Rush Enterprises, Inc.
Q1 2022 Earnings Call Transcript

Published: 27 Apr 2022

[Operator:]

Good day. And thank you for standing by and welcome to the Rush Enterprises’ First Quarter 2022 Earnings Results Call. [Operator Instructions] I would now like to hand the conference over to your speaker today Mr. Rusty Rush, Chairman, CEO and President. Thank you.

[Rusty Rush:]

Yes, Maria, thank you. Good morning, and welcome to our first quarter 2022 earnings release conference call. On the 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 31, 2021, and in our other filings with the Securities and Exchange Commission.

[Rusty Rush:]

As indicated in our news release, we achieved first quarter revenues of $1.6 billion and net income of $93 million or $1.60 per diluted share. We are proud to declare a cash dividend of $0.19 per common share. We're very proud of our results in the first quarter, which were largely driven of the continued strong economy and healthy consumer spending from most of the quarter. While new truck, much of the quarter – excuse me, while new truck production capacity remained limited due to component parts supply chain issues, our Class A new truck sales significantly outperformed the market. Our aftermarket revenues also greatly contributed to our financial results and were primarily driven by increased demand for parts and service support and our continued focus on our aftermarket strategic initiatives. Further, the acquisition of 19 dealership locations from The Summit Truck Group in the fourth quarter of 2021, and the gain on the sale in connection with the establishment of our joint venture with Cummins positively impacted our financial performance in the first quarter. In the aftermarket our annual parts, service and body shop revenues were $543 million, up 30.7%. And our as absorption ratio was 136.3. In the first quarter, there was a healthy, widespread demand for parts and service, especially from refuse, large national fleets and some energy customers. We continue to add service technicians to our workforce and remain focused on our strategic aftermarket initiatives. We expect parts supply constraints will continue through the year, but we believe parts and service demand will remain strong. With the continued expansion of our workforce with technicians as well as aftermarket professionals dedicated to large national fleets. As we integrate our newly acquired locations into our network, we believe our aftermarket results will meaningfully outperform the market this year. Turning to truck sales, we sold 3,528 new Class 8 trucks accounting for 6.9% of the total U.S. Class 8 market. While the industry is still plagued by limited new truck production, we experienced healthy demand for most market segments we support, particularly over-the-road, construction and vocational customers. And we are pleased is with our Class 8 truck sales results this quarter. ACT Research forecasts U.S. Class 8 retail sales to be $244,500 in 2022, up 7.5% from 2021. While we expect production capacities and truck allocation will limit our ability to meet the full demand of the market, our backlog remains strong, and we believe our Class 8 truck sales will outpace industry growth in 2022. Our Class 4 through 7 new truck sales reached 2,141 units in the first quarter, accounting for 3.7% of the U.S. market. Though production capacity remains limited with some manufacturers increasing heavy duty production over medium duty, we experienced healthy demand from a variety of market segments, especially vocational and municipalities. ACT Research forecast U.S. Class 4 through 7 retail sales to be 263,000 units in 2022 up 5.4% from 2021. Looking ahead we expect production constraints on Class 4 through 7 trucks to continue. And we believe our results will align to the industry in 2022. Our used truck sales reached 2,395 units in the first quarter, up 24.5% year-over-year. Used drug demand remains strong. The values began to retrack slightly from the historic high levels we experienced in 2021. Based on production capacity of new truck manufacturers, those values may continue to slightly decline through the year. We believe softening spot rates will be offset by new truck production constraints resulting in healthy used truck demand for the remainder of 2022. Next week, we expect to close on a deal to increase our investment in Rush Truck Centres of Canada Limited to s80%. This additional investment will allow us to more fully integrate these 14 locations into our dealership network and further strengthen the support we offer cross-border transportation customers. Looking ahead, we are closely monitoring inflation, consumer spending and interest rates along with other economic factors, which may impact our industry with growth of opportunities in our new locations. And with our continued focus on expense management, we believe our financial results will remain strong this year. It is important for me to thank our employees for their outstanding work and for their commitment to our company and our long-term strategic goals. With that, I'll take your questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Justin Long with Stephens. Your line is open.

[Operator:]

Thank you. Our next question comes from Jamie Cook with Credit Suisse. Your line is open.

[Operator:]

Thank you. [Operator Instructions] We have a question from Andrew Obin with Bank of America. Your line is open.

[Operator:]

Thank you. And I'm showing no further questions in the queue. I'd like to turn the call back to Rusty Rush for closing comments.

[Rusty Rush:]

Okay. Well, thank you very much, and we look forward to speaking with everyone in July with our second quarter earnings release call. Thank you to you guys. Have a good start to the summer coming up. Steve.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.