Rush Enterprises, Inc.
Q3 2022 Earnings Call Transcript

Published: 26 Oct 2022

[Operator:]

Good day and thank you for standing by. Welcome to the Rush Enterprises Incorporated Reports Third Quarter 2022 Earnings Results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to Rusty Rush, CEO, President and Chairman of the Board. Please go ahead.

[Rusty Rush:]

Good morning and welcome to our third quarter 2022 earnings release conference call. On call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Jay Hazelwood, Vice President and Controller, and Michael Goldstone, Vice President, General Counsel and Corporate Secretary. Now, Steve will say a few words regarding forward-looking statements.

[Steve Keller:]

Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31st, 2021 and in our other filings with the Securities and Exchange Commission,

[Rusty Rush:]

As indicated our news release, which achieved third quarter revenues of $1.86 billion, net income of $90.4 million, or $1.59 per diluted share. We're -- excuse me, we're proud to declare a cash dividend of $0.21 per common share. We're pleased with their results in the third quarter, which were largely driven by pent-up demand for new commercial vehicles and continued strong demand for aftermarket parts and service. New truck production remains limited due to component suppliers, but our Class 8 new truck sales significantly outperformed the industry. Our results were also positively impacted by 17 locations in the South and Midwest acquired in the fourth quarter of 2021 and 15 locations in Canada, where those operating results are now included in our financials due to our additional investment in Rush Truck Centers of Canada Limited. In the aftermarket, our parts, service, and body shop revenues were $622.1 million, up 34.4% year-over-year, and our absorption ratio was 136.2%. In the third quarter, we experienced strong widespread demand for most market segments, especially refuse, leasing and energy. Our growth was also driven by the addition of aftermarket sales professionals and service technicians throughout our company, which allowed us to better support our customer base, especially large national fleets. While parts supply constraints are still impacting the industry, we're beginning to see parts supply catch up through the needs of the market. In addition, we expect demand for repairs and maintenance to remain strong through the end of the year, but to be tempered by fewer working days in the fourth quarter and seasonal softness to the industry typically experiences through the winter months. Turning to truck sales. We sold 4,200 new Class 8 trucks accounting for 6% of the total U.S. -- U.S. Class 8 market and 1.4% of the Canadian Class 8 truck market. While new truck production remains limited, we continue to experience healthy demand from most market segments, including both over-the-road and vocational customers. ACT Research forecasts Class 8 U.S. sales to be 258,600 units in 2022, up 13.7% from 2021 and Canadian Class 8 retail sales to be up 3,150, up 7.2% from 2021. We expect truck production to remain lotions to be constant. And for our fourth quarter Class 8 commercial vehicles to be similar to what we achieved in the third quarter. Our Class 4-7 truck sales reached 3,223 units in the third quarter, accounting for 5.3% of the U.S. Class 4-7 markets and 1.7% of the Canadian Class 5-7 market. While production remained limited, we saw a healthy demand from a variety of market segments, particularly vocational, food and beverage customers. ACT Research forecasts U.S. Class 4-7 retail sales to be 230,975 units in 2022, down 7.5% from 2021, and Canadian medium-duty retail sales to be 11,025 units, down 16.6%. As we look ahead, we expect the production of Class 4-7 trucks to improve slightly, and our results will align with the industry in 2022. Our used truck sales reached 1,763 units in the third quarter, up 8% over 2021. Overall demand softened for Class 8 on-highway used trucks due to an uptake in new truck production, weak spot rates, rising interest rates and high fuel prices, which continue to burden owner operators and small fleets. As we expect used truck values to continue to decline for the remainder of the year and into 2023, we made the decision to minimize our used truck inventory to a historically low level during the third quarter. We will continue to closely watch used truck values and manage our inventory levels to allow us to meet the needs of the market while minimizing the negative effect of declining used truck values. Our lease and rental operations continue to be a significant contributor to our company's overall profitability. With third quarter lease and rental revenues increasing 37.1% year-over-year. This growth is driven largely by our recent acquisitions as well as higher than normal rental utilization rates caused by limited new truck production. As we look to the future, we are carefully monitoring inflation, interest rates, fuel prices and other economic factors, which may impact consumer spending, our customers and our industry in general. However, there is still significant demand for new commercial vehicles and aftermarket parts and service, which we expect will continue through the year. With our ongoing focus on disciplined expense management and executing our strategic initiatives, we believe our financial results will remain strong for the foreseeable future. As always, I would like to thank our employees for their outstanding work this quarter and for their continued commitment to our company's goals. With that, I'll take your questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Jamie Cook from Credit Suisse. Your line is open.

[Operator:]

Thank you. One while we prepare for our next question. The next question that we have is coming from Andrew Obin of Bank of America. Please go ahead.

[Operator:]

One moment I'll bring that person on stage. Andrew your line is open.

[Operator:]

Yes, we can hear you now.

[Operator:]

Thank you. [Operator Instructions] One moment while we get ready for the next question. Now, the next question is coming from [Indiscernible]. Your line is open.

[Operator:]

Thank you. I would like to now turn the call back over to management for closing remarks.

[Rusty Rush:]

Well, I appreciate that. Well, thank you, everyone, for listening today and participating. I hope everyone has a happy holiday. It will be sometime in February before we talk to everyone again. So, wishing everyone happy holidays and thank you very much. We'll see you in February. Bye, bye.

[Operator:]

This concludes today's conference. Thank you all for participating for the rest of your day. You may disconnect.