Q1 2025 PACCAR Inc Earnings Call

April 29, 2025

[music].

Operator: Good morning and welcome to PACCAR's first quarter 2025 earnings conference call. All lines will be in listen-only mode until the question and answer session. Today's call is being recorded and if anyone has an objection, you should disconnect at this time.

Operator: Good morning and welcome to PACCAR's Q1 2025 earnings conference call. All lines will be in listen-only mode until the question-and-answer session. Today's call is being recorded, and if anyone has an objection, you should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning, and welcome to <unk> first quarter 'twenty 'twenty earnings Conference call all lines will be in listen only mode until the question answer session.

Today's call is being recorded and if anyone has any objection you should disconnect at this time.

Ken Hastings: I would now like to introduce Mr Ken Hastings, PACCOR's Director of Investment Relations. Mr Hastings, please go ahead. Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations.

Ken Hastings: I would now like since juice, Mr. Ken Hastings, <unk> director of Investor Relations. Mr. Hastings. Please go ahead.

Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations. Joining me this morning are Preston Feight, Chief Executive Officer; Harry Schippers, President and Chief Financial Officer; Kevin Baney, Executive Vice President; and Bryce Poplosky, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the Investor Relations page of PACCAR.com. I would now like to introduce Preston Feight.

Ken Hastings: Good morning, we would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, <unk> director of Investor Relations.

Ken Hastings: And joining me this morning are Preston Veit, Chief Executive Officer, Harrie Schippers, President and Chief Financial Officer, Kevin Boehne, Executive Vice President, and Brice Poplawski, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the Investor Relations page of PACCAR.com.

Preston Feight: And joining me. This morning are Preston Feight, Chief Executive Officer, Harry <unk>, President and Chief Financial Officer, Kevin <unk> Executive Vice President.

Ken Hastings: And price per Farscape, Vice President and controller.

Ken Hastings: As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode.

Ken Hastings: Certain information presented today will be forward looking and involve risks and uncertainties that may affect expected results for additional.

Ken Hastings: Information, please see our SEC filings.

Ken Hastings: The Investor Relations page of <unk> Dot com.

Preston Veit: I would now like to introduce Preston Feit. Thanks, Ken. Good morning, everyone.

Preston Feight: I'd now like to introduce Preston Feight.

Preston Feight: Thanks, Ken. Good morning, everyone. First, I'd like to congratulate Harry Schippers on his upcoming retirement after a wonderful 39-year career at PACCAR. We'll all miss him, and we wish him all the best on the next chapter in his life. Congratulations to Kevin Baney, our Executive Vice President, who's been responsible for DAF Trucks and will now become responsible for PACCAR Financial Services. Kevin will also work with Ken on investor relations. Congratulations to Bryce, who has been promoted to PACCAR's Senior Vice President and CFO, reporting directly to me. I'd like to thank PACCAR's outstanding employees who did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry. PACCAR achieved good revenues and net income in Q1, including record revenues at PACCAR Parts, good performance by the truck divisions, and strong financial services results.

Preston Feight: Thanks, Ken good morning, everyone.

Preston Veit: First, I'd like to congratulate Harrie Schippers on his upcoming retirement after a wonderful 39-year career at Paccor. We'll miss him. and we wish him all the best on the next chapter in his life.

Ken Hastings: First I'd like to congratulate Harry skippers on his upcoming retirement after a wonderful 39 year career at <unk> <unk>.

Preston Feight: Yes.

Preston Feight: And we wish him all the best on the next chapter in his life.

Preston Veit: Congratulations to Kevin Boehne, our Executive Vice President, who's been responsible for Doff Trucks and will now become responsible for Paccar Financial Services. Kevin will also work with Ken on investor relations.

Preston Feight: Congratulations to Kevin <unk>, our executive Vice President who has been responsible for <unk> trucks that will now become responsible for Pac or financial services Ken.

Preston Feight: Kevin will also work with Ken on Investor Relations.

Preston Veit: And congratulations to Brice, who has been promoted to PACCAR Senior Vice President and CFO, reporting directly to me.

Speaker Change: And congratulations to price who has been promoted to <unk>, our senior Vice President and CFO reporting directly to me.

Preston Veit: I'd like to thank Paccor's outstanding employees who did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry. Paccor achieved good revenues and net income in the first quarter, including record revenues at Paccor Park, Good performance by the truck divisions and strong financial services results. Paccor achieved revenues of $7.4 billion and adjusted net income of $770 million. Paccor Parts achieved record quarterly revenues of $1.7 billion and quarterly pre-taxed income of $427 million. We're pleased with the continued growth at Paccor Parks after a record-setting 2024. Paccor Financial had a very good quarter, achieving pre-tax income of $121 million, just 6% higher than the $114 million in the first quarter of last year.

Speaker Change: I'd like to thank Packers outstanding employees, who did an excellent job, providing our customers with the highest quality trucks and transportation solutions in the industry.

Speaker Change: <unk> achieved good revenues and net income in the first quarter, including record revenues at Pac our parts.

Speaker Change: Good performance by the truck divisions and strong financial services results.

Preston Feight: PACCAR achieved revenues of $7.4 billion and adjusted net income of $770 million. PACCAR Parts achieved record quarterly revenues of $1.7 billion and quarterly pre-tax income of $427 million. We're pleased with the continued growth at PACCAR Parts after a record-setting 2024. PACCAR Financial had a very good quarter, achieving pre-tax income of $121 million, just 6% higher than the $114 million in the first quarter of last year. We estimate this year's US and Canadian Class 8 market to be in a range of 235,000 to 265,000 trucks. The North American truck market is being affected by uncertain economic conditions and the overall impact of new tariffs. In Europe, DAF's premium aerodynamic trucks provide customers with the latest technology and the best operating efficiency. We project the 2025 European above-16-ton market to be in a range of 270,000 to 300,000 trucks.

PACCAR achieved revenues of $7.4 billion and adjusted net income of $770 million. PACCAR Parts achieved record quarterly revenues of $1.7 billion and quarterly pre-tax income of $427 million. We're pleased with the continued growth at PACCAR Parts after a record-setting 2024. PACCAR Financial had a very good quarter, achieving pre-tax income of $121 million, just 6% higher than the $114 million in the first quarter of last year. We estimate this year's US and Canadian Class 8 market to be in a range of 235,000 to 265,000 trucks. The North American truck market is being affected by uncertain economic conditions and the overall impact of new tariffs. In Europe, DAF's premium aerodynamic trucks provide customers with the latest technology and the best operating efficiency. We project the 2025 European above-16-ton market to be in a range of 270,000 to 300,000 trucks.

Speaker Change: Packer achieved revenues of $7 4 billion and adjusted net income of $770 million.

Speaker Change: Our parts achieved record quarterly revenues of $1 7 billion and quarterly pre tax income of $427 million.

Speaker Change: We're pleased with the continued growth at Packer parts after a record setting 2024.

Speaker Change: Yeah.

Speaker Change: Pack, our financial had a very good quarter, achieving pre tax income of $121 million.

Speaker Change: Two 6% higher than the $114 million in the first quarter of last year.

Preston Veit: We estimate this year's U.S. and Canadian Class 8 market to be in a range of 235,000 to 265,000 trucks. The North American truck market is being affected by uncertain economic conditions and the overall impact of new tariffs.

Speaker Change: We estimate this year's U S and Canadian class eight market to be in a range of 235 to 265000 trucks.

Speaker Change: The North American truck market is being affected by uncertain economic conditions and the overall impact of new tariffs.

Preston Veit: In Europe, DOT's premium aerodynamic trucks provide customers with the latest technology and the best operating efficiency. We project the 2025 European above 16 ton market to be in a range of 270 to 300,000 trucks. This year's South American above 16 ton truck market, where Doff trucks are highly desired by our customers, is expected to be in a range of 100 to 110,000 vehicles. Paccor delivered 40,100 trucks during the first quarter and anticipates delivering 37,000 to 39,000 trucks in the second quarter. Paccor's truck parts and other gross margins were 14.8% in the first quarter, as economic uncertainties and tariffs began affecting input costs and truck prices.

In Europe, thus premium aerodynamic trucks provide customers with the latest technology and the best operating efficiency.

Speaker Change: We projected 2025 European above 16 tonne market to be in a range of 270 to 300000 trucks.

Preston Feight: This year's South American above-16-ton truck market, where DAF trucks are highly desired by our customers, is expected to be in a range of 100,000 to 110,000 vehicles. PACCAR delivered 40,100 trucks during the first quarter and anticipates delivering 37,000 to 39,000 trucks in the second quarter. PACCAR's truck, parts, and other gross margins were 14.8% in the first quarter, as economic uncertainties and tariffs began affecting input costs and truck pricing. With a full quarter of current tariff-related impacts, we anticipate second quarter margins could be in a range of 13% to 14%. Margins could improve considerably depending on how the announced truck tariff policy investigation progresses. In the second half of the year, we anticipate increased customer demand as policy and emissions regulations become more stable. PACCAR's industry-leading trucks, expanding parts business, best-in-class financial services, and advanced technology strategy position the company well for an excellent future.

This year's South American above-16-ton truck market, where DAF trucks are highly desired by our customers, is expected to be in a range of 100,000 to 110,000 vehicles. PACCAR delivered 40,100 trucks during the first quarter and anticipates delivering 37,000 to 39,000 trucks in the second quarter. PACCAR's truck, parts, and other gross margins were 14.8% in the first quarter, as economic uncertainties and tariffs began affecting input costs and truck pricing. With a full quarter of current tariff-related impacts, we anticipate second quarter margins could be in a range of 13% to 14%. Margins could improve considerably depending on how the announced truck tariff policy investigation progresses. In the second half of the year, we anticipate increased customer demand as policy and emissions regulations become more stable. PACCAR's industry-leading trucks, expanding parts business, best-in-class financial services, and advanced technology strategy position the company well for an excellent future.

Speaker Change: This year's South American above 16 tonne truck market, where Dr. Trucks are highly desired by our customers is expected to be in a range of 100 to 110000 vehicles.

Speaker Change: <unk> delivered 40100 trucks during the first quarter and anticipate delivering 37% to 39000 trucks in the second quarter.

Speaker Change: <unk> truck parts and other gross margins were 14, 8% in the first quarter as economic uncertainties, and tariffs began affecting input costs and truck pricing.

Preston Veit: With a full quarter of current tariff-related impacts, we anticipate second quarter margins could be in a range of 13 to 14 percent. Margins could improve considerably depending on how the announced truck tariff policy investigation progresses. In the second half of the year, we anticipate increased customer demand as policy and emissions regulations become more stable.

Speaker Change: With a full quarter current tariff related impacts, we anticipate second quarter margins could be in a range of 13% to 14%.

Speaker Change: Margins could improve considerably depending on how the announced truck tariff policy investigation progresses.

Speaker Change: In the second half of the year, we anticipate increased customer demand as policy in emissions regulations become more stable.

Preston Veit: Paccor's industry-leading trucks, expanding parts business, best-in-class financial services, and advanced technology strategy position the company well for an excellent future.

Speaker Change: <unk> industry, leading trucks expanding parts business best in class financial services, and advanced technology strategy positioned the company well for an excellent future.

Harrie Schippers: Harrie Schippers will now provide an update on Paccor Parts, Paccor Financial Services, and other business highlights. Harrie, over to you one last time. Thanks Preston.

Preston Feight: Harry Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harry, over to you one last time.

Harry Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harry, over to you one last time.

Speaker Change: Harry Skippers will now provide an update on packer parts tanker financial services and other business highlights Harry over to you one last time. Thanks Braxton.

Harrie Schippers: Thanks, Preston. PACCAR's Q1 adjusted net income of $770 million excludes a $265 million after-tax provision related to EU civil litigation settlements. PACCAR is making good progress on resolving the civil litigation. The company has settled with the majority of claimants and continues to pursue appropriate resolutions. PACCAR Parts achieved record revenues in Q1, with excellent gross margins of 30.7%. We estimate parts sales to grow by 2% to 4% in Q2 and for the full year. PACCAR Parts is beginning to benefit from the live data of the 600,000 connected Kenworth, Peterbilt, and DAF trucks in operation. This connectivity enhances our customers' operational efficiency and vehicle uptime. PACCAR Parts has 20 parts distribution centers worldwide and continues to expand its global distribution network. PACCAR Financial Services' pre-tax income was a robust $121 million, compared to $114 million a year earlier.

Harrie Schippers: Becker's First Quarter Adjusted Net Income. 770 million, excludes the $265 million after-tax provision related to EU civil litigation settlement are making good progress on resolving the civil litigation. The company has settled with the majority of claimants and continues to pursue appropriate resolutions. Pekka Farnes achieved record revenues in the first quarter, with excellent gross margins of 30.7%. We estimate part sales to grow by 2-4% in the second quarter and for the full year. Packer Parts is beginning to benefit from the live data of the 600,000 connected Kenworth, Peterbilt and Duff trucks in operation. This connectivity enhances our customers' operational efficiency and vehicle uptime.

Speaker Change: First quarter adjusted net income.

Speaker Change: 770 million excludes the $265 million after tax provision.

Speaker Change: Later to EU Civil litigation settlements.

Speaker Change: It's making good progress on resolving the civil litigation.

Speaker Change: The company has settled with the majority of claimants and continues to pursue appropriate resolutions.

Speaker Change: <unk> achieved record revenues in the first quarter with excellent gross margins of 37%.

Speaker Change: We estimate parts sales to grow by 2% to 4% in the second quarter.

Speaker Change: The full year.

Appliances is beginning to benefit from the alliance data on the 600000 connected kenworth Peterbilt and <unk> trucks in operation.

Speaker Change: This connectivity enhances our customers' operational efficiency and vehicle uptime.

Harrie Schippers: Packa Parts has 20 parts distribution centers worldwide and continues to expand its global distribution network. Financial Services pre-tax income was a robust $121 million. compared to 114 million a year earlier. This reflects solid portfolio growth and continued strong credit quality. Pecca Financial operates 13 used truck centers around the world to support the sale of premium Kenworth, Peterbilt, and Dove used trucks . and is building a new U-Strip Center in Warsaw, Poland this year. USTRA demand and pricing improved in the first quarter, and we expect it to further improve throughout the year. Similar to Packer Parts, Packer Financials provides steady profitability during all phases of the business cycle.

Speaker Change: Pick up part of 70 parts distribution centers worldwide.

Speaker Change: Continues to expand its global distribution network.

Speaker Change: Financial services pre tax pre tax income was a robust $121 million.

Speaker Change: Compared to $114 million a year earlier.

Harrie Schippers: This reflects solid portfolio growth and continued strong credit quality. PACCAR Financial operates 13 used truck centers around the world to support the sale of premium Kenworth, Peterbilt, and DAF used trucks and is building a new used truck center in Warsaw, Poland, this year. Used truck demand and pricing improved in Q1, and we expect it to further improve throughout the year. Similar to PACCAR Parts, PACCAR Financial provides steady profitability during all phases of the business cycle. In 2025, we're planning capital investments in the range of $700 million to $800 million, and R&D expenses in the range of $450 million to $480 million, as we continue to invest in key technology and innovation projects. These include next-generation powertrains, advanced driver-assistance systems, and integrated connected vehicle services. PACCAR is also investing in manufacturing capacity to support future long-term growth and our customers' success.

This reflects solid portfolio growth and continued strong credit quality. PACCAR Financial operates 13 used truck centers around the world to support the sale of premium Kenworth, Peterbilt, and DAF used trucks and is building a new used truck center in Warsaw, Poland, this year. Used truck demand and pricing improved in Q1, and we expect it to further improve throughout the year. Similar to PACCAR Parts, PACCAR Financial provides steady profitability during all phases of the business cycle. In 2025, we're planning capital investments in the range of $700 million to $800 million, and R&D expenses in the range of $450 million to $480 million, as we continue to invest in key technology and innovation projects. These include next-generation powertrains, advanced driver-assistance systems, and integrated connected vehicle services. PACCAR is also investing in manufacturing capacity to support future long-term growth and our customers' success.

Speaker Change: This reflects solid portfolio growth. Thank you.

Speaker Change: Continued strong credit quality.

Speaker Change: Becker financial operates 13 used truck centers around the world.

Speaker Change: To support the sale of premium Kenworth, Peterbilt and <unk> trucks and.

Speaker Change: And it's building a new used truck center in Warsaw, Poland. This year.

Speaker Change: Used truck demand and pricing improved through the first quarter and.

Speaker Change: And we expect it to further improve throughout the year.

Speaker Change: Similar to packaged parts Becker financials provide steady profitability during all phases of the business cycle.

Harrie Schippers: In 2025, we're planning capital investments in the range of $700 to $800 million. and R&D expenses in the range of $450 to $480 million. as we continue to invest in key technology and innovation projects. These include next generation powertrains, advanced driver assistance systems, and integrated connected vehicle services. Paccor is also investing in manufacturing capacity to support future long term growth and our customers success. This includes an expansion of the Duff Factory in Brazil. Construction of a new Paccor engine remanufacturing facility in Columbus, Mississippi, and an expansion of the Paccor Technical Center in Washington State.

Speaker Change: In 2025, we are planning capital investments.

Speaker Change: $700 million to $800 million.

Speaker Change: And R&D expenses in the range of $450 million to $480 million.

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

Speaker Change: These include next generation powertrains.

Speaker Change: <unk> driver assistant systems, and integrated connected vehicle services.

Speaker Change: Becker is also investing in manufacturing capacity to support future long term growth in our customers' success.

Harrie Schippers: This includes an expansion of the DAF factory in Brazil, construction of a new PACCAR engine remanufacturing facility in Columbus, Mississippi, and an expansion of the PACCAR Technical Center in Washington State. As Preston noted, this is my last earnings conference call. PACCAR is an exceptional company, and I want to thank all my colleagues, past and present, for making it such a wonderful place to have a career. We're pleased to answer your questions.

This includes an expansion of the DAF factory in Brazil, construction of a new PACCAR engine remanufacturing facility in Columbus, Mississippi, and an expansion of the PACCAR Technical Center in Washington State. As Preston noted, this is my last earnings conference call. PACCAR is an exceptional company, and I want to thank all my colleagues, past and present, for making it such a wonderful place to have a career. We're pleased to answer your questions.

This includes an expansion of the <unk> factory in Brazil.

Speaker Change: <unk> of our new pack arrangements <unk> manufacturing facility equaled limbus, Mississippi.

Speaker Change: And an expansion of the FERC Technical Center Workington state.

Harrie Schippers: As Preston noted, this is my last earnings conference call. Paccor is an exceptional company. And I want to thank all my colleagues, past and present, for making it such a wonderful place to have a career. Pleased to answer your question.

Speaker Change: As best and noted this is my last earnings conference call.

Speaker Change: <unk> is an exceptional company and I want to thank all my colleagues past and present for making such a wonderful place to advocate here.

Speaker Change: Im please to answer your questions.

Speaker Change: Yeah.

Operator: Ladies and gentlemen, if you'd like to register your question, please press star followed by one on your telephone keypads now. As a reminder, that's star followed by one on your telephone keypads now.

Operator: Ladies and gentlemen, if you'd like to register a question, please press Star followed by 1 on your telephone keypads now. As a reminder, that's Star followed by 1 on your telephone keypads now. If you'd like to withdraw your question, please press Star followed by 2. When preparing to ask your question, please ensure you're unmuted locally. Our first question comes from Chad Dillard of Bernstein. Chad, your line is open. Please go ahead.

Speaker Change: Ladies and gentlemen be launch ready sure. A question. Please press star followed by one on your telephone keypad now.

Speaker Change: As a reminder, that stoffel up by one on your telephone keypad now if you'd like to be truly a question. Please press star followed by two <unk> to ask a question. Please ensure you're on mute locally.

Operator: If you'd like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you are unmuted locally.

Chad Dillard: Our first question comes from Chad Dillard of Bernstein. Chad, your line is open, please go ahead. Hi, good morning, guys. Hey, Chad.

Speaker Change: Our first question comes from Chad Dillard of Bernstein, Chad. Your line is open. Please go ahead.

Chad Dillard: Hi, good morning, guys.

Preston Feight: Hey, Chad.

Speaker Change: Hey, Chad.

Chad Dillard: Oh, I Hey, so I wanted to dig a little bit more into your your guidance for gross margins. I was hoping to tease out just how much are you embedding in terms of incremental tariff costs and how much you expect to pass through to customers. And then just talk through how we're thinking about gross margins to the balance of Yeah, Chad.

Chad Dillard: Oh, hey. So I wanted to dig a little bit more into your guidance for gross margins. I was hoping you could tease out just how much are you embedding in terms of incremental tariff costs and how much you expect to pass through to customers. And then just talk through how you're thinking about gross margins for the balance of the year, please.

Chad Dillard: Oh.

Speaker Change: Hey, so I wanted to dig a little bit more into your guidance for gross margins I was hoping can you tease out.

Speaker Change: Just how much are you embedding in terms of incremental tariff costs and how much should start to pass through to customers and then just talk through how we're thinking about gross margins for the balance of the year. Please.

Preston Feight: Yeah, Chad. As we shared in our comments, it's a little bit uncertain out there right now in terms of what the tariff policies will look like. You may or may not be following how they apply to trucks specifically, but last week, the government announced a Section 232 investigation into tariffs for medium and heavy-duty trucks to evaluate what their policies would be. There's an open comment period through the middle of May, and then they haven't declared when they would make any kind of revision to those policies. But they're under review, which could have meaningful impact to what the impact is on a per-truck basis. And obviously, that's an input cost to us right now. So it could have a shaping form factor for us in Q2 and beyond.

Chad Dillard: Yes, Chad.

Speaker Change: Yeah.

Preston Veit: As we shared in our comments, it's a little bit uncertain out there right now in terms of what the tariff policies will look like. You may or may not be following how they apply to trucks specifically. But last week, the government announced a Section 232 investigation into tariffs for medium and heavy duty trucks to evaluate what their policies would be. There's an open comment period through the middle of May and then they haven't declared when they would make any kind of revision to those policies. But they're under review, which could have meaningful impact to what the impact is on a per truck basis.

Speaker Change: As we shared in our comments, it's a little bit uncertain out there right now in terms of what the tariff policies will look like.

Speaker Change: You may or may not be <unk>.

Speaker Change: Following how they apply to truck specifically, but last week the government announced the section 232 investigation into tariffs for medium and heavy duty trucks to value with their policies would be theres, an open comment period through the middle of May and then they haven't declared when they would make any kind of a revision to those policies, but they're under review which could have.

Speaker Change: Meaningful impact to what the.

Preston Veit: And obviously, that's an input cost to us right now. So it could it could have a shaping form factor for us in Q2 and beyond.

Speaker Change: The impact is on a per truck basis, and obviously, that's an input cost to us right now so it could it could have a shaping form factor for us in Q2 and beyond.

Preston Veit: And kind of hard to actually know what the exact numbers are going to be because of that uncertainty. But we think that right now, you know, we are an American company that builds our trucks in the markets. for the markets. So our teams in Denton and Chillicothe are doing a great job building trucks for us for the US markets, but there are components that come into those factories from our suppliers from other countries. And so we don't know how they would be affected. God, it's helpful.

Preston Feight: Kind of hard to actually know what the exact numbers are going to be because of that uncertainty. We think that right now, we are an American company that builds our trucks in the markets for the markets. Our teams in Denton and Chillicothe are doing a great job building trucks for us for the US markets. There are components that come into those factories from our suppliers from other countries, and so we don't know how they would be affected.

Kind of hard to actually know what the exact numbers are going to be because of that uncertainty. We think that right now, we are an American company that builds our trucks in the markets for the markets. Our teams in Denton and Chillicothe are doing a great job building trucks for us for the US markets. There are components that come into those factories from our suppliers from other countries, and so we don't know how they would be affected.

Speaker Change: <unk>.

Speaker Change: Kind of hard to actually know what the exact numbers are going to be because of that uncertainty.

Speaker Change: But we think that right now.

Speaker Change: An American company that builds our trucks in the markets.

Speaker Change: For the markets so.

Speaker Change: Our teams in Denton and Chillicothe did a great job building trucks for us for the U S markets, but there are components that come into those factories from our suppliers from other countries and so we don't know how they would be affected.

Chad Dillard: Got it. That's helpful. And then just over to the vocational side of your business, I know that you guys tend to over-index to that part of the market. I would just be curious on how you're thinking about contribution from there as we go through the balance of the year.

Preston Veit: I mean, just over to the vocation side of your business. I know that you you guys tend to over index to that part of the market. I would just be curious on how you're thinking about contribution from from there as you go through the balance of the year. Yeah, it's still a solid part of our business right now. I mean, the vocational market is reasonable, and so it feels like that'll continue to be a strength throughout the year, and we'll see how that plays. The LTL market still also feels stable, and I think everybody kind of is aware that the truckload carriers are still under some pressure, and so that pressure is something that we feel in the market estimations for the year.

Speaker Change: Got it Thats helpful.

Speaker Change: And then just over to that location side of your business I know that you guys conduct over indexed to that part of the market.

Speaker Change: Just be curious on how youre thinking about education from from there as we go through the balance of the year.

Preston Feight: Yeah, it's still a solid part of our business right now. I mean, the vocational market is reasonable, and so it feels like that'll continue to be a strength throughout the year. And we'll see how that plays. The LTL market still also feels stable. And I think everybody kind of is aware that the truckload carriers are still under some pressure. And so that pressure is something that we feel in the market estimations for the year.

Speaker Change: Yes, it's still it's still a solid part of our business right now.

Speaker Change: Occasional market is reasonable.

Speaker Change: And so it feels like that will continue to be a strength throughout the year.

Speaker Change: We'll see how that plays the alltel markets still also feels stable.

Everybody is aware that the truckload carriers are still under some pressure and so that pressure is something that we feel in the market estimations for the year.

Chad Dillard: I'll pass it on. Cool.

Chad Dillard: Good. Thanks. I'll pass it on.

Speaker Change: Okay. Thanks, I'll pass it on.

Preston Feight: Cool. Have a good day.

Chad Dillard: Have a good day. Thank you.

Speaker Change: Have a good day.

Operator: Thank you. Our next question comes from Jamie Cook of Truist. Jamie, your line is open. Please proceed with your question.

Jamie Cook: Our next question comes from Jamie Cook of Truist. Jamie, your line is open. Please proceed with your question. Hi, good morning. I guess if you could just unpack a little further the margin disappointment relative to, I mean, your deliveries were essentially in line with expectations, the margins, you know, were lighter relative to your guide. I know you talked about input costs in truck pricing. If you could unpack that more and let us know, you know, what price cost was for both truck and parts. I guess that's my first question. And then my question, just, you know, your comfort level with inventory level.

Speaker Change: Thank you. Our next question comes from Jamie Cook of tourists. Jamie. Your line is open. Please proceed with your question.

Jamie Cook: Hi. Good morning. I guess if you could just unpack a little further the margin disappointment relative to, I mean, your deliveries were essentially in line with expectations. The margins were lighter relative to your guide. I know you talked about input costs and truck pricing. If you could unpack that more and let us know what price cost was for both truck and parts. I guess that's my first question. And then my question, just your comfort level with inventory level. Some of the industry experts, the inventory levels were really elevated. And I'm wondering if that's a concern in yours, how that impacts orders and if you could comment on your orders specifically. And then last, congratulations to Harry. Thank you for all your help throughout the years. And congrats, Bryce. Look forward to working with you. Thanks.

Jamie Cook: Hi, Good morning, I guess, if you could just unpack a little further than margin disappointment relative to your deliveries were essentially in line with expectations and margins.

Jamie Cook: Our lighter relative to your guide I know you talked about input cost in truck pricing, if you could unpack that more and let us know.

Jamie Cook: What price cost was for both truck and parts I guess, that's my first question and then a question.

Jamie Cook: Yes.

Jamie Cook: Your comfort level with inventory levels.

Jamie Cook: Some of the industry experts, the inventory levels were really elevated, and I'm wondering if that's a concern of yours, how that impacts orders, and if you could comment on your order specifically.

Jamie Cook: Some of that.

Jamie Cook: Industry experts the NDA.

Jamie Cook: Inventory levels were really elevated.

Speaker Change: Wondering if that's a concern of yours, how that impacts orders and if you could comment on your order specifically and then Lasse congratulations to Harry Thank you for all your help throughout the years and congrats price prior to working with you. Thanks.

Preston Veit: And then last, congratulations to Harrie, thank you for all your help throughout the years, and congrats, Brice, look forward to working with you. Thanks. Thank you. Well, Jamie, it's nice of you to recognize Harry. We're all going to miss him greatly. He's a good guy. To pick up on your first question, I mean, I think if we try to, I think your words unpack it a little bit further. If I think about the margin, I think of sequentially, cost being up 1%, and price being relatively flat. And that's really a factor of the tariff impacts that we saw, but they weren't a full quarter of impact of those tariffs.

Preston Feight: Thank you. Well, Jamie, it's nice for you to recognize Harry. We're all going to miss him greatly. He's a good guy. To pick up on your first question, I mean, I think if we try to, I think your words unpack it a little bit further. If I think about the margin, I think of sequentially costs being up 1% and price being relatively flat. And that's really a factor of the tariff impacts that we saw, but they weren't a full quarter of impact of those tariffs. That's the easiest way to think about the delta of what we shared previously and what we experienced today. Now what we see coming into a look for Q2 is we took the conservative view we shared with you as to say that if there's a full quarter of tariff impacts, it could look like this.

Jamie Cook: Thank you.

Speaker Change: Well, Jamie it's nicely to recognize Harry World, We're all going to Miss him greatly as a good guy.

To pick up on your first question I mean, I think can be tried to I think your words unpack it a little bit further if I think about the margin I think sequentially costs being up 1% and price being relatively flat and that's really a factor of the tariff impacts that we saw but they were at a full quarter of impact of those tariffs. That's the easiest way to think about the delta of what we.

Preston Veit: That's the easiest way to think about the delta of what we shared previously and what we experienced today. And now what we see coming into a look for Q2, is we took the conservative view we shared with you is to say that if there's a full quarter of tariff impacts that could look like this. Now, life isn't quite that straightforward, because we'll also be pricing those tariffs into our customers trucks as we go along. But we do have the backlog that we have to manage. And we can't just pass that along as we have relationships with people.

Speaker Change: <unk> previously and what we experience today and now what we see coming into or look for Q2.

Speaker Change: As we took the conservative view, we shared with you is to say that if there is a full quarter of tariff impacts that could look like this now.

Preston Feight: Now, life isn't quite that straightforward because we'll also be pricing those tariffs into our customers' trucks as we go along, but we do have the backlog that we have to manage. We can't just pass that along, as we have relationships with people. So there's a partial pass along, and we're working with our suppliers on that as well. It's kind of a few inputs and a few outputs out of this. We see that over time, we'll be adjusting our pricing to match the tariffs, but it takes some time to do that. Or, as we mentioned, the tariffs might change, and that would reduce the need to make those adjustments.

Now, life isn't quite that straightforward because we'll also be pricing those tariffs into our customers' trucks as we go along, but we do have the backlog that we have to manage. We can't just pass that along, as we have relationships with people. So there's a partial pass along, and we're working with our suppliers on that as well. It's kind of a few inputs and a few outputs out of this. We see that over time, we'll be adjusting our pricing to match the tariffs, but it takes some time to do that. Or, as we mentioned, the tariffs might change, and that would reduce the need to make those adjustments.

Speaker Change: Life isn't quite that straightforward because we'll also be pricing.

Speaker Change: Those tariffs into our customers' trucks as we go along but we do have the backlog that we have to manage and we can't just pass that along as we have relationships with people. So there is a partial pass along.

Jamie Cook: So there's a partial pass along. And we'll work with our suppliers on that as well. So it's kind of a few inputs and a few outputs out of this. And we see that over time, we'll be able to do that. We'll be adjusting our pricing to match the tariffs, but it takes some time to do that. Or, as we mentioned, the tariffs might change, and that would reduce the need to make those adjustments. Did you guys put through the 4-7% that's out there in the Sorry, go ahead, go ahead. Go ahead, Jamie. No, I was just gonna say a follow up.

Speaker Change: Our suppliers on that as well so it's kind of a a few inputs on a few outputs out of this and we see that over time.

Speaker Change: We will be adjusting our pricing to match the tariffs, but it takes some time to do that or as we mentioned the tariffs might change and that would reduce the need to make those adjustments.

Speaker Change: Yeah.

Jamie Cook: Did you guys put through the 4% to 7% that's out there in the, sorry, go ahead. Go ahead.

Speaker Change: Did you guys. Thank you Ron and good morning, 7% that's out there.

Doug: Sorry go ahead Doug.

Preston Feight: No, go ahead, Jamie.

Jamie Cook: No go ahead go ahead Jamie.

Jamie Cook: No, I was just going to say a follow-up. There's been talk that the industry has put through an incremental, I think, 4% to 7% price increase at the end of Q1, wondering if you were in, if you also were putting price increases through at that level. And then, sorry, you can answer after that the question on the elevated inventories.

Speaker Change: No obviously is going to say a follow up.

Jamie Cook: You know, there's been talk that, you know, the industry's put through an incremental, I think, four to 7% price increase, you know, at the end of the first quarter wondering if you were in, if you also were put putting price increases through at that level, and then sorry, you can answer after that the question on the elevated inventories. Yeah, inventory. Yeah, for sure. Yeah, your numbers are about the right numbers to think about in terms of what's been passed along, you just have to get into the sequencing of when you announced a price increase, when you're going to build it, what your backlog was that already was behind that.

Doug: Ben.

Doug: Talk that the industry's put through an incremental I think 4% to 7% price increase.

Doug: We ended the first quarter wondering if you were in.

Doug: If you also.

Doug: Putting price increases through at that level, and then sorry can answer after that the question on the elevated inventories inventory yes.

Preston Feight: Yeah, inventory. Yeah, for sure. Yeah, your numbers are about the right numbers to think about in terms of what's been passed along. You just have to get into the sequencing of when you announce a price increase, when you're going to build it, what your backlog was that already was behind that. So you don't affect all of that. And that's the puts and takes of that. If I switch over to your question on inventory levels, we look at the inventory for Class 8 for the industry, which is around four months. And we're at 3.1 months. And then I think back to the earlier conversation we had with Chad, we have a lot of vocational trucks. So we're probably actually lighter on a like-for-like comparison because vocational trucks take a longer time to get a body put on them and put back into service or put into service.

Doug: Yes for sure yes. Your numbers are about the right number to think about in terms of what's been passed along and you just have to get into the sequencing of when you announce a price increase when youre going to build a what your backlog was that already was behind that so you don't affect all of that and that's the that's the puts and takes of that.

Preston Veit: So you don't affect all of that. And that's the, that's the puts and takes of that. If I switch over to your question on inventory levels, we look at the inventory for Class A for the industry is around four months, you know, and we're at 3.1 months. And then I think back to the earlier conversation we had with Chad, you know, we have a lot of vocational trucks. So we're probably actually lighter on a like for like comparison, because vocational trucks take a longer time to get a body put on and put back into service, put into service.

Doug: If I switch over to your question on inventory levels, and we look at the inventory for class eight for the industry is around four months.

Speaker Change: And we're at three one months and then I think back to the earlier conversation, we had with Chad we have a lot of vocational trucks. So we're probably actually lighter on a like for like comparison, because vocational trucks take a longer time to get a body put on them and put back into service are put into service. So we feel pretty comfortable with our three months of retail inventory.

Preston Veit: So we feel pretty comfortable with our three months of retail inventory. Thank you. That was very helpful. Great. Have a good day. Thank you.

Preston Feight: So we feel pretty comfortable with our three months of retail inventory.

So we feel pretty comfortable with our three months of retail inventory.

Jamie Cook: Thank you. That was very helpful.

Speaker Change: Thank you that was very helpful.

Preston Feight: Great. Have a good day.

Doug: Great have a good day.

Speaker Change: Okay.

Operator: Thank you. Our next question comes from Michael Fenninger of Bank of America. Michael, your line is open. Please proceed.

Michael Feniger: Our next question comes from Michael Feniger of Banks America. Michael, your line is open. Please proceed. Thank you. Thanks, guys, for taking my question. Just on the EPA emissions change, if there is a change in 27, how does that inform your view in terms of how you guys are looking at your costs as the truck markets saw? So, you know, is this a time when you guys normally might pull back more costs and protect margins? Or is there an eye on 2026 where we, you know, if there is a view that the EPA 27 is still intact, that we have to build towards that?

Speaker Change: Thank you. Our next question comes from Michael finish out of Bank of America. Michael Your line is open. Please proceed.

Michael Feniger: Thank you. Thanks, guys, for taking my question. Just on the EPA emissions change, if there is a change in 2027, how does that inform your view in terms of how you guys are looking at your costs as the truck markets soften? So is this a time when you guys normally might pull back more costs to protect margins, or is there an eye on 2026 where if there is a view that the EPA 2027 is still intact, that we have to build towards that? So just kind of curious how that also is shaping your guys' kind of view as you kind of go through 2025.

Michael: Thank you thanks, guys for taking my question.

Speaker Change: On on the EPA emissions change.

Speaker Change: If there is a change in 2007 and how does that inform your view in terms of how you guys are looking at your costs as the truck market saw so.

Speaker Change: Is this a time when you guys normally might pull back more cost to protect margins or is there an eye on 2026, where we if there is a view that the EPA 2007 is still intact that we have to build towards that so just kind of curious how that also is shaping your guys kind of view as you kind of go through 2020.

Michael Feniger: So just kind of curious how that also is shaping your guys' kind of view as you kind of go through 2025.

Speaker Change: Hi.

Preston Veit: Yeah, great, great conversation for us to have together. I think, as we think about the regulatory standards, there's a lot that gets mixed into that conversation. And it's really not one conversation. It's really a couple parts to that. One is greenhouse gas or CO2 reductions, which have a standard which is intended to come into effect in 2027. So that's where you see an ACT impact, clean truck. The EPA has stated that they intend to look at those standards and potentially not implement GHG phase three in 2027. That would mean the number of electric vehicles, the kind of CO2 reductions that come with that could be adjusted.

Preston Feight: Yeah, great conversation for us to have together. I think as we think about the regulatory standards, there's a lot that gets mixed into that conversation. It's really not one conversation. It's really a couple of parts to that. One is Greenhouse Gas or CO2 reductions, which have a standard which is intended to come into effect in 2027. So that's where you see an ACT impact, a clean truck impact. The EPA has stated that they intend to look at those standards and potentially not implement GHG Phase 3 in 2027. That would mean the number of electric vehicles, the kind of CO2 reductions that come with that could be adjusted. That's not what they've done yet, but that's what they've made a stated intent to address. Those changes really don't have a significant input cost change for us in terms of vehicle costs.

Speaker Change: Yes, great great conversation for us to have together I think as we think about the regulatory standards. There is a lot of it gets mixed into that conversation.

Speaker Change: And it's really not one conversation, it's really a couple of parts to that one is greenhouse gas or <unk> reductions, which have a standard which is intended to come into effect in 2027.

Speaker Change: So thats, where you see an acte impact.

Speaker Change: Clean truck impact.

Speaker Change: The EPA has stated that they intend to look at those standards and potentially not implement <unk> phase III in 2027 that would mean the number of electric vehicles, the kind of CODI reductions that come with that could be adjusted.

Preston Veit: That's not what they've done yet, but that's what they've made a stated intent to address. Those changes really don't have a significant input cost change for us in terms of vehicle costs. So the trucks that are GHD compliant don't look like the diesel trucks that are GHD compliant don't have a real different cost structure in 2027.

Speaker Change: Thats not what they've done yet, but that's what they've made a stated intent to address.

Speaker Change: Those changes really don't have a significant input cost change for us in terms of vehicle costs. So the trucks that are ghd compliant or don't look like the diesel trucks that are TG complaint don't have a real different cost structure in 2027. So if those changes are made there might just be less requirements for evs made that's part one of this regulatory.

Preston Feight: So the trucks that are GHG compliant don't look like the diesel trucks that are GHG compliant don't have a real different cost structure in 2027. So if those changes are made, there might just be less requirements for EVs made. That's part one of this regulatory discussion. The part two of the regulatory discussion is around NOx. The NOx standards, which are in place, call for a reduction from today's 200-milligram engines down to a 35-milligram engine. That's the law that's in place today. If that law enacts, then costs of the vehicles will go up significantly because there'll be additional hardware required to meet those NOx levels. The government has said they intend to look at that and consider whether that will stay at 200 milligrams or, excuse me, move to 335 milligrams or stay at today's 200 milligrams.

So the trucks that are GHG compliant don't look like the diesel trucks that are GHG compliant don't have a real different cost structure in 2027. So if those changes are made, there might just be less requirements for EVs made. That's part one of this regulatory discussion. The part two of the regulatory discussion is around NOx. The NOx standards, which are in place, call for a reduction from today's 200-milligram engines down to a 35-milligram engine. That's the law that's in place today. If that law enacts, then costs of the vehicles will go up significantly because there'll be additional hardware required to meet those NOx levels. The government has said they intend to look at that and consider whether that will stay at 200 milligrams or, excuse me, move to 335 milligrams or stay at today's 200 milligrams.

Preston Veit: So if those changes are made, there might just be less requirements for EVs made. That's a part one of this regulatory discussion.

Speaker Change: Tori discussion.

Preston Veit: Part 2 of the Regulatory Discussion is around NOC. And the NOx standards, which are in place, call for a reduction from today's 200 milligram engines down to a 35 milligram. That's the law that's in place today. If that law enacts, then costs of the vehicles will go up significantly, because there'll be additional hardware required to meet those NOx levels. The government has said they intend to look at that and consider whether that will stay at 200 milligrams or, excuse me, move to 335 milligrams or stay at today's 200 milligrams. And that's less clear that there would be really an adjustment there.

Speaker Change: Two of the regulatory discussions around Nox.

Speaker Change: And the Nox standards, which are in place call for reduction from today's 200 milligram engines down to a 35 milligram engine.

Speaker Change: That's the law that's in place today, if that law enacts then cost of the vehicles will go up significantly because there'll be additional hardware required to meet those nox levels.

Speaker Change: The government has said they intend to look at that and consider whether that will stay at 200 milligrams or excuse me move to 335 milligrams or stay at today's 200 milligrams and that's less clear that there would be really an adjustment there.

Preston Feight: That's less clear that there would be really an adjustment there. The good thing for PACCAR is we've made great investments in clean diesel technology along the way, never adjusted from that, as we've shared with you over the years. So we're prepared for any of these situations that come up. We've got great engines for today that meet the NOx standard at today's cost structure. We've got new engines designed and running that can meet the 35-milligram NOx standard, and they come with some on-costs. So whichever way the standards go, we'll be in a very good position to meet those for our customers. Of course, what the government does will inform the market's reaction. So what we look at is, say, today's numbers are 35 milligrams. That would drive up the cost of a product in 2027. We're prepared for that.

That's less clear that there would be really an adjustment there. The good thing for PACCAR is we've made great investments in clean diesel technology along the way, never adjusted from that, as we've shared with you over the years. So we're prepared for any of these situations that come up. We've got great engines for today that meet the NOx standard at today's cost structure. We've got new engines designed and running that can meet the 35-milligram NOx standard, and they come with some on-costs. So whichever way the standards go, we'll be in a very good position to meet those for our customers. Of course, what the government does will inform the market's reaction. So what we look at is, say, today's numbers are 35 milligrams. That would drive up the cost of a product in 2027. We're prepared for that.

Preston Veit: The good thing for Paccor is we've made great investments in clean diesel technology along the way. Never adjusted from that, as we've shared with you over the years. And so we're prepared for any of these situations that come up. We've got great engines for today that meet the NOx standard at today's cost structure. We've got new engines designed and running that can meet the 35 milligram NOx standard, and they come with some on-cost. So whichever way the standards go, we'll be in a very good position to meet those for our customers. And of course, what the government does will inform the market's reaction.

Speaker Change: The good thing for <unk>, we've made great investments in clean diesel technology, along the way never adjusted from that as we've shared with you over the years and so we're prepared for any of these situations that come up we've got great engines.

Speaker Change: For today that meet the Nox standard at today's cost structure, we've got new engines designed and running that can meet the 35 milligram Nox standard.

Speaker Change: Come with Salon costs, so whichever way the standards go we'll be in a very good position to meet those for our customers and of course with the government does will inform the markets reaction.

Preston Veit: And so what we look at is, say, today's numbers are 35 milligrams. That would drive up the cost of a product in 2027, and we're prepared for that. If it changes, we'll be in good shape, too.

Speaker Change: And so what we look at it as a todays numbers are 35 milligrams that would drive up the cost of the product in 2027, and we're prepared for that with the changes will be in good shape too.

Preston Feight: If it changes, we'll be in good shape too.

If it changes, we'll be in good shape too.

Michael Feniger: understood if I could just my follow up just if you kind of dive into the part side, you know, it seems like the growth was a little slower than than we expected. margins just are we starting to kind of normalize here?

Michael Feniger: Understood. If I could just, my follow-up, just if you could kind of dive into the parts side. It seems like the growth was a little slower than we expected. Margins, just, are we starting to kind of normalize here? What do you kind of see when we think of the parts margins on a year-over-year sequential basis, how we kind of think about that profitability? Anything we should kind of think about that as we're thinking for the full year into Q2, but for 2025? Thank you.

Speaker Change: Understood and if I could just my follow up just if you could kind of dive into the parts side.

Speaker Change: It seems like the growth was a little slower.

Speaker Change: Than we expected.

Speaker Change: Margins just are we starting to kind of normalize here what are you kind of see when we think of the parts margins on a year over year sequential basis, how we kind of think about that profitability. As you kind of think about that as we're thinking for the full year and into Q2, but for 2025. Thank you.

Preston Veit: What do you kind of see when we think of the parts margins on a year over year sequential basis, how we kind of think about that profitability, anything we kind of think about that as we're thinking for the full year and into Q2, but for 2025. Thank So we were very proud of the parts team that they've been able to grow parts sales in the first quarter in a soft market for parts and services. And the margin levels of above 30%, that's pretty good margin for Pecca parts. And we think there's an amazing job getting solid good margins out of a out of a soft market these days.

Speaker Change: Yes.

Harrie Schippers: So we were very proud of the parts team, that they've been able to grow parts sales in Q1 in a soft market for parts and service. And the margin levels of above 30%, that's a pretty good margin for PACCAR Parts. And we think team does an amazing job getting solid, good margins out of a soft market these days. And we expect parts to continue that growth throughout the year at levels between 2% and 4%.

Speaker Change: We were very proud of the parts team that they've been able to grow product sales in the first quarter in a soft market for parts and service.

Speaker Change: The margin levels are above 30%.

Speaker Change: That's pretty good margins for peg apart.

Speaker Change: We think team does an amazing job getting.

Speaker Change: Solid good margins out of a out of a soft market. These days.

Preston Veit: And We expect parts to continue that growth throughout the year at levels between 2% and 4%.

Speaker Change: And we expect parts to continue that growth throughout the year to levels between 2% and 4%.

Preston Veit: You know, and I would add everything Harry said makes perfect sense. And I'd say he shared in his opening comments, the number of connected vehicles we have now and the number of connected vehicles and the technology that our parts team is bringing gives us a great confidence that parts will continue to grow over the short, medium and long term at good levels.

Preston Feight: You know what? I would add that everything Harry said makes perfect sense. And it's he shared in his opening comments the number of connected vehicles we have now and the number of connected vehicles and the technology that our parts team is bringing gives us a great confidence that parts will continue to grow over the short, medium, and long term at good levels.

Speaker Change: You know what I would add everything Harry said makes perfect sense and I'd say he shared in his opening comments the number of connected vehicles, we have now and the number of connected vehicles and the technology that our parts team is bringing.

Speaker Change: It gives us a great confidence that parts will continue to grow over the short medium and long term at good levels.

Tami Zakaria: Thank you.

Operator: Thank you. Our next question comes from Tami Zakaria of J.P. Morgan. Tami, your line is open. Please go ahead.

Tami Zakaria: Our next question comes from Tami Zakaria of JP Morgan. Tami, your line is open. Please go ahead.

Speaker Change: Thank you. Our next question comes from Tami Zakaria of Jpmorgan. Your line is open. Please go ahead.

Tami Zakaria: Hey, good morning to all and congrats to Kevin on the new role. And Harrie, what an exemplary career at Paccor. And I will definitely miss you. But best of luck, I'm sure great things await you.

Tami Zakaria: Hey, good morning to all. And congrats to Kevin on the new role. And Harry, what an exemplary career at PACCAR. And I will definitely miss you, but best of luck. I'm sure great things await you. So I wanted to ask a question on tariffs again. I just wanted to clarify, and I appreciate the situation is very fluid, but it seems like there aren't any potential Section 232 tariffs embedded in the Q2 gross margin guide. Is that correct? And if so, what's essentially embedded in that 13% to 14%? Does it include the now-paused tariffs, which could become effective at any point next month? So what's really in that 13% to 14% guide?

Tami Zakaria: Hey, good morning to all and congrats to Kevin on the new role.

Speaker Change: And Harry what an exemplary career, Ed Packer, and I will definitely Miss you, but best of luck I'm sure great things.

Preston Veit: So, so I wanted to ask a question on tariffs again, I just wanted to clarify, and I appreciate the situation is very fluid. But it seems like there aren't any potential Section 232 tariffs embedded in the second quarter gross margin guide. Is that correct? And if so, what's essentially embedded in that 13 to 14%? Does it include the now paused tariffs, which could become effective at any point next month? So what's really in that 13 to 14% guide? 13 to 14% includes tariffs as they are today is the impact of what's going on there. So that's as it is, that's as the rules are today, that's what we've given you.

Speaker Change: Over to you.

Speaker Change: So I wanted to ask a question on <unk>.

Speaker Change: So again I just wanted to clarify and I. Appreciate the situation is very fluid, but it seems like.

Speaker Change: There aren't any potential section 232 tariffs embedded in that.

Speaker Change: Second quarter gross margin guide is that correct and if so what's the assumption embedded in that 13% to 14%.

Speaker Change: Does that include the now pause tariffs, which could become effective at any point next month.

Speaker Change: Whats really in that 13% to 14% guide.

Preston Feight: 13% to 14% includes tariffs as they are today, is the impact of what's going on there. So that's as it is. As the rules are today, that's what we've given you. The Section 232 adjustments could include impact on foreign-made trucks. It could include impact on components. It could also include exemptions on components for US-made trucks. None of that is clear, and so we have to wait and see what that looks like.

Speaker Change: 30% to 14% includes tariffs as they are today is the impact of what's going on there. So thats as it is as the rules are today, that's what we've given you. The section 232 adjustments could include impact on foreign made trucks. It could include impact on component to it could also include exemptions on components for U S made trucks.

Preston Veit: The Section 232 adjustments could include impact on foreign made trucks, it could include impact on components, it could also include exemptions on components for US made trucks. None of that is clear. And so we have to wait and see what that looks like. But I think it's okay to summarize that the impact overall, the overall impact would be I think that's a fair way to say it, and that's kind of why we tried to give you that conservative look at the quarter with the standards of today, because we know what we know, and if the rules change, then we think that...

Speaker Change: None of that is clear and so we have to wait and see what that looks like.

Harrie Schippers: But I think it's okay to summarize that the impact overall, the overall impact would be less unfavorable or even favorable. Is that?

Speaker Change: But I think it's okay.

Speaker Change: Why is that.

Speaker Change: Well the overall impact would be.

Speaker Change: Less unfavorable even favorable.

Preston Feight: I think that's a fair way to say it. And that's kind of what we tried to give you, that conservative look at the quarter with the standards of today because we know what we know. And if the rules change, then we think that if anything, it should be upside for us.

Speaker Change: I think thats, a fair way to say it and Thats kind of we tried to give you that conservative look at the quarter with the standards of today because.

Speaker Change: We know what we know and if the rules change then we think that.

Preston Veit: If anything, it should be upside.

Speaker Change: If anything it should be upside for us.

Tami Zakaria: Okay, understood. That's very helpful.

Tami Zakaria: Understood. That's very helpful. Then in the same thread, I wanted to understand the potential impact of tariffs on the parts business. I know that you don't manufacture parts yourself, but any color on what mix of parts come into the US from the outside, and how much is locally sourced, and whether you have to take pricing to offset some of these tariff headwinds on the cost of procurement?

Speaker Change: Understood. That's very helpful and then in the same thread.

Preston Veit: And then in the same thread, I want to understand the potential impact of tariffs on the parts business. I know that you don't manufacture parts yourself, but any color on what mix of parts come into the U.S. from the outside and how much is locally sourced and whether you have to take pricing to offset some of these tariff headwinds on the cost of procurement. Yeah, you go ahead. So tell me, President Volkmann, to you, but...

Speaker Change: I wanted to understand the impact potential impact impact of tariffs on the parts business.

Speaker Change: I know that you don't manufacture parts yourself, but any color on what mix of parts come into the U S from the outside and how much is locally sourced and whether you have to take pricing to offset some of these tariff headwinds.

Speaker Change: On the cost of procurement.

Harrie Schippers: Yeah. So tell me, but Preston, we'll continue, but for parts, we don't have a backlog. So if we get cost increases for parts, it's much easier to pass those on with almost immediate effect. So it has less of a margin impact there. There are parts that are sourced and are impacted by tariffs, but we're working with the suppliers. If and when those costs for us would go up, we would increase prices accordingly.

Speaker Change: Yes.

Speaker Change: President.

Speaker Change: We'll continue that.

Preston Veit: For parts, we don't have a backlog. So if we if we get cost increases for parts, it's much easier to pass those on with almost immediate effect. So it has less of a margin impact there. There is parts that are sourced and impacted by tariffs, but we're working with the suppliers. And if and when those costs for us would go up, we would increase prices accordingly. Yeah, and I just to give you ballparks, I'd say, you know, less than half of our purchases are really from maybe country of origin outside the US. Parts, it's a little bit higher percentage than the nominal, but it's not, it's not the majority.

Speaker Change: For parts, we don't have a backlog.

Speaker Change: If we get cost increases for parts.

Speaker Change: It's much easier to pass those on with almost immediate effect. So it has less of a margin impact there there is.

Speaker Change: Products that are sourced.

Speaker Change: Are impacted by tariffs, but we're working with the suppliers.

Speaker Change: Different windows close for US we'd go up we would increase our prices accordingly.

Preston Feight: Yeah. Just to give you ballparks, let's say less than half of our purchases are really from maybe country of origin outside the US. Parts, it's a little bit higher percentage than the nominal, but it's not the majority. Because as you said, we actually do make some of our parts, right? The proprietary parts are, in many cases, things we do make for ourselves and do get made in America.

Speaker Change: Yes.

Speaker Change: Just to give you a ballpark that's less than half of our purchases are really from maybe country of origin outside the U S or parts, it's a little bit higher percentage.

Speaker Change: The nominal but its not it's not the majority because as you said.

Preston Veit: Because as you said, we actually do make some of our parts, right, the proprietary parts are in many cases, things we do make for ourselves and do get made in America. Understood.

Speaker Change: We actually do make some of our parts right. The proprietary parts are in many cases things, we do make for ourselves and do get made in America.

Tami Zakaria: Understood. That's very helpful. Thank you.

Preston Veit: That's very helpful. Thank you. You bet.

Speaker Change: Understood that's very helpful. Thank you.

Preston Feight: You bet.

You bet.

Operator: Thank you. Our next question comes from Rob Wertheimer of Melius Research. Rob, your line is open. Please go ahead.

Speaker Change: Thank you. Our next question comes from Rob West Phyma Melius Research. Your line is open. Please go ahead.

Rob Wertheimer: Our next question comes from Rob Wertheimer of Melius Research. Rob, your line is open. Please go ahead. Thank you. My first question is on the Section 232 tariff, truck policy and investment. Is the potential positive there a relative one because you make more trucks in the US, I suppose, than some of your competitors? Or is it more of an industry comment you were making where they could, you know, kind of offset some of the hit to I think it could be both, Rob. Feniger's is an astute observation, but I think it could be both. It could be a relative and it could be an absolute.

Speaker Change: Okay.

Preston Feight: Thank you. My first question is on the Section 232 tariff truck policy investigation. Is the potential positive there a relative one because you make more trucks in the US, I suppose, than some of your competitors? Or is it more of an industry comment you were making where they could kind of offset some of the hit to purchase parts from overseas?

Rob Wertheimer: Thank you. My first question is on the Section 232 tariff truck policy investigation. Is the potential positive there a relative one because you make more trucks in the US, I suppose, than some of your competitors? Or is it more of an industry comment you were making where they could kind of offset some of the hit to purchase parts from overseas?

Speaker Change: Thank you Mike.

Speaker Change: My first question is on this section 232 tariff truck policy.

Speaker Change: Investigation is a potential positive there are relative one because you make more trucks in the U S. I suppose than some of your competitors or is it more of an industry comment you were making where they could you know kind of offset some of the hit to.

Speaker Change: Purchase parts from overseas.

Preston Feight: I think it could be both, Rob. I think yours is an astute observation, but I think it could be both. It could be a relative, and it could be an absolute.

Speaker Change: I think it could be both Rob and it gives us an astute observation, but I think it could be both it could be a relative and it could be an absolute.

Preston Feight: Okay. Perfect. Thank you. And the second one's going to be a little bit general, but you mentioned you have the truck backlog. You're not repricing those instantly for tariffs. I'm a little bit curious, how are you managing through this fairly dynamic environment? I mean, when you know the tariff, are you pricing that immediately into current orders, or do you not because the tariff could change by the time the truck gets made and delivered? And a little bit, if you're willing, the same question on, do you anticipate any margin impacts from production variances from supply chain from when you order and when you choose to order depending on tariff? I mean, is that a potential margin risk towards the end of the year or not? And if I don't get back on the line, I'd just like to say, Harry, congratulations.

Rob Wertheimer: Okay. Perfect. Thank you. And the second one's going to be a little bit general, but you mentioned you have the truck backlog. You're not repricing those instantly for tariffs. I'm a little bit curious, how are you managing through this fairly dynamic environment? I mean, when you know the tariff, are you pricing that immediately into current orders, or do you not because the tariff could change by the time the truck gets made and delivered? And a little bit, if you're willing, the same question on, do you anticipate any margin impacts from production variances from supply chain from when you order and when you choose to order depending on tariff? I mean, is that a potential margin risk towards the end of the year or not? And if I don't get back on the line, I'd just like to say, Harry, congratulations.

Speaker Change: Okay perfect. Thank you and the second one is going to be a little bit general, but you mentioned you have the truck backlog, you're not repricing those instantly for tariffs I'm a little bit curious how are you managing through that fairly dynamic environment. I mean, when you know the tariff are you pricing that immediately into.

Preston Veit: Current orders or do you not because the tariff could change by, you know, by the time the truck gets made and delivered. And a little bit, if you're willing, the same question on do you anticipate any margin impacts on, you know, from production variances from supply chain from when you order and when you choose to order depending on tariff. I mean, is that a potential margin risk towards the end of the year?

Speaker Change: Current orders or do you not because of the tariff could change.

Speaker Change: By the time, a truck at maiden delivered and a little bit if youre willing to same question on do you anticipate any margin impact on on from production variances from supply chain from when you order and when you choose to order depending on tariffs I mean is that a potential margin risk towards the end of the year or not.

Preston Veit: And if I don't get back on the line, I'd just like to say, Harrie, congratulations. It's been a pleasure talking with you over the years and thank you for everything. Thanks, Scott. I think that all the things you said in terms of the pricing structures and the timing for them are all true, but there's not a single 30-second answer I could give you about how they affect things. There are times when we have a backlog we're protecting, there's times when component prices are coming in, there's times when we know what they're going to be, there's times when it's a little bit uncertain.

Speaker Change: Get back online I'd, just like to say congratulations it's been a pleasure talking with you over the years and thank you for everything.

Preston Feight: It's been a pleasure talking with you over the years, and thank you for everything.

It's been a pleasure talking with you over the years, and thank you for everything.

Preston Feight: Thanks, Rob. Yeah. I think that all the things you said in terms of the pricing structures and the timing for them are all true, but there's not a single 30-second answer I could give you about how they affect things. There are times when we have a backlog we're protecting. There's times when component prices are coming in. There's times when we know what they're going to be. There's times when it's a little bit uncertain. We're still defining HTS codes, which is what the government defines the tariff structures around. And so we're deciding whether those specific components or subassemblies are USMCA compliant. That's having some impact. So I really can't give you a better answer than it's pretty dynamic right now. And the beautiful thing about being part of this company is having great people who are thinking about it every day.

Speaker Change: Thanks, Rob.

Speaker Change: Yes, I think that all the things you said in terms of the pricing structures and the timing for them are all are all true, but there's not a single 32nd answer I could give you about how they affect things there are times when we have a backlog we're protecting their times when component prices are coming in there's times. When we know what they are going to be Theres times, when it's a little bit uncertain, we're still <unk>.

Preston Veit: We're still defining HTS codes, which is what the government defines the tariff structures around, and so we're deciding whether those specific components or subassemblies are USMCA compliant. That's having some impacts. I really can't give you a better answer than it's pretty dynamic right now, and the beautiful thing about being part of this company is having great people who are thinking about it every day, and we work closely with our suppliers on this. I think collaboratively with our suppliers, our dealers, our customers, and this great team, we feel like we've got our fingers really on the pulse of it and are right on top of it.

Speaker Change: Finding HTS codes, which is what the government defines the tariff structures around.

Speaker Change: And so we are deciding whether those specific components or sub assemblies are U S. MCA compliant that's having some impact so I really can't give you a better answer than it's pretty dynamic right now and the beautiful thing about being part of this company is having great people, who are thinking about it every day and we work closely with our suppliers on this I think to collaboratively with.

Preston Feight: We work closely with our suppliers on this. I think collaboratively with our suppliers, our dealers, our customers, and this great team, we feel like we've got our fingers really on the pulse of it and are right on top of it.

We work closely with our suppliers on this. I think collaboratively with our suppliers, our dealers, our customers, and this great team, we feel like we've got our fingers really on the pulse of it and are right on top of it.

Speaker Change: Our suppliers our dealers our customers and this great team, we feel like we've got our fingers really on the pulse of it or right on top of it.

Preston Veit: Understood. Thank you. You bet.

Preston Feight: Understood. Thank you.

Rob Wertheimer: Understood. Thank you.

Speaker Change: Understood. Thank you.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question comes from Stephen Volkmann of Jefferies. Stephen, your line is open. Please go ahead.

Steve Volkmann: Our next question comes from Steve Volkmann of Jeffrey. Steve, your line is open. Please go ahead. Thank you very much.

Speaker Change: Thank you. Our next question comes from Steve Volkmann of Jeffries, Steve. Your line is open. Please go ahead.

Chad Dillard: Thank you very much. And my congratulations as well, Harry. You're going to miss this, believe it or not. And my question is, I can see you shaking your head there. Anyway, I'm curious at a pace.

Stephen Volkmann: Thank you very much. And my congratulations as well, Harry. You're going to miss this, believe it or not. And my question is, I can see you shaking your head there. Anyway, I'm curious at a pace.

Speaker Change: Thank you very much and my congratulations as well here youre going to Miss this believe it or not.

Harrie Schippers: And my congratulations as well, Harry, you're gonna miss this, believe it or not. And my question is, I can see you shaking your head there. Anyway, no, I said I know I will. I know I will miss this. Well, anyway, um...

Speaker Change: My question is.

Speaker Change: Okay.

Speaker Change: I can see you're shaking your head there.

Speaker Change: I'm curious.

Harrie Schippers: I said I know I will, Rob. Steve, I know I will miss this, Steve. So I'm going to.

Speaker Change: No I will Rob.

Speaker Change: Sure.

Speaker Change: I don't know if I missed this.

Chad Dillard: All right. Well, anyway, I'm curious. I know there's a lot of moving pieces on the tariffs here. Assuming nothing changes on 232, that doesn't happen. What's in place today stands. Is it reasonable to assume the gross margins will be the lowest of the year in Q2 and then sort of improve as the year progresses as pricing comes in?

Stephen Volkmann: All right. Well, anyway, I'm curious. I know there's a lot of moving pieces on the tariffs here. Assuming nothing changes on 232, that doesn't happen. What's in place today stands. Is it reasonable to assume the gross margins will be the lowest of the year in Q2 and then sort of improve as the year progresses as pricing comes in?

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Well anyway.

Preston Veit: I'm curious. I know there's a lot of moving pieces on the tariffs here. Assuming nothing changes on 232. They just that doesn't happen. And what's in place today stands.

Speaker Change: I'm curious.

Speaker Change: I know, there's a lot of moving pieces on the tariffs here, assuming nothing changes on 232, they just that doesn't happen and what's in place today stands.

Preston Veit: Is it reasonable to assume the gross margins will be the lowest of the year in the second quarter and then sort of improve as the year progresses as pricing comes in? Well, like you know, we're in a really uncertain economic time and tariff time. So guiding the second quarter is something more than even a lot of people are doing. Asking me to go out into Q3 and Q4 and forecast that. I'm very reluctant to that. We do feel like we have a great strategy in place and that the more time passes, the more likely we are to get that in place.

Speaker Change: Is it reasonable to assume that gross margins will be the lowest of the year in the second quarter, and then sort of improve as the year progresses as pricing comes in.

Preston Feight: Well, like you know, we're in a really uncertain economic time and tariff time. So guiding the second quarter is something more than even a lot of people are doing. Asking me to go out into Q3 and Q4 and forecast that, I'm very reluctant to that. We do feel like we have a great strategy in place and that the more time passes, the more likely we are to get that in place. We do feel like the market will strengthen as we get into the second half of the year. So if you want to suppose that into improving margins, I think that's a fair supposition.

Speaker Change: Well.

Speaker Change: We're in a really uncertain economic time in tariff time, so guiding the second quarters there'll be more than even a lot of people are doing.

Speaker Change: Asking me to go out into Q3, and Q4 and forecast that.

Speaker Change: Very reluctant to that.

Speaker Change: We do feel like we have a great strategy in place and that the more time passes and we're like we are to get that in place and we do feel like the market will strengthen as we get into the second half of the year. So if you want to suppose that into improving margins I think that's a fair supposition.

Preston Veit: And we do feel like the market will strengthen as we get into the second half of the year. So if you want to suppose that into improving margins, I think that's a fair supposition.

Preston Veit: Building our trucks in the U.S. for the U.S. at the end of the day, that should be a good thing for us.

Harrie Schippers: Building our trucks in the US for the US, at the end of the day, that should be a good thing for us.

Speaker Change: Building our trucks in the U S.

Speaker Change: At the end of the day it should be a good thing for us.

Preston Veit: Okay. And then I don't know if Preston, this is what you were thinking, but I'm curious how you're thinking about the potential for pre-buys. And now it feels like there could be two flavors here, one ahead of any emission changes. I think we've talked about that on previous calls. I'm curious if for an updated thought there, but we might also see some pre-buys if this 232 thing comes in and people want to buy the pre-tariff trucks off the lot, maybe. I don't know.

Chad Dillard: Okay. And then I don't know if, Preston, this is what you were thinking, but I'm curious how you're thinking about the potential for pre-buys. And now it feels like there could be two flavors here. One, ahead of any emission changes. I think we've talked about that on previous calls. I'm curious if for an updated thought there. But we might also see some pre-buys if this 232 thing comes in and people want to buy the pre-tariff trucks off the lot maybe. I don't know. Just any thoughts in that direction would be great.

Stephen Volkmann: Okay. And then I don't know if, Preston, this is what you were thinking, but I'm curious how you're thinking about the potential for pre-buys. And now it feels like there could be two flavors here. One, ahead of any emission changes. I think we've talked about that on previous calls. I'm curious if for an updated thought there. But we might also see some pre-buys if this 232 thing comes in and people want to buy the pre-tariff trucks off the lot maybe. I don't know. Just any thoughts in that direction would be great.

Speaker Change: Okay, and then I don't know if pressed and this is what you were thinking but im curious how youre thinking about the potential for pre buys and now it feels like there could be two flavors here. One ahead of any emission changes I think we've talked about that on previous calls I'm curious for an update.

Speaker Change: <unk> thought there, but we might also see some pre buys a fifth $2 32 thing comes in and people want to buy the pre tariff trucks off the lot maybe I don't know just any thoughts in that direction would be great.

Preston Veit: Just any thoughts in that direction would be great. I would say that regarding the regulatory standards, as we as we shared, if there is a current NOx standard implemented, or if there's a NOx standard Change, implemented in 2027. So a move from 200 milligram engines to 35 milligram engines that will affect hardware on trucks, which will drive up costs on trucks. And so that could drive customer buying patterns into 2026. The thing is, nobody knows that right now. Because the rule is in place, the law is in place around the 35 milligram NOx standard. But there is a statement made that they're considering opening it back up.

Preston Feight: I don't really see that commentary on the Section 232 of the buying the trucks off the lot because we're really building trucks for customers. So they have a customer name on them. The consideration of Section 232 is whether there would be tariffs applied to trucks built outside of the US and then how they would treat components that are coming into trucks that are built in the US. So I don't really think there's kind of a pre-buy scenario around tariffs that I would envision. I would say that regarding the regulatory standards, as we shared, if there is a current NOx standard implemented, if there's a NOx standard change implemented in 2027, so a move from 200-milligram engines to 35-milligram engines, that will affect hardware on trucks, which will drive up costs on trucks. And so that could drive customer buying patterns into 2026.

Speaker Change: I don't I don't really see that commentary on the section 232 of the buying the trucks awful lot because we're really building trucks for customers. So they have a customer name on them.

Speaker Change: And the consideration of section 232 is whether there would be tariffs applied to trucks built outside of the U S. And then how they would treat components that are coming into trucks that are built in the U S. So I don't really think theres kind of a pre buy scenario around tariffs that would vision.

Speaker Change: I'd say that regarding the regulatory standards as we as we shared if there is a current Nox standard implemented if theres is Nox standard.

Speaker Change: Change implemented in 2027, so will move from 200 milligram agents to <unk> 35, milligram and yet that will affect hardware on trucks, which will drive up costs on trucks, and so that could drive.

Speaker Change: Customer buying patterns into 2026.

Preston Feight: The thing is, nobody knows that right now because the rule is in place. The law is in place around the 35-milligram NOx standard. But there is a statement made that they're considering opening it back up. And we recognize that on costs for our customers makes their lives difficult. So we're well-positioned to offer our customers a 200-milligram engine if that's what's legally allowed. And we also recognize if the government says it's got to be 35-milligram engines, we have great engines to offer them there too.

The thing is, nobody knows that right now because the rule is in place. The law is in place around the 35-milligram NOx standard. But there is a statement made that they're considering opening it back up. And we recognize that on costs for our customers makes their lives difficult. So we're well-positioned to offer our customers a 200-milligram engine if that's what's legally allowed. And we also recognize if the government says it's got to be 35-milligram engines, we have great engines to offer them there too.

Speaker Change: The thing is nobody knows that ratio because the rule is in place. The law is in place around the 35 milligram Nox standard, but there is a statement made that they are considering opening back up and we recognize it on cost for our customers makes their lives difficult. So we're well positioned.

Preston Veit: And we recognize that on cost for our customers makes their lives difficult. So we're well positioned to offer our customers a 200 milligram engine, if that's what's legally allowed. And we also recognize that the government says it's got to be 35 milligram engines, we have great engines to offer them there too.

Speaker Change: To offer our customers a 200 milligram engine.

Speaker Change: That's what's legally allowed and we also recognized as the government says it's got to be 35 milligram unions with great engines to offer them there too.

Preston Veit: Thank you.

Chad Dillard: Thank you.

Stephen Volkmann: Thank you.

Speaker Change: Thank you.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question comes from Stephen Fisher of UBS. Stephen, your line is open. Please go ahead.

Steven Fisher: Our next question comes from Steven Fisher of UBS. Steven, your line is open. Please go ahead. Thanks very much. And of course, add my thank you to to Harry and congratulations. It's been a real pleasure.

Speaker Change: Thank you. Our next question comes from Steven Fisher of UBS. Steven Your line is open. Please go ahead.

Chad Dillard: Thanks very much. And of course, add my thank you to Harry, and congratulations. It's been a real pleasure. Just from a backlog perspective and ordering, what kind of visibility do you guys have to Q2 to Q4 at this point? We've heard some anecdotes about it's really challenging for buyers to kind of step up and place orders at the moment. So I'm curious what kind of visibility and what's the fill-out look like at this point, and how does that vary between North America and Europe?

Steven Fisher: Thanks very much. And of course, add my thank you to Harry, and congratulations. It's been a real pleasure. Just from a backlog perspective and ordering, what kind of visibility do you guys have to Q2 to Q4 at this point? We've heard some anecdotes about it's really challenging for buyers to kind of step up and place orders at the moment. So I'm curious what kind of visibility and what's the fill-out look like at this point, and how does that vary between North America and Europe?

Steven Fisher: Thanks very much.

Steven Fisher: Add my thank you to to Harry Congratulations it's been a real pleasure.

Steven Fisher: Just from a backlog perspective, and ordering, what kind of visibility do you guys have to Q2 to Q4 at this point? And we've heard some anecdotes about, you know, it's really challenging for buyers to kind of step up and place orders at the moment. So I'm curious, what kind of visibility and what's the fill out look like at this point? And how does that vary between North America and Europe? Yeah, sure. I think we're in the in the kind of a normal pattern for ourselves of where we are in the market cycle. We have substantially full in the second quarter taking orders through the third and fourth quarter right now.

Speaker Change: Just from a.

Our backlog perspective, and ordering what kind of visibility do you guys have two Q2 to Q4 at this point.

Speaker Change: Heard some anecdotes about.

Speaker Change: It's really challenging for buyers to kind of step up and place orders at the moment. So I'm curious what kind of visibility in what's the fill out look like at this point.

Speaker Change: And how does that vary between North America and Europe.

Preston Feight: Yeah, sure. I think we're in the kind of a normal pattern for ourselves of where we are in the market cycle. We have substantially full in the second quarter, taking orders through the third and fourth quarter right now. I'd say that this is actually comparable between the US and Europe in terms of backlog, kind of that substantially full in the second quarter and starting to think through the third quarter right now. And I agree with your comments that the customers are trying to discern what their buying pattern should be and what the tariff policies will be. And so they're kind of contemplative of that, and it's affecting some people's buying patterns. But listen, the trucks we're building today are the most efficient trucks we've ever built, and they're good for operating costs, and the customers love them.

Speaker Change: Yes, sure I think we are in the in the kind of a normal pattern for ourselves of where we are in the market cycle. We have substantially full in the second quarter, taking orders through the third and fourth quarter right now.

Preston Veit: I'd say that there's actually comparable between the US and Europe in terms of backlog, kind of that substantially full in the second quarter and starting to think through the third quarter right now. And I, you know, I agree with your comments that the customers are trying to Discern what their buying pattern should be and what the tariff policies will be and so they're kind of contemplative of that and it's affecting some people's buying patterns but listen the trucks we're building today are the most efficient trucks we've ever built and they're good for operating costs and the customers love them so there is that pull towards those trucks as well.

Speaker Change: I would say that this can be actually comparable between the U S and Europe in terms of backlog.

Speaker Change: That substantially full in the second quarter and starting to think through the third quarter right now.

Speaker Change: With your comments that the customers are trying to.

Speaker Change: Discern what theyre buying pattern should be and what the tariff polls will be policies will be and so theyre kind of contemplated that is affecting some people's buying patterns, but listen the trucks. We're building today are the most efficient trucks we've ever built.

Speaker Change: And they're good for operating cost and the customers love them. So there is that pull towards those trucks as well.

Preston Feight: There is that pull towards those trucks as well.

There is that pull towards those trucks as well.

Chad Dillard: That makes sense. Then just on the parts growth, I'm just curious, what do you think is going to drive the acceleration in Q2 and for the rest of the year? What kind of sort of freight conditions you're assuming for that? Then I know you've mentioned a couple of times about general improvements for the second half of the year. Just curious, I guess, beyond parts, what are you assuming is going to change to drive that improvement? Thank you.

Steven Fisher: That makes sense. Then just on the parts growth, I'm just curious, what do you think is going to drive the acceleration in Q2 and for the rest of the year? What kind of sort of freight conditions you're assuming for that? Then I know you've mentioned a couple of times about general improvements for the second half of the year. Just curious, I guess, beyond parts, what are you assuming is going to change to drive that improvement? Thank you.

Speaker Change: That makes sense and then just on the parts growth just curious what do you think is going to drive the acceleration in that in the.

Speaker Change: In Q2 and for the rest of the year, what kind of sort of freight conditions youre, assuming for that and then.

Speaker Change: You've mentioned a couple of times about general improvements.

Speaker Change: The second half of the year, just curious I guess beyond parts.

Speaker Change: What are you assuming is going to change to drive that improvement.

Preston Veit: that.

Preston Feight: You bet. I just think the general comment, the last one first, it feels to me like our customers, truckload customers, have been in a kind of a long period of low rates, and yet there's still a lot of ton miles being driven. So trucks are being used. And kind of back to what I just stated before is like the trucks we're building today are the most efficient, highest-performing trucks we've ever built. And so there is a desire for those trucks, especially as their older trucks continue to accumulate miles. I'd also add that we're seeing the used truck market start to show some good signs of pricing in the US. And so that's an upside for people to think about turning their fleets also.

Preston Veit: I just think the general comment, the last one first, it feels to me like Our customers, truckload customers, have been in kind of a long period of low rates, and yet there's still a lot of ton miles being driven. So trucks are being used, and kind of back to what I just stated before, is like the trucks we're building today are the most efficient, highest performing trucks we've ever built. And so there is a desire for those trucks, especially as their older trucks continue to accumulate miles, but also add that we're seeing The used truck market starts to show some good signs of pricing in the U.S.

Speaker Change: You bet.

Speaker Change: The general comment the last one first it feels to me like.

Speaker Change: Our customers truckload customers have been kind of a long period of low rates.

Speaker Change: And yet there is still a lot of ton miles being driven so trucks are being used and kind of back to what I. Just stated before is like the trucks. We're building today are the most efficient highest performing trucks, we've ever built and so there is a desire for those trucks, especially as our older trucks continue accumulate miles I'd also add that we're seeing.

Speaker Change: The used truck market start to show some good signs of pricing in the U S and so that's an upside for people think about turning their fleets also so.

David Raso: And so that's an upside for people think about turning their fleets also. So if there's a good residual value on their truck and there always is for the Paccar premium trucks, then that's helpful to them to think about how they want to do their second half buys. Thank you.

Preston Feight: So if there's a good residual value on their truck, and there always is for the PACCAR premium trucks, then that's helpful to them to think about how they want to do their second-half buys.

So if there's a good residual value on their truck, and there always is for the PACCAR premium trucks, then that's helpful to them to think about how they want to do their second-half buys.

Speaker Change: So if theres a good residual value on their truck and they are always is for the pack of our premium trucks. That's helpful to them to think about how they want to do their second half buys.

Chad Dillard: Thank you.

Steven Fisher: Thank you.

Speaker Change: Thank you.

Preston Feight: You bet.

Speaker Change: Okay.

David Raso: Our next question comes from David Raso of Evercore. David, your line is open, please go ahead. Hi, thank you for the time and obviously, thank you, Harrie. We spent a lot of time in Europe together and obviously congrats.

Operator: Our next question comes from David Raso of Evercore. David, your line is open. Please go ahead.

Speaker Change: Our next question comes from David Raso Evercore, David Your line is open. Please go ahead.

Chad Dillard: Hi. Thank you for the time. Obviously, thank you, Harry, for all the meetings and time in Europe together. Obviously, congrats to you and you and Kevin. First question, production versus retail, Q2. How are you thinking about your deliveries, your production versus retail? And sort of how do you think about production versus retail for the rest of the year? And then I have a quick follow-up about the sequential pattern of cost versus price.

David Raso: Hi. Thank you for the time. Obviously, thank you, Harry, for all the meetings and time in Europe together. Obviously, congrats to you and you and Kevin. First question, production versus retail, Q2. How are you thinking about your deliveries, your production versus retail? And sort of how do you think about production versus retail for the rest of the year? And then I have a quick follow-up about the sequential pattern of cost versus price.

Hi, Thank you for the time and obviously, thank you Harry for all the meetings and time in Europe, together and obviously congrats to you and are you and Kevin.

David Raso: First question, production versus retail, 2Q, how are you thinking about your deliveries, your production?

David Raso: First question production versus retail <unk>, how are you thinking about your deliveries your production versus retail and sort of how do you think about your production versus retail for the rest of the year and then I have a quick follow up about the sequential pattern of cost versus price.

Preston Veit: Ritter, Scott Group, David Raso, Robert Salmon, Michael Feniger, Jerry Revich, Steven Fisher, I'm going to talk about production versus retail for the rest of the year, and then I have a quick follow-up about the sequential pattern of cost. For production versus retail, I think they're pretty much in good position with each other. We already talked about inventory levels for us being in a reasonable position. So I think production versus retail, there's not a lot of step change between the two of them.

Preston Feight: For production versus retail, I think they're pretty much in good position with each other. We already talked about inventory levels for us being in a reasonable position. So I think production versus retail, there's not a lot of step change between the two of them. Then your sequential question is what specifically, David?

David Raso: For production versus retail I think they are pretty much in good position with each other we already talked about inventory levels for us being in a reasonable position. So I think production versus retail theres not a lot of step change between the two of them.

Preston Veit: And then your sequential question is what specifically, David? And that's a full year and a full year comment on production versus retail. Just to clarify the first part. That's a comment basically for the rest of the year. Well, I would say it more specifically to 2Q, but I think it does generally apply to the full year.

Speaker Change: And then your sequential question is typically David and Thats, a full year and the full year comment on production versus retail just to clarify the first part Thats a comment basically for the rest of the year not just <unk>, you're pretty comfortable production, but I would say it more specifically to <unk>.

Chad Dillard: And that's a full-year comment on production versus retail, just to clarify the first part. That's a comment basically for the rest of the year, not just Q2. You're pretty comfortable with production.

David Raso: And that's a full-year comment on production versus retail, just to clarify the first part. That's a comment basically for the rest of the year, not just Q2. You're pretty comfortable with production.

Preston Feight: Well, I would say it more specifically to Q2. I'd say it more specifically to Q2, but I think it does generally apply to the full year.

David Raso: Say it more specifically to <unk>, but I think it does generally apply to the full year.

Chad Dillard: Okay. Then the follow-up. The math you're implying sequentially is, say, revenues down $250 to 270 million sequentially, but gross profits down $190 million, right? So a pretty challenging decremental sequentially. But when I think about that, is Q2 getting full tariff impact from what we know now, not speculating about future tariffs? Is it a full quarter of tariff hit, but not a full benefit from the pricing actions you're expected to take? So would the idea be by Q3, that negative sequential gross margin, all else equal, should get better? Or is it, no, we're getting what we can on price in Q2, and that quarter hit on tariffs, it doesn't really necessarily get any better in Q3? Just trying to get a sense of that negative sequential. How painful is that?

David Raso: Okay. Then the follow-up. The math you're implying sequentially is, say, revenues down $250 to 270 million sequentially, but gross profits down $190 million, right? So a pretty challenging decremental sequentially. But when I think about that, is Q2 getting full tariff impact from what we know now, not speculating about future tariffs? Is it a full quarter of tariff hit, but not a full benefit from the pricing actions you're expected to take? So would the idea be by Q3, that negative sequential gross margin, all else equal, should get better? Or is it, no, we're getting what we can on price in Q2, and that quarter hit on tariffs, it doesn't really necessarily get any better in Q3? Just trying to get a sense of that negative sequential. How painful is that?

David Raso: Okay, then the follow-up, the math you're implying sequentially is, say, revenues down $250-$270 million sequentially. but gross profits down $190 million, right, so a pretty challenging decremental sequentially. But when I think about that, is the second quarter getting full tariff impact from what we know now, not speculating about Is it a full quarter of tariff hit, but not a full benefit from the pricing actions you're expecting? So would the idea be by third quarter, that negative sequential gross margin, all else equal should get better? Or Is it? No, we're getting what we can on price in 2Q and that quarter hit on tariff.

Speaker Change: Okay, and then the <unk>.

Speaker Change: Follow up the math youre, implying sequentially as say revenues down $250 million to $70 million sequentially, but gross profit is down $190 million alright, so a pretty challenging.

Speaker Change: Decrementals sequentially, but.

Speaker Change: But when I think about that.

Speaker Change: Is the second quarter getting full tariff impacts from what we know now not speculating about future tariffs is it a full quarter of tariff hit.

Speaker Change: But not a full benefit from the pricing actions you expect it to take so would the idea be by third quarter that negative sequential gross margin all else equal should get better or.

Speaker Change: Is it now where we're getting what we can on pricing <unk> in that quarter hit on tariffs it.

David Raso: It doesn't really necessarily get any better. I'm just trying to get a sense of that negative sequential, how painful is that?

Speaker Change: That doesn't really necessarily get any better in <unk>, just trying to get a sense of that negative sequential how painful is that or is that just sort of the way to think about it the rest of the year.

Chad Dillard: Or is that just sort of the way to think about it the rest of the year?

Or is that just sort of the way to think about it the rest of the year?

Preston Feight: Yeah, David, I can always count on you to come up with some good analysis for us. Once again, didn't disappoint. I would say that your assessment is about correct, is like the sequential change is really because of the full quarter impact of the tariffs without the ability to fully pass that into price. Then as we see stability in tariff policy going forward, you would expect to see the pass-on of price and cost to be more aligned.

Speaker Change: David you can always count on you to come up with some good analysis for us.

Speaker Change: Once again it didn't disappoint I would say that your assessment is about correct as like the sequential change is really because of the full quarter impact of the tariffs without the ability to fully pass that into price.

Speaker Change: And as we see stability in tariff policy going forward, you would expect to see the pass on of price and cost to be more light.

Chad Dillard: Okay. Thank you very much. I appreciate it.

David Raso: Okay. Thank you very much. I appreciate it.

Preston Veit: Thank you very much. Great question, thank you. Thank you.

Speaker Change: Okay. Thank you very much I appreciate it.

Preston Feight: Yeah. Great question. Thanks.

Speaker Change: Great question. Thanks.

Speaker Change: Yeah.

Operator: Thank you. Our next question comes from Angel Castillo of Morgan Stanley. Your line is open. Please proceed with your questions.

Angel Castillo: Our next question comes from Angel Castillo of Morgan Stanley. Your line is open. Please proceed with your question. Hi, thanks for taking my question and Harry, I just want to echo everybody else. Congratulations and wish you all the best. Unknown Speaker.

Speaker Change: Thank you. Our next question comes from Andrew Casella of Morgan Stanley. Your line is open. Please proceed with your questions.

Harrie Schippers: Hi. Thanks for taking my question. And Harry, I just want to echo everybody else. Congratulations and wish you all the best. Maybe just to continue to unpack that a little bit more, the Q2, could you just maybe parse out how much of that is maybe volume-related, the contraction in gross profit margins sequentially, how much of that is volume versus the tariff flow through you're talking about? And if you could talk about also the deliveries you've got into for Q2 by region, that would be helpful.

Angel Castillo: Hi. Thanks for taking my question. And Harry, I just want to echo everybody else. Congratulations and wish you all the best. Maybe just to continue to unpack that a little bit more, the Q2, could you just maybe parse out how much of that is maybe volume-related, the contraction in gross profit margins sequentially, how much of that is volume versus the tariff flow through you're talking about? And if you could talk about also the deliveries you've got into for Q2 by region, that would be helpful.

Andrew Casella: Hi, Thanks for taking my question and Hey, just wanted to echo everybody else congratulations.

Speaker Change: You all the best.

Angel Castillo: Maybe just to continue to unpack that a little bit more, the 2Q, could you just maybe parse out how much of that is maybe volume-related, the contraction and gross profit margins sequentially, how much of that is volume versus the tariff flow through you're talking about? And if you could talk about also the deliveries you've got into for 2Q by region, that would be great. I would say that, of course, if there's a few less trucks in the quarter, that could have some impact, but I would say it's mostly more to do with the discussion around tariffs is driving it.

Speaker Change: Maybe just continuing on in fact that a little bit more of a <unk> could you just maybe parse out how much of that is maybe.

Speaker Change: Volume related to the contraction in gross profit margins sequentially, how much of that is volume versus tariff flow through you are talking about and if you could talk about also the deliveries you've you're guiding to for <unk> by region that would be helpful.

Preston Feight: I would say that, of course, when you have if there's a few less trucks in the quarter, that could have some impact. But I would say it's mostly more to do with the discussion around tariffs is driving it. So that feels more likely to be the talking point. And then in a by-region standpoint, I think the North America or US, Canada feels relatively flat in deliveries, similar to Europe. What we've seen is the Mexico market is really kind of given a pause right now. And that pause is probably because their economy can be impacted by the trade discussions that are ongoing. So customers are hesitant there. And that's really the biggest number change between deliveries in Q1 and Q2.

Speaker Change: I would say that of course, when you have if there's a few less trucks in the quarter that could have some impact, but I would say, it's mostly more to do with the discussion around tariffs was driving it so that feels more likely to be the talking point and then by region standpoint, I think the North America U S, Canada feels relatively flat.

Preston Veit: So that feels more likely to be the talking point. And then in a bi-region standpoint, I think the North America or US, Canada feels relatively flat in deliveries. Similar to Europe, what we've seen is the Mexico market is really kind of given a pause right now. And that pause is probably because their economy can be impacted by the trade discussions that are ongoing. So customers are hesitant there. And that's really the biggest number change between deliveries in Q1 and 2. Got it. That's very helpful.

Speaker Change: Deliveries similar Europe, what we've seen is the Mexico market is really kind of given a pause right now in that pause is probably because their economy can be impacted by the trade discussions that are ongoing with customers are hesitant. There that's really the biggest number change between deliveries in Q1 or two.

Speaker Change: Okay.

Chad Dillard: Got it. That's very helpful. And then could you maybe, on the tariff side, there's been a lot of discussion around the pricing ability, but maybe could you touch on just the levers or the ability to maybe mitigate some of these potential headwinds kind of near-term as you think about either cost management or other kind of initiatives you can implement? And just more broadly, strategy-wise, as we think about just all of this uncertainty impacting your desire to either invest or the location or maybe the areas that you choose to invest in going forward, right? So the R&D reduction. So just a broader discussion there would be helpful.

Angel Castillo: Got it. That's very helpful. And then could you maybe, on the tariff side, there's been a lot of discussion around the pricing ability, but maybe could you touch on just the levers or the ability to maybe mitigate some of these potential headwinds kind of near-term as you think about either cost management or other kind of initiatives you can implement? And just more broadly, strategy-wise, as we think about just all of this uncertainty impacting your desire to either invest or the location or maybe the areas that you choose to invest in going forward, right? So the R&D reduction. So just a broader discussion there would be helpful.

Speaker Change: Got it that's very helpful and then could you maybe.

Preston Veit: And then could you maybe, on the tariff side, there's been a lot of discussion around the pricing ability, but maybe could you touch on just the levers or the ability to maybe mitigate some of these potential headwinds kind of near-term as you think about either cost management or other kind of initiatives you can implement? And just more broadly, strategy-wise, how should we think about just all of this uncertainty impacting your desire to either invest or, you know, the location or maybe the area? Is that you choose to invest in going forward?

The tariff side, there's been a lot of discussion on the pricing ability, but maybe could you touch on just the levers or the ability to maybe mitigate some of these potential headwinds kind of near term.

Speaker Change: About cost management or other kind of initiatives you can implement and just more broadly strategy wise, how should we think about just all of this uncertainty impacting your desire to either invest or co location or.

Speaker Change: Maybe the areas that you choose to invest in going forward.

Preston Veit: I saw the R&D reduction. So just a broader discussion that would be I would frame the investment appetite we have as to continue making great investments on the products we have for the future with no real deviation in that approach. We love what our business plans and product plans look like for the next five years and so we'll continue making those investments because they have great returns for our customers and our company and our shareholders. So no change there at all. High confidence in those product developments is what I would share on that one.

Speaker Change: R&D reduction so just a broader discussion there would be helpful.

Preston Feight: Well, I would frame the investment appetite we have as to continue making great investments on the products that we have for the future with no real deviation in that approach. We love what our business plans and product plans look like for the next five years. And so we'll continue making those investments because they have great returns for our customers, our company, and our shareholders. So no change there at all. High confidence in those product developments. That's what I would share on that one. And can you remind me again your first question?

Speaker Change: Well I would I would frame the investment appetite. We have is to continue making great investments on the products, we have for the future with no real deviation in that approach, we'd love, what our business plans and product plans look like for the next five years and so we'll continue making those investments because they have great returns for our customers and our company and our shareholders. So no change there at all.

Speaker Change: Confidence in those product developments. This is what I would share on that one.

Speaker Change: Yeah.

Preston Veit: And can you remind me again your first question? Yeah, just on the tariffs, just anything that you can do in terms of levers that you can pull for cost management or other ways to kind of mitigate some of the margin pressure. Yeah, I mean, we work closely with our suppliers, obviously, is one of the key elements we can do here. So where are components coming from? And are they USMCA qualified? So does that mean they have an H, a code applied to them, skip the acronym? Do they have a code applied to them and an understanding that they are USMCA compliant?

Speaker Change: And can you remind me again your first question.

Chad Dillard: Yeah. Just on the tariffs, just anything that you can do in terms of levers that you can pull for cost management or other ways to kind of mitigate some of the margin pressure.

Angel Castillo: Yeah. Just on the tariffs, just anything that you can do in terms of levers that you can pull for cost management or other ways to kind of mitigate some of the margin pressure.

Speaker Change: Yeah just.

Speaker Change: On the tariffs just anything that you can do in terms of levers that you can pull from a cost management or other ways to kind of mitigate.

Speaker Change: Some of the margin pressure.

Preston Feight: Yeah. I mean, we work closely with our suppliers. Obviously, it's one of the key elements we can do here. So where are components coming from? And are they USMCA qualified? So does that mean they have an HTS code applied to them? Do they have a code applied to them in an understanding that they are USMCA compliant? And if they do, then that reduces the tariff impact. That's really dynamic because you're talking about not just first-tier, but second- and third-tier suppliers. So I think we have a great team of people working on these cost management programs in partnership with our wonderful suppliers. Together, they're controlling costs in the best way possible. And we think there is some potential to mitigate some of those costs, no matter what the scenario.

Speaker Change: Yes, I mean, we work closely with our suppliers. Obviously is one of the key elements. We can do here. So we're components coming from.

Speaker Change: Are the Usmc qualified so does that mean they are in each.

Speaker Change: A code apply to them skip the acronym do they have a code applied to them and understanding that they are U S. MCA compliant and if they do then that reduces the tariff impact that's really dynamic.

Preston Veit: And if they do, then that reduces the tariff impact. That's really dynamic. Because you're talking about not just first tier, but second and third tier suppliers. So I think we have a great team of people working on this cost management programs in partnership with our wonderful suppliers together, they're controlling costs in the best way possible. And we think there is some potential to mitigate some of those costs. No matter what the scenario. Very helpful. Thank you.

Speaker Change: Because you were talking about not just first year, but second and third tier suppliers. So I think we have a great team of people working on this cost management programs in partnership with our wonderful suppliers together, they're controlling costs and the best way possible and we think there is some potential to mitigate some of those costs.

Speaker Change: No matter what the scenario.

Chad Dillard: Very helpful. Thank you.

Angel Castillo: Very helpful. Thank you.

Speaker Change: Very helpful. Thank you.

Preston Feight: Great.

Speaker Change: Great.

Kyle Menges: Our next question comes from Kyle Menges of City. Kyle, your line is open, please go ahead. Thank you. And I'll echo everyone else. Congrats on the retirement Harry and best wishes.

Operator: Our next question comes from Kyle Menges of Citi. Kyle, your line is open. Please go ahead.

Speaker Change: Our next question comes from Kyle <unk> of Citi. Kyle Your line is open. Please go ahead.

Chad Dillard: Thank you. I'll echo everyone else. Congrats on the retirement, Harry, and best wishes. I was hoping if you guys could, again, just elaborate on the gross margin in the quarter and just what's embedded in the guide for Q2. I think just more specifically, I'm trying to get a handle on the cost inflation you're seeing and what could actually be, I guess, stickier, notwithstanding tariff impacts, just kind of thinking about what could maybe be a little bit stickier on the cost inflation side, just in kind of the big buckets of raw materials, components, labor, and I guess anything else to call out.

Kyle Menges: Thank you. I'll echo everyone else. Congrats on the retirement, Harry, and best wishes. I was hoping if you guys could, again, just elaborate on the gross margin in the quarter and just what's embedded in the guide for Q2. I think just more specifically, I'm trying to get a handle on the cost inflation you're seeing and what could actually be, I guess, stickier, notwithstanding tariff impacts, just kind of thinking about what could maybe be a little bit stickier on the cost inflation side, just in kind of the big buckets of raw materials, components, labor, and I guess anything else to call out.

Kyle: Thank you and I'll echo everyone else congrats on the retirement, Harry and best wishes.

Kyle Menges: I was hoping if you guys could, again, just elaborate on the gross margin in the quarter and just what's embedded in the guide for 2Q. And I think just more specifically, I'm trying to get a handle on the cost inflation you're seeing and what could actually be, I guess, stickier, notwithstanding tariff impacts, just kind of thinking about what could maybe be a little bit stickier on the cost inflation side, just in kind of the big buckets of raw materials, components, labor, and I guess anything else to call out. Yeah, I feel like we've done a pretty good job of explaining everything we can around gross margins for Q1 to Q2, and I think that most of the impacts are really related to the cost impact, and most of the Q2 cost impact is assigned to tariffs, and I think we've kind of shared quite a bit on that.

Kyle: I was hoping if you guys could just elaborate on the gross margin in the quarter and just what's embedded in the guide for <unk> and I think just more specifically I'm trying to get a handle on the cost inflation, you're seeing and what could actually be I guess stickier notwithstanding.

Kyle: Tariffs impacts just kind of thinking about.

Kyle: What could maybe be a little bit stickier on the cost inflation side, just in kind of the big buckets of raw materials components labor I guess anything else to call out.

Preston Feight: Yeah. I feel like we've done a pretty good job of explaining everything we can around gross margins for Q1 to Q2. And I think that most of the impacts are really related to the cost impact, and most of the Q2 cost impact is assigned to tariffs. And I think we've kind of shared quite a bit on that. I'm not sure what else I could add on that. I don't know if anybody else would.

Kyle: Yes, I feel like we've done a pretty good job of explaining everything we can around gross margins for Q1 to Q2 and I think that most of the impacts are really related to the cost impact in most of the Q2 cost impact is assigned to tariffs and I think we've kind of shared quite a bit on that not sure what else I could add on that <unk>.

Preston Veit: I'm not sure what else I could add on that. I don't think Bayles would.

Preston Veit: On the other cost elements, we've seen... of course, being flat, good productivity flows through our cost reduction efforts. We've got production CMP programs going on with a lot of our suppliers and productivity in the factories is going well too with offline inventories at low levels, production is pretty smooth in most factories. So yeah, from that perspective, things are moving well along. Okay, got it.

Chad Dillard: On the other cost elements, we've seen cost being flat. Good productivity flows through our cost reduction efforts. We have cost reduction CMP programs going on with a lot of our suppliers, and productivity in the factories is going well too. Offline inventory is at low levels. Production is pretty smooth in most factories. So yeah, from that perspective, things are moving well along.

Harrie Schippers: On the other cost elements, we've seen cost being flat. Good productivity flows through our cost reduction efforts. We have cost reduction CMP programs going on with a lot of our suppliers, and productivity in the factories is going well too. Offline inventory is at low levels. Production is pretty smooth in most factories. So yeah, from that perspective, things are moving well along.

Kyle: Good.

Kyle: The other cost elements we've seen.

Kyle: Of course being flat good productivity flow through our cost reduction efforts we of course.

Kyle: CMP programs go along with a lot of our suppliers and productivity in our factories is going well too is offline inventories at low levels production is pretty smooth and most factories. So.

Kyle: So again from that perspective things are moving well along.

Chad Dillard: Okay. Got it. And then I just wanted to dig into the parts growth a little bit more for Q2, expecting I think up 2% to 4%. Just a little surprised by that, I guess, with deliveries implied down 20%, and then freight activity could be fairly muted. So just help me understand what gives you confidence in parts growth of that 2% to 4%. And I guess is it a lot of it pricing?

Kyle Menges: Okay. Got it. And then I just wanted to dig into the parts growth a little bit more for Q2, expecting I think up 2% to 4%. Just a little surprised by that, I guess, with deliveries implied down 20%, and then freight activity could be fairly muted. So just help me understand what gives you confidence in parts growth of that 2% to 4%. And I guess is it a lot of it pricing?

Speaker Change: Okay got it and then I just wanted to dig into the parts growth a little bit more for the second quarter expect Anthony up 2% to 4% just.

Preston Veit: And then I just wanted to dig into the parts growth a little bit more for the second quarter, expecting anything up two to 4% just A little surprised by that, I guess with deliveries implied down 20 and then freight activity could be fairly muted. I'll be understand what gives you confidence in parts growth of that two to four percent. I guess there's a lot of it right. Well, it isn't pricing. So if you if you look at the The first quarter, sequentially, pricing was up like two and a half percent. Cost was up similar, but the price increase of between two and three percent, of course, that helps with revenue growth as well.

Speaker Change: Well, a little surprised by that I guess with deliveries implied down 20% and then freight activity could be fairly muted. So just.

Speaker Change: I understand what gives you confidence in parts growth about 2% to 4% I guess, there's a lot of it pricing.

Chad Dillard: Some of it isn't pricing. So if you look at the first quarter, sequentially, pricing was up like 2.5%. Cost was up similar. But the price increase of between 2% and 3%, of course, that helps with revenue growth as well.

Harrie Schippers: Some of it isn't pricing. So if you look at the first quarter, sequentially, pricing was up like 2.5%. Cost was up similar. But the price increase of between 2% and 3%, of course, that helps with revenue growth as well.

Speaker Change: Some of it is in price.

Speaker Change: If you look at the.

Speaker Change: Yes.

Speaker Change: The first quarter sequentially pricing was up like two 5% gross was similar but the price increase of between two and 3% of course, it helps with revenue growth as well.

Preston Veit: Thank you.

Chad Dillard: Okay. Thank you.

Kyle Menges: Okay. Thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. Our next question comes from Tim Thein of Raymond James. Tim, your line is open. Please proceed.

Tim Thein: Our next question comes from Tim Thein of Raymond James. Tim, your line is open. Please proceed. Great. Thank you. Good. Good morning.

Speaker Change: Thank you. Our next question comes from Tim Thein of Raymond James Tim. Your line is open. Please proceed.

Speaker Change: Yeah.

Jamie Cook: Great. Thank you. Good morning. Maybe just to start, just an update just from the standpoint of your, sorry, your footprint in North America. And just thinking, again, obviously hard to know where the tariff winds are going to blow. But as we sit here today, I'm just curious if the company is thinking of any changes to the footprint with respect to the Canadian and Mexican output. And then I guess related to that, there's been some capacity increases that have been put forth. And I'm just curious if you're rethinking those or how you're approaching those with the potential that maybe the market size is not as large as maybe what we would have thought a year or so ago. So kind of a two-part question just on the North American capacity and footprint.

Tim Thein: Great. Thank you. Good morning. Maybe just to start, just an update just from the standpoint of your, sorry, your footprint in North America. And just thinking, again, obviously hard to know where the tariff winds are going to blow. But as we sit here today, I'm just curious if the company is thinking of any changes to the footprint with respect to the Canadian and Mexican output. And then I guess related to that, there's been some capacity increases that have been put forth. And I'm just curious if you're rethinking those or how you're approaching those with the potential that maybe the market size is not as large as maybe what we would have thought a year or so ago. So kind of a two-part question just on the North American capacity and footprint.

Speaker Change: Great. Thank you good morning.

Preston Veit: Maybe just to start an update just from from the standpoint of your Sorry, your footprint in North America. And just thinking, you know, again, obviously hard, hard to know where where the tariff winds and are going to blow. But if as we sit here today, I'm just curious if the company is thinking of any changes to the footprint with respect to the Canadian and Mexican output. And then I guess related to that, there's been some some capacity increases that have been put forth. And I'm just thinking, I'm curious, if you're rethinking those, or how you're approaching those with the potential that, you know, maybe the market sizes aren't as large as maybe what we would have thought a year or so ago.

Speaker Change: To start.

Speaker Change: An update.

Speaker Change: Yes.

Speaker Change: From the standpoint of view.

Speaker Change: Alright, your footprint in North America.

Speaker Change: And just thinking again, obviously hard to know where when the tariff wins are going to blow, but as we sit here today I'm just curious if the company is thinking.

Speaker Change: Any changes to the footprint with respect to the.

Speaker Change: Canadian and Mexican.

Speaker Change: And then I guess related to that.

Speaker Change: There has been some some capacity increases that have been put forth and I'm just.

Speaker Change: Curious.

Speaker Change: They're rethinking those are or how you're approaching us with the potential of that.

Speaker Change: So maybe the market sizes are.

Speaker Change: Margins, maybe what we would have thought a year or so ago. So kind of a two part question just on the north American capacity and footprint.

Preston Veit: So kind of a two part question just on the North American capacity and put Right. Thanks, Tim. Thanks for your question. Footprint in North America is really well-positioned. I think we have a great Peterbilt factory, a principal Peterbilt factory in Denton, Texas. Fantastic people, fantastic investments we've made there, brought up the efficiencies. Chillicothe, Ohio, also does a great job for us, for our Kenworth factory for Class 8. We have our plant in Renton, Washington, which has capacity for us. Those are the principal three Class 8 truck plants that we use for North American, for U.S.

Speaker Change: <unk>.

Preston Feight: Thanks, Tim. Thanks for the question. Footprint in North America is really well positioned. I think we have a great Peterbilt factory, a principal Peterbilt factory in Denton, Texas. Fantastic people, fantastic investments we've made there, brought up the efficiencies. Chillicothe, Ohio also does a great job for us for our Kenworth factory for Class 8. We have a plant in Renton, Washington, which has capacity for us. Those are the principal three Class 8 truck plants that we use for North American for U.S. production. And then we have our plant in Mexico, which basically produces a lot for the Mexican market. That's its biggest space that we've done. And we've made great investments in that because the market down there is good, and we're the market leader in Mexico. And then we have our Sainte-Thérèse factory, where we've made investments there.

Tim Thein: Great. Thanks, Tim Thanks for the question.

Speaker Change: Footprint in North America is really well positioned.

Speaker Change: Great Peterbilt factory, a principal Peterborough factory in Denton, Texas Fantastic people Fantastic investments, we've made there brought up the efficiencies.

Speaker Change: Chillicothe, Ohio also does a great job for us for Kenworth factory for class eight River plant in Renton, Washington, which has capacity for us.

Speaker Change: Those are the principal three class eight truck plants that we use for North American U S production.

Preston Veit: production. And then we have our plant in Mexico, which basically produces a lot for the Mexican market. That's its biggest space that we've done, and we've made great investments in that because the market down there is good, and we're the market leader in Mexico. And then we have our St. Therese factory. We've made investments there, and that's a great factory with good people in it, too. So we feel like the footprint, we probably have the best footprint of anybody, I think, and feel very proud of our people and the great work they do in those factories.

And then we have our plant in Mexico, which were basically produces a lot for the Mexican market.

Speaker Change: Its biggest space that we've done and we've made great investments and that is the market down there is good and we're the market leader in Mexico, and then we have our Saint <unk> factory and we've made investments there.

Preston Feight: And that's a great factory with good people in it too. So we feel like the footprint, we probably have the best footprint of anybody, I think, and feel very proud of our people and the great work they do in those factories. We can't give them enough of a shout-out for how good they are, especially in dynamic times. And then I would say the capital investments we've made around capacity will be well served for us, right? We don't think about quarters of our investments. We think about years and providing great values to our customers and being able to build the trucks they want from us, better, cleaner, more efficient trucks. And that's what those investments have been centered around. And so they're going to be good for our shareholders, good for our customers, good for our dealers, and good for PACCAR.

And that's a great factory with good people in it too. So we feel like the footprint, we probably have the best footprint of anybody, I think, and feel very proud of our people and the great work they do in those factories. We can't give them enough of a shout-out for how good they are, especially in dynamic times. And then I would say the capital investments we've made around capacity will be well served for us, right? We don't think about quarters of our investments. We think about years and providing great values to our customers and being able to build the trucks they want from us, better, cleaner, more efficient trucks. And that's what those investments have been centered around. And so they're going to be good for our shareholders, good for our customers, good for our dealers, and good for PACCAR.

Speaker Change: And Thats, a great factor with good people doing it too so we feel like the footprint, we probably have the best footprint of anybody I think can feel very proud of our people and the great work they do in those factories.

Preston Veit: We can't give them enough of a shout out for how good they are, especially in dynamic times. And then I would say that the capital investments we've made around capacity will be well served for us, right? We don't think about quarters of our investments, we think about years of providing great values to our customers and being able to build the trucks they want from us, better, cleaner, more efficient trucks. And that's what those investments have been centered around. And so they're going to be good for our shareholders, good for our customers. Good for our dealers and good for Paccor.

Speaker Change: Can't give them enough of a shout out for how good they are especially in dynamic times.

Speaker Change: And then I would say.

Speaker Change: The capital investments, we've made around capacity will be well served for US right. We don't think about quarters of our investments, we think about years and providing great values.

Speaker Change: To our customers and being able to build the trucks they want from us better cleaner more efficient trucks and thats, what those investments have been centered around and so they're going to be good for our shareholders. Good for our customers.

Speaker Change: Good for our dealers and good for <unk>.

Preston Veit: Okay, thank you, Preston. And just on the sixth, the medium duty market, obviously, you know, it's becoming a bigger one, the more important one for Paccor in recent years, that the outlook for 90 to 100,000 units in 25, was that altered in terms of how you're thinking about the market sizes here? We still think that's the market size for the medium duty market. Okay, all right. Thank you.

Jamie Cook: Okay. Thank you, Preston. Just on the medium-duty market, obviously, it's becoming a bigger one and more important one for PACCAR in recent years. The outlook for 90 to 100,000 units in 2025, was that altered in terms of how you're thinking about the market sizes here?

Tim Thein: Okay. Thank you, Preston. Just on the medium-duty market, obviously, it's becoming a bigger one and more important one for PACCAR in recent years. The outlook for 90 to 100,000 units in 2025, was that altered in terms of how you're thinking about the market sizes here?

Speaker Change: Okay. Thank you and just on the medium duty market, obviously, becoming a bigger and more important one for <unk> in recent years.

Speaker Change: The outlook for for 90 to 100000 units in 'twenty five.

Speaker Change: Does that alter it in.

Speaker Change: In terms of how youre thinking about that the market size this year.

Preston Feight: We still think that's the market size for the medium-duty market.

Speaker Change: So we still think thats the market size for the medium duty market.

Jamie Cook: Okay. All right. Thank you.

Tim Thein: Okay. All right. Thank you.

Speaker Change: Okay alright, thank you.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question comes from Jerry Revich of Goldman Sachs. Jerry, your line is open. Please go ahead.

Jerry Revich: Our next question comes from Jerry Revich of Goldman Sachs. Jerry, your line is open. Please go ahead. Yes, hi. Good morning, everyone.

Speaker Change: Thank you. Our next question comes from Jerry Revich with Goldman Sachs. Jerry Your line is open. Please go ahead.

Michael Feniger: Yes. Hi. Good morning, everyone. And congratulations, Harrie, Brice, and Kevin. Can I ask, in terms of the impact of tariffs that we spoke to over the course of this call, so over the past two quarters, your profit per truck as a result of the tariffs is down about $5,000 for Q2 versus Q4 roughly. Based on where you're quoting trucks in March and April, is it fair to say you're going to make up a big chunk of that headwind based on the mid-single-digit number for pricing that you quoted, Preston? It sounds like you should be able to make really good progress in Q3 relative to that number. But I'm wondering if you could put a finer point on that.

Jerry Revich: Yes. Hi. Good morning, everyone. And congratulations, Harrie, Brice, and Kevin. Can I ask, in terms of the impact of tariffs that we spoke to over the course of this call, so over the past two quarters, your profit per truck as a result of the tariffs is down about $5,000 for Q2 versus Q4 roughly. Based on where you're quoting trucks in March and April, is it fair to say you're going to make up a big chunk of that headwind based on the mid-single-digit number for pricing that you quoted, Preston? It sounds like you should be able to make really good progress in Q3 relative to that number. But I'm wondering if you could put a finer point on that.

Speaker Change: Yes, hi, good morning, everyone and congratulations.

Jerry Revich: And congratulations, Harry, Brice, and Kevin. Can I ask, in terms of the impact of tariffs that we spoke to over the course of this call, so over the past two quarters, your profit per truck as a result of the tariffs is down about $5,000 for QQ versus 4Q roughly. Based on where you're putting trucks in March and April, is it fair to say you're going to make up a big chunk of that headwind based on the mid-single-digit number for pricing that you quoted? Preston, it sounds like you should be able to make really good progress in 3Q relative to that number, but I'm wondering if you could put a finer point on that.

Speaker Change: So Kevin.

Speaker Change: Can I ask in terms of the impact of tariffs that we spoke to you over the course of this call. So over the past two quarters. Your profit per truck as a result of the tariffs is down about $5000 for Q2 versus <unk> 40, roughly based on where you are putting trucks in March and April is it fair to say.

Speaker Change: Youre going to make up a big chunk of that headwind based on the.

Speaker Change: Mid single digit number for pricing that you've quoted a precedent. It sounds like you should be able to make really good progress in <unk> relative to that number.

Speaker Change: I'm wondering if you could put a finer point on that.

Preston Veit: Yeah, Jerry, I think I understand the math you're doing. And I think it's really hard to see what Q3 is going to look like right now, simply because we I think we really should wait and see what the tariff policy is, and what the changes might be to it. And it'll be a lot easier to talk about that once we have that clarity for ourselves. So I think that let's just hang on that question for a little bit, see what the policies become.

Preston Feight: Yeah, Jerry, I think I understand the math you're doing. And I think it's really hard to see what Q3 is going to look like right now, simply because I think we really should wait and see what the tariff policy is and what the changes might be to it. And it'll be a lot easier to talk about that once we have that clarity for ourselves. So I think that let's just hang on that question for a little bit and see what the policies become.

Jerry: Yes, Jerry.

Jerry: And I think I understand the math, you're doing and I think it's really hard to see what Q3 is going to look like right now simply because we I think we really should wait and see what the tariff policy is.

Jerry: And what the changes might be to it and there'll be a lot easier to talk about that once we have that clarity for ourselves.

I think thats lets just hanging on that question for a little bit and see what the policies become.

Michael Feniger: Okay. Fair enough. In terms of your production flexibility, you could make any truck in any plant if you want to. Depending on how tariffs go, to what extent could it make sense to make medium-duty trucks in the US plant? In other words, what kind of impact on productivity would it make if you just increase the variability SKU if you choose to move in that direction?

Jerry Revich: Okay. Fair enough. In terms of your production flexibility, you could make any truck in any plant if you want to. Depending on how tariffs go, to what extent could it make sense to make medium-duty trucks in the US plant? In other words, what kind of impact on productivity would it make if you just increase the variability SKU if you choose to move in that direction?

Preston Veit: Fair enough. And then in terms of, you know, your production flexibility, you could make any truck at any plant, if you want to, depending on how tariffs go, to what extent? Could it make sense to make medium duty trucks in the US plant? In other words, what kind of impact on productivity would it make if you just increase the variability skew if you choose to move Yeah, I mean, you said we have the flexibilities in our plans, which is great, but we like the way we have our build laid out right now, and don't have any plans to change that.

Jerry: Okay.

Jerry: Fair enough and then in terms of your production flexibility you could make any trucker at any plant if you want to.

Jerry: Depending on how tariffs go to what extent.

It makes sense to make medium duty trucks in the U S plant in other words, what kind of impact on productivity and would it make if you just increase the variability of SKU, if you choose to move that direction.

Preston Feight: Yeah. I mean, you said we have the flexibilities in our plans, which is great. But we like the way we have our build laid out right now and don't have any plans to change that.

Jerry: Yes, I mean, you said, we have the flexibilities in our plants, which is great, but we like the way we have our build laid out right now and don't have any plans to change that.

Michael Feniger: Okay. Thank you.

Jerry Revich: Okay. Thank you.

Preston Veit: Okay, thank you. Thank you.

Jerry: Okay. Thank you.

Operator: Thank you. Our next question comes from Jeff Kauffman of Vertical Research Partners. Jeff, your line is open. Please go ahead.

Jeff Kauffman: Our next question comes from Jeff Kauffman of Vertical Research Partners. Jeff, your line is open. Please go ahead. Thank you very much.

Speaker Change: Thank you. Our next question comes from Jeff Kauffman of vertical Research partners. Jeff. Your line is open. Please go ahead.

Jamie Cook: Thank you very much. And like everybody else, Harry, best of luck in retirement. Congratulations to Kevin and Bryce. I feel like the tariffs and EPA questions have been beaten pretty hard here. So I want to go back to Preston.

Jeff Kauffman: Thank you very much. And like everybody else, Harry, best of luck in retirement. Congratulations to Kevin and Bryce. I feel like the tariffs and EPA questions have been beaten pretty hard here. So I want to go back to Preston.

Okay. Thank you very much.

Preston Veit: And like everybody else, Harry, best of luck in retirement. Congratulations to Kevin and Brice. I feel like the tariff and EPA questions have been beaten pretty hard here. So I want to go back to So I want to go back to your comment, which I thought was great, which is, look, you know, freight's still moving and ton miles are still up, and this is really kind of a tariff cost impact. And at the end of the day, we still got to move freight.

Speaker Change: Like everybody else Harry Best of luck in retirement, and congratulations to Kevin and Bryce.

Speaker Change: I feel like the tariff and EPA question had been beaten pretty hard here, So I will.

Speaker Change: Wanted to go back to it.

Preston Feight: So I want to go back to your comment, which I thought was great, which is, look, freight's still moving and ton miles are still up. And this is really kind of a tariff cost impact. And at the end of the day, we still got to move freight. So I guess my takeaway is, despite the uncertainty and despite people delaying decisions, I think, would your view be over a three to five-year period that there's unlikely to be any destruction in truck demand over the long term? Jeff, I think that's the right observation to make, right? America, over 70% of the product in America is moved by trucks. It is still going to be moved by trucks in the next three to five years. And trucks are wear-out items. And the trucks we build become more and more efficient, which increases people's desire to have them.

Speaker Change: [laughter].

Speaker Change: So I want to go back to your comment, which I thought was great which is still.

Speaker Change: Still moving in ton miles are still up and this is really kind of a tariff cost impact.

Speaker Change: And at the end of the day, we still got to move freight. So I guess my takeaway is despite the uncertainty and despite people delaying decisions I think would your view be over a three to five year period that is unlikely to be any disruption in truck demand.

Preston Veit: So I guess my takeaway is, despite the uncertainty and despite people delaying decisions, I think would your view be over a three to five year period that there's unlikely to be any destruction in truck demand over the long term? Jeff, I think that's a, that's the right observation to make, right? America over 70% of the product in America is moved by trucks. It's still going to be moved by trucks in the next three to five years, and trucks are wear out items. And the trucks we build become more and more efficient, which increases people's desire to have them.

Speaker Change: Over the long term.

Speaker Change: Jeff I think that's the right observation to make great America over 70% of the product in Americas move by trucks.

Speaker Change: Theyre going to be moved by trucks in the next three to five years and trucks are aware out items and the trucks, we build become more and more efficient which increases people's desire to have them. So the number of trucks over that period of time is going to be constant we expect our percentage to grow over time, because we build the very best trucks and that becomes increasingly important we have the best dealers and so we.

Preston Feight: So the number of trucks over that period of time is going to be constant. We expect our percentage to grow over time because we build the very best trucks, and that becomes increasingly important. We have the best dealers. And so we expect that that's going to increase over time. So that bodes well for the future.

So the number of trucks over that period of time is going to be constant. We expect our percentage to grow over time because we build the very best trucks, and that becomes increasingly important. We have the best dealers. And so we expect that that's going to increase over time. So that bodes well for the future.

Preston Veit: So the number of trucks over that period of time is going to be constant. We expect our percentage to grow over time because we build the very best trucks, and that becomes increasingly important. We have the best dealers. And so we expect that that's going to increase over time. So that bodes well for the future.

Speaker Change: Expect that thats going to increase over time, so that bodes well for the future.

Scott Group: That's my one. Thanks. Thank you.

Jamie Cook: That's my one. Thanks.

Jeff Kauffman: That's my one. Thanks.

Speaker Change: That's my one thanks.

Preston Feight: You bet.

Speaker Change: You bet.

Operator: Thank you. Our next question comes from Scott Group of Wolfe Research. Scott, your line is open. Please go ahead.

Scott Group: Our next question comes from Scott Group of Wolf Research. Scott, your line is open. Please go ahead. Hey, thanks. I'm a guidance for delivery. Do you have any directional color by region.

Speaker Change: Thank you. Our next question comes from Scott Group of Wolfe Research. Your line is open. Please go ahead.

Jamie Cook: Hey, thanks. On the guidance for deliveries, do you have any just directional color by region you can give?

Scott Group: Hey, thanks. On the guidance for deliveries, do you have any just directional color by region you can give?

Scott Group: Hey, thanks.

Speaker Change: On the guidance for delivery do you have any.

Scott Group: Directional color by region.

Preston Veit: You can get Yeah, yeah, I think we even shared that a little bit earlier, but maybe you didn't catch it is we think that the US markets relatively flat, we think Europe's relatively flat, we think most of the impact and change sequentially is through Mexico. helpful. And then I think you guys said Cost in Q1 was up 1% sequentially and price was flat. Do you have just a do you know, how should we think about that that's embedded within the guide for Q2 in terms of cost? sequential and tri-sequential. Yeah, we would expect in Q2, we would see some price increase and then depending on how the tariff structure is, there could be costs higher than that.

Scott Group: Yes.

Preston Feight: Yeah. Yeah. I think we even shared that a little bit earlier, but maybe you didn't catch it, is we think that the US market's relatively flat. We think Europe's relatively flat. We think most of the impact and change sequentially is through Mexico.

Yes, yes, I think we even shared that a little bit earlier, but maybe you didn't catch it is we think that the U S market is relatively flat. We think Europe is relatively flat, we think most of the impact.

Speaker Change: And change sequentially is through Mexico.

Jamie Cook: Okay. Helpful. And then I think you guys said cost in Q1 was up 1% sequentially and price was flat. Do you have just a how should we think about that embedded within the guide for Q2 in terms of cost sequential and price sequential?

Scott Group: Okay. Helpful. And then I think you guys said cost in Q1 was up 1% sequentially and price was flat. Do you have just a how should we think about that embedded within the guide for Q2 in terms of cost sequential and price sequential?

Speaker Change: Okay helpful. And then I think you guys said.

Speaker Change: Cost in Q1 was up 1% sequentially and price was flat.

Speaker Change: Do you have just the two.

Speaker Change: How should we think about that that's embedded within the guide for Q2 in terms of costs sequential and price sequential.

Preston Feight: Yeah. We would expect in Q2, we would see some price increase. And then depending on how the tariff structures are, it could be cost higher than that.

Speaker Change: Yes, we would expect in Q2, we would see some price increase and then depending on how the tariff structures there could be cost higher than that.

Jamie Cook: Okay. So I guess, I mean, ultimately, my big picture question is, is Q2 a timing issue as was suggested earlier of full cost impact of tariff, but a timing inability to price it? Or is there some in a soft market, is there some lack of ability to actually get the full pricing benefit? Is it a timing issue, or is it a pricing power issue? I guess is ultimately my question.

Scott Group: Okay. So I guess, I mean, ultimately, my big picture question is, is Q2 a timing issue as was suggested earlier of full cost impact of tariff, but a timing inability to price it? Or is there some in a soft market, is there some lack of ability to actually get the full pricing benefit? Is it a timing issue, or is it a pricing power issue? I guess is ultimately my question.

Preston Veit: So I guess, ultimately, my big picture question is like, is this is Q2 a timing issue, as was suggested earlier, of full cost impact of tariff, but a timing and ability to price it? Or is there some In a soft market, is there some lack of ability to actually get the full pricing benefit? Is it? Is it a timing issue? Or is it a pricing power? I would look at it like you did with the timing issue being the principal effect there for the quarter. And I think that's the right way to think about it.

Speaker Change: Okay. So I guess ultimately my Big picture question is like is that is Q2, a timing issue as was suggested earlier.

Speaker Change: Full cost impact of tariff, but.

Speaker Change: A timing and ability to price it or is there some.

Speaker Change: In a soft market is there some lack of ability to actually get the full pricing benefit is it is it a timing issue or is that a pricing power I.

Speaker Change: I guess is ultimately my question. So I would look at it like you did with the with the timing issue being the principal effect there for the quarter.

Preston Feight: I think I would look at it like you did with the timing issue being the principal effect there for the quarter. And I think that's the right way to think about it is mostly a timing effect. I mean, obviously, it depends on the state of the market. But I think that the biggest impact right now is this timing impact of pricing versus the cost timing.

Speaker Change: And I think that's the right way to think about it is mostly a timing effect I mean, theres, obviously it depends on the state of the market, but I think that the biggest impact right. Now is this timing impact of pricing versus the cost timing Sir.

Preston Veit: It's mostly a timing effect. I mean, there's obviously it depends on the state of the market. But I think that the biggest impact right now is this timing impact of pricing versus the cost. Thank you. Appreciate it. You bet. Thank you.

Jamie Cook: Certainly. Okay. Thank you. Appreciate it.

Scott Group: Certainly. Okay. Thank you. Appreciate it.

Speaker Change: Okay. Thank you appreciate it.

Preston Feight: You bet.

Speaker Change: You bet.

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

Operator: There are no further questions in the queue at this time.

Speaker Change: Thank you there are no further questions in the queue. At this time are there any additional remarks from the company.

Operator: Are there any additional remarks from the company? We'd like to thank everyone for joining the call and thank you, operator. Thank you.

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

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

Speaker Change: We'd like to thank everyone for joining the call and thank you operator.

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

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

Speaker Change: Thank you ladies and gentlemen, this concludes today's <unk> earnings call. Thank you for participating you may now disconnect your lines.

Q1 2025 PACCAR Inc Earnings Call

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