Rush Enterprises, Inc. Q4 FY2024 earnings call

• 2024 had $7.8 billion in annual revenues and net income of $304.2 million or $3.72 per diluted share. Fourth quarter revenues were $2 billion, net income $74.7 million or $0.91 per diluted share, and a cash dividend of $0.18 per common share was announced.
• 2024 was challenging due to freight recession, high interest rates, and economic uncertainty, hitting over-the-road carriers hard but public sector and vocational markets helped balance.
• Aftermarket revenues down slightly but market share grew via national account sales force. Expect aftermarket demand soft first few months of 2025 but pick up later, plan to grow national account base and expand technician workforce.
• Class 8 truck sales in 2024 down 11.4% y-o-y, market conditions tough with high inventory and competitive pricing; expect 2025 Class 8 sales challenging first half, improve second half with pre-buys from EPA regs.
• Class 4-7 new truck sales up 5.1% y-o-y, medium-duty production stabilized, expect flat medium-duty sales in 2025.
• Leasing and rental revenue flat in 2024, expect to remain strong in 2025. G&A expenses expected higher in Q1 2025 due to seasonal employee benefits and payroll taxes.
• Monitoring proposed tariffs on vehicles and parts from Canada, Mexico, or China, which could impact new vehicle and part demand if enacted.

Truck Sales: In 2024, Rush Enterprises sold 15,465 new Class 8 trucks, a 11.4% year-over-year decrease, representing 6.1% of the US market and 1.7% of the Canadian market. Class 4 through 7 new truck sales were up 5.1% year-over-year, with 13,935 units sold, accounting for 5.3% of the US market and 3.1% of the Canadian market. Used truck sales in 2024 were 7,110, basically flat year-over-year. Leasing and Rental: Leasing and rental revenue was $354.9 million, flat from 2023. Aftermarket: Parts, service, and body shop revenues were $2.5 billion in 2024, down 1.8% from 2023, with an absorption ratio of 132.2% compared to 135.3% in 2023.

• Aftermarket: Expect demand to remain soft in first few months of 2025 due to freight market struggles, but anticipate pickup later; plan to grow national account customer base and expand technician workforce.
• Class 8 trucks: ACT Research forecasts US and Canadian new Class 8 truck sales flat in 2025, expect sales challenging first half, improve second half with freight rate recovery and pre-buys from EPA regs.
• Medium-duty trucks: Expect flat sales in 2025 as supply has caught up with demand.
• Leasing and rental: Expect to remain strong in 2025.
• G&A expenses: Anticipate Q1 2025 G&A expenses to be sequentially higher than Q4 2024 due to seasonal factors.

• Industry challenges: Persistent freight recession, high interest rates, and economic uncertainty impacting over-the-road carriers and new Class 8 truck sales.
• Tariffs: Proposed tariffs on vehicles and component parts from Canada, Mexico, or China could significantly increase prices and decrease demand for new commercial vehicles and parts.
• EPA emissions regulations: Uncertainties around engine changeover, pre-buys, and warranty costs related to emissions regulations pose challenges.

Q: Given commentary about second-half recovery, how should we think about earnings seasonality in 2025 versus a normal seasonal pattern and when parts and service turn positive again?

A: Rusty Rush said the year will ramp up from beginning to end, back half should be stronger than front half. Parts and service will ramp up throughout the year, maybe with some inflation positively affecting parts and service totals.

Q: As things ramp up, how should we think about SG&A control as you ramp into the next cycle?

A: Rusty Rush mentioned they managed G&A well in 2024, goal is to keep gross profit dollars recreated on the back ends around 40%, aiming for 50% or more but averaging in 40% range during ramp-up.

Q: How did the vocational market end the year and how is it thought about in 2025?

A: Rusty Rush said vocational market remained strong in 2024, expects it to still remain strong in 2025 with strength in construction, refuse, and potential oilfield pickup.

Q: What drove medium duty strength and expectations for 2025?

A: Rusty Rush said medium duty strength was due to pent-up demand from Class 8 being the focus of supply side, expects medium duty sales to be flat in 2025 as supply has caught up with demand.

Q: Unpack policy uncertainties around emissions regulations, latest cost conversations with customers around pre-buy, and uncertainty/lack thereof.

A: Rusty Rush discussed uncertainties around EPA emissions regulations, expecting diesel changes to go through but possibly with tweaks, and pre-buy conversations with uncertainties due to new administration and infrastructure issues.

Q: Impact of tariffs beyond cost of new truck and inventory management to mitigate risk?

A: Rusty Rush expressed confusion and concern about tariffs on Mexico and Canada, seeing it as possibly saber rattling, with OEMs having contingency plans but it being costly and cumbersome, and they are monitoring and have plans but don't believe it will be implemented as is.

Q: Discounting on new truck pricing in first half of 2025?

A: Rusty Rush said no broad-based discounting expected, expect most pricing to be pretty flat, with some one-off deals but not significant discounting overall