is going to change, but 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: Dramatically I don't care this with the Oems.

Speaker Change: But they are too busy taking care of their businesses to worry about the cost increases that are going to come with meeting 27 emissions, which is going to happen.

Speaker Change: We can all make 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 as these things have been worked on for a while so but I do expect that we will get <unk>.

Rusty Rush: We usually start picking up in October, November, and December, which translates into picking up, and business picking up next year. So I can't tell you exactly when I expect that to happen, but usually, you have ATA in October, and then 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 people I've talked to, they were on the bottom, and they can see slight, you know, slivers of green out there in 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. People still remember what it was like in 2010 when we went into EGR, excuse me, SCR.

Speaker Change: <unk>.

Speaker Change: We usually start picking up in October November December.

Speaker Change: Which translates into picking up 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 HCA in October and then people follow through on that so im looking.

Speaker Change: Long as everybody can businesses really are flattening like what I said, what I've talked to people I've talked to they were on the bottom and they can see slight slivers of green out there and their business going forward that they weather. The toughest part then people will start getting concerned.

Speaker Change: How about the technology of diesel trucks at all yet for treatment and everything people still remember what it was lagging peers, Tim when we.

Speaker Change: We went into <unk> excuse me SCR.

Rusty Rush: One company stayed on EGR, but we went to SCR, and the after-treatment that happened and then also combine that with what we'd look for cost increases to be, you're gonna see some. I just don't think you're really gonna see it until late this year, which translates into sometime next year, probably spreading deliveries on your big orders throughout the year, starting next year sometime. But I don't look for any uptick in the next couple months.

Stephanie: One company Stephanie.

Speaker Change: Went to SCR and the after treatment that happened and then it also combine that with what we'd look for cost increases to be.

Speaker Change: Youre going to see some I, just don't think you're really going to see it till late this year, which translates into sometime next year, probably spread deliveries on your big orders throughout the year, starting next year sometime but I don't look for any uptick in the next couple of months I can tell you that big uptick now in the next but we are out talking and when people are starting to.

Speaker Change: Talk more about it some.

Speaker Change: Some people thought they were going to talk to you can read some Oems I read earlier, that's going to happen.

Speaker Change: It's it's happening but in a very gradual.

Speaker Change: Early stage, let's say like that but there will be they will understand their businesses customers are smart.

Rusty Rush: But there will be, they will understand their businesses, customers are smart, and they'll know when it's time to kick it in gear, but I don't look forward to the back half of the year, back, excuse me, back of the month. You bet. For the next couple of months, you think this 15,000 is relatively flat or down from that number. Is that a fair estimate?

Speaker Change: No one is to advocate getting gear, but I'll look forward to the back half of the year.

Speaker Change: Adjusted here.

Speaker Change: For the next couple of months do you think Thats 15000 sort of relatively flat or down from that number is that a fair estimate from my perspective, unless unless some.

Rusty Rush: From my perspective, unless some, you know, the big 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, it's just going to be limited. I mean, yes, I'm not around to answer your question without just over-talking like I do a lot. But yes, I don't expect any big uptick in orders. How did that EGR decision work out for that CEO? I shouldn't say that. I am so sorry.

Speaker Change: The big change.

Speaker Change: It's a big Big Big customers, a couple three or four big customers one of the place big orders that are spread that the demand is not.

Speaker Change: The demands.

Speaker Change: Yes, Rod to answer your question without Overdraw being like I do a lot, yes, I don't expect any big uptick in orders.

Speaker Change: Our decision to work hard for that.

Speaker Change: I shouldn't say that.

Rusty Rush: I didn't say that. I didn't say that. I didn't say that. Let me try, so...

Speaker Change: Yes.

Speaker Change: Sorry.

Speaker Change: I didn't say what items, there that I didn't say that.

Rusty Rush: I didn't say that. I'll fly into it. I'll fly into it. I don't think I was allowed into that building for a while. Just a question about macro.

Speaker Change: Let me.

Speaker Change: Say that offline too.

Speaker Change: I'm thinking that was allowing for that building for a while.

Speaker Change: Joe.

Rusty Rush: I always ask you because you have very good systems; lots of uncertainty about the economy. I think the PMIs just came out and indicate a sort of step down in industrial activity. What are you seeing?

Speaker Change: Just a question on.

Joe: Macro I always ask you because you have very good systems lots of uncertainty about the economy I think the PMI is just came out.

Speaker Change: Indicated 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 would love to take to get your take because you tend to be very smart about it. Thank you.

Rusty Rush: You have a 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? I would love to get your take on it because you tend to be very smart about it. Thank you. Oh, and... One's been piloted on me today, aren't you, boy? Huh, good question. I just see a lot of uncertainty. To be honest with you, I mean, I see more uncertainty in my mind about the economy. And I know it sounds like a broad no answer.

Andrew <unk>: Oh Andrew.

Speaker Change: Turning it on me today are Jim Boyd.

Jim Boyd: Good question, how do you see a lot of uncertainty to be honest with you I mean I see more.

Speaker Change: Certainly in my mind about the economy.

Rusty Rush: But truly, I do believe that this election and all this stuff that's going on outside of everything else has got people a little bit paralyzed in some areas. You know, as I look around, obviously, the truckload side is still not in good shape. 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.

Speaker Change: Sounds like a broad no answer, but clearly I do believe that.

Speaker Change: I just think this election and all the stuff that's going on outside of everything else has got people little bit paralyzed in some areas.

Speaker Change: As I look around obviously, the truckload side is still not in good shape. The LPL side. He has been in good shape.

Speaker Change: We were off a little bit in energy this last from a parts and service perspective.

Speaker Change: This last quarter more than I would've anticipated.

Rusty Rush: Uh, 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: I think the economy.

Speaker Change: It looked a little hot earlier.

Speaker Change: <unk>.

Speaker Change: It was going to be.

Speaker Change: A tougher back out what I do expect it to pick up after that I do expect no matter what anybody else says I do expect it to.

Speaker Change: My problem is sometimes I get.

Speaker Change: I'll look at it by industry of our glasses right I got to take back you want to take my macro pullback macro glasses on and sometimes maybe I'm not the best at that.

Rusty Rush: 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 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, pretty good about it because we will have a great drop year from a business perspective, and we will have taken capacity out of the marketplace, and that's always a good thing. It'll be a platform to set up for good in my industry. But I just looked at it. This back half is gonna be a little slow, if you ask me.

Speaker Change: A stab at it but I don't look for anyway.

Speaker Change: I'm not looking for a recession, if thats, what youre, saying.

Speaker Change: Right now, but I'm, just looking for sort of Bubbling along right now until we get into November and into 'twenty five.

Speaker Change: And then I'm going to feel especially from an industry perspective about what we feel pretty good about it because we would've had a trough year.

Speaker Change: Okay.

Speaker Change: And we will.

Speaker Change: Taken out capacity.

Speaker Change: Out of the marketplace and Thats always a good thing.

Speaker Change: So there'll be a platform to set up for it.

Speaker Change: Good for my industry, but.

Speaker Change: Just look these back half no real slow you asked me and im not going to be I'm, not an economist. So I know, we will get out past that much.

Rusty Rush: And I'm not an economist, so I'm not gonna get out of that much. But I can tell you something. Is it fair to say that your vocational business is fairly stable? Is that a fair statement?

Speaker Change: Sorry to say.

Speaker Change: Is it fair to say the relocation business is fairly stable is that a fair statement.

Rusty Rush: Yes, 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: Yes.

Speaker Change: 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.

Speaker Change: I wouldn't look for continued growth medium duty big orders and is back half I think that will slow down a little bit from where it has been.

Speaker Change: But it is not dropping terribly like we said our Q3, but not sold out in Q4 there. So.

Speaker Change: Where we had been pretty sold out for a couple of plus years running in medium duty, we're not going to be.

Speaker Change: Im not a year out when I look at it anymore, but does that mean, it's terrible look reality is.

Speaker Change: You're not supposed to be sold out a year ahead, let's get back to the real world.

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 shows 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 probably ought to, 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.

Speaker Change: That's one of the things I'm. Most proud of is how we manage inside these type of situations and it's showing in the numbers that we're producing and it will continue to show as you know I'm pretty conservative judging by where we end up.

Speaker Change: Whereas sometimes the Magnum I had a private or a valve has been on it's probably a bit more on us.

Speaker Change: Because these people that work with me beside me everyday all eight.

Speaker Change: They've proven pay execute extremely well.

Rusty Rush: They execute extremely well. And just as we have done this year and the previous 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 is all I can tell you. And I think the numbers are going to play out for where we are.

Speaker Change: As we have this year and the prior few years I, just sometimes I wish everybody understood the diversification.

Speaker Change: The company and I hope this year proves it to anyone that if this is the trough middle year of a five year run.

Speaker Change: When youre in pretty good shape.

Speaker Change: We're in pretty good shape. So all I can tell you I think the numbers are going to play out.

Rusty Rush: We're going to 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. Look, we're down. We're down GNA. Remember, I never talk about SGNA.

Speaker Change: Yes, we are going to sell less trucks, but we're going to do a good job of managing through it given the diversification of our earnings stream.

Speaker Change: And what we do and how we go to market.

Speaker Change: Expenses were down.

Rusty Rush: I talk about GNA. For Q1-Q2, we're down 4.7% in G&A. That's outstanding.

Speaker Change: G&A came around it we're talking about SG&A I talk about G&A.

Rusty Rush: 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, you know, when the market does pick back up, which I believe will have to get real fast, we'll get to those numbers I've been talking about for the last three or four years, and 25 and 26. We will execute. You've got that commitment from me. Well, sir, thank you so much. You betcha. As a reminder, to ask a question, please press star one one on your telephone. The next question comes from A.B. Arasolowicz of UBS.

Speaker Change: Q1 to Q2 were down four 7% and G&A. That's outstanding 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.

Speaker Change: When the market does pick back up which I believe.

Speaker Change: Get real fast we will get to those numbers I have been talking about the last three or four years and 25 and 26, we will execute you got that commitment for me.

Speaker Change: Well, Sir thank you so much.

Speaker Change: You bet you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone.

Eric <unk>: The next question comes from Eric <unk> with UBS. Your line is open.

Operator: Your line is open. Good morning, guys. Thanks for a good morning.

Eric: Hey, good morning, guys. Thanks, Doug.

Eric: Good morning.

Rusty Rush: 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 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. Well, I don't think that really it's not from leftover 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.

Eric: So just wanted to dig into vocational.

Speaker Change: 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 of a leftover pent up demand after the past couple of years with tighter supply.

Speaker Change: Similar to what we saw with medium duty.

Speaker Change: Well I don't think that really is not from leftover demand we were taking care of class eight demand regardless balancing it through the last few years I think it has to do with more of the.

Speaker Change: The money the government has been thrown at it.

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.

Speaker Change: And I think some of these customers got a little bit behind back coming out of Covid and they are still catching up with where they got a little bit behind in the age of their fleets not necessarily because Rick.

Speaker Change: It was balanced across the board, but they didn't take the hits in their business at the over the road business right. So those guys have had to slow down somewhat this year 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 we could've done.

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. We could have done more vocational business this year, except there's been a lack of, we had a component issue with transmissions, you know; or we would have sold more this year than we have.

Speaker Change: More vocational business this year, except theres been a lot.

Speaker Change: <unk>.

Speaker Change: We had a component issue with transmissions.

Speaker Change: Or we would have sold more this year than what we have so we've got to believe that that business will carry over into 'twenty five what business didn't get booked and I cant quantify it exactly for you, but that business will get carried over <unk> 25, because that demand is still there.

Rusty Rush: So we've got to believe that that business will carry over into 2025. What business didn't get booked, and I can't quantify it exactly for you, but that business will be carried over into 2025 because that demand is still there, given what's going on.

Speaker Change: Given what's going on so I feel really good about where it's going to continue to be strong excuse me end of 'twenty five and then sometime in 'twenty.

Speaker Change: We're going to pick up in the over the road business. The <unk> business will still be good with our LDL customers.

Speaker Change: The.

Speaker Change: But a small customer is being taken out of the market Youll show back up by the end of 'twenty five.

Speaker Change: And I think the over the road business will pick up somewhere at 25% as I said.

Rusty Rush: And I think the over-the-road business will pick up somewhere in 2025, as I said, with maybe, you know, orders coming in late this year. But I could be wrong. It could roll into next year, just depending on, but if this is the bottom, I do believe people are going to start thinking about how they get ready for January 1 of 2027 and how they, you know, how they position 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.

Speaker Change: Maybe orders coming in late this year.

Speaker Change: Could be wrong it could roll into next year, just depending on if this is the bottom.

Speaker Change: Believe people are going to start thinking about how they get ready for January one of 2007 and how they how they position.

Speaker Change: Their fleets from a <unk> perspective.

Speaker Change: Going into all of that but no vocational could still be solid.

Speaker Change: <unk> I could give you we're not looking for right now we're not looking for any anything going backwards over across across the board.

Rusty Rush: Now, I will, you know, we're not looking for anything going backwards across the board when you look across the whole country. So that would be my response. Okay.

Speaker Change: When you look across the whole country, so that would be my response.

Rusty Rush: 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 this here over the road Class A, but... Yeah, also curious if you think that stick can 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 throughout some inventory here in a week's second half.

Speaker Change: Okay got it I appreciate that.

Speaker Change: And then just in terms of your comments about the more competitive truck pricing in the second half.

Speaker Change: Any way you can kind of dimensionalize that in terms of like.

Speaker Change: Yes year over year price changes and just to what extent does it vary by OEM.

Speaker Change: I'm assuming that were.

Speaker Change: Just talking about their over the road class eight but.

Speaker Change: Also curious if you think thats kind of as we go into 2025, and it's really more.

Speaker Change: Market share battle over pricing or really just temper.

Speaker Change: 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, 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.

Speaker Change: Well.

Speaker Change: What I'll say going to be a more competitive it will be more competitive understand though.

Speaker Change: Third quarter business is already book, Okay, Where's that LIBOR book in Q3 business really right now we're in the middle.

Speaker Change: One month through.

Speaker Change: At three months corner. So that's there's not much that I can do to move that.

Rusty Rush: I think, you know, when you talk about pricing, we have you know, when you look at our inventory. 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.

Speaker Change: Thank you.

Speaker Change: When you talk about pricing, we have when you look at our inventories.

Speaker Change: Im 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 truly our inventories we're very prudent about.

Rusty Rush: 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 used; that's new also across the board. So I feel good that when I say we're going to be competitively set up to do what we should do with our inventories. When I talk about it, it's going to be more competitive, but not crazy competitive, if that makes any sense.

Speaker Change: Making sure we understand where the market is and the demand and that's not just us that's new also across the board. So I feel good that we are.

Speaker Change: We're.

Speaker Change: We're going to be competitively set up to do what we should do with our inventories.

Speaker Change: When I talked about.

Speaker Change: Going to be more competitive, but not crazy competitive that makes any sense.

Rusty Rush: 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 overcompetitiveness like I saw going way back to 2009 or something 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 want to get back in that situation again.

Speaker Change: People I think the Oems are going to show decent discipline.

Speaker Change: 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 thats really what I was trying to say, but not crazy over competitiveness like I saw going way back to 2009 or some time like that when it was.

Speaker Change: Ah 92000 class eight truck market, so because understanding that all youre doing is.

Speaker Change: You're setting yourself up now when the market picks up to half two because I think.

Speaker Change: The majority of always cost increases have been have been required remember what inflation was like drove it all up so Oems had to catch up and they have done that and I don't want to get back in that situation again will they be more competitive in certain situations, where certain deals probably as needed because they still do need some fourth quarter build.

Rusty Rush: 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 to keep build 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. It's out of line a little bit, too.

Speaker Change: At the same time, they'll manage build rates down.

Speaker Change: Guarantee you build rates are coming down.

Speaker Change: Finally.

Speaker Change: One of the things we got out of whack, we got way too much inventory across the whole country right. Now you can go look at it.

Rusty Rush: 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.

Speaker Change: It's out of idle get to almost an all time high but they'll have to slowdown I know Oems are slowing down build rates and by the way im not getting specific to any Oems I'm just talking broadly here.

Rusty Rush: I'm just talking broadly here, but I know bill rates are going to come down. They have to.

Speaker Change: But I know bill rates are going to come down that.

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.

Speaker Change: You'll see that throughout the back every 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 one mandate.

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 it 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're at. 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.

Speaker Change: Bill rates to be down, 15%, 20%, because they stay high too long they got too much inventory shoved out they've got to bring them down theres only so much the market can take.

Speaker Change: No.

Speaker Change: That's my overall view of.

Speaker Change: Where we're at when it comes to.

Speaker Change: <unk> and.

Speaker Change: And where they are at but we feel that.

Speaker Change: When you take bill rate up Youll relieve some of the pressure on pricing right. When you stop overbuilding. So I think we got a little bit too over built here.

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? It's going to be under what I've told people? No, it's not.

Speaker Change: I think bill rates are coming down I think build rates will be positioned to be ramped back up but.

Speaker Change: It will be a little more competitive is it going to be.

Rusty Rush: We're going to be at our highest on the highest 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. All I can tell you is that it will be more competitive, but we believe we've priced our stuff to market, and we're prepared to do that.

Speaker Change: We're going to be under what I've told people no its not but we're going to be at our highest on hires of 'twenty three no but were not correctly, we're going to stay pretty consistent youll see our blended rates, probably fairly consistent which you should be with where we are currently I don't look for our our margins blended our blended margins on truck.

Speaker Change: So I don't look for them to come backwards from really from where they're at right now.

Speaker Change: So all I can tell you, but it will be more competitive, but we believe we mark our stuff to market and we're prepared to do that I expect any orders, we will be competitive but not to the point of dramatically back in a couple of points or something like that out of margins. Okay.

Rusty Rush: And I expect any orders we get on will be competitive, but not to the point of dramatically knocking a couple points or something like that out of the margins. Okay. All right, that's very helpful. Thanks for the time.

Speaker Change: Alright.

Speaker Change: Very helpful. Thanks for the time.

Operator: You bet. Thank you for the call. I have no further questions at this 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: I would now like to turn the call back over to Rusty for closing remarks. 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: Yes first off I just want to thank our employees one more time I know I've mentioned them a couple of 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 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: Their persistence in there.

Speaker Change: Execution of our strategies in spite of US we did reduce some expenses and we will continue along those lines. So we can do the right thing and produce the kind of results from producing right now so I would just like to thank them one more time for their efforts during this last quarter it was tough.

Rusty Rush: But we're dialed in right now, and we're going to execute, try 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. Because remember, I did this during the quarter. We did it during the quarter.

Speaker Change: But we're dialed in right now and we're going to execute private stay pretty flat in the back like I said in parts and service work on our expenses a little bit.

Rusty Rush: 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 that for our shareholders and for the company. So thank you all very much.

Speaker Change: With where we're at because we remember I did this during the quarter. We did it during the quarter. So there'll be a little off a little bit more reduction that took place in the back half of the quarter, we're not looking to do anymore, 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 to do that for you.

Operator: And we'll talk to you again in October, I guess. Appreciate it. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. This video was made in cooperation with the U.S. Embassy in the Philippines. No part of this recording may be reproduced without the permission of the U.S. Embassy in the Philippines.

Speaker Change: For our shareholders and for the company. So thank you all very much and we'll talk to you again.

Speaker Change: October I guess so.

Speaker Change: I appreciate it thank you.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

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Speaker Change: Ladies and gentlemen, thank you for standing by welcome to Rush Enterprises reports second quarter 2024 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.

Operator: 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.

Speaker Change: I ask a question. During this session you will need to press star one on your telephone you wouldn't hear an automated message of biting your hand, just raise to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

Rusty Rush: 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.

Speaker Change: We'd 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 statements. Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

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 now Steve will say a few words regarding forward looking statements.

Rusty Rush: 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. 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.

Steve Keller: Certain statements we will make today are considered forward looking statements as defined in the private Securities Litigation Reform Act of $19 95, because these statements include risks and uncertainties. Our actual results may differ materially from those expressed or implied by such forward looking statements important factors that could cause actual results to differ materially from those expressed or implied by such.

Steve Keller: 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.

Steve Keller: Yes.

Speaker Change: As indicated in our news release, we achieved second quarter revenues of 2 billion and net income was $78 7 million or <unk> 97 per diluted share were proud to declare a cash dividend of <unk> 18 per common share an increase of five 9% over our prior quarterly dividend and our eighth increase since announcing our intent to begin playing.

Speaker Change: Cash quarterly cash dividend in July of 2018.

Speaker Change: Despite the ongoing challenges facing our industry that are highlighted in our earnings release 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 have.

Speaker Change: During the last industry troughs in 2020 and 2016.

Speaker Change: Although low freight rates continue to negatively impact over the road carriers, we expect we experienced ongoing strength in other key customer segments, including public sector, and vocational which positively impacted our class eight truck sales revenues and market share during the second quarter. Our class four through seven sales remained steady and we executed.

Speaker Change: Well on our used truck pricing and inventory strategies.

Steve Keller: 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 part sales perspective, and outperformed the industry with respect to service sales.

Steve Keller: In the aftermarket our parts service and body shop revenues were $627 4 million down three 6% compared to the second quarter of 2023, and our absorption ratio was 134% as.

Speaker Change: As I stated in the news release, the freight recession and high interest rates are still negatively impacting over the road carriers. These same challenging economic conditions also led to decrease in demand from wholesale independence parts distributors and energy <unk>.

Steve Keller: Decreases in those segments were partially offset by healthy year over year growth of our public sector vocational and medium duty cost.

Steve Keller: Looking ahead, we do not expect market conditions for ask of our aftermarket demand to improve significantly in the third quarter. However, we are committed to leveraging of 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.

Steve Keller: 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 period in 2023.

Steve Keller: We believe that these actions will allow us to improve our market share and continued to outperform the industry.

Steve Keller: Turning now to truck sales, we sold 40 128, new class eight trucks in the second quarter accounting for six 8% of the total U S class eight market and one 7% of the Canadian market.

Steve Keller: <unk> demand caused by a lingering Frank recession led to an 18, 6% decline in U S class eight retail sales in the second quarter of <unk> 24, compared to the same quarter. In 2023, however, strong retail sales in vocational customers and the timing of deliveries to certain other large customers helped to offset the decline.

Steve Keller: And over the road sales.

Steve Keller: And allowed us to increase our class eight market share.

Steve Keller: ACD research forecasts U S class eight retail sales to be 228700 units in 2024 down 15, 8% compared to 2023 during.

Rusty Rush: During the second quarter, the industry experienced higher-than-normal Class 8 order counts, and week ordering dates, 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. 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 new truck sales reached 3,691 units in the second quarter, or 5.7% of the U.S. market and 2.4% of the Canadian market.

Steve Keller: During the second quarter, the industry experienced higher than normal class eight order cancellations and weak order intake.

Steve Keller: Which we believe will cause <unk>.

Steve Keller: New class eight truck sales to be down for the remainder of the year. We also expect 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.

Steve Keller: Our class four through seven.

Steve Keller: New truck sales reached 3600 91 units in the second quarter or five 7% of the U S market and two 4% of the Canadian market commercial vehicle production continued to increase and delivery times have improved resulting in healthy activity for medium duty customers our class four through seven commercial.

Steve Keller: Vehicle sales were broad based across industry segments, and we are pleased to outpace the market in the second quarter.

Steve Keller: ACD research forecast U S class four through seven retail sales to be 262000 units in 2024 up three 7% from 2023, we will closely monitor economic factors that could impact customer spending and lead to a decrease in class four through seven commercial vehicle demand.

Steve Keller: However at this time, we anticipate our third quarter class four through seven commercial vehicle sales will be consistent with our second quarter results.

Steve Keller: We sold seven 723 used trucks in the second quarter down seven 8% year over year used truck demand remained weak due to low freight rates more radio available new truck alternatives and higher interest rates. However, the right of use depreciation has slowed to more manageable levels.

Steve Keller: And we executed well on our used truck strategies, 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.

Steve Keller: Looking ahead, we will continue to monitor industry and macroeconomic conditions looking for signs of significant freight recovery.

Steve Keller: I previously stated we expect retail sales of new class eight trucks to decrease from second quarter levels throughout the remainder of the year and for retail sales will remain solid for new class four through seven trucks. Despite the difficult market conditions. We believe we are well positioned to continue to outperform the industry and to increase.

Steve Keller: Our market share.

Steve Keller: It is also worth noting that we instituted expense reductions during the second quarter in anticipation of the 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.

Rusty Rush: With that, I'll take your question. 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.

Steve Keller: With that I'll take your question.

Steve Keller: Okay.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be in the U K.

Speaker Change: Withdraw your question. Please press Star one line again.

Operator: And our first question will come from Daniel Imbro with Stevens. Your line is now open. Hey, good morning guys. Thanks for your questions. Thank you, man. Good to hear from you. Russell, I'll start maybe on the demand backdrop.

Daniel <unk>: And our first question will come from Daniel <unk> with Stephens. Your line is now open.

Daniel <unk>: Hey, good morning, guys. Thanks for taking the questions.

Daniel <unk>: Thank you Emmanuel good to hear from you.

Rusty Rush: Obviously, fleets are slowing spending, and the freight backdrop has remained tough. I'm just curious how the back half pipeline looks as we head on the Class 8 side into the second half. And maybe how has that tone changed as you talk to carriers?

Rusty Rush: Rusty I'll start maybe on the demand backdrop, obviously fleet. They are slowing spending in the freight backdrop has remained tough I'm just curious on the back half pipeline looks as we head on class eight tied into the into the second half and maybe how has that tone changed as you talk to carriers I would go with the last few months some are sounding a little more positive that we're seeing.

Speaker Change: So normalization happening in the freight market is im curious if youre hearing that or how you think that would affect the back half.

Speaker Change: From that perspective, you asked how do I look at it.

Speaker Change: I'm going to say, so I would say similar from a class eight perspective now similar to Q1 more not as many units as we sold in Q4.

Speaker Change: In the fourth quarter is still to be still to be told I can still get you all the trucks you need in the fourth quarter. If it needs. So right. So obviously, we have booked business booked in the fourth quarter, but it still is.

Speaker Change: Still coming together right that quarter still coming together given the reduction in lead times with basically all class eight Oems.

Speaker Change: From a customer perspective.

Speaker Change: Yes.

Speaker Change: For me, yes, things have leveled off or they getting.

Speaker Change: A lot better no are they bobolink, where I think they are pretty level talking to customers like I do yes, I think bounced.

Rusty Rush: Are they bobbling along where I think they're pretty level when 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 and a little, you know, a little spot here, and then you skip a little bit here; you really need a consistent trend line of positive news. Do I believe that it's coming? You bet. Do I believe it's going to be difficult to get to that situation, to a real positive environment?

Speaker Change: Bouncing along there.

Speaker Change: Slight green shoots youll see here and here, but it takes trend lines. It doesn't take a little here a little.

Speaker Change: It was bought here I mean, you skip and then a little bit here, you really need a consistent trend line of positive news I believe that's coming you bet <unk>.

Speaker Change: It's going to be difficult to get to that situation get to a real positive environment.

Rusty Rush: Oh, 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 will be, I'm not that guy to peg exactly.

Speaker Change: Not that guy to peg exactly but I do believe.

Rusty Rush: But I do believe there's not this continual pessimism of continuing to drop, drop, drop, right? But I do believe we'll inch our way forward here in the back half of the year. But setting the stage, I think, as we continue to get, you know, there's still capacity, there's still a little bit too much capacity out there in the marketplace. It's a balancing act, you know, between supply and demand, where we have had some come out, you know, we've also, it's not like freight tonnage has grown a lot either. So, you know, we're getting our way.

Speaker Change: Theres not this continual pessimism of continuing to drop drop drop right, but I do believe there'll be.

Speaker Change: Yeah sure our way forward here in the back half of the year, but setting the stage I think as we continue to get.

Speaker Change: Capacity, there is still a little bit too much capacity out there in the marketplace. It's a balancing act.

Speaker Change: Between supply and demand, where we have had some come out.

Speaker Change: We've also got like freight tonnage has grown a lot either okay. So.

Rusty Rush: 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, you know, 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. I think if you see most everybody, it's low singles if they've given anything back here recently.

Speaker Change: We're getting our way. We're finally I think I think you can see the light right.

Speaker Change: But it's not a fourth was not a full picture yet.

Speaker Change: But our customer base will be able to take advantage of it.

Speaker Change: Get back some of that those freight rates that they've been so <unk> being such a highly competitive and you're just doing what they've had to do the last few years a reduction in freight rates should be about over with I think if you see most everybody. It's low singles if they've given anything back here recently and I expect that the flat and I expect that to maintain.

Rusty Rush: And I expect that to flatten out, 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 Hall for Hire. Not a really helpful color.

Speaker Change: But then they should be able to start picking up.

Speaker Change: And I am talking about the truckload side when I get in the <unk> side here, obviously, but on the truckload side for sure that that's really what I see for <unk> offer higher.

Rusty Rush: 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? Yeah, I obviously don't see any big pickup taking it in reverse, or I'll let me let me hit you take it the way you asked.

Speaker Change: Really helpful color and then if I could follow up on the parts and service side, you mentioned revenue step down sequentially. I guess can you talk about what changed since the first quarter. The macro has been tough, but it felt like demand for parts and services may be slowed more than we thought and then given the stable macro I guess, how do you think that year over year growth shapes up for sequence.

Speaker Change: So growth shapes up into the back half.

Speaker Change: Yes, obviously I don't see any big pickup.

Speaker Change: It reversed.

Speaker Change: You can take it the way you asked it.

Speaker Change: Look we said.

Speaker Change: We've been fighting it all as I've talked about it for a while we've had double digit declines from what I call our unassigned accounts continually.

Speaker Change: And thats, the small accounts and thats still 30% of our business okay.

Rusty Rush: 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 it, read all the public trucks, they've been in there for two years. And we fought back and fought back and had growth inside of that.

Speaker Change: Mall customers out there are still <unk>.

Speaker Change: Lovely.

Speaker Change: What you've seen is the large customers.

Speaker Change: I read all the public trucks, they've been ended for two years and we've fought back and fought back and had growth inside of that well. It. Finally is finally coming to where we had we went backwards a little bit but the most important thing to understand is the diversity of our customer base. If we were tied strictly to the over there.

Rusty Rush: Well, you know, it's finally coming to where we had it. We went backwards a little, But the most important thing to understand is the diversity of our customers. If we were tied strictly to the over-the-road business, you would have seen double digits, somewhere between 10 and 20 percent declines in our parts and service business, but we don't. Because we go about it in a very strategic way because of the brands we represent and how we go to market.

Speaker Change: Business, you will see double digit.

Rusty Rush: We make sure that we're doing it in a way that we're hitting every market. 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 on.

Speaker Change: We.

Speaker Change: Make sure that we're doing it in a way that we're hitting every market.

Speaker Change: First vacation of our customer base is one of the most key things that we have and so that allows you in one segments way down to still maintain and go off and then I'll look to the fact, we could see this coming and we mentioned it in April.

Rusty Rush: And then I look at the fact that we could see this coming. And we mentioned it in April that we were going to make some adjustments. That's the good thing about the business; you 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?

Speaker Change: We were going to make some adjustments so thats a good thing.

Speaker Change: The business is.

Speaker Change: Understand that the absorption rates that we run now compared to where we used to we can make adjustments with our absorption rate down slightly yeah.

Speaker Change: But we made some pretty good adjustments inside our expense base to help offset some of that reduction.

Bill: And run a pretty high Bill told me a few years ago, we'd be running 134% and complaining.

Speaker Change: You are crazy.

Rusty Rush: Uh, 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, oh, I don't see any, you know, big catalyst to really push that revenue line up. 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.

Speaker Change: But those are the kind of things, we're able to do now as I look forward.

Speaker Change: I don't see any big.

Speaker Change: I don't see any big catalyst to really push to push that revenue line up I do think we can maintain.

Speaker Change: With where we are currently at.

Speaker Change: And hopefully we still have some expense things that.

Speaker Change: Expense things that are going to come in that will help to offset the lack of growth.

Speaker Change: But we really you got to remember, even though we're very diversified there's still the largest base. We do business with is the over the road business, whether it be the large public carriers or large carriers private or whether it be the small customers. It is steel look majority of trucks on the road out there.

Rusty Rush: 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: Thank God that we have the diversity of our customer base, we do to maintain where we're at and we don't 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 overall customers that have suffered which is the biggest sector again that we have we do all these other things vocational and wholesale municipal.

Speaker Change: And all these other market segments, but at the same time, that's still the largest so when it gets here like it has to be able to pull through and produce the numbers.

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, we have 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. And again, that balance of earnings streams is what's providing results. As I said in comments a minute ago, go back and look at the last trough. It's 20, and the trough is 16.

Speaker Change: Im comments a minute ago go back and look at the last trough 'twenty trough in 16. This organization is not even close to that it looked like the same organization than it was back in the results. 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.

Rusty Rush: This organization is not even close; it doesn't even look like the same organization that it was back in. 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-type levels and, you know, 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.

Speaker Change: Continuing to provide outstanding results, we have but we will be backwards in truck sales like I said, we'll go back more of a Q1 type levels.

Speaker Change: Well, let's just let it unfold in front of us, but I'm very confident the organization to do what it's been doing.

Rusty Rush: And, you know, just look at the last few years' results. I mean, we're tracking in a tough year, we're tracking to, 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. I appreciate all that color.

Speaker Change: Just look at the last few years results I mean, we're tracking.

Speaker Change: Trough year, we're tracking two well well.

Speaker Change: I'm not going to get into its third best or whatever year, we've ever had as an organization and thats pretty thats pretty outstanding.

Rusty Rush: I'm going to have to 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. I guess, what are you seeing as the most attractive uses of that capital as we think about cash flow generation through a cycle? Sure.

Speaker Change: No I appreciate all that color and if I can ask a quick follow up you mentioned, obviously your growth has been raised and cash flow has been a source of positive throughout this 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 I guess, what do you think is the most attractive uses of that capital as we think about.

Speaker Change: The cash flow generation through the cycle.

Speaker Change: Sure well, we've had to take a balanced approach to the last few years to what we would do a free cash flow we've said that.

Speaker Change: We'll give somewhere about 40% back.

Speaker Change: Shareholder return and that would be in a combination obviously of dividend.

Speaker Change: Share repurchase 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. So.

Speaker Change: We would.

Speaker Change: M&A would be that the biggest thing I would tell you that we will be focused on right.

Speaker Change: I have a lot of it out there right now, but not necessarily are we looking at things of course, we are.

Rusty Rush: Are we looking at things? Of course we are. 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.

Speaker Change: At the same time I can't sit here.

Speaker Change: The way I wouldn't sit here and tell you we're going to do some I wouldn't announce it to you when it's done but growth inside of the organization.

Rusty Rush: I would announce it to you when it's done. But growth inside the organization, 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 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 of 21 when we bought the the second largest Navistar deal 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 they're 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: When it comes to that piece.

Speaker Change: Okay.

Speaker Change: <unk>.

Speaker Change: Is there we had a little acquisition in Nebraska this quarter and there are some others that we're looking at not a big one which is a singles man, sometimes folks don't understand that just because I'm not doing big M&A like I say the last big M&A deal was December 'twenty, one when we bought the second largest navistar dealer work.

Speaker Change: We're always doing what I call bought singles were open and up 345 stores a year. If you don't see that it was small.

Speaker Change: And we're buying little deals that sometimes we don't even talk about okay, but right now M&A will always be first and foremost to continue to expand our footprint remember.

Speaker Change: The best thing, we have going for us is our footprint.

Speaker Change: Outside of our people now, but the number one thing because our footprint is the differentiation that we can touch more.

Speaker Change: More customers, especially as customers continue to consolidate.

Speaker Change: It's not as Fractionalize customer base than it used to be and we can drive efficiencies not just into our organization, but most importantly, and that their organization leveraging off that footprint with our outstanding people. So we can go out and do what we are out there. We are always out there looking for new customers right and you've always got target customers and things are going.

Rusty Rush: We're out there. We're always out there looking for new customers. You've always got target customers and things you're going after. And that's, to me, one of 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.

Speaker Change: Returning to shareholders.

Rusty Rush: And then it'll just be returning to shareholders. If you look at the average, we've averaged around 40% the last five years. Some years, it was as high as 25.

Speaker Change: If you look at the average and we've averaged around 40%. The last five years. Some years. It was 20 some years it was 50.

Rusty Rush: Some years, it was You know, but that depends on that year when you're, you know, sometimes, [inaudible] There will be acquisitions if we can find them to continue to build our footprint out. Great. I appreciate all the color. Best of luck. You bet. Thank you. The next question comes from Andrew Obin with Bank of America. Your line is open. Hey Rusty, how are you? Good morning.

Speaker Change: That's about it depends on that year when you are.

Speaker Change: Sometimes.

Speaker Change: Limited as to what you can do anyway.

Speaker Change: From a repurchase perspective, and when you hit it from that perspective.

Speaker Change: Consistently raised our dividend every year, sometimes more than 5% for 10%, but our commitment is 5% to 10%.

Speaker Change: And.

Speaker Change: Last year. It was 21, okay just after so.

Speaker Change: But we will continue to those will be the three main things that we'll do it right as shareholders to maybe even like a shareholder return is one and not to be shareholder return and then of course number one will be acquisitions. If we can find them to continue to build our footprint out.

Speaker Change: Great I appreciate all the color best of luck.

Speaker Change: You bet. Thank you Dan.

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

Andrew <unk>: Hey, Rusty how are you.

Rusty Rush: 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 at this point? So, what was that question again, Andrew? I'm sorry. Oh, just your mix.

Rusty Rush: Good morning, very good Andrew how are you this morning.

Andrew <unk>: I'm good just maybe.

Speaker Change: You talked about outperformance and obviously because you have higher vocational mix versus the industry can you just remind us where we are in.

Speaker Change: In your mix at this point.

Rusty Rush: So what was that question again, Andrew I'm sorry.

Rusty Rush: Your mix, your class 8 mix versus the industry, right? Because you have more vocational training, right? You have more waste.

Andrew <unk>: Your mix your mix your class eight class a mix.

Andrew <unk>: Versus the industry right because you have more vocational right do you have more ways correct.

Rusty Rush: Correct, correct. You have all the road rules, but less of it. Could you just remind us what the mix is like these days? I'm gonna give you, 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 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, you know, key pieces.

Andrew <unk>: The road, but could you just remind us what the mix is like these days.

Rusty Rush: Again, it's diversification, diversification to each market segment, and that's really, and I mean, I appreciate the color of the question, but the color would be somewhere in that range. 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 the second half. Where are the orders trending in July and August? What are you seeing? What's your experience?

Speaker Change: I'm going to give you.

Andrew <unk>: Andrew I don't know.

Andrew <unk>: Status.

Andrew <unk>: Im going to give you like keep total graco, but I always say and I, usually say somewhere around 50 50.

Andrew <unk>: Okay.

Speaker Change: Depending on the brand, 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, Firstly, let's say, 45% of our business and vocational somewhere in that range.

Speaker Change: When you really look into the construction the refuse and all of those businesses and that's on the <unk> side, right and Thats one of the key pieces.

Speaker Change: Again, this diversification diversification to each market segment.

Speaker Change: And that's really I appreciate the color.

Speaker Change: Question, but the color would be somewhere in that range.

Speaker Change: Alright, and then what folks I'm wondering just in terms of orders what do you think and I think you've clearly been early sort of sound and caution about outlook for second half.

Speaker Change: 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 a just a demand perspective, quoting, no question, it's been down for our customers.

Speaker Change: Andrew.

Andrew <unk>: <unk> to where we were in the first quarter.

Andrew <unk>: Really it started all it's been all year.

Andrew <unk>: It's been pretty down for us all year from an order intake perspective now.

Speaker Change: We'll say that we have.

Speaker Change: We hit a few deal a couple of deals along the way, but from a just a.

Speaker Change: Demand perspective, quoting no question, it's been down our customers.

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. I would, you know, last month, I think I was on a call with, I guess, pretty good, a few and a bunch of investors, around 15,000. And I'm, 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.

Speaker Change: We're starting to get talk.

Speaker Change: <unk> emissions, we're at right now talking with folks, but it's been very difficult for a lot of the truckload guys to start talking about that when you can see that our earnings and the pressures that they felt 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.

Andrew <unk>: Last month, I think I was on a call I guess pretty good view of it.

Speaker Change: Active investors around 15000.

Speaker Change: Don't know where there will be this month I have.

Speaker Change: Not sure, but I'm not going to say, they're not going to be super outstanding.

Rusty Rush: 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 meet the supply demand. We still need more supply from a truckload perspective. It's still the biggest market out there.

Speaker Change: Because folks are there as I said theres still build available in the back part of the year.

Speaker Change: People are still running.

Speaker Change: 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 27 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 too 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 'twenty seven emissions.

Speaker Change: Lot of folks.

Speaker Change: Still believe that well.

Speaker Change: Election is going to change, but 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 of 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: Dramatically I don't care.

Speaker Change: And the Oems.

Speaker Change: But they are too busy taking care of their businesses to worry about the cost increases that are going to come with meeting 27 emissions, which is going to happen.

Andrew <unk>: We can all make 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 as these things have been worked on for a while so but I do expect that we will get <unk>.

Rusty Rush: We usually start picking up in October, November, and December, which translates into business picking up next year. So I can't tell you exactly when I expect that to happen, but usually, you have ATA in October, and then 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 people I've talked to, they were on the bottom, and they can see slight, you know, slivers of green out there in 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 aftertreatment and everything. People still remember what it was like in 2010 when we went into EGR, excuse me, SCR.

Speaker Change: We usually start picking up in October November December.

Andrew <unk>: Which translates into picking up business picking up next year. So.

Andrew <unk>: Can't tell you exactly when I expect that to happen, but usually you have got <unk> in October and then people follow through on that so im looking.

Andrew <unk>: As long as everybody can businesses really are flattening like what I've said and what I am talking people I've talked to they were on the bottom and they can see slight slivers of green out there and their business going forward that they weathered the toughest part then people will start getting concerned.

Speaker Change: How about the technology of diesel trucks at all the after treatment and everything people still remember what it was lagging peers 10 when we.

Andrew <unk>: We went into <unk> excuse me SCR.

Rusty Rush: One company stayed on EGR, but we went to SCR, and the aftertreatment that happened and then also combine that with what we'd look for cost increases to be, you're gonna see some. I just don't think you're really gonna see it until late this year, which translates into sometime next year, probably spreading deliveries on your big orders throughout the year starting next year sometime. But I don't look for any uptick in the next couple months.

Stephanie: One company, Stephanie we went to SCR and the after treatment that happened and then it also combine that with what we'd look for cost increases to be.

Andrew <unk>: Youre going to see some I, just don't think you're really going to see it till late this year, which translates into sometime next year, probably spread deliveries on your big orders throughout the year, starting next year sometime but I don't look for any uptick in the next couple of months I can tell you that big uptick now in the next but we are out talking and where people are starting to.

Rusty Rush: I can tell you that there is a big uptick now in the next, you know, but we are out talking, and when people are starting to talk more about it, some people thought they were gonna talk, you can read some OEMs I read earlier and said, oh, it's gonna happen. Nah, it's happening, but in a very gradual, you know, early stage, let's say like that. But there will be, they will understand their businesses, customers are smart, and they'll know when it's time to kick it into gear, but I don't look forward to the back half of the year, back a couple months. You bet. For the next couple of months, you think that's 15,000, sort of. Relatively flat or down from that number.

Andrew <unk>: Talk more about it some.

Speaker Change: Some people thought they were going to talk to you can read some Oems I read earlier, that's going to happen.

Andrew <unk>: It's it's happening but at a very gradual.

Andrew <unk>: Early stage, let's say like that but there will be they will understand their businesses customers are smart and they don't want us to advocate getting gear, but I'll look forward to the back half of the year.

Speaker Change: You bet.

Speaker Change: For the next couple of months do you think Thats 15000 sort of relatively flat or down from that number or is that a fair estimate from my perspective, unless unless some.

Rusty Rush: Is that a fair estimate? From my perspective, unless some, you know, 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, I'm not around to answer your question without just over-talking like I do a lot. Yes, I don't expect any big uptick in orders. How did that EGR decision work out for that CEO? Oh, I shouldn't have said that. So sorry.

Speaker Change: The big change.

Speaker Change: Some big Big Big customers, a couple of three or four big customers one of the place big orders that are spread that the demand is not.

Speaker Change: No.

Speaker Change: The demands you're just going to be around to answer your question without overdraw being like I do a lot, yes, I don't expect any big uptick in orders.

Speaker Change: Currently.

Speaker Change: Our decision to work hard for that.

Speaker Change: I shouldn't say.

Rusty Rush: I didn't say that. I didn't say that. I didn't say that. I didn't say that offline. I don't think I was allowed into that building for a while. Just a question on macro.

Speaker Change: Sorry.

Speaker Change: Yes.

Speaker Change: Adam sorry, if I didn't say that.

Adam: Let me say that offline too.

Speaker Change: I'm, sorry that was allowing for that building for a while.

Speaker Change: Okay.

Rusty Rush: I always ask you because you have very good systems. Lots of uncertainty about the economy. I think the PMIs just came out indicate sort of a step down in industrial activity. What are you seeing?

Speaker Change: Just a question on.

Speaker Change: Macro I always ask you because you have very good systems lots of uncertainty about the economy I think the PMI is just came out India.

Rusty Rush: You have a 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? Would love to get your take because you tend to be very smart about it. Thank you. Oh, and One's piloted on me today, aren't you, boy?

Andrew <unk>: Oh Andrew.

Speaker Change: Turning it on me today are Jim Boyd.

Rusty Rush: Huh, good question. 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 this election and all this stuff that's going on outside of everything else has got people a little bit paralyzed in some areas. You know, as I look around, obviously, the truckload side is still not in good shape.

Jim Boyd: Good question, how do you see a lot of uncertainty to be honest with you I mean I see more.

Andrew <unk>: Certainly in my mind about the economy.

Speaker Change: Sounds like a broad no answer, but clearly I do believe that.

Speaker Change: I was just thinking this election and all the stuff that's going on outside of everything else, you've got people a little bit paralyzed in some areas.

Speaker Change: As I look around obviously, the truckload side is still not in good shape. The LDL side. He has been in good shape.

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 recovery, but I do expect it to pick up after that. I do expect, no matter what anybody else says, I do expect it to.

Speaker Change: We were off a little bit in energy this last from a parts and service perspective.

Speaker Change: This last quarter more than I would've anticipated.

Speaker Change: I think the economy, just it looked a little hot earlier.

Speaker Change: I think that I think it was going to be.

Speaker Change: A tougher back out, but I do expect it to pick up after that I do expect no matter what anybody else says I do expect it to.

Rusty Rush: My problem is sometimes I get, I'll look at it through my industry 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: My problem is sometimes I get.

Speaker Change: I'll look at it through by industry of our glasses right I got to take back you want to take my macro pullback macro glasses on and sometimes maybe I'm not the best at that Mega.

Rusty Rush: 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 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 here from a business perspective, and we will have taken out capacity. [inaudible] Is it fair to say that your vocational business is fairly stable? Is that a fair statement?

Meg: Meg a stab at it but I don't look for anyway.

Speaker Change: I'm not looking for a recession, if thats, what youre, saying.

Speaker Change: Right now, but I'm, just looking for sort of Bubbling along right now until we get through November and into 'twenty five.

Speaker Change: And then I'm going to feel especially from an industry perspective about what we feel pretty good about it because we have had.

Speaker Change: Throughout the year.

Speaker Change: Okay.

Speaker Change: We've taken out capacity.

Speaker Change: Out of the marketplace and Thats always a good thing.

Speaker Change: There'll be a platform to set up for.

Speaker Change: For good for my industry, but.

Speaker Change: I just look these back half's going below slope, you asked me and im not going to I'm not an economist. So I know, we will get out past that much.

Speaker Change: Sorry to say.

Speaker Change: Is it fair to say the relocation business is fairly stable is that a fair statement.

Speaker Change: Yes.

Speaker Change: 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.

Speaker Change: I wouldn't look for continued growth or medium duty big orders and is back half I think that will slow down a little bit.

Rusty Rush: I think that'll slow down a little bit from where it has been, but it's not troughing terribly, like we said in 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: From where it has been.

Speaker Change: But it is not frothy terribly like we said our Q3, but not sold out in Q4 there.

Speaker Change: So.

Speaker Change: Where we had been pretty sold out for a couple of plus years running in medium duty, we're not going to be.

Speaker Change: On a year out when I look at it anymore, what does that mean, it's terrible.

Speaker Change: The reality is youre.

Speaker Change: You're not supposed to be sold out a year ahead, let's get back to real World I think thats one of the things I'm. Most proud of is how we manage inside these type of situations and it's showing in the numbers that we're producing and it will continue to show as you know I'm pretty conservative judging by where we ended up first.

Speaker Change: However, as the.

Speaker Change: Clients.

Speaker Change: <unk> had a private or a valve has been probably a bit more on us.

Speaker Change: Because these people that work with me beside me every day.

Speaker Change: Right.

Speaker Change: They've proven pay execute extremely well and just as we have this year and the prior few years I, just sometimes I wish everybody understood the diversification.

Rusty Rush: 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 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. That's all I can tell you.

Speaker Change: And I hope this year proves it.

Speaker Change: One that if this is the trough middle year of a five year run.

Speaker Change: When youre in pretty good shape, we're in pretty good shape. So all I can tell you I think.

Rusty Rush: And I think the numbers are going to play out for where we are. 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 and what we do and how we go to market and, you know, expense stuff. Look, we're down.

Speaker Change: The numbers are going to play out yes, we are going to sell less trucks, but we're going to do a good job of managing through it.

Speaker Change: Given the diversification of our earnings stream.

Speaker Change: And what we do and how we go to market.

Speaker Change: Expenses were down.

Rusty Rush: We're down on G&A. Remember, I never talk about SG&A; I talk about G&A. Q1 to Q2, we're down 4.7% on G&A. That's outstanding, okay? That is truly outstanding.

Speaker Change: G&A memoranda were talking about SG&A I talk about G&A.

Speaker Change: Q1 to Q2 were down four 7% and G&A.

Speaker Change: 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.

Rusty Rush: And so I'm very proud of our people for doing more with less, and we will continue to execute that way. 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. Well, sir, thank you so much. You betcha. As a reminder, to ask a question, please press star 1-1 on your telephone. The next question comes from Avy Arasolwicz with UBS. Your line is open. Good morning, guys. Thanks for a good morning,

Speaker Change: When the market does pick back up which I believe.

Speaker Change: Get real fast we will get to those numbers have been talking about the last three or four years and 25 and 26, we will execute you got that commitment for me.

Speaker Change: Well, Sir thank you so much.

Speaker Change: You bet you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone. The next question comes from Eric <unk> with UBS. Your line is open.

Eric <unk>: Hey, good morning, guys. Thanks for a good.

Eric <unk>: Good morning.

Rusty Rush: So just wanted to dig into vocational a little bit more, just kind of want to understand how much you think that continued strong demand there 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. Well, I don't think that really it's not from leftover demand. We were taking care of class A demand regardless.

Eric <unk>: So just wanted to dig into vocational.

Eric <unk>: 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 of years with tighter supply.

Speaker Change: Similar to what we saw with medium duty.

Rusty Rush: Balancing it through the last few years. I think it has to do with more of the money the government's been throwing at it, 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 So those guys have had to slow down some.

Speaker Change: The the money the government has been thrown at it.

Speaker Change: And I think some of these customers got a little bit behind back coming out of Covid and they are still catching up with where they've got a little bit behind in the age of their fleets not necessarily because lake.

Speaker Change: We're 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. We could've done more vocational business. This year, except there has been a lack of we had a component issue with transmissions.

Speaker Change: Or we would have sold more this year than what we have so we've got to believe that that business will carryover into 25, what business didn't get booked and I cant quantify it exactly for you, but that business will get carried over <unk> 25, because that demand is still there.

Speaker Change: Given what's going on so I feel really good about where it's going to continue to be strong excuse me end of 'twenty five.

Rusty Rush: So, you know, I feel really good about where it's going to continue to be strong, excuse me, into 2025. And then sometime in 2025, 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, 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. 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.

Speaker Change: Sometimes.

Speaker Change: We're going to pick up in the over the road business. The <unk> business will still be good with our LDL guesswork.

Speaker Change: But the.

Speaker Change: But a small customer is being taken out of the market Youll show back up by the end of 'twenty five <unk> and I think the over the road business will pick up somewhere at 25 as I said.

Speaker Change: Orders coming in late this year.

Rusty Rush: It could roll into next year, just depending on, but if this is the bottom, I do believe people are gonna start thinking about how they get ready for January 1 of 27 and how they, you know, how they position 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 any, no, I will, you know, we're not looking for anything going backwards across the board, you know, when you look across the whole country. So that would be my response. Okay, I got it.

Speaker Change: 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 thinking about how they get ready for January one of 2007 and how they how they position.

Speaker Change: Their fleets from a <unk> perspective.

Speaker Change: Going into all of that but no vocational could still be solid.

Speaker Change: I can give you we're not looking for right now we're not looking for any anything going backwards over across across the board.

Speaker Change: When you look across the whole country, so that would be my response.

Rusty Rush: 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 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 to clear out some inventory here in a week.

Speaker Change: Okay got it I appreciate that.

Speaker Change: And then just in terms of your comments about the more competitive truck pricing in the second half.

Speaker Change: Any way you can kind of dimensionalize that in terms of like.

Speaker Change: Yes year over year price changes.

Speaker Change: And just to what extent does it vary by OEM I am assuming that we are.

Speaker Change: I was just talking about sort of over the road class eight but.

Speaker Change: Also curious if you think that's kind of as we go into 2025, and it's really more of like a market share battle over pricing or really just.

Speaker Change: Emperor Aerie, and keeping things moving clear out some inventory here and weak 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. Okay, it's 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.

Speaker Change: Well.

Speaker Change: I'd say its going to be a more competitive it will be more competitive understand though correct.

Speaker Change: Third quarter business is already book, Okay, Where's that LIBOR book in Q3 business really right now we're in a minute.

Speaker Change: One month through.

Speaker Change: Three month quarter. So thats there is not much that I can do to move that.

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 marked to market. We do that every quarter and have done that for 27 years. I don't come out and talk about it.

Speaker Change: Thank you.

Speaker Change: When you talk about pricing, we have when you look at our inventories.

Rusty Rush: 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 used; that's new also 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. I, when I talk about it, it's going to be more competitive, but not crazy competitive, if that makes any sense.

Speaker Change: Making sure we understand where the market is and the demand and that's not just us that's new also across the board. So I feel good that we are.

Speaker Change: When I say we're.

Speaker Change: We're going to be competitively set up to do what we should do with our inventories.

Speaker Change: When I talked about.

Speaker Change: There'll be a more competitive but not crazy competitive that makes any sense.

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 overcompetitive. It's like I saw it 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 when inflation was like driving it all up?

Speaker Change: People I think the Oems are going to show decent discipline.

Speaker Change: 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 thats really what I was trying to say, but not crazy over competitive and it's like I saw it going way back to 2009 or some time like that when it was.

Speaker Change: 92000 class eight truck market, so because understanding that all you're doing is.

Speaker Change: You're setting yourself up now when the market picks up to half two because I think.

Speaker Change: The majority of always cost increases have been have been required remember what inflation was like grow it all up so Oems had to catch up and they have done that and I don't want to get back in that situation again will they be more competitive in certain situations, where certain deals probably as needed because they still do need some fourth quarter Bill.

Rusty Rush: So Williams had to catch up, and they have done that, and they don't wanna 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.

Rusty Rush: Okay, at the same time, they'll manage build 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.

Speaker Change: At the same time, they'll manage build rates down.

Speaker Change: Guarantee you build rates are coming down.

Speaker Change: Finally.

Speaker Change: One of the things we got out of whack, we 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.

Speaker Change: It's out of idle get to almost an all time high but they'll have to slowdown I know Oems are slowing their build rates and by the way I'm not getting specific to any Oems I'm just talking broadly here.

Speaker Change: But I know bill rates are going to come down thereafter.

Speaker Change: You'll see that throughout the back half.

Speaker Change: We will continue to decline through Q4, when you look at how many I don't remember the exact stats I don't have more mandate.

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.

Speaker Change: <unk> 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 theres only so much the market can take.

Speaker Change: So.

Speaker Change: That's my overall view.

Speaker Change: Sure.

Speaker Change: Where we're at when it comes to <unk>.

Speaker Change: <unk>.

Speaker Change: And where they are at but we feel.

Speaker Change: When you take bill rate up Youll relieve some of the pressure on pricing right. When you stop overbuilding. So I think we got a little bit to overbuild here.

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? It's going to be under what I've told people? No, it's not.

Speaker Change: I think bill rates are coming down I think build rates will be positioned to be ramped back up.

Speaker Change: But.

Speaker Change: It'll be a little more competitive is it going to be.

Speaker Change: He is going to be under what I've told people no its not but we're going to be at our highest highs of 23, no, but we're not correctly, we're going to stay pretty consistent youll see our blended rates, probably fairly consistent which it should be with where we are correctly I don't look for our our margins blended our blended margins on <unk>.

Rusty Rush: We're 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 pretty consistent, which 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 to come backwards from where they're at right now.

Speaker Change: So I don't look for them to come backwards from really from where they're at right now.

Rusty Rush: It's all I can tell you, but it will be more competitive, but we believe we've priced 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. All right, that's very helpful. Thanks for the time. You bet. Thank you for the call. I have no further questions at this time.

Speaker Change: I can tell you, but it will be more competitive, but we believe we mark our stuff to market and we're prepared to do that I expect any orders, we get will be competitive, but not to the point of dramatically back in a couple of points or something like that out of margins. Okay.

Speaker Change: Alright very.

Speaker Change: 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.

Operator: I would now like to turn the call back over to Rusty for closing remarks. Yeah, first off, I just want to thank our employees one more time. I know I've mentioned them a couple of times on this call, but I can't mention them enough.

Rusty Rush: Yes first off I just want to thank our employees one more time I know I've mentioned them a couple of times on this call, but I can't mention them enough.

Speaker Change: Their persistence.

Speaker Change: Sure.

Speaker Change: Execution of our strategies in spite of US we did reduce some expenses and we will continue along those lines. So that we can do the right thing and produce the kind of results from 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 <unk>.

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 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.

Rusty Rush: But we're dialed in right now, and we're going to execute, try to stay pretty flat in the back, you know, like I said, in parts and service, and 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.

Speaker Change: Execution try to stay pretty flat in the back like I said in parts and service work on our expenses a little bit.

Speaker Change: With where we're at because remember I did this during the quarter. We did it during the quarter. So there'll be a little over a little bit more reduction that took place in the back half of the quarter, we're not looking to do anymore, 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 to do that for you.

Rusty Rush: 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 outstanding results. And I look forward to continuing to do that for our shareholders and for the company. So thank you all very much, and we'll talk to you again in October, I guess. I appreciate it. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: For our shareholders and for the company. So thank you all very much and we'll talk to you again.

Speaker Change: October I guess so.

Speaker Change: I appreciate it thank you.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2024 Rush Enterprises Inc Earnings Call

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