RUSHA - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Rush Enterprises First Quarter 2019 Earnings Result. At this time, all participants are in a listen-only mode. Later we'll conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Chairman, CEO and President of Rush Enterprises, Mr. Rush. Rusty

sir. begin, may You

Rusty Rush

morning, everyone, Earnings First XXXX to and Conference Call. welcome Release our Quarter Good

On Steve? today Vice it to Weaver, and of Executive for Michael the Medium-Duty Officer; Keller Vice over Corporate Vice Financial call Goldstone, forward-looking would Taylor, some President; to are Secretary; Steve Trucks. and Steve Jay Vice General I turn Hazelwood, President, President Steve Controller; Chief and statements. Counsel Keller, President Derrek now like

Steve Keller

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

Rusty Rush

by the income impacted quarterly focus $X.XX proud positively activity. As news our and release, and we our on strong financial million and per our of our economy initiatives by which $XX of stated driven $X.X quarter, robust billion achieved net was diluted share. in extremely strategic of or revenues strengthening We're industry this performance

body were million, the of also $X.XX service dividend XXXX. the from our of per revenues first pleased common quarterly $XXX and In are to aftermarkets, cash X.X% quarter We share. parts, up another declare shop

compared aftermarket of even profit resulting to grew XX.X% than same profit of the XXXX first XXXX. at XX.X% margins Our gross pace quarter quarter revenue, faster of the aftermarket in gross an our in in

was first XXX.X%. ratio absorption quarter for the Our

was increased approximately particularly and All-Makes aftermarket Our of Parts our customers, attributable down initiatives, execution technologies, vocational to XX% technicians hours most new sector in energy and activity service the was year-over-year. successful offerings of network. strategic from expanded additional primarily healthy There growth was but activity operations, offerings the our

in aftermarket overall Given energy sector, with quarter first decline the I'm section our growth. pleased very the --

to believe to industry-wide expect the results. quarter pace believe and sector drive the be on and efficiencies activity improve time aftermarket the of With activity our remain modestly that growth aftermarket company strong our We first through energy will overall aftermarket throughout efforts continued year. reduce initiatives, our will remainder we our dwell with in

XXXX accounting Class up truck Class to of sales. market. the year-over-year trucks, sold new X% X and U.S. We Turning for X.X% X total

XXXX. of in truck economy strong sales performance units widespread country. sales result activity Research to currently retail was be throughout solid XXX,XXX forecast Our U.S. a the X Class a and ACT

remains and Our second backlog quarter has the on but XXXX, decreased it will quarter. are we from third and confident truck strong, pace that our late the first in with be sales

from sales had medium-duty U.S. in to abilities XXX,XXX to nationwide. customers X.X% ACT to Class We another work-ready trucks this XXXX. provide Research reached strong in market. the XXXX and accounted closely watch X.X% fourth medium-duty, our sales X-X new beyond. factors, several may Class In continue units the market of to the impact We quarter U.S. truck which market truck units sales X-X quarter due up and for year, to our forecasts retail be

which accelerate help downturn will expect any partially Class later year. in results offset X the Class X-X throughout We the XXXX, to our will in market

Centers of which and the of XX% and company can our the in demand. used but network strategic a completed effectively now truck increased our year-over-year, We XX growth, unit were Ontario, of of In essentially market customers can Our Canada. opportunity revenue effectively Rush operates stable purchase year. support later Used this be excited this Truck values sales our the truck pricing X%. may -- Canada expansion face used remain area We're the Limited, inventory about in to but flat truck network subsidiary pressure support operating of dealerships believe Canada. equity in

goals. our It in for and past taxes I'll while take capital that with to the would employee these increased their announce As our invest hard payroll strong, normal Even our years, work your and our shareholders. employees to thank increases, contributed benefits commitment balance our dedication these to allows remain is With able financial like quarter. sheet to is questions. to I first us in and to customers returning that, their in positive results. expenses seasonal we our future and long-term

Operator

with Thank you. Delco Stephens. [Operator our Brad from question first comes Instructions] And

Brad Delco

Rusty, morning. Hey Good

Rusty Rush

morning. Good

Brad Delco

I want parts the service margins. about and gross to ask you

they of XX% trend seen to number higher. XX% the where think Do you go? that to to I were were updated recall continue should I Navistar. being of correctly, you XX.X%. have sort number with have mix thoughts But talking guys or on we If some any that that about us of in could sort because range

Rusty Rush

both still higher. look way, continue mix, don't to to a back time, or of do as side tell X on working still service I than I know perspective. much report the sometimes mean years. years break that to trend can we we are Brad. to it sides grow history, a have are to X service have house our it have X.X mix. At the obviously, we room our the but to you service very a area especially we've I from been younger we been remember, -- the with reported believe the But expect growth X the get on But mixed on trend same on around for would [running] Obviously, you believe number. it X you do had side. with the got you hard service when parts parts I we apart. got side, And we if service service more for side the We've has much years. going, upward, initiatives in so -- the the years, and that goals more our Well, to service always lot and parts we we've that margin initiatives to from over

probably a things which is right? we on you didn't the little trending I to engine You of remember historically we've historical cap that point by pricing the like say all I or piece to secrets parts tell been that strategic Navistar we've a of in got offset that trade side But there's of them because Cummins just able or used I I'd there lot. you've I their don't get more so. to see when competitive, would bit than takes But It course, say on so one still we've consider dominated say, from mix content the mix some say runway, with much move side, more engines. I mix, higher can we them can engine, point -- sales, out. it's really keep be part they proprietary that? the to probably we But upwards. to if hit would got given in a Is another got into the there. than to the of own margin another that a proprietary get, of we of got the a initiatives, But proprietary in of the would numbers your margin that because some was some there at grew rate service. going Of is, margins unless on on. given you grew service the some

Brad Delco

Okay, but it…

Rusty Rush

time. last years, happen at not to -- next out of have traction Don't the all tell you've you -- That's all speed that these quarter over that them been over rolling initiatives because are to time. I'll gaining We're running keep moment, at right? got expect the we full we've consistently couple the

here it's the hard -- But -- at for I'm some be right, given will swagging eating, sort those So to with do as runway forward me it go for the I there's an this. pudding believe peg of just number in it's still I of hate we to there. -- the variables. exact proof because

Brad Delco

today the see margin -- Got that you. says the nothing that throughout XXXX? should within your of view But pressure rest number should

Rusty Rush

-- can hard you see see okay? for lot], don't it'd believe I go can back -- be into right? sometime. we were -- to the years, get was And -- recession it deterioration, me were [a -- the slight you I hit hit range, that we XX% believe I but couple down a some in country when I a do No. could see

Brad Delco

Yes.

Rusty Rush

sell. sides, around of I'm and from it it's your really some good the how back lot a It's margins. got acquisition it. that it's these to of areas, things we've It's not some with made pretty of at get not in There -- purchase that is I into we've all -- point also. of sale. wrapped just said initiatives you not But you from see into these So all those, not the -- that. some all It's It's the also, for areas and both side There's too. here in other purchase there's don't how going but details just a you'll we lot -- of of go right? progress the

Brad Delco

a question. And then kind of longer-term maybe

parts a are lot to call has do XX%. sales sales X let's I Some think down down your could Class ACT What XX% an in and XX%? service do business environment the, of you guess, Class X in it XXXX, where

Rusty Rush

got from get at -- was the really because harder mentioned still hope climb -- we grow to to quarter, continue the and I is think we this and really we've we up --. But can you would tougher. that's was and I can proud things comps continue Obviously, go, that rate. one -- I Consider about the do. hill I to of it tougher your higher the I grow. believe

the would years back double-digit around at go have almost margin XX%, oil in the been Let's quarter. growth, and showed a on seeing that you first gas especially we few side, when

down, less used they market, trucks, our parts make up share the did just even but of than tied less just your piece make what with in real vehicles. what of because to. not they up-bidding taking we There's they in than a us up of growth So even truck involved with of historically do what to they sales

all aging up and service. right? high that backwards. going double your it Because digits digits parts to the your can means when which to units bit then still and replacement, more you're starts and again, requires fleet So little the below even I So the you age stop -- means fleet too, starts -- believe personally the in market you to with low if counterbalance stay is remember fleet less a possibly sell and single selling, we

year through our X our and -- year trucks, year -- is -- So sweet year X usually spot sweet through is X X, from spot. X say, year

a of The there's So out parts when less that's don't bit that's like average you hit a -- age could increases little to consumption. you they you age trucks. it and an goes when bit, -- and the when peak little they sell when upside

Brad Delco

for get thanks the queue. great I’ll Okay time. in back

Rusty Rush

Thank you Brad.

Operator

question Suisse. And comes our Cook from with Crédit Jamie next

You may proceed.

Jamie Cook

morning. sales a of for the come quarter we good little half Class expectations XXXX. I were guess, first with Hi, questions, what the down what in last One, look saying two if the have regards you Rusty. your saying least it and seems X Nice cadence third at like quarter, to for second from quarter. at you're

do I And around about you is, then put if you. seeing the profitability prices interesting, higher, on are the So being recovering particular things oil my with comments thought XX%, potentially? any second the you in put we could that? change? down up. question you how you that were But made think color And of trajectory energy some Thank

Rusty Rush

take take Yes. in you well, asked. order them in just I'm going them -- the I'll to

going I were -- we You're units few more deliver a did. to I QX last -- in right. did than thought we

had few honest not was we I I deliver we'll going The in to expect what expected fleet did in I think to not to more I in had units, would I'm did deliver some mix anything. you. a right? XXX QX, least okay? QX. extraordinary But we missed business a much as to at big a an as may -- timing have it's quarter, sold was deliver in I stuff QX We we time, here as record little. -- with over-the-road there, little of QX what what sorry, I'm much we of years. hope get QX, be as the at different cycle on a a margins. first saw the In typical of that's that's deals into And same this surprising. from it, deals. and lot quarter, And had you the you in somewhat you we typical right? are experienced the I've is the a as that of lot that's the smaller smaller over lot a sold. in was piece selling At further inventory quarter.

I don't want bit it backlogs hit overstate hard. have So might we we what like little did. maybe bit to feel more I to down. too I But Maybe going -- said. comfortable. than you are a a it, you thought do coming little were

is backlog the Our so But everybody. down. margin is so is --

you're are XX,XXX that of at right? we at have a OEMs, have the units months intake in So of rates And total building we're X You when can't X months. currently, in XX,XXX building order right?

time. I've -- up don't backlogs XXX days. long doing at chew out just some anything past a count on out really look, You're always ourselves. OEMs, the I this going like I And been to

let's bit But biggest that, fuzzy a something like -- I'm -- now. you'll our all our medium-duty So never been. out little And strong. -- my ever right backlog, as is always saying still why backlog it's is I on said, QX that's

just that. Let's say

that's be of to I one So going a little I bit. off know at it's base And getting think keys. I'm -- and -- the

We're about I the okay? they're dealer, of a much, margin. the We're the big and we're just to the a I there's make little we few too. We're X less Now thing deals one cost. Hino. a Peterbuilt, Ford what we But realized and as understand Isuzu, think just you got largest -- organization. They a International. quite still the Remember, largest piece do. of Class not half have cost largest they're they the not half

that mind. the remain stable you've should few So years. got Because for that in keep to market next

out board cyclical, you on franchises think to boy X as not When the change. unseen. that us those, more we've go anybody at and else help. will all dynamics that than I does got got Class going but the the distribution as that may the here, the more same, it is That's of be help look we've market be across

understands I stuff, that other think happens. last everybody mile, all

and to a side. done out We that's on I going years us of XX% that's next you've and and "Well, we've this When going XX% -- oil to on to given XX think all things year. last -- a there." in help looking side. you and starting believe to over one the I over It And that's to the okay? believe over to years. X was next of -- sitting at While off, be at drop the is dropped don't to the started was the whoa, to going and It's I it got on we going to But off you numbers I -- it that. I last know I February, little go, growth was and to the time. case was little quarter. off parts oil we're that's Class Xst the just a I weeks I said, be had medium hanging the focus to couple gas. softness or I couple our what in service it's seeing going talking think didn't the off. help. chair, recognize Back after gas be

truck little very sales involved. have We

oil okay? inventory at companies, big I field inventory, They starting the be at inventory. their look you we're And away that when of up think built okay? chewing hopefully, pretty think to, now heavy, I supplier lots services had

pipelines Permian of issues the getting stuff coming out and oil getting that. You on. out, gas had There's oil and pipeline like of

where oil prices You are. see

seeing, troughed. from service to we're What pretty a and from and believe, sales pretty we perspective parts So that good believe we've is a I now. feel perspective, trough got you've right

in like one things the where -- should to you're I'm should So or next numbers be is prices oil heartening people fall where play, troughing of for oil that's year when reading believe and say me the should up so. putting remain and probably just you this what

we and cognizant heat of do but But believe CapEx same stuff, one things next from do those not and saw would through pretty we to given said, some all the be It or got I we've or perspective. up. as softening. at I efficiencies and at, do a that, year, I do lot Permian depleted we -- wells. moderate have or of believe to believe, we the cranes take It's service the trucks. we've that equipment would this It's doesn't inventories But time, we're the built purchasing service stuff. is mobile pick get of build throughout year whether and trough, thing as in that do We are trailers see and and good expect see a proficient just And back kinds the some it'll we're some to we equipment -- I stuff many not parts that that The the Eagle the got we of at drill in could that's And where to back that as inventory up. country, we things I At that now. it's as gets I Ford. pretty rigs just the up different there. out now stuff many like makeups increases

Jamie Cook

Okay. Thank you. in back queue. I get will

Operator

with Our next Research. question comes Buckingham from Neil Frohnapple

You may proceed.

Neil Frohnapple

on on truck X you've if guys? experienced But for are sleepers? weakness are pretty [muted] any those I'm any on about signs mean, increases like values used Rusty, a actually truck I pressure Good cancellations? get morning quarter. talked Or starting heavy on in more see of just initial here. later you congrats wanted from the curious to Class guys in to great and you thoughts cycle XXXX. your order still potential the And in you --

Rusty Rush

think are whole muted yourself]. haven't I ago. but but across XXX were intake freight the XX,XXX know I freight -- [muted], all seen like they drivers. we right? too, and a thought I have [feeling once country rates not look, couple You network, of they that one cancellations adding XX, about across down pretty people can't it are And not days and whole cancellations, biggest lot They maybe rates it. to as are are the the have -- these seen think of add talk going I a might

let's say. day, are freight the the X% it'll flat, Our read said up maybe across be board. shipper rates reports I one other something

keep are get and things people Some just like hoping to contracts as flat, [let] that.

So that that's -- I XXXX. in record was -- a but year mean

Let's don't lose sight of that.

current Our story. little it but continue But XXXX, knows then record can how and you increases customers that's I -- wild had not don't rate a way. that think in everybody works.

So believe shoot, it that be truck values sometime. less drop will has closely. watching to Used let's I at I'm

year last we to have to I that our don't I expect, don't volumes turns But on peak go I don't perspective, We of think would year margin that. last I maintain right be I think up might used. if maintain believe, up. now, on know be from can give know I think our, margins our our able margins and used we had do maintain to little I trucks. we'll record a bit

you picking But get was used There They're end I just values it's truck holding get to gong was -- get and money but going into I February, we're in of along to we stuff. it right. is I in the up, seasonal year up read, to little talked maintaining. less closely April, closely. our he somewhere some right but sure up what March. a which volumes be And by -- are we'll President tough. I watching we'll to has I'm So stuff there's to close. some much there, back is Vice April. brought in inventory talking to -- But there's priced with volumes normal in manager, watching to always March, to think. other he our volume March, truck I be you last a if so the middle projected and watching to less, said pretty believe make is things got day, a pretty And lot up. once good the but my, be so and far, being going strong be But January I back they're be mean, of my and pick so line. have our be the time the be -- some used in type and hit

mean, the was giving I'm third, I last in So fourth not know down go to winter. I fall you definitive year Remember, and quarter, going late answer. it a told you I some

variables, I can sold OEMs, talk they out." all get I used all billed spot -- because don't -- be but don't you that of my the I'm sure bit look I markets enough want, can get they before was as it'll year, there to if wrong. so say have rate I -- times little when the But be XXX believe of variables. Well, was said, but I I all out -- And glad glad just know on those because said, But and call, until I'm projecting to got they last be So Like they a We because truck you adjustment guess people that's until good I'm I -- used be for still -- -- done for is. can wrong. they And stretching I'm look they to there. exactly of know I "Well, I'm it'll days, an I XXX be I off. days not not do mind. I Like I'm why past told in will I as variables, past want. sometimes. as it's this comes out, enough the it be what there, to it year-end to foolish and

later you to devaluation normal be type this will would devaluation in just I the not giving used, but of year calendar but to some answer. devaluation. outside anyway, closely. love believe I a truck There we have I'm some be But be So know of wrong, watching we'll exact sometime used I will got

Neil Frohnapple

your used been truck That's helpful. new high used as of And probably and wouldn't X.X% have certainly gross was... if margin

Rusty Rush

That Yes. a was that was look, all look that record. I hold. a -- record for to was Don't That mean, time.

lot I mean, stock, look. -- go constructions. lot was of mix. that and of had of can a in QX, of a a just a We a had not lot business made it You to of small We a fleet where compared up, then had we stuff lot there lot in QX.

So sometimes it's about the mix, right?

Neil Frohnapple

then for the just to a to I Are And margin gross you truck Right. guess by the question provide Steve get X.X%? able then. the breakdown quarter in to

Steve Keller

XX.X%. Yes. was and used X.X% was Heavy X.X%, light X.X%, medium was was

Neil Frohnapple

Okay pass thanks on. much very I’ll it

Rusty Rush

and were the those side. said, do mix you of a what in to a cycle on sales Class with which had stuff, I -- this see is bunch As small of of way time out, it X

Operator

of Instructions] from question [Operator Bank And Andrew Obin our with comes America. next

Andrew Obin

morning. Good

Rusty Rush

Mr. Obin. morning, Good

Andrew Obin

you think it? what permanent to takes structural know SG&A positive sort specifically. I what S of on should -- SG&A COGS SG&A, just let's Can What talk and guess, How puts year, say, takes? done for puts question this a and negative? and are things XXXX? the big and both you SG&A have that variable, and but between, we I about actually I SG&A is about components -- have XXXX

Rusty Rush

We in tied be That range we -- do, going to certain going piece of down. going truck going be a profits going tied a to it's strip pretty when sales, percentage and the tied to -- profit long what a let's We apart. it's S okay? of going be as truck be makes is is it it -- in that as sales. typically to go Yes, That's to much up. sales. be gross S gross to It's that -- and to up it is, keep they Well, truck variable percentage on is piece it's a -- component directly typically out. we strip on of S

with to just So that. it's fluctuate going

G&A, you'd an be don't man for sales Andrew, are see XXXX, I stretch what bit and know going is a going little old watch or a just back to can -- truck a you But S be So we've I S might to invested down. going the is bunch. if up me. like of able Obviously,

you that, and the quarter, comps, it's stock, know, earlier, everything first kicks because fully is all in taxes the that some by and like -- employee benefits, said else lot I stuff, got lots quarter G&A of toughest Our QX. good as a stuff on of always

So that's why you QX typically always up. see that jumps sequentially

We investing even on lot. remember When because you a you to if -- -- we've independent -- when look been go have we've at the been to strategy. want same-store [working] you if

we that with stuff. turning turning It our free. do and people. I'm loaning it. But row. as It if dollar I'm Plus, So -- money a lot takes for to we The XX as the part or you information. people that up. good technology And the there's spend -- of we're number as out stuff. stores, believe parts to of then the is out loaning strip number. -- the an selling come some keeping is that an look deliver part we're helping we're we I'd takes in absolute platform. not money X bang I'm that absorption or we're in not on last getting rolled better wrenches not same world the that the there's that, investments. we're the evolve, number believe. out buck just our rolling e-commerce to at for XX continues stuff good but up. but out of we've and and much always I months is what's but everyone, I it in -- driving These now, -- on as not rolled we're top like, for it, continuing can't been is in We driving we're the -- right doesn't come come -- but our didn't That's going it we're think XX Well, that to. we're digit revenue doesn't I it driving been like a press under remember, Well, in -- And move the first mentioned like slightly March. what's double release, quarter quarter tell free. out of one I to that invest. I with this are

-- if going G&A you not. And backwards? keep going so stay going will could when make now, at I -- we there our cannot year-over-year. is I to growth are And the -- there went not path are. been adjustments to rate, things flat have just double-digit not it's on. down it -- G&A, we're continue look With we But are Of right It's flat. it course,

You it don't get keep all. to

to of money. some spend it make to got You

don't know I I if you're looking So know question. for. answered what don't I your really

Andrew Obin

of Yes, for let's you're I let's about we're going thinking guess, what XXXX? I down call have a on I'm if revenue let's close just of level simpler $X then let's just versus or G&A add question it Should to $X question that? is, to it, I'm that? talking much so add it sort million of Class call that. like million $XX Should $XXX asking. XXXX, to know, that. billion, that? just $XX even that. what I added XXXX say, cost SG&A permanent billion a how I And what side I of under X similar $XXX was to So I was, call just things round in mean, in we Should million That's to very we than million to simple I up, -- add XX% sort to back sort don't had looking XXXX.

Sorry, it simpler. I was think

Rusty Rush

Yes, them or dig Andrew, and up offline well, we'll I'll of numbers back 'XX. 'XX me. up. dig sitting I maybe have go go don't here front in Anthony --

'XX. me So it's don't be to to them... for to a little back have going I difficult jump

Andrew Obin

Keller, get to... Keller, Keller Get get

Rusty Rush

probably back to but here. me is be can can't do to little 'XX 'XX honest. tough now go be But But right I I'll I going can on to and a you jumping it. call, back back do on Okay? take I to this it 'XX,

Andrew Obin

Okay. quarter. Great I will follow off-line. up

Rusty Rush

you got were takes we make it. a I to was question. going than and the it. money Yes, that bit spending business, make to little to X-year go plus. there to money, money And to money a happy about back follow share. you of spend go plan our closer up of no happy profit. going we And going you It be through $X.XX to to as spend you've be to -- invest mean, the and to I'll some you're get we as get in trying Remember, will it with that, together to X% that it gain not -- want and we keep X% business -- I of as gross Right difficult is believe of not share. truck every This is especially get more profit when can always My can goal when how dollar. when you every XX% probably our we is because investments share The $X.XX. XX%. less are range higher. we're it spending gain. G&A, that always our to to to think keep, like the key we we're My to we're that's you're goal are of hard to get got right? And keeping you're We much And where is get to around But put running much take growing, gross get XX% we continuing return. share profit keeping gross dollar. without somewhere we're now, We're say. was parts to part

of So me and making creating keep can see the think profit dollars. dollars measure we spend -- in money. we're I making profit service day, for gross of you to absolute I to the and little producing a those side, dollars, some numbers we're gross the end I not And gross parts dollars, At profit you it pay percentages. the on have

Andrew Obin

you. Thank

Rusty Rush

You're welcome.

Operator

I comments. call over and this any conference. for Rush like turn back now to now Mr. to of concludes the Rusty would Q&A Ladies closing today's our gentlemen, portion

Rusty Rush

Well, I we call look was don't you Thank really That in the with sweet. have forward I any talking very comments. to closing and second to in, and July everyone listening much. you sometime. quarter appreciate short

Derrek Weaver	Executive Vice President
Jay Hazelwood	Vice President and Controller
Michael Goldstone	Vice President, General Counsel and Corporate Secretary
Rusty Rush	Chairman, President and CEO
Steve Keller	Chief Financial Officer
Steve Taylor	President of Medium-Duty Trucks
Brad Delco	Stephens
Jamie Cook	Crédit Suisse
Neil Frohnapple	Buckingham Research
Andrew Obin	Bank of America

Rush Enterprises (RUSHA) 27 Apr 192019 Q1 Earnings call transcript