Rush Enterprises, Inc. Q2 FY2025 earnings call

• Financial results: Q2 net income $72.4 million ($0.90 per diluted share), Board approved $0.19 per share cash dividend. - Industry challenges: Freight recession, trade policies, engine emissions regulations causing customer delays. - Aftermarket: Revenues at highest in 12 months, sequential growth from owner operators/small fleets, technician turnover at 12-month low, expanded sales force. - Truck sales: Class 8 down y-o-y due to fleet delivery timing, medium-duty solid with growth. - Used trucks: Sales flat y-o-y, inventory rightsized. - Leasing: Record revenues, full-service leasing revenue increased, rental utilizations improved sequentially. - Capital allocation: Repurchased $83.9 million of common stock, paid dividend, increased dividend by 5.6%.

Rush Enterprises reported Q2 revenues of $1.9 billion. Aftermarket operations accounted for approximately 63% of total gross profit. Parts, service, and collision center revenues reached $636.3 million, a 1.4% increase compared to Q2 2024. In truck sales, 3,178 new Class 8 trucks were sold in the US, a 20% y-o-y decrease, but strong vocational market. Medium-duty market saw 3,626 new Class 4-7 commercial vehicles delivered in US, a 1% y-o-y increase. Used commercial vehicles sales were 1,715, essentially flat y-o-y. Rush Truck Leasing had record revenues of $93.1 million, up 6.3% y-o-y.

• Aftermarket: Expect stable demand in Q3 with modest sequential growth. - Class 8 trucks: Expect sequential decline in Q3 new Class 8 truck sales due to uncertainty. - Medium-duty: Expect Class 4-7 truck sales in Q3 consistent with Q2. - Used trucks: Expect Q3 sales in line with Q2. - Leasing: Confident leasing and rental performance solid for remainder of year.

• Industry uncertainty: Freight recession, trade policies, engine emissions regulations causing customer delays and uncertainty. - Production shutdowns: OEMs taking production down due to uncertainty, potential retail delivery decline. - Regulatory uncertainty: Ambiguity around engine emissions regulations and trade policies creating confusion.

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

A: Dramatically different in back half of year. Every OEM taking production down. April-May-June were worst 3 months of order intake since 2009. Production to be drastically hit sequentially. Uncertainty around emissions and trade policy creates further ambiguity.

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

A: Maintaining flat to slightly up compared to market. Grew sales force slightly, committed to continue traditional plus new initiatives. Parts and service account for 63% of profits, stable.

Q: Wouldn't the production shutdowns drive an uptick in parts and service over next 6-12 months?

A: Theoretically correct, but need to consider customer business health. If customer business is decent, old-age trucks would drive parts and service, but caveats exist.

Q: Thoughts on share buyback and Board's thinking?

A: Added $50 million to repurchase authorization, $75 million left. Do it prudently under 10b5-1. Balance sheet flush, capable of buyback but at prudent pace.

Q: How has macro outlook evolved and key verticals/geographies?

A: More uncertainty than before. EPA and trade policy uncertainty has changed but not settled. Closer to knowns on EPA and trade policies, which will help once clarified.