Rush Enterprises, Inc. Q3 FY2024 earnings call

• Revenues were $1.9 billion with net income of $79.1 million, and excluding a $3.3 million pretax charge due to Hurricane Helene-related property damage, EPS would have been $1 per share. A cash dividend of $0.18 per share for both Class A and Class B common stock was declared.
• The industry faces low freight rates and high interest rates, keeping Class 8 truck demand low, but vocational and public sector customers showed good activity, and medium-duty demand held up well.
• Aftermarket saw a slight revenue improvement over the second quarter, particularly in service sales which outpaced the market. Parts service and body shop revenues were $633 million, down slightly from the prior year but up from the previous quarter. Slight sequential growth in aftermarket sales through over-the-road customers was seen, the first since early 2023.
• Sold 3,604 new Class 8 trucks in the third quarter, accounting for 5.3% of the US Class 8 market and 1.6% in Canada. Class 4 through 7 new truck sales were 3379 units, accounting for 5% of the US market and 2.9% in Canada. Used truck sales were 1,829 units, up 1.8% year-over-year. Lease and rental revenue was almost flat, down just 0.4%.

In the third quarter of 2024, Rush Enterprises had revenues of $1.9 billion. For truck sales, 3,604 new Class 8 trucks were sold, accounting for 5.3% of the total US Class 8 market and 1.6% in Canada. Class 4 through 7 new truck sales reached 3379 units, accounting for 5% of the US market and 2.9% in Canada. Used truck sales were 1,829 units in the third quarter, up 1.8% year-over-year. In the aftermarket space, parts service and body shop revenues reached $633 million, down slightly 1.6% from the third quarter of 2023 but up from the previous quarter. Lease and rental revenue was almost flat year-over-year, down just 0.4%.

• Anticipates fourth quarter Class 8 truck sales will increase slightly compared to the third quarter, but with high inventory levels across the industry, pricing will remain competitive through the first half of 2025.
• Expects to begin a gradual return to more normal market conditions in early 2025.
• Optimistic that rental utilization rates will increase in the fourth quarter and moderate growth in leasing and rental revenues as we move into 2025.
• Anticipates vocational and public sector markets to remain bright spots and expects this trend to continue into the fourth quarter.

• Industry facing low freight rates and high interest rates keeping demand for Class 8 trucks on the low side.
• Tough used truck market.
• High inventory levels across the industry affecting pricing through the first half of 2025.
• Difficulty in hiring and retaining technicians.
• Uncertainty regarding 2027 EPA regulations.

Q: Andrew Obin asked about constructive order commentary and the economy, including where vocational volumes are relative to normal average and the economy's outlook.

A: Rusty Rush responded discussing that customer base for over-the-road carriers is bobbling on the bottom, vocational has strong demand with some supply shortages smoothing out later in 2025, and the economy has varied with construction up from CapEx perspective and oil and gas soft but maintenance spending off, and expects improvement in the back half of 2025.

Q: Daniel Imbro asked about the impact of inventory on gross margin, cost takeouts, and tech availability.

A: Rusty Rush said inventory is in better shape now than before, cost takeouts were made by adjusting G&A based on parts and service gross profit, and tech availability is still a struggle with efforts to recruit and retain technicians through multiple prongs.

Q: Ian Zaffino asked about the M&A environment, outlook on vocational truck side.

A: Rusty Rush said there's some small M&A activity, no large deals currently, and vocational truck side continues to be strong with expected strong performance in 2025 driven by government spend on infrastructure bills.

Q: Avi Jaroslawicz asked about aftermarket sales being at the bottom, rebound of Class 8 in late 2025, and vocational volumes relative to normal average.

A: Rusty Rush said aftermarket sales are seen as around the bottom with seasonality and expectation of growth in the back half of 2025, Class 8 rebound in late 2025 influenced by over-the-road market improvement and pre-buying ahead of emissions regulations, and vocational volumes expected to be strong in 2025.