Q4 2024 Rush Enterprises Inc Earnings Call

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Operator 2: Good day, thank you for standing by. Welcome to the Rush Enterprises Reports Q4 2024 Earnings Results. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, W.M. Rush, Chairman of the Board, Chief Executive Officer, and President. Please go ahead.

To ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising heinous race.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your first speaker today.

Speaker Change: Your rush Chairman of Board, Chief Executive Officer, and President. Please go ahead.

W.M. Rush: Well, good morning, everyone. Thanks for joining our Q4 and Year-End 2024 Conference Call. I have with me today Jason Wilder, Chief Operating Officer, Steven L. Keller, Chief Financial Officer, Jay Hazelwood, Vice President and Controller, and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary. Now, Steven L. Keller will say a few words regarding forward-looking statements.

Speaker Change: Well good morning, everyone. Thanks for joining our fourth quarter and you'll have to wait way Board conference call.

Speaker Change: With me today, Jason Wilder, Chief operating Officer, Steve Keller, Chief Financial Officer.

Speaker Change: Vice President.

Michael Goldstone: And Michael Goldstone.

Speaker Change: Senior Vice President General Counsel and corporate Secretary.

Speaker Change: I will say a few words regarding forward looking statements.

Steven L. 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 31 December 2023, and in our other filings with the Securities and Exchange Commission.

Speaker Change: 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.

Speaker Change: 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.

W.M. Rush: As we mentioned in our news release, we had $7.8 billion in annual revenues for 2024, and our net income was $304.2 million, or $3.72 per diluted share. For the Q4, our revenues were $2 billion, and our net income was $74.7 million, or $0.91 per diluted share. We are also happy to announce a cash dividend of $0.18 per common share. 2024 was a challenging year for the industry, which faced persistent headwinds, including the ongoing freight recession, high interest rates, and economic uncertainty. These factors hit over-the-road carriers hard, leading to weak demand for new Class A trucks from that customer segment. However, our strength in public sector and vocational markets helped balance things out, and we managed to hold our ground in a tough Class A environment market.

Speaker Change: We mentioned in our news release, we had $7 $8 billion in annual revenues are going to weigh more in our net income was $304 2 million or $3.72 per diluted share.

Speaker Change: For the fourth quarter revenues were 2 billion and our net income was 74 7 million to 91 cents per diluted share.

Speaker Change: We are also happy to announce a cash dividend of <unk> 18 per common share.

Speaker Change: 2024 was a challenging year for the industry, which faced persistent headwinds, including the ongoing freight recession high interest rates and economic uncertainty. These factors yet over the road carriers are leading to weak demand for new class eight trucks from that customer segment.

Speaker Change: However, our strength in public sector, and vocational markets help balance things out and we managed all of our ground in a tough class eight and Walmart are class four through seven truck sales were strong.

W.M. Rush: Our Class 4-7 truck sales were strong across various customer segments, and we outperformed the market in the medium-duty truck sales. We continue to execute well on our sales strategy and were able to deliver strong profits. The same challenging operating conditions that impacted new Class 8 truck sales also impacted the aftermarket industry. Our sales force's dedication to our strategic initiatives helped us to slightly outperform the industry, despite the difficult operating environment that we faced in 2024. I am very proud of our financial results. Focusing on the aftermarket, our parts, service, and body shop revenues were $2.5 billion last year, down 1.8% from 2023. Our absorption ratio was 132.2%, compared to 135.3% in 2023.

Speaker Change: Various customer segments, and we outperformed the market in the medium duty truck sales.

Speaker Change: We used truck market remains challenging, but we continue to execute well on our sales strategy and we're able to deliver strong brands the.

Speaker Change: The same challenging operating conditions that impact new class eight truck sales also impacted the aftermarket interest right.

Speaker Change: But our sales force his dedication to our strategic initiatives helped us slightly outperformed the industry. Despite the difficult operating environment that we faced in 2024.

Speaker Change: I am very proud of our financial results.

Speaker Change: As the only aftermarket our parts service and body shop revenues $2 5 billion last year down one 8%.

Speaker Change: Right.

Speaker Change: Our absorption ratio was 132, 2% compared to 135, three and 2023.

W.M. Rush: Even though our aftermarket revenues were slightly down, we grew our market share by expanding our national account sales force, which allowed us to enhance our service to large strategic accounts. Demand was sluggish for the over-the-road, energy, and wholesale customers, but we saw strong sales to vocational, public sector, and medium-duty leasing customers. In 2025, we expect aftermarket demand to remain soft the first few months due to the freight market continuing to struggle, which results in lower over-the-road fleet utilization rates. However, we are optimistic that that demand will pick up as the year goes on and the freight market improves. We believe that our focus on growing our national account customer base and our other aftermarket strategic initiatives will result in revenue growth this year.

Speaker Change: Our aftermarket revenues were slightly down we grew our market share by expanding our national gas Salesforce, which allowed us to enhance our service to large strategic accounts.

Speaker Change: Demand was sluggish really over the roads energy and wholesale customers, but we saw strong sales the locational public sector and medium duty leasing just.

Speaker Change: In 2025, we expect market demand to remain the first few months due to the freight market continuing to struggle, which results in lower over the road fleet utilization rates.

Speaker Change: We are optimistic that demand will pick up as the year goes on.

Speaker Change: Freight market improves.

Speaker Change: We believe that our focus on growing our national account customer base and our other aftermarket strategic initiatives will result in revenue growth this year.

W.M. Rush: We are also committed to expanding our technician workforce in 2025, particularly mobile technicians, which will allow us to reduce vehicle dwell time in our shops, better serve our customers, increase back-counter part sales, and grow market share. Regarding truck sales, we sold 15,465 new Class A trucks in 2024, down 11.4% year over year, representing 6.1% of the US market and 1.7% of the Canadian market. Market conditions were tough, with high inventory levels and competitive pricing. However, our sales to specialty market customers helped offset weak demand from our over-the-road customers. ACT Research forecasts US and Canadian sales of new Class A trucks to be 277,200 units in 2025, basically flat with 2024. We expect sales to be challenging in H1 2025. We anticipate the demand will improve in H2 of the year as freight rates recover.

Speaker Change: We are also committed to expanding our technician workforce of 2025, particularly mobile data, which will allow us to reduce vehicle dwell time in our jobs better serve our customers increase back back counterparts sales and grow market share.

Speaker Change: Regarding truck sales, we sold 15000 border 65, new class eight trucks in 2020 were down 11, 4% year over year, representing six 1% of the U S market and one 7% of the Canadian market.

Speaker Change: Market conditions were tough with high inventory levels at a competitive price.

Speaker Change: Our sales to specialty market customers helped to offset weak demand from our over the road.

Speaker Change: ACD research forecast U S and Canadian sales of new class a drugs to be 277200 units.

Speaker Change: Good morning, Brad.

Speaker Change: Basically flat with 22 anymore.

Speaker Change: We expect sales to be challenging in the first half.

Speaker Change: We anticipate that demand will improve.

Speaker Change: Second half of the year is freight rates recover.

W.M. Rush: In addition, despite uncertainty around engine emissions regulations, we believe the EPA's clean diesel regulations will drive some pre-buy activity later this year. We are optimistic that pre-buys, along with strong vocational sales, will allow us to achieve strong new Class 8 truck sales and keep pace with the market in 2025. Our Class 4-7 new truck sales were up 5.1% year over year, with 13,935 units sold in 2024, representing 5.3% of the US market and 3.1% of the Canadian market. Medium-duty vehicle production has stabilized and delivery lead times improved throughout the year. Our strategic focus on diversifying our customer base and focusing on large national accounts paid off, and we outperformed the market in new Class 4-7 truck sales. ACT Research forecasts US and Canadian sales of new Class 4-7 trucks to be 282,250 units in 2025, up 5.3% from 2024.

Speaker Change: Despite uncertainty around engine.

Speaker Change: <unk> regulations, we believe the Epa's clean diesel regulations will drive some pre buy activity later this year.

Speaker Change: We are optimistic that pre buys along with strong vocational sales.

Speaker Change: <unk> achieved strong new class eight truck sales and keep pace with the market in 2025.

Speaker Change: Our class four through seven new truck sales were up five 1% year over year with 13935 years, So 24, representing five 3% of the U S market and three 1% originated market.

Speaker Change: Medium duty vehicle production has stabilized and delivery lead times improve throughout the year.

Our strategic focus on diversifying our customer base and focus around large national accounts paid off.

Speaker Change: We outperformed the market in new class four through seven drove sales.

Speaker Change: ACD research forecasts U S uranium sales.

Speaker Change: Our new class four through seven drugs to be 282250 <unk> five.

Speaker Change: Five 3% from tornado anymore.

W.M. Rush: However, supply has caught up with demand, and we believe the medium-duty market may begin to slow in 2025. Nevertheless, we believe that our expertise in the medium-duty sector and our Ready to Roll program will help us achieve strong medium-duty commercial sales in 2025. We sold 7,110 used trucks in 2024, basically flat year over year. The used truck market was challenging due to values continuing to fall and tight credit, but our disciplined inventory and pricing strategies helped us deliver strong results. With freight rates showing signs of improvement and used truck values stabilizing, we are cautiously optimistic about 2025. Leasing and rental revenue was $354.9 million, basically flat for 2023. Our Rush Truck Leasing division continues to be a key contributor to our overall performance. While rental revenue was slightly down in Q4, leasing revenue increased as we replaced 1,500 units in our fleet.

Speaker Change: However, supply has caught up with demand and we will in the medium duty market may begin to slow in the morning.

Brian: Nevertheless, we believe that our expertise in the medium duty sector and are ready to roll program will help us achieve strong medium duty commercial sales and good morning, Good morning, Brian.

Brian: We sold 70 110 used trucks in <unk> basically flat year over year in the used truck market was challenging due to values evolve and die Craig, but our disciplined inventory and pricing strategies helped us deliver strong results with freight rates showing signs of improvement.

Brian: Used truck values stabilizing we are cautiously optimistic about 2025.

Brian: Leasing and rental revenue.

Brian: It was a $354 9 million.

Brian: Basically flat with 2023.

Brian: Extrapolating Division continues to be a key contributor to our overall performance.

Brian: Rental revenue was slightly down in the fourth quarter leasing revenue increased as we replace 15 ordered units in our fleet.

W.M. Rush: As the age of our leasing and rental fleet decreases, we should recognize higher revenue and lower maintenance and operating costs going forward. We expect our leasing and rental business to remain strong in 2025. I wanted to remind everyone that due to seasonal increases in employee benefits and payroll taxes that occur in Q1 of every year, we expect our G&A expenses to be sequentially higher in Q1 2025 compared to Q4 2024. Lastly, I want to make a final comment on the proposed tariffs that may impact vehicles and component parts manufactured in Canada, Mexico, or China. We are currently monitoring this situation closely. If such tariffs are enacted and significantly increase the aggregate price of new commercial vehicles or parts, we believe the demand for new commercial vehicles and parts could decrease in 2025.

Brian: At the age.

Brian: The age of our leasing and rental fleet decreases we should recognize higher revenue and lower maintenance and operating costs going forward.

Brian: We expect our lease enrollment business to remain strong.

Speaker Change: Hey, Bob.

Speaker Change: I wanted to remind everyone that due to seasonal increases and employee benefits and payroll taxes that occur in the first quarter of every year, we expect our G&A expenses to be sequentially higher in the first quarter of 2020 plan.

Speaker Change: Compared to the fourth quarter of 2024.

Speaker Change: Lastly, I wanted to make a final comment on the proposed tariffs that may.

Speaker Change: The impact vehicles in component parts manufactured in Canada, Mexico or China.

Speaker Change: We are currently monitoring this situation closely.

Speaker Change: Such tariffs and.

Speaker Change: And significantly increase the aggregate price of new commercial vehicles are bars, we believe the demand for new trucks commercial vehicles and parts. Good decrease I was wondering if any of that.

W.M. Rush: Before we wrap up, I want to thank our employees for their hard work and dedication in 2024. Despite the challenges, they stayed focused on our strategic initiatives and expense reduction goals, helping us achieve strong financial results. With that, I will take your questions.

Speaker Change: Before we wrap up I want to thank our employees for their hard work and dedication in tornado anymore.

Speaker Change: Neither challenges they stayed focused on our strategic initiatives and expense reduction goals, helping us achieve strong financial results with that I will take your questions.

Operator 2: Thank you. At this time, we’ll conduct the question and answer session. As a reminder, to ask a question, you will need to press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andrew Obin of Bank of America. Your line is now open.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Speaker Change: A reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: These standby with a composite Q&A roster.

unknown: And our first question comes from the line of Andrew Oldman with Bank of America. Your line is now open.

Andrew Obin: Yes, good morning. Can you hear me?

Andrew Oldman: Yes, Hi, good morning can you hear me.

W.M. Rush: Yes, we've got you, Andrew.

Andrew Obin: Excellent. Rusty, given your commentary about H2 recovery, how should we think about earnings seasonality in 2025 versus a normal seasonal pattern? I'll just throw in, and specifically, when does parts and service turn positive again? 2-part question. Thank you.

Speaker Change: Yes, we got you Andrew.

Rusty: Excellent Rusty.

Speaker Change: Your commentary about second half recovery, how should we think about earnings seasonality in 'twenty five.

Speaker Change: Versus a normal seasonal pattern and I'll just throw in specifically.

Speaker Change: Parts and service turn positive again, so two part question. Thank you.

W.M. Rush: You got it. Andrew, it's going to be an interesting year. The H1 of the year, we're still seeing the lingering effects of the freight recession, okay? Without question, here in Q1. We are seeing signs of activity, right? Regardless of what the numbers showed, like in December, the order numbers were down in January. We are seeing the last few weeks signs of activity that don't tell me that we're going to get better in the over-the-road business in H2. Vocational businesses are still strong. We believe that, I think if you check with the large over-the-road guys, they're starting to get low single to maybe up to trying to get maybe to mid-single digits on the contracts that are coming up. That has to take hold, right? That has to take effect, right?

Speaker Change: Got it no Andrew it's going to be an interesting year.

The first half of the year, we're still blades and the lingering effects of the freight recession okay.

Speaker Change: Without question, there and diverse war.

Speaker Change: We do expect though but we are seeing signs of activity right regardless of what the numbers show dug in December than they are in order numbers were down in January we are seeing in the last few weeks the signs of activity.

Speaker Change: That show dogs Jeremy.

Speaker Change: We're going to get better in the over the road business in the back half vocational business as our sales grow.

Speaker Change: But we believe that.

Speaker Change: You are getting I think if you check with a large over the road guys, they're starting to get those same.

Speaker Change: What's.

Speaker Change: Trying to get maybe the mid <unk>.

Speaker Change: Double digit on the contracts that are coming up so that has to take whole right that has to take effect right.

W.M. Rush: It just isn't going to happen overnight. It shows it may breed confidence in the over-the-road carriers and the fact that, okay, we for sure bottomed out in the back half of last year like we talked about and prior. Well, now we start getting confidence going forward, and where we're at going into later into this year. Then I'll talk a little more in a minute, if someone would like me to, about what we see when it comes to the government regulations and all with everything up in the air right now. I do believe, I'll get to the parts and service here in a second. I do believe that when you ask about what the year's going to look like, the year's going to ramp up from beginning to the end. Okay?

Speaker Change: It doesn't happen overnight, but it shows <unk> confidence in the over the road carriers and the fact that okay. We are.

Speaker Change: Sure bottomed out in the back half of last year like we talked about we're talking about in prior well now we started getting confidence going forward.

Speaker Change: Where we're at going into.

Speaker Change: What's going on and the later this year and then I'll talk a little more in a minute is somewhat likely to about what we see when it comes to the government regulations at all with everything up in the air right now.

Speaker Change: But I do believe they will get to the parts and service and I do believe that when you ask about what the year is going to look like three years to ramp up from the beginning to Oems.

W.M. Rush: A tougher start, but I do see and believe that by the time we get into the back half of the year, we're definitely going to be on the upswing. I looked at the overall deliveries in retail in the US in January, we're down 2,000 units from last January. As you know, it's only a couple thousand, you are starting a little softer in January from where you were last year. We do firmly believe that the back half of the year will continue to ramp up, and I think that it's hard to talk about pre-buys and all because we have too many regulation uncertainties out there, which I don't mind getting into if someone would like in a minute, that we have to figure them out. We have to see what the government does right after the administration.

Speaker Change: Tough or tougher start, but I do see and believe that by the time, we get into the back half of the year, we're definitely going to be on the upswing.

Speaker Change: Again, when it comes to.

Speaker Change: Look at the overall deliveries in retail in the U S. In January were down 2000 units from last January So I think it was.

Speaker Change: So a couple of thousand you are starting.

Speaker Change: A little softer in January from where you were last year, but we do firmly believe that the back half of the year. We will continue to ramp up and I think that you still it's hard to talk about pre buys and all.

Speaker Change: Because we got so many regulation uncertainties out there, which I don't mind getting into somewhat of a lag in a minute.

Speaker Change: There is still debate.

Speaker Change: We've got to figure out.

Speaker Change: What the government does right. After the administration has only been in office, what 30 days now the New administration, and obviously I don't know.

W.M. Rush: Has only been in office, what, 30 days now? The new administration, obviously I don't have to tell everyone that there's a lot of uncertainty as to how a lot of things, whether it's tariffs or EPA regulations or any of this stuff, are going to shake out right now. We've got thoughts about it, not sure. I do believe that overall it's going to be a ramp up throughout the year from beginning to end. Maybe, with a better close than what we had in 2024, that would be my plan. The H2 definitely should be stronger than the 2024 H2, H1. We're just going to have to work our way through it. We had to work last year extremely hard. If you remember, I always called it hand-to-mouth, man.

Speaker Change: One that there is a lot of uncertainty as there are a lot of things, whether it's tariffs or EPA regulations or any of this stuff.

Speaker Change: Shake out right now we've got thoughts about it but I'm not sure, but I do believe that.

Speaker Change: Overall, it is going to be a ramp up throughout the year from beginning to layer.

Speaker Change: Maybe.

Speaker Change: With a better close than what we had in 24 that would be my plan for the back half will definitely should be stronger than the 20 more back half on half. We've just got to work our way through it look we had been last year extremely hard and you remember I was called at hand to mouth map, we were back in a normal regular times, where you can get it.

W.M. Rush: We were back in normal, regular times where you didn't have allocation, right? You were working to get trucks, and you could get them in 60 to 90 days. Well, guess what? That's still the environment we're in right now. From a parts and service perspective, it goes right along with what I see from when I talk about where we're at, it goes right along with truck sales, to be honest with you, ramping up throughout the year. I do think we may get a little bit more inflation, which will can have sometimes a positive effect on parts and service totals when you get through them all. We'll have to see how that all shakes out again. We do believe that it will ramp up. We will get up into maybe not the H1 of the year.

Speaker Change: And you didn't have allocation right.

Speaker Change: We're going to get trucks, when you can get them at a 60 to 90 days well guess what.

Speaker Change: The environment, we're in right now.

Speaker Change: From a parts and service perspective.

Speaker Change: Please go ahead with his goes right along with what I see.

Speaker Change: From when I'm talking about where we're at right around the cross sales to be honest with ramping up throughout the year.

Speaker Change: Do you think we may give a little bit more inflation.

Speaker Change: Which will have didn't.

Speaker Change: Didn't have.

Speaker Change: Sometimes a positive effect from parts and service.

Speaker Change: Totals when you get through them, all but we will have to see how that all shakes out again, but we do believe that it will ramp up we will gear up and maybe not the first half of the year I would really like I said the first few months is fairly flat.

W.M. Rush: I look for, like I said, the first few months fairly flat. Ramping up to mid-single digits and growth when we get into H2 is how I'd look at it. You want to do more, but right now I want to be conservative in my outlook. I'm not one to really get out over my skis too far, as you've known me for 28 years. We have confidence that we'll be all over the market as it begins to ramp back up, and we'll continue to drive. There's still runway left in a lot of our strategic initiatives, and we're always working on others behind the scenes that I may not talk about.

Speaker Change: But ramping up to mid single digits.

Speaker Change: Growth when we get into the back half of the year as I look at it.

Speaker Change: Wanted to do more but right now I don't want to give you are being conservative in my outlook not wanted to really get out of it.

Speaker Change: My skis too far.

Speaker Change: For 28 years.

Speaker Change: So, but we have confidence that will be all over the market.

Speaker Change: It begins to ramp back up and we will continue to grow.

Speaker Change: Drive will slow that there's still runway left.

Speaker Change: And a lot of our strategic initiatives and we're always working on others.

W.M. Rush: Anyway, that would be my take on the year, and it's pretty similar on both sides, ramping up, especially once we get settled down with all these uncertainties that are out there right now.

Speaker Change: Behind the scenes that I talked about so anyway that would be my take on the year is pretty similar both both sides ramping up, especially once we get settled out with all these uncertainties that are out there right now.

Andrew Obin: Rusty, just a follow-up question. As things ramp up, as G&A was one of the sources of upside in the quarter, how do we think about as G&A control as you ramp into the next cycle? Will it look similar to the prior cycle, or are there any incremental savings as you get efficiency? That will be it for me. Thank you.

Speaker Change: And just a follow up question as things ramp up how should we think about.

Speaker Change: SG&A was one of the sources of upside in the quarter, how do we think about SG&A control as you ramp into the next cycle will it look similar to the prior cycle or.

Speaker Change: Are there any incremental savings as you get efficiency and that will be it for me. Thank you.

W.M. Rush: There you go. Put the heat on me on G&A. Remember one thing. S is S. S is directly tied to the sale of trucks. Okay? We run the business off of G&A. Our S is going to be in that 25% range or so all the time related to the gross profit of trucks. The G&A piece is what we manage on a daily basis. You could look back, that was a big contributor this last year. Big contributor. We were down almost 5%. We were down 4.9% year over year in Q4. If I'm not mistaken, it was similar, I feel like 7% in Q3, and we were sequentially flat with Q3 and Q4, but Q3 was down like 5.2%, if I remember right, over Q2. We did an outstanding job, from my perspective, in managing that G&A.

Speaker Change: Eric You go put the heat on me on DNA remember went back as SaaS answer directly tied to the sale of drugs.

Speaker Change: So we run the business, our G&A are going to be.

Speaker Change: 25% range or so all the time related to the gross profit of trucks.

Speaker Change: The G&A basis.

Speaker Change: Manage on a daily basis, I mean, you can look back at that was a big contributor of this last year big contributor.

Speaker Change: We were down almost 5%, we've got four 9% year.

Speaker Change: Year over year.

Speaker Change: In Q4, if I'm not mistaken it was similar.

Speaker Change: I feel like server user.

Speaker Change: Sequentially, we were sequentially flat with three and four but <unk> was down.

052, if I remember right over two so we didnt outstanding job from my perspective, and managing that G&A as it ramps up as you ramp up parts and service.

W.M. Rush: As it ramps up, as you ramp up parts and service, it's not like loaning cash or loaning money to someone. It does come with a G&A expense. Our goals will be to try to keep of a gross profit dollar recreated on the back ends, we're going to try to keep 40% or so of that. I've got a goal to keep 50 or more, but typically, it averages out. If you go in the ramp-up period over a 3-year cycle, it'll average out in that 40% range to 50. We're handling parts, we're doing this, we're doing that, we're working with whole goods, right? It takes people to do all that work. That's a great situation to be in. If we can stay close to that 50% number in a ramp-up period, then I will be very happy about it.

Speaker Change: Cash relevant money to somewhat it does cut was in G&A expense and our goals will be to try to keep.

Speaker Change: The gross profit dollar recreated on the backend is we're going to try to keep 40% or so.

Speaker Change: I've got a goal to keep 50 or more but typically.

Speaker Change: Averages out if you go in their ramp up period on work over a three year cycle to average out in that 40% range.

Speaker Change: Because we're handling parts we're doing this we're doing that.

Speaker Change: Working with whole goods right. So.

Speaker Change: It takes people to do all that work, but thats a great situation to be in.

Speaker Change: Can stay close to that 30% number and a ramp up period.

Speaker Change: Then I will be very happy about it.

W.M. Rush: We're looking for that, okay. I'm looking to get back. We were 135 down to 132 in absorption, and that's a direct correlation, obviously, with gross profit on parts and expenses. We lost some gross profit last year, but we managed our expenses well to keep it that tight of a number to produce a year like that, when you're going negative on your parts and service. That's not easy. Okay. I would expect us to even do a better job. I'm not going to get into specifics as to why I believe that, but the world continues to evolve. e-commerce continues to evolve, which actually helps when it comes to expenses. It's not all the way there, but it's only going one direction. Always, we should be able to do business, hopefully cheaper, okay, in the future. It's not all the way there yet.

Speaker Change: And we will continue we're looking for that okay.

Speaker Change: Im looking to give back 135 down to 132 on absorption and that has a direct correlation obviously with gross profit and margin growth.

Speaker Change: Answers.

Speaker Change: We lost some gross profit last year, but we managed our expenses well to keep at that type of a number to produce a year like that winter going negative on your parts and service and <unk>.

Speaker Change: So I would expect us to even do a better job.

Speaker Change: To get into specifics as to why I believe that.

Speaker Change: But the world continues to evolve.

Speaker Change: Commerce continues to evolve, which actually helps when it comes to expenses is not all the way there, but it is only going one direction. So always we should be able to do business hope way cheaper.

Speaker Change: In the future, it's not all the way there yet or in the truck business.

W.M. Rush: We're in the truck business. We're not in the most highly technical business in the world. It is evolving, and I think there will be opportunities for us to take some of that normal what we see in expenses, when the cycle ramps up. Hopefully, we'll be able to take some of that out, with technology as we move forward. It's not ever going to go all the way, but at the same time, we ought to be able to do a better job of trying to squeeze those expenses. We still have 390 outside salespeople, right, on the parts and service side. They're not going away. I can see a shift in our business. Now, this is over a longer period.

Speaker Change: And the most highly technical business in the world. So, but it is evolving and I think there will be opportunities for us to take some of that normal what we see in expenses.

Speaker Change: When the cycle ramps up hopefully, we'll be able to take some of that out.

Speaker Change: Technology as we move forward, it's not ever going to go all the way, but at the same time, we ought to be able to do a better job.

Trying to squeeze those expenses, but it's still we still have 390 outside salespeople right on our parts and service side. So they are not going away.

Speaker Change: But.

Speaker Change: Business I can see a shift in our business now this is over a longer period.

W.M. Rush: It continues to shift right now more towards e-commerce, et cetera, which you would hope you could take some costs out, but it can also make it a more competitive landscape, too. There's a yin and a yang there that you've got going with it. I know I'm giving you a long-winded answer, but you're used to my long-winded answers. Trust me, I think we'll do a better job on G&A and the ramp-up than we have this quarter.

Speaker Change: Two.

Speaker Change: It continues to shift right now more towards e-commerce, et cetera, et cetera, which we would hope you could take some costs out but it can also break and make it a more competitive landscape too so there's others.

Speaker Change: Amy Yang there, we achieved Scott going with it but I know I'm, giving you a long winded answer, but youre used to my long winded answers.

Speaker Change: So <unk>.

Speaker Change: Trust Me, we'll we'll I think we'll do a better job on G&A and the ramp up than we have.

Andrew Obin: Thanks so much.

Speaker Change: Sure.

Speaker Change: Thank you so much.

W.M. Rush: You betcha, friend.

Operator 2: Thank you. One moment for our next question. Our next question comes from the line of Daniel Imbro of Stephens. Your line is now open.

Speaker Change: Okay.

Speaker Change: Thank you Amit for next question.

Speaker Change: Our next question comes from the line of Daniel Ambarella of Stephens. Your line is now open.

[Analyst] (Stephens): Thanks. Morning, everyone. This is Brady on for Daniel. Rusty, I wanted to start by asking about your different end markets. You've talked about how resilient vocational has been for you in recent years. How did that market end the year? While you've talked about how Class 8 fleet sales probably likely take until the back half to recover, how are you thinking about that vocational side of the business in 2025? We believe it'll still remain strong. I would say we're starting to fulfill some of that, but there is still strength in vocational. Our construction business, I could possibly see, I can't believe I'm even saying this, a little more in the oil field pickup, which we haven't had, to help offset anything else. The refuse business is still strong in 2025. I see vocational remaining strong.

Speaker Change: Yes. Thanks. Good morning, everyone. This is Brady on for Daniel Rusty I wanted to start by asking about your different end markets you talked about how resilient vocational has been for you in recent years, how did that market in the year.

Speaker Change: While we talked about how class eight fleet sales, probably likely take until the back half to recover how are you thinking about that vocational side of the business in 2025.

Speaker Change: Okay. Yeah, no. We believe it is global remains strong.

Speaker Change: We haven't seen.

Speaker Change: Yeah.

I would say, we're starting to fulfill some of that but there is still strength in vocational.

Speaker Change: I mean are we in our construction business.

Speaker Change: Possibly see if I can.

Speaker Change: I believe I am saying there is a little more in the oilfield pick up which we have on that.

Speaker Change: Sure.

Speaker Change: Offset anything else the refuse business is still strong.

Speaker Change: In 2025.

Speaker Change: So I mean.

Speaker Change: I see.

W.M. Rush: Maybe not as deep or as big a backlog right at the moment, but still strength in demand, right? Because you had a transmission issue for a while a year ago that actually pushed, and we weren't able to get to all of it. Now we're chewing away at that, but we still got good demand. You never know, like I said, it's crazy for me to think with oil and gas, what, the last 4 years, that was a bad word. You're obviously with a different administration there, you're seeing some activity around that sector, too, which we haven't had. I feel pretty good about it. Again, though, look, we're not backlogged. You can build this up in 60 days if you wanted, okay? It's not like we've got these huge 1-year backlogs like we had in 2023. Okay? That's not the case at all.

Speaker Change: Locations remaining strong maybe not as deep as biggest backhaul right at the moment, but still strength and demand right. So because you had a.

Speaker Change: And you might remember you had a transmission issue for a while a year ago that actually pushed and we weren't able to get all of it now we're chewing away at that but we still got good demand.

Speaker Change: You never know.

Speaker Change: It's crazy for me to say.

Speaker Change: With oil and gas.

Speaker Change: The last four years.

Speaker Change: That was a bad word but.

Speaker Change: Obviously within memory administration, there youre seeing some activity around that sector, which we haven't had.

Speaker Change: So.

Speaker Change: Pretty good about it.

Speaker Change: Again, though look worse, we're not backlog.

Speaker Change: Bill just 60 days if you wanted.

Speaker Change: It's not like we've got these huge one year backlogs like we had in 2003.

W.M. Rush: There's no such thing as allocation. There's plenty of opportunity to build trucks out there right now because, most factories, I don't believe, are running at full tilt at the moment. I mean, they're running, you have to run. There's no shutdown days or things like that. They could ramp up build, if demand came in line, which is something Remember, in this industry, when demand hits that over the roadside, it happens fast, and it happens really quick. As we get into H2 of the year, I wouldn't be surprised to see, I'm not going to call for allocation in 2026 yet, but I could see it getting there. A lot has to do with regulations and things. Back to your original question, vocational is still strong, man. We feel good about it.

Speaker Change: Not the case at all so there is no such thing as allocation as there is.

Speaker Change: An area of opportunity.

Speaker Change: Build trucks out there right now.

Speaker Change: Most factories I don't believe were running at full tilt at the moment.

Speaker Change: The shutdown days and things like that but they could wrap up build.

Speaker Change: If demand came in line, which is I think remember in this industry when demand hits that over the road side <unk>.

Speaker Change: Fast.

Speaker Change: And that was really quick so as we get into the back half of the year.

Speaker Change: Wouldnt be surprised to see.

Speaker Change: Do you know.

Speaker Change: I'm not going to call for allocation in 2006, yet.

Speaker Change: I could see it getting there a lot.

Speaker Change: It has to do with regulations.

Speaker Change: And things, but back to your original question vocational skills wrong then.

Speaker Change: So we feel good about it.

[Analyst] (Stephens): Okay, great. Thanks for that color. I wanted to switch gears a bit for my second question and see if we could touch on medium duty. Medium duty's been very strong for you guys in recent years. Could you just talk a little bit about what's driving that strength and what you're expecting from medium duty in 2025?

Speaker Change: Okay.

Speaker Change: Okay, great. Thanks for that color I wanted to switch gears a bit for my second question and see if we could touch on medium duty medium duty has been very strong for you guys. In recent years can you just talk a little bit about what's driving that strength and what youre expecting for medium duty in 2025% sure what drove X right now listen we went into the <unk>.

W.M. Rush: Sure. Well, what drove that strength? Now, listen, we went into the year, medium-duty had a big backlog, right? They chewed away at it. It all happened, you have to go back when we had supply issues in 2022 and 2023, because manufacturers that built both medium-duty and heavy chose to take componentry and put it towards heavy because they make more money on it. Well, you had pent-up demand. Medium-duty was really stretched out. They weren't running them as fast and hard to manufacture to do both. Well, guess what? Once Class 8 slowed down last year, they chewed out the medium-duty backlog. Medium-duty right now is just like Class 8. I can get you one in 60 days, okay? It's not that hard to get a medium-duty truck at the moment.

Speaker Change: Medium duty was had a big backlog right.

Speaker Change: Good away at it.

Speaker Change: It all happens you have to go back when we had supply issues in 'twenty two 'twenty three because.

Speaker Change: Manufacturers that <unk> built both media and have each of us to take componentry and put it towards heavy because they make more money on it.

Speaker Change: That has that game.

Speaker Change: So you had pent up demand we medium duty was really stretched out they were running them as fast and hard to manufacturers to do both well guess, what once class a slowdown last year in Rome.

Speaker Change: A few that medium duty backlog so medium duty right. Now is just like class eight gives you 60 days okay.

Speaker Change: Not that hard to get a medium duty truck at the moment. So while we expect I've mentioned in the call.

W.M. Rush: While we expect, I mentioned in the call, I know that, ACT has medium duty up 5 something percent. Kenny's a great friend of mine. I'm not sold on all that right at the moment, for 2025, to be honest. That's just a personal opinion. I do expect, we're going to have a good year. I know in the H2 we've got some good stuff working in the Q4, but that's a particular transaction. We still should remain I expect to be flat, if you want to know the truth, in medium throughout the year. That would be about where I would think our medium duty. That's strong. Like you said, we've had strong results. I expect it to remain strong. Is there a lot more to give this year there? I don't think so. I don't see it right now.

Speaker Change: No.

Speaker Change: And ACP as medium duty five something percent.

Speaker Change: Canada is a great friend of mine I'm not sold all of that right at the moment.

Speaker Change: For 2005 to be honest. This is the first of all about it but I do expect we're going to have a good year.

Speaker Change: We've got some I know in the back half with Smbs that bucket in the fourth quarter, but thats.

Speaker Change: Particularly our transaction.

Speaker Change: But we're still should remain.

Speaker Change: I expect to be flat, if you want to know the truth and mediums throughout the year that would be about where I would think our meeting. So that's wrong like you said with very strong results I expect from the Marine stock is there a lot more to get this year there.

W.M. Rush: Because we've caught up with that pent-up demand that was created by medium duty not being the focus, but Class 8 being the focus of the supply side, because the supply side's caught up, so medium duty's caught up. There's still good demand out there. It's just you don't have these pent-up big backlogs like you used to have. I hope that sheds a little color on it. Personally, I'm thinking it's going to be probably flat. I do expect to be somewhat back-loaded, okay? Especially in H2. I'm not sure about medium, I can say that for sure. For sure, on the backlogs in H2, back to Class 8, that's what we talked about ramping up quite and through, hopefully, ramping up throughout H2 of the year.

Speaker Change: So I don't see it right now but.

Speaker Change: Because we had caught up with that pent up demand that was created by medium duty not being the focus of our class eight being the focus of the suppliers that is a byproduct caught up so medium duty is caught up so but there's still good demand out there.

Speaker Change: Just you don't have these big backlogs like we used to have so I hope that adds a little color on it. So I'm just personally taken it is going to be probably flat.

Speaker Change: Both sides, but I do expect.

Speaker Change: To be somewhat back loaded okay, especially in eights im not sure about medium I can say that for sure.

Speaker Change: But for sure.

Speaker Change: Backlogs in the back half.

Speaker Change: Back to the eight that's what we've talked about ramped well acquire and drove that hopefully ramp again throughout the back half of the year.

W.M. Rush: Medium duty, probably pretty constant through the year. Looking at a flat year-over-year.

Speaker Change: In medium duty, probably pretty constant during the year.

Speaker Change: But looking at a flat year over year.

[Analyst] (Stephens): Okay, great.

W.M. Rush: Where we need.

[Analyst] (Stephens): Thanks for.

W.M. Rush: Yeah. You're welcome.

Speaker Change: Okay, great thanks for that yet.

[Analyst] (Stephens): Yeah, go ahead, Rusty. Okay.

W.M. Rush: As I said, I'd like to talk about it in a minute. There's another call. I'll ramble on here in a minute about some of the uncertainties and things that are out there that will really dictate the year right now. I have confidence in the year, but there are things surrounding our environment, just like there have been the last 30 days, that we're all waiting to get clarity on. With regulations, tariffs, and all that wonderful stuff, which can create a little bit of hesitation for folks out there. I did say, as I mentioned earlier, we're seeing some activity better in the last couple, 3 weeks, in spite of all the non-clarity.

Speaker Change: Go ahead <unk>.

Speaker Change: Okay.

Speaker Change: And as I said and I'd like to talk about it and then Theres another GUL Ahmad.

Speaker Change: I'll ramble on here in a minute about some of the uncertainties and things that are out there that will really dictate the year right now.

Speaker Change: I have confidence in the year, but there are things surrounding our environment just like there had been in the last 30 days.

Speaker Change: We're all waiting to get clarity on.

Which regulations.

Speaker Change: So all of that wonderful so that which.

Speaker Change: It can create.

Speaker Change: A little bit of hesitation for folks out there, but I would say as I've mentioned earlier, we're seeing we're seeing some activity better in the last couple of weeks in spite of all the non <unk>.

W.M. Rush: That's not real clear to me, as the uncertainty about where rules and regs and how things are going to fall out here, which have a very direct correlation on the decisions that the business people make inside their truck businesses. My voice is not good.

Speaker Change: Okay.

Speaker Change: It's not real clear EMEA asset the uncertainty about where rules and regs and how things are going to fall out here, which have a very direct correlation on the decisions the business people make inside their drug business.

[Analyst] (Stephens): Maybe if I could just.

Speaker Change: Okay.

W.M. Rush: Go ahead.

Speaker Change: Maybe if I could.

[Analyst] (Stephens): One quick final one.

Speaker Change: Maybe if I could just one quick one quick final one.

W.M. Rush: Sure, go for it.

[Analyst] (Stephens): You've built a lot of cash on the balance sheet in recent quarters. Can you just talk about uses of cash, Rusty? Are you seeing anything in the M&A pipeline? What are you seeing there for 2025?

Speaker Change: You've built a lot of cash on the balance sheet in recent quarters can you just talk about use of cash Rusty or are you seeing anything in the M&A pipeline kind of what are you seeing there for 2025, well MMA as always by one.

W.M. Rush: Well, M&A is always my first option to spend. We have committed for 7, 8 years, 9 years, we've committed to return 35% and 40% back to shareholders, which we've been doing. Some years might be 50%, some might be 30%. It just depends. We try to be opportunistic in repurchasing. We've been consistently raising our dividend, 8%, 9%, 10%, somewhere in that range. We raise it the second Q2, we take a look at it. Yeah, we're in pretty good shape. For your information, we redid all our credit lines in December and got a 5-year run on all that has got us set up. If we need, we can pull cash. We got good cash on the balance sheet, and I have great structure to get cash if needed quickly. We're set up to do M&A, we just got to find it, right?

Speaker Change: To spend money right, we have a committed shoot for seven or eight years nine years, we committed to returning 35%, 40% back to shareholders, which we've been doing some unit.

Speaker Change: Is it might be 30, it just depends on how we try to be opportunistic.

Speaker Change: We had repurchasing.

Speaker Change: We've been consistently raising our.

Speaker Change: Thanks, David.

Speaker Change: Eight 910% somewhere in that range, we raise it in the second year to date and so I think in Q2.

Speaker Change: Take a look at it.

Speaker Change: Yes, we're in pretty good shape.

Speaker Change: We re.

Speaker Change: For your information, we redid all of our credit lines.

Speaker Change: In December and got a five year run on all of that has got to set up.

Speaker Change: Need.

Speaker Change: Weakening we can push we can pull cash we have a good cash on the balance sheet.

Speaker Change: Rate structure to get cash if needed quickly. So we're set up to do M&A, but you've got to find the right and trust me that responsibility falls on me.

W.M. Rush: Trust me, that responsibility falls on me. I probably need to find a couple deals that do work for us. I don't have anything imminent, and I wouldn't tell you if it did. Why I say that, am I always looking? Am I talking to other people? You better believe it. There's nothing huge. There's some small deals. We've added a store up in Nebraska, a couple stores in Nebraska back in the summer. Really haven't added anything but Greenfield since, a couple of Greenfield places. Yeah, I'm always in conversations, but as I said, even if it was imminent, I probably wouldn't tell you. That is the first choice of cash, and then the second choice is return to shareholders.

Speaker Change: We need to get it signed a couple of deals that do work for us I don't have anything imminent I wouldn't tell you, but there.

Speaker Change: So what.

Speaker Change: But what I can say that <unk> always looking at talking to other people you better believe it but theres nothing huge there is some small deals where we've added a score up in Nebraska, the Gulf of scores in Nebraska back in the summer really have mattered anything, but greenfield SaaS couple of Greenfield places, but yes, I am always in conversations, but as I said even.

Speaker Change: If it was eminent I probably wouldn't tell you.

Speaker Change: So that is the first choice of gas in the second choice is to return to shareholders we didn't.

W.M. Rush: We didn't repurchase as much last year as we did the prior year, but understand our approval is, we approved it on 1 December. When I look at what we repurchased last year, I throw in a $65 million repurchase that we had in December 2023. Really after that prior, when we approved, we approved for new $150 million every 1 December. We are repurchasing currently. Every day we're doing our 10b5-1. We repurchase and acquire very consistently all the time right now. I would expect our repurchase, unless I spend it on M&A, will be more than the calendar year 2024. Should probably end up being more, I'm pretty sure, I know it will, in 2025.

Speaker Change: We purchased as of March last year, as we did the prior year, but understand our approval.

Speaker Change: We improved on the first of December so.

Speaker Change: When I look at what we've repurchased last year and throw in a $65 million repurchase that we had.

Speaker Change: In December of 'twenty.

Speaker Change: Three and really master that prior when we approve we prove we approved a new $150 million number one December. So we are repurchasing currently everyday we do our 10 B vial. So.

Speaker Change: We repurchased Nook library consistently all the time right now so I would expect our repurchase.

Speaker Change: As I spend it on M&A will be more than the calendar year 'twenty four should probably be end up being more I'm pretty sure that nor will in 2025, because we still believe.

W.M. Rush: Because we still believe, outside of handing shareholders a dividend, but repurchasing our stock is a clear direction from management in the belief in this organization. We've shown that throughout the last 8 or 9 years, consistently doing it, and we will consistently do it and continue, because I still believe we're a great value, and we've got a lot in front of us. There you go. There's your cash answer.

Speaker Change: Given you have any shareholders a dividend with repurchasing our stock.

Speaker Change: Cleared.

Speaker Change: Direction from management and the belief in this organization and we've shown that throughout the last eight or nine years consistently doing it and we will consistently do it and continue because I still believe we're a great value.

Speaker Change: And we've got a lot in front of us.

Speaker Change: There you go Thats cash answer.

[Analyst] (Stephens): Okay, great. Thanks for all the time this morning, Rusty. I'll pass it along.

Speaker Change: Okay, great. Thanks for all the time this morning, Rusty El Paso aggressive upfront.

W.M. Rush: Appreciate you, my friend. You bet.

Speaker Change: Beth.

Operator 2: Thank you. One moment for our next question.

Speaker Change: Great.

Speaker Change: Thank you Juan for next question.

Yeah.

W.M. Rush: Hello.

Operator 2: Our next question comes from the line of Avinatan Jaroslawicz of UBS. Your line is now open.

Speaker Change: Our next question comes from the line of Ross <unk> of UBS. Your line is now open.

Avinatan Jaroslawicz: Hey, good morning.

W.M. Rush: Good morning.

Speaker Change: Hey, good morning.

Speaker Change: Good morning.

Avinatan Jaroslawicz: Sounds like you're interested in talking about some of the policy uncertainties, interested in unpacking some of that. Starting with the emissions regulations and the engine changeover, what are the latest conversations with customers looking like around the pre-buy? You hearing any more uncertainty or less?

Speaker Change: It sounds like you're interested in talking about some of the policy uncertainty so interested in unpacking some of that.

Speaker Change: Starting with the emissions regulations and the engine changeover.

Speaker Change: What are the latest cut.

Speaker Change: Conversations with customers looking like around the pre buy you are hearing any more uncertainty or less yes.

W.M. Rush: Yeah. Well, it's interesting, right? You got to know a map, right? When you go someplace and you're going into unknown territories, it's always good to have a map where you're going. Well, we thought we had a very clear map as to where things were headed, as clear as mud is anyway, as to what was going to happen and what happened in 2024 in California, what was going to happen in 2027. Well, I'm going to tell you, I'm going to speak like I'm a customer, because I am a customer. Okay. I'm the middle guy. I am a customer also. Clarity, not right now.

Speaker Change: It's interesting right because.

Speaker Change: You got a map right when he goes to a place.

Speaker Change: Youre going to unbound territories, it's always good to have a go.

Speaker Change: Sure.

Speaker Change: Well, we thought we had a very clear map as to where things were as clear as mud is anyway as to what what was going to happen and what happened in 2004 in California, what was going to happen in 2007, while the new.

Speaker Change: I'm going to speak like customer because I am a customer.

Speaker Change: Okay, and middle Guy I am a customer also so clarity.

W.M. Rush: If you look back in the last, back in, prior to the new administration coming on, ACF or clean trucks, that was for our customer base, where they were going to have to roll in electric, BEV trucks and stuff over a time frame. That was thrown out. Okay. Right now, as of last Friday, for Valentine's Day, the EPA is challenging ACT or clean truck, which affects all the OEMs. They're going to have to sell this many electric, can do this much, all these rules and regs. I'm not going to get into all the detail or I got three or four people on my staff that are way more intelligent about it than I am. I know just enough to be dangerous. Okay. That is up in the air because it got approved outside of Congress.

Speaker Change: Right now as you look back in the last.

Speaker Change: So back in.

Speaker Change: Prior to the new administration coming on Acs, where a murder, whereas <unk> trucks that was for our customer base.

Speaker Change: We're going to have roll in electric Bev trucks and stuff over a timeframe that was thrown out okay.

Speaker Change: Right now as of last Friday for Valentine's Day.

Speaker Change: The EPA is challenging.

Speaker Change: Or clean drop.

Speaker Change: Which affects all of the Oems, which is how they're going to have to sell this many electric can do this much.

Speaker Change: Always rules and regs I'm not going to get it all detailer I got a lot of terrific people on my staff in a way more intelligent about it than I am I know just thereof.

Speaker Change: Dangerous.

Speaker Change: So that is up in the air because it got approved outside of Congress should have been approved in Congress. So theyre, taking it to Congress our sorts itself, that's the new administration, which is obviously.

W.M. Rush: They're saying it should have been approved in Congress, so they're taking it to Congress. Now, how it all sorts itself out, that's the new administration, which is obviously totally different than the prior administration. Okay. They're promoting, big promoters. While it's still, we understand there's an environment issue, but they're staying with carbon fuels for longer, right. While we still work on the technology piece, which in truth is the right thing. I don't know how it's going to shake out. I don't expect the diesel emissions regs that are in place to go into place in 2027 to change. I think it could line up. You had a .2 and a .35. I personally think. I could be wrong. They'll probably end up settling, and this is just my personal opinion, and then going and aligning it at those 35.

Speaker Change: Totally different than the prior administration, okay. Therefore rory.

Speaker Change: Big promoters, while still we understand there is an environment issue, but.

Speaker Change: Okay.

Speaker Change: Stay well.

Speaker Change: Carbon fuels for longer but while we can still work on the technology piece, which Andrew is the right thing. So I don't know how its going to shake out.

Speaker Change: We expect.

Speaker Change: The diesel emissions regs.

Speaker Change: Place to go into place in 'twenty two.

Speaker Change: To change.

Speaker Change: Thank you.

Speaker Change: Could could lineup we already at a point to an appointment was three five.

Speaker Change: Personally they.

Speaker Change: I could be wrong, probably ended up settling and has it's just my personal opinion.

W.M. Rush: Well, that's still, you've got to clean it up more. Okay? Remember, we're just talking about diesel. It's still diesel. We're taking the BEV piece and taking the electric piece and pushing it out. That's what's going to happen. That, then taking some of your greenhouse gas stuff, and which is tied to the BEVs in 2030 and all these other years, I expect all that to get stretched out. That's my opinion, okay? I do expect the new rules and regs around diesel to stay. Now, are they going to stay in the same context the way they're written now, where you've got these huge, long warranties on after-treatment, that have never existed? That take up a lot of the cost. You're talking, nobody's really given a price of that. They're like all manufacturers. All manufacturers wait and then surprise you.

Speaker Change: Aligning those refi, while Thats still you got to clean it up more okay per member.

Speaker Change: Just talking about diesel is still diesel we're taking the best fees and data and the electric piece and pushing it out that's what's going to have taken.

Speaker Change: <unk> taken several your greenhouse gas steps and which is tied to the beds and 2030 and all these other years I expect all of that to get stretched out.

Speaker Change: My opinion, Okay, I do expect leverage.

Speaker Change: Wasn't regs around diesel.

Speaker Change: Now because they are going to stay in the same context the way they are written now.

Speaker Change: <unk> got this huge long warranties on after treatment.

Speaker Change: That have never existed there.

Speaker Change: Take up a lot of the cost.

Speaker Change: Childcare.

Speaker Change: Nobody has really given the price of.

Speaker Change: Golf manufacturers at all May record weight, and then some projects, but we're talking about 15 to $20000.

W.M. Rush: We're talking, what, $15,000, $20,000, and with after-treatment. Now, a lot of that is around them, is written in, is because of the warranties. Could those change? I hear rumors all the time that they might change a lot of that cost. That would change some of the costing of it. I don't know that it will or it won't, but all those types of issues are what are going to be vetted here pretty quickly. We've been cleaning diesel up for a long time. Go back to 1988. 60 trucks today produce what one truck produced back then when it comes to NOx and things like that. That's a crazy number to me. We cleaned it up in 2004. We cleaned it up in 2007. We cleaned it up in 2010. We're going to clean it up again.

Speaker Change: With after treatment.

Speaker Change: None of that is around the breakdowns because of the warranties could those two those change.

Speaker Change: Resolve its high.

Speaker Change: Right.

Speaker Change: They might change a lot of that cost so that would change some of the costing of it.

Speaker Change: I don't know very well at Walmart, but all of those types of issues.

Speaker Change: Are what are going to be vetted here pretty quickly.

Speaker Change: We are still low.

Speaker Change: We've been cleaning diesel up for a long time.

Speaker Change: Go back to 1988.

Speaker Change: 60.

Speaker Change: 60 trucks today.

Speaker Change: What one truck produced back then when it comes to Nox and things like that that's a crazy number of clean we cleaned it up in all four we cleaned it up another seven between ended up in 2000, and so we're going to clean it up again.

W.M. Rush: We're going to slow down what those numbers turn out to be, what those warranties, I can't tell you yet, because that was Friday. It was Happy Valentine's Day. Later, they just announced, the EPA did, that they're going to try to run this all back through Congress. The OEMs have spent way too much money on this after-treatment stuff, preparing for this. I don't see it going away. All we're doing is cleaning up diesel, man. We've done it a lot. We've done it for decades, okay? There's nothing, that's the right thing to do. The right thing to do is to do that, push out some of these BEV requirements, because they're way ahead. Look, I'm sorry, I'm just talking plain. We got 120 years.

Speaker Change: But we're going to slowdown.

Speaker Change: Those numbers turn out to be what those what is I can't tell you yet because that was Friday happy Valentine's day.

Speaker Change: Later, they just announced the EPA did that theyre going to try to run this all back to Congress.

Speaker Change: Alright.

Speaker Change: <unk> have spent way too much money.

Speaker Change: After treatment stuff preparing for this but I don't see it going away.

Speaker Change: Yes.

Speaker Change: All we're doing is cleaning up data that we've done it a lot we've done it for decades. Okay. So there is nothing thats the right thing to do the right thing to do is to do that push out some of these bad requirements. Because they are way ahead, I mean look we got a 100 and the scrap just talking Blaine, we got 120 years.

W.M. Rush: 120 years of infrastructure around internal combustion, and we're going to change it in 6, 7 years? Give me a break. Okay? We don't have the grid. We don't have the infrastructure. There are so many. Is it the right thing probably to do long term? Yes. Also doing it with automotive is different than trucks. Trucks do so many different applications. You know what a car does? I don't care if it's a Kia or a Ferrari. It goes from point A to point B. Okay? That's what a car does. Trucks, I don't care if they're picking up garbage, pouring concrete, hanging signs, in the oil field, over the road. They do so many different applications that I expect it to be a multi-pronged answer when we get there. It doesn't get done in this short of period of time. There you go.

Speaker Change: Third one years of infrastructure around internal combustion.

Speaker Change: Going to change it.

Speaker Change: Seven years give me a break our guidance, we don't have a grid we have.

Speaker Change: The infrastructure there are so many isn't the right thing probably to do long term, yes, but also doing it with automotive is different.

Speaker Change: Trucks do so many different application carve outs.

Speaker Change: It's a kia Ferrari haigler subordinated point basis, Okay, let's look at gardeners trucks, I don't care, but pick it up garbage pouring concrete bag in size.

Speaker Change: All over the road they do so many different applications that I expect it to be a multi prong answer when we get there.

Speaker Change: But again get this short period of time.

W.M. Rush: You get Rusty's rambling on about his own thoughts. We'll get it done in 20 years. BEV will be more. BEV will be for a lot of applications, around town and this, that, and the other. We don't have the necessary components. I use this in my simple way. Some people think it's like plugging in a hair dryer. Let me tell you something, it's not. Okay? It's way more complicated than that because of the grid, and infrastructure, and everything else. We can't even catch up on the cars, right? Automobiles will be way easier to do than trucks because of all the different applications. You're getting a long, rambling answer, as I always say, but I expect we're going to go through with the diesel changes. They could tweak them. They could tweak the warranties.

Speaker Change: No.

Speaker Change: Royalty scrap values on thoughts, we'll get it done in 20 years, we will get there will be more megawatt wafer bar of applications around town I missed that in here, but we don't have the necessary components.

Speaker Change: I use in my simple way ours. Some people think it's like plugging in a hair dryer Glen the days of gas Nat gas way more complicated than that because of the granting of an infrastructure and everything that we get any catch up on the cars right automobiles will be ways here to do and trucks because of all the different.

Speaker Change: <unk>.

Speaker Change: We get them all rambling answer as I always say, but I expect we're going to go through with additional changes that could tweak them, but if we could tweak the warranties, but.

W.M. Rush: We're not going to change flipping the diesel switch again in 2027 because there's been too much spent, too much prepped. We will go through in some form or fashion. What'll happen is the other stuff will get pushed out to give our industries time to refine the technology and the things that are needed to do it properly. Okay? We're not there, man, and to do all that we were trying to do. I understand we got to do a better job cleaning the environment up, but we got to do it within the bounds of reality. There's your answer. I think there'll be a free-buy. I don't know how it'll all shake out to how much, because anytime you come with new after-treatment and stuff, boy, do I remember 2010. Okay? Everything was, all the DPFs clogged everywhere, et cetera.

Speaker Change: We're not going to change and flipping the diesels, which again in 2000 and sell it because there have been too much spent too much script, we will go through in some form or fashion, but what will happen is there other stuff will get pushed out to give to give to give our interest rates time to refine the technology and the things that are new.

Speaker Change: Needed to do it properly.

Speaker Change: We're not there manner and to do all what we were trying to do it it was that last year.

Speaker Change: I understand we are getting better at that point in the environment, but we got to do it within the bounds of reality.

Speaker Change: The answer I think there'll be a pre buy.

Speaker Change: How it all shake out how much because anytime you come with new after treatment and is that more do I remember 2000, Dan Okay. Everything was galvanized dps clog everywhere et cetera et cetera.

W.M. Rush: I'm not saying that that'll be the case, but I'm saying there always is issues. We'll be dealing with issues with all the new diesel technology, which is typical, okay, when you do things like this. That's how it works. It's something we can work on and do, something we've got 100+ years dealing with, right? We'll figure all that while behind the scenes, we do the right things to get into these other technologies, whether it is not everything's going to be electric, hydrogen, and fuel cell, and all this other, while that continues to progress, and then it'll take its place over the next 20 years.

Speaker Change: But that will be the case, but I am saying there always is.

Speaker Change: What we're dealing with issues with all the new diesel technology, which is typical.

Speaker Change: When you do things like this that's how it works, but it's something we can work on a new southern we've got 100 plus years dealing with right. So we'll figure all of that while behind the savings we do the right things to get into these other technologies whether it.

Speaker Change: Whether it is not everything is going to be electric and hydrogen fuel cell and all this other while that continues to progress and then Europe.

Speaker Change: It will take its place over the next 20 years.

Avinatan Jaroslawicz: That makes sense to me, and I appreciate the perspective there. Shifting over to tariffs. I know you noted the uncertainty around that and the prospect that it could really increase the price of trucks and squeeze demand.

That makes sense.

Speaker Change: Right the perspective there.

Speaker Change: Shifting over to parents. So I know you noted.

Speaker Change: Okay.

Speaker Change: The uncertainty around that.

Speaker Change: <unk>.

Speaker Change: That it could really increase the price of trucks.

W.M. Rush: Oh, man.

Avinatan Jaroslawicz: I guess 2 things there. 1, just could you help frame for us what that impact beyond the cost of a new truck?

Speaker Change: Squeeze demand, Matt So I guess two things there one just could you help frame for us what that is.

Speaker Change: Impact beyond the cost of a new truck.

W.M. Rush: Sure

Avinatan Jaroslawicz: Also, with the uncertainty, are you doing anything differently this year in terms of managing your inventory to try to mitigate that risk?

Speaker Change: And also.

Speaker Change: With certainty.

Speaker Change: Are you doing anything differently. This year in terms of managing your inventory to try to mitigate that risk.

W.M. Rush: Well, first off, about 17 days ago, maybe 18, on a Saturday, I'm going, Are you kidding me. Okay. We're really going to put 25% tariffs on Mexico and Canada. I understand the Chinese part, but the automotive sector, and I'm not just talking trucks, there is nothing more tied to Mexico than the automotive sector, okay. All the suppliers, all the manufacturers, everybody's got plants down there and stuff. It's like, you got to be kidding me. I understand. I don't understand fentanyl, but I read about it, and I understand the immigration issues, but you're messing with an economy now, let me tell you. If it's manufactured down there, you're talking $30,000, $40,000 in a truck. Even the trucks that are manufactured in the US, they'll have components for you in them. If you put a 25% tariff on there, that'd probably be another $10,000.

Speaker Change: Well first of all.

Speaker Change: Hum.

Speaker Change: 17 days ago, maybe 18 on a Saturday.

Speaker Change: Governor you candidly.

Speaker Change: We're really going to put 25% tariffs on Mexico and Canada.

Speaker Change: I understand the Chinese part, but the automotive sector and I'm not just target drugs. There is nothing more jive to Mexico than the automotive sector. Okay Highway all of the suppliers all of the manufacturers everybody's got plants down there and stuff.

Speaker Change: And it's like you had any kidney.

Speaker Change: I understand.

Speaker Change: I don't understand.

Speaker Change: And I understand the immigration issues, but.

Speaker Change: Your medicine with an economy now let me tell you.

Speaker Change: Youre for Utah.

Speaker Change: Target, if it's manufactured down there jargon $30 $40000.

Speaker Change: And even as trucks that are manufactured in the U S. They all have components.

Speaker Change: If you put a 25% tariff honor that probably be another 10000 automobiles will be six to 8000 have been on who and where and what it gives is always remember the Devil's in the detail design brand right. So I'm not the expert on all of that but I got to tell you that makes absolutely zero cents to make I believe.

W.M. Rush: Automobiles would be 6,000 to 8,000, depending on who, and where, and what. Remember, the devil's in the detail, in the fine print, right? I'm not the expert on all of that, but I got to tell you, that makes absolutely zero sense to me. I believe, I've told everybody since the new administration was announced back in November that it's a negotiation. I cannot believe that we would go do that. Look, those factories, it's not like China. Those are our factories. I'm on the border. I've been on the border. I'm born and raised in Texas, okay? I have the whole border for Peterbilt, all the way from Tijuana to Brownsville. I understand. We built those Maquiladora plants back in the '80s, okay? They're our stuff. More and more and more. I cannot see doing that. I just truly can't see. We own them.

Speaker Change: Everybody says.

Speaker Change: New administration was announced back in November.

Speaker Change: It's a negotiation.

Ken: Ken I believe that we would go do that.

Ken: Those factories like China, those are our fabrics, along the border outbound and more and more and raised in Texas So that.

Ken: I have the old order for Peterbilt ball away from Tijuana to Brownsville.

Ken: We built those maquiladora plants back in the age Okay, there are more and more and more.

Ken: Let's see.

Ken: Doing that I've, just truly can't see we own them its not like <unk>, Bob genre, we outmost factories okay.

W.M. Rush: It's not like we're sending them by China. We own those factories, okay? It just makes absolutely zero sense to me. We need a strong, solid neighbor on the south, and it's just a labor issue. We build all that stuff down there, but it's all our stuff, man. It really doesn't make any sense to me. Would there be disruption? Yes. Is there something I can do? Well, first somebody tell me a date. I got 2 weeks. Okay, no, I can't do anything in 2 weeks. We would just deal with it. You talk about crippling an industry. You got to realize, Laredo, Texas, that's the biggest port in the United States. I don't care about these ocean ports. There's more freight coming through out of Mexico than the USA. I'm on I-35. I look out my window right now.

Speaker Change: This makes it absolutely zero sense to me.

Ken: We made a strong solid neighbor almost out.

Ken: It's just the labor.

Ken: We build all of that stuff down there, but it's all our stuff.

Ken: So it really doesn't make any sense to be would there be disruption, yes, his or something I can do a first some idea, albeit.

Ken: Alright at two weeks, Okay, No I can't.

Speaker Change: In two weeks, we would just deal with it but can you talk about cripple an analyst you got to realize like Laredo, Texas. That's the biggest port in the United States I don't care about these ocean courts, there's more freight governments out of Mexico.

Ken: 135, I look out my window right that.

W.M. Rush: Over half the vehicles are trucks going up and down the highway, okay. It's all from manufacturing that goes on in the South. I don't know where we'd come up with the workforce to do it all anyway, as we work our way through it. I'm getting into my own personal views here about all that, but you're going to know because I don't mind telling them. It just makes no sense to me. I've got to believe it's saber-rattling and negotiations. Maybe there will be some hand slaps and things like that on the wrist or something. I'm not close enough to the government to really know what they're thinking. I don't see doing that with your two bordering neighbors, one to the north and one to the south, the only ones you border, okay.

Over half the vehicles or trucks.

Ken: Up and down the highway Okay, and Thats all for manufacturing that goes on in the south.

Ken: What we've come up with a workforce to do it all anyway.

Ken: As we work our way through it but I'm getting ahead of my own personal views here about all of that but youre going to know because I don't timetable.

Ken: So it just makes no sense to me I've got to believe it's sabre rattling in negotiations.

There are obvious manned slabs and things like that on the risk or something.

Ken: I'm not close enough to the government didn't really know what they're thinking.

Hi.

Ken: But I don't see doing that with your two bordering neighbors wanted the northern one to the south of the only ones you bore okay. I have a hard time, making sense out of that first solid, especially when we build at all.

W.M. Rush: I have a hard time making sense out of that personally, especially when we built it all, okay? We drove all that ourselves. Do people have plans? Yeah, OEMs have contingency plans around how they would get around it, but it would be costly, and it would be cumbersome to implement and take time, but sure they do. When OEMs are thinking about it, they have to. I have to. Yes, I've thought about it. I have a hard time believing we're really going to do this with Mexico and Canada. That's just my opinion. I could be dead ass wrong. Excuse me, dead wrong. Don't worry, we've thought about it. We're behind the scenes. Yes, there are plans as to what we would do, how we would react. I just have a hard time believing we'd really do it.

Ken: So I think we drove all that ourselves wasn't driven by it.

Ken: Over.

Ken: Thank you.

Ken: Yes.

Ken: People have plans, yes Oems.

Ken: Tangency plans around how they would get around it.

Ken: It would be costly.

Ken: It would be cumbersome to implement tend to take time, but sure they did.

Ken: Oems are thinking about it they have to answer yes, I've thought about it but.

Ken: But I have a hard time, believing we're really going to do this with Mexico and again, that's just my opinion and you'd be dead asphalt was confusion make dead wrong.

Ken: But.

Ken: Don't worry.

Ken: We've thought about it we are behind the scenes, yes their plans as to what we would do how would we or how we would react I just have a hard time delay, but we really do it.

Avinatan Jaroslawicz: That makes sense. I guess moving a little bit away from the uncertainty towards what we're seeing today. I know H2 2024, there was a bit of discounting on new truck pricing, and so just wondering if that's something that we should be expecting here for H1 2025 as well.

Ken: That makes sense.

Ken: Moving on with little bit away from the uncertainty.

Ken: Yes.

Ken: Towards what we're seeing today.

Ken: I know.

Ken: Last year, there was a bit of discounting on new truck pricing and so just wondering if that's something that we should be expecting here for the first half 'twenty five as well.

W.M. Rush: No, I expect most of the stuff that we're doing right now is pretty flat. Slight, I mean slight, maybe increase. I don't see a lot of discounting. Maybe a one-off deal here or there, but there's not broad-based discounting going on. We'd already taken margin out last year, okay? Someone, when I say that, the manufacturers, and then through us, and we've managed to maintain a good blended margin. That's what I always tell folks. Remember, we don't sell just Avidity, we sell immediate, we sell used. We've done a pretty good job of keeping it over 9% or better of blended margin. Was new compressed a little bit? Yes. Do I see it getting compressed a whole lot more? No. We've already been a little bit compressed on it. I think most OEMs, well, we've been planning on having a pre-buy, right?

Ken: No I expect most of the stuff that we're doing right now.

Ken: It's pretty flat.

Ken: Slight timing slight maybe increase I don't see a lot of discounting.

Ken: Maybe a one off deal here or there, but there's not broad based discounting going on I mean, we'd already taken margin out last year some of them when I say that.

Ken: The manufacturers and then pull through us and we've managed to maintain.

Ken: A good blended margin as well as tell folks remember we don't sell just heavy duty was immediate use so we've done pretty good job. Thank.

Ken: I'll keep it over 9% or better.

Ken: Blended margin, so was new compressed a little bit yes.

Ken: Glad to see it getting compressed a whole lot more no.

Ken: I think we'll be pretty.

Ken: We've already built a little bit compressed on it.

Ken: I'd say most Oems.

W.M. Rush: They were trying to maintain what they felt. You can look, their margins are off some. You can look at it later in the back half of last year, there's no question. I don't know how much more there is to take out of that. I think there'll be enough demand to keep things pretty flat, to be honest with you, without getting any increases in anything off either. I expect everything to stay pretty flat.

Ken: Planning on having a pre buy right. So.

Ken: They were trying to maintain what they felt their margins are awesome.

Ken: You can look at it later in the back half of last year. There is no question, but.

Ken: I don't know how much more there is to take out of that I think there'll be enough demand to keep things pretty full out there to be honest with you without giving any increases in any way.

Ken: <unk>.

Ken: Record earnings is a pretty flat.

Avinatan Jaroslawicz: All right. Very helpful. That's it for me. Appreciate the time. Thank you.

Ken: Alright very helpful.

W.M. Rush: You bet. Thank you, sir.

Ken: I appreciate it thank you.

Ken: Thank you Sir.

Operator 2: Thank you. I'm showing no further questions at this time. Now I'd like to turn it back to W.M. Rush for closing remarks.

Rusty Rush: Thank you I'm showing no further questions at this time I would now like to turn back to Rusty rush for closing remarks.

W.M. Rush: Okay. I guess I look forward to talking to everybody in April. This is the shortest time between calls. I might talk to everybody in about 2 months. Thank you for your participation today.

Okay, I guess I'll look forward to talking to everybody in April since the shortage time between calls talk to everybody about two months and thank you for your participation today.

Operator 2: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Rusty Rush: Thank you for your participation today's conference. This does conclude the program you may now disconnect.

Rusty Rush: Okay.