Rush Enterprises, Inc.
Q4 2021 Earnings Call Transcript

Published: 17 Feb 2022

[Operator:]

Good day, and thank you for standing by. Welcome to the Rush Enterprises, Inc Reports Fourth Quarter and Year-End 2021 Earnings Results. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that this call is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Mr. Rusty Rush, Chairman, CEO, and President. You may begin.

[Rusty Rush:]

Good morning, and welcome to our fourth quarter and year-end 2021 earnings release conference call. On the call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Derrek Weaver, Executive Vice President; 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, 2020, and in our other filings with the Securities and Exchange Commission.

[Rusty Rush:]

As indicated in our news release, we achieved annual revenues of $5.1 billion and net income of $241.4 million or $4.17 per diluted share. In the fourth quarter, we achieved revenues of $1.3 billion, net income of $68.6 million or $1.18 per diluted share. We are proud to declare a cash dividend of $0.19 per common share. Throughout the year, healthy consumer spending and an overall strong economy led to increased demand for new commercial trucks and aftermarket services. That said, component supply chain has negatively impacted the production capability of truck manufacturers and aftermarket parts component suppliers as well as our truck and aftermarket sales in 2021. Demand for trucks and parts and service remained strong, expensive from our large fleet customers. We remain committed to our strategic initiatives and to diligently managing expenses, which contributed to our outstanding financial results this year. We grew our network of Rush Trucks substantially in 2021. In addition to adding three new locations in Arizona, California, and Illinois, we entered into our largest acquisition in company history, acquiring 17 full-service dealerships and other locations from the Summit Truck Group. In January of 2022, we closed our agreement with Compass who has acquired 50% interest in Momentum Fuel Technologies. All of these changes reflect our commitment to strengthening and enhancing not only our network but also our products and services we offer to our customers. Looking ahead, supply constraints will likely continue to impact the industry through mid-2022. But we expect healthy demand for new trucks as well as aftermarket parts and services due to the country's continued economic recovery. We believe our continued focus on after-market initiatives and expense management along with network growth will contribute to increased revenue and profitability in 2022. In the aftermarket, our annual parts, service and body shop revenues were $1.8 billion, up 12.1% and our annual absorption rate was 129.8%. We added approximately 150 service technicians to our workforce in 2021 and remain committed -- focused on our strategic aftermarket initiatives, including our Express services, mobile service and [Indiscernible] maintenance. -- considering that there are fewer working days in the fourth quarter, we were particularly pleased with our fourth quarter aftermarket revenue, which was essentially flat to the [third quarter]. We expect some like constraints will continue through the middle of the year. But we believe the demand for aftermarket parts and services will remain strong. As we continue to add technicians to our workforce and implement our existing strategies or new locations, we believe our 2022 results will outperform the industry. Turning to truck sales, in 2021, we sold 11,052 new Class 8 trucks, [Indiscernible] for 4.9% of the total U.S. Class 8 market. And [Asian-wide] economic recovery led to strong demand for new class 8 trucks but limited new truck production impacted our deliveries throughout the year. In the fourth quarter, consumers bidding remained healthy, and we experienced an increase in sales as the year ended, which historically equates to composite truck sales results in the first quarter. ACG Research forecast U.S. Class 8 retail sales to be 247,500 units in 2020, up 8.9% from 2021. While we expect we will continue to feel the effects of production capacities. Demand for new truck sales remain strong. And due to our recent acquisitions and strong backlog, we believe our Class 8 truck sales will outpace the industry this year. Our Class 4-7 new truck sales reached 10,485 units in third quarter, a guiding to 4.2% of the U.S. market. Although demand remained strong through the year through the healthy economy, production capacity was limited and some manufacturers focus on increasing heavy-duty production, more than medium-duty though manufacturers were not able to increase production to pre-pandemic levels. [Indiscernible] Our Class 4-7 retail sales would be 263,700 in 2020, up 5.6% from 2021. As we look ahead, we believe demand will be healthy, but production constraints 4-7 will likely continue. We expect our [Indiscernible] results and in 2022 we will grow at a pace similar to the expected growth in the industry. Our used truck sales reached 7527 units in a 2021, up 1.7% year-over-year. The used truck demand and values remain strong, largely due to production limitations of new class A drugs and strong spot rates across the country. In 2022, we expect used truck management to remain strong, though values may begin to normalize in the second half of the year. In 2021, we made significant strides in developing strong expense management processes to achieve, record-high profits paid of all of our remaining [real estate] debt, restructured our lease and rental fleet debt to allow us to take advantage of our strong free cash flow and paid the majority of the purchase price of our acquisitions in gas. We are proud that our approach to help us keep our balance sheet and cash positions, while we continue to return value to our shareholders through our earnings growth, quarterly dividends, and our stock repurchase plan. We have while expense management will remain a focus in 2022 due to normal seasonal increases in employee benefits, payroll taxes, and equity ramps. We expect our general and administrative expenses to be sequentially higher in the first quarter of 2022 compared to the fourth quarter of 2021. As always, I want to thank our employees for their outstanding work in 2021 for providing superior service to our customers and remaining committed to our long-term growth goal, especially given the continuing challenges of the COVID-19 pandemic. It is important that I emphasize that [Indiscernible] net income and EPS results could not have been achieved without their dedicated work and focus. With that, I'll take your questions. And also understand my voice is even worse than usual today. So bear with me, I always got a heavy voice but I am suffering from laryngitis right now, but other than I feel great. So we'll take questions now.

[Operator:]

[Operator Instructions] Please stand by wheel compile the Q&A roster. And our first question comes from Jamie Cook from Credit Suisse. Your line is now open.

[Operator:]

And our next question comes from Justin Long from Stephens. Your line is now open.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from Andrew Obin from Bank of America. Your line is now open.

[Operator:]

And I'm showing no further questions. I would now like to turn the call back over to Rusty Rush for closing remarks.

[Rusty Rush:]

We appreciate you taking the time this morning to listen to our fourth-quarter results, year-end results. We look forward to talking to you sooner as we'll be speaking to you about the middle of April with our first-quarter results. And hopefully, you'll be [Indiscernible]. Thank you very much. We'll see you then.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.