Rush Enterprises, Inc. Class B Aktie

Good day, and thank you for standing by. Welcome to Rush Enterprises Reports First Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, Rusty Rush, Chairman, CEO and President. Please go ahead.

Well, good morning, and welcome to our first quarter 2026 earnings release call. With me on the call this morning are Steve Keller, Chief Financial Officer; Jody Pollard, Chief Operating Officer; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Senior Vice President, General Counsel and Corporate Secretary.

Before I get started, Steve will say a few words regarding forward-looking statements.

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, 2025, and in our other filings with the Securities and Exchange Commission.

Thank you, Steve, and thanks, everyone, for joining us today. As we reported yesterday, we generated revenues of $1.68 billion in the first quarter with net income of $61.5 million or $0.77 per diluted share. We also declared a quarterly cash dividend of $0.19 per share, which reflects our continued focus on returning value to shareholders.

Now stepping back for a minute, the first quarter was still a tough environment for the commercial vehicle market. Industry-wide retail sales for new trucks remained at historically low levels, and we're still working through the effects of the freight recession, excess capacity and general economic uncertainty. That said, we do believe this quarter represents the trough of the cycle.

And more importantly, we're starting to see some early signs that things are moving in the right direction. Freight rates improved a bit, miles driven began to pick up and customer sentiment started to feel a little more optimistic. As a result, we saw increased quoting activity and order intake as the quarter progressed, especially from our large fleet customers. That hasn't translated into sustained strength in truck sales yet, but it's a good leading indicator and gives us confidence that demand is starting to come back.

One thing that stood out again this quarter is the strength of our business model. Even with soft truck sales, our aftermarket leasing and rental businesses, along with disciplined expense management, helped us stay very profitable and perform well overall. We also stayed focused on growing the business. During the quarter, we signed an agreement to acquire Peterbilt dealerships in Southern Louisiana and Mississippi. We expect to close that deal and begin operating those locations at Rush Truck Centers in June. So even in a down cycle, we continue to invest in the business, expanding into new markets and positioning ourselves for long-term growth.

Our aftermarket business continues to be a key strength for us. It made up roughly 66% of our gross profit in the quarter and generated $627 million in revenue, up slightly year-over-year. Demand was still soft in the sub segments, especially for some of our over-the-road customers. But overall, we were able to deliver growth, which speaks to the strength of our relationships and our execution. We also started to see some positive indicators here, more freight activities and more miles being driven, which should translate into stronger parts and service demand as customers began catching up on deferred maintenance.

Our aftermarket strategic initiatives are also making a difference. Our inspection processes and parts delivery optimization have gained traction across our network and are delivering incremental revenue, increasing uptime for our customers and delivering a better experience overall. Looking ahead, we expect the aftermarket to gradually improve as we move through the year and continue to be a key driver for our performance.

Turning to truck sales. The market was still very tough in the first quarter with Class 8 industry sales at their lowest level since COVID. But even in that environment, we performed well. We sold 2,964 Class 8 trucks in the U.S. and captured a 7.2% market share. That really comes down to execution, having the right inventory and the diversity of our customer base. As I mentioned earlier, we saw solid order activity and increased engagement from customers during the quarter. We think that's being driven by improving freight conditions and customers beginning to plan for 2027 engines emissions regulations.

Class 4 through 7 truck sales saw the worst demand since 2015, but our results were more about timing than demand. Some large fleet customers pushed deliveries into later in the year. So we expect that to benefit us in the coming quarter. Used truck demand improved as we moved through the quarter, and we're seeing better conditions tied to improving spot rates and tighter capacity. So overall, while the first quarter was slow, we expect sales to improve gradually in the second quarter and then pick up in the second -- pick up more in the second half of the year.

Renewal leasing continue to be strong and growing part of our business. Revenue was $92 million in the quarter, up a little over 2% year-over-year. Leasing demand remains strong as customers look to replace aging equipment and get ahead of cost increases tied to the upcoming emissions regulations. Rental is below where we'd like it to be, driven by current market conditions, but it did improve as the quarter progressed, and we expect utilization to continue trending up through the year. Overall, Rush Truck Leasing continues to generate consistent reoccurring revenue and remains an important contributor to our performance.

So to wrap it up, the first quarter reflected the ongoing pressure from the freight recession and weak truck demand, but we delivered solid earnings and profitability. That speaks to the strength and balance of our business. We believe we're at the bottom of the cycle, and we're encouraged by early signs we are seeing, whether that's freight, customer activity or order trends. As conditions continue to improve, we believe we're well positioned to capture that demand and grow the business.

Before I close, I want to thank our employees across the company. Their focus, discipline and commitment to our customers continue to drive our performance, especially in a very challenging environment like this.

With that, I'll take your questions.

[Operator Instructions] Our first question for the day will be coming from the line of Avi Jaroslawicz of UBS.

So glad to see that the year is still on track for improvement sequentially. But just thinking about the second half here, it sounds like there's still a decent amount of uncertainty around the prebuy for this year on just a number of fronts, whether the OEMs are going to have new engines ready and how the rules are going to be enforced and the demand dynamics around that. Can you just give us a rundown on how those different moving parts are shaping your expectations?

Well, that's a good statement there, Avi. It's kind of crazy. We're at April 30 tomorrow. We've got 8 months left in the year, and we still don't have definitive regulations printed, okay? Now when I'm talking about emissions regulations, they have sent out signals and told people the EPA has of what they're going to do, right? They're going to keep supposedly at 0.35, but they have not clarified about credits, et cetera, if there's going to be NCPs, things like that. We're probably still 60 days away from it. But regardless of that, we do know that there are going to be new emissions regulations. So I think that's spurred customers to go ahead.

Order activity, as you can see, starting in December has been up dramatically from where it was the prior 7 or 8 months from an order intake. So even with that uncertainty, there is certainty of something going down. Exactly what it is, we're not exactly sure because it hasn't been posted by the EPA yet. So we'll still have to follow that and see. We hope to know within the next 45 to 60 days. But if I've been -- if I told you that 45 days ago and held my breath, I wouldn't be in very good shape because I told you I'd know by now. So it keeps the can kicked down the road a little bit. So I think the most important thing is that customers' business is people are more optimistic.

Finally, because of the contraction on the supply side, right, of taking trucks out, whether it was through non-domicile because building less trucks in the back half of last year, building less trucks in the first quarter of this year. We slowed the intake down. So the supply side squeezed down. Customers are more optimistic about rates. Coming in, if you'd asked me 3 or 4 months ago, everybody said, I know this is one of your question, but you know me, I'm going to ramble on, that we're going to be flat to low singles and it was mid-singles. Now people are looking at maybe high single-digit increases. So people are optimistic.

At the same time, to your point, about emissions, not knowing clearly what it's going to be, what the stated, but we do know it's going to be worse, whether there would be NCPs and the cost would go up dramatically or the total enforcement of what's out there for EPA January '27. So that's about the best thing I can tell you is there's still uncertainty, but you know something is coming down the tracks, right? You just don't know exactly what.

Got it. I appreciate that, Rusty. And just to follow on a point there. So thinking about the improving conditions within the freight market, as you just noted, really more driven by supply reductions, capacity reductions, that doesn't necessarily help the parts and service side as much as improving freight activity. So what are you seeing there? And when do you think we might see parts and service volumes inflect positively?

Yes. It's funny. People -- theoretically, people believe that when truck sales go down, okay, that you're going to get more parts and service. Well, that's not really actually the case because people are cutting back their budgets and things. And that's what we've seen, right? That's why we've been fairly flat over the last couple of 3 quarters, right? Even in spite of inflation we've had, we've remained flat. And that's because people have tightened their belts.

The best thing I can see is for their business to get better, right? Historically, when customers feel better about looking forward and more optimistic, there will be no postponing of any maintenance or any repairs because it's just like anything. When your income level goes down, you learn how to take your outcome, what you spend down to. It's no different than you as a person managing your household. So that's what customers have done. The most encouraging thing for me is going to be seeing -- hopefully seeing second and third quarter releases and list and hearing about contract rates going up. So that optimism that we see out there comes to fruition is the best way I can describe it.

We expect -- I would tell you this, we've been growing slightly. I'm not happy with it, but we have gradually gone January, February was better than January. March was better than February. And April, it looks like it's going to be a little bit better than March. So I think as conditions improve, not just truck sales, but obviously, parts and service, too, will improve with that. And that's -- it's just a matter of because tonnage has gone up. Tonnage was up for the first time, I think, in 2 or 3 years in February, if I'm not mistaken, I'm not sure where it was in March. But it is getting a little bit better, not just from the supply side, but I think on the other side of the house.

Now people are going to -- we've got a lot of outliers out there. I don't have to tell you what's going on overseas and fuel and all this other stuff. But the general macro, I think, environment for continued improvement at the customer level is it's there without any interruptions from geopolitics or something like that. But -- so I mean, I just do believe that things are going to be better. I don't want people to get -- I believe we're going to be up in some areas, it's going to build through the year.

And because we're on -- and I believe it's not going to go away in '27. My personal belief is I see a nice -- a pretty good 4-month run anyway. I'm not going to try to forecast outside of a year, but I feel pretty good about where it is. But it's going to be a gradual -- I just believe it's going to continue to get better based upon conversations I have with many customers and people around the industry.

And our next question is going to be coming from the line of Brady Lierz of Stephens.

You mentioned that you expect overall commercial vehicle sales to improve gradually. Could you just help us break that out between your heavy-duty and your medium, light duty just because of the weakness in the medium duty in the first quarter, like should we see a more immediate recovery in that versus Class 8? Just any clarity around kind of breaking out those 2 trends would be helpful.

Yes. Sequentially, yes, because it was so off in Q1, right? Sometimes you get numerator denominator, right? So from a percentage basis, yes, you're going to see medium improve quicker because heavy-duty obviously wasn't off as bad as the market. We were off about 6%, market was 20%, 21%. And we were way off in medium and a lot of it was timing, yes. So sequentially, medium will pick up quicker because we're starting at a lower base, right, if you want to talk about sequential.

We -- if I was to look out for the year, I expect a better year on the Class 8 side up over the last year and maybe medium will be closer. It will catch back up to flat maybe for the year. So that bodes pretty well for the next few quarters because we started such a hole on the medium-duty side. But I expect heavy-duty to continue to ramp up, if you want me to throw a number out, say heavy-duty is up 15% in Q2. And if things hold together, we get through all the emissions clarification and business that continues to look better for our customer base, both across the board vocationally and over-the-road.

Over-the-road is what we've talked about mainly. We do a lot of vocational business, over-the-road is still the biggest market that's out there, right? You're talking 2/3 of the market. So if that continues to get better for that customer base, we will continue to increase quarter-by-quarter as the year goes, and I believe for sure roll into Q1 because remember, from an emissions perspective, it's all about when the engine was built and usually -- I don't want to get into the weeds. Usually, those engines will be built maybe halfway through January of next year. And because we are the retailer and it takes anywhere from 32 days to 5 months, depending on the type of product it is to get there, that bodes well for us all the way through next year in Q1.

And I don't -- if the economy is in good shape and the business is still aligned, look, the number that's going to come out this year probably is not going to be anything more than a normal replacement. The deal is it's going to be backloaded, right? I mean 41,000 units was all Class 8. It was COVID, second quarter of 2020, I think it was -- second and third quarter of 2020, that's the lowest in 6 years. And medium was the lowest since 2015. So it wasn't just us, even though we were a little worse on the medium side.

So when you think about it, with that emissions regulations and improving business conditions, economic conditions for our customer base as long as the geopolitical things stay out of the way, I mean, it's set there to just ramp up slowly. It's not going to be an add water and stir thing just in Q2, but you better believe Q2 better be better than Q1, but it's not going to creep dramatically, but it's going to build. And I believe that's the case across our whole business model, right? I really -- I feel good. There's not one segment that I can sit here right now and tell you, I feel bad about. And I feel good. I'm not going to sit here and feel great like that, but I feel good about the whole thing. I want to watch it continue to evolve. We're still working business, okay? We really are.

We've been -- we've had -- as I've said, we've had nice order intake with the majority of it going to start coming in, in Q2. I said maybe up 15% on Class 8 and maybe a little more, maybe a little less, but somewhere in that range, the timing rules and all those things, too. But it should build from there through the rest of the year and through Q1 anyway for sure. And typically, hopefully, our parts and service will build, as I told you, has been slowly building. I'm looking forward to seeing it ramp up a little faster, but I don't always have my finger on that trigger.

Makes sense. Maybe I just -- for my second question, I just wanted to follow up on an earlier one and maybe ask about it from a different angle. Just the reduction in capacity in the freight market driving the improvement, how do you think, if at all, that affects new truck sales this cycle? Is that a headwind? Or does the emission regulation offset that? Just any thoughts around this kind of competing dynamics would be helpful.

Okay. Well, the first thing was supply, right? You really want the environment to be better from a demand perspective, right? You have supply and you got demand to your point about supply. Supply has been pulled out for really the last 3 quarters, okay? If you took the last Q3, Q4 and Q1 and strung them together, it's going to scare you how low a retail was from a demand perspective, to be honest with you, it would be under 200,000 units in the U.S., okay, annualized. But that has taken the supply up. But you need a combination of both, right?

So it was nice to see the tonnage bumped up in a couple of the months. I think it was February, I'm not mistaken, if I'm not mistaken. And even though it's not robust, you got both of those, I believe it will continue. And like I said a minute ago, even if we -- there's something like 41,000 in the U.S., ACT says it will be 225,000, right? Well, it means it's going to have to average 60,000. So that's a 50% bump, 60,000 a quarter, but it's not going to be loaded like that, it will probably be 50,000 in Q2. And then so that just bumps up Q3 and Q4, right, to even get to that 225,000, which is really under replacement or right at replacement. It's really under replacement. So that is a driver.

But people have to -- 3 years freight recession man, that was -- I've never seen one like that, right? And I felt so sorry for a lot of our customers. I really did. We were fortunate enough with our diversified business model and how we go to market that we don't rely upon one revenue stream. We just haul freight. No disrespect to my customer base, but we don't. So I've had to watch the suffering for the last 3 years. So it's just -- I feel better. I feel good for them. I'm kind of watching all the suffering of that over-the-road segment of the customer base, whether it be the small buyer or the large buyer across the board. But I believe that if demand will hold right, I can't -- I'm not an expert on the demand side.

There's too many macroeconomic influences on the demand side. I do know that the average age of fleet is probably a little over half a year or so more than where it should be, where most people like it. I mean I can tell you all these little bit anecdotes that I've got that make me feel good about it. And like I said, even if we have a big ramp-up and do 60,000 average 180-plus thousand in the last 3 quarters, we're still only going to be a replacement cycle. So that's not a huge big prebuy that scares you going forward from my perspective, which means we should roll through '26 and there won't be this big drop in '27. That's my viewpoint on the whole thing as I look at. I know -- I don't know if I answered your question because sometimes I just answer my own question.

No, I think you did. And I appreciate it.

So we're in good shape. The supply thing is really good because non-domiciled drivers, when we cracked that, it was -- there was a bunch of different anecdotes that have helped try to align that up and get it in line. And now it's not -- and just because we're going to have a little prebuy, I don't want to -- it won't be huge, so it won't get out of balance again. We may have maybe a couple, 3 years of nice growth across that segment.

And the next question will be coming from the line of Andrew Obin of Bank of America.

Maybe we can talk a little bit about -- you sort of talked about parts and services, clearly a focus for the OEM yesterday as well. You have this big initiative with large corporate customers. Can you just talk as to how that initiative is progressing? Are you -- do you think you are outgrowing the industry on parts and services? And what levers do you have to keep outgrowing the industry?

Yes. I would tell you, the first quarter, we were probably close to in line. Everything is crazy to me what I saw across the first quarter. I'm not talking -- I've got pretty good statistics on other dealer groups, okay? But we can get to our manufacturers. And probably the hardest hit piece was service. Service was back for us in Q1, and that's why maybe our margin mix was down a little bit because it comes into a mix, as you know, your margin is much higher on service than parts.

But I was nervous. What are we doing wrong, right? But not that it makes you -- I don't want to ride the same boat with everybody else, so don't ever expect that. But at least I do know that across what I've been able to track across pretty much a large group of dealers that I was able to get their retail environment. Service was off across the board, 3% to 4%. It was up 4% across a group -- group of 200-some-odd dealers. How about that? I have that information. So it doesn't make me feel any better. We were up a little less than that.

So -- but it still was interesting that the spend -- customer spend was off in Q1. And it's just the ending of, as I said, tightening your belt, right? People have just tightened their belt the last couple of 3 quarters. When you asked about the initiative, yes, our initiatives are still there for sure. We grew our national account business, okay? But at the same time, that was on the parts side. I think people really tightened up on the service piece a lot.

When I say that, you can extend maintenance intervals. There's many things you can do. You don't have to fix every oil leak, okay? You don't have to -- you can extend your oil change maintenance interval 5,000 miles or something. As I said earlier, when things are tight, that's what people do. And that's why when their business gets better, people get back into a more normalized part of the cycle, what they do normally, right? They're not squeezing it here and there. So I think that's what we saw in Q1 because service was -- for us was down, too. Parts was up, but our service wasn't down as well. The numbers I pulled from some other folks, but it was close.

So it was just -- but as people -- as their business gets better, they'll get back to more normalized spending cycle. And that's what I expect to happen because that's what I think as people -- the spot market folks was up 25%, 30%, okay, year-over-year. So that's a good thing, right? The balance between spot and contract got way better, right? Because spot was so cheap for so long that people that had contracts weren't using that. They were using the spot market, right, where they could take advantage and it just spiraled down all the rates over the last 3 years. But getting a better balance across that right now is allowing folks to be more optimistic. And when they're optimistic, people spend money, okay? That's just the way it works.

When your business gets better, you don't worry about doing things that are out of the norm for you. You know what the right things to do, but when things are tough, you squeeze. And it's the same thing we do with our business, no different. I just -- as I've said many times, I just -- I love our business model, whether it's through our leasing or parts or service or sales, we have many different revenue streams that allow us to balance our way through the last 3 years, 2/3 of the trucks on the road or over the road, and we managed to produce decent earnings, right?

So Andrew, I expect parts and service, all of that initiative is still ongoing. As I said, it was up last year on the parts side. The service side has been my most concerning piece, to be honest with you. Parts was slightly up, and it will get even better through that initiative and many other initiatives that I'm not going to talk about, by the way, that we always have ongoing. That's -- you've always got to have something going, I can tell you that. So we track.

And maybe, Rusty, you have a footprint across the country. You sometimes share with us what you're seeing in terms of macro. Can you just go and just, a, what are you seeing in terms of macro overall and just maybe sort of go on key verticals, right? You clearly have big off-road presence. So what are we seeing in key off-road verticals? And then are you seeing any impact in your oil and gas business from higher commodity prices? And clearly, I think we talked of on-road, but just maybe just give us an overview of what you're seeing from a macro perspective in some of your key verticals.

Sure. Well, geographically, from a spend perspective, I would tell you that we're up slightly in the first quarter, say, in refuse and construction, right? Most of the other is still -- is not -- it is flat, to be honest with you. We haven't seen that. Our national accounts were pretty flat in Q1. Now they were up last year, and -- but we're not keeping up with -- should I say, with our plan. Our plan was already in the first quarter. It's been -- there's not one huge terrible area, Andrew.

I expect our -- we still suffer our unmanaged accounts. That would probably be the one thing. If you remember what I told you about unmanaged accounts before. That's the small customer, which still makes up 30% or so of our business. And I've got to tell you, it is a little over 30%. It is -- even though it was bad last year, it's down almost another 10% the first quarter of this year. So -- but we've managed to make it up. We managed to make our revenues up with -- in different sectors, like I said, really vocational has been probably the biggest thing that we managed to keep from a parts and service perspective.

When I say that, we're talking about refuse construction, all the vocational businesses from that perspective. Geographically, I would tell you, we've seen Florida continues to be strong. I didn't touch on oil and gas. We haven't seen that big a bump from oil and gas yet, right? We do expect to possibly see something, but it has not come to fruition yet. I don't want to go through all the regions, but probably -- but Texas is always one of the strongest areas we have along with Florida.

And if I remember right, we were doing fairly well in the Chicago region this year in Northern Illinois region, too also. But I don't want to go through 23 states, but I would tell you that, again, I feel good about all of them that we're going to continue to get gradual improvement without any of this geopolitical stuff getting in the way. I think we're lined up for continued solid, which is actually better than having some huge prebuy, right? It goes on from a sales perspective or everything else.

I just want to see a consistent solid growth and taking share because taking share is what it's about. And maybe we didn't take as much share as I wanted in Q1, which were slightly better than what I've seen from others, but slightly is not good enough. So we're focused on continuing to do what we've done in the past. We've got some other initiatives we're rolling out. And all I can say is we're ready. We're ready, willing and able and excited to what I believe is going to be the better environment, as I continue to say, without any interruption from something outside of the industry itself.

[Operator Instructions] And our next question will be coming from the line of Cole Couzens of Wolfe Research.

Yesterday, PACCAR suggested that recent order strength is perhaps a little misleading and that build rates and retail sales remain more muted and thus, the pricing backdrop remains more competitive right now. What do you think is driving recent order strength? And how sustainable are current order rates in the coming months?

Good question, right, because I believe that -- well, not as robust as, say, what we saw in February, which was what was that, 46,000 or something like seventh or eighth best month ever that's happened. I think that was a little overstated driven by one OEM. I do believe there's strength in the order intake. And I do believe as long as we're going to keep bringing up this overseas stuff. As long as that doesn't interfere, I believe there's going to be sustainability to continued solid order intake.

Now is that 30,000 a month or something right now? I consider that a pretty good month myself. So I don't know -- from our perspective, I can only speak about from -- I can speak for more than that, but I know that what our order intake is and it continues to remain solid with a backlog, right? You don't just wake up one morning and somebody orders a truck from you. There's a process you go through, right, from a quoting and a competitive drop back. And people are still adjusting to all the tariffs, the OEMs, the customers, ourselves that will come part of everyday life, at least we've got -- at least we know what they are.

Now our manufacturers understand from their own personal perspective what they are. And so I believe we're going to see continued -- I can't sit here and tell you it's going to stay over 35,000 a month as I said the other. But if it continues at 25,000 to 30,000, we didn't have a month like that for like 7 in a row, and we continue that. So we started from a low base as far as backlog. But I still believe there's going to be continued strength, maybe not as strong as a couple of the months we've seen, but continued order strength.

And I think once we continue to get more clarity around emissions and customers' businesses, look, we didn't deliver many trucks the last 3 quarters, right? So people -- I know some customers have got off a trade cycle last year, right, that did not buy as much, right? It was last year, the U.S. was 216,000 or something like that. Well, that's under by 20-some-odd thousand what replacement is, and it's continued to be under replacement into Q1. And so even without all the outside activity, people have to get back to replacing trucks. It's funny that you think about it. Probably I know people thought, am I even going to be in business because that 3-year freight recession. All of a sudden, you wake up, you're getting more optimistic because you think you're going to get better rates, they're not going backwards. They've trough, they're coming back up.

You see the spot environment. You go, I am going to still be in business. I do need to buy trucks, right? I can't be running old trucks all the time with my maintenance charts through the roof. So I believe there's some natural sustainability to it and you add in the emissions and other stuff that's coming forward on January 1. And I just believe it's going to continue to be good. I don't know -- I don't think there's going to be this huge prebuy, as I said earlier. But you could consider a prebuy based upon what the first quarter was, how bad the first quarter retail was and how, well really Q4 -- how bad Q4 was, right? So you have to get somewhat back in line.

And the good part is I don't think it's going to just be crazy, right? I think it's going to be solid continued order growth because people's business is -- customers' businesses are getting better. And then the other outside influence of the emissions, which, like I said, we'll hopefully know more, but we know whatever it is, it's coming. So I mean, I hope that helps answer the question. But I feel good about it. And I've said that 100 times, I think, already. I'm not -- and I think it's sustainable for a while myself.

That's helpful, Rusty. And maybe just another question. Just in the context of an improving demand backdrop and visibility to higher truck prices next year, when do you think we can start to see truck pricing move higher this year? And is there a gross margin opportunity ahead of the EPA transition to sell older trucks you might have in inventory towards the end of the year or into early 2027?

Well, when you talk about that, you think about -- trust me, we talk about what inventories were going to carry, right, into the first quarter of next year just because as long as it's built, as that engine stamp dates December 31 are back. So -- and we'll make those determinations. For us, I mean, as far as the back part of the year, there's still build slots. So I think a lot of OEMs are protecting some of their Q4 build slots because they're trying to push them forward because you can't just go to the suppliers and say, okay, I need 3 or 4 months right now. They need to give them a better run rate of that.

I know the build rates have moved up an OEM or 2. I've at least I've been told that. So I mean, from our perspective, we're trying to make sure we're properly inventoried. You got to make sure you got the demand for it, but we would like to be properly inventoried going into next year. I'm still going to sell into this year, too. Don't get me wrong. We've done a nice job, but we've still got room to sell in the back half of this year, but we still have activity out there, right? We continue to have activity.

When you talk about older trucks, I'm not sure exactly what you mean if you're talking about carrying trucks into next year with these engines, we'll carry some stuff over. It won't be -- I can't tell you what that will be, but we're always carrying inventory. So it might ramp. We might carry a little bit more into next year. We just have to wait and see and see how the year plays out because there's still room to build them, right? So I hope that answers your question.

Yes. No, that's helpful. And maybe if I could squeeze one last question.

Sure. I'm going back to your conference for the first time in a while.

We're looking forward to it, Rusty. But on SG&A expense, it only increased 2% sequentially in the first quarter. That's a lot better than historical trends in 1Q. Can you maybe talk about the measures you're taking to kind of drive this cost management?

Yes. Well, a lot like our customers, I knew Q1 was going to be a trough. And this is a credit to the entire organization from my management staff down to every technician and everyone in the organization, it doesn't matter what you do. It was tough, right? We had to squeeze down and we did. It was -- it had to be contributed by a lot of folks. And those are never easy steps to make, right? Because normally, you're right. I mean we were down year-over-year, what, 2.5%, I think. And what -- I'm looking at just G&A. Remember, I know you haven't followed us for long, but I separate S over here because S is always just a derivative from truck sales, right? That's the commission piece off of truck sales.

The G&A piece is what we were focused. And G&A by itself was off 2.5% in spite of inflation, in spite of normal raises last year, in spite of everything else. But that's the contributions by everybody. As business, we're going to try to maintain that discipline. That's always the hardest part, is maintain if you get into a growing environment. We're not in a growing environment yet. I talked about it all. I can see it coming, okay? We got to get that parts and service business back because that's really what I'm driving it off of, not so much truck sales, truck sales and truck sales. That G&A is driven by what we do in the parts and service business.

So I appreciate from everyone's efforts in giving in that first quarter and what we had to do, made it tougher. We had to do cutbacks. But we did them, we executed, and we've done it before. And it's just part of being a somewhat cyclical business. Sometimes you have to make those tough decisions right and squeeze it back. So hopefully, our parts and service will continue to go up, and we love that. We love to be able to hire back some stuff again that parts and service business continues to go up. We want to keep the gross we get, mind you, but it takes -- there's a cost to doing it, right? We always tell everybody, we're trying to keep at least 40%, 50% of every gross profit dollar of parts and service, but it takes people to make it happen.

So when that starts to grow, we'll be able to maybe add some folks to help us. It's a chicken and egg thing. But it was a great job by our team to do that. It wasn't me or anything that I did. It was just an overall effort throughout the organization, realizing how tough the quarter was going to be going into it. So I'm just extremely proud of the entire organization and their execution. And I look forward to hopefully a little more breathing room as we get downstream without having to be quite so hard and tight on everybody.

That does conclude today's Q&A session. I would like to turn the call back over to Rusty for closing remarks. Go ahead, please.

Yes. Well, I just want to appreciate everybody joining us this morning, and we will look forward to speaking to everybody in July, and we'll discuss Q2 and see if everything is still -- the outlook is the same. I'm banking on it. See you. Thank you. Bye-bye.

Thank you for joining today's program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Rush Enterprises Reports Fourth Quarter and Year-end Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to your speaker today, Rusty Rush, CEO, President and Chairman of the Board. Please go ahead.

Good morning, and welcome to Rush Enterprise's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me on the call today are Jason Wilder, Chief Operating Officer; Steve Keller, Chief Financial Officer; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Senior Vice President, General Counsel and Corporate Secretary. Before we begin, Steve will provide some forward-looking statements disclaimer.

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, 2024, and in our other filings with the Securities and Exchange Commission. .

Thanks, Steve. As we reported in our earnings release for 2025, we generated revenues of $7.4 billion and net income of $263.8 million, or $3.27 per diluted share. In the fourth quarter of revenues were $1.8 billion and net income was $64.3 million or $0.81 per diluted share. I am also pleased to announce that our Board of Directors approved a cash dividend of $0.19 per share. 2025 was another challenging year for the commercial vehicle industry.

Freight rates remained under pressure excess capacity continued to be a factor and customers face uncertainty around trade policy and emissions regulations. All these factors negatively impacted demand, particularly for new trucks in the over-the-road segment. and also created a more difficult aftermarket environment. Despite these conditions, I am proud of how our team performed. We remain disciplined, generating strong cash flow, manage expenses effectively and continue investing in the long-term growth of our business.

Toward the end of the fourth quarter, we began to see improvement in new Class 8 truck demand quoting activity and for [indiscernible]. Both increased, and that momentum has carried into the first quarter. We believe a key driver of this improvement has been increased clarity particularly around tariffs and the EPA's anticipated confirmation of the 2027 NOx standard. With some of that uncertainty behind them, fleets are beginning to plan for the future for future vehicle replacement cycles again.

We also continue to expand our network and we acquired IC Bus dealerships in Ontario, Canada with an area of responsibility that includes the provinces of Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island. In addition, we added a full-service Peterbilt dealership in Tennessee with Duplex Center's National Central. These strategic conditions strengthen our footprint and enhances our ability to support customers over the long term.

Turning to the aftermarket, parts and service and collision center revenues totaled $2.5 billion for the year. essentially flat compared to 2024, and our annual absorption ratio was 130.7% compared to 132.2% in 2023. In the fourth quarter, aftermarket revenues were $625.2 million, up from $606.3 million in the fourth quarter of 2024. Absorption was 129.3% compared to 133 in the prior year period. While after market conditions were challenging in 2021, we continue to see strength in key customer segments, such as the public sector and medium beauty leasing. Our focus on operational efficiency, reducing dwell time, improving parts delivery and strengthening service execution also supported our performance.

Demand remains soft in January, but we are beginning to see signs of improvement as fleet utilization increases and customers address deferred maintenance and aging equipment, we expect parts and service demand to strengthen looking at vehicle sales. We sold 12,432 new Class 8 trucks in 2025, representing 5.8% of the U.S. market. In Canada, we sold 338 new Class A trucks, representing 1.4% in the Canadian market. As I mentioned earlier, demand was soft for much of the year, particularly among over-the-road fleets. However, demand from our vocational and public sector customers remained relatively stable helping offset some of the weakness in the over-the-road segment and highlighting the benefit of our diversified customer base.

ACT is forecasting new U.S. Class 8 retail sales of 211,300 units in 2026. We believe the first quarter will represent the trough for Class A retail sales, and we are encouraged by recent improvements in order intake fleet ages remain elevated by historical standards, and we expect replacement demand to increase as the year progresses. With respect to medium-duty commercial vehicles, new U.S. Class 4 to 7 retail sales totaled 217,412 units in 2025. Down 15.6% compared to 2024. Despite that decline, we sold 12,285 new Class 7 commercial vehicles in the U.S., down 8.5% significantly outperforming the industry and increasing our market share to 5.7%.

In Canada, we sold 993 new Class 527 commercial vehicles, representing 6.3% in the Canadian market. We continue to be pleased with our medium-duty performance. We believe our diverse customer mix and ready-to-roll strategy continue to differentiate us from our competitors. ACT is forecasting U.S. Class 4-7 retail sales of 218,245 units in 2026, up slight compared to 2025. While we remain cautious given weak order intake over the past several months, can broader economic uncertainty, we are beginning to see improved quoting activity, and we are well positioned to fulfill all orders as customers move forward when purchasing decisions. We sold 6,977 used trucks in 2025 down 1.9% compared to 2024 as freight rates improve and pre-buy activity builds ahead of the future emissions regulations, we expect to use truck demand to improve in 2026.

Our leasing and rental business delivered another solid year. Leasing and rental revenues totaled $369.6 million in 2025, an increase of 4.1% compared to 2024. In the fourth quarter, leasing rental revenue increased 3.6% year-over-year. This business continues to benefit from the strength of our full-service leasing operations, supported by strong customer demand [indiscernible]. From a capital allocation perspective, we remain disciplined and continue to return capital to shareholders during 2025, we repurchased $193.5 million of our common stock. We also announced a new stock repurchase program authorized the company to repurchase up to $150 million of common stock through December 31, 2026.

In addition, we returned $58 million to shareholders through our quarterly dividend program, a 5.6% increase compared to 2024. These actions reflect the strength of our balance sheet and our confidence in the long-term outlook for our business. Looking ahead to 2026, we expect market conditions to remain challenging in the first quarter, but we are optimistic about the remainder of the year. with fleet ages elevated and maintenance needs increasing, we expect both commercial vehicle sales and aftermarket conditions to improve as we move into the second quarter.

While we cannot control the price of the market recovery, we can control our execution. We believe we are well positioned to respond quickly and effectively to our customers' needs as conditions improve. Historically, when the cycle turns, demand for both new commercial vehicles and aftermarket parts and service rebounds quickly. and we believe the strategic investments we have made over the past several years will help us serve customers better and gain market share. Finally, I want to thank our employees for their hard work and commitment through 2025. This is a very demanding year and their focus and execution were critical to our performance.

With that, we will open it up for questions.

[Operator Instructions] Our first question will come from of Brady Lierz from Stephens.

I wanted to I wanted to maybe start unsurprisingly on Class 8. As you mentioned in your prepared remarks, we've seen an improvement in orders late in '25 and here early in 2026. But can you just kind of talk about what you're hearing from your customers? Are you expecting this to be a pretty meaningful pre-buy here in 2026 ahead of the '27 regulations? Just any clarity there would be helpful.

Sure. We'd be happy to. The answer would be cautiously maybe not even cautiously. We're optimistic that yes. there will be a prebuy before we get into the 2027 emissions regulations. Based upon not just the regulations, right, but you can incorporate regulations all you want. I was around Well, you were away still in high school back in 2009 and '10.

When we went to SCR, and we were supposed to have this big buy and 9. Obviously, it was the worst year in 40 years, right? When a little economic problem going on. So what I'm reflecting on is not just the fact of the 2027 ambitions, but the fact that their business is improving. And I'm not going to get ahead of myself and say it's like accelerating or ramping up rapidly, but it is improving especially over the last 90 days. I don't have to tell you, spot rates have been up as 6 months ago, most people would have thought going in there, contract rates were probably going to be flat. Now people are hoping to get contract rates up mid-singles, right? that line between spot and contract has moved nicely.

More spot was so much lower before. So your business has to be good. So you got to and I'm going to say it's great, but you least need to be able to see forward, right? And that's important. We had so much uncertainty last year with regulations, with EPA regulations with tariffs and everything else. So now you can focus on these regulations and do it while your business is gradually getting better. It may not be reflected in all the first quarter reports. But I think most customers feel that their business is improving when you talk about we're talking about over-the-road customers right now because that still is the biggest segment, even though we're more diversified than most folks when it comes to vocational over the road. But we still need that over-the-road customer to be solid, right?

This is the biggest piece of what you do still. And so combining some most we don't have full clarity, but we know we're not changing. We're always going to be 35 the government when I come talking about NOx and stuff. So we realize that's going to be there's a little they haven't clarified everything, but you pretty much know what the cost is. And when you're doing something like this, the cost is 1 thing. It's a little bit new after treatment systems. And I watched in 2010 when every particulate filter was logged up when we came out a SCR back in '10.

So I feel there's a lot of people that still remember that you can have issues when you come out. So I'm just giving you background. So you combine the EPA issue, clarity on tariffs, which has given clarity to pricing throughout this year, which we did not have last year and their business is getting better. So I am optimistic. The issue will be this the issue will be we're not going to run out of time. So it's already were, what, 8 days will weigh 9 days, what is 10 days wait, excuse me, from the end of this month, I apologize and we'll be into March already. So I do expect order intake to remain what we've seen over the last couple of months. in that range, if not maybe even a little more because I think people are lining up. So I do believe Class 8 or is going to continue solid. You have to remember, we had 5 or 6 months on last year. a 6-month run that was close to being less than the last 2 months, 5 months, for sure, we're opposed to being less than the last 2 months.

So I mean, all that I know it's a long-winded answer, but you folks are used to my long-winded answers, I just want to give you a full perspective here. Yes, the emission piece is there. Yes, that's important. But it's also important that people can lease a little further in their business to have clarity, which we didn't have. So the combination of the 2, yes, I think we're going to get and I think you're you may run into a problem with supply side problem with Tier 2 and Tier 3 suppliers.

We're not there yet by any species because there was a lot of backlog to fill up. But it will be interesting to see where we are 60 days from now. So I mean, a lot of customers are realizing a bit better I think some goes to I know they are they better get on board now and not wait until summer or we may run it's hard to ramp up for that sort of period of time. Williams will ramp up but there's only so much you can do, you don't have clarity past January 1, really. But I don't see just going further, I don't see 27 to be a huge drop off either because we're going to get started. It's going to be we're going to get started like here in Q1, okay? There's no question lighter than we were last year in Q1.

So you start in a hole. So the year could be similar, maybe slightly up but it's going to be packed into the back 3 quarters of the year so you say I should.

No, that's all very helpful color. Maybe we could just talk about parts and service for a second. Typically, you see a pretty nice sequential step-up in the first quarter compared to the fourth quarter. But has the severe winter weather we've seen this year impacted that at all? Just want to get any thoughts there. And then if you could just talk about some of your strategic initiatives in parts and service. You've mentioned in the past, growing the technician head count mods, just how are those initiatives progressing?

Yes. Well, I'm not going to say it, as I mentioned earlier, January was a tough month when you ask about the freezes, I mean we were going to shut down for about a week in the Dallas-Fort Worth area and some other areas. We were down in the south, we don't know how to handle ice and snow. I can tell you, it's not like it's funny that weather cold weather is good. for your parts and service business, say, in Chicago. They're used to handling it. They've got snow blows. They don't have any snow lows in Dallas, nothing is over for 5 days, okay? we were almost we really were we were running skeleton crews. It was detrimental let me tell you, to our southern stores in some areas.

So that's why January was a real tough one. We're starting to see life a little more live. As I've said all my life, if I could just get rid of November through February, but I'm we're from the south recently on Texas. And if I could just get rid of November epay, I would have except for Christmas and Thanksgiving. But we're getting to the end of it and we're starting to see it's typical seasonality, I would tell you, here was sold in January and we solved in November and December for but that's seasonal. That's not something we don't deal with in the last January was probably softer than it usually was because some of our bigger areas on the feeder book side or which are further south, that frozen up a little bit.

So and we don't operate some of these places don't operate well on that. But I think it's just normal. We'll be we got it a little bit. But we should come out of it here as the sun comes out and it heats up here into March and April. I mean I see no reason we won't. And we're seeing signs in February. The things are better than what they were, which is just typical from a strategic initiative, our mobile service thesis something that we're really big on and we continued last year was a big year for us from a mobile investment perspective. I mean, I can tell you, we took on more depreciation in mobile units last year than we had at the end of '24. So those are investments that we make that payback comes but over the next 5 or 6 years, right, as you ramp all that up, you like to think it's all immediate, but it's not always all immediate.

So we continue to ramp up that piece of our business. It's a larger piece of our business than it ever has been. It was running around 30%. Now it's running more like mid-30s or more of our overall business. So going forward, we continue to believe that's going to continue to be a big piece of what we do. outside of our shops. I would tell you that it we did go backwards a little bit in Dagnitions in the fourth quarter. But I think we were I was just I'm not sure exactly why it wasn't I'm not going to say it with dramatic, so I'm not going to make any big deal out of.

But we are focused on containing to get back to adding especially a higher-level skilled technicians best we can and are doing our best to train the young ones. You'd be amazed the turnover usually comes in those first year, second year folks because we continue to have programs and work our way through that. But yes, we'll continue to try to grow technicians like we have in the past, while we're still doing it profitably, right? You can go to be careful when you're doing that, but you got to be able to do it profitably, not just do it for the sake of doing it. We've got some great programs from a delivery perspective. We're running a pilot project.

I don't want to get it all I'm not going to get into all that stuff. How about that. Some of that is inside proprietary. But you can rest assured we're not sitting on our hands. We never have an ever will. We'll be out there running or running up front, hopefully, because you're always getting chased so you got to have something going on.

Yes, absolutely. Well, 1 final 1 for me and then I'll pass it along. You mentioned quite a few times just throughout this challenging freight market the last couple of years, 1 of your priorities has been controlling your expenses, controlling the controllable you did a nice job of that in 2025 in particularly in the fourth quarter. Can you just talk about how we should think about expenses in 2026, given both your focus on wanting to maintain that cost discipline but also considering we are expecting the market to improve here in 2026.

Right. Well, I mean let me say this, if we get in to get to really what I believe we're not there yet, if we can get into a growth where we really feel some real growth. I'm not ready to claim and I'm bugging parts and service costs. Remember, truck sales are when you go everybody goes, SG&A, SG&A, we run it differ is attached to truck sales. G&A is attracted to all the other expenses, right? Because that's the variable commission piece driven by what truck sales are. So you sort of you got to look at it in 2 separate buckets, right? And that's how we do it. And I would hope that we can maintain our G&A at least close to flat, okay?

That's my plan here and in Q1 would be to do that. Now as we ramp up, if the parts and service business ramps up, we always talk about the fact that we will spend half of the growth because we just half of the growth will more have to be sped the gross profit growth. Now when I let me back up a second. Remember this about Q1, don't comp Q1 to any other quarter. Q1 has always jumps from Q4, okay? We have you've got all your payroll taxes restarting and all our equity costs go up.

The majority of our, not all, majority of our equity cost go out in Q1. So if you look at our historical record, it will always show a jump from Q4 to Q1. So don't forget that. I would be compared to last be what I would tell you to do not compare to Q4 because that's always a jump that we have. You start up a lot of different things in Q1, like payroll taxes run down as the year goes on, et cetera, and really more than anything, the equity costs are all the majority not majority, but half the equity cost in the company run in 1 quarter. and that would be in Q1. So again, don't compare it to Q4 compared to last year's Q1. But we would hope to stay do a good job for now staying close to that number last year, but it's possible that it will ramp up some if our gross profits in parts of service are going in. We can't just it takes people to do what we do.

People turn rates, people drive deliver parts, people do all these different things. So it's there's not like owning money here. I'm handling hard assets and stuff like that. But I'd love to have that problem. So hopefully, we will continue to see growth. And if we know that I plan on keeping it as flat as possible, okay? If we stay flat embarks in service, I'm trying to keep it as close as I can with as little inflation as possible to where we were, but we're hoping to have some growth. And like I said, we're after getting out of January or seeing a little uptick here in February, but it's not enough. But like I said, I'm used to the seasonality of the business, whether I like it or not. And I just have to deal with it and hopefully, we'll pop out in the spring like always.

Our next question will come from the line of Avi Jaroslawicz from UBS.

So Rusty, as where things are standing today and you kind of discussed it a little bit already, just there, what are your expectations for price cost in the aftermarket business? I think it was somewhat of a tailwind last year just as you raised prices of inventory to match the cost increases you were seeing, but then there is a lag for when those hit COGS. So how should we be thinking of should that be a headwind here in 2026? And if so, roughly what are we talking about?

Yes, you can have a slight headwind as inflation with inflation slowing down. Okay. But I don't look at it just to be monumental, okay? There will still be inflation. It may not be quite as much. Inflation can't be a tailwind to you when you're doing that you can maintain. So I would say we'll have a little bit of a headwind. But when you look at it as from a percentage of the whole, it's something that if you've got a growing market, you could overcome without question.

So while we'll have inflation, I don't expect the inflation from that perspective, from a parts perspective to be as much as last year from what we're seeing from the suppliers and the OEMs right now. But it will be there just won't be quite as much. Hopefully, what we're talking about is the market will get better and grow. The overall margin was flat I mean, not just for us, for everybody or even down over some people or some whether it's independents or dealer-operated stuff. Some of them were negative last year. So I'm hoping that we get into a more as our customer base gets healthier, their spend will be more normalized. You got to think back like this the way I look at it. This over 3 years in a freight recession. And I've been around I hate to say how long, but I'll be I'm young. Young at art, but we've seen a lot. When it gets like that, people don't necessarily spend like they would if their business was normal when they're not in their business in a recession, you saw companies lose money that never lost money.

Well, guess what? When that's going on, you're going to put off you're going to put off spend. You're going to add you know what I'm doing. I'm backing 5,000 miles to the old change. You know what, I'm not fixing that center. You know what I'm not doing this so the health of the customer is the most important thing out there. And yes, we do a lot of locational stuff, but the over-the-road market is still the biggest piece. And even the small I mean we've been off double digits from our small customer for the last each year for the last 3 years. So as the best bad.

Well, that may be bad. But right now in the safe but I look at it as a positive. I look at he can't get much worse, right? It's only 1 way to go and that's up. So I hear you about a little bit of , but I think the overall market, when I look at the possibilities, a healthier freight market is going to be way better than a little bit of headwind. And it's not overwhelming headwind either, by the way. But I still think there's going to be some inflation. There's no question. But other than that, we've been able to hold our bars. As you can see, I think we ran 37 blended parts and service in Q4. So which is in line, probably if you look you're looking back, it's in line, we're 37.2,% 37.6%, 30s, 58 actually in the last Q1 of '25. So my point being, 37% is solid. So and I would hope as we can maintain in that same range blended parts in the service margin regardless of inflation.

But the health of our customer base, especially the largest customer, basically over-the-road carrier once the big carrier gets healthy, I guess what the little carrier follows along -- and that is where more of your retail parts and service comes from a lot, not more, but I talk of it that has been super depressed. And so that to me, that's I'm not trying to get I'm not it's not there yet but I've seen these cycles before, and I don't want to get too bullish or anything. But if things go according to historical, that I think we should be in fairly good shape to capitalize on that.

That makes sense. Appreciate that. And then on the medium-duty side of the business, saw a pretty sharp drop-off in sales there still better than the industry, but a sharper deceleration than the industry in the quarter? So how are you thinking about the shape of the medium-duty demand here in 2026? Do you think it's going to be fairly similar to what we see in heavy duty or.

I don't know. I have some concerns around it, to be honest with you. But I haven't seen the acceleration in it over the last 60, 90 days that I've seen in the heavy-duty side. But a lot of times, the medium-duty business is a lot of leasing and a lot of different customer base, right? And it's tied more to the general economic activity of things going on locally in a lot of ways because it's not more diversified type of products, not just not [indiscernible] leasing in box trucks and stuff. There's a lot of other medium-duty segments that we play into. So I we're seeing more quoting activity right now. It hasn't come to fulfillment but since the heavy ads, but lotteries, it will be springtime as we get around here going up with the NTA and some things like it's a big conference that comes up the convention. Things like that where some of these things happen.

So I am sure that it will line up historical. I can't sit here and tell you that we're going to sell lots and lots more. I would imagine we would be some maybe based on ACT going at pretty flat, to be honest with you, we would stay in line with the percentage of the market we're at now. But I can't tell you I've booked it all already. That's for sure. but I can also tell you, I'm not afraid. So we've got a pretty good sales force out there. And it will represent many brands. And we feel good it will come. It just hasn't really happened yet for us, to be honest.

But the quoting activities picked up, you got a quote before you got a quote before you can order to get in order and get it built and get it delivered. So I'm confident that we'll execute in the lines of where we have historically here, if not grow it, I've got stuff going on. I'd like to see happen. It might allow to even grow it, but I don't want to get out of here my skis on.

Our next question will come from the line of Andrew Obin from Bank of America.

Rusty, Steve good morning..

Well, good morning, Andrew.

Just a question just going back to something you said. I think you guys were fairly skeptical, and there was a big industry debate about ACT orders last month and whether they're onetime in nature. It sounds like you're sort of warming up to the fact that orders could actually improve faster. Could you just unpack this for us? Just what are you seeing happening with industry waters over the next 3 to 6 months, how that's going to play out?

Sure. I may be a little repetitive here, Andrew. But I thought I'd try to answer, but we believe that about 90%, once we got clarity, remember, we already started on November 1 let's get that right. 232, the when they changed the tariff rules took effect first of November. Then we got some clarity a little later after that. about, well, we're going to hold on and keep the 2027 rules in place from the emissions perspective. except for we're going to loosen up a few things here.

We probably it hasn't come out yet. But the beds have said, we're not going to keep all the warranties not hasn't been physically done, but they have communicated to customers and the like, that we're going to cut the warranties back. Well, that was more than half the cost. We're going to be a little flexible on credits and how you do that. And I'm not the genital expert.

So you had all that go down. Well, that gave clarity, right? So then you started us we started looking out next year, I spoke of. They knew they really wanted they pulled back on purchases last year in the second half. And you can't do that for too long. You've got to bottle that got your maintenance is going to go through the roof your fleet goes up on these big fleets. So people really started talking, I would tell you in November. And all were remember what it was 18,000, 20,000 units, I can't remember. But was picking up, and then we had a big December, $40,000, $30,000, $40,000, I mean, and then it was 30,000 last month. We at the same time, as I said earlier, people's businesses they started to be able to see your tender acceptance rates came down from 98% acceptance to low 90s.

We started even in the high 80s, which started to drive spot market of it. It wasn't just weather did here recently, and people felt better about where they were at from in contracts going forward. You can just there's been a little bit of tightening, right? So that gives you and people worried it isn't sustainable, right? The first 30 days. And now I'm going I don't know him, maybe I'm going to be wrong. Maybe it's not sustainable. I have a feeling that after 3.5 years this company somewhat sustainable, if not gradual, right? But sustainable, whether it's there's not some spike but a gradual sustainable improvement in their business. You tie that in with how you've got clarity you know what it's going to be at the end of '27. You may have slowed down on some uropanies it did in $25 million Well, that's why I think you're going to see a good order intake this month also. I'm just guessing it's a short month, but it will be solid.

I do believe it's a shorebase we know February but I would expect it still to be solid. And from people I've talked to some people I talk to. So and I think what's going to happen is if the backlogs and I don't know for everybody because I even heard of 1 OEM that has some shutdown weeks here in the first quarter. Now why I'm dealing with, I don't believe, but I've heard of 1 OEM that has and I'm not here I don't want to get it all that. But my point being, I know for people that they're filling up here not filling up, but you're getting orders, right? You've got to so all of a sudden, the backlog is increasing, okay? Well, then people look at it here as we get into the spring time and say, wait a minute, I don't want to get left behind in the fourth quarter because some people you see these orders. Remember, they're not on build immediately, but they are building a backlog. Most of them spread over time.

So I just believe I could be wrong. I mean it's just my gut and maybe touch with the market that yes, it will continue because people are feeling their business is great, but they don't feel in the dumps sometimes when you've been living in the swamp dumps, it doesn't have to get a whole lot better to make you feel better, right? And it's been 3 years of prolonged freight recession, but at least now you got to believe because remember, the first thing that happened is capacity is coming out, right? everybody reads about non-CDL driver non-drivers they've been taken out here and there. and they have. And but that's not an ad water and stir thing. But as that goes on, can you have less can take of drugs. Remember, we built a lot less trucks in the back half so 25 than what we did in the for first half. So you slow that pick it down, you start taking some of those noncompliant CDL drivers out you start squeezing the capacity piece.

And all of a sudden, their business starts getting a little better. The economy looks a little better. ISM looks better. I think there's a lot of things that tend to make me believe how long was emission regulations coming January '27, we're going to have pretty good last 3 quarters of the year, right? Now and I'm not predicting demand gloom after that, but that's a little far out to me to understand right now. I'm just dealing with what I got in the present and over the mid rest of this year, and we'll talk about '27 as we get halfway through a little further through the year this year. But I feel good that kidney is sustainable and will lead to maybe even a third year.

The problem is you start off remember, the first quarter is going to be off so you're starting to hold to begin with, so you got to climb back out and then catch back up which you should do for sure, in the back half of the year, deliver more trucks than we did last year for sure.

Great, Rusty. And just a follow-up. I mean, it clearly seems that you're highlighting the improvement over the road, finally driving your optimism for the rest of 26 you've alluded to other parts of the economy getting better. Can you just talk about off-highway, which has been such a moneymaker for you over the past year, sort of got you through the drought but maybe if we could talk about sort of these corporate fleets, if we could talk about construction if we can talk about waste. What are you seeing in those markets because those tend to be economically sensitive as well. But as I said, it seems to us that your message is very clear on finally starting to see green issues on over-the-road recovery.

Very well put, Andrew. Yes, we're seeing it on that side of the market. Yes, we love the diversity of our customer base, you know that. I would tell you the vocation pieces I don't see the pickup that I see across, but I can see fairly flat to where we have been, right? Because we've been pretty solid in it. I got to be honest with you. So as you said, can help us over the last couple of years when this over-the-road freight recession.

We've been really solid around that area. So I think that, let's say, I don't want to get into specifics. We might be a little softer in 1 segment and up a little in another segment. But when you look at vocational as a whole, I'm going to say we're really probably flat with where we have been. I don't see any huge decrease or anything. We may because some of them, we were still catching up from Cove in the last couple of years when it couldn't get drugs 3 years ago.

So we have fulfilled maybe some of that pent-up demand somehow is more like business as usual. But I don't see any big downtick is for back to business as usual. Some of the people we do business with were playing catch up 24 and 25 from not getting as much product in '22 and '23, to be honest with you. So where they may be off a little is not off because they're off.

It's not because they played a little catch-up and we were able to capitalize on that. So when I look at those businesses, they're doing well, but they've caught back up to their normal replacement cycles. They got left out a little bit some of those groups at left out back in '22 and '23, and that we picked them back up '24 and '25. So just because someone may be bought from me or some they're buying 750, 800 doesn't mean in their business. It's bad. It just means they've caught back up, right? So you got to but I think overall, it will be somewhat flat at locational pieces.

It's been a while since you've been constructive about over the road. Good to hear.

Well, it's nice to feel even though it's a big piece and but it's a for us, locates big as you don't. So it's nice to feel that you've got an opportunity to maybe a little bit when I saw over the road, I'm hoping our small customer base comes back. I haven't been a little bit I'm a little I'm optimistic there. I mean, I don't want to get overly anything. We talk to you in April and I'll have a whole lot better feel for what's going on, right?

The sustainability of what we're seeing and I'm not on to get over but like you said, it's been a while since we've been able to talk optimistically about the over-the-road business. And I just am looking forward. I think things are going to be better, right? So you add that with everything else we got the Scott here in Q1 because we're just taking away remember, people get excited because these orders taking it.

Orders taking in did not mean Rust has delivered them yet we are the tail of the dog, right? A lot of times we got to do a lot of upfitting and things like this to trucks when we get them. So that's why when you hear me. talk about, well, took orders us, well, that doesn't mean I'm going to add water and deliver them 30 days later. It contains 3, 4 months to get them out there and get them delivered because of what has to be done because we are the we are we're the last guy that touches the end user. So even though they're manufactured to mean we don't have as you know, we have upfitting places around the country. where we make sure to do all those things that customers need a one-stop shop is where we like to be. You bet.

[Operator Instructions] Our next question will come from the line of [ Cole Cousins ] from Wolfe Research.

From a Class 8 pricing perspective, can you talk to what you're seeing across the market at this point? Are OEMs raising prices yet? Or does it remain pretty competitive as OEMs look to protect or gain share? And maybe how do you see this progressing through the year with EPA 27 on the horizon?

Yes. Well, you probably didn't do real well asking that question of the OEMs did you so you're asking me, put me on the spot. I would tell you right now, we're still building backlogs. I would say I have where let's say there are no big discounting going on compared to where we run there's no huge raises now because that's 1 of the things as we get later in the year.

I wouldn't be surprised to see a supply demand if demand exceeds supply, even around long enough to know what that means. I won't even try to tell you. Everybody knows what that means. It's okay? And so we're not there yet. Backlogs need to be backlogs need to be built up. They've been growing down pretty good and people were building trucks in 4 weeks for you if you wanted it. So once backlogs get built up, and we'll just let the OEMs decide and we'll be the poor guy in the middle trying to get deals done.

But right now, I would say right now, most OEMs are still in the process of getting their backlogs more healthy. So I'm not going to say it's total throw out there right now because it's not, but I mean it's not it's balanced at the moment. But we continue you start popping some 40,000 if you start by 2 or 3 more 35,000, 40,000 months in, which are not necessarily typical of these months coming up in March and April, February month in March and April, and probably going to see demand as outpace supply. And I'll let you take it from there.

No, that makes a ton of sense. And maybe just I know we've asked a lot of questions about this, but to follow up on Brady and Andrew's questions, maybe to put a finer point on it. How much of what you saw in December and January do you think was replacement CapEx versus growth CapEx versus some degree of prebuy activity. And if it was some degree of prebuy activity, can you maybe talk to the risk of potential order cancellations late in the year if things maybe aren't as good as they seem, and people are customers are trying to get in line ahead of EPA '27 as backlog start to build again?

I feel very good about how solid what we took was, how about that on with that. I mean I see nobody out there trying to put placeholders okay? The business we took, I would he would take a recession or something for these folks not to take what they ordered, okay? That's how solid I feel about it, okay?

It's not people putting placeholders as you know, you've seen wrap-ups before, when people put placeholders out there just so they get old slots. That's not what's going on at the moment, obviously, none of that, to be honest with you. I see people being proactive, understanding what I just went through on the last question. They don't want to get caught that demand out of whack demand supply piece, right? You know what that means like we already know what that means.

So they're trying to be proactive, not just to the mentions but also to knowing this year is probably going to back up and whether you can get that second or third tier supplier, Yes. And that's what I say you know what happens with the man outpace supply where price goes, right, Let's get real. So I think people are catching up. They probably didn't purchase as much in the back half of last year because they didn't.

And I don't really, that's about the best way I can tell you is solid, right? Yes. I go back to everyone I get to you their business is better. I've said that 3 or 4 times also, right? So it's not just mentioned, remember, I want I long winded this earlier. It's not just the like you said, you're going to go on top of the 2 questions and I'll answer the same way. Their business is better. You've got emissions coming. You feel better, like I said, you've been in the Duflo. Maybe it's not a straight fee but it's a gradual climb up, if you're good about where you're at, you're trying to plan for your future. You know you're going to be in business for a long time, and you need to do the right thing. You just put that together, and I think that's what you're going to see and that's what you're seeing.

And I don't believe that activity level is going to go away. It may not may be 35,000, 40,000 every month. But we some people that aren't participating are going to wake up here in 60 days. If we have a couple, 3 more months of order intake like this to low and that's what you asked about price. That's where we're going to see how things move along then with that. So I would tell you that the folks that are on top of their game can feel well enough about what's going on for doing the right things to for their business plan and not waiting until the last minute to do that knowing that there still is putting back there's backlog out there still to be built. We better wait until July would be my comment where you might get caught because ramping up production.

I think these OEMs are having to make decisions right now in the next 30 to 60 days, what they're going to do in the back half of the year. You got to remember that's more labor, that's more of this, and it's the second and third tier suppliers that have been down in the last half of last year. you ask them to ramp up. I got to go who long for, right? And that's where you run into a problem. And that's what could happen. So if I'm planning on being in business and around a long time, and I'm a smart player, then I'm not working it right now, okay?

That's what I'm doing because that could be an issue, Scott. And as you know, but you better be looking out. You may not be living just in the moment, you'd better be looking out a little ways would be my comment to anybody, and I'm not trying to place their tactics. I'm just telling you that you run into issues with that, right? And we'll just I think if I'm not mistaken, when the engine is built is the 2 or you're a lot, but hanging One, you got to remember. So when you get towards the end of this year, it's about the Indian, right? Engines all have to be built both in the '26 before you go in to '27. So it could be an interesting back half. Let's just say that.

That makes that's good color. I appreciate it, Rusty. And maybe if I could squeeze 1 last question in.

Of course, I hate to talk.

I heard you on the small accounts being down double digits for the past couple of years. It sounds like that hasn't really come back yet, but maybe there's some hope that it will through the year but maybe can you talk to what you've seen from the national account level and maybe from a higher level, talk to some of the initiatives you guys are pursuing to grow national account mix going forward?

Yes. You bet we are. We always national accounts is easier and more effective and more controllable. I can't it's hard to control what we call the unassigned accounts. That's still 30% of our business, roughly and that's the little folks, right? So we just want that to come back because that's going to be a higher margin, right? When you do national got business, I understand they're national for a reason. -- they're not paying retail, okay? So while it can be a little hard on your margins, it's still more solid sustainable repetitive business, should I say, right? So you're looking for that foundation, right? The treatment of cherry on top comes when you get the smaller retail guy back in the game.

You got us not listening to me on the phone right now okay, those folks. But they're still a part of what we do so but I mean, our national gun business was up not as much as we had been up, but it was up some side of the house, not so much. But in some areas, it was for last year, we will continue to focus on that.

And so but we were up not as much as we had. We were up buying like overall blended all OEMs were above 6%, okay? So we will continue to grow that. understanding you're blending revenue, you're buying margin, you're doing all that. We love that fees. We're going to get you to focus on that piece. It's the sustainable piece, more sustainable. It doesn't have the volatility of the small customer out there, right? So but that's why I'm open. But you got to get those guys the national accounts have to feel better, which they do the buy all the time.

They just may not buy quite as much sometime. We were up 6 years before, we were up double-digit incentive, right? Again, like I said, you're growing the revenue margin is not as high as the other. We work the blended margins, but I think everybody understands that, right? So and we're fine with that. we'll manage that piece. It's much more manageable than the unassigned accounts because they're not assigning really don't know don't know who they are, right? So smaller. But hopefully, later this year, is the big guys get healthy, the little guys usually follow but then they get growth.

Then what happens is they get too good, they get too big, and we go back in the cycle again a couple of years from now. But for right now, I would tell you, I'm hoping that some capacity still comes out, which is a small guy, but the 1 that's left will be a healthier customer, okay? And we will see some pickup in that later this year, too. As rates go up, it helps everybody, not just a big guy. It helps a little guide too. And so I don't know, it's a long-winded answer there, but I hope some of that I gave you some points there that you can grab that makes some sense to you.

Thank you. I'm not showing any further questions in the queue. I would now like to turn it back over to Rusty for any closing remarks.

Hey, we appreciate everybody's participation this morning. and short time what we talk again. We'll talk in February, a couple of months away. So Excuse me, I may not be said I was looking at it April, my pad, 2 months from February and April, we'll talk in April. So thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Rush Enterprises, Inc. reports Third Quarter 2025 Earnings Results. [Operator Instructions] I would now like to turn the conference over to Rusty Rush, President, CEO and Chairman of the Board. You may begin.

Good morning, and welcome to our third quarter 2025 earnings release call. With me this morning are Jason Wilder, Chief Operating Officer; Steve Keller, Chief Financial Officer; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Senior Vice President, General Counsel and Corporate Secretary.

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, 2024, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved third quarter revenues of $1.9 billion and net income of $66.7 million or $0.83 per diluted share. I am pleased to announce that our Board of Directors approved a $0.19 per share cash dividend. The commercial vehicle industry continued to face challenging operating conditions in the third quarter of 2025. Freight rates remain depressed and overcapacity continues to weigh on the market.

In addition, while the industry gained some clarity regarding the tariffs that will be imposed on certain commercial vehicles and parts beginning November 1, economic uncertainty and regulatory ambiguity remains, especially with respect to engine emissions regulations. These factors are impacting our customers' vehicle replacement decisions.

Despite these headwinds, I am proud of the financial performance our team delivered in the third quarter. Our employees' commitment to operational discipline and customer service was evident in our ability to maintain strong aftermarket results and manage expenses effectively. And I'm deeply grateful for their dedication.

Our aftermarket operations accounted for approximately 63% of our total gross profit in the third quarter, with parts, service and collision center revenues reaching $642.7 million, an increase of 1.5% compared to the third quarter of 2024, and our absorption ratio was 129.3%.

In the third quarter, our aftermarket products and service businesses remained resilient despite ongoing market challenges. Our strategic focus on technician recruiting and retention, expanding our aftermarket sales force and identifying new customer segments helped to offset weak demand.

Looking ahead, we anticipate continued challenges in our aftermarket business due to seasonal trends and broader industry headwinds, but we remain confident that our diversified customer base and operational discipline will allow us to successfully navigate the remainder of the year.

With respect to truck sales, we sold 3,120 new Class 8 trucks in the U.S. during the third quarter, accounting for 5.8% of the total U.S. market. While this represents 11% year-over-year decrease, we outperformed the market primarily due to stable demand from our vocational customers, underscoring the strength of our diversified customer base.

Looking forward, economic and regulatory uncertainty continues to dampen customer demand, particularly with respect to new Class 8 trucks. We believe that the weak demand the industry is currently experiencing will negatively impact new Class 8 truck sales for at least the next 2 quarters. That said, if stricter emission laws become effective as planned and if capacity continues to exit the market due to bankruptcies, retail sales being below replacement levels, and continued enforcement of government policies regarding English language proficiency and non-domiciled drivers, Class 8 truck sales may be strong in the second half of 2026.

In the medium-duty market, we delivered 2,979 Class 4 through 7 medium-duty commercial vehicles in the U.S. in the third quarter, representing an 8.3% year-over-year decrease and a 5.6% market share. We also sold 448 Class 5 through 7 commercial vehicles in Canada, which represents 10.7% of the new Canadian -- of the Canadian Class 5 through 7 commercial vehicle market.

Despite ongoing industry headwinds, our medium-duty results in the third quarter outpaced the broader market. Our performance was bolstered by a significant increase in bus sales following our acquisition of an IC Bus franchise in Canada, which further diversified our customer base. Looking ahead, we expect medium-duty commercial vehicle sales to remain stable through the remainder of the year.

We sold 1,814 used commercial vehicles in the third quarter, essentially flat compared to the same period in 2024. While financing remains a challenge for used truck buyers, we believe our inventory is rightsized and that our used truck sales strategy is on track. Unlike the new truck market, the used truck market is less exposed to tariff concerns and regulatory uncertainty, which may provide customers more confidence and incentive to consider used trucks as part of their fleet mix in the near term. We expect fourth quarter used truck sales to be in line with the third quarter.

Rush Truck Leasing achieved record revenues of $93.3 million in the third quarter, up 4.7% year-over-year. Our full-service leasing revenue increased as we brought new vehicles into service, which also helped lower operating costs and increased profitability. Rental utilization was 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 third quarter. We repurchased $9.2 million of our common stock as part of our expanded $200 million repurchase authorization, and we also paid a cash dividend of $14.8 million in the quarter.

In summary, despite the aforementioned industry headwinds, I believe we've delivered solid results, and I'm proud of our team's performance in the third quarter. Our employees across the U.S. and Canada continue to demonstrate resilience, and I'm deeply grateful for their dedication.

With that, I'll take your questions.

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

I'm sure the team works very hard. Just a question, could you just tell us, we've been stuck in this cyclical malaise for a while now. We've been waiting for the turn of the cycle for a while now. Can you just expand and tell us what are you seeing? When do you feel things actually bottom? And what's the path going forward? What gets this thing sort of on court and just lets the sales actually go up eventually?

Right. And I'm guessing, Andrew, that you're speaking about from my customers' perspective. Is that correct?

Yes, correct. Yes.

Okay. Well, great. Well, I just so happened, I spent the last couple of days in lovely San Diego, California at ATA, which is the largest truck convention -- our customer truck convention there is. So I met with quite a few customers while I was out there. And I think as I mentioned in one of the paragraphs there in the press release, and I mentioned a little bit earlier, this is the first time I'm going to say, I mean, we've been 3 years in a freight recession, 3, okay? This usually doesn't last, but 12 to 16 months, I have never seen in my career, it go so long, right? And you could figure out why supply was not coming out, right?

There's supply and then there's demand. I can't really speak to demand as well. That's more of an economic-driven, the only economy-driven stuff around tariffs and just around the economy itself. But from a supply side, the crazy thing is it just has not come out of the market. It always comes out faster. And I think if you look at it after rates were way up in '21, '22 and they started coming down. That's been that 3-year row, just depressed freight rates from the customer perspective, especially on the truckload side, not so much on the LTL side, but on the truckload side for sure.

And I think the government has finally got their arms around some of this when -- I mean, one of the things I learned while I was there is you read a lot and people are saying this is non-domiciled driver thing and the English-speaking proficiency, but really around the non-domiciled driver thing. Most some of the numbers I've heard before, well, if we can enforce that, it's going to be up to the states to enforce that, okay? And I've heard numbers of 5% or something. Well, I was there. Some of the carriers I talked to said that was way understated. And like 15 to 20 of the states are really starting to enforce it right now and that they all have to get on board. And so over the next little bit, it could take out up to 15% of the drivers, which are probably some of the smaller carriers have been using to hang on and stay. Those are the carriers that usually go out in a freight recession first, not your more well-capitalized bigger guys, but the smaller carriers are always that variable piece that get in and get out based upon where rates are. And so that's one of the things that I believe will, for sure, help.

Also, I think we -- people continue to buy trucks after we came off of allocation, we should have not slowed down selling trucks or producing trucks quicker than we did because there's 2 sides to it, right? That's the attrition side. Well, the other side is what are you producing, right? Well, right now, the last -- the back half of this year, I mean, you're talking we're going to be down in production 30%, 35%, 40% at all the OEMs combined. I'm not sure exactly where it is, but it's down dramatically. And I think that's going to continue into the first quarter for sure, maybe the first half.

If you add that, you think about that, so you're shutting down the supply side, the intake side, you're taking people out of the attrition side. Well, you should start to get a more rightsized or balanced fleet out there with what market demand is, right, or what freight tonnage is. And I think you can see that if you look out.

Now on top of that, even though the carriers, and I'm on their side, would prefer that it's changing the law that's going into effect right now. The current law, the way it stands is 35 -- don't give me, it's changing to 35 particulates on the NOx side. It's 200 currently, okay? But the new law says 35. I'm with the carriers. They would prefer a pause on 35 and they -- but I'm not in the middle of that, but you see folks and customers that are putting pressure on the EPA to pause that law.

Right now, I can't tell you where it goes. But if it stays as is and goes into effect, I do believe it will change -- if it stays as is, you will see change in the warranties will come down because a lot of the cost for that is going to be more. But it's still going to add more cost where tariffs have added more cost to an industry that's been in a 3-year recession. But people are asking for, like I said, carriers are asking to say 200, and I support them on that. I don't know. But currently, if you look at the law, it said it's going to go to 35. Well, that's going to add more cost also by the end of next year.

So you tie that in with tariff costs, which are happening for sure, starting Saturday with the new tariffs, I mean, the tariffs already all year, but with the new 232 rule and how that affects everything, you're going to put -- the EPA thing will only increase cost on trucks at the end of next year. So you add that with a better rightsized fleet, for the environment. That's why I wrote you can see a much stronger back half of next year.

Now I would prefer that we also have freight tonnage growth with that. So it's not just regulatory driven. I think if we can get some freight growth, which I hope we get some certainty. I mean uncertainty for everybody has been the craziest thing trying to run a business all year, okay? But we get some certainty around whatever it is, add that in, like I said, take it supply out. And even if it stays that 35% will help truck sales, but I'd like for my customer to be more healthy. And I think getting the right-sized fleet is the most important thing with a pickup in freight tonnage. And that's why you see some optimism.

I'm more optimistic now for that -- the big over-the-road market. Look, that's still 2/3 of the market that's out there, all right? Vocational is awesome. And we do more in vocational than 1/3 of our business, but that's still the largest segment, and it has been obviously headwinds for everyone, my customers more than me for the last 3 years.

So I know that's a long-winded answer, but you're used to my long-winded answers, I'm hoping. And that's sort of the way I see it right now. I have a little more optimism than I have had after coming back from San Diego, that's not happening right now, okay?

Remember, we had 5 months, 6 months of the lowest order intake since 2009. I'm the tail of the dog. So we are going to feel it in Q4 and Q1 without question. At the same time, it feels good to really believe that you can see real drivers to get back and get the market rightsized long as the economy stays in good shape. That's sort of the way I see it.

And just a follow-up question. I ask it on every call, but what's your read on the macro, just general macro outside of the stuff that feeds into your customer base? Is it getting better? Is it getting worse? What are you excited about? What are you worried about?

No. I'm not an economist, Andrew. What I worry about? I worry about unemployment, which for sure would affect consumer demand. That bothers me. I worry about -- I don't feel that we have seen the full effect of tariffs, no way. We had a prebuy prior to August, but we're draining those -- as we drain those inventories down, we've got to restock. I have seen many large companies, manufacturers, customers across all segments that have eaten a lot of those costs. I don't see them eating those costs forever, which ends up being pushed down to the consumer at the end of the day.

Those are the 2 things that bother me more than anything. I'm hoping we can get around all that. But I do -- an inflationary -- a little more inflationary environment if tariffs get pushed through because everybody knows that people prebought prior to August, but we're draining those. So -- and you put that in, we get some more unemployment. You read some of the stuff you see. I see a little anecdotes out there myself that have me a little nervous, a little bit concerned. I can't say this is going to -- this is a number or this is what's going to happen. But I do have some concerns as I look at -- just look around myself and try to pay attention to what's going on, right?

Like I said, I'm not an economist. I'm just looking at it from my street level, but I do have quite a bit of touch and feel with a lot of different companies and things out there. So besides all the big stuff you read about when you read about UPS and these big companies that are laying off right now, Amazon by laying all these people off. There you go. That's what I'm worried about.

And I'll -- just feeding into that, I'll just take advance and ask one last question. How is your parts and service business trending on a daily basis into the year-end? Is it getting better? Is it getting worse because that's also a good indication and also obviously has quite a bit of torque to your financials.

Yes. Well, it was flat to slightly up for the third quarter, but September was softer than I would have liked. Remember, we naturally or yes, we naturally have seasonality. And I've always told folks if I could get rid of sometimes November, December, January and February, I might keep the holidays for the kids. But other than that, from a business perspective, if I could sometimes we're in the south, -- it can help a lot of our stores in the South, the majority of them are. So that's a little harder, a little softer. You have fewer working days.

We typically tick down 3% or so, 3% to 4% from Q3 and Q4 and Q1. It will start picking back up, hopefully by late February, March. It softened a little quicker in September. I'm waiting to get October finished tomorrow night. I'm hoping that we can try to get pretty close to flat with last year. I'll be really close, I think. But it's still to be -- how about TBD, to be determined. There are certain things I look at that show month-over month, we got the same amount of backlog in our work in process in the parts and service. But I do -- I'm hoping it's just like normal seasonality, and we have a slight downtick and less -- we have 1 less working day, which is quite a bit of gross profit as big as our parts and service operations are and it's the holidays, factories shut down between Christmas and New Year, but you deal with that every year.

So I'm hoping we stay in the range of what we typically do. I was a little disappointed with September. Typically, we'll start in October. But we'll see here by the end of the working -- the month by midnight tomorrow night on Halloween because they'll be closing tickets and doing what they do every month, getting it all in. So we'll see, but I expect it to be fairly close to flat with last year's number, which if we're there, given the environment, I'll be okay with it. I'll be okay with that.

Our next question comes from Brady Lierz from Stephens.

I wanted to start kind of just with the outlook for the remainder of '25 and the first half of '26. You've mentioned a couple of times on the call that you expect a challenging end to '25 and for that to persist into 1Q. But can you expand just a little on that? I mean what are your customers telling you as to why they're not placing orders? Is it just uncertainty around regulation? Or is it uncertainty around tariffs? Or is it both? And if we got more certainty around those items, could we see a meaningful improvement -- and then maybe just kind of related, your vocational customers seem more resilient. So are there some company-specific opportunities you have to help offset this weakness and outperform the market?

Well, from a delivery perspective, we slightly outperformed the Class 8 dip. I think [indiscernible] market was up more than that, I think, in Q3. But around -- I'll go to your first part, Q4, first Q1, maybe partially into Q2, I can't tell. Look, remember, like I said earlier, we're the tail of the dog. And when you look at the order intake from April, May, June, July, August, September, it's like September, it was 20,000 units. We have months that was 7,400 units. This is North America, 11,000. Those were the worst order intake months since 2009.

I know that every manufacturer has taken more down days over the last -- since July. Everybody built as much as they could in the first half of the year. There is not one manufacturer, not one that hasn't taken many down days and weeks, okay, so far in this quarter, okay? So we're building less trucks. I guess it's less to sell because there's been less demand. And you can circle lead. That's all of the above. When you see you hit it, it's really 3 things. It's their business. It's everybody's business, but the uncertainty, tariffs that make freight go up and down and cost of trucks go up and down. And then you add in, can we get an answer on emissions next year because everyone I spoke to, if their business can get a little bit -- a little -- which we're not -- I'm not saying they're getting it now because you got to take care of those supply issues that I rambled on and talked about earlier when I talk about the amount of trucks on the road, has to get in line with freight.

If you can get that back in line, bring some certainty, here's what the emissions regulations are, whatever they are. And if they stay as they are currently under the law, I don't think there's any question in spite of the large freight customers, they'll probably try to pull a little bit forward, not have huge prebuys, but they will try to shift some stuff maybe they do in Q1 or '27 or Q2 and try to shift some of those purchases into the back half of the year. If it stays as it's written right now and doesn't get -- there's not a pause and they get a little relief, which I said before, for their sake, it might hurt my truck sales in the back half. But for their sake, I just assume they get it -- get that relief. But it's what you said. But really, they need to get aligned -- really, we've got to get the supply aligned with tonnage, and to where they can get a little contract rates.

I mean if you look at the TL side, I mean, if they got 2%, they were lucky this last year because they were going down, down, down 10%, 15-plus percent the prior couple of years. Well the cost of trucks and everything operationally and inflation went up, up and up, they have nots, you've seen the ORs and some of these things, and they're not what they historically have been on that side. Now LTL still fared better. Of course, 2 years ago, they got a little tailwind with the demise of yellow and stuff. So when the third largest carrier goes out. And there's many fewer barriers to entry or there's excuse me, more barriers to entry in LTL with all the doors and terminals and all the stuff that's required in that space. So they've weathered it better than the TL side.

But I just got to tell you, the next couple of quarters is going to be tough. You can tell by the order intake that's been there. And it wasn't like everybody was ordering trucks handover fish. Some people -- it was -- we weren't even -- it's difficult to give a price on a trucks deal. But remember, the tariffs, the definition of it just came out 1.5 weeks ago, okay? And these manufacturers are just pouring through it, trying to make sure they clearly understand it, okay? Because it gets pretty complicated as to where -- how these tariffs are figured out from where you build and what are your suppliers because people use different suppliers and where that comes from, et cetera. I would tell you that we'll probably have a whole lot more clarity as to how things are going to pick up in the next 30 to 45 days.

There wasn't a lot of clarity at ATA because people -- it was good for some manufacturers and bad for others. And they're trying to sort it out with the Rule 232 is what I'm talking about, but that just came out, whatever, 10, 12 days ago, 10, 11 days ago, and folks are just pouring through it, making sure that they understand it right. So I mean I'll be honest, you couldn't price a lot of people right now. And when you can't do that from a manufacturer, that somebody is supposed to buy something. It's been crazy all year because you would price like you would give quotes that were only good for 90 days, right, or maybe 120 based upon the ever-changing environment around tariffs.

Well, that's difficult. You've got all these question marks. If this happens, this will, if not, it's no good. I mean this is the world we've been living in for the last 6-plus months, which has made it extremely difficult. So as all I can tell you is clarity, clarity, clarity and less uncertainty and continue taking supply out and hopefully get a little bump in freight early on in tonnage here. I don't see it right now. But I would hope as we get into the first part of next year, we do see something by the time we get out of Q1, into Q2, something there while you're taking supply out over here, while you're building less trucks, so your intake is less. So you should naturally be squeezing down the supply of trucks. I mean that's all I can -- the best way I can describe it, which for me, the hard part was while we were in a freight recession, we just kept building and selling trucks longer than we probably should have. But now we're on that rightsizing piece, along with the government activities around drivers that are going on the things I mentioned earlier. So anyway, I have some optimism. It's just not over the next 6 months. Okay.

That's very helpful color. And if I could just follow up on medium-duty. Medium-duty has continued to kind of be a stable growth driver for your business. Can you talk about what you're seeing in medium-duty into the end of the year? And just maybe any preliminary thoughts on medium-duty in 2026?

Medium-duty is a different environment, right, a different market by far than the Class 8 world. I would tell you, we expect it to be fairly flat in Q4 with Q3 on the medium side. Most of the downturn will be -- for us will be on the Class 8 side, for sure. Like I've mentioned, there's no question we're going to deliver fewer trucks and things because you can see order intake, that kind of tells you what you're going to eventually come to regardless of what our share percentage might be, there's going to be a lot less deliveries in this country because we haven't taken many orders in for the last 6 months.

I would tell you there's a lot of leasing around the medium-duty, okay? And also what we call our Ready-to-Roll inventory. It's just -- it's more about the general economy and what's going on around there. Housing has a lot to do with. There's a lot -- the leasing companies. I would tell you, we're working some stuff that had me somewhat hopeful for the entire year next year. But it too will probably suffer some, maybe not to the degree, right? It will be more stable, I believe, than the Class 8 business will for the next couple of quarters. But at the same time, I don't know that we can comp -- I don't believe we'll comp to the same that we did this year, but it won't have as big a hit, say, as the heavy-duty side will right now.

So that's about all I can tell you about it. It's pretty much hand-to-hand combat out there still right now, right? If you want a truck, I still build a queue this year. All good news tell me, there's lots of slots open for everyone, for all manufacturers. So that's -- it's going to be November 1, and we shut down, most manufacturers shut down in the last 10 days of the month of December. So -- and they're still not full by any stretch in their backlogs, and that's why they keep taking shutdown days. I'm talking about all manufacturers. Some will probably do better than others, but I'm not going to get into all that right now.

But -- all I can tell you is that medium-duty should weather better from a downturn perspective given the diversity of its -- of the markets it serves because it serves so much the general economy. But it's not totally -- it will get – it will suffer some for sure, though.

That's super helpful. Maybe just a final quick follow-up. Could you share what you're seeing in the used truck market, particularly how is used truck pricing trending just given this, like you said, volatile backdrop to say the least?

Well, I think it's been fairly stable. And when I say that, normal depreciation, unlike, say, a year ago, if you asked me that, I would have told you no, depreciations for 2 years for sure, we're double depreciating. I would tell you now depreciation is more in line with what you typically would see from a percentage perspective. So that's good.

And our used trucks, while it's always more difficult winter time with used, but we've done a really nice job. I'm proud of the job we've done on the used side all year long, managing our inventories and staying and doing whatever we have to do to support our customer base. Because remember, one thing about used is you have -- you've got -- you take trades, right? So you have to have the flexibility and the ability to take trades. We've managed -- we've taken our inventory up a little on purpose during this last couple of quarters to try to move more, not to -- we've taken it way down, okay? I think we've probably split the middle on where our inventory is currently from where I used to carry it to where we do now because you got to turn your used inventory. And our turns are -- they're maybe not as tight as they were at one time, but our production overall, you got to have inventory to do that for sure.

As always, when you think about, as I mentioned in my comments to open, used trucks, they don't have to worry about tariffs or emissions, do they, okay? So there is somewhat of an advantage to that -- there's not -- there's certainty around used trucks. So they're not worried about tariffs or, as I said, emissions. when you're buying a unit. So that's a plus. So we've had a really nice year, and we expect it to be solid going forward. I mean the problem is just -- the volumes just can't make up for when heavy-duty pops down.

But remember, we -- the thing about the company, and I think sometimes people lose sight of is we have many revenue streams. Remember, I got a great leasing fleet. We're super profitable in our leasing operations. We're profitable on our parts and services. You can tell all the time. Everybody is focused always on truck sales, and they are a big piece of what we do. But at the same time, they're not the most -- parts and service is the one stable piece that you -- when I say it -- it does not have the volatility of the Class 8 truck sales market.

So fortunately, we have all those revenue streams that help us weather the storm, but we top it up, knock it out of the park when you're not -- you need to have all pieces contributing. But the good part is, unlike some other businesses where they're tied to just 1 or 2 revenue streams, we have many more, which allow us to get through environments like we're seeing right now and continue to put out the kind of results we do.

Are they the best results we've ever had, of course, not. But we're not going to sell as many trucks, but they're going to be solid and they're going to be good. And forgive the environment, a whole lot better than my customer base has had to put up with. I feel sorry sometimes what they've had to go through the last 3 years. A lot of them have anyway, especially like I said, on the truckload side and some of the others.

So anyway, I know it's probably more you want to hear about, but that's just how I it. But now we're good where we're at on used and hope to continue to have solid quarters there.

Our next question comes from Avi Jaroslawicz from UBS.

So I know parts and service business is a pretty big focus area for you guys in trying to grow that. Can you just remind us what you're doing to pick up more share in that part of the business? And is that more challenging to pick up more share in a softer market like that, like what we're seeing now? And also, where are you still seeing opportunity within that space?

Well, it is more challenging without question, right, because the overall market is down. I would tell you we're holding our own this year. I don't know that we've picked up as much as we would like to because when you get in this type of environment, it becomes much more highly competitive and especially with the inflation stuff we've seen in the parts arena this year, it becomes more competitive, to be quite honest.

Some folks are just looking to turn cash, right? And sometimes margin sometimes takes a backseat. So you have to balance what you're doing between taking share and margin and results at the same time. And so that becomes a challenge in this type of environment when it's not a growing sector, we've remained fairly flat all year, right?

I would tell you we're in line, maybe a little bit better than the overall from a dealer -- break it into independents and dealers. And I would tell you from a dealer perspective versus other dealers, I think we're in pretty good shape. The independents, they can get down and dirty when it comes in this type of environment. But our overall deal is this. And over time, I don't want to look at it just every quarter. I'd rather look at it annualized and over a couple of 3 years.

If the market goes up, just make a simple math, 5%, we want to go up 6%, okay? Why that means we're taking share. We have historically been able to do that and then throw a little M&A in there and do better than that some years, right? But -- so I'm not going to say we've done that this year, but I think we've taken some maybe not as much as I would like. We want to be 20% better, right? Because to be 20% better, if you're taking a little bit more, you're just slowly ramping up your share. It's not an add water and stir arena.

And as far as what we do, like our technology and our data is second to none, okay? So it's continuing to take that. And without getting into each and every project that we have out there, we always have projects going on to help enhance it that support growth, right? They're not just -- we don't go about it the same way every year like what we go about our business, but we keep enhancing and adding technology and stuff to make it easier and easier for our customers to do business with us. And that's the key piece from our perspective as we look at going forward.

Our industry is -- it's not like consumer, right? It tends to operate a little behind the time well, which can be challenging because you have to keep pace with your customers, right? And when I say that, I don't want to downgrade our industry, but it's typically still a little more hands-on than, say, some other consumer type things and how you go about it. But technology continues to be a bigger piece of it. And I don't like to get into some of the things we do just because I consider them proprietary. I think those investments and also our investments in folks and people, our growth in the mobile service area, those types of things, we have goals that are pretty well stated out there.

I think most a lot of investors understand that because we expound on them quite a bit when we go to conferences. I have 3 up here coming up in the next month. to let people know those types of investments, where we want to grow our mobile service fleet to x and then we want to take our total technicians, and we want to grow our outside service -- excuse me, our outside parts and service, what we call ASRs, take those guys more -- grow that part of our business, too.

But sometimes you got to be careful because in a market that's getting really tight, you need to have a market out there, but we still think there's a lot of runway, and we will continue to do it and have the goals we have around, like I said, to try to do about 20% better from a growth perspective. If market goes up 5%, we want to go up 6% because it's not somewhere you're going to go from 5% to 15%. If market is 5%, we're not going to take 15%, I mean if I'm giving stuff away or doing this and doing that. And that would not be -- I don't believe that's the right way to go about it.

That concludes the question-and-answer session. I would like to turn the call back over to Rusty Rush, President, CEO and Chairman of the Board, for closing remarks.

Well, everyone, this is the longest gap between earnings calls. We won't be talking to everybody until February. So in the meantime, I wish everyone a happy holidays and safe holidays, and we'll talk to you in February. God bless you all. Thank you.

This concludes today's conference call. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Rush Enterprises Q2 Earnings Release Conference Call. [Operator Instructions] 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.

[Audio Gap] Vice President and Controller; and Michael Goldstone, Senior Vice President, General Counsel and Corporate Secretary.

Now over to Steve for a few comments.

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, 2024, and in our other filings with the Securities and Exchange Commission.

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 the 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.

[Operator Instructions] 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, good question, sir. Dramatically different in the back half of the year from the first half of the year. Every OEM is taking production down. Every OEM has shutdown days. I'm not going to get into specifics, but you can broadly say across all brands, all manufacturer, it is going -- you're going to see a lot less trucks built, okay? You say, so what causes all that? Well, as I talked about, it's the uncertainty. I mean, I'll get to the emissions stuff and if anybody wants to know my opinions on all that and where we stand from a 232 and a tariff perspective there.

But let's just look at April, May and June. April, May and June were the worst 3 months of order intake since 2009, okay? The U.S., Canada and Mexico took in less than 30,000 Class 8 trucks, okay? That eventually comes to fruition inside of the build that we see. There's just still so much uncertainty to know what -- we had -- we built a lot of trucks. So, actually, Q2 retail deliveries were flat to slightly up for the whole country. But I think that everyone pulled everything forward that they could. And right now, production is going to take -- is dramatically hit from quarter sequentially as we've seen since COVID, okay?

When you -- and I put COVID as an outlier, really, since you go back way further than that to see, you're going to see from a production, not necessarily all the way through retail. Retail will be down, too, but production will be drastically down across all OEMs currently. Because there's just not any demand out there because uncertainty is there. I mean, I don't -- I guess, what was it, Tuesday? We pulled the GHG3 stuff, but that still has not given any clarity as to what we're going to get from an emissions perspective. Is it going to stay 200? Is it going to be 0.035? Is it going to go to somewhere in the middle? These 4 engine manufacturers and OEMs don't even have direction yet from the government.

So by what we're dealing with is creates uncertainty on through the chain to the end user on top of the fact that we're still in a freight recession, et cetera. So -- but as I've said in the release, for sure, I'm expecting to be down in third quarter. Don't even ask me what the fourth quarter is going to look like, because it's hand to mouth and with less trucks for sure going to be built with people canceling ships, folks laying off employees, folks taking shutdown days, large numbers of these, taking 2, 3 weeks off.

Every manufacturer has their own philosophy, but no one is right now currently as we sit, everybody is handling the same, to be honest with you, different but the same. Because there really is not any demand because there's still no firm knowledge of where we're going to be from an EPA perspective into January of '27. Is it going to stay at 0.035? Is it going to stay at 200 stay at 200 go to 0.035, which is what the rule of the law says it is right now. But that is very much in question right at the moment, somewhere in -- but I have no exact idea. And so customers, by nature, are just waiting to get some direction.

Now I think I said somewhere in the release that, well, maybe things will start shaking out and looking a little better. And what I'm talking about is activity. I'm not saying orders. I'm saying by the time we get to Q4, I hope in the latter part of the year that we can finally get some solid trade stuff down from a tariff perspective and the Congress and the administration is looking at the 232 rule, if that gets where we stand on that, if we get where we stand from an emission perspective, then you know how to play your game, right? You know what to do with your business. I mean if it goes and stays at 0.35 (sic) [ 0.035 ], we're probably going to see -- probably we will see a pickup next year, I think, in order demand. If it stays at 200, not sure what that means, right? You won't have the additional cost. You won't have the change in technology to deal with.

So fleets won't be looking at -- I mean, I hate to use the word -- I heard it, but I haven't used the word in a while, 'prebuy', but I didn't even say it. There might be a slight pre-buy if we go to [ 0.3 ], stay at 0.35 (sic) [ 0.035 ] next year. I mean -- and I know I'm answering -- I'm trying to give you a broader answer. I can't help myself, maybe your question, but trying to give you some outlook beyond where we are right now in Q3 and Q4, but into next year because I think that's what's important to understand is to try to get an outlook into where it's really going to go. But I can't tell you because I don't have the answers to these questions right now, right?

And so all that does create uncertainty. And we are finally seeing the fulfillment -- true fulfillment of the uncertainty we talked about on the last call back in April. But it only continues to intensify because the further down -- you still don't know, right? And it just continues to beg, what do I do? What should I do? Are engines going to go up X? Are they going to -- we need some clarification.

I think once we get that, I think we should -- may be able to -- regardless of how much activity, I'm not going to get -- it will depend on what some of these rulings are, also some of these tariff trade policy decisions. But I think we'll be able to get kicked off really. I think we're almost in a lull till we get these answers, to be honest with you.

And besides, remember, I would tell you from what I've been reading in the last couple of weeks, most of your public carriers -- I would say the reports are slightly better than they were in Q1. They're not outstanding by any such. But I think more people have gotten to their numbers as depressed as they are than what -- you can see slight green shoots in there, but not a lot. There's still -- it's still a tough road out there because we're still out of balance, right? And I know I keep throwing out all these things, but we've still got too much capacity. I think it's continuing to slight cut out slowly out of the marketplace and to meet the demand level that's out there. But there you go, I'll shut up.

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 ad 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?

Well, I think right now, by maintaining flat to slightly up, I think we're growing compared to the market, okay? I think we're doing better than the aftermarket for the reports. And remember, getting aftermarket comps is probably the most difficult thing there is because you get them from different sources, right? It's not like vehicle. Vehicles is a real simple and they're titled, right? It's easy to count those, getting to understand what the overall aftermarket is. But I think we're doing it slightly better than the overall aftermarket.

I would tell you that I think our historical traditional way we go to market is what's allowing us to be fairly good. I would tell you that we're working really hard. We just finished the strategic offsite here in June to really try to -- not refocus, but even more double up with some more strategic initiatives to try to really accelerate the growth in our aftermarket business, especially going into next year. Right now, if we can maintain, which I will tell you, since I'm on the box, I guess I can say what I want now that I've released earnings, July continued and maybe a little better than June, not great, let's just call it flat.

We're continuing to maintain which from a company perspective, given the environment, I almost feel like we're growing, okay? I mean it may have said 1.4% to revenue with a little expanded margin. Well, to me, it was better than that just given the environment, right? So we're -- to quantify it exactly what those -- because they were slight. We grew our sales force slightly. I'm not going to sit here and kid you. We didn't add double digits or anything like that because I'm not sure the market is accepting of that right now. But I'll tell you what, we're positioned to do things like that.

And we've got a few other things. But again, some of this stuff's proprietary from my perspective. So I'm not going to get into everything. But trust me, we're hands down committed to continue to do what we have traditionally done plus a throw a few new things at it as we move forward, especially into '26 and '27. Like I said, I believe we can maintain where we're at in parts and service based on what I'm seeing. We haven't seen anything go way out of whack or out of line. And as you know, as I was at the earning, anywhere 63% last quarter of our profits come from parts and service. So that being the much more stable.

That's why sometimes I think our business model is underappreciated in the fact whether it's truck sales, it's new, it's heavy, it's used, it's medium, our leasing operations and what they contribute to the company. Obviously, our parts and service operations and the stability. And then our ability to manage expenses where -- if you look at the earnings this quarter, it's the first quarter over the last 3 or 4 that we weren't down 4% or 5% in G&A. We were slightly up but basically flat. But you have to go back and understand that we made those cuts over a year ago.

So -- but being able to maintain that, I'm very proud of people. In spite of inflationary pressures and things like that, we've been able to maintain that piece of it. So as usually, like I said, I'm ramping off on other tangents. But at the same time, I'm trying to give you a flavor. I was really proud of the quarter.

When you look at the truck sales pressures that we had and compare them to year-over-year be less than 10% off of what we were last year with 25% less trucks or so, I was Class 8, saying. I was really proud of that, and it was driven by the parts and service operations, right? And I do believe we have growth back to your original question in there. I'm not sure that it takes place dramatically this year, but I am very comfortable. Like I said, what makes me feel good is even though we're only slightly up, I feel like it's more than that given the environment that we're dealing with now.

[Operator Instructions] 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 on, Andrew. That's what we're hoping for, okay? Theoretically, you're correct. The other -- but there's one caveat what's your business like, okay? Theoretically, you're 100% correct. But you'll have to take into account what does the customer's business truly look like, right? Are they squeezing it down because their business isn't that good. So where, for sure, the -- you're going to drive old-age trucks.

But first, you got to make sure you're utilizing all of them, too. What's your utilization and how is your business. And if all those align, then there's no question what you're saying is totally correct. But those are caveats to that, that you have to take into account also. So yes, without question. Actually -- but yes, in the back of my mind, that's what I'm hoping for, okay? But I've got these caveats that have -- that ride with it, right? Our business has to be decent. So...

Another question for you, and I appreciate sort of the fact that you accelerated buyback. But if you look at your track record, if you look where we are in the cycle, can you share with us the latest thoughts of the Board on maybe stepping up the buyback? Because historically, you've been very conservative with your balance sheet, and I appreciate the reasons for it. But the pushback we get is -- the execution is fantastic. Stock is inexpensive. They have capacity on the balance sheet. How is the Board and your thinking is evolving on the share buyback?

Well, I think we announced during the quarter that we added $50 million to it, okay? I think I've got about $75 million or so left to spend of the $200 million. I would hope that the opportunities present themselves. We wouldn't be approving it if we didn't plan on trying to spend it. But we do it prudently. I'm just not out there, and we do it under a 10b5-1, right? So what happens sometimes is you set prices and you don't touch it for a while because we're in a quiet period.

Now we -- Steven and I'll be relooking at that tomorrow as we reset the matrixes up to continue making sure we're purchasing, right? The stock fluctuated some in the quarter. It got down a little bit and back up. And we set a matrix in [ June 10 ], and we'll be -- don't touch it until now, and we'll be looking at it. But we wouldn't approve the money that we've got out there if we didn't want to spend it. So we feel real good about our cash position. Heck, will pick up I don't know, $35 million, $40 million with a big, beautiful bill in cash from a tax perspective this year.

So as you know, our balance sheet is nice and flush, and we have the capability to do it. So -- but as you said, we have been -- over time, we've been typically fairly conservative. I'm not going to go out and -- but we -- I think we have proven the ability and the want to and the desire to buy stock back. Maybe not at the pace that some people want, maybe at the pace that some do, maybe too much for others. But it's at the pace that we feel comfortable with. We believe in this organization. We think it's a great opportunity to buy stock back at every moment. I mean, look, I'll just let the track record...

20-year history says there's never want to bad moment to lever up and buy back our stock?

I don't -- you used the word, you're not going to ever get me to do, lever up. Let's step back here a minute, Andrew. It's not rush. I'm sorry. Fire me. I'm 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?

Gosh, I always look back to the 1st of April every day, Andrew, and think of what a liberation it's been. Okay. More uncertainty than you shake a stick at. How have I changed in 3 to 4 months? Well, I know this, you asked about geographies. I don't want to think -- I don't want to be like the whole country like California has been in the last 1.5 years. Let's just say that, okay? No disrespect to my lovely California stores, anyone out there.

But from a business perspective, industry-specific perspective, it has been very, very difficult on the truck sales side. No one -- it's almost like gridlock. I mean, no one has -- if the whole country was to act like California has been from a truck sales perspective, it'd be really -- we'd be woeful. It'd be really tough. But fortunately, obviously, we are doing different things here for the rest of the country as the political side fight it out with the Feds, having obviously a difference of opinion than CARB does out there, but I'm staying out of that. But fortunately, that's loosening up and going to a little more what I would call realistic look.

You ask what's changed? There's a lot that's changed. No matter where the EPA ends up, it is way different than what it was, November 5 or whatever it was of last year, okay? And it's moved to what I would say, I'm not going to get too far or whatever, but it's moved in the right direction to a more realistic view of what the involvement should be from the EPA's perspective that makes sense for this country, okay? I'm not going to get into how far each way, but I'm going to say that's obviously changed a lot over the last few months.

Now it has -- the problem is it hasn't settled down. okay? So once that gets settled down, I think we'll all be able to play the game, right? It's like tell me the rules and then I'll play the game. I don't care if they're good or bad or whatever, whatever the tariff is. Stop changing all this stuff. If I'm a manufacturer, I don't manufacturer to hire 20 people just to try to figure this stuff out on a daily basis, right, as to where they're at.

We need a little stability with a little -- looking forward, and I think that will be good for everyone. I really do believe that we're going to get some of that later this year. So I couldn't have told you in April. I feel like it's coming. I feel like we're closer to knowns from the EPA and firm trade policies, I hope. So that whether it's the inflow or outflow of freight for our customer base or for a manufacturer trying to figure out what vehicles cost or what they have to spend and what they have to have their engines, we just need some stability. We need some -- this is what it's going to be. But we're in the middle of -- but we're getting closer, I think, to getting those answers. A whole lot closer than we were in April, right?

And that's why I'm kind of proud of the quarter is just because, hey, we took a 25% hit in truck sales, and we took way more than $0.07 difference in gross profit from trucks from Q2 of last year to Q2 of this year. But hey, we went from $0.97 to $0.90. Why? Because we executed like hell on everything else that we have in our touch. And so that's why I know this organization will continue to be fluid enough to be able to keep managing this has proven anything to me. It's that we do have that ability. I'll put our numbers up against anybody's numbers, but I'm the only public really any way sing truck dealer out there of execution in Q2, and we plan on doing it beyond Q2 and into the future, Andrew.

It's just I feel closer to knowing the rules. And once -- once we do -- it's not just -- once customers know the rules, they'll be able to make decisions. But we don't have the rules of the game yet. And I think what you see right now is just gridlock on folks ordering trucks. They want to know what's going to happen.

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 trumps everything right now. What -- are they going to -- am I going to have to go to -- is it going to stay at 0.35 (sic) [ 0.035 ]? Is it going to stay at 200 milligrams? I mean there's a very good chance it could stay. Look, I don't know. I'm not involved. I'm not in Washington, D.C. I don't have a phone number to anybody at the EPA. But I know a lot of people do. I get a lot -- and by the way, those opinions I'm getting are varied. So I'm just trying to form an opinion when it's secondhand information. But I am pretty close to a lot of folks.

The funny part is that they're not all the same thought processes, right? So we -- and when you hear this, if you put yourself in my shoes, well, I understand why a customer is stuck in gridlock, okay? I get it. Besides my business being somewhat tough, I'm going to buy what I have to buy. And I mean, I just really have to buy. I'm not going to step out until I know. And at the same time, I want my business to get if I'm an over-the-road carrier, which is still 65% of everything out there or better. I want my business to also be a little better.

So even though we -- retail was good, right now, we've hit that sweet point. But I do believe, as I said, just get us some stuff, and I think activity -- now that activity will start. Remember, for me, it's next year business. So okay, Rusty is not saying this is all a fourth quarter great business for us. I'm a tail of the dog. So -- but guess what, it's got to start with activity. Then it starts with pricing and quoting and orders and then manufactured and then all of a sudden has to be done to a truck sometimes after it comes off the line until it gets to that retail space.

But I do believe -- not to the volumes but how much will be determined. If it goes to 0.35 (sic) [ 0.035 ], stays at [ 0.3 ], stays where the law is right now, not where we're -- not the 200 we're at, then you're probably going to get -- you're going to get some uptick without question.

Now I don't know about the ability to be able to volume-wise produce because we're getting so late in the game. But I'm confident the administration will come with something, I hope, in the next 60 days, just to give clarity to everybody out there from -- this is from a truck sales perspective. Thank God, 2/3 of my profits come from parts and service though as a company. But I do need that other piece, too, okay, I want that other piece with it that trucks the piece at the same time.

But again, our leasing business is solid. We expect it to remain solid, not going to grow exponentially, but guarantee it's pretty good. And keep our parts and service stock, maintain discipline inside our expense base. I don't really want to go out there and rip this place apart. We cut it back last year. It was the right thing to do. We've maintained basically exact flat headcount other than adding revenue creation positions. And we're just going to keep hanging in there and producing solid results until we see a catalyst to really -- to drive the market to better than what it's been right now, the truck to the sales market.

And also, like you said, guess what, when you talked earlier, your first question earlier, "Hey, Rusty, if they get older, should you work on them more?" True, right? As long as their business is in line with the expenditures needed as the fleet ages, without a question, people have to do more parts and service. That benefits us, too. It's better margin business. But we do want to sell trucks. We need that whole thing working. But the truck sales side is just on a little bit of a hold right now until we get a little more clarity.

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.