PACCAR Inc (NASDAQ:PCAR) Q4 2022 Earnings Call Transcript

Jerry Revich: Yes. Hi, and good afternoon, everyone. I just want to go back to the really strong margin performance and the outlook. So when we look back when you were posting anywhere close to this level of margins, your parts’ margins are up significantly from that timeframe. OEM margins are a touch lower than where they were in 2006. And I’m wondering, Preston, just earlier in the conversation, you mentioned that they improved fuel economy and other features. Are we at a point where we can expect new truck margins to also be up versus the last cycle as well as we think about what that looks like over the next couple of quarters?

Preston Feight: What I think I’d point you towards is the good performance of the trucks. Kenworth, Peterbilt and DAF have brought out trucks that are really performing well. I mean, they’re winning awards. They’re the most fuel-efficient trucks in the industry, they are most desired trucks in the industry. And that bodes well for our truck margins.

Jerry Revich: Okay, and then you spoke about a new approach to the telematics part of the business. Can you just talk about the revenue opportunity for PACCAR, if you can charge $20 per month per truck on your field population, that would suggest a pretty healthy subscription opportunity? I’m wondering, what could the economics look like to you folks based on the partnership structure? And how do you think about the cadence of the product rollout?

Preston Feight: We think that there’s a growing business in connected vehicles, and it’s growing because we have our vehicles connected, there’s a lot of interesting and useful data to our customers on the vehicles that we have. We’ve offered our PACCAR Connect System. And that PACCAR Connect System is now going to be intertwined with platform sciences operating system and application store. So with the combination of those, it gives us an opportunity for further growth. That’s one thing. I’d also say that our parts team is working closely with the data that comes from the truck, our financial services team works closely with the data that comes from the truck all to the benefit of our customers and our dealers. And we think that will be a growing opportunity in recurring revenue.

Jerry Revich: And can you just talk about your expected economics? Would you expect to charge for the enhanced features? So for some comparable systems that are available after market they do go as high as at $20 per month, is that feasible for your offering?

Preston Feight: I think it’s going to vary depending on the customer and the suite of technologies that they take.

Operator: Our last question will come from David Raso of Evercore ISI.

David Raso: Hi, I might try to squeeze in two quickly a little longer term and one short term sorry. Longer term, the idea of a pre buy mid-decade, I am curious. If you think about your builds for the industry, yourselves in €˜24 being influenced by an assumed recovery in €˜25 and ’26, the pre buy before the €˜27 models are out in sort of spring of €˜26. Just theoretically, should that provide a higher floor to €˜24 builds? Because of we’ve seen in the past, obviously some of these pre buys get well ahead of supply. Is that thing thinking about €˜24 builds whatever macro view someone may have, that they can be influenced by some order , some sense of a pre buy in €˜25 and €˜26. And then I’ll be quick on the near-term question. But if you can answer that.

Preston Feight: David, I’m going to let you work that, that’s not how we are looking at it. We just think about the products we’re offering, the benefit to the customers and making sure that we’re the leader in the market with those products. So how the market

David Raso: Other conversation with customers gets though about?

Preston Feight: Oh, yes, of course we do. But the market will be in ’24 and €˜25, I think is beyond this call.