管理層發言
Good day, and thank you for standing by. Welcome to the Rush Enterprises Q2 Earnings Release Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rusty Rush, CEO. Please go ahead.
As indicated in our news release, we achieved second quarter revenues of $1.9 billion and net income of $72.4 million or $0.90 per diluted share. I'm pleased to announce that the Board of Directors approved a $0.19 per share cash dividend, a 1% increase over our prior quarterly dividend and our ninth increase since announcing our intent to begin paying a quarterly cash dividend in July 2018. Market conditions remained difficult in the second quarter as the industry continues to face a freight recession that has persisted for more than 2 years and continues to face uncertainty with respect to trade policies and engine emissions regulations. As a result of these factors, many of our customers are delaying vehicle acquisition and maintenance decisions. However, despite these many challenges, our employees remain focused on operational discipline and customer service in the quarter, which helped us deliver solid results.
So I want to thank them for their hard work and dedication. Our aftermarket operations accounted for approximately 63% of our total gross profit in the second quarter, with parts, service and collision center revenues reaching $636.3 million, an increase of 1.4% compared to the second quarter of 2024, and our absorption ratio was 135.5%. In the second quarter, aftermarket revenues reached their highest level in the past 12 months, and we saw sequential growth from owner operators and small fleets, which we hope and believe may be early indicators of improving demand. Technician turnover reached a 12-month low, and we expanded our aftermarket sales force, further strengthening our ability to support our customers. Looking ahead, we expect stable aftermarket demand in the third quarter with potential for modest sequential growth. With respect to truck sales, we sold 3,178 new Class 8 trucks in the U.S. during the second quarter, accounting for 5.4% of the total U.S. market.
While this represents a 20% year-over-year decrease, it is important to note that it is primarily due to the timing of several large fleet deliveries that occurred in the second quarter of last year, which made for a difficult year-over-year comparison. In Canada, Class 8 sales totaled 81 units, representing 1.2% of the market. Although demand from large over-the-road fleets remains weak, we achieved strong sales in the Class 8 vocational market, highlighting the strength of our diversified customer base. We expect vocational demand to remain solid for the remainder of the year. However, due to ongoing uncertainty around trade policy and engine emissions regulations, new Class 8 truck sales may decline sequentially in the third quarter, and the market outlook beyond the third quarter is difficult to project at this point. In the medium-duty market, we delivered 3,626 new Class 4-7 commercial vehicles in the U.S. in the second quarter, representing a 1% year-over-year increase and 6.2% market share.
We sold 177 medium-duty vehicles in Canada, which represents 4.6% of the Canadian Class 5-7 market. Our medium-duty results were solid in the second quarter with both year-over-year and quarter-over-quarter sales growth. Demand was broad-based across all of our customer segments, and we saw particular strength with lease and rental customers. We believe that our Ready-to-Roll inventory program continues to differentiate us, enabling faster delivery and improved flexibility for customers. Looking ahead, we expect Class 4-7 truck sales in the third quarter to be consistent with our second quarter. We sold 1,715 used commercial vehicles in the second quarter, essentially flat compared to the same period in 2024. While financing remained a challenge for used truck buyers, we believe our inventory is rightsized and our used truck strategy is on track. Unlike the new truck market, the used truck market is less exposed to trade and regulatory uncertainty, which could give truck buyers more confidence and incentive to consider used trucks as part of their fleet mix in the near term.
We expect third quarter used truck sales to be in line with the second quarter. Rush Truck Leasing achieved record revenues of $93.1 million in the second quarter, up 6.3% year-over-year. Our full-service leasing revenue increased as we brought new units into service, which also helped lower operating costs and increased profitability. Rental utilizations were lower year-over-year, but improved sequentially, and we are confident our leasing and rental performance will be solid for the remainder of the year. On the capital allocation front, we remain focused on returning value to shareholders. During the second quarter, we repurchased $83.9 million of our common stock as part of our expanded $200 million repurchase authorization. We also paid a cash dividend of $14.5 million in the quarter. And as I previously mentioned, we just increased our quarterly dividend by 5.6%. In summary, I am proud of our team's performance in the second quarter.
Through disciplined execution, we continue to deliver solid financial results and return value to shareholders. As we move forward, we will continue to remain focused on operational efficiency and providing our customers with best-in-class service. With that, I'll take your questions.
分析師問答
Our first question comes from the line of Daniel Imbro with Stephens Inc.
Well, Rusty, I'll start maybe on the industry a little bit. I'm sure visibility into orders is about as clear as mud. But how are you thinking about the third quarter as we sit today? And then from a strategic standpoint, just related to that, with the lack of visibility, I guess, what are the OEMs communicating? Are they taking down production? Are they still pumping out new trucks and telling you guys to deal with them? Kind of what's the order backdrop? And how is that changing with the OEMs?
Well, that's a great question. The second half of the year looks significantly different from the first half. All OEMs are reducing production and implementing shutdown days. While I won’t dive into specifics, you can expect fewer trucks to be manufactured across all brands and manufacturers. The main reason for this is the prevailing uncertainty. Looking back at April, May, and June, those were the worst months for order intake since 2009, with fewer than 30,000 Class 8 trucks ordered in the U.S., Canada, and Mexico. This drop in orders will eventually reflect in the production numbers. We constructed a lot of trucks, and retail deliveries in Q2 were stable or slightly increased nationally. However, it seems everyone has pushed forward what they could, and currently, production has taken a significant hit quarter over quarter compared to the period since COVID. If we exclude COVID as an anomaly, the prolonged uncertainty continues to discourage demand, and though retail sales may also decline, production will see a significant drop across all OEMs.
Moreover, there remains a lack of clarity regarding emissions regulations that affects engine manufacturers and OEMs. Companies are uncertain about future emissions standards, and clients are essentially waiting for guidance. I mentioned in the release that there could be a glimmer of hope in activity levels, not necessarily orders, by Q4 if we can receive more definitive information on tariffs and emissions guidelines. If emissions standards stabilize at 0.035, we might see an increase in order demand next year. If they remain at 200, the implications are less clear, as fleets wouldn’t need to adapt to additional costs or technology changes. There may be a slight pre-buy if we move to 0.035, but it’s just too early to predict definite outcomes. The uncertainty is palpable, and while I aim to provide a more extensive outlook, the answers remain elusive at this point. We're beginning to realize the tangible effects of the uncertainty discussed on the last call in April, which seems to be intensifying.
We're experiencing a lull until we receive more clarity on forthcoming regulations. Additionally, my observations from the past few weeks indicate that most public carriers are performing slightly better than in Q1, but the improvements are modest and the environment remains challenging due to an excess in capacity that needs gradual adjustment to match demand.
No, always helpful, and I appreciate the answer there. I guess maybe on what is more in your control right now, I guess the parts and service improvement in 2Q was notable. I think revenue was up. It sounds like addition and retention got better. I guess, one, can you talk about what you guys changed to actually drive that or improve retention and hiring? And then two, if you were to size up maybe what the earnings power or revenue uplift you can get from the hiring you've done? Like how should we think about the earnings power that you could add that's more in your control from growing parts and service over the next year relative to everything else out of your control, like the Class 8 demand?
I believe that by staying flat to slightly up, we're outperforming the market. We're doing better than the aftermarket reports, which can be challenging to assess due to varying sources of data. Unlike vehicle sales, which are straightforward to quantify, understanding the overall aftermarket is more complex. However, I think we're slightly above the overall aftermarket performance. Our traditional market strategy has played a significant role in this success. We've been working diligently, recently completing a strategic offsite in June to enhance our initiatives aimed at accelerating growth in our aftermarket business, especially as we approach next year. If we can maintain our current performance, I can say that July has continued flat or perhaps slightly better than June. Given the current environment, I feel like we're experiencing growth. Although we reported a 1.4% increase in revenue with a modest margin expansion, I believe it may be even stronger given the circumstances.
We have made slight additions to our sales force, not massive changes, because I'm uncertain if the market can accommodate significant growth right now. Rest assured, we are committed to our traditional approach while integrating new strategies as we look toward 2026 and 2027. I expect we can sustain our position in parts and service based on recent observations. There hasn’t been significant volatility, and as mentioned during the earnings call, parts and service contributed 63% to our profits last quarter, showcasing their stability. I think our business model may be somewhat undervalued as we consider the diverse aspects of our operations, including truck sales, leasing, and, importantly, parts and service. This quarter, we saw our general and administrative expenses remain nearly flat, which is an achievement given the cuts we made over a year ago. I'm proud of our team's efforts to maintain stability despite inflationary challenges.
Overall, while we faced pressures in truck sales, I’m satisfied with our performance, especially considering the year-over-year results. It’s noteworthy that we were only less than 10% off last year's figures with a 25% reduction in Class 8 trucks. Our parts and service operations have been a significant driver of this results, and while I predict a gradual growth trajectory, I remain confident. Even if our uptick seems modest, it feels more substantial based on the current economic landscape.
Our next question comes from Andrew Obin of Bank of America.
Just a follow-up on the parts and service question. As it seems that a lot of the production shutdowns have to do with the fact that it's more regulatory uncertainty more than anything else. Meanwhile, your parts and service business would indicate that people will continue to utilize the trucks in the field. Wouldn't the setup result in more wear and tear and older trucks, just lack of natural replacement? Wouldn't that drive an uptick in parts and service over the next 6 to 12 months?
You're right, Andrew. That's what we're hoping for. Theoretically, you're correct. However, there's one important consideration regarding the state of the customer's business. Are they minimizing operations because their business isn't performing well? Certainly, you'll rely on older trucks, but first, you need to ensure you're fully utilizing them. What is your utilization rate and how is your business performing? If all those factors align, then what you're saying is absolutely correct. However, those considerations must also be taken into account. So, yes, without a doubt, that's what I'm hoping for, but those factors do come into play. Our business needs to be in decent shape for that to happen.
Another question for you, and I appreciate the acceleration of the buyback. However, considering your track record and where we are in the cycle, could you share the Board's latest thoughts on possibly increasing the buyback? Historically, you have been very conservative with your balance sheet, which I understand. However, we have received feedback that your execution is excellent, the stock is affordable, and there is capacity on the balance sheet. How is the Board's perspective evolving regarding the share buyback?
We announced this quarter that we added $50 million to our buyback program. I believe there is about $75 million remaining to spend from the total of $200 million. We hope opportunities will arise, and we wouldn't have approved the funds if we didn't plan to use them, though we approach this carefully. There's a process in place, and sometimes we set prices and leave them for a while, especially during quiet periods. Steven and I will review this tomorrow to ensure we keep purchasing as needed. The stock saw some fluctuations during the quarter, going down a bit and then back up. We established a matrix on June 10, and while we haven't adjusted it since, we will look at it again soon. We're confident in our cash position, and we expect to receive a significant cash benefit from taxes this year. Our balance sheet is strong, and we have the capacity to proceed. Historically, we've been conservative, but we have demonstrated our intent and ability to buy back stock, albeit at a pace that balances various concerns. We believe in this company and consider it a great opportunity to repurchase shares whenever possible. Our track record speaks for itself.
20-year history says there's never want to bad moment to lever up and buy back our stock?
I don't think you're ever going to get me to leverage up. Let's take a moment to consider this, Andrew. There's no need to rush. I'm sorry, but I'm just too conservative.
A little bit more leverage. A little bit more leverage. A little bit more leverage. How about a little bit more leverage? Let me ask, look, as I said, the execution has been stellar. We appreciate it. Can you talk about just what are you seeing on macro? I keep asking this question. You have fantastic systems. Just maybe walk us across key verticals, across key geographies. And more importantly, how has your thinking evolved over the past, let's call it, 3, 4 months since we've been liberated?
I often reflect on April 1st and how liberating it has been, even amidst a lot of uncertainty. In the past 3 to 4 months, I've noticed changes, particularly regarding geographies. I don't want to generalize about the entire country based on California's situation over the last year and a half, though I have great respect for my California stores. From a business standpoint, especially concerning truck sales, it’s been quite challenging. There's been a sort of gridlock; if the rest of the country mirrored California's truck sales, it would have been dire. Thankfully, we are taking different approaches across the country while the political side sorts things out with the federal government, given their differing views from CARB. I believe things are starting to loosen up and we're moving towards a more realistic perspective. There have been significant changes, especially in relation to the EPA compared to where we were last November.
The direction has shifted for the better, aligning more closely with what makes sense for the country. However, stability is still lacking. Once we establish clearer guidelines, we can navigate things more effectively. Manufacturers shouldn't have to hire extra personnel just to keep up with constant changes. Consistency is what we need, and I believe we'll see that as the year progresses. I couldn't have predicted this in April, but it feels like we are nearing clarity from the EPA and more stable trade policies. This situation impacts everything, from how our customers handle freight to the costs of vehicles. Stability in rules is crucial as we get closer to finding those answers. We're in a much better position now than we were in April, which is why I'm proud of this quarter. Despite a 25% drop in truck sales and a larger decrease in gross profit compared to last year, we managed to reduce our profit margin from $0.97 to $0.90.
This was achieved through strong execution in other areas of our business. I believe our organization is adaptable enough to maintain this momentum; we can compete with anyone in the industry. As the only public truck dealer focusing on execution in Q2, we plan to continue this success going forward. I'm feeling more confident about understanding the rules of the game, which will allow our customers to make informed decisions. Right now, the indecision is causing delays in truck orders as people await clarity on the future.
So that trumps everything, right? So it's hard to get a read what the macro sentiment except that because this uncertainty?
No question. That is the main priority right now. Will it remain at 0.35? Will it stay at 200 milligrams? There's a good chance it might. Honestly, I don't have any involvement in Washington, D.C., and I can't directly contact anyone at the EPA. However, I do hear from a lot of people, and those opinions vary. I'm attempting to form my own perspective based on secondhand information. I have connections with many individuals, but their thoughts are not all aligned. If you were in my position, you'd understand why customers are feeling stuck in uncertainty. My business is challenging, and I need to purchase what is necessary. My decisions rely on what I know, and I want my business as an over-the-road carrier, which constitutes a large portion of the market, to improve as well. Even though retail is performing well at the moment, I believe activity will begin to rise soon. Remember, my focus is on next year's business.
I'm not suggesting that this quarter will bring a significant boost. I need to see activity start before anything else, and then we can discuss pricing, orders, and production. There’s a process that needs to happen before everything reaches the retail space. If the regulations adjust to 0.35 or remain stable as they are now, we will likely see an increase without a doubt. I'm uncertain about our capacity for volume production since time is running short. However, I am hopeful that the administration will provide some clarity in the next couple of months, especially from a truck sales perspective. Thankfully, two-thirds of my profits come from parts and service, but I still want to see improvement in truck sales. Our leasing business is strong and should remain that way, although it won't see exponential growth. We will continue to maintain discipline in our expenses, having already made necessary cuts last year.
We're keeping our headcount steady except for hiring in revenue-generating roles, and we'll keep delivering solid results until we see a driving force that can push the sales market forward. Regarding your earlier question about older trucks, it’s true that as fleets age, they require more maintenance, which benefits us as it represents a higher margin business. However, we do want to push truck sales, so both aspects need to be functioning effectively. The truck sales side is currently on hold until we get further clarification.
Okay. I'm showing no further questions at this time. I would now like to turn it back to Rusty Rush for closing remarks.
Sure. Nothing big here. We appreciate everybody's participation. We will look forward to speaking to everyone in late October, I do believe. So take care. We'll see you now.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.