Rush Enterprises, Inc. Q2 FY2025 earnings call

• Achieved Q2 revenues of $1.9 billion and net income of $72.4 million or $0.90 per diluted share. - Board approved a $0.19 per share cash dividend, a 1% increase over prior quarterly dividend. - Market conditions difficult with freight recession persisting over 2 years and uncertainty in trade policies and engine emissions regulations. - Aftermarket operations accounted for ~63% of total gross profit, with parts, service and collision center revenues up 1.4% y-o-y. - Aftermarket revenues at highest level in past 12 months, sequential growth from owner operators and small fleets. - Technician turnover at 12-month low, aftermarket sales force expanded. - Class 8 truck sales in U.S. down 20% y-o-y due to timing of large fleet deliveries last year; strong sales in Class 8 vocational market in Canada. - Medium-duty market had solid results with year-over-year and quarter-over-quarter sales growth. - Rush Truck Leasing had record revenues, full-service leasing revenue increased, rental utilizations lower y-o-y but improved sequentially. - Repurchased $83.9 million of common stock in Q2 as part of $200 million repurchase authorization, paid $14.5 million cash dividend.

In the second quarter, aftermarket operations accounted for approximately 63% of total gross profit. Parts, service and collision center revenues reached $636.3 million, an increase of 1.4% compared to Q2 2024, with an absorption ratio of 135.5%. In truck sales, 3,178 new Class 8 trucks were sold in the U.S. in Q2, accounting for 5.4% of the total U.S. market, a 20% year-over-year decrease. In Canada, Class 8 sales totaled 81 units, representing 1.2% of the market. Medium-duty market: 3,626 new Class 4-7 commercial vehicles delivered in the U.S. in Q2, a 1% year-over-year increase and 6.2% market share; 177 medium-duty vehicles sold in Canada, representing 4.6% of the Canadian Class 5-7 market. Used commercial vehicles: 1,715 sold in Q2, essentially flat compared to same period in 2024. Rush Truck Leasing achieved record revenues of $93.1 million in Q2, up 6.3% year-over-year.

• Expect stable aftermarket demand in third quarter with potential for modest sequential growth. - New Class 8 truck sales may decline sequentially in third quarter due to ongoing uncertainty around trade policy and engine emissions regulations. - Expect Class 4-7 truck sales in third quarter to be consistent with second quarter. - Expect third quarter used truck sales to be in line with second quarter. - Confident leasing and rental performance of Rush Truck Leasing will be solid for remainder of year.

• Market conditions remained difficult with freight recession persisting over 2 years. - Uncertainty with respect to trade policies and engine emissions regulations. - Many customers delaying vehicle acquisition and maintenance decisions.

Q: How are you thinking about the third quarter as we sit today and what's the order backdrop with OEMs?

A: Dramatically different in back half of year from first half. Every OEM taking production down, April, May and June were worst 3 months of order intake since 2009. Production going to be dramatically hit from quarter sequentially due to uncertainty in trade policies and engine emissions regulations. Expect to be down in third quarter, don't know fourth quarter outlook.

Q: Can you talk about what you guys changed to drive parts and service improvement and earnings power from it?

A: Maintaining flat to slightly up, doing better than aftermarket market. Worked hard, finished strategic offsite in June to accelerate growth in aftermarket business. Grew sales force slightly, positioned to do more, committed to continue traditional way plus new initiatives.

Q: With production shutdowns due to regulatory uncertainty, wouldn't that drive uptick in parts and service over next 6-12 months?

A: Theoretically correct, but have to take into account customer's business situation. If customer's business is decent, will drive old-age trucks and more parts and service, but caveats exist.

Q: Latest thoughts of the Board on stepping up the share buyback?

A: Announced adding $50 million to $200 million repurchase authorization, have about $75 million left. Do it prudently under 10b5-1, feel good about cash position, believe in buying back stock at appropriate pace.