Q3 2024 Rush Enterprises Inc Earnings Call

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Operator: Ladies and gentlemen, thank you for standing by. Welcome to Rush Enterprises Inc.'s Q3 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 would need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw the 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 your speaker today, W.M. Rush, Chairman of the Board, Chief Executive Officer, and President. Sir, please go ahead.

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Rush Enterprise Report 3rd Quarter 2024 earnings results.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during the session, you would need to press star one on your telephone. You would then hear an automated message of vicing your hand is raised.

Speaker Change: To withdraw the question, please press star of one one again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Rusty Rush, Chairman of the Board, Chief Executive Officer and President Sir, please go ahead.

W.M. Rush: Well, good morning, and welcome to our Q3 2024 Earnings Release Call. With me on the call are Jason Wilder, incoming Chief Operating Officer, Steven Keller, Chief Financial Officer, Jay Hazelwood, Vice President and Controller, and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary. Now, Steven will say a few words regarding forward-looking statements.

Rusty Rush: Good morning and welcome to our third quarter of 2020 for our inch face call. With me on the call, our Jason Wilder, incoming Chief Operating Officer.

Rusty Rush: Steve Keller, Chief Financial Officer, J.A. 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.

Steven 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 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 forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended 31 December 2023, and in our other filings with the Securities and Exchange Commission.

Steve Keller: Certain statements will make today are considered for looking statements as defined in the private securities litigation reform act of 1995. Because these statements include risk and uncertainties. Our actual results may differ materially from those expressed or implied by such forward-looking statements.

Steve Keller: And important factors that could cause actors else to differ materially from those expressed or implied by such foreign-looking statements include, but are not limited to those discussed in our annual report on Form 10K for the year in December 31, 2023, and are other islands with the Securities and Exchange Commission.

W.M. Rush: Thanks for joining us this morning. I'm pleased to report that we had a solid Q3. We announced revenues of $1.9 billion and net income of $79.1 million, which comes out to $0.97 per diluted share. In the Q3 of 2024, we incurred a one-time pre-tax charge of $3.3 million due to Hurricane Helene-related property damage. Excluding this charge, EPS would have been $1 per share. Once again, we are happy to declare a cash dividend of $0.18 per share for both Class A and Class B common stock. As we've experienced over recent quarters, the industry is still dealing with low freight rates and high interest rates, and these difficult operating conditions are keeping demand for Class A trucks on the low side. Given these headwinds, we are proud of our performance this quarter.

Speaker Change: Thanks for joining us this morning.

Speaker Change: I'm pleased to report that we had a solid third quarter.

Speaker Change: We announced revenue is 1.9 billion and then it comes a 79.1 million. This comes after the 97 cents per diluted share in the third quarter of 2024. We incurred a one-time pre-tax charge of 3.3 million due to hurricane Atlanta related property damage.

Speaker Change: Excluding this charge, EPS would have been a dollar for sure. And once again, we are happy to declare dividend cash given, and 18 cents for sure, for both Class A and Class B come and stop.

Speaker Change: And as we have experienced over recent quarters, the industry is still dealing with low freight rates in high infrastructure.

Speaker Change: And these difficult operating conditions are keeping demand for class eight trucks on the low side. Given these headwinds, we are proud of our performances.

W.M. Rush: While the over-the-road carrier segment faced some challenges, we saw good activity from Class A vocational and public sector customers. Medium-duty demand also held up well, helping us outperform in Class 4 through 7 sales. Despite a tough used truck market, our strategy is paying off and contributing positively to our earnings. In the aftermarket space, we saw a slight revenue improvement over Q2, particularly in service sales, which outpaced the market. Diving deeper into our aftermarket results, our parts, service, and body shop revenues reached $633 million, down slightly, 1.6% from Q3 2023, but up from the previous quarter. Despite the ongoing freight recession, we are finally seeing slight sequential growth in aftermarket sales through over-the-road customers. The first growth we have seen since early 2023.

Speaker Change: While the over-the-road carrier segment faced some challenges, we saw a good activity from class eight vocational and public sector customers.

Speaker Change: Media and Beauty Man, they're man also held up welcome. Helping us out perform in Class 4 through 7 seals.

Speaker Change: In despite our tough, youth truck market, our strategy is paying off and contributing positively to our earnings.

Speaker Change: And the aftermarket space, we saw a slight revenue improvement over the second quarter, particularly in service sales, which house-based market.

Speaker Change: Diving deeper into our aftermarket results, our parts service and body shop revenues, reach 633 May.

Speaker Change: down slightly 1.6% from the third quarter of 2020-3, but up from the previous quarter.

Speaker Change: Despite the ongoing freight process, we are finally seeing slides, sequential growth, and after market sales, drove over the road gust. The first growth we have seen since early 2023.

W.M. Rush: The refuse and public sectors continue to be strong for Class 8 aftermarket sales, and our Class 4 through 7 aftermarket sales were healthy across the board. Though we expect some seasonality to adversely affect the Q4, we anticipate beginning a gradual return to more normal market conditions in early 2025. Looking at truck sales, we sold 3,604 new Class 8 trucks in the Q3, accounting for 5.3% of the total US Class 8 market and 1.6% in Canada. ACT Research forecasts for 264,000 new Class 8 sales in the US and Canada in 2024, down 12.5% from last year. Continued low freight rates and high interest rates contributed to a 3.5% decline in Class 8 retail sales from last year, sir. Economic uncertainty continues to weigh on Class 8 carriers. Despite these challenges, we are pleased with our Q3 results.

Speaker Change: The Refuge and Public Centers continue to be strong for classified after market sales. And our Class 4-7 after market sales, we're healthy across the board.

Speaker Change: Though we expect some seasonality to adversely affect the forecorder, we anticipate beginning a gradual return to a more normal market conditions at early 2020V.

Speaker Change: Looking at truck sales, we sold 364 new classic trucks in the third quarter, accounting for 5.3% of the total U.S. class eight market, and 1.6% in Canada.

Speaker Change: ACT research forecast for 264,000 new class-sex trails in the US and Canada in 2024. Down 12 1.5% from last year.

Speaker Change: Continue low-frainerates in high-interference. Confirmed into a 3.5% decline in class that you retails sales from last year's to.

Speaker Change: and economic think on certainty continues to weigh on class 8 careers.

W.M. Rush: Specialty markets like vocational and public sector remain bright spots for us, and we expect this trend to continue into the Q4. We saw a slight uptick in orders at the end of the Q3. We expect that our Q4 Class 8 truck sales will increase slightly compared to our Q3 results. However, with high inventory levels across the industry, we anticipate that pricing will remain competitive, making sales challenging through the H1 of 2025. Our Class 4 through 7 new truck sales reached 3,379 units in the Q3, accounting for 5% of the US market and 2.9% in Canada. ACT Research projects US and Canadian Class 4 through 7 truck sales to be 273,000 units in 2024, up slightly, roughly about 2.5% from last year.

Speaker Change: Despite these challenges, we are pleased with our third quarter results.

Speaker Change: Specialty markets like vocational and public stripper remain right spots for us and we expect this trend to continue into the fourth quarter.

Speaker Change: We saw a slide up check in orders at the end of the work court. So we expect that our fourth quarter class egg truck sales will increase slightly compared to our third quarter results.

Speaker Change: However, with I am the Dwayne Levels across the industry, we anticipate that pricing will remain competitive, making sales challenging through the first half of the 2021.

Speaker Change: Our Class 427 New Truck Sales reached 3379 units in the third court, got it for 5% of the U.S. market and 2.9% of Canada.

Speaker Change: A C T research project US and Canadian Class 427 drug sales to be 273,000 units in 2024. I'm Slimey.

W.M. Rush: Demand remains strong in this medium-duty space across all segments, our efforts to diversify our customer base is paying off. On the used truck side, we sold 1,829 units in Q3, up 1.8% year over year. Although used truck demand is still weak, we continue to successfully execute our strategy, which led to positive results in Q3. Depreciation rates for used trucks have stabilized, we continue to manage our inventory levels effectively to meet market demand. Lease and rental revenue was almost flat year over year, down just four-tenths of 1%. However, we are optimistic that rental utilization rates will increase in Q4, we expect to see moderate growth in our leasing and rental revenues as we move into 2025. So far, it's been a challenging year for First Vehicle Equipment, I am incredibly proud of our team's hard work.

Speaker Change: Roughly about 2.5% from last year. Demand remains strong in this meeting due to space.

Speaker Change: across all segments. And our efforts to diversify our customer base. It's laying off.

Speaker Change: On the U-Trump side, we sold 1829 units in the third order, up 1.8% year over year.

Speaker Change: Although youth truck demand is still weak, we continue to successfully execute our strategy, which led to positive results in the third quarter. The appreciation rates for youth trucks have stabilized, and we continue to manage our inventory levels effectively to meet market demand.

Speaker Change: Least in rental revenue was almost flat year over year down just 4-10 to 1%. However, we are optimistic that rental utilization rates will increase in the fourth quarter and we expect to see moderate growth in our leasing and rental roads as we move into 20-25.

Speaker Change: So far, it's been a challenging year where she'll be a close friend. By I'm in front of the crowd of our team's hard work. Their dedication has helped us manage.

W.M. Rush: Their dedication has helped us manage our expenses and stay on track with our sales initiatives, allowing us to keep delivering value to our shareholders despite these challenging times. I am confident that we will finish the year in a solid financial position. I would like to extend my sincere gratitude to all our employees for their hard work this quarter. They stayed focused on our long-term goals while continuing to provide top-notch service to our customers. Before we wrap up, I personally want to thank Michael McRoberts, who, as we announced, will step down as COO on 31 October. Mike has been invaluable to us, and we are glad he is staying on as a special advisor and board member. I would also like to congratulate Jason Wilder, who will step in as our new COO on 1 December.

Speaker Change: our expenses and stay on track with our sales initiatives, allowing us to keep the living value to our shareholders despite these challenging times. I'm confident that we will finish the year in a solid financial position.

Speaker Change: I would like to extend my sincere gratitude to all our employees for their hard work this forward. They say they stay focused on our long-term goals, while continuing to provide top-notch service to our customers.

Speaker Change: Before we wrap up, I personally want to thank Mike McLeanbergs who as we announced will step back to COO on October 31st.

Speaker Change: Mike has been invaluable to us. When we are glad he is staying home as a special advisor and boardman.

Speaker Change: I would also like to congratulate Jason Wilder who will step in is our new CLO from December forks. I have full confidence in Jason. Let's expect a smooth transition. With that, I'm happy to take your question.

W.M. Rush: I have full confidence in Jason and expect a smooth transition. With that, I am happy to take your questions.

Operator: Thank you. The first question comes from Andrew Obin with Bank of America.

Speaker Change: Thank you as a reminder task of question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.

Speaker Change: And the first question comes from Andrew Oben with Bank of America. Your line is open.

W.M. Rush: Well, good morning, Mr. Obin. How are you today?

Speaker Change: Hey Rusty, good morning.

Andrew Obin: I'm doing great. Just a question. You had constructive order commentary, particularly into the quarter end. At the same time, I would say, I think ACT forecasts no retail sale recover until H2 of 2025. How do you balance the commentary that you've made in the press release? Seems there are multiple references to this bottoming out with the uncertainty that we're still facing in H1 of 2025.

Rusty Rush: Well, good morning, Mr. Open. How you today?

Andrew Oben: I'm doing great. Just a question, you know, you have constructive order commentary particularly into the quarter end.

Andrew Oben: You know at the same time I would say I think ACG forecast no retails every cover until second half of 25.

Speaker Change: How do you balance the sort of the commentary that you've made in the press release seems our multiple references to this bottoming out with the uncertainty that we're still facing in the first half of 25?

W.M. Rush: Well, I think I was talking bottoming out as far as our customers' business. As far as the truckload carriers, the haul for hire carriers. I believe, freight has been bobbling on the bottom for them. Contraction of rates, I think it's about over with. If you read some of the reports that I've read in the last couple of weeks, you'll see that most carriers do believe they've been bobbling on the bottom, and that's where they're at. I think where we're getting a little bit mixed up here is the customer base and what I see for our business. When I talk about our business, and I said we've had some uptick in order intake, understand, people are still thinking sometimes, or I know they're not, but we had two years of allocation.

Speaker Change: Well, when I say, I think I was telling the bottom of the map as far as our customers' business, right? As far as the truckload carriers, the hall for a higher carriers, I believe, you know, freight has been bubbling on the bottom for them, right? From a in-contraction of rates.

Speaker Change: I think it's about over with and you reach some of the reports that I've read in the last couple weeks. You'll see that most characters do believe they've been bothering on the bottom.

Speaker Change: You know, and that's where they're at. So I think we'll get a little bit mixed up here as a customer base and what I see for our business. And when I said, I'm going to talk about our business, and I said, we've had some uptake in order intake.

Speaker Change: Understand, you know, people are still thinking sometimes that I know they're not, but you know, we had two years of allocation.

W.M. Rush: What we've gotten back this year into what, the way it always was. I couldn't have told you back in Q1 we were going to have this great of a Q3. It's just shortened windows. Some of that order uptick that I talked about that we had in the last six weeks, let's say. Maybe not, let's say go back two weeks, the prior six weeks, we did have pretty solid order intake. A lot of that's Q4 build, okay? Not all of that's 2025 build. In fact, the majority of it was going to be built in Q4. We're in shorter lead times, but obviously I'm very pleased with the fact that we're adapting as a sales organization to what we historically lived in, where you're living in 90-day lead times. Okay, that's really what I was reflecting.

Speaker Change: Well, we've gotten back this year.

Speaker Change: And what do I always was? Right? I couldn't have told you back in Q1. We were going to have this great of Q3.

Speaker Change: It's just shortened windows, right? And some of that order of tick that I talked about that we had in the last six weeks, let's say. Maybe not, let's say, go back two weeks, but the prior six weeks, week, week, week, week, we didn't have per cell in order intake.

Speaker Change: But a lot of that's Q4 build. Okay? Not all of that's 20-25 build. In fact, the majority of it was going to be built for quarter. So we're in shorter leat times.

Speaker Change: But obviously you've had very pleased

Speaker Change: With the fact that we're adapting as a sales organization

Speaker Change: To what we've

Speaker Change: Historically live there.

W.M. Rush: We're not living in 9-month lead times. It was nice to see the order intake pick up, and we're still trying to sort out 2025, but some of that stuff that we'll build in Q4 will roll over to be delivered in Q1. I couldn't sit here right now and tell you I've got Q1, or we don't have it all sold out. I am confident, as we have shown in the last 2 quarters, that we have the ability. We're on top of our game. I'll be honest with you, a lot of people were a little lax coming out of allocation, but we're getting back on top of our game and making it happen, just like we have for decades, but if not even better. Our customer base is bobbling on the bottom, but we're, I think, taking advantage of short lead times.

Speaker Change: We're living in 90-day lead times, right? Okay, that's really what I was reflecting. We're not living in nine monthly times. So, you know, it was nice to see the order intake pick up. And we're still trying to sort out 25, but some of that stuff that we're building Q4 will roll over to be delivered in Q1.

Speaker Change: I couldn't sit here right now and tell you, I've got Q1, I don't have it also that, right? But I am confident as we have shown.

Speaker Change: And the last two quarters that we have the ability, when I'm talking about our game, you know, we would probably honestly people were a little ax coming out of allocation, but we're getting back on time with our game and making it happen. Just like we have for decades, but if it's not even better. So, you know, our customer base is bubbling on the bottom.

W.M. Rush: It can be a little more nerve-wracking. That's because you got conditioned to allocation for a couple of years with 9-month lead times. Now you're back to more normalized 90-day lead times, even less, sometimes 60 to 90-day lead times. I feel good that there is still going to be some business there. I believe we can maintain what we're doing. How would I say that? I don't see any big uptick in orders until the back half of next year when we start thinking, when our customers on the over-the-road side. We're doing real well in vocational, but that's still the biggest piece of what we do. This truckload side is still a huge, large piece, and the small carriers are not back. Large carriers are being conservative in their outlook as they get their businesses righted, their ORs back in shape. That will come back.

Speaker Change: But we're, I think, taking advantage.

Speaker Change: Of short lead times, it's just, you know, it can be a little more nerve-wracking.

Speaker Change: But that's because you got conditioned to allocation for a couple years with nine months, Lee times.

Speaker Change: Now you're back to more normalized 90 daily times, even less than 60 to 90 daily times. But I feel good that there is still going to be some business there. It may not be quite, I believe we can maintain what we're doing. That would I say that. I don't see any big uptake in orders.

Speaker Change: until the back half and next year. When we start thinking, you know, when our customers on the over the roadside, we're doing real well and vocational, but, you know, this still the biggest piece of what we do. There's pressure outside of still a huge large piece, and the small carriers are not back.

Speaker Change: large carriers are being, you know, conservative in their outlook is they get their businesses right in their awards back in shape.

W.M. Rush: I do expect for us to continue along the lines of where we have been performing from a volume perspective, but a big uptick coming in H2 of next year as people start to think about 2027, all the new technology, the costs that are going to go along with it, plus the performance that we're not sure of going out into 2027, to be honest, we meet the new EPA regulations. Anyway, that's a long, rambling answer, but that's how I answer, and you know that. That's what I see. Over-the-road customers not doing great, but bobbling on the bottom, looking for some uptick here as we move into next year, which we hope will drive further sales in H2 of next year and into 2026. Feel solid about we can continue the performance we've been in.

Speaker Change: But that will come back, but I do not expect for us to continue.

Speaker Change: along the lines of where we have been performing.

Speaker Change: For the volume perspective, but a big uptake coming in the back half an exterior is people, you know, start to think about 2027, all the new technology, the costs that are going to go along with it, plus the performance, and the new.

Speaker Change: We're not sure going out into 27 beyond us with VP-new EPA regulations. So anyway, that's a long-ground big answer, but that's how I answered you know that. So we're, that's one I see. Customers, a little customers.

Speaker Change: Not doing great, but evolving on the bottom, looking for some uptake here is we move in the next year which we hope will drive further sales in the back-after-after year and into 26. But feel solid about we can continue to perform as we bid.

Andrew Obin: Yeah. Thanks so much. Just a commentary for you. As I said, look, when somebody like you starts getting marginally less negative, just let's keep it there. I think you are getting more positive, but at least your press release got more positive. What are you seeing? I always ask questions about the economy because what are you seeing? You do touch a lot of verticals. You touch a lot of off-road. Caterpillar today, maybe not the most exciting numbers, but what are you seeing on construction? What are you seeing in oil and gas, outside of truckload industry? What does the economy look like? Are you feeling more positive, more negative into 2025? Thank you.

Speaker Change: And yeah, thanks so much. And just a commenter for you. As I said, book when somebody like you starts getting...

Speaker Change: marginally less negative, you know, just let's keep it there.

Speaker Change: I think you are getting more positive, but at least your press release got more positive. What are you seeing? I think I always ask questions about the economy because

Speaker Change: What are you seeing? Because you do touch a lot of verticals, right? You touch a lot of off-road.

Speaker Change: You know, caterpillar today may be not the most exciting numbers, but what do you see in construction?

Speaker Change: What are you seeing in oil and gas outside of truck load industry? What does the economy look like? Are you feeling more positive, more negative into 25? Thank you.

W.M. Rush: Sure. We've seen when it comes to vocational, when you start breaking vocational businesses down. Oil and gas has been soft. No one's really bought much equipment for oil and gas. Everybody's just refurbing and fixing it because people view it with all the BEV and everything going electric or however it all works out, oil and gas, some people think has long term, I don't want to call it terminal value, but long term, obviously, downside to it. There's not a lot of CapEx being spent. There's a lot of maintenance being spent. We've been off about 20% when you look at our numbers from a parts and service perspective.

Speaker Change: Sure.

Speaker Change: Now I think, you know, we've seen both put in terms of location when we start breaking vocational businesses down. Now all the gases are solved.

Speaker Change: Okay, our one and guess, let's see, look, no one's really much equipment for both of gas. Everybody's just re-förerving and fixing it, right? Because people view it with all the, you know, the bed and everything you want electric, or a hydrant, however it all works, that only gets. Some people think has a long term. I don't want to call it terminal value, but long term, you know, obviously, downside to it.

Speaker Change: So everyone there's not a lot of cat-pack space there's a lot of

Speaker Change: Maintenance being spent, but that maintenance was even we've been off of that 20 percent. When you look at our numbers from the parks and service spec, perspective, now remember it is not the same piece as much of a fence or sentence about businesses it was a decade ago by any stretch. But even if it's...

W.M. Rush: Now remember, it is not the same piece, as much of a percentage of our business as it was a decade ago by any stretch. Even if it's, oh, I don't know, 5%, 7% piece of what we do. It's off 20%. Construction, though, is up from a CapEx perspective, right? You're seeing the flow of money coming through from the infrastructure bill, and we've been limited a little bit on some of the vocational products by some supply shortages on the transmission side. That, I think, is going to smooth itself out later into next year. That was really an issue we dealt with in H2 of this year. Demand is strong. Refuse and demand still remain strong around that sector. Municipal is pretty solid.

Speaker Change: 5-7% piece of what we do, it's all 20%.

Speaker Change: construction that was up from a cat-box perspective, right? You know, you're seeing the flow of money coming through from the Emperor's Rucker Bill. And, you know, we've been limited a little bit on some of the vocational products by some supply shortages on the transmission side.

Speaker Change: But that I think is going to smooth itself out later in the next year that was really an issue we dealt with in the back out with this year. But demand is strong. You know, refuse the demand still remains strong around that sector.

W.M. Rush: It's varied, Andrew, you're always waiting for those truckload guys to really get back into it, I see that happening more in H2 of next year. Private carrier purchases earlier this year were extremely strong. It's one thing when you look at our business model, that's what I try to drive the focus is we really have diversified our business model. Sometimes when it comes to our customer base and our geography, which geography can have a lot to do with it, depending on what's going on. California is tough. We're performing out there, given the new CARB laws, my order intake out there is, huh, 50% of what it was. That stuff will smooth out. That's the good part. It's just one state for me, right?

Speaker Change: You're an Esports 40-solid. You know, it's very different. But you're always waiting for a truckload guy to really get back into it. But you know, I see that having more in the back half of the year.

Speaker Change: Private carrier purchases earlier this year were extremely strong. That's one thing when you look at our business model. That's what I've provided for our products. We really have to diversify our business model.

Speaker Change: sometimes when it comes to our customer base and our geography was geography. We can have a lot to do. We know what's going on. I mean California stuff. You know we're performing out there but

Speaker Change: Given the new car blows, you know, my word already take out there's 50% of what it was.

Speaker Change: But you know that stuff will smooth out. That's a good part. It's just one state for me, right?

W.M. Rush: I can go on and on and say, you know me, I can talk all day about the business because I love it. The good part is we've got a very diversified customer base that we deal with. We're not just tied to big, 1,000-truck orders. Ours is a much more diverse customer base, so it allows us to navigate these waters and perform the way we do. You said, I was laughing at how you phrased that, Andrew Obin. There's going to be a free buy-up sometime in dry bulkers. ACT has next year going down 10% or so, right? They've come up 10% from where they came into this year. I'm not so sure the numbers they have out, they got like 230,000 to 234,000 for the US this year and like 217,000, 216,000, something like that for next year.

Speaker Change: I mean, I can go on and on and say, you know me, I can talk all day about the business because I love it. But the good part is we've got a pretty diverse and bright customer base.

Speaker Change: that we deal with, we're not just tied to big, I don't big, you know, thousand truck workers. I was as much more than first customer base, so it allows us to, you know, navigate these waters and perform the way we do. So yeah, you said I was laughing at what's got you phrase that, Andrew.

Speaker Change: You know, there's going to be a free box sometime.

Speaker Change: Good ride, boys. But we've been able...

Speaker Change: ACT has mixed year going down.

Speaker Change: 10% or so right. I mean, but they've come up 10% from where they became into this year. So I'm not so sure the numbers they have out, they got like 232 and 34,000 from the US this year. And like 2,000 from 27, 2016 something like that for next year.

W.M. Rush: I will say this, I see no downside to that. Now, I do see it more in the H2, but I see no downside to it. I feel good about the next couple of years. We're slugging it out through a tough spot through the H1 of the year, but I think we were slugging it out right now, and you see the performance of the company. That's all I can tell you.

Speaker Change: I will say this, I see no downside of that.

Speaker Change: Now I do see it, you know, more in the back end but I see no downside to it. So, you know, I feel good about the next couple of years. We're just, we're slugging it out to a tough spot through the first half of the year but I think we were slugging it out right now.

Andrew Obin: This is great. Thanks so much.

W.M. Rush: You bet.

Operator: Our next question comes from Daniel Imbro with Stephens. Your line is open.

Speaker Change: This is great. Thanks so much.

Speaker Change: You better.

Speaker Change: And our next question comes from Daniel Embro was Steven your line is open.

Daniel Imbro: Yeah. Good morning, guys. Thanks for taking our question.

W.M. Rush: Thank you, Daniel. Good morning to you, sir.

Speaker Change: This is a good morning to all of you.

Daniel Imbro: Rusty, one start maybe on the new unit side. You mentioned, obviously, order uptick picking up a little bit, inventory is still going to challenge pricing for the intermediate term, I guess. How should we think about the impact of that on gross margin or gross profit per unit? However you want to think about it. Kind of across both, I guess, new or used, any difference in Class 8 medium duty. Just curious how that's going to trend over the coming quarters, given the inventory versus demand backdrop.

Speaker Change: Thank you, Dan, good morning, be yourself.

Daniel Embro: Well, so I want to start maybe on the new, you mentioned obviously the order of tick picking up a little bit, inventory is still going to challenge pricing for the intermediate term. I guess how should we think about the impact of that on growth smart data or growth profit for unit? Have you ever want to think about it kind of across both, I guess, new, or use, and then any different V class eight, medium duty, just curious how that's going to trend over the coming quarters, given the inventory of your first demand backdrop?

W.M. Rush: Right. No, I will say this. Our inventory, we've been working on it all year. Okay? It's in better shape now than it was six months ago, okay? Say three months ago. With the downturn late last year and everybody used it out of Texas, we had a bunch of small order fallout, which turned into what we would consider stock inventory. We have been managing it inside of all the numbers extremely, I would tell you, well. We've been making sure it's mark to market, every quarter, and I feel that has helped us start to disperse the inventory. I feel we're headed in the right direction. I feel a lot better about it than I did without getting too deep into how I manage it or how we manage it.

Speaker Change: Right? No, I will say this. Are you in the Tory?

Speaker Change: We've been working on it all year.

Speaker Change: Okay, and it's been a better state now than it was six months ago, okay, or say three months ago, you know, we had with the big with the downturn, you know, last late last year, everybody used to outpace it. We had a bunch of small order fallout, which turned into what we would consider stock inventory.

Speaker Change: But we have been managing it inside of all the numbers extremely I would tell you well we've been making sure it's marked a market every quarter and I feel that has helped us start to disperse of it when we're doing it.

Speaker Change: And so I feel we're headed in the like to, I feel a lot better about it than I did. Well, that's getting too deep deep into how I manage it. We manage it. I feel better about it now than I did in April. I can promise you that. So, we got our arms around it.

W.M. Rush: I feel better about it now than I did in April, I can promise you that. We got our arms around it, and we've been able to drive it down. Over the last 60 days, we turned the corner and been taking inventory down, regardless what the overall. The overall, we got 90,000 Class 8 units or so, largest inventory ever across the country in the US, right? I feel better about ours than that, than the numbers you're posting for everyone else. I feel a lot better about ours. Now, we're not perfect yet, but I know we're headed in the right direction. I know we shut the spigot off, and our inventory is continuing day by day to get in better shape, and I feel decent about it, as I'm saying. Is it perfect where I want it? No.

Speaker Change: And we've been able to drive it down over the last 60 days. We've turned on the corner and been taking inventory down. We're going to spend what we've overall, you know, at the overall, we've got 90,000 class eight units or so. Largest inventory ever across the country of the U.S. Right? So.

Speaker Change: You know, but I feel better about ours than that than others you're posting for everyone else I feel a lot better about ours

Speaker Change: Now, we're not perfect yet, but I know we're hitting right direction. I know we should have spicked it all. And you know, having our inventory is continuing day by day to get in better shape. And I feel decent about it because I'm saying so, is it perfect where I want it? No.

W.M. Rush: Talking about used, you said something about the used. Look, our used folks have done an outstanding job. Why? We used to carry, oh, I don't know, 45% more in inventory than we currently do. We saw where the volumes were, and we got our inventories down. I want to tell you where we would carry 2,500 units, we got our inventories under 1,500, and we're turning them. That's the key piece of inventory in used. You got to turn used trucks. If you're not turning your used trucks in under 90 days, you're going to lose money. It's just as simple as that. Because unlike new trucks, used trucks depreciate every day. New trucks are on MSOs where used are obviously, they're titled used vehicles. They're not like fine wine. They don't get better with age.

Speaker Change: Talking about you, you said something about the use. Look, our use folks.

Speaker Change: Have done an outstanding job. Why? We used to carry, oh, I don't know, 45% more in inventory than we currently did.

Speaker Change: So we saw where the volumes were and we got our inventory down. You know, I want to say we're going to carry 2500 units. We got our inventory is under 1500 and we're turning up. And that's the key piece inventory and use.

Speaker Change: You can turn your trucks. If you're not turning your trucks under the 90s, you don't lose money. It's just as simple as that.

Speaker Change: Because unlike new drugs, you fluxed to appreciate every day. New drugs are on Internet cells, we're used to producing a pile of use to hear those.

W.M. Rush: You got to make sure you keep your turns right. I'm very positive and very pleased with how our used truck departments have performed or at least managed our business for the year. That's been a plus for this year, a nice plus. Where it's not anything the size of our new, it's nice to get. We're in hand-to-hand combat sometimes right now, I tell people, hand-to-mouth. You just keep slugging it out so when you can get some from the used truck department that you didn't get last year, it makes up for some of the softness that we're having on the on-road business in the new side.

Speaker Change: And they're not like fine wine, they don't get better with age. So you've got to make sure you keep your turns right. And I feel really, I'm very, very positive, but please allow you to restructure the Department of State before or at least, you know, in managed our business for the year.

Speaker Change: That's been a plus for this year over last year. A nice plus. Where it's not anything the size of our news, it's nice to get, you know.

Speaker Change: We're in hand to hand combat sometimes right now. I tell people right hand to mouth. So we're, you know, you just keep slugging it out so we can get some from the youth drug department that you get in the get last year. It makes up for some of the softness that we're at. You know, having an old, an old bit of business in the new side.

W.M. Rush: When you get into the overall business, if there's one thing you haven't asked yet or anybody's asked me yet about, that I'd love to talk about, and that will be when we get a chance to talk about the expense management of the organization. I'll be quiet and let you ask me.

Speaker Change: You know, and you're on when you get into the overall business, I mean, I'm going to if there's one thing we have to ask you, anybody who's asked me in about, that I'd love to talk about and that will be when you're chance to talk about the expense benefit of the organization. But I'll be quite let you ask me.

Daniel Imbro: It's like you're looking at my question list there, Rusty. I was going to ask next on the cost side.

W.M. Rush: Go for it.

Daniel Imbro: You forgot a bunch of them.

W.M. Rush: I got all day. I've got all day, Daniel. Go ahead.

Daniel Embro: It's like you're looking at my question list here, Rusty. I was going to ask next on the call file. Go for it. You've got all day. I've got all day, Daniel. Go ahead.

Daniel Imbro: You took out a lot of OpEx in the quarter. I guess, first, can you maybe just talk about where you guys are pulling costs out of the business? Secondly, I guess, how do you think about the sustainability of these cost takeouts? Obviously, we're at a cyclical trough, and how much can we keep out of the business as the business improves next year? Where do you see opportunities to further reduce it? How does that cost management shape it up?

Daniel Embro: You took out a lot of op-ecs in the quarter. I guess, first, can you maybe just talk about where you guys are pulling costs out of the business? And secondly, I guess, how do you think about the sustainability of these cost takeouts? Obviously, we're at a cyclical trough. And how much can we keep out of the business as the business improves next year? Where do you see opportunities to further reduce it? How does that cost management shape it up?

W.M. Rush: Well, we saw flattening out. I went to everybody back in April and said, Folks, the parts and service business, typically, let's talk about parts and service. Strip truck sales out of it. Truck sales is what drives the S. We run this business S in one side, G&A on the other side. S is typically, remember, just reflective of truck sales because that's where your commission is. That's your variable piece on the truck sales side. G&A is that where you really run your business. That's the dealership business without truck sales. Truck sales take the S piece. The G&A piece, we looked at it and said, Look, I don't see the seasonal uptick that we typically get in the summer. Guess what? We didn't have it. We didn't get it. We have been fairly flat-lined.

Speaker Change: Sure. Well, we saw flattening out, and I went to everybody back in April and said, folks, the parts and service business,

Speaker Change: typically we and this is let's talk about parts and service strip truck sales out of it truck sales

Speaker Change: is what drives the S. We run this business.

Speaker Change: S in one side, G and A on the other side, okay? S is typically, remember, just reflective of truck sales, because that's where your commission is. That's your variable piece on the truck sales side.

Speaker Change: G&A is that where you really run your business, right? That's the dealership business without drug sales, drug sales take the S piece. So the G&A piece, we looked at it and said, look, I don't see the seasonal uptick that we typically get in the summer.

Speaker Change: And guess what? We didn't have it. We didn't get it. We have been fairly flat-lined.

W.M. Rush: Yet, at the same time, as I've tried to tell people, that's the flexibility of the business model. We're way better than what we used to be at it. That's, what we call absorption, and that's numerator, denominator. Denominator being expense. You got gross profit from parts and service above it. If you don't see that growing, if you see it flattening, you've got to make some expense adjustments driven by what you see on the parts and service gross profit side. Now, as you saw, we were down a slight. I talked about revenue being down. We're actually down a little bit in margin, took a little bit of a margin hit. At the same time, go back to April, we decided we had to make some adjustments, and we did.

Speaker Change: Yet, at the same time, is I've tried to tell people that's the flexibility of the business model. I've been telling for years, and we're way better than what we used to be at it. And that's what we call absorption.

Speaker Change: And that's a numerator and a denominator, the denominator being expense, you got gross profit from parts and service above it. If you don't see that growing, if you see it flattening, then you've got to make some expense adjustments driven by what you see on the parts and service gross profit side.

Speaker Change: We, as you saw, we were down, I talked about revenue being down, we actually got a little bit margin, took a little bit of a margin hit, but at the same time, go back to April, we decided we had to make some adjustments.

W.M. Rush: When you look at our G&A piece, we're off 4.5% sequentially to Q2. We're off 7.7% from last year's Q3. I am so proud of the organization, I can't tell you how proud I am, for doing more with less. You ask sustainability. Look, our goal when we start back, if it starts to ramp back up, and you have to add some people back, because remember, when you're doing service and you're doing selling parts, it takes people. I'm not loaning money. I'm working on equipment. At the same time, you try to keep a certain percentage of that gross profit, and we historically have done that. That's what's driven our absorption number up 50 points in 20 years.

Speaker Change: And we did.

Speaker Change: I mean, when you look at our G and A piece, I mean, we're all four and a half percent sequentially to Q2, we're all 7.7 percent from last year's Q3. I am so proud of the organization, I can't tell you how proud I am, for doing more with less.

Speaker Change: So you ask sustainability.

Speaker Change: It is our goal, and we're going to start back.

Speaker Change: if it starts to ramp back up, right? And you have to add some people back. Because remember, when you're doing a service and you're selling parts, it takes people. I'm not loaning money. I'm working on equipment.

Speaker Change: But at the same time, you try to keep a certain percentage of that gross profit, and we historically have done that. That's what's driven our absorption number up 50 points in 20 years, okay? So...

W.M. Rush: We still run it. If you'd have told me we would never have picked up anything in gross profit in the summer months, you still got inflation, you still got payrolls, you still got everything going up on you, yet we were able to basically maintain a pretty flat absorption rate by working that expense number. I would expect going forward, if it does start ramping up like I'm hoping it does next year. Right now, we're working on all our budgets for next year. We're not getting way out there. We're going to try to have mid-level, we hope for at least mid-level parts and service growth right now. I'm waiting on budgets to come back in, and we're helping drive them to the field.

Speaker Change: But, you know, to run it, we still run it, if you told me, we would never have picked up anything in gross profit in the summer months. You're still dealing, you know, you still got inflation, you still got payrolls, you still got everything going up on you, yet we remembered to basically maintain a pretty flat absorption rate by working that expense number.

Speaker Change: I would expect going forward if it does start ramping up like I'm hoping it does next year.

Speaker Change: I mean, right now we're working on all our budgets for next year, we're not getting way out there. We're going to try to have...

Speaker Change: Mid-level, we hope for at least mid-level parts and service growth right now. I'm waiting on the budgets to come back in and we're helping drive them to the field. So if we do go, so if we pick up...

W.M. Rush: If we pick up, say, six points or something like that in gross profit, we try to keep half of it, which will drive more money to the bottom line. Sustainability is there. There's no question in my mind that we'll be able to sustain it because we're doing it where we're at. Now, it will take a little bit more expense if gross profits and sales revenues start to go up in parts and service, but that's your goal is to keep part of it, but it takes people to sell parts, to work on trucks, to do things. Our model just is driven by what goes on. We have the flexibility to adapt to whatever the markets throw at us or whatever we're able to take from the market. Remember, we're going to keep trying to take share.

Speaker Change: Save six points or something like that and most probably we try to keep half of it Right, which will drive more money to the bottom line. So sustainability is there. There's no question in my mind We'll be able to sustain it

Speaker Change: because we're doing it where we're at. Now, it will take a little bit more expense if gross profits and sales revenues start to go up in parts of service. But that's your goal, is to keep part of it. But it takes people to sell parts, to work on trucks, to do things.

Speaker Change: Our model is driven by what goes on, right? We have the flexibility to adapt to whatever the markets throw at us or whatever we're able to take from the market.

W.M. Rush: Our goal is to continue to take share. We're going to continue to add outside parts and service salespeople, where we can give them a solid book of business to go call upon as we try to take share. No matter what the market is. On the service side, we're going to try to continue to add techs. We didn't do that good a job this year on that piece of it. At the same time, we just finished our senior leadership conferences last weekend for about 300 folks came up here in town. We're going to get back. That was one of the big messages to everybody. We're going to get back because we do expect business to have some better growth next year.

Speaker Change: Because remember, we're going to keep trying to take care of it.

Speaker Change: Our goal is to continue to adapt to shape, texture.

Speaker Change: We're going to continue to add outside parts and service salespeople where we can give them a solid book of business to go call upon as we try to take share.

Speaker Change: No matter what the market is, and on the service side, we're going to try to continue to add techs. We didn't do that good a job this year on that piece of it. But at the same time, we just finished our senior leadership conferences last weekend, and for about 300 folk came over here in town.

Speaker Change: And, you know, we're going to get back. That was one of the big messages to everybody. We're going to get back because we do expect business to be a little, you know, have some better growth next year.

Daniel Imbro: That makes sense. Maybe last one, just to follow up on that. I guess, how is tech availability out there? I feel like just across a lot of all markets, it's difficult to find technicians, difficult to hire them. You mentioned you guys haven't done as well this year as you'd like to on the technician hiring. Just curious, has that backlog gotten better at all, or has that available labor pool gotten better at all for you guys? Just any thoughts there.

Speaker Change: That makes sense. Maybe the last one, just to follow up on that. I guess, how is tech availability out there? I feel like just across a lot of bed markets, it's difficult to find technicians, difficult to hire them.

Speaker Change: You mentioned you guys haven't done as well this year as you'd like to on the technician hiring. So just curious, has that backlog gotten better at all, or has the available labor pool gotten better at all for you guys? Just any thoughts there?

W.M. Rush: Good question. No, it's always a struggle. It's a struggle on the entry-level technicians. That's where your turnover comes in. Technicians, I don't want to get too deep in the weeds here, but it's level 1 through 5 being the old experienced guy, just can do anything. It's at level 1 and 2s, if you got some secret sauce for it to help me, I'd sure appreciate it. We do a lot of things. We sort of have a lot of efforts around retention on those 1s and 2s, and it's that I think there was a study here recently and we saw, was it 40%? 40% of your level 1 and 2s are out of the business in 2 years. They're going to do something else. They think they want to be technicians, 40% of them are out of the industry.

Speaker Change: All right.

Speaker Change: Good question. No, it's always a struggle, right? It's a struggle only the entry-level technicians, right? That's where your turnover comes in

Speaker Change: Technicians, I don't want to get too deep in the weeds here, but it's level one through five, five being the old experienced guy, right, this can do anything. And it's at level one and two.

Speaker Change: If you've got some secret sauce for it to help me, I'd sure appreciate it.

Speaker Change: We do a lot of things, we sort of have a lot of efforts around, you know, retention on those ones and twos. I think there was a study here recently, we saw, was it 40%? 40% of your level one and twos are out of the business in two years. Not good.

Speaker Change: They're going to do something else. They think they want to be technicians.

W.M. Rush: You can see that's a hard road to hoe. We keep plugging away at it, and that's one of the big things is, it's difficult. It hasn't changed, and it's still very difficult. We work with tech schools, we work with high schools. We have recruiters. We go at it. It's a multi-pronged attack, and it's something I think we'll always be battling, even though being a technician is nothing like it was 25 years ago with all the technology that's been put into trucks. It's a whole different job, and it takes a whole different skill set, but it's still sometimes a very difficult. I have all the confidence. We're not talking. We're trying to grow 150 to 200 techs a year. About five or six years ago, we tried to grow it too many, about 500.

Speaker Change: But 40% of them are out of the industry. So you can see that's a hard road to hoe, right? And so, but we keep plugging away at it. And that's one of the big things is, it's difficult.

Speaker Change: It hasn't changed, and it's still very difficult. We work with tech schools. We work with high schools. We work with a whole different—we have recruiters. We go at it. It's a multi-pronged attack, and it's something I think we'll always be battling.

Speaker Change: Even though, being a technician, it's nothing like it was 25 years ago.

Speaker Change: With all the technology that's been put into trucks, it's a whole different job.

Speaker Change: And it takes a whole different skillset, but it's still, you know, sometimes a very difficult. We'll get, I have all confidence, and we're not, we're trying to grow 150 to 200 techs a year.

W.M. Rush: We realized that wasn't going to work. We couldn't support it that way. We've really worked hard to try to level set the jobs and bring in more jobs that'll be beneficial for a level 1 and 2, because they can't do what a level 4 and 5 can. You've got to make sure that you're feeding them the proper work. I feel good about our ability to hopefully get our technicians. It's really the turnover for that level 1 and level 2 technician. I think we're making much progress this next year in that area.

Speaker Change: About five or six years ago, we tried to grow it too many, about 500, we realized that wasn't going to work. That was, we couldn't support it that way. But we've really worked hard to try to level set.

Speaker Change: the jobs.

Speaker Change: and bring in more jobs that will be beneficial for a level 1 and 2, because they can't go to a level 4 and 5 can. So you've got to make sure that you're feeding them, you know, the proper work.

Speaker Change: And, you know, I feel good about our ability to hopefully get our, you know, technicians really the turnover for that level one, level two technician. I think we're going to make some, I think we're going to make some progress this next year in that area.

Daniel Imbro: Great. Appreciate all the color, and best of luck, guys.

W.M. Rush: Thank you.

Speaker Change: Appreciate all the color and best of luck, guys.

Operator: Our next question comes from Ian Zaffino with Oppenheimer. Your line is open.

Speaker Change: Thank you.

Speaker Change: Bye.

Speaker Change: And our next question comes from Ian Zaffino with Oppenheimer. Your line is open. Hey guys, thanks for taking my question. Appreciate it.

Ian Zaffino: Hey, guys. Thanks for taking my question. Appreciate it.

W.M. Rush: You bet.

Ian Zaffino: Just kind of looking at the landscape here, I guess sort of with the environment is, how's the M&A environment, I guess, in this backdrop? Where do you see multiples and kind of what's out there? I know you're sitting on a great balance sheet, so any color you could kind of give there and then I have a follow-up. Thanks.

Speaker Change: You bet.

Ian Zaffino: Just kind of look at the landscape here, I guess, sort of with the environment is...

Ian Zaffino: How's the M&A environment, I guess, in this backdrop? Where do you see multiples and kind of what's out there? And I know you're sitting on a great balance sheet. So any color you could kind of give there. And I have a follow-up. Thanks.

W.M. Rush: Well, obviously, I never talk about M&A till I do it. There's a little out there. I'm always working a little bit. We actually had a little M&A in the quarter. It's small stuff. We had a small deal up in Nebraska. I don't have any large M&A I'm working on right now. There's a couple other small things. I don't have anything big to announce that I could tell you, and I wouldn't tell you anyway till I did it. I don't see that there's this huge rush of people trying to get out of the industry at the moment, even though it wouldn't surprise me as we get further into the next two years with looming 2027 EPA regulations coming on, that some people don't try to get out prior to that. I'm not seeing it right now, not for those reasons.

Speaker Change: Well, obviously, I never talk about M&A until I do it.

Ian Zaffino: There's a little out there, you know, I'm always working a little bit we have.

Ian Zaffino: We actually had a little M&A in the corner.

Ian Zaffino: We added a small deal up in Nebraska.

Ian Zaffino: Oh

Ian Zaffino: But I don't have any large M&A I'm working on right now. There's a couple other small things.

Ian Zaffino: I don't have anything big to announce that I can tell you, and I wouldn't tell you anyway until I did it. So I don't see that there's this huge rush of people trying to get out of the industry.

Ian Zaffino: at the moment.

Ian Zaffino: Even though it wouldn't surprise me as we get further into the next two years with looming 27 EPA regulations going on that some people don't try to get out prior to that. I'm not seeing it right now, not for those reasons.

W.M. Rush: There's not a lot of big M&A going on right now that we have going around. We're constantly looking, so if anybody out there wants to bring me a deal that I need in an area I'm not, I'll be happy to look at it. I know it's just a roundabout question, but I'm never going to tell you what I'm doing anyway, when it comes to M&A till I do it. There's not a lot of big activity at the moment. I wouldn't be surprised as we get further along down the road towards 2027 January 1 EPA, that M&A activity picks up prior to that.

Ian Zaffino: But there's not a lot of big M&A going on right now that we have going around. We're constantly looking.

Ian Zaffino: So, if anybody out there wants to bring me a deal that I need in an area I'm not, I'll be happy to look at it.

Ian Zaffino: So, but I mean, I know it's just a roundabout question, but I'm never going to tell you what I'm doing anyway when it comes to M&A until I do it. So, but if it's not, there's not a lot of big activity at the moment, but I wouldn't be surprised.

Ian Zaffino: as we get further along down the road towards 27 January 1 EPA, that M&A activity picks up prior to that.

Ian Zaffino: Okay, thanks. I guess I know you did that Navistar deal and that went quite well, so kind of wanted to see if there's anything to build on that.

Speaker Change: Okay, thanks, and I guess I know you did that Navistar deal and that went quite well, so

W.M. Rush: Yeah. We did a lot of Navistar deal. We did one two years ago, or I guess it's almost three, two and a half years ago, we did. It was almost three. It was December 2021. That was a big deal. We bought the second largest at that time, international dealer. We'll continue to look. We have more availability on that side of the house, and we'll continue to look for M&A around where it makes sense. If some shows up.

Speaker Change: Yeah, we did a lot of Navistar deal. We did one two years ago, or I guess it's almost three, two and a half years ago we did.

Speaker Change: It was almost three, it was December of 21. That was a big deal. We bought the second largest at that time, international dealer. We'll continue to look. We have more availability on that side of the house and we'll continue to look.

Ian Zaffino: Okay. Okay, thanks. Then just maybe as a follow-up, can you just maybe talk about the outlook you're seeing now on the vocational truck side? I mean, Allison came out yesterday with quite good numbers on the vocational side.

Speaker Change: for M&A around where it makes sense, right? If one, if some serves up, so, okay.

Speaker Change: Okay, thanks. And then just maybe as a follow-up, can you just maybe talk about the outlook you're seeing now on the vocational truck side? I mean, Allison came out yesterday with quite good numbers on the vocational side. So I kind of wonder what you're seeing there looking forward. Thanks.

W.M. Rush: Sure

Ian Zaffino: kind of wonder what you're seeing there looking forward. Thanks.

W.M. Rush: Yeah. I may have touched on it a little bit ago. Yeah, I'll bet they had good numbers. They were sold out of 3000 Series or 4000 Series transmissions back in May for the whole year. They're managing their sales. They have their own toys. Yes, vocational has continued to be strong, as I mentioned. It actually probably cost us some sales because we couldn't get enough transmissions this year in 2024. That probably pushed some of those sales into 2025, so that's a good thing. We expect that to continue. As I mentioned earlier, most all my vocational, I expect to continue to be strong through 2025.

Speaker Change: Yeah, I may have test started a little bit ago, but yeah, I bet they had good numbers.

Speaker Change: They were sold out of 3,000 or 4,000 series transmissions back in May for the whole year. So, anyway, but they're managing their sales, you know, they have their inventory. So, yes, vocationals continue to be strong, as I mentioned.

Speaker Change: You know it actually probably cost us some sales because we couldn't get enough transmissions this year 24, so

Speaker Change: You know, that probably pushed some of those sales into 25, so that's a good thing. We expect that to continue. As I mentioned earlier, I expected, most all my vocational, I expect to continue to be strong through 2025. I'm not going to look out into 26 on it, but we do expect strong vocational sales across the board.

W.M. Rush: I'm not going to look out into 2026 on it, but we do expect to continue strong vocational sales across the board. Regardless of which location it's in, driven by the government spend on those bills, on the infrastructure bills. That's what we expect. We're still seeing it and that's a solid piece for us. We're in the refuse business strong also, so that's solid for us also. Our medium-duty vocational continues to be strong too.

Speaker Change: regardless of which vocation it's in, you know, driven by the, you know, government spend on those bills, on the infrastructure bills. And, you know, and you're.

Speaker Change: That's what we expect. We're still seeing it and that's a solid piece for us. We're in the refuse business strong also, so that's solid for us also. And our medium duty vocational continues to be strong too.

Ian Zaffino: All right, great. Thank you very much.

W.M. Rush: You bet.

Operator: As a reminder, to ask a question, please press star one one on your telephone. The next question comes from Avinatan Jaroslawicz with UBS. Your line is open.

Speaker Change: All right. Great.

Speaker Change: You bet.

Speaker Change: As a reminder, to ask a question, please press star 1 1 on your telephone. And the next question comes from Avi Arosalewicz with UBS. Your line is open.

Avinatan Jaroslawicz: Good morning.

W.M. Rush: Good morning, sir. Good morning.

Avi Arosalewicz: Good morning, sir.

Avinatan Jaroslawicz: Morning. Yeah, just noted in the press release that you're hopeful aftermarket sales are around the bottom now. Just curious what you're seeing there to have some confidence in calling this the bottom. Also how are you thinking about the ramp back up in sales for aftermarket? Should that be more muted than normal, just given the over-the-road continues to be a more challenged market?

Avi Arosalewicz: Goodbye.

Avi Arosalewicz: So, yeah, you noted in the press release that your hopeful aftermarket sales are around the bottom now. I'm just curious what you're seeing there to have some confidence in calling this the bottom.

Avi Arosalewicz: And also, how are you thinking about the ramp back up in sales for aftermarket? Should that be more muted than normal, just given the over the road continues to be a more challenged market?

W.M. Rush: Okay. Well, we've seen it, as I mentioned. Aftermarket sales have been pretty flat. That's why we made some adjustments back in April. You know what? Sometimes flat's a good thing when you cut expense, okay? It's not a bad thing. Usually we'll ramp up a little more in the summer than what we did given our geography, even though we are across 24 states, given our geography of where we're at. I would tell you that going into Q4, as I mentioned, there is some seasonality in the press release that it's a little softer in Q4. That's nothing more than every year, right? You've got fewer working days because of the holidays. It's like, if you bill hours right in the shops, right? You got to be there to turn wrenches.

Speaker Change: Okay, well, no, you know, we've seen, as I just mentioned, it's been, perhaps, Margie's been...

Speaker Change: Pretty flat

Speaker Change: And that's why we made some adjustments back in April. That's, you know what? Sometimes flats a good thing when you cut expense.

Speaker Change: Okay, so it's not a bad, you know, because we didn't see easily will ramp up a little more in the summer than what we did

Speaker Change: given, you know, given our geography, even though we are across 24 states, given our geography.

Speaker Change: of where we're at, but I would tell you that there is, you know, going into Q4, as I mentioned, there is some seasonality in the press release that it's a little softer in Q4, but that's nothing more than every year, right? Because you've got fewer working days because of the holidays.

Speaker Change: So there's, you know, it's like, it's like, you know, you build hours, right, in the shops, right? So you got to be, you got to be there to turn wrenches, well, you know, with the holidays, with Thanksgiving and Christmas.

W.M. Rush: Well, with the holidays, with Thanksgiving and Christmas, leading up to New Year's, it's naturally a little bit slower for those days. You lose then your air conditioning business, goes down a little bit, but there's other things that pick up, but it's just seasonally a little bit softer in Q4. That's nothing out of the norm. So, a couple of points or so less than the coverage points typically in Q4. That being said, I just believe that as this thing bottoms out in the over-the-road guys, and they slowly ramp back up next year, I would hope by the time we get to summer, I don't see any big ramp up early in the year. I do see growth in the parts and service business when we get to the seasonal part, say next May and June, around that timeline.

Speaker Change: up to New Year's, you just naturally a little bit slower for those days, you know, you lose then, you know, your air conditioning business goes down a little bit, but there's other things you pick up, but it's just seemingly a little bit softer in Q4, but that's nothing out of the norm.

Speaker Change: You know, a couple points or so less than a couple three points typically in Q4. That being said, I just believe that as this thing bottoms out from the over-the-road guys

Speaker Change: they slowly ramp back up next year. I would hope by the time we get to summer, I don't see any big ramp up early in the year, but I do see growth.

Speaker Change: in the parts and service business.

Speaker Change: When we get to the seasonal part, say, next May and June, around that timeline, I'm not perfect on this, but I do believe we'll see some growth in the parts that are more like what we typically get. I expect a more typical...

W.M. Rush: I'm not perfect on this, but I do believe we'll see some growth, in the parts and service, more like what we typically get. I expect a more typical summertime, late spring through fall, summer included, of course, ramp up in our parts and service next year. I just believe by that time, I think the spot market's going to be better. I think we'll have taken enough capacity out of the over-the-road business. Remember, when you look at the numbers we're producing, thank God we got a diversified customer base, because we still, even though the small customer was off less than what we call our unassigned accounts, but the small, which is still 30% of what we do, are people we really don't even know. Okay? Our growth was in the big customer. That's where we managed was through that piece of our business.

Speaker Change: summertime, you know, late spring through fall, summer included, of course, ramp up in our parts of service next year.

Speaker Change: I just believe by that time, I think the spot market is going to be better. I think we've taken enough capacity out of the over-the-road business. Remember, when you look at the numbers we're producing,

Speaker Change: Thank God we've got a diversified customer base because we still, even though the small customer was off less than what we call our unassigned accounts, but the small, which is still 30% of what we do, are people we really don't even know. Our growth was in the nationals.

W.M. Rush: The small person was off still 8% to 9% year over year. Remember last year, he was off 12 or so in Q3. The combination of being off 20%, going back comparing it to 2022, is quite dramatic for that small customer. The numbers we're producing are in spite of those headwinds with 30% of our customers. I do expect the comps get easier as we're starting to see we won't have that big a downturn in that smaller customer base. I expect the larger customers to come on better sometime. They're either going to have to buy trucks or fix trucks, one of the two. I expect that to pick up, as I said, middle of the year next year. I don't see any big downturn for us outside of normal seasonality because of our diversification over the next couple of quarters.

Speaker Change: You know, the big customer, that's where we managed was through that piece of our business.

Speaker Change: But the small person was off still 8-9%.

Speaker Change: year over year. And remember last year he was off 12 or so in Q3, so the combination of being off 20%, going back comparing it to 22, is quite dramatic for that small customer. So the numbers we're producing are in spite of those headwinds with 30% of our customers.

Speaker Change: But I do expect, you know

Speaker Change: The comps get easier as we're starting to see we won't have that big a downturn in that smaller customer base. I expect the larger customers to come on better sometime. They're either going to have to buy trucks or fix trucks, one of the two. So I expect that to pick up, as I said.

Speaker Change: middle of the year, next year. And I don't see any big downturn for us outside of normal seasonality because of our diversification over the next couple of quarters.

W.M. Rush: Hopefully, that holds true, but that's just my outlook on it right now with the growth mainly pushed into the back two thirds of next year. All right. From a parts and service perspective, we'll continue to manage expenses the way we are and continue to, as I said, in spite of shorter lead times on truck sales, I expect us to keep being able to push out quarters. We expect to deliver a few more trucks in Q4 Class 8 than we did in Q3. While I can't tell you what Q1 looks like, I expect us to execute because I can still build you trucks in December. Okay.

Speaker Change: Hopefully, that holds true, but that's just my outlook on it right now with the growth mainly pushed into the back two-thirds of next year.

Speaker Change: From a parts and service perspective, we'll continue to manage expenses the way we are and continue to, as I said, in spite of no shorter lead times on truck sales.

Speaker Change: I expect us to keep being able to push out corners. We expect to deliver a few more trucks in Q4 Class 8 than we did in Q3.

Speaker Change: And while I can't tell you what Q1 looks like.

Speaker Change: I expect this to execute because I can still build your trucks.

W.M. Rush: It's not like I may not have the clarity that we had for a couple of years, but I've got the machine, and I believe the folks in this organization and their ability to execute no matter what the environment is.

Speaker Change: in December. Okay, so it's not like, you know, I may not have the clarity that we had for a couple years, but I've got the machine. And I believe, you know, the folks in this organization and their ability to execute no matter what the environment is.

Avinatan Jaroslawicz: That makes a lot of sense. Then I guess also, yeah, thinking about the rebound that you're talking about for Class 8 in late 2025. It sounds like you're thinking of that being more from just improvement in the over-the-road market. To what degree would you say that the pre-buying ahead of the emissions regulations would also be a factor in that, Josh?

Speaker Change: That makes a lot of sense.

Speaker Change: And then I guess also, yeah, thinking about the rebound that you're talking about for class 8 and late 25, it sounds like you're thinking of that being more from just improving the over-the-road market, and to what degree would you say that the pre-buying ahead of the emissions regulations would also be a factor in that?

W.M. Rush: No, no question. For sure. Everybody thought. You go back a year, pre-buy was going to start here, back half of this year. Well, it didn't, okay. Like I said, I can still build you a truck in December. It didn't happen, right. Why. Because the over-the-road guys were getting crushed. You can just read all the earnings reports. I mean, LTL is good, better, but the truckload side of it, which is a big piece of it, was getting hurt. What you're seeing is they're going to get healthier. Okay, I do believe that. Capacity's finally come out of the market. That's the hardest thing, is couldn't take any capacity out. Financial institutions were more lax than I've ever seen them in pulling the chain and taking capacity out, but that's not my business to run.

Speaker Change: There's no question, both of them, for sure. You know, everybody thought.

Speaker Change: You go back right here

Speaker Change: You know, pre-battle was going to start here, back half of this year. Well, it didn't. Okay. Like I said, I can still build you a truck in December.

Speaker Change: So, it didn't happen, right? Why? Because the over-the-road guy was getting crushed.

Speaker Change: I mean, just read all the earnings reports. I mean, LTL is good, better, but the truckload side of it, which is a big piece of it.

Speaker Change: was getting hurt. So what you're seeing is they're gonna get healthier. I do believe that. Capacity's finally come out of the market. That's the hardest. I just couldn't take any capacity out.

Speaker Change: Financial institutions were more lax than I've ever seen them and you know pulling the chain and taking capacity out But that's not my business to run and but I think you are seeing that with all the bankruptcies and things coming out But you still got to dispose of that equipment and that's being done as time goes on that's happened. So they're getting healthier

W.M. Rush: I think you are seeing that with all the bankruptcies and things coming out, you still got to dispose of that equipment, and that's being done as time goes on. That's happened. They're getting healthier. People will start focusing on the regulations coming in 2027, right? All it's really done is we thought it was going to start earlier a year ago. Now it's not. If you think about it, what you're doing is you're compressing that demand. It's probably going to make the peak get higher when it does because you're going to have less time to take care of demand. People have been having to run their businesses and manage on it, say, Look, I'll deal with that 2027 EPA rule when I can, but right now I've got to run my business.

Speaker Change: So, people will start focusing on the regulations coming in, you know, 20 and 27, right? So, but all it's really done is we thought it was going to start earlier a year ago. Now it's not. So, if you think about it, what you're doing is you're compressing that demand.

Speaker Change: It's probably going to make the peak get higher when it does, because you're going to have less time.

Speaker Change: To take care of demand, people have been having to run their businesses and manage on it.

Speaker Change: Say, look, I'll deal with that 27 EPA rule when I can, but right now, I've got to run my business. Look at my OR. As that gets better, the focus will become more focused.

W.M. Rush: Look at my O.R. As that gets better, the focus will become more on, Hey, I got to get ahead of some of this 2027. They're not going to pre-buy everything, but they're going to compress and try to buy a little ahead so they don't have to deal with the new technology and whatever it's going to cost, $15,000 to $20,000 on diesel, and then rolling in a BEV electric and everything else as all these rules and regs come about. They're going to try to pre-buy a little bit, driven by the fact also that their business is in better shape, right? Not in the shape it's been this summer, okay? I do believe it's going to continue to get better as we move through it next year.

Speaker Change: more on, hey, I got to get ahead of some of this 27. They're not going to pre-buy everything, but they're going to compress and try to buy a little ahead so they don't have to deal with the new technology.

Speaker Change: You know, whatever it's going to cost, $50,000 to $20,000 on diesel, and then rolling in a bad electric.

Speaker Change: and everything else is all these.

Speaker Change: Rules and regs come about, so they're going to try to pre-buy a little bit, but driven by the fact also that their business is in better shape, right? Not in the shape it's been this summer.

Speaker Change: Okay, but I do believe it's going to continue to get better as we move through it next year. I believe by the middle of the year that their business will be stabilized and they might be getting some rate.

W.M. Rush: I believe by the middle of the year that their business will be stabilized, and they might be getting some rate. Now I can focus on, Oh, my gosh, we got 18 months till January 2027. I need to be thinking. I don't know exactly how that timing is going to work out, but logic says that's what's going to happen, right? As one thing settles out, gets better, then we can focus on out ahead of us. Right now, I'm not looking down the hill, I'm looking at the tips of my skis, right? We can start looking down the hill, and once we've got our skis straight and not going sideways. If that makes any sense, that's how I see the combination of the two.

Speaker Change: And now I can focus on, oh my gosh, we've got 18 months to, you know, till January 27. I need to be thinking, you know, I don't know exactly how that timing is going to work out, but logic says that's what's going to happen.

Speaker Change: As one thing settles out, it gets better, then we can focus on, you know.

Speaker Change: out ahead of us. Right now you're just kind of looking at the, I'm not looking down the hill, I'm looking at the tips of my skis, right? Then we can start looking down the hill and once we've got our skis straight and not going sideways. So if that makes any sense, that's how I see the combination of the two.

Avinatan Jaroslawicz: Yeah, no, that does. Thanks for unpacking that. I guess just a last question. Where are vocational volumes relative to longer-term normal average? Just trying to understand how much runway is left to that market.

Speaker Change: Yeah, no, that does. Thanks for unpacking that. And then, I guess, just a last kind of question, where vocational volumes relative to longer term, kind of normal average, trying to understand.

W.M. Rush: I think all of 2025. I'm not going to look out to 2026 because that's a little far out for me. I feel really good about our vocational business in 2025. Where is it compared to normal? Well, what's normal in the truck business? Would be my question. I don't know that I know what normal is. It's one thing you learn in this business, the truck business can have some cyclicality. I would tell you, what, 25% better than what normal is? I don't know. Demand's strong, is the easiest way for me to say it, and continues to be. We look for vocational demand to continue to be strong in 2025. I'm not going to look out into 2026 on that yet.

Speaker Change: how much runway is left to that market.

Speaker Change: I think all of 25. I think, I'm not going to look at the 26.

Speaker Change: because that's a little far out for me, but I feel really good about our vocational business in 2025. Where is it compared to normal? Well, what's normal in the drug business?

Speaker Change: Would be my question. I don't know what I know. What normal is It's one thing you learn in this business, it's pretty Truck sales could have some cyclicality, but I would tell you what

Speaker Change: 25% better than what a normal is? I don't know. I mean, you know, but demand strong is the easiest way for me to say it and continues to be and we look for vocational demand.

Speaker Change: to continue to be strong.

W.M. Rush: As we get further into 2025, I'll try to get a feel for it because we're only out booking 2026 business right now. It's hard for me to see where 2026 is going to be. We are obviously talking about and booking some 2025 business, and both sides, whether it's over-the-road or immediate or vocational. Vocational, we've booked more than we have over-the-road, I can tell you that. We expect it to remain strong in 2025. 2026 is going to be hard for me to look at right now. Hope so.

Speaker Change: In 2025, I'm not going to look out into 26 on that yet.

Speaker Change: But, you know, as we get further into 25, I'll try to get a feel for it because we're not trying to, we're really not booking 26 business right now. So it's hard for me to see where 26 is going to be. But we are obviously talking about and booking some 2025 business.

Speaker Change: And both sides, whether it's over the road, or media, or vocational. Vocational, we've booked more than we have over the road, I can tell you that. So we expect it to remain strong at 25, 26 is gonna be hard for me to look at right now.

Avinatan Jaroslawicz: All right. Got it. Appreciate the time. Thank you.

Speaker Change: Hope so.

W.M. Rush: You bet.

Speaker Change: All right. Got it. Appreciate the time. Thank you.

Operator: I show no further questions at this time. I would now like to turn the call back over to W.M. Rush for closing remarks.

Speaker Change: You bet.

Speaker Change: I show no further questions at this time. I would now like to turn the call back over to Rusty Rush for closing remarks.

W.M. Rush: Well, I'd like to thank everyone for their participation this morning. We won't be talking to you till February with Q4 release. Happy holidays to all, to you and yours, and we'll talk to you again in February. Thank you all very much.

Rusty Rush: Well, I'd like to thank everyone for their participation this morning. We won't be talking to you until February, so with the four-quarter release, so happy holidays to all, to you and yours, and we'll talk to you again in February. Thank you all very much.

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

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